- Consolidated EPS of $0.01
per share and Consolidated Adjusted EBITDA of $6.8 Million, Driven by 12th
Consecutive Quarter of Pure Sunfarms' Positive Adjusted
EBITDA
- Pure Sunfarms Remains Top-Selling Dried Flower Brand in
Ontario, Alberta and British
Columbia
- Completed the Acquisition of Balanced Health Botanicals:
Combined North American Cannabis Operations Comprised 43% of Total
Village Farms Sales
- Village Farms Fresh Produce Delivered Positive Adjusted
EBITDA
VANCOUVER, BC, Nov. 9, 2021 /PRNewswire/ - Village Farms
International, Inc. ("Village Farms" or the "Company") (NASDAQ:
VFF) (TSX: VFF) today announced its financial results for the third
quarter ended September 30,
2021. All figures are in U.S. dollars unless otherwise
indicated. For Consolidated Results see below.
Management Commentary
"Our strong third quarter results were driven by another record
performance from our Canadian cannabis business, Pure Sunfarms, as
well as a partial quarter's contribution from the acquisition of
Balanced Health Botanicals, and improved results in our Village
Farms Fresh Produce business," said Michael
DeGiglio, CEO, Village Farms. "Pure Sunfarms achieved record
net sales and adjusted EBITDA since launching its retail branded
products two years ago, with a healthy 44% gross margin, driven by
our focus on profitable market share, leading cost of production
and leadership in premium quality flower. We are especially proud
of this performance during a period that saw aggressive price
reductions by certain competitors in what appears to be an attempt
to "buy" market share, dispose of inventory, and/or generate needed
cash, while we have maintained the same "Everyday Premium" pricing
strategy we launched with two years ago, while enhancing our gross
margin."
"We are proud to have achieved what we have to date organically,
and look forward to continuing to build on our leading market share
performance in the expanding Canadian market, while additionally
pursuing international sales. To address anticipated demand, we
began planting out in half of our second 1.1 million square foot
production facility (Delta 2) in September. Internationally, Pure
Sunfarms completed its first export shipment and saw the completion
of the EU-GMP certification inspection, a critical step towards
EU-GMP certification and future sales into the European medical
market. Upon receipt, we plan to aggressively pursue exports
to EU-GMP jurisdictions, including Israel, with the same "Everyday Premium"
strategy that has been so successful in Canada."
"With the acquisition of 100% of Balanced Health Botanicals
during the quarter, our combined Canadian and U.S. cannabis
operations generated $31.2 million in
sales, comprising 43% of Village Farms' total sales, and
$9.3 million in adjusted EBITDA, with
only a partial quarter's contribution from Balanced Health.
Balanced Health not only provides a growing and profitable
platform with exceptional cannabis experience for the U.S. CBD
market opportunity but also the potential for expansion across all
cannabinoid products, including high-THC products, as permissible
under currently evolving legislation. We continue to monitor
developments in cannabis legislation for this opportunity, as well
as the opportunity to leverage our exceptional U.S. greenhouse
operations for the U.S. high-THC market, when permitted to do
so."
"Village Farms Fresh Produce business saw improved financial
results during the third quarter as tomato pricing recovered due to
more stable retail demand amidst industry supply constraints.
We continue to manage this business with a focus on
profitability and enhancing our market share and product offerings
to our retail customers, as we are increasingly encouraged about
the future prospects for the Controlled Environment Agriculture
produce industry and our opportunities in it."
Canadian Cannabis (Pure Sunfarms) Third Quarter and Other
Recent Highlights
(Dollar Amounts are Before Village
Farms' Proportionate Share in the year ago period)
- Achieved record revenue, gross margin and adjusted EBITDA since
the launch of its retail branded products in late 2019:
-
- 53% year-over-year growth and 13% sequential growth in total
net sales to C$34.5 million
(US$27.4 million);
- 44% gross margin, above the Company's stated target range of 30
to 40%;
- 93% year-over-year and 20% sequential growth in Adjusted EBITDA
to C$10.9 million (US$8.6 million), the 12th consecutive
quarter of positive Adjusted EBITDA;
- Maintained the leading market share positions in key
markets:
-
- Remained the top-selling brand* of dried flower products:
-
- In Ontario (by kilograms sold
and dollars sold) for the third quarter 2021 and for the period
since Retail Branded sales launch in October
2019;
- In Alberta** for the third
quarter 2021 and monthly since October
2020 (by dollars sold);
- In British Columbia** for the
third quarter 2021 and monthly since October
2020 (by dollars sold);
- Remained the top-selling Licensed Producer*** of dried flower
products in Ontario (by kilograms
sold and dollars sold) for the quarter ended September 30, 2021;
- Launched 31 new SKUs across four product categories;
- Completed its first export shipment of cannabis, supplying a
variety of high-quality, high-THC dried flower products to Village
Farms' minority interest investee, Australia-based Altum International Pty Ltd.
for the Australian medicinal cannabis market;
- Commenced cannabis cultivation in the completed half of its
second 1.1 million square foot greenhouse facility, Delta 2;
and,
- The certifying body of European Union Good Manufacturing
Practices (EU-GMP), EUDRA, completed inspection of the Delta 3
facility.
*
|
Based on OCS market
data for the quarter ended September 30, 2021.
|
**
|
Market share
performance data cited has been calculated by Pure Sunfarms from
sales information provided by Buddi retail store data from over 300
retailers across Alberta and British Columbia as of September 30,
2021.
|
***
|
Market share
performance and data cited has been calculated by Pure Sunfarms
from sales information provided by OCS as of September 30,
2021.
|
Canadian Cannabis (Pure Sunfarms) Financial Summary for the
Three and Nine Months Ended September 30,
2021 and September 30, 2020
(Before Village Farms' Proportionate Share)
(millions except %
metrics)
|
Three Months Ended
September 30,
|
|
|
2021
|
2020
|
Change of
C$
|
|
C$
|
US$
|
C$
|
US$
|
|
Total Gross
Sales
|
$45.6
|
$36.2
|
$28.8
|
$21.6
|
+59%
|
Total Net
Sales
|
$34.5
|
$27.4
|
$22.6
|
$17.1
|
+53%
|
Gross Margin
1
|
44%
|
44%
|
34%
|
34%
|
+26%
|
SG&A
|
$6.7
|
$5.4
|
$3.3
|
$2.4
|
-106%
|
Share-based
compensation
|
$0.3
|
$0.2
|
$0.0
|
$0.0
|
N/A
|
Net
income
|
$6.7
|
$5.3
|
$2.8
|
$2.0
|
+140%
|
Adjusted EBITDA
3
|
$10.9
|
$8.6
|
$5.7
|
$4.3
|
+93%
|
Adjusted EBITDA
Margin 3
|
32%
|
31%
|
25%
|
25%
|
+26%
|
|
|
|
|
|
|
(millions except %
metrics)
|
Nine Months Ended
September 30,
|
|
|
2021
|
2020
|
Change of
C$
|
|
C$
|
US$
|
C$
|
US$
|
|
Total Gross
Sales
|
$118.1
|
$94.5
|
$69.6
|
$51.4
|
+70%
|
Total Net
Sales
|
$87.0
|
$69.6
|
$53.5
|
$39.6
|
+63%
|
Gross Margin
1
|
39%
|
39%
|
40%
|
40%
|
-3%
|
SG&A
|
$17.1
|
$13.7
|
$9.1
|
$6.7
|
-88%
|
Share-based
compensation
|
$1.9
|
$1.5
|
$0.0
|
$0.0
|
N/A
|
Net (loss) income
2
|
$7.1
|
$5.7
|
$12.4
|
$9.0
|
-43%
|
Adjusted EBITDA
3
|
$23.1
|
$18.5
|
$14.9
|
$11.0
|
+55%
|
Adjusted EBITDA
Margin 3
|
27%
|
27%
|
28%
|
28%
|
-4%
|
1.
|
Gross margin for the
three months ended September 30, 2021 excludes the (C$1,534)
(US$1,217) reduction in cost of sales and for the nine months ended
September 30, 2021 excludes the C$2,291 (US$1,841) charge,
respectively, inventory adjustment from the revaluation of
inventory to fair value at the acquisition date of November 2,
2020.
|
2.
|
Net income includes
C$6,044 (US$4,348) of debt forgiveness income as an outcome of the
"Settlement Agreement" in March 2020 between Pure Sunfarms, Emerald
Health Therapeutics and the Company.
|
3.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standard
meaning prescribed in by GAAP. See "Non-GAAP Measures"
below.
|
Canadian Cannabis (Pure Sunfarms) Sales Composition by
Product Group
|
Three months
ended
September 30,
|
Nine months
ended
September 30,
|
Channel
|
2021
|
2020
|
2021
|
2020
|
Retail,
Flower
|
59%
|
49%
|
64%
|
52%
|
Retail, Oil & 2.0
Product
|
7%
|
4%
|
9%
|
2%
|
Wholesale, Flower and
Trim
|
34%
|
47%
|
27%
|
46%
|
Village Farms' Third Quarter and Other Recent
Highlights
- Total cannabis sales (Pure Sunfarms and Balanced Health
Botanicals combined) were $31.2
million, which included Pure Sunfarms sales of $27.4 million and Balanced Health sales of
$3.8 million;
- Total Canada and U.S. cannabis
adjusted EBITDA (Pure Sunfarms and Balanced Health Botanicals
combined) was $9.3 million, which
included Pure Sunfarms Adjusted EBITDA of $8.6 million and Balanced Health Adjusted EBITDA
of $0.7 million;
- Improved financial results from Village Farms Fresh Produce,
with positive Adjusted EBITDA of $1.4
million as pricing trended upward toward historical levels
following one of the lowest pricing environments for
tomatoes-on-the-vine and beefsteak varieties in the past ten years
during the first half of 2021;
- Acquired 100% interest of profitable Colorado-based CBD-platform Balanced Health
Botanicals, which owns and operates one of the leading brands in
the U.S. CBD market, providing immediate entry into that market in
a consumer products category adjacent to the high-THC cannabis
market, as well as the broader consumer packaged goods (CPG)
wellness arena;
- Balanced Health Botanicals expanded its product portfolio with
the launch of its innovative Synergy Collection, developed to
enhance the multitude of benefits offered by the hemp plant and
other ingredients beyond CBD alone;
- Entered into an option agreement whereby the Company has the
right to acquire an 80% ownership interest in Netherlands-based Leli
Holland B.V., one of ten applicants selected by lottery to
receive a license (subject to customary government approval) to
legally cultivate and distribute cannabis to retailers under the
Dutch government's Experiment to Investigate Closed Cannabis Supply
Chains; and,
- Unveiled new corporate branding embodies the Company's
evolution over the last four years to a vertically integrated
plant-based consumer products company, targeting high-growth,
large-market opportunities in North
America and around the world, including cannabinoids,
related wellness products and fresh produce.
The Company's financial statements for the three and nine months
ended September 30, 2021, as well as
the comparative periods for 2020, have been prepared and presented
in conformity with accounting principles generally accepted in
the United States of America
("GAAP"). On September 30, 2021,
Village Farms owned 100% of Pure Sunfarms Corp. ("Pure Sunfarms"),
after the acquisition was completed on November 2, 2020. Accordingly, for the
three and nine months ended September 30,
2021, Pure Sunfarms' financial results are presented in the
Cannabis sector and consolidated with Village Farms' results.
For the three and nine months ended September 30, 2020, Pure Sunfarms is accounted
for on a proportionate basis within "Equity Earnings from
Unconsolidated Entities". Village Farms acquired 100% of Balanced
Health on August 16, 2021 and their
financial results for August 16, 2021
through September 30, 2021 are
presented within the Cannabis sector and consolidated with Village
Farms' financial results for the three and nine months ended
September 30, 2021.
Village Farms' Consolidated Financial Summary for the Three
and Nine Months Ended September 30,
2021 and September 30, 2020
and Corporate Highlights
($US millions except
per share
metric)
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
Sales1
|
$72.4
|
$43.0
|
+68%
|
$195.2
|
$122.7
|
+59%
|
Produce
|
$41.2
|
$42.9
|
-4%
|
$121.6
|
$122.3
|
-1%
|
Cannabis2
|
$31.2
|
$0.0
|
N/A
|
$73.4
|
$0.0
|
N/A
|
VFCE
|
$0.0
|
$0.1
|
-43%
|
$0.2
|
$0.4
|
-45%
|
Net Income
(Loss)1
|
$0.7
|
$0.5
|
+43%
|
($11.2)
|
$4.6
|
-343%
|
Income (Loss) Per
Share1
|
$0.01
|
$0.01
|
0%
|
($0.14)
|
$0.08
|
-275%
|
Adjusted
EBITDA1, 3
|
$6.7
|
$4.6
|
49%
|
$8.7
|
$7.9
|
+10%
|
Produce
|
$1.4
|
$4.7
|
-71%
|
($3.1)
|
$7.2
|
-143%
|
Cannabis2
|
$9.3
|
$2.5
|
+270%
|
$19.2
|
$6.4
|
+202%
|
VFCE
|
($0.2)
|
($0.1)
|
-39%
|
($0.3)
|
($0.2)
|
-16%
|
Corporate
|
($3.8)
|
($2.5)
|
-48%
|
($7.1)
|
($5.5)
|
-30%
|
1.
|
Sales, Net Income,
Income (Loss) per share and Adjusted EBITDA includes results from
Pure Sunfarms and Balanced Health pursuant to the Company's
statutory reporting requirements.
|
2.
|
Cannabis includes the
results of Cannabis – U.S and Cannabis – Canada.
|
3.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standard
meaning prescribed by GAAP. See "Non-GAAP Measures"
below.
|
Response to the Ongoing Coronavirus Pandemic
In March 2020, the World Health
Organization declared the outbreak of the COVID-19 virus a global
pandemic. This outbreak continues to cause major disruptions to
businesses and markets worldwide as the virus continues to spread.
A number of countries as well as certain states and cities within
the United States and Canada have enacted temporary closures of
businesses, issued quarantine or shelter-in-place orders, and taken
other restrictive measures in response to COVID-19. To date, all of
our operations are operating normally and abiding by applicable
restrictions, however, the extent to which COVID-19 and the related
global economic crisis affect our business, results of operations
and financial condition, will depend on future developments that
are highly uncertain and cannot be predicted, including the scope
and duration of the pandemic and any recovery period, future
actions taken by governmental authorities, central banks and other
third parties (including new financial regulation and other
regulatory reform) in response to the pandemic, and the effects on
our produce, clients, vendors and employees. We continue to service
our customers amid uncertainty and disruption linked to COVID-19
and we are actively managing our business to respond to the
impact.
Summary Statutory Results
(in thousands of U.S.
Dollars unless otherwise indicated)
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2021 1
|
|
|
2020 1
|
|
|
2021 1
|
|
|
2020 1
|
|
Sales
|
|
$
|
72,442
|
|
|
$
|
43,037
|
|
|
$
|
195,212
|
|
|
$
|
122,722
|
|
Cost of
sales
|
|
|
(54,693)
|
|
|
|
(37,418)
|
|
|
|
(169,891)
|
|
|
|
(112,809)
|
|
Gross
margin
|
|
|
17,749
|
|
|
|
5,619
|
|
|
|
25,321
|
|
|
|
9,913
|
|
Selling, general and
administrative expenses
|
|
|
(13,132)
|
|
|
|
(4,942)
|
|
|
|
(30,249)
|
|
|
|
(12,676)
|
|
Share-based
compensation
|
|
|
(1,820)
|
|
|
|
(472)
|
|
|
|
(5,705)
|
|
|
|
(1,329)
|
|
Interest
expense
|
|
|
(620)
|
|
|
|
(299)
|
|
|
|
(1,959)
|
|
|
|
(1,273)
|
|
Interest
income
|
|
|
50
|
|
|
|
101
|
|
|
|
99
|
|
|
|
577
|
|
Foreign exchange
loss
|
|
|
(324)
|
|
|
|
(484)
|
|
|
|
(635)
|
|
|
|
(880)
|
|
Gain on settlement
agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,681
|
|
Other (expense)
income
|
|
|
(119)
|
|
|
|
27
|
|
|
|
(354)
|
|
|
|
92
|
|
Loss on disposal of
assets
|
|
|
—
|
|
|
|
—
|
|
|
|
(40)
|
|
|
|
(6)
|
|
(Provision for)
recovery of income taxes
|
|
|
(1,077)
|
|
|
|
(336)
|
|
|
|
2,543
|
|
|
|
607
|
|
Income (loss) from
consolidated entities after income
taxes
|
|
|
707
|
|
|
|
(786)
|
|
|
|
(10,979)
|
|
|
|
(294)
|
|
Equity earnings
(losses) of unconsolidated entities
|
|
|
38
|
|
|
|
1,306
|
|
|
|
(175)
|
|
|
|
4,885
|
|
Net income
(loss)
|
|
$
|
745
|
|
|
$
|
520
|
|
|
$
|
(11,154)
|
|
|
$
|
4,591
|
|
Adjusted EBITDA
2
|
|
$
|
6,785
|
|
|
$
|
4,556
|
|
|
$
|
8,736
|
|
|
$
|
7,921
|
|
Earnings (loss) per
share – basic
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
(0.14)
|
|
|
$
|
0.08
|
|
Earnings (loss) per
share – basic
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
(0.14)
|
|
|
$
|
0.08
|
|
Net income
(loss)
|
|
$
|
745
|
|
|
$
|
520
|
|
|
$
|
(11,154)
|
|
|
$
|
4,591
|
|
Other comprehensive
(loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(3,912)
|
|
|
|
31
|
|
|
|
165
|
|
|
|
(41)
|
|
Comprehensive (loss)
income
|
|
$
|
(3,167)
|
|
|
$
|
551
|
|
|
$
|
(10,989)
|
|
|
$
|
4,550
|
|
1.
|
For the three and
nine months ended September 30, 2021, Pure Sunfarms is fully
consolidated in the financial results of the Company. For the three
and nine months ended September 30, 2020, Village Farms'
proportionate share of Pure Sunfarms earnings are reflected in
equity (losses) earnings of unconsolidated entities. For the three
and nine months ended September 30, 2021, Balanced Health's
financial results of August 16, 2021 to September 30, 2021 are
fully consolidated in the financial results of the
Company.
|
2.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standardized
meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers. See
"Non-GAAP Measures" for a definition and reconciliation of Adjusted
EBITDA to net (loss) income, the nearest comparable measurement
under GAAP. Management believes that Adjusted EBITDA is a useful
supplemental measure in evaluating the performance of the Company.
Adjusted EBITDA includes the Company's majority non-controlling
interest in Pure Sunfarms (through November 1, 2020), and 65%
interest in VFH.
|
Discussion of Financial Results
A discussion of our consolidated results for the three and nine
months ended September 30, 2021 and
2020 is included below. The consolidated results include public
company expenses and all four of our operating segments: Produce,
Cannabis-Canada, Cannabis-U.S. and clean energy. The remaining
41.3% interest in Pure Sunfarms was acquired by Village Farms on
November 2, 2020; for the three and
nine months ended September 30, 2021,
the operating results of Pure Sunfarms are consolidated in our
Consolidated Statements of Income (Loss), and for the three and
nine months ended September 30, 2020,
Pure Sunfarms' results are included in equity earnings from
unconsolidated entities in our Consolidated Statements of Income
(Loss). Village Farms acquired 100% interest of Balanced Health on
August 16, 2021 and as such, its
results from August 16, 2021to
September 30, 2021 are consolidated
in our Consolidated Statements of Income (Loss) for the three and
nine months ended September 30, 2021
and their results are immediately accretive to the Company's
operations.
Under "Cannabis-–Canada Segment Results", we also present a
discussion of the operating results of Pure Sunfarms, before any
allocation to Village Farms, which were not consolidated in our
financial results for the three and nine months ended September 30, 2020 but were consolidated in our
results for the three and nine months ended September 30, 2021. As a result of the Pure
Sunfarms Acquisition, Pure Sunfarms recognized an increase in the
fair value of its inventory on-hand on the acquisition date,
resulting in a $1,217 reduction to
cost of sales in the third quarter of 2021 and a ($1,841) charge to cost of sales for the nine
months ended September 30, 2021 from
the revaluation of its inventory to fair value. This is a non-cash
accounting charge to cost of sales and should be adjusted for when
analyzing the actual operational results of Pure Sunfarms.
Under "Cannabis Segment Results – U.S.", we present a discussion
of the operating results of Balanced Health for the period of
August 16, 2021 to September 30, 2021, which were consolidated in
the Company's financial results for the three and nine months ended
September 30, 2021.
CONSOLIDATED RESULTS
Three Months Ended September 30,
2021 Compared to Three Months Ended September 30, 2020
Sales
Sales for the three months ended September 30, 2021 were $72,442 as compared to $43,037 for the three months ended September 30, 2020. The increase in sales was
primarily due to the inclusion of the Canadian cannabis Q3 2021
revenues of $27,393, the addition of
U.S. cannabis Q3 2021 post-acquisition revenues of $3,838 and an increase in produce grower partner
sales of $4,189, which were partially
offset by a decrease in our own produce sales of ($5,970). The produce grower partner sales
increase was due to higher volumes of pounds sold of tomatoes,
peppers, cucumbers and mini-cucumbers. The decrease in our own
produce sales was due to a (17%) decrease in the average selling
price of tomatoes in the three months ended September 30, 2021 versus September 30, 2020 along with a (10%) decrease in
our own production volume. The produce price decrease is the result
of a market supply overage from an increase in Canadian and U.S.
tomato production, primarily affecting the commodity prices of
beefsteak and tomato-on-the-vine varieties. The decrease in our own
production volume was due to effects of the tomato viruses on our
crops and the corresponding greenhouse clean-out efforts at all
Texas facilities in an attempt to
eradicate the tomato viruses prior to planting the next crop
cycle.
Cost of Sales
Cost of sales for the three months ended September 30, 2021 were $54,693 as compared to $37,418 for the three months ended September 30, 2020. The increase in cost of sales
was primarily due to the addition of Canadian cannabis Q3 2021 cost
of sales of $14,244, the inclusion of
U.S. cannabis Q3 2021 post-acquisition cost of sales of
$1,231 and higher produce grower
partner costs of $3,844, which were
partially offset by a reduction in our produce costs of
($1,851). The Q3 2021 cost of sales
for Pure Sunfarms includes a $1,217
reduction in cost of sales from the revaluation of its inventory to
fair value at acquisition date. The increase in produce grower
partner cost of sales was driven by higher volumes of pounds sold.
The decrease in our own produce costs was primarily due to the
(10%) decrease in production volume.
Gross Margin
Gross margin for the three months ended September 30, 2021 increased $12,130 or 216% to $17,749, or a 25% gross margin, in comparison to
$5,619, or a 13% gross margin, for
the three months ended September 30,
2020. The positive variance between periods is primarily
attributable to Canadian cannabis Q3 2021 gross margin of
$13,149, U.S. cannabis Q3 2021
post-acquisition gross margin of $2,607 and higher produce grower partner gross
margin of $345, which were partially
offset by lower gross margin from our own produce assets of
($4,119).
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three
months ended September 30, 2021 increased $8,190 or 166% to $13,132 compared to $4,942 for the three months ended September 30, 2020. The increase in selling,
general and administrative expenses was primarily due to the
inclusion of Canadian cannabis Q3 2021 expenses of $5,324, U.S. cannabis Q3 2021 post-acquisition
expenses of $2,062 and an increase in
corporate expenses, primarily related to public company costs such
as legal and regulatory fees and incremental costs of U.S.
reporting compliance along with the transaction and legal expenses
associated with the acquisition of Balanced Health.
Share-Based Compensation
Share-based compensation expenses for the three months ended
September 30, 2021 were $1,820 as compared to $472 for the three months ended September 30, 2020. The increase in share-based
compensation was primarily due to the vesting of performance shares
earned by key corporate and operational employees in Q3 2021 as
compared to Q3 2020 and the cost of stock options for Canadian and
U.S. cannabis management of $249 in
Q3 2021 versus nil in Q3 2020.
Equity Earnings from Unconsolidated
Entities
Our share of earnings from our joint ventures for the three
months ended September 30, 2021 was $38 compared to earnings of $1,306 for the three months ended
September 30, 2020. The Q3 2021 equity earnings include only
our proportionate share of the earnings of Village Fields Hemp
("VFH") compared to Q3 2020 which includes our proportionate share
of the earnings of Pure Sunfarms and VFH. After completion of the
Pure Sunfarms Acquisition on November 2,
2020, Village Farms began fully consolidating operating
results of Pure Sunfarms and its results are presented in the
Company's consolidated operating results for the three months ended
September 30, 2021. For information
regarding the results of operations from our joint ventures, see
"Reconciliation of U.S. GAAP Results to Proportionate Results"
below.
Net Income
Net income for the three months ended September 30, 2021 was $745 as compared to $520 for the three months ended September 30, 2020. The 43% increase in net
income was primarily due to an improved operating profit for the
Canadian cannabis segment and the addition of the U.S. cannabis
segment's operating profit in the three months ended September 30, 2021 as compared to September 30, 2020.
Adjusted EBITDA
Adjusted EBITDA for the three months ended September 30, 2021 was $6,785 compared to $4,556 for the three months ended September 30, 2020. The 49% increase in adjusted
EBITDA was primarily due to improved operating results of the
cannabis business which includes the addition of the U.S. cannabis
segment's positive operating results, partially offset by the lower
operating profit of the produce business and an increase in
corporate expenses. See the reconciliation of Adjusted EBITDA to
net income in "Non-GAAP Measures—Reconciliation of Net Earnings to
Adjusted EBITDA".
CANNABIS SEGMENT RESULTS - CANADA
The Canadian cannabis segment currently consists of Pure
Sunfarms. Pure Sunfarms' comparative analysis are based on the
consolidated results of Pure Sunfarms for the three and nine months
ended September 30, 2021 and
September 30, 2020, not accounting
for the percentage owned by Village Farms. See "Reconciliation of
U.S. GAAP Results to Proportionate Results" for a presentation of
the cannabis segment's proportionate results for the three and nine
months ended September 30, 2021 and
September 30, 2020.
Three Months Ended September 30,
2021 Compared to Three Months Ended June 30, 2021
Sales
Canadian cannabis net sales for the three months ended
September 30, 2021 were $27,393 (C$34,508)
as compared to $24,761 (C$30,418) for the three months ended
June 30, 2021. The sequential net
sales increase was comprised of a 1% increase in branded sales and
a 48% increase in non-branded sales. For the three months ended
September 30, 2021, 59% of revenue
was generated from branded flower and pre-rolls and 7% of revenue
from branded oils, edibles and vapes ("Cannabis Derivative
Products") as compared to 66% of revenue from branded flower and
pre-rolls and 8% of revenue from Cannabis Derivative Products for
the three months ended June 30, 2021.
For the three months ended September 30,
2021, non-branded sales represented 34% of revenues compared
to 26% for the three months ended June 30,
2021. The Canadian cannabis segment continues to experience
strong demand for its branded flower amidst what continues to be a
congested market. The increase in non-branded sales was largely
attributable to the availability of high-potency flower and trim to
meet demand from other licensed producers ("LPs") in the wholesale
market.
Cost of Sales
Canadian cannabis cost of sales for the three months ended
September 30, 2021 was $14,244 (C$17,947)
as compared to $14,941 (C$18,328) for the three months ended
June 30, 2021. As a result of the
Pure Sunfarms Acquisition, Pure Sunfarms recognized an increase in
the fair value of its inventory on the acquisition date, resulting
in a $1,217 (C$1,534) reduction to cost of sales in the third
quarter of 2021 and a ($133)
(C$145) charge to cost of sales in
the second quarter of 2021 from the revaluation of its inventory to
fair value. This is a non-cash accounting charge to cost of sales
and should be adjusted for when analyzing the actual operational
results of the Canadian cannabis segment. The decrease in cost of
sales between the periods was driven by the lower charge from the
revaluation of inventory to fair value at acquisition date. In
addition, cost of sales (excluding the non-cash accounting charge)
as a percentage of revenue decreased to 56% from 60% for the
sequential quarter as our cost of production decreased due to
increased yields in cultivation which has a downward impact on the
cost per gram.
Gross Margin
Gross margin for the three months ended September 30, 2021 increased $3,329 (C$4,471) to
$13,149 (C$16,561), or a 48% gross margin, in comparison
to $9,820 (C$12,090), or a 40% gross margin, for the three
months ended June 30, 2021. Excluding
the Pure Sunfarms' purchase price inventory adjustment of
($1,217) (C$1,534), gross margin for the three months
ended September 30, 2021 increased
$1,979 (C$2,792) to $11,932 (C$15,027),
or a 44% gross margin, in comparison to $9,953 (C$12,235),
or a 40% gross margin, excluding the Pure Sunfarms' purchase price
inventory adjustment of $133
(C$145) for the three months ended
June 30, 2021. The increase in gross
margin between sequential periods was attributable to an increase
in gross margin for both branded and non-branded sales, due largely
to an increase in yields which in turn lowers the cost of
production, and availability of higher potency products which
results in higher sales prices, both of which positively impact
gross margin.
Selling, General and Administrative Expenses
Canadian cannabis selling, general and administrative expenses
for the three months ended September 30,
2021 were $5,324 (C$6,702), or 19% of sales compared to
$4,370 (C$5,368), or 18% of sales for the three months
ended June 30, 2021. The increase in
selling, general and administrative expenses as a percentage of
sales for the three months ended September
30, 2021 in comparison to the three months ended
June 30, 2021 was due to an increase
in brand and commercial activities such as media and trade spend as
well as higher workforce and IT expenses to support the increase in
point-of-purchase sales and market share growth, especially in
flower.
Share-Based Compensation
Share-based compensation expenses for the three months ended
September 30, 2021 were $186 (C$234) as
compared to $191 (C$234) for the three months ended June 30, 2021.
Net Income
Canadian cannabis net income for the three months ended
September 30, 2021 was $5,287 (C$6,661) as
compared to net income of $3,221
($3,988) for the three months ended
June 30, 2021. The higher net income
between periods was primarily driven by a higher gross margin from
an increase in non-branded sales while selling, general and
administrative expenses remained relatively consistent as a
percentage of revenue.
Adjusted EBITDA
Adjusted EBITDA for the three months ended September 30, 2021 and June 30, 2021 was $8,627 (C$10,867)
and $7,369 (C$9,124), respectively, representing an increase
of 17%. The increase in Adjusted EBITDA was driven by growth of
non-branded sales and an increase in gross margin in the three
months ended September 30, 2021 as
compared to the three months ended June 30,
2021.
Three Months Ended September 30,
2021 Compared to Three Months Ended September 30, 2020
Sales
Canadian cannabis net sales for the three months ended
September 30, 2021 were $27,393 (C$34,508)
as compared to $17,048 (C$22,627) for the three months ended
September 30, 2020. The net sales
increase was comprised of an 91% increase in branded sales and a
10% increase in non-branded sales. For the three months ended
September 30, 2021, 59% of revenue
was generated from branded flower and pre-rolls and 7% of revenue
from Cannabis Derivative Products as compared to 48% of revenue
from branded flower and pre-rolls and 5% of revenue from Cannabis
Derivative Products, as Pure Sunfarms launched Cannabis Derivative
Products in Q3 2020. The sales increase was due to the impact of
store openings throughout Canada
combined with increased production and availability of high-quality
flower. Non-branded sales also benefited from store openings and
the growth of the Cannabis Derivative Products in the broader
market which in turn increased demand for cannabis biomass sold to
other LPs. For the three months ended September 30, 2021, non-branded sales represented
34% of revenues compared to 47% for the three months ended
September 30, 2020.
Cost of Sales
Canadian cannabis cost of sales for the three months ended
September 30, 2021 was $14,244 (C$17,947)
as compared to $11,154 (C$14,826) for the three months ended
September 30, 2020. The Q3 2021 cost
of sales for Pure Sunfarms includes a $1,217 (C$1,534)
reduction in costs of sales from the revaluation of its inventory
to fair value at acquisition date and the Q3 2020 cost of sales
includes an inventory write down of ($1,042) (C$1,412)
for distillate purchased from third party extraction companies for
which the market value had decreased since initial purchase. The
increase in cost of sales between periods was driven by an increase
in net sales, including a higher volume of branded sales which
require incremental costs for manufacturing, packaging and
distribution. However, cost of sales as a percentage of revenue
decreased between comparable periods due to increased production
efficiencies in Q3 2021.
Gross Margin
Gross margin for the three months ended September 30, 2021 increased $7,255 (C$8,760) to
$13,149 (C$16,561), or a 48% gross margin, in comparison
to $5,894 (C$7,801), or a 35% gross margin, for the three
months ended September 30, 2020. The
Q3 2021 gross margin includes a Pure Sunfarms $1,217 (C$1,534)
positive impact from the revaluation of its inventory to fair value
at acquisition date and the Q3 2020 gross margin includes the
negative impact of the ($1,042)
(C$1,412) distillate inventory write
down. The increase in gross margin between periods was primarily
due to an increase in yields which has a downward impact on cost of
sales along with production efficiencies which also positively
impact gross margin.
Selling, General and Administrative Expenses
Canadian cannabis selling, general and administrative expenses
for the three months ended September 30,
2021 were $5,324 (C$6,702) compared to $2,447 (C$3,261)
for the three months ended September 30,
2020. The increase in selling, general and administrative
expenses for the three months ended September 30, 2021 in comparison to the three
months ended September 30, 2020 was
primarily due to additional headcount to support the growth of the
Canadian cannabis business.
Share-Based Compensation
Share-based compensation expenses for the three months ended
September 30, 2021 were $186 (C$234) as
compared to nil for the three months ended September 30, 2020. The increase in share-based
compensation is due to the cost of stock options for Canadian
cannabis management.
Net Income
Canadian cannabis net income for the three months ended
September 30, 2021 was $5,287 (C$6,661) as
compared to $2,081 (C$2,779) for the three months ended September 30, 2020. The higher net income between
periods was driven by higher net sales, gross margin and operating
profit.
Adjusted EBITDA
Adjusted EBITDA for the three months ended September 30, 2021 and September 30, 2020 was $8,627 (C$10,867)
and $4,250 (C$5,642), respectively, representing an increase
of 103%. The increase in Adjusted EBITDA was driven by higher net
sales and gross margin in the three months ended September 30, 2021 as compared to the three
months ended September 30, 2020.
CANNABIS SEGMENT RESULTS – UNITED
STATES
The U.S. cannabis segment currently consists of Balanced Health.
For the three and nine months ended September 30, 2021, U.S. cannabis financial
results are based on the consolidated results of Balanced Health
from the closing date of the acquisition of August 16, 2021, as the results of Balanced
Health from August 16, 2021 through
September 30, 2021 are consolidated
in the Company's results.
Sales
U.S. cannabis net sales for the period of August 16, 2021 to September 30, 2021 were $3,838. Over 99% of sales are generated in
the United States and gross sales
are composed of 80% from e-commerce sales, 17% from retail sales,
3% from shipping income and 1% from bulk sales offset by a (1%)
loyalty program impact as loyalty program customers generate
loyalty points that may be used when purchasing Balanced Health
products.
Cost of Sales
U.S. cannabis cost of sales for the period of August 16, 2021 to September 30, 2021 were $1,231. Cost of sales can be primarily attributed
directly to e-commerce, retail and bulk cost of sales with all
other costs of sales categorized within other manufacturing costs
including expenses such as warehouse expenses, freight and shipping
supplies.
Gross Margin
U.S. cannabis gross margin for the period of August 16, 2021 to September 30, 2021 was $2,607 or 68%.
Selling, General and Administrative Expenses
U.S. cannabis selling general and administrative expenses for
the period of August 16, 2021 to
September 30, 2021 was $2,125. As the U.S. cannabis business derives a
significant number of sales through its online technology
platforms, the primary expense categories within selling, general
and administrative include sales and marketing of 41%, merchant
fees of 14%, e-commerce support of 14% and IT services of 9%.
Share-Based Compensation
U.S. cannabis share-based compensation for the period of
August 16, 2021 to September 30, 2021 was $63. The share-based compensation is due to the
cost of stock options for U.S. cannabis management.
Net Income
U.S. cannabis net income for the period of August 16, 2021 to September 30, 2021 was $300 due primarily to the gross margin of
68%.
Adjusted EBITDA
U.S. cannabis adjusted EBITDA for the period of August 16, 2021 to September 30, 2021 was $672 and is due primarily to the operating
profit.
Reconciliation of Consolidated Net Income to Adjusted
EBITDA
The following table reflects a reconciliation of net income to
Adjusted EBITDA, as presented by the Company:
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
(in thousands of
U.S. dollars)
|
|
2021
1
|
|
|
2020
1
|
|
|
2021
1
|
|
|
2020
1
|
|
Net (loss)
income
|
|
$
|
745
|
|
|
$
|
520
|
|
|
$
|
(11,154)
|
|
|
$
|
4,591
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
3,306
|
|
|
|
1,518
|
|
|
|
10,616
|
|
|
|
4,540
|
|
Foreign currency
exchange loss
|
|
|
286
|
|
|
|
484
|
|
|
|
521
|
|
|
|
880
|
|
Interest expense,
net
|
|
|
570
|
|
|
|
198
|
|
|
|
1,860
|
|
|
|
696
|
|
Recovery of income
taxes
|
|
|
1,077
|
|
|
|
336
|
|
|
|
(2,543)
|
|
|
|
(607)
|
|
Share-based
compensation
|
|
|
1,820
|
|
|
|
472
|
|
|
|
5,705
|
|
|
|
1,329
|
|
Interest expense for
JVs
|
|
|
13
|
|
|
|
240
|
|
|
|
40
|
|
|
|
636
|
|
Amortization for
JVs
|
|
|
(64)
|
|
|
|
598
|
|
|
|
—
|
|
|
|
1,276
|
|
Foreign currency
exchange loss for JVs
|
|
|
—
|
|
|
|
33
|
|
|
|
—
|
|
|
|
118
|
|
Provision for income
taxes for JVs
|
|
|
—
|
|
|
|
245
|
|
|
|
—
|
|
|
|
1,736
|
|
Deferred financing
fees
|
|
|
68
|
|
|
|
—
|
|
|
|
234
|
|
|
|
—
|
|
Incremental utility
costs due to storm
|
|
|
—
|
|
|
|
—
|
|
|
|
1,400
|
|
|
|
—
|
|
Purchase price
adjustment 2
|
|
|
(1,217)
|
|
|
|
—
|
|
|
|
1,841
|
|
|
|
—
|
|
Other
expense
|
|
|
181
|
|
|
|
—
|
|
|
|
181
|
|
|
|
—
|
|
Gain on settlement
agreement 3
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,681)
|
|
Gain on settlement of
net liabilities from JV
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,496)
|
|
Gain on disposal of
assets
|
|
|
—
|
|
|
|
(88)
|
|
|
|
35
|
|
|
|
(97)
|
|
Adjusted EBITDA
4
|
|
$
|
6,785
|
|
|
$
|
4,556
|
|
|
$
|
8,736
|
|
|
$
|
7,921
|
|
Adjusted EBITDA for
JVs (See table below)
|
|
$
|
(13)
|
|
|
$
|
2,333
|
|
|
$
|
(140)
|
|
|
$
|
6,050
|
|
Adjusted EBITDA
excluding JVs
|
|
$
|
6,798
|
|
|
$
|
2,223
|
|
|
$
|
8,876
|
|
|
$
|
1,871
|
|
1.
|
For the three and
nine months ended September 30, 2021, Pure Sunfarms is fully
consolidated in the financial results of the Company. For the three
and nine months ended September 30, 2020, our share of Pure
Sunfarms' earnings is reflected in equity earnings of
unconsolidated entities. For the three and nine months ended
September 30, 2021, Balanced Health's financial results from August
16, 2021 to September 30, 2021 are fully consolidated in the
financial results of the Company.
|
2.
|
The purchase price
adjustment primarily reflects the non-cash accounting
charge/(positive impact) resulting from the revaluation of Pure
Sunfarms' inventory to fair value at the acquisition
date.
|
3.
|
See "Results of
Operations – Consolidated Results – Gain on Settlement Agreement"
above.
|
4.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standardized
meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers.
Management believes that Adjusted EBITDA is a useful supplemental
measure in evaluating the performance of the Company. Adjusted
EBITDA includes the Company's majority non-controlling interest in
Pure Sunfarms (through November 1, 2020), and 65% interest in
VFH.
|
Breakout of JV
Adjusted
EBITDA
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
(in thousands of
U.S. dollars)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Pure Sunfarms
Adjusted
EBITDA
|
|
$
|
—
|
|
|
$
|
2,511
|
|
|
$
|
—
|
|
|
$
|
6,365
|
|
VFH Adjusted
EBITDA
|
|
|
(13)
|
|
|
|
(178)
|
|
|
|
(140)
|
|
|
|
(315)
|
|
Total JV Adjusted
EBITDA
|
|
$
|
(13)
|
|
|
$
|
2,333
|
|
|
$
|
(140)
|
|
|
$
|
6,050
|
|
Reconciliation of Consolidated U.S. GAAP Results to
Proportionate Results
The following tables are a reconciliation of the GAAP results to
the proportionate results (which include our proportionate share of
the joint venture operations, Pure Sunfarms and VFH ). Pure
Sunfarms was a joint venture until the Company acquired 100%
ownership on November 2, 2020.The
tables reflect the full statements of income for Pure Sunfarms and
VFH multiplied by the ownership percentage of the Company (versus
presenting the results of these joint ventures in Equity Earnings
from Unconsolidated Entities):
|
|
For the Three
months ended September 30, 2021
|
|
|
|
Produce
|
|
Cannabis1,2
|
|
Clean
Energy
|
|
Corporate
|
|
Hemp1
|
|
Total
|
|
Sales
|
|
$
|
41,152
|
|
$
|
31,231
|
|
$
|
59
|
|
$
|
—
|
|
$
|
7
|
|
$
|
72,449
|
|
Cost of
sales
|
|
|
(39,099)
|
|
|
(15,475)
|
|
|
(119)
|
|
|
—
|
|
|
52
|
|
|
(54,641)
|
|
Selling, general and
administrative
expenses
|
|
|
(2,239)
|
|
|
(7,387)
|
|
|
(59)
|
|
|
(3,447)
|
|
|
(8)
|
|
|
(13,140)
|
|
Share-based
compensation
|
|
|
—
|
|
|
(249)
|
|
|
—
|
|
|
(1,571)
|
|
|
—
|
|
|
(1,820)
|
|
Loss on disposal of
assets
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other expense
(expense), net
|
|
|
(798)
|
|
|
(69)
|
|
|
(8)
|
|
|
(133)
|
|
|
(18)
|
|
|
(1,026)
|
|
Recovery of income
taxes
|
|
|
(497)
|
|
|
(2,024)
|
|
|
—
|
|
|
1,444
|
|
|
—
|
|
|
(1,077)
|
|
Net (loss)
income
|
|
$
|
(1,481)
|
|
$
|
6,027
|
|
$
|
(127)
|
|
$
|
(3,707)
|
|
$
|
33
|
|
|
745
|
|
Adjusted
EBITDA 3
|
|
$
|
1,334
|
|
$
|
9,299
|
|
$
|
(118)
|
|
$
|
(3,717)
|
|
$
|
(13)
|
|
$
|
6,785
|
|
(Loss) earnings per
share – basic
|
|
$
|
(0.03)
|
|
$
|
0.07
|
|
$
|
(0.00)
|
|
$
|
(0.03)
|
|
$
|
0.00
|
|
$
|
0.01
|
|
(Loss) earnings per
share – diluted
|
|
$
|
(0.03)
|
|
$
|
0.07
|
|
$
|
(0.00)
|
|
$
|
(0.03)
|
|
$
|
0.00
|
|
$
|
0.01
|
|
|
|
For the three
months ended September 30, 2020
|
|
|
|
Produce
|
|
Cannabis1,2
|
|
Clean
Energy
|
|
Corporate
|
|
Hemp1
|
|
Total
|
|
Sales
|
|
$
|
42,933
|
|
$
|
10,007
|
|
$
|
104
|
|
$
|
—
|
|
$
|
—
|
|
$
|
53,044
|
|
Cost of
sales
|
|
|
(37,106)
|
|
|
(6,547)
|
|
|
(312)
|
|
|
—
|
|
|
—
|
|
|
(43,965)
|
|
Selling, general and
administrative
expenses
|
|
|
(2,560)
|
|
|
(1,436)
|
|
|
(36)
|
|
|
(2,346)
|
|
|
(213)
|
|
|
(6,591)
|
|
Share-based
compensation
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(472)
|
|
|
—
|
|
|
(472)
|
|
Gain on disposal of
assets
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|
89
|
|
Other (expense)
income, net
|
|
|
(696)
|
|
|
(336)
|
|
|
(13)
|
|
|
54
|
|
|
(13)
|
|
|
(1,004)
|
|
Recovery of
(provision for) income
taxes
|
|
|
(2,340)
|
|
|
(245)
|
|
|
—
|
|
|
2,004
|
|
|
—
|
|
|
(581)
|
|
Net income
(loss)
|
|
$
|
231
|
|
$
|
1,443
|
|
$
|
(257)
|
|
$
|
(760)
|
|
$
|
(137)
|
|
$
|
520
|
|
Adjusted
EBITDA 3
|
|
$
|
4,653
|
|
$
|
2,511
|
|
$
|
(85)
|
|
$
|
(2,345)
|
|
$
|
(178)
|
|
$
|
4,556
|
|
Earnings (loss) per
share - basic
|
|
$
|
0.00
|
|
$
|
0.02
|
|
$
|
(0.00)
|
|
$
|
(0.01)
|
|
$
|
(0.00)
|
|
$
|
0.01
|
|
Earnings (loss) per
share - diluted
|
|
$
|
0.00
|
|
$
|
0.02
|
|
$
|
(0.00)
|
|
$
|
(0.01)
|
|
$
|
(0.00)
|
|
$
|
0.01
|
|
|
|
For the nine
months ended September 30, 2021
|
|
|
|
Produce
|
|
Cannabis1,2
|
|
Clean
Energy
|
|
Corporate
|
|
Hemp1
|
|
Total
|
|
Sales
|
|
$
|
121,558
|
|
$
|
73,452
|
|
$
|
202
|
|
$
|
—
|
|
$
|
7
|
|
$
|
195,219
|
|
Cost of
sales
|
|
|
(122,486)
|
|
|
(45,664)
|
|
|
(1,741)
|
|
|
—
|
|
|
(38)
|
|
|
(169,929)
|
|
Selling, general and
administrative
expenses
|
|
|
(7,736)
|
|
|
(15,723)
|
|
|
(143)
|
|
|
(6,647)
|
|
|
(109)
|
|
|
(30,358)
|
|
Share-based
compensation
|
|
|
—
|
|
|
(1,534)
|
|
|
—
|
|
|
(4,171)
|
|
|
—
|
|
|
(5,705)
|
|
Loss on disposal of
assets
|
|
|
—
|
|
|
(40)
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(35)
|
|
Other expense,
net
|
|
|
(798)
|
|
|
(1,423)
|
|
|
(29)
|
|
|
(599)
|
|
|
(40)
|
|
|
(2,889)
|
|
Recovery of
(provision for) income
taxes
|
|
|
2,875
|
|
|
(2,654)
|
|
|
—
|
|
|
2,322
|
|
|
—
|
|
|
2,543
|
|
Net (loss)
income
|
|
$
|
(6,587)
|
|
$
|
6,414
|
|
$
|
(1,711)
|
|
$
|
(9,095)
|
|
$
|
(175)
|
|
$
|
(11,154)
|
|
Adjusted
EBITDA 3
|
|
$
|
(3,138)
|
|
$
|
19,202
|
|
$
|
(269)
|
|
$
|
(6,919)
|
|
$
|
(140)
|
|
$
|
8,736
|
|
(Loss) income per
share – basic
|
|
$
|
(0.08)
|
|
$
|
0.08
|
|
$
|
(0.02)
|
|
$
|
(0.12)
|
|
$
|
(0.00)
|
|
$
|
(0.14)
|
|
(Loss) income per
share – diluted
|
|
$
|
(0.08)
|
|
$
|
0.08
|
|
$
|
(0.02)
|
|
$
|
(0.12)
|
|
$
|
(0.00)
|
|
$
|
(0.14)
|
|
|
|
For the nine
months ended September 30, 2020
|
|
|
|
Produce
|
|
Cannabis1,2
|
|
Clean
Energy
|
|
Corporate
|
|
Hemp1
|
|
Total
|
|
Sales
|
|
$
|
122,356
|
|
$
|
22,958
|
|
$
|
366
|
|
$
|
—
|
|
$
|
98
|
|
$
|
145,778
|
|
Cost of
sales
|
|
|
(111,750)
|
|
|
(13,782)
|
|
|
(1,059)
|
|
|
—
|
|
|
(120)
|
|
|
(126,711)
|
|
Selling, general and
administrative
expenses
|
|
|
(7,414)
|
|
|
(3,870)
|
|
|
(146)
|
|
|
(5,116)
|
|
|
(500)
|
|
|
(17,046)
|
|
Share-based
compensation
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,329)
|
|
|
—
|
|
|
(1,329)
|
|
Gain on settlement
agreement
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,681
|
|
|
—
|
|
|
4,681
|
|
Gain on settlement of
net liabilities
|
|
|
—
|
|
|
2,496
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,496
|
|
(Loss) gain on
disposal of assets
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(6)
|
|
|
99
|
|
|
98
|
|
Other expense,
net
|
|
|
(696)
|
|
|
(634)
|
|
|
(44)
|
|
|
(744)
|
|
|
(129)
|
|
|
(2,247)
|
|
Recovery of
(provision for) income
taxes
|
|
|
(939)
|
|
|
(1,736)
|
|
|
—
|
|
|
1,546
|
|
|
—
|
|
|
(1,129)
|
|
Net income
(loss)
|
|
$
|
1,557
|
|
$
|
5,437
|
|
$
|
(883)
|
|
$
|
(968)
|
|
$
|
(552)
|
|
$
|
4,591
|
|
Adjusted
EBITDA 3
|
|
$
|
7,219
|
|
$
|
6,365
|
|
$
|
(231)
|
|
$
|
(5,117)
|
|
$
|
(315)
|
|
$
|
7,921
|
|
Earnings (loss) per
share – basic
|
|
$
|
0.02
|
|
$
|
0.10
|
|
$
|
(0.01)
|
|
$
|
(0.02)
|
|
$
|
(0.01)
|
|
$
|
0.08
|
|
Earnings (loss) per
share – diluted
|
|
$
|
0.02
|
|
$
|
0.10
|
|
$
|
(0.01)
|
|
$
|
(0.02)
|
|
$
|
(0.01)
|
|
$
|
0.08
|
|
(1)
|
The adjusted
consolidated financial results have been adjusted to include our
share of sales and expenses from Pure Sunfarms and VFH on a
proportionate accounting basis, on which management bases its
operating decisions and performance evaluation. GAAP does not allow
for the inclusion of the joint ventures on a proportionate basis.
These results include additional non-GAAP measures such as Adjusted
EBITDA.
|
|
The adjusted results
are not generally accepted measures of financial performance under
GAAP. Our method of calculating these financial performance
measures may differ from other companies and accordingly, they may
not be comparable to measures used by other companies.
|
(2)
|
The Cannabis results
include the financial results of both Cannabis – U.S. and Cannabis
- Canada.
|
(3)
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standardized
meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers.
Management believes that Adjusted EBITDA is a useful supplemental
measure in evaluating the performance of the Company. Consolidated
Adjusted EBITDA includes our majority non-controlling interest Pure
Sunfarms (through November 1, 2020), and our 65% interest in
VFH.
|
This press release is intended to be read in conjunction with
the Company's Consolidated Financial Statements ("Financial
Statements") and Management's Discussion & Analysis
("MD&A") for the three and nine months ended September 30, 2021 in the Company Form 10-Q,
which will be filed on (www.sec.gov/edgar.shtml) and SEDAR
(www.sedar.com) and will be available at www.villagefarms.com.
Conference Call
Village Farms' management team will host a conference call
today, Tuesday, November 9, 2021, at
8:30 a.m. ET to discuss its financial
results. Participants can access the conference call by
telephone by dialing (416) 764-8659 or (888) 664-6392, or via the
Internet at: https://bit.ly/3b9dXql.
For those unable to participate in the conference call at the
scheduled time, it will be archived for replay both by telephone
and via the Internet beginning approximately one hour following
completion of the call. To access the archived conference call by
telephone, dial (416) 764-8677 or (888) 390-0541 and enter the
passcode 942299 followed by the pound key. The telephone replay
will be available until Tuesday, November
16, 2021 at midnight (ET). The conference call will
also be temporarily available on Village Farms' website
at http://villagefarms.com/investor-relations/investor-calls.
About Village Farms International, Inc.
Village Farms leverages decades of experience as a large-scale,
Controlled Environment Agriculture-based, vertically integrated
supplier for high-value, high-growth plant-based Consumer Packaged
Goods opportunities, with a strong foundation as a leading fresh
produce supplier to grocery and large-format retailers throughout
the US and Canada, and new
high-growth opportunities in the cannabis and CBD categories in
North America and selected markets
internationally.
In Canada, the Company's
wholly-owned Canadian subsidiary, Pure Sunfarms, is one of the
single largest cannabis operations in the world, the lowest-cost
greenhouse producer and one of Canada's best-selling brands.
In the US, wholly-owned Balanced Health Botanicals is one of the
leading CBD brands and e-commerce platforms in the country.
Subject to compliance with all applicable US federal and state laws
and stock exchange rules, Village Farms plans to enter the US
high-THC cannabis market via multiple strategies, leveraging one of
the largest greenhouse operations in the country (more than 5.5
million square feet in West
Texas), as well as the operational and product expertise
gained through Pure Sunfarms' cannabis success in Canada.
Internationally, Village Farms is targeting selected, nascent,
legal cannabis and CBD opportunities with significant medium- and
long-term potential, with an initial focus on the Asia-Pacific region and Europe.
Cautionary Statement Regarding Forward-Looking
Information
This press release contains forward-looking statements within
the meaning of the United States Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is
subject to the safe harbor created by those sections. This press
release also contains "forward-looking information" within the
meaning of applicable Canadian securities law. We refer to such
forward-looking statements and forward-looking information
collectively as "forward-looking statements". Forward-looking
statements may relate to the Company's future outlook or financial
position and anticipated events or results and may include
statements regarding the financial position, business strategy,
budgets, expansion plans, litigation, projected production,
projected costs, capital expenditures, financial results, taxes,
plans and objectives of or involving the Company. Particularly,
statements regarding future results, performance, achievements,
prospects or opportunities for the Company, the greenhouse
vegetable industry or the cannabis industry are forward-looking
statements. In some cases, forward-looking information can be
identified by such terms as "can", "outlook", "may", "might",
"will", "could", "should", "would", "occur", "expect", "plan",
"anticipate", "believe", "intend", "try", "estimate", "predict",
"potential", "continue", "likely", "schedule", "objectives", or the
negative or grammatical variation thereof or other similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this press release are subject to
risks that may include, but are not limited to: our limited
operating history, including that of Pure Sunfarms and our start-up
operations of growing hemp in the United States; the
legal status of Pure Sunfarms' cannabis business; risks relating to
obtaining additional financing, including our dependence upon
credit facilities; potential difficulties in achieving and/or
maintaining sales levels, growth, and profitability; variability of
product pricing; risks inherent in the cannabis, hemp and
agricultural businesses; the ability of Pure Sunfarms to cultivate
and distribute cannabis in Canada; existing and new
governmental regulations, including risks related to regulatory
compliance and licenses under the Canadian act respecting cannabis
to amend to the Controlled Drugs and Substances Act, the Criminal
Code and other Acts, S.C. 2018, c. 16 (Canada) for its Delta greenhouse facilities,
changes in our regulatory requirements; risks relating to
conversion of our greenhouses to cannabis or hemp production in
Canada and in the USA; risks related to rules and regulations at
the U.S. federal (Food and Drug Administration and United States
Department of Agriculture), state and municipal levels with respect
to produce and hemp; retail consolidation, expected market size for
our products, market share participation, risks regarding the legal
status of cannabis and high-THC products in the USA, technological advances and other forms of
competition; transportation disruptions; product liability and
other potential litigation; retention of key executives; labor
issues; uninsured and underinsured losses; vulnerability to rising
energy costs; environmental, health and safety risks, foreign
exchange exposure, risks associated with cross-border trade;
difficulties and ability in managing our growth and our corporate
and commercial international expansion; restrictive covenants under
our credit facilities; natural catastrophes; the ongoing and
developing COVID-19 pandemic; and tax risks.
The Company has based these forward-looking statements on
factors and assumptions about future events and financial trends
that it believes may affect its financial condition, results of
operations, business strategy and financial needs. Although the
forward-looking statements contained in this press release are
based upon assumptions that management believes are reasonable
based on information currently available to management, there can
be no assurance that actual results will be consistent with these
forward-looking statements. Forward-looking statements necessarily
involve known and unknown risks and uncertainties, many of which
are beyond the Company's control, that may cause the Company's or
the industry's actual results, performance, achievements, prospects
and opportunities in future periods to differ materially from those
expressed or implied by such forward-looking statements. These
risks and uncertainties include, among other things, the factors
contained in the Company's filings with securities regulators,
including this press release. In particular, we caution you that
our forward-looking statements are subject to the ongoing and
developing circumstances related to the COVID-19 pandemic, which
may have a material adverse effect on our business, operations and
future financial results.
When relying on forward-looking statements to make decisions,
the Company cautions readers not to place undue reliance on these
statements, as forward-looking statements involve significant risks
and uncertainties and should not be read as guarantees of future
results, performance, achievements, prospects and opportunities.
The forward-looking statements made in this press release relate
only to events or information as of the date on which the
statements are made in this press release. Except as required by
law, the Company undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise, after the date on which
the statements are made or to reflect the occurrence of
unanticipated events.
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SOURCE Village Farms International, Inc.