VFF - Earnings call transcript Q3 2020 | Village Farms International, Inc.

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Operator

Good morning, ladies and gentlemen. Welcome to Village Farms International's Third Quarter 2020 Financial Results Conference Call. Earlier this morning, Village Farms issued a news release reporting its financial results for the third quarter ended September 30, 2020. That news release along with the company's financial statements are available on the company's website at villagefarms.com under the Investor's heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay, both by telephone and via the Internet, beginning approximately one hour following completion of the call. access are to news in how release. of the available replays today's Details

XX-K, let that beyond part XX, ended remind on ended be date we statements. many the were the to me Before or SEC by made MD&A we begin, are a required XXXX, like statements these that and for securities law, underlying such and call go turn are providing could with you These XXXX, call. actual material during the I various statements, statements after forward-looking applied in Village results conference of quarter uncertainties the implied ahead, as Canadian would these which December made XX-Q September International. Chief Officer Farms of for expressed cause obligation or securities XX, forward-looking those and These differ control. the forward-looking summary risks the formal are of number available of from Certain assumptions which our revise or assumptions, sir. subject today's Form of today may over statements uncertainties year Edgar. regulators, except and its and undertake any the Executive applicable to to to Michael in materially now of update is filings A Please DeGiglio, in statements. the as publicly the to no risks, contained are including company's

Michael DeGiglio

This then spend the key minutes Chief on financial and for Financial concluding return quarter. the you, morning joining have with and Ruffini. I'll me today. the Village for some us takeaways thoughts Steve Farms' everyone call Thank and Stephen to highlighting today's will results a going we'll then Q&A. I'm thank review some you, Carol, few With Officer, is

Sunfarms its our That eighth business like and another low once EBITDA Produce its strength produce. is business is contributions improvement other of as coupled Pure segments by Farms year-on-year years of profitability cannabis in showed demonstrates income. that experience our shows and was metrics. agriculture. increases again with Canadian of any EBITDA underlying to quarter-on-quarter is seventh unmatched grew quarter importantly, cannabis Village XX expertise, of and of harder that out quarter-on-quarter strong is From consecutive the Pure by highlight Sunfarms with growth supplier. all consecutive cost Pure intensive on net quarter seat, an first from Sunfarms cannabis achievement achieved positive positive execution across posted this driven I'd and my key adjusted scale, well. large each And model, more in The which call Farms plus both market profitability. Village experience that

the could expertise Sunfarms you, under opportunities back of more from Pure closing welcome high our QX As Sunfarms, roof profitable. even format, sales this Sunfarms we for with proving derived very that quarter On with I ahead. call acquisition, forward with a large one lower be Pure we shared price look conference Pure the even to a proportion out our was profound of offerings, last

strategy. An of quarter of small Pure a grow. gram our awareness, proportion will product X.X larger power example centerpiece, in B.C. earnings house offerings sales And third to be evidence drives those The brand back branded as the as of as would swung is grown Sunfarms currently discuss, now Steve QX which composition format our the sales. sales

market, of matching is and our branded cost and that a like leading the to related The sales to in retail highlight and is it that profitability produce I'd of discuss our to built success is profit pool circle in a wholesale [ph] driver quality share efficient markets able build, growing second drive operations to grow our key cannabis profitability. of channel quality The claim. we of production. vicious be we brand share a more more It's operate strength products should and and market most to the the

we of continue sales In these share cannabis data category we market we brands which growth, we hope calls mix. market in new volume. and available, individual shared brand the only XX% volume dollar underlying ourselves, share a you terms XX% pleased is with benchmark launches, in that was number combination you that is That excess am to that product under The performance year. market one sales and and been that Sunfarms in jumped a share some normalized have in in October. both the the led able On data Ontario, for space of as retail will sequential the I discuss. more of provides to all all by are sales sales again, which Pure flower brand dried growth

for the to year-to-date, back retail way also brand It's of all dollars, going and remarkable top We unmatched. volume remained year the performance a but just consistent by selling our products not one the ago. both launch a

we firmly scale from efficiency. and know, in simple in and rooted the beginning a straightforward our have rather you believed As business model,

And from sales million, majority of of by products, our is increase sequential that which QX greenhouse is the revenue XXX% our I X% very is was generated this of of and of the strong standard, by to XX% honest our generating the the in profitability than than income QX small this significantly production is publicly That lowest of retail to a lower our quarter. cost X.X increased indoor investment. Net sequentially in million. under in sales the in late less channel. percentage brand and was to a note net And launch increases still $XX wholesale how only driven branded quarter both translated Our traded drove sales will here the $X.X key peers. the quarterly and cannabis second results. and among producers, just circle vast This into

of prudence invested and with and business managing the day away discipline. from The one third profitability is From Pure guarded and have take capital. built the our quarter we return that value Sunfarms on

experience. the in as this of we production our not advantage will with many managing done build We as market We have, are levels over moment, to the I a demand. decades ramp actively of in have discuss our and more others did

We high-quality see can shortage a have some continue can to who rather wholesale increased of lower supply by market, the any our of cost perhaps but decision activity the and not they producers grow. at result realized source product, in in they a strategic channel,

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operations X, on same facilities provide Delta which and it's highly dispersed larger is X XX% located site than the and a and As Delta over X Delta X the as geographically significant advantages scalable, is about X combined. reminder,

output of aligned the additional We our afforded complete back as benefit cleaning scaling are back at during Delta a production summer, we doing at now near-term with and full and the actively demand, sterilization. which X after inventory us

the of and No capital the bring In addition Delta next that X.X the products and with - The important of launch very first Sunfarms our QX square during highlight X.X to foot oils X, sister of into half production late Delta is X year. requirements most million Pure bottled in completed. operational September. other facility into was

As for about at oils. people vapes embody high-quality has is proposition to consumers, approach so products uncomprising a experience. commitment products with and our price similarly that we pure resonating These flower quality expected, the products well our and resonated consumers that with to dried approachable an want cannabis our value

will extract, vapes best oil have or products strains. the thinning received with gate legal have market. our and cannabis and the vape a entice launched out cannabis by products XXX believe Consistent we excellent still had those and agents pricing our been Spectrum of flavoring quality Both transition sources flower added are agents well made with terpenes consumers. strategy Full our XXX% to products, of purchasing pure Our vape illicit very for to no from traction our we price that and and dried at oil

the and they product in we right uniquely publicly accomplishment stores entire confidence remarkable of price. of market These anywhere is the be group launch of uses to whole be another estimated market depending and happy yet to network with in resale, to As the legal this ultimately consumers as again, legal Pure around group. safety from We a access this driver profitable. do at to three of sales, reminder, cannabis to by to quality a on successful And X.X their to annual want rapidly source the congratulate half believe his cannabis the will purchase are major again and from to the quarters cannabis team, and a will and market represent approach and still of product like expands, And Sunfarms on cannabis the Increasingly, geography. growth such able and Mandesh would process I once continue so legal the pay power illicit that their tax a consistency take products. are the be market. in fair to network total these have

QX the Canada to take the the of to know-how acquisition last unmatched vision cannabis completion in of our Our brings assets, of of people and underscores week. build full value Village best Sunfarms circle. the Farms Pure and only importance remainder business the It further out of

look clarity behind the that may occur. So turning to opportunities forward in regulatory us, election our U.S., the to we with the cannabis

is partnerships initially Company the Altum, opportunity. execution Internationally, We making steady to we in work have Kong and encouraged capitalize this on expand a Hong progress the its hard on invested Asia in number market. the continue parallel strategic like which direction regulatory to been at paths multiple of be to focused strategies developing of on environment, of Pacific, by the potential have strategy,

So for turning business moment. produce a now to our

another continuing strong noted to to in management a focus cannabis EBITDA growing as cost tomatoes drove on progress Village capacity Farms growers, our a I The million contributed million. onset, and transition turnaround continued our in partner sales, through continued quarter. with higher performance our to has As positive the displaced had $X.X price good as well and $X.X

related is what the While opportunities important the in the It that critical, talk our themselves, to and as depth these and of outsize like is business. important I'd the produce results. is in growth opportunities, who'll and and the have to turn internationally. financial times domestically is heard numbers the of of of me both strength organization many call also you engine Steve, to our powering Steve? are to lives over say cannabis breadth

Stephen Ruffini

like the on Thanks, financial to strategy. support results, providing which Mike. on expand background comment more Farm I'd Mike's Village the

business, of million XX% the QX, produce Our over for versus produce sales XXXX. quarter $XX increased

essentially facility no had as On produce gross cannabis as selling price Delta being The XX% as impact now to is directly is production, lower there prices tomatoes X our we in XXXX, the production of Mike sales. our back as increase increasing tomato from margin, selling mentioned. no our into average of cost our year-on-year on of converted rolls volumes, on in

in of As the to such, we prior million in $X.X million of improvement saw quarter gross XXXX, QX our $X.X a from of year-on-year $XXX,XXX. a third loss margin

that spring helped getting our been EBITDA have amazing our thanks in traffic but positive brands, like throughout all business, to and would in margin due partners that and on Our again our the fresh all had in tomato the mentioned our in XX% was Village produce continued on the gross to gross the year-on-year truly in to improvement produce the to Canada. diversion certainly year-on-year workforce facility. the the the shelves, lower by work higher for of since XXXX. not business produce I Farms incremental a pandemic. increase truly versus to to XXXX in this the to XXXX Farms QX, trend quarter the by in in I'd retail to Village depreciation acquisition produce nature. and the shortages to a is The expect was the store SG&A both which X has of produce pricing increased related back $X.X offset are the price of note XXXX. in margin I flow selling strong the employees of a produce strategic in production, our supporting was sincere expenses the driven related substantive of lower result by on not quarter, distributing last higher by and primarily commitment U.S. to corporate Pure year-on-year year-on-year who out extend should financing are shares. Sunfarms Supply $X.X million, back the incremental the Delta business X and margin, throughout for million cash late gross due the our of facility Delta the the our more and growing, with increase million continue SG&A we grocery expenses summer pricing add and involved entire produce the the EBITDA remaining balance Produce by these which of volumes, $X.X QX,

XX.X% to we the performance did quarter owned ended the during XX, will [technical Farms until we for results, a not results have consolidated control reminder but Turning at X, own Pearson as I of QX time it cannabis, September the address business consolidation XXXX, which Farms Pearson Village XXX%. we November the difficulty], shortly. in not the been financial the Farms

our sales Pure sales dynamics we I the Farms balance Sunfarms quarter especially of wholesale of year our Canadian quarter. build continue for The Pearson ago XX.X% the indicator cannabis XX% XX% late sales our X.X% which dollars sales. in quarter made contributed the of flower uneven noted, for position, represented Mike sales As of the as sales retail products given sequentially, launch quarter, our of brand X.X strong up a the strong on for to and view and market. was future, this

channel its driven by offset XXX% of were sales SKUs, totaling retail Sunfarms large compared replenishment growth in which The sales retail launch Pure quarter, in in second quarter-on-quarter XX% the increase driven higher With increase and Sunfarms retail pre-rolls, format large format and as XX% a which XX% was of a this by XX% Pure sales in were ongoing were as sales sales. sales. to decrease quarter by the expected related format small

back both this seen in Cannabis wholesale market dynamics. our many I reoccurring, demand, ratio investors to our are could But the the remind not in to was supply and we retail momentum. the QX, Inside actively total footnotes by looking seen as which retail continuing resulting that Pearson inventory. by new in by balance conversion customer our large we Our an did competitors the quarter-on-quarter. a recognition in experiencing and our marked economic Farms the quarter the not X.X We buying overall quarter-on-quarter operate selling and to by small the mentioned we versus third year-on-year goods in slow factors, volume by increase continue in in quarter-on-quarter, for price work sequential their of well and of of growth In sales in process in read over inventory strong overall which QX, as while our prices sales To-date, Pure there the ahead year-over-year the X% driven businesses. to that our average who a the finished have month-and-month, buyers, we pullback footnote result which of XXXX market approximately driven can indication Sunfarms of want inventory prevention were including growth and system, pandemic our our our format managing our increase while decreased inventory Overall, margins, a increase, during our pared XX.X% mention quarter, wholesale versus be by decrease distribution blended XX% in external to any flower spot decreased remain the enhances relatively second pricing that sales, financial situation seven. third and wholesale inventory, still production value. was quarter. format net for the those

to Gross which versus quarter the trends margin changed Delta mirror one We in forecasts. versus our but actively a sales XX.X% of in to annual crops, our our order crop facilities on produce actively cash supply profitability. more back XX.X% inventory. totally was historical The commitment. to forecasts sales based maintain Pure and Sunfarms demand. our maximize importantly Presently, flows, in ramp-up different to supply our to continue demand QX of flower beauties XXXX, which the dynamic. our full in ability QX, had production Switching is assess versus XX.X% for versus fresh this of the to We down fresh are X

reflection the market the write X.X of XXXX. was margin in QX extraction margin in today Cannabis be used enhance and as license were received third flower on inventory This quarter. vapes X.X our down. the extractor, Farms for our which CADX.X the of quarter's margin distillate a our cost gross the XX.X%, assessed versus Pearson dropped need the actual against write remaining market any the Cannabis will inventory distillate Health products. purchased million, The been than and on write adjusted down the no The in September, third Canada sales gross early market from inventory SKUs $X in there's includes manufactured value, margins Pure has The value in was finally million distillates has quarter. of Sunfarms these distillate achieved party earlier We an will lower this since gross the in is Without further which of by for such true and products down, purchase. products for

own important in these plant. to It license as the coming Cannabis and were X.X expect a in quarters. was have products launch vapes extraction X.X Pure and Sunfarms for due margins somewhat other higher flower the our ongoing vape to and we pens perspective versus retail Cannabis our of From its to quarter. volume a oil to manufacture obtain wholesale, the advance We this margin gross success similar products

format, we Our retail sell occurred as so our formats versus margin by is this SKUs as margin was consistent pretty formats, quarter. enhanced small large more

retail increase dynamics, product we spot manufacture Cannabis LPs. mentioned Wholesale potency market we transition other increase as are available and needs do and to own by heavily our driven sales, an margin X.X quality products. the are our mentioned, versus of in X.X our margins which expect As by as impacted

We continue were quarter actively for expenses our SG&A year-over-year, a by XX% which result Sunfarms access sales to without mix expense is essentially year-on-year. flat approximately for these of SG&A subsidies the decreased channels. vape of subsidies, COVID-XX-related Pure

previewed detailed average not Pure call, price sold information provide have or of kilograms decision the selling during Mike As we last Sunfarms to or quarter's the produced production. or made provided cost on

best As to more interest it's the become market not to continues our disclose. in sophisticated

our XX.X%, earlier. As Mike to can inventory you margin strong consistent see that we It continue our the distillate QX to without of is on XX.X% write production from percentage circle commercial of our our telling not margins. our down, spoke our gross cost virtuous the of of financial QX in be margin interests gross customers with compared performance as simply

capacity proprietary The gross no in cost to Village loans. need brand low on be existing Farms our a bank have Both production solid on the borrowing support demonstrated ongoing term sheets ground have quality, businesses to objectives. Sunfarms their continue We balance information. give and Pure entities to and away

at position we my net decided million. XX, on Farms, we cash tenure for the As $XX had a first September of XXXX time Village

or million May well complete Pure acquisition as paid complete million X, CADXX just or of balance $XX the $XX to the on course, on million a million due to acquisition. Of we Sunfarms XXXX CADXX.X issued note X, November of

debt with our ground So normal but produce on positive flow as we our firm are both ongoing cannabis. back into cash position operations of in we're today, net and financial from

our pro Farms results Sunfarms Pure this press as Village November earlier, month, X. mentioned Speaking forma, consolidated as in of, release beginning closing mentioned earlier I have fully our been on we

one be required and accounting though QX for As of and year. The QX, ten combining are financial remainder such for acquisition Sunfarms Pure deemed the year the to JV Village months is accounting as XXXX, entity, material include October JV of in of to combined Sunfarms, of months January Pure pro to month XX Farms our we consolidated to of closing. and results year due i.e. roughly XXXX in for transaction occurred of for Village statements the Since XXXX. the and Pure XXXX QX, the full Sunfarms within full acquisition will two Farms, enlarged results retroactively is and results days if file the report X, forma full

a income of this In market you the For Canadians our Bar know will on report and giving Business within this of Acquisition forma meaning Report, Report. interest the press as provided the we've the statement of pro report, release a call the view component morning.

which is early the in on preliminary nine when $X.XX entire be back. forma the EBITDA I include million adjusted income in XXXX, press million, judgments. been it share year-to-date increase release, reported. our for purposes for ended will to reported $X.X business the accounting do our will if $XX.X caveat As - based XX, months the per share, September combined reported Based EBITDA XXXX and write-offs include at our has We on informational does inventory estimates nine is statutory we for our EBITDA note $X.XX add indication had adjusted months adjusted year. not In this would only per we year-to-date and pro from the do

transaction GAAP, Village the look while later are reports the completing filing to of of Sunfarms for soon Mike. accounting that, As acquisition and year over staff Farms U.S. to and Farms. we early hopefully Pure actively from accretive for very work now want and we well Sunfarms into the as are acquisition U.S. this still the possible state thank back all incremental was recognize working as I'll With confident to Canadian of subject no and Village converting the I to accounting to we fair than turn the in on required such, it consolidation and Pure their all the and and when as Farms, forward and report, IFRS market as December. the completion Village efforts

Michael DeGiglio

Thanks, Steve.

going for still I very never has was opportunity positive going and It CPG vertically considerable meaningful solid outlook quarter accomplishments, forward emerging quarter a a United Farms to so business States, ahead. superb in business, our agricultural-based So pursue of Village steady markets believe each and and internationally. is has the by integrated marked we And progress forward, the strong aggressively as transformation in markets legal in with done a in the job. high momentum been cannabis many related growth targeted opportunities team the

out for the us Village Pure by our the are up We entirely knowledge team new high which built facilities, growth, in institutional opportunities industry Farms, our model, our Pure experience the proving capitalize as management by Sunfarms leveraging that its on and a only position in success, our our work joint with those markets. the financial best Sunfarms' allowing perform it this constrained Owning all of sole of bring entirety folks our particular the now the Pure to on knowhow, venture. success to provides is we value high for full owner, who were shareholders the our to Sunfarms value continue not are contribution set of company of the of but and the to in brilliantly. a are foundation people the expertise, people,

the Canada cannabis high factors. is Columbia, we momentum assets to which oil square unmatched half which company on natural and sales clearly in than sales This Ontario, cannabis markets a our in steady British combined or North why and XX.X strong momentum American million in new the new of the of U.S. no is a ramp expect opening Canadian suppliers. of the retail up United States by market continue the introduction market, prospects totaling based in We in vape, and confident the especially Growth low swift products, more in stores, of to over for the landscape other and accelerated be our continued the feet, in products United States with and should of be visible X.X number which has, cannabis shift very internationally. so THC fewer up

to considerable is capital, All continues opportunities generate to the have position funded our and able shareholders. a all pursue benefit performing We well. by business, deliver that our again produce value invested drives industry being growth our return of to creation our leads for quite company on these which this and

So I'll to with that, we'll any open questions. Carol. over hand to it up

Operator

you. Please ahead. first from Cooper from Doug [Operator Your comes question this morning Thank Instructions] Securities. go Beacon

Doug Cooper

Good morning, everybody, clarification and a per congratulations Steve, revenue gram. with on want to on great start quarter. I just

Or sequentially. pricing that on You side? said an just that And it and retail was up XX.X% the is is average between retail wholesale?

Stephen Ruffini

Across all channels.

Doug Cooper

wholesale exact you numbers in the to difference retail the the if - two don't pricing terms give Okay. just seeing? the quantum And difference bit maybe of maybe can you you're talk that the and about between little a between want

Stephen Ruffini

instance all place, high range over the whether pricing the for wholesale flower. of grade X potency trim is Again, or selling selling we're

versus QX, on retail was sales which percentage small driven because predominantly been sold [ph] enhanced consistent large broader. as and format format, small percentage, was the large as QX, quarter-on-quarter QX, pretty essentially, So margin was a retail enhanced, has But a pricing in we QX, format. in we the as and QX we our call did between The range that price QX in by is our that format. much average more of mentioned

Doug Cooper

quarter sort mistaken. retail of in live us into by have if region, breakdown the the give the the you some did came loading Saskatchewan, Ontario, of on say I BC, breakdown Can you think idea side, then much Alberta? I'm that not And

Stephen Ruffini

Well, are customer. the impacting also And pricing is clearly largest provincial the continues buyers. our differences Ontario on to format between pricing be there

does so it's a it So not price, national vary. like

province of quarter weighting another a sales a selling versus into So into impact the quarter one average will for also quarter. one price particular

Michael DeGiglio

Yes.

coupled I now - aggressive BC. with very next now over about retail forward, Ontario right stores the year talking Doug as think starting over aggressive in at the growth going the

seconded I more going think BC. forward Ontario that'll continue penetration in drive to by

Doug Cooper

between split wholesale? do think maybe you and the suppliers little bit? in a maybe that Can just is What further, you Mike, talked dropping. of optimal just it. And expand And your business I've about a on missed can a maybe you've you little retail comment number

Michael DeGiglio

that that's industry examples expand I a massive and There's but on many have huge guess it penetration options a we're want premium are strategy. lot companies, of well-known But by of to very examples very brands, of where perception. Well, have keep that. and brands saying a I'll a still market open there our CPG it's going. share, wholesale we And are

we've to us, my investment we the which made I capital have is right X, than investment already Farms. double here remarks, as two, Village larger on capacity with those mentioned can Delta Delta which cumulatively. X, And For in the

of our focus the But even had are level. our maximize a relationship or make unique continue unique not doing as do, is house history with the never smaller may that doing maybe to a XX% to retail always a on direct There's us we XX-year companies, that right that. why do, We've our a for there things works. things produce, some have in So, to or of to and companies retail now, that business. are niche don't portion do, relationships can't sense trade. our I share lot in And innovative the extent a are cultivation. that have or won't wholesale think XX% to have sales the though venue in branded market marketplace of at And companies those

years. next goal be, rather what goes in interesting over So It will of I think, we'll be should two say Canadian how but the the lot not landscape. a it there's not Doug, a see I'd really percentage changes that

Doug Cooper

- breakdown, talked you about - they breakdown year Okay. you if a trying guess particular have be I X.X Do Ontario, a retail just were flower between your just from X.X% sales and think X.X products products. the you sales, do talk And months of the I'm six level at about could now? in to maybe is between what

Stephen Ruffini

no there's still individual or it's changing. indication if We believe look And I still rules. that's flower that the mean, at you states, U.S. flower.

a stores more grow, we'll once more I increased amount I percentage X.X and government cannibalization there's think the trade see illegal products products, of the as of continue flower. it with Canadian and adequate down the X.X of split, presence taking maybe rollout, to as illicit and retail as shut trades. will the will But still but more think retail is greater the stores far there's

X.X I foreseeable continuing while well, the strains premier gram for very future. As and on we to are that the mentioned see grow call, doing

Operator

comes question Sarugaser from James. next ahead. Please Raymond go Our Rahul from

Rahul Sarugaser

and Steve. Mike morning, Good

Michael DeGiglio

Hi, Rahul.

Rahul Sarugaser

guys. done, Congrats Thank those rocking on you for the quarter. Well comments.

clearly So, devalue clear first flower. and dominance a there's in the question segment is,

out Now market vapes emergence have on pricing. the guys aggressive pretty of been the with the putting I you're and in pricing, you guess noticing

pricing relative up opening you them, notice going driving noted do retails how see you as forward revenue as as you the So, to particularly competition, Mike? there,

Michael DeGiglio

been so there Canada just the being user, main affordable cannibalize early that always market saw a fact I'm in casual going Well, order customer And the that's gone that's And decades, but potency, these was on we reiterate, target in focus and the And provide, in offer order we've weekend the to to of Rahul, luxury. on pricing that attributes, us, everyday we based consumers illicit the for all at at price. order after. on, to Pure consumer coined affordable And to user, our an that was terms have it. the of quality, strategy the in safety, the trade. by team that - to key Sunfarms,

launched. positioning points. we're more or And where products the price at that's we So, doing less the that all we're

Now, under be other if price it. competitors, is so that point XX%

billion here. to with needs trade have that's market billion to that a $X the because live to market. $X come just it, illicit setting It's You

we the that's how pricing going So, forward. position

Rahul Sarugaser

so Thanks total rev. of Okay, then great. that And the was much. in terms relatively your of large portion community, wholesale

grow? number And do of you market being recent that to how Are So, in going forward? the seeing some also, particularly outdoor that context your all grow? you relative of Village outdoor in Croptober wholesale the products see see you And in that provide durable? one, of Farms do durability competing comments maybe the

Michael DeGiglio

a stigma has wholesale to Well, attached term. the

brand the Canada Costco eventually An in to I mean, be, name, correct I mean, opposed to I channels. mean, in private wholesale, an maybe example term that's corporate sell if their wants as brands. channel. under cannabis So, alternative would is alternative

it's early to we important. we but again, think not have I So, profitable it's stigma We're will could And relationships that those this wholesale wholesale. too think to to meaningful. I think that at the tends tell, look be term use

the along. at prove we profitable that are We all wholesale level,

going we that to produce that to positive we patient weren't flow. be with now, that cash Delta And our We we that X, we We're we've at channels look right and don't in ramp sell. our anything decisions. production. we in the up. prudent very to still made remain But when So quick put as want our but true alternative can we're fact to investment can't at look

looked and years private very doing I see the people as in niche-oriented that a at for flows us. that it brand, channels of combination how next wholesale markets, So, couple other innovative offerings other are

Operator

comes Your ahead. Please next question from Adam from go Scotiabank. Buckham

Adam Buckham

for Good taking morning. question. Thanks my

in both understand forward, is small there the you further this as format volatile QX and see the do about Or But in versus rep Canadian near-term? Now flower a dynamic. think moving you mix? think shifts as mix do be more could normal market I quarter we

Michael DeGiglio

say, quarter, into last for license, almost certainly, I think, the normal, much year. basically sales And quarter more so I fourth certainly would mean, our second you normal I didn't last have if the we Adam, more us, a of remember quarter. year,

it's So, year. one been

how at look last really can't we performed we So, year.

it third comments, in the year, quarter. a were from As first, solely and wholesale different his was market XXX% second, Steve said last selling we

what need. getting going is historical us forward for data we some So,

by the think offerings. quarter the think time. time product It a I this right fact I heard right And The other COVID, shown impacted pantry an the was of that on. second year between was was the people, But more you've hoarding talk seeing. we And second third We quarter X.X, our the especially very very that companies to we the format launched are of really at so I there's pleased it you, we're going the But the didn't point. direction normalization early very at the can quarter. any we today. at it's launched early end from remain We're this numbers tell extent and about third for where where want at quarter, has saying, to in and numbers this just large confident advantageous. on we're specific last we us

So, I that think what help be. great will it's I question. think reinforce balance a quarter fourth probably the will And

Adam Buckham

I progress any great. wondering customers. just on And that's there's signing Thanks. on Okay, some new updates provincial if was

Michael DeGiglio

it's slowly But an the U.S. I still Well, there because is except of excited there. feel the we're more stores. government is the that the as Columbia exciting in It's is the at that nothing, British the that next that like into April, we've did capacity. progress. interesting Columbia now XXX I that that to not clearly Kentucky that's team's that penetration. us at by September, very, moving entree aggressively. And about right doing in in the finally Moonshine. not shut U.S., pinnacle easy by on XX, I'm Quebec. We've showing of always opening is that in mean, the to for The what's promoting conversations we greater to of talking and stores XX end the they Ontario's fact confident on Quebec. think eyeballing about for we'll make an a looking lot XX-XX, top doubling direction British I talked of X,XXX, traction Ontario stores think the XX realm it, about is And prohibition month, XX, very But the down and had us.

then will and some a to and increase illegal pressure the product, on some at enough when greater share legal trade, us that there's penetration point channel there going continue forward. for retail we be here, So will and market for stores great hope that

Operator

next question from ahead. go Aaron from comes Your Alliance Please Global Grey Partners.

Aaron Grey

on Congrats recent as as well Sunfarms. acquisition the guys. morning, Good of the and quarter Pure

for encouraged that X.X me, far, thus you you're question the having Mike in mentioned September. just recently by launched pretty just them First products

where website, sorry, dedicated $X. channel have they could pressure, Just $X, see even any you wondering looking It's incremental like color specific starting if another been pricing to kind you're just for category OCS of there? the give at just some I'm under

towards right think category? Thanks. in So just now leveraging you equity positioned, seeing Sunfarms especially been dynamics? have terms curious guys And kind of within what Pure the brand the has how you're of you the flower

Michael DeGiglio

that now that was our license. we you for long in we mean, We're comments price I a Steve We that, the I realize but we waited and because alluded early, mode didn't now. some attractive. extraction extraction have I anyway. as put launched - must time Oh, know, missed - were didn't his final in to

in we we that mimicking at We kind weren't So concerned our on we what go did trade the be margin were under out realm and of illicit a knew XX%, the going to flower side. given we to again, margin. probably the what with tied price. the could competitors, of somewhere And the knew existing

a release. sort we've where so leading both So, that on so didn't encouraging say in much we vape a But think, to the for we're but part, we of we're our in far, three allude seen of to the we some of that that's quality going there. brands were the very data and today, most or leading kind offerings top

So flower the there report get to we that fourth And will in pricing I we come I to margins when we think now, are right be similar on quarter. once traction. our wise, visibility think going the very margins think

going So to that's from there we something compression, be one. that but is the price said day

So on our based it we're for prepared models and that.

Aaron Grey

in because you maybe Ontario, different, kind of great considering that a buyers? of share. a market then you've asking differences of markets, might guys, for in obviously, the Or terms in some Thanks. you're provincial some been because Ontario in need buying within Okay, doing trends shares and seeing can has province you great about great. market second, And obviously, what different those Ontario? color. you're way you And well when patterns But we're done really Thanks for be and in there talk some how specifically Ontario? able be Alberta which traction some So, more so is too, talk just for other it cannabis. traction Can maybe you of that a of the kind of from the been with provinces, in Alberta? we the of might also province to terms at well terms about had seeing Canadian you've for see big looking in traction that

Stephen Ruffini

Yes.

talk very talk have the reason the we and because it, Ontario don't we'd other don't is data, we're we We're be the we data. pleased about provincial about speculating Ontario, that someone. so think feel we in should the that because we we governments, like I have get data

needs Sunfarms amount talk So, perception, doing and well in perception still pretty it of that slow. and Pure the pretty It's increase about happen. than I been we're really my BC, and BC the needs really one the Alberta stores except is to to want other number Canada. feedback from wouldn't that to consumption They've

it's to is, and even like lot time. I of good that there's is of growth good retail recognized on news of the traction take illicit though yet. in going a example, Like starting for about Mississauga, doing was news be just BC, the to second an based have cannibalization the Toronto not look but store a yesterday So, Ontario, Mandesh but with has talking people does the there one suburb trade. is of we're that if you at, province million well in And it,

that has decided ready. guess I So, city not they're council,

the when happens. road and So, down that's huge a that potential if

an on that. take And pockets up that very to time so illustration of certain about that's retail will gear feel just we and encouraged

best can give right So, color now. that's the it I on

Operator

Your with go Please Capital next question comes from Partners. Scott ROTH Fortune ahead.

Scott Fortune

you provinces, products? provide there's it like many these X.X moving for provinces. of too inventory there and you not there, still level cadence said moving little brands, morning, all the for velocity too many at seems Can of competitors a Good on some question. are are taking and the thanks color in at the kind the And just

the X.X sense your for of Just velocity your moving kind products of forward.

Michael DeGiglio

pretty that sold we Well, launch. on the quickly

So, pleasantly we - I was were surprised. actually

good out more the best is traction, So, gain, coupled using we're or that pure our and to our - And think We don't feel going price are for belt. our just well. going line to so will no gain we X.X fact any it that's we're we at little quarter with the strains want have is the a of indications even sold of This top lines, gaining really talk it's can we're pretty kind quickly. what full including And point we to more by-products specifics. that we just be of our conservative extraction. under that. And cannabis, a the resonate,

myopic in to pretty products is share. more focused So, are still us. not Maybe the We're kept market large it come now. the future, where have have we on too, but X.X the and growing, really that'll we markets on confectionery products going we were or with that relatively small right those beverage

So, we want higher, to get our penetration quick can. as as we

And so good. so far,

Scott Fortune

sense and there? to kind that as how your different products you have then picking the at the look X.X of And SKUs up trend on then out that, SKUs XXXX? follow-up what's many And we for

Michael DeGiglio

about speak. another product there's And call, to as I launching I in future. out the we're foreseeable we but we're the mentioned on Well, vape as ready roll last three, think edibles

start. initially, good put see feedback, Good consumer probably else somewhere five That's that'll that's we So, we We'll start. a And once good And a us, launch. and feedback. we'll plan what seven. do. to for between us see get

Operator

from comes question Craig-Hallum Lauriers Eric go from Des Group. next Please Capital Your ahead.

Eric Des Lauriers

All and for right. questions. guys, Congrats thanks quarter my on solid taking

see help Delta X what come online? need X, Delta just in you production before us full in Can to online could bringing at the you're that mentioned in you market So, and understand you Delta XXXX. X that

Michael DeGiglio

over done prudent. of down. felt want things produce summer. always to the we sort to we've be would slowing sell. what we saw We We what And need Well, it like we can see

remember, giving In summer. got And look we started it if we out, wholesale numbers was and the like production originally in without doing you we still August, any into we're during production quarter our you while Delta the in the just converted, third to curtailed conversion. - fact, if X

market double say for better what in inventory things in our And time a us down, of than we great sold August the out. move and to produce. we quarter, the more at slow look some alone, it's third So we fact in

capacity summer the conservative us. out approach prudent our that on taking for very reducing proved So well over

solid. right to we be. want where Our is churn The inventory is it

So into up. full now to we're ramp takes as back X. you know, time, Delta production on It

sunk the of just the done we've Now It's into capital Delta and X. up. it is a gearing matter conversion

XX of gearing excellence expertise, up, overnight. Our a don't it's just get years to process, you

looking not then on we'll So capacity, prudently to overcapacity. demand We rush get envision to speed. third supply up to at in quarter, that to ramping increased X to our probably start go based people We're up start and any we're our numbers. up going gearing that Delta

grow that every to are every we'll rooms, say. we XX So mind, a as on monitoring in we opposed as keep in set just ramp XX to or our then, have just the the to up capacity go, slow with week facilities should month, way up And banging be bring I it.

Eric Des Lauriers

more could color appreciate One Okay, that's Texas. there's to of in potential cannabis market? existing tax And your could the legislation position your cannabis readiness a just pieces of billions Since maybe this Texas helpful. revenue. in Can Texas agriculture seen legalization we've the you state. there. comment firm business then week, turning for you talk on serve a I filed dollars to law election, And application? produce successful the XX how license in of U.S. the cannabis And been projected

Stephen Ruffini

working on strategies of except all been say I'm have multiple strategies. we Well, any to our to are load front not going and that working out

U.S., want I than in achievements a put results the number to most a entering principles, at look in you profitable, by near the I the were achievements, and that U.S. And at what our if So we're nowhere production, those say go way, we're to long will and or low-cost metric we market. we've out the now think our the other results done to major one first, profitable. think, leading very don't this our to Canada, anything every us point today, And second but excited I pinging about in third most from playbook, of and brand consistently Canada. way

process Village I for possibilities and the in very strategies, will we U.S. multiple and regulatory at looking we're the say excited about the have Farms. the we're So,

Operator

Your next go Andrew question Stifel from from GMP. Partheniou comes Please ahead.

Andrew Partheniou

Thanks for my taking on questions. guys. And quarter great the congrats

yourself apart peers. your to continue You set from

Michael DeGiglio

Thanks.

Stephen Ruffini

you. Thank

Andrew Partheniou

at bit Just on more We've ordering on say bit boards. that color out X.X Would already products little the out How inventories shift And big quickly called dynamics is the still of how that of smaller reordered? us you that you you initial little have initial but to And the from selling quickly. the you that's case? you orders a launch going? Could retail with did provincial satisfied from on seen orders, that feel a frequent. your bulk awards give the you level? are provincial

Stephen Ruffini

certain mean vape mentioned, as very or as are of a I earlier I an strains system, lot provincial access a pens still that mentioned, is of distribution or moving. new Well, analyst this have buyers SKUs aren't certain

I little their very part. bit So, there's We've sell-through. been guesswork, with a on happy of guess our

else, they're out goes Pure out flower hand, pens, on that's say, one vape they're which the or for testament of from is, and the out brand, either or the to they something consumer and standpoint, that CPG a in sold buying flip the lost a turn vape of stock, If a a then demand, Sunfarms well, we pen, mentioned, walking side asking Mike As the that's for of sale. around strong of store.

that's lost us. for sale the So,

what's stocked we're as buyers sure are a major actively our to time hand, to mentioned, do drive and data, lot sales with work not working provincial So, with that the continuing is brand. resources have the incremental of shelves to putting and to more DCs behind people long-term all with product, your make continuing get to inventory buyers. success effort Mike the at and your we're on Again, actively in has we retail with level, but and and of just what levels, the imperative store at

Michael DeGiglio

think Sunfarms so. Yes. told grow team has want very they And also, all us Pure to much that I

than more been. more is the are collaboration becoming the orders ever. And than consistent positive have they So,

and and I getting said, Steve placing. exceeding, their exceed to think teams the they're better orders noticed starting So see at they're we forecasts, it the as

So better we place think a in definitely it's [ph].

Andrew Partheniou

Switching new for your smaller that the that It's might helpful. product strains formats Thanks you've to that. how launched. gears Great. very guys tie and into

of your $X front that the probably anecdotally under is a innovation And called strain Pink have key guys Kush for guys I of you think I are your page XX OCS, see thing gram. the with out you belt. grams on a

the bit you a strains? what you doing can color a strains, in part format little And terms give new that So, of have of small this quarter? new developing played product might on are in good the launching of guys in how growth

Stephen Ruffini

product that weekend, buyers, mean, the analysts innovation just earmark Well, in you It's they're low over and innovative. it mentioned, always that process. personally looking for something come to a was would living down I and Montreal are provincial constantly new constant buyers, consumers obviously that.

of the can constant both in designed constantly way were X on strains, that the marketplace So, so we it's the X with a standpoint. cultivation they one new process. facility grow the the reasons rooms, and also are Delta but that's Delta And facility try the multiple

Michael DeGiglio

in the fiber Yes. that Columbia, brand. the huge in British production. it's renowned And that connection to thread is going like That there's the just to a of of mean, Leamington. other in you're British Canada, about in world one difference. cannabis in our Columbia cannabis see That's And I lot not strains things no of pipeline, a

that history So, way DNA, back. that goes

lot tell very strategically how, when, you as they can there them, strains the the looks of team a And I in So, where. there's launch pipeline.

said, I everyone forward with is so lot and about of new innovation excited to And as see, strains continue a coming you will think Steve it.

sort location territory in benefits of of Canada. our I in think of the heart the of one cannabis that's

Operator

comes Cooper question ahead. Beacon from from next Your go Doug Please Securities.

Doug Cooper

Everything guys. Thanks very been Hi, has much. answered.

Michael DeGiglio

day. Just the other

we're Okay, good.

good think operator. I we're

Operator

Thank you.

Rahul ahead. from comes Raymond Your from Sarugaser James. go next Please question

Rahul Sarugaser

Mike. Sorry,

Just yes, one last question.

more maybe you to generally, can strategy just the So at generally, your federal keep those compete which be MSOs I things of yourself. But you that the changes U.S. how to out? recent the to at farms in you'd moment? level. able given if playing prefer would favor see you How the U.S. quite relative know sort And said to the in elaborate are

Michael DeGiglio

Yes.

this, MSOs say mean, great job. the done me I have Let a

distribution. of that's where But interstate on I in bricks them, that think I pure area and shine commerce focused will best. a think we we that's believe that they're cannabis play lot one mortar have happen. time, the And that and companies

to incredible and strains around try grower you're You just really going or if five, seven facilities to have can't six, have one state, given a seven, five, production indoor eight consistency. going growers in

So Texas bills deliverables, every two in From there Texas, with end, see know, is And competitive. in be they MSOs years. and if, in we get out one have could with But effective, migration cap like successful, technology, as less play to I doubt. the ones, perspective, think there. our unfortunately, even market big is of end, cost can example, successful no other they're a we've they a flower We as be the find Canada, in proven are, will don't to to part. if pockets how meets more they the will especially Texas because things national going a there's lot

way already close Canada when Texas this and same the So our the go Once rather out. We're conversion and assets between play I one RAC years. and May, sort or we nearly ready is first size it's very we happens, we launch have to going probably be years whether of Texas. few plans. nothing first January will than next to in in And population medicinal two that's have think there, as it's We Texas, window go. to ready the in a be

at, or strategic partnerships other the to bring So is we the have we table. our prepared And where that work of and can Republic if locations, a do look won't we're doesn't strengths or nationally. to mean we to country. like acquisitions that itself Texas in But

I think lot a there. there's of pretty known. We're opportunity well

As you are. principle we know, Village a Farms company. is where That's in U.S.

like coming But on we're for home. possibilities of So it's ray about us. excited

Rahul Sarugaser

Great, today. that's all for me Cheers.

Michael DeGiglio

you. Thank

Carol. thanks, Okay,

Operator

back This for does it to I'd conclude like turn And call. any our the Q&A of closing remarks. portion

Michael DeGiglio

And the to on very exciting that'll you everyone, thanks, of for fourth on our we us quarter quarter for updates again, next consolidation call, a yearend, happy operator. the today. going today. for your on shareholder Thanks, Once certainly with we can be forward joining I this one tell just I'm how our well feel And Okay. speaking and today. look and I full you we're opportunities you, call about forward. participation doing. remain largest I thank very excited

Operator

Ladies conclude this for conference Thank more your call. once participation. does gentlemen, today's and you

may disconnect. now You

Village Farms International (VFF) 13 Nov 202020 Q3 Earnings call transcript