VFF - Earnings call transcript Q1 2022 | Village Farms International, Inc.

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Operator

Good morning, ladies and gentlemen. Welcome to Village Farms International First Quarter 2022 Financial Results Conference Call. This morning, Village Farms issued a news release reporting its financial results for the first quarter ended March 31st, 2022. That news release along with the company’s financial statements, are available on the company’s website at villagefarms.com under the Investors heading. Please note that today’s call is being broadcast live over the Internet and will be achieved 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

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

Michael DeGiglio

challenges Affairs, from and our our Canadian macro first Corporate Gillin Chief offset Financial VP Village first joining Ruffini performance which continued saw of for and quarter Farms' strong Executive by Produce businesses, was the Sunfarms, our business. quarter morning execution me Village today’s us CEO facing somewhat Farms' Fresh, and recently The Chris. unfortunately XXXX time, Lefever Mandesh appointed Pure Ann and Good the Dosanjh, you, Thank Steve of for first everyone. is President With Officer, is

recently for impacted start a So, last -- negatively QX years and COVID. let both several our our who me of this have Those several Produce macro onset of additional that year, business, the negative factors Produce business. quarters and the positively factors know our since with In number of followed collided. have will

shortages First, it's inflationary both growing the our the growing an oversupply which and supply/demand environment. inputs contributed very and all were pricing These strong both to very the pressures same fertilizers our a been labor, freight, time, industry. cost of good season in The packaging, imbalance. strengthened industry, for such further of contributed actually growing greenhouse by market. products increases in the hurt as field-grown, well across At as a to ongoing the challenging power trucker were cost profound as swift. customers The season

have trying, international trade our six across This been able than been a very free realize with is ships pricing commoditized not cannabis. have any retailers. five dynamic daily. is We a to material Produce that borders to but increases product market with difficult

experience pressure will our in seen respond. long times before As this on and multiple will industry we and agriculture oversupply results. pressures these Produce inflationary we continues, as I've the

longer And will help including are that product which distribution and reaction. attrition, there term. scale, diversify spread initiatives, grow understand more it's partnerships produce costs, We build to We be and marketing new evaluating will offerings. supply our balance likely

for we EBITDA cannabis. a legal our the powerhouse all, in even that opportunity our footprint, currently highest for maintain environment assets However, recreational conviction cultivation negative US or the

revenue. or of Texas least a replacement Our have assets at million $XXX billion more of million to $XXX with capability generating value the cannabis $X

we me can Having leadership success businesses early the existing good to that assets cannabis in successfully, cannabis, are to replicate the news and Canadian back consumer same invest underlying the as and well the cultivation were ones assets of had in of when see strategy very the use financially, US quarter. DNA. strategy, markets, unmatched our perform the business US, the and and they Each only which assess Canadian contributed participate. get the so US options in working US days even and Both to to QX, we ability to improve we of to a as for and adjusted again their business. power brings in to leverage our the our the as are business, growth. success future our on cannabis for track of We cannabis continue In continued experience EBITDA our done operationally their Canadian positive in market respective to fresh we that we convinced

And top-selling Our Canadian consecutive Pure to category, delivered industry. in its maintain Alberta quarter. LifeScience operations, Ontario achieved Sunfarms its Ontario's best Columbia in of ROSE flower our EBITDA, first history. in cannabis market was its ever and at brand sold what month in we leadership under and British positive just March, XXth in sales the the Pure quarter XX% the Ontario, continued Sunfarms volume the best flower in during dry remaining unmatched share dried share in by in

bud strategically to feedback once and the retailers We market sales share. and ongoing again, and to that marketing are management country. they several over most give supported continue superb are to to grateful our build invested and ensure to by the have across teams the we quarters, support tenders us brands to past kudos And consumers our

clearly is investment Our dividends. paying

announcement NOYA cookies high-quality Pure Canada. is success also to Cookies a of range of grow with the bring LP our attention peers. flower Sun-Grown Sunfarms Pure quality one global will of validation team. with operations and with further provincial of boards. and SKUs the as Our its of has and as record process Pure with Sunfarms Pure partnership brands cannabis whole among the for flower This the genetics generated expertise few Sunfarms of to week, Last partnered Sunfarms the

in of approach three single an We legal for by our us the firmly asset many available calls our house plan Pure first times. to for are Canada. been months, has as of brand follow. The The one specifics of In for brand built purchase more positioning prove position, in house of a leg of transition first a the first question We organically in premium It's single to strategic with in we coming next expression years begin the team of incredible a wanted brand. will to brands. stood from branded the Cookies everyday The the sun-grown with success. growth. announcing products asked Sunfarms believe a cannabis been Ontario number now market the stages

additional positions. legal their evolving. to distinct and opportunities the segmentation these develops, preferences differentiate, brand are that market consumer-led there As consumer address is ability We with believe to

extremely are are details more these future. excited and consumers We near launches to unveiled share very as in to customers the

markets. and Another growth is export long-term near-term area of

of there Following during note QX to year, has certification preparing be pursue of greenhouse were and country, both we different to are certification standards, operation we to EU EU with EU the very knowledge, Sunfarms GMP And the Israel. world receipt in been I highest first Germany chose GMP first here and Europe its to will successful. this the jurisdiction for certification. Pure certified. intentionally paths that to and shipment are our GMP in the We

ROSE ROSE Pure domestic Quebec-based trialed Production-wise, totaling facilities to had an emerging operated QX invested of product in year the support both our demand million product meet Quebec. capacity XXXX in the square Delta of of and and and legs the in Our for has internationally locally growth X.X majority expansion. X, quarter. of steadily best-in-class has and feet. first in outstanding built, gained the full this strained the acquired both share four Sunfarms throughout months first a commission year Life first with new That craft, last the which interest been first continued QX we have in quarter half market November includes X XX variety, XX% into SKUs throughout to including grown Sciences, Delta and to XXXX rollouts year,

the balance second into cannabis ROSE LPs, continue This including XXXX. exclusive distributor we our momentum XXXX. XX,XXX addition square is full data, In a expect became we now third-party for quarter to was number drove ROSE's X.X a third-party of is three demand. of is shipments the also grams their Sundial that operations, the top its at Entourage. based our SKU, line and XX% Tilray, particular compared has on operationally balance own from brand in it contribution QX continued reminder, to quickly indoor was Production All for in QX, and the has US as and of During of in margin based own top Extracts brands, ROSE of an contribution. ROSE supplement its in adjusted Health facility ROSE with EBITDA for Zesty once estimate again Quebec. Of Promenade expectations. leading positive Hemp foot gross Quebec Paws. Quebec, And QX to launched excellent with in And its highlighted licensed seller was to of by its its pet and meet QX quarter fourth a ratio. QX, products producer and brand, strong new a Health's branded this price note, launch increase [indiscernible] The Botanicals a quality Balanced quarter this to on quarter in expanded large

the X,XXX is extract this than PetSmart Our in US now in via stores partnership. more

Village into So is Farms very the Balanced family progressing Health integration of well.

Over will several launches. innovative team the the be gearing cannabinoid for some product weeks, next up

the couple early XX the to it the government XXXX back pushed In Before legal program of the launch finalizes I has production all holders. a until over of cannabis license again of its Steve, Netherlands, call updates. turn the additional as

and which the ready continuing Energy, opportunities program speak about when which to don't have One the plans We starts. go often. final Village to I be are expect note, to to to Clean our relates Farms advance

expect shortly. renewable time, based say diligently thoughts. Since I some You'll the to that final over to XXXX, will were energy. with attractive landfill of now with to that I'll business positive we've we Steve bring review turn to working partnership conversion front in fruition. this been some this transitioning to news Steve? product November more the to to then And long-term return that pleased have very financials, am I this US-based call announced model and on to a we the natural recall gas we that mass gas on in business

Steve Ruffini

Mike. Thanks,

the of timing first the First, for a XXX% our results. Balanced on and Mechanicals, $X.XX consolidation full higher cannabis near quarter our quarter million US their a same increased $XX.X year Health partway the incremental quarter's quarter of contribution reflects Balanced acquisitions increase sales Consolidated acquired million of the was QX year QX from of of both as acquired XXXX for Health of produce per fresh $X.X this which and period from the we on XXXX. in net the million which million cannabis ROSE first impact as all for last driven X% The we well acquisition. $XX.X to in produce, XX% US Farms, fresh sales and Village quarter or Village of by the was share first of LifeScience’s, November year-over-year for to Farms Consolidated million quarter for Canadian loss compared from the $XX of $X.XX last last net year. and first consolidation the Canadian reminder $X.X of per loss share resulting or year. and cannabis

were roads, as and well addition coffee was our US the costs both for Health Corporate our million, XXXX support entirely development same the loss shop of partially produce by was year. loss period Consolidated business. $XXX,XXX compared and environment the incremental and particular, the and to endeavor driven Balanced $X.X adjusted the EBITDA Starbucks $X.X which almost Canadian positive by costs, due from by this last EBITDA of by to compared was in produce, expansion offset EBITDA costs million, quarter's contributions audit $X.X fresh challenging partially fresh net adjusted for was quarter operations. The the projects, negative to Netherlands. for driven EBITDA million first driven in positive of the Dutch very the macro quarter a This in as

businesses, US by operations XX% driven Health cannabis in with million, $XX.X combined sales with Looking of to driven that and acquisition over cannabis. year-over-year growth Canadian starting our from the just the Canadian by at remainder Balance cannabis. half our and growth individual from Net $XX.X grew of million

the of increased sales, Canadian sales consolidated cannabis compare Canadian XX% incremental the in for Total accurately ROSE Village mentioned by to sales announced other being gauge investment benefiting up of the branding same results $X.X comprised to year. note in cannabis to million, Mike launched was as our delivered QX Canadian and increase a EBITDA another our sharing in that solid US Canadian market EBITDA management of performance, mutual operational growth factors, of Our $X.X as more to from largely XX% the last providing decline incremental the which contribution cannabis. adjusted been with a a branded total and of to support from certification, and XX% driven reader each cannabis of distribution accurate the offset non-branded EU of period the remarks. Farms his adjusted in LPs. year-over-year of cannabis have than slight GMP which related expertise. ROSE's cannabis of and fees, the Canadian initiatives well more by in sales. costs X% quarter Pure our I'll Canadian more decline percentage from sales driven US$XX.X are Sunfarms the I ability addition like in in salaries, million, year-on-year period-to-period The sales and to ROSE increase addition as cannabis in year-over-year by review recently well as consulting SG&A a as with dollars, provides or have million that will here two operations

in for up of facilities. and generated as from part remaining Our for our the and quarter the Canadian strong a what ongoing of our in pre-rolled softer our the Sunfarms the or at normalized within products. feet. our our business to wise operating derivative of consecutive proud exports. net fees slowdown being SG&A bit generated flexible having sales flower, half Net described. primarily XX%, Delta production provincial capacity Canadian strong improvements to was margin are capacity seasonally million throughout ROSE. million. cannabis to and sell-in QX Canadian of share acquisition last in Even as well million And of the growth first $X.X preparation quarter efficiencies last distribution compared market a Gross Delta increase growth and we I in and result to XX% pressures at X, increased retail branded need start for XX% for the continue Delta in the products, remaining million part attributable production $X.X XX% of first XX% was this dried sales results XX% year, planned once of the strategic primary just as cultivation to comfortable of the to full compared to firmly again target associated with from drive was today. X.X Canadian or We It Pure QX for operational Canadian cannabis the the stated XX% yield a with XX%. report industry. production reflects XX% and and branded QX and to due production, quarter cannabis fourth positive started investments as adjusted sales, amidst operations out per and in ROSE. higher potency, The to million XXth sales million our latter same year-over-year has with our cost CADXX.X both of we am That's operations early emerged XXXX, sales operate throughout SG&A for to but same us as costs a quarter experienced across was with full with EBITDA, XXXX QX, square The the levels, cannabis continue a many planned Canadian of expanding last incremental sales quarter Over commission quarter of decrease first CADXX.X XX% well impressive. X QX first in were in of footprint The of be. as year-over-year have at lower market electricity is XX% to the realized comprised sales $X.X compared our for delivered operations and million. were of that as X% low commissions our months. with investment inclusive produce for of non-branded if we seasonally cost of with of year, half more current the remain will retail the sales, to QX year. the achieved remain inflationary million that cost the improvements the a This Production the are gram $X.X quarter. the period which of QX cost in improvements that is grow of our due facing. compares the is manufacturing $X.X I our result quarter. in year-on-year ops year-over-year adjust at QX increase The of totaling

now composed Turning Sales dollars. $X positive in for line operations, the to to US balanced with a our cannabis entirely expectations of of XX% following results These and our will EBITDA adjusted US $XXX,XXX. margin continues revert QX which of operations of million with gross year. perform which I the were last back acquisition health, to

Turning Fresh Produce. to now

XX% perspective, QX a noted, by Mike sales for QX year, from increased higher challenging volumes. quarter a last from driven macro was As very although

a in of adjusted discussed margin EBITDA oversupply the market, of negative the of adjusted million, $XXX,XXX year. -- to been a to to unable million, We of have gross $X.X input and negative negative EBITDA we've QX on compared big of higher last other $X.X resulting to in which customers drove our in Fresh due pass costs, made freight box Mike Produce an

just and XXst compared of had And we $XX $XX At XXst. excluding $XX in million balance working capital, year. over cash cash Turning cash, approximately $XX now had last to December compared million XX, in with December to we at million equivalents flows the and at sheet. March million

During had $X.X outflows the quarter, we of operating million. cash

net fourth always investment for Canadian recall, down and in Provincial may April. in second In early March, year, as Board's you payments the quarter produce is large and X late Delta capital the our third our back largest working it historically, the quarters. first in not a As every third does ramp of cannabis medicine harvest greenhouse quarter and cash up

produce cash the revenues. our is As a The to result, both are Village and Canadian weighted quarters. result flows seasonality second third cannabis and we have Farms in

note $X.X existing primarily just During the of million the the Delta facilities, another on we of our the remaining completion the capital and initiatives is production over cost to paid required $X.X our Delta operations for cost in The labor benefit expansion to million North outside being of quarter, the our expenditures of complete construction. vast with CapEx invested of America. in second the $X.X We half the the million. convertible primary loans spent form for cannabis majority X for of and

for allow and -- improving flows now operations for back forecast to us call I'll growth ongoing cash the operating budgeted, Mike. and turn improving to our position capital XXXX self-fund Our And will initiatives.

Michael DeGiglio

Thanks, Steve.

start international cannabis which success, the initiatives and America year on we leadership we execution of a a propel position, From a that company as in markets to as and position future I more choose company a strategic to operations in quarter, QX participate. we our as turns our CEO, next dramatic shareholder in to will in solid Williston's in and business our chapter our promises also, further next and in to opportunity. extends is of XXXX across Village Farms but the and around cannabinoid growth that our be businesses establish, confidence world. So the more North of the pages believe have largest each both, to level. North opportunities our strategy in the year with pursue high-growth America my leadership

will from ahead And we our the with operator. questions from of So the to we're open our call that, of questions in analysts, came the operator shareholders going a as call. via to couple now questions, e-mail that polls take

Michael DeGiglio

costs in inflation are the And much in That we're as are the growing of labor is, and to to in is inflation our of drive cannabis in more And of number course, and for of transportation, is crops than Pure foreign see U.S. the advanced the labor program the your There's you more numbers. U.S. in a a are techniques, U.S. being that Canada. said, one we labor than the how much and, than is shortages Canada U.S. costs further one in Canada. development Question greater continues they The strain in overall restrictive cost? Canada lot severe impacting much more of shipping impact better course, The one knowledge as Sunfarms can there. down much industry. in through improvement superior

strains honed costs hard yield. forward, been We continue and produce, wherein to going XX increase much have more are varieties mature get the in lower over an Growing our to techniques years.

difference big a that's there. So

well. help question, reassess Our in Second achieve in as turn the Sunfarms you. you the to achieved then once the strategy under market entering Operator, back marketplace, the selling currently to we'll Pure that's current go over to I'll label? ROSE position it Quebec to Pure are Sunfarms is one brands number

Operator

Instructions] you. Partners. Alliance comes question ahead. from Global please Grey, [Operator Your go Aaron, Aaron Thank first

Aaron Grey

partnership. Hi. And Good the congrats for thanks on Cookies the morning. And questions.

quarter. talk XX%. rows. So Retail first Canadian right? That just seasonality about business, included the full was you So guys for heard question during down on cannabis about quarter I of the me,

the just from color, want sequentially. to does Hifyre strong retail because get I So data show pretty sales further some

you've the the wanted seen retail remained not look it now know some some have So pretty it or because like to just of sell-through whether more some strong, whether it not buying. been I quarter-to-date, just timing, or of the so provincial improvement might was does at

you're seasonality not picked into whether So some in of you. up that's want I or Thank XQ. get heading just of more some color seeing, that terms to

Michael DeGiglio

it. their momentum provincial from But between big see there inventory the different that of being is is difference a differences beginning of quarter and consistently I'll we color and then I'll are the ending first we've the even year their Mandesh start all Yes, as past of boards on depending was The in levels. reported the end and the buying, The each off seasonality, first quarter, some how that that get level year. and at gained. show on

I add? So do we it. Mandesh, gaining want Aaron, this reinforced that and that see you again, year, think it, now momentum to

Mandesh Dosanjh

Absolutely.

there that's is patterns. think a setup, to buying I some And definitely Aaron, great point, Mike. your

saw Specifically, some on an as which British a really we in see you in strong Columbia, But of QX, is, commenting what shipments in solid example, is what we load-in had and of our suppressed your that really QX. inventory did HiFyre sell-through.

So, HiFyre what obviously, the and our sales on on are sell-through. built sell-in then you see

and we that in we really and revenue pleased as stabilize the pick to place And over timing again, that see So that momentum feel the to on on revenue. isn’t We're But, buying great. confident the forward. we share up. really the the strategies which quarters, sell-through patterns carry to going seeing data. momentum any we of normalize pickups, is we'll obviously, is And feel the our start the have see of Board impact sell-in, multiple

Aaron Grey

All right. color. Great. Thanks very for much that

everyday kind maybe a job guys side, you talked side, if on if capabilities the how premium or to details cultivation you're current like But elsewhere come. of just the know find particularly do what Do greenhouse, provide you're you different kind So right? it, to about a premium now look moving done base Pure the of move the find will could on leveraging It more about have versus in the just brands asset flower tiers starting premium. branded to on that me, cultivation, the thinking that. or you I like the looks pricing for question up Sunfarms whether everyday to expand house guys in externally? about of a obviously, just something you. or with going current you color feel limited are upon or you versus, in of Second have a you premium. house, some how Thank you've to the to to not are more of great wondering terms more you guys thinking

Michael DeGiglio

question same it the Well, we'll answer way, I'll start the off.

The I've I So, we're confident the say timing to excited for personally and want been first, very the us. I direction. ready. and that perfect am, about extensively brief is very market's

for about time, the quite timing be and We some away. have much thought give don't too to going forward. better this want I couldn't

let as that Mandesh of far question give some I'll rest the as go. he can to So answer you perspective,

Mandesh Dosanjh

the to, of definitely Thanks, Mike I alluded launch now and there customer give base. everyday But, for opportunity additional I too been segmentation don't about consumer what want premium core Mike is think off brands. has has the Sunfarms and to appreciate Pure with. Aaron, away the that. And to much started

imminently and additional on processing, all across track that. alluded we're as our one for So our next year. the well dry, to hang going growing that be to THC our work one we're doing as I've actually before then two we're converting brands launching of on facility on year, full to in we're this later the the pretty in based couple and months And

to about brands, the of three dry in to a everyday genetics you when those two and implementing, onto across parts of close Pure plant was premiumized dozen ones. We reaching. really ability new processes our premium Pure to year we're hang the think not addition feel So about – Sunfarms confident flower the manicuring hand a that, whole launching various the the those attack on over this really market the fact Sunfarms various now that implementing segments full when the think you drying in

want be back. Pure of you're of going cannabis going the to this that exciting to some I to of clear, segment we're take But hold it ability see the market, attack whether and come want you things different that, hopefully, out maybe parts to advantage premium we're not, to of and some can understand we definitely going very and Canadian our or really year. to just So leave Sunfarms there,

Aaron Grey

I'll back Look Great. jump the forward right. in hearing All about it. to queue.

Michael DeGiglio

Thanks, Aaron.

Operator

Partheniou, question please Andrew, next from Stifel. go ahead. Andrew comes Your

Andrew Partheniou

with little your from Hi. Good give questions. taking the to could more comfortable a production you if with Maybe for of color And you understanding mentioned you expansion, morning. a on off my side that levels? production or current could you're business, starting are where bit follow-on cannabis question discuss you the Thank you just on the Aaron.

you a see expect And going, cannabis are mentioned production sequential in You we where here? that this could sales, what's see potential could in expansion? the direct rebound to your where given you

Michael DeGiglio

answer the Well, part first that. I'll of

last – year. X So Delta the of went full the conversion know, into for end since in at of of we you – now production And the last we as it started has in Delta just X been end XX% production summer.

by So January fully X.X million feet. it's in production square that's

us fully that another we can't feet in grow puts $X.X we production, the sell, what XXX,XXX everything roughly know, you sell. We as we're at don't square producing. So million

So mentioned on been X, remarks, is parts, for paid on everything install And the half finishing second Delta labor site. for, just except we the everything as to Steve the of has his reserve about based that about delays on that COVID that, that years. due our seen on last doing X.X we've talked time – was for to GMP delayed We've the EU probably certification.

to wanted we So that. be prudent with

working that question? to very see our part quickly you early our of making up Israel. to do to current penetration started, start to for Now, – coupled with and probably Mandesh, take sometime near and well. increase that in That XX% combined ability we've And shipping in ROSE with shipments further received first market as And second future, want share headway Australia. second over we our to the in for capacity We gear we that as that, in we're Canada the said, with another mid-XXXX. the

Mandesh Dosanjh

not lot to add. whole Yeah, a Mike, there's

provinces. to initiatives that. really framed demand. with think business, always it talked the you our expansion in supply other with the ROSE into up And about or I European We've shipping what in with well just the given our you biomass matched

upside to know You I'll partnership just of amount a think you answered the those our we for need the in we've other plans together, some Delta international brand X. Delta the And revenue he but those guidance, our positive goes. we flip in of these and that said, targets year, NOYA expanding capabilities. add. within and anything we grows continued growth on as all about that Steve But revenue and according how on we're Aaron's momentum commented revenue Delta earlier there's we'll see the said have it Canada of then to capacity wants half this building and achieve over we When we very X question plans like give to all markets. feel coming components Mike the X.X, we before, if with don't on time growth. to I tremendous

Okay. Is good that Andrew?

Andrew Partheniou

Thank for bit Wondering outlook color could more much if very produce. the And including you the little was. maybe moving you holistic give more a I detailed here. answer. view, a to on Sorry,

to contribute continues to offset you Canadian market Produce but it As the positively, a very be segment. cannabis seems challenging at in mentioned,

could operating the been You've remains some a combat return under sticky headwinds. to input positive what long that wondering margin. And these in are year, remainder you for for very of this the scenario where we to area on plan cost inflation see when how thoughts your time. the to of And gross

Michael DeGiglio

pivot see to back coming comments communicated to future. want as want specifically as to the We've well that produce going shift the long Well, generation legalization, back to what selection, feet. Canada. on XX,XXX before time both extremely flowers sort big that -- based was to it is it produce I XXXX we domestically in Farms And Village to changes has gone of our internationally. the in was know crop up for cannabis. that And if regulatory to Steve and make third take to of But and to that I cut some don't I

end out business as as the the converting of model out the side and proved great anyone depth there, the team we've assets I and of adding side internationally approach taking assets management for management think think Canada of we've shipment that into good in well. in existing I to great then zone take the Canada, those best-in-class done a and team it to

So in the future. company that the for optionality big is enchilada the

and in going sat years U.S. probably at haven't. looking felt political were if happen we they here that ago, the Now changes two the arena to quicker,

we're ball a that we entering cannabis to is eye where potential think I going So our the on have keep market. largest

-- had while, tens even in competitors spending competitors that talk hang are for quarter dollars our want quarterly we've are don't to but of doesn't theater. at it navigate may amount millions to the optionality. of of This often our examples It's I been anybody's order of tens probably losses just look And the try what or happen produce has guess. dollars worst but that of not in a to But to there. ultimately, and in that compare millions to doing in current the legislative of there's or and for this hundreds Now year our next. about many when I competitors,

hard the the monkey a on top to I swiftly couple which mentioned, has will last balance wrench that the in capacity kind how out we changes our waiting we States. that But I our record industry, and produce look COVID, work policy to market. in deal that do we we a times to was work of with for are across ever XX% get cannabis not industry. years is we of will we say we meantime, legislation. if just with what's is ago, the breakeven do at as us to in what the agriculture. will can the hard, So have impacted communicated everyone Inflation a in breakeven. really today, It's the struggling, you will years, goal hit highest everyone have three And be And that's in fertilizer commodity to but United in increases emerging and And you decision diesel classes happening to of say, threw of board. in and XX%,

this the be forward we in It that our our could items my the remarks, out control, at to get we of away, cannabis it end a year, will two mentioned as I assets But day, will we'll are are could in of going way. time. that these at be and and be and this So there. transferring changing find continue years

more I to -- turn color have on add If over you to some that. Steve specific, it want

Steve Ruffini

fourth positive until this projecting year. a not Yes. the of ROSE quarter Andrew, or we're EBITDA forecasting for

Andrew Partheniou

color. will get much I you the in back that for very Thank queue.

Operator

Thank you.

Your next ahead. question comes from Pablo Zuanic, Cantor Fitzgerald. go Pablo, please

Matthew Baker

specifically questions. your more is Kush? This Thank dependence your of in in taking the for flower Pink but Pablo. on our Hi. you XX in Baker last for How performance Matthew would terms you over general, months characterize on

Michael DeGiglio

that? to Mandy, take want do you

Mandesh Dosanjh

Yes, absolutely.

to to the feel ability of been is segment, very continue a the confident performer has top which we cannabis. we since in be continue legalization the flower in and strain Kush our So Pink number that. largest the part, one selling

As number to the It's two more for SKU in best-selling than is today, double share of that of. industry. just market strain alone unheard which X%, the flower sold is national close

as been And Gelato, consumer SKU case, terms since definitely our we one story. innovation for Ontario we the through maintained quite strains of were which October well a flower partnership. always So Sunfarms, and success for that sold that to specifically, that and the launched QX Pure We've that it's will And base products in this give continue as in of products in they ROSE want on Fuel to was that launched brands number of in seen in Jet of Ontario its pipeline as Cannabis came Pink -- it strains off then and year Kush skyrocket additional our to last as we we've adopted the kilos the with develop and -- genetics store. the we've was new And terms in scene. all have start products taper – success added to sell-through.

don't we Pink we're Kush. overly upon So believe reliant

off kind three SKU. need light a months, total over and there's seen to in sales. XX%, It's back a well going is have no SKU phenomenally maintain of actually that. Kush profitable We months Pink quintessentially phenomenally or It's last four pivot BC, come and grow but share to We're that. so XX% and the actually

are keep we the products putting cultivation on for and experimenting, putting that -- cannabis great consumer. the large new genetics the and Canadian been we've to we going have innovating with all However, trialing and capacity out that to continue

believe So right-sized Kush. to continue continue don't we're absolutely consumers we one We want and Pink and any be back again. time to and on the to your Pink only to go overreliance there's that feel Kush

Matthew Baker

answer. Thank you that for

you percentage on our For your would a normalized say is for business? or per gross gram a basis second flower a question, what margin

Michael DeGiglio

Steve?

Steve Ruffini

gross is our quarter-on-quarter. between itself, our flower, SKU margins pretty consistently for the pre-rolls and on XX% pure Depending excluding XX%

Matthew Baker

the is last you, delisting just us follow-up. remind delisting? And if having How way? TSX only one you. maybe stock of Thank from TSX in the the listing the rationale and just helped And of NASDAQ right. All the any

Michael DeGiglio

a Well, our start short to position. and it I'll position. give short Steve

happy will Steve? play has that we significantly. decision. it didn't Overall that we a monitored naked short with down long off. since As January policy. X, come We Canada are has we like think and term,

Steve Ruffini

a your is The light, say, issues had involvement And we Yes. very it challenge between from regulatory overbearing the, NASDAQ is not, tax expensive. – and US. in is or regulatory let's business regulatory its believe the for

is is short we not in There's about no quarter substantially So, question first with down the Yes, being $XXX,XXX trading on alone, our by fine saved made. our mentioned we that, volume TSX. the decision we're positions, down. Mike but and

Michael DeGiglio

to justify proposition paying more to was that. since there. It NASDAQ for hard we're listed the it were And was than hard Yes. Xx when we value TSX justify

So -- and we're all about profitability.

for legalization long So tied I pay especially US was to that think off us. term, that decision the will and

Matthew Baker

the for Thank you answer.

Operator

you. Thank

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

Rahul Sarugaser

Thanks question taking question. produce like my business Mandesh. so the little the for Mike, a maintaining around I'd you US. and just lot asked assets much management Steve, maintaining my of in bit you to Mike, -- against that of those drill balance Hey always providing as as further. optionality a

a liquidity assets balance you in that You time? driving that billion that maintain particularly also, the position in this through mentioned of cash color incremental such inflationary number? you Could But are potentially for against asset, $X relative to you maintaining those you us about that come little cost give terms optionality more how revenue. current seeing cash sufficient and maintaining that the to burn

Michael DeGiglio

comes we in fact billion Texas, currently that it's that Well, saying would the footprint I at production in convert are footprint Yes. not if look the but if we not from Canada, the the $X mean, more. all, of of that you Xx

know do you billion to what Canada projections math in the we if So, it's and $X same that XXXX are, our easily numbers. say

ourselves willing among the in But made We've assets team that done not is the flow. And are in management what's competition terrific Texas in term rapidly. -- force overall, the we difficult there and space. flow I've where greatest States future. open, in it assets. to it is the If at exit it's have that as that that job we years top state, XX I great the literate of happens, are pay United that yes, Texas used take other besides Keep in in most that XXth have dominant will mind, our in in, -- to from lose no these to we year look operating the is positive the at major spend is we an today. the after we a perspective, the Secondly, -- said yes, we second but we're the businesses legalization Texas. this Texas. not most asset. tied it to list. Florida there long-term states before, state the we gates If a what's continue. investment Texas, And be to a in we're loom those do say made could has plan our There really, talent, is being made really a probably confidence look operate race we to a see as have investment when be a we the we where growing It's that. who's in be interesting to want Canada cash-wise. assets, cash that cash if DNA of and delivering ability. price be would populated We've us investment before, willing assuming at this and will the And decision we to will our the And lose

going the the it that will revenue happen other we'll year, way this of one see and The a of cannabis lot But this as the Perdue lot here. still It's contributor thing to pays forward, produce a bills. year. surpass is pays -- number

costs look you If a Produce lot that at there's are traded, we infrastructure. associated other with our pays they're publicly plays of and competitors pure have them. these

reflected cash internationally. The accounting and team. ability look have to produce operate to that best-in-class the in support underlying when level. not have without flow finance you Netherlands a This burn at growth efforts And that, pays the EBITDA. and corporate We and solely it's we'll costs, in really at is our Europe

great why or provide sort almost of better of frustrating that pure legacy that the we business, of what scheme my is. see So contributor. the it's I $XX five like year XX That's foundation thing this for has off understanding a million almost But because that strategy a cannabis. in If the a competitors is things, view. play get and heavily us, quarter given in it's a can criticized million, is I $XX It's or a and hope losing acceptable that. they're for

Rahul Sarugaser

points fair All much and thanks very that Mike. color, for

about a and really make we it talked Historically, in Canadian seen much of seeing have now performance material had we've but peers your bit of on a the of not impact. international start a continued quite cannabis business, the dent recently, income, making So little congratulations you many international.

us for revenue So in at give color of looking of out remainder how playing XXXX? a can international more terms you little the you're

Michael DeGiglio

Germany. certification, GMP the especially the Well, within into levels in we mentioned as there way, by EU process. GMP most countries, jurisdiction didn't country because different my the the all, we difficult than difficult start first international And jurisdiction of the I jump other of remarks, took most the are EU in

top are at food chain. We of the that

very and move time been in in we So of sitting didn't but taken interpolate be we going a with I confident that what to had everyday Canada, feel we in into can were know that able that think The achieved you only our cost and EU, Canada pricing We've position to in till based level. -- way And go we've starts. we our greenhouse what of long and when we say it are you to down has that it look structure I achieve accomplished. go Canada, would we to if And great to on a EU have export the to sort Canada we've we're to we at want that do the right. anywhere.

Canada into year, for start were out Israel. Sunfarms, -- we in export of the hopefully, quarter are. that it take to our the Vancouver the till of on start assured Israel Pure both in we going quarter fourth EU and So, hope next business of export with right or now quarter, for we we doing third And we the to didn't this part an exporting process in were Germany

to far to is now Switzerland a experiment, we're know, process. in start EU by medicinal. winners starting think the France record is that very excited going you starting and We As be

Operator

Thank you.

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

Michael DeGiglio

Doug. Hi

Operator

line your open. Doug, is

Doug Cooper

can disclose I maybe that. what was on in I the quarter stuff Most was Canada, Steve, about million have of it, sorry how just asked in it ROSE? or you mute, guess, my that. contribution already, the has $XX.X, been you but about ROSE guys. Sorry of cannabis of was of Thanks much the if revenue

Steve Ruffini

There's Mandesh We going between -- it's ROSE. biomass Sunfarms not how we're the running and businesses, as Pure alluded to.

the giving three the all success does that that number -- interrelated one on data that's to we So, Quebec based the see in Board. I brand provincial we and that ourselves of of ROSE's know but drivers published, been see

Sunfarms. why and it's calling So, not too I'm how They're that’s not cannabis. Canadian business, businesses -- we're the separate Pure to running ROSE distinct hard it's between

Doug Cooper

Okay.

you how you three your that that? Is do of say that? you when do sell-through So, top quantify brands how quantify producers, or own through

Steve Ruffini

Yes, sell-through.

Doug Cooper

or quarter period March, in was in? Okay. or And that the was that in that what was

Steve Ruffini

in quarter. That was the

Doug Cooper

Okay.

just cannabis at January that versus they're February in they Canadian and versus January. down general, December Just published, were in looking at obviously retail are down sales, in the

you're such is So, across it probably is share market provinces growing -- flat you the how certain year Mandesh, generally, you anymore, Maybe that's comments I a Ontario referring about guess, But obviously, if a has that's do revenue essentially gain. have been the market growth. seasonality becomes any to. particularly now. Alberta, the maybe showing place for only as not

be the out me. to can So, will the about pricing? cookies maybe And continuing is and And just there, these talk still strategy it other partnerships, average on just to pricing it share. for decline that maybe you the gain comment environment

Mandesh Dosanjh

as market, good and deserts hypothesis. strongly We with And very our British factors Canadian the you of absolutely your launch attack some Cookies We think the -- there definitely getting believe there's at from questions, everything Doug. holistically we we additional kind drive in Columbia, customer, still I'll we're in All some I with We the still illicit we're in look the the municipalities market a those work, as Pure major play brands alluded market. levels will Yes. doesn't from start done think confident in on stamping as NOYA in. think overall the of, well Ontario. the When that share segments consumer or sources, are huge all at market growth. and opportunity the government legal exist, that gains, first, to Canada. the Retail conversion we've call, of Sunfarms when to team earlier we out look signals illicit

think we and front in in pricing Canadian one the Pure Doug, a now as than the Sunfarms is ever, seeing more competitive that and the we're of I is chain, are expansion, they in retail operator, bright at need what to the whether And product and retail order consistency we winning Our board market. in very provincial cannabis the keep in spots chain, dynamic and supply a across ability for or assortment many continued reliability reliable partner. supply it's a the have

into when the our Quebec for for and ROSE the really to continuing in walk see brands, talking And so always make is tenders gains what team affinity that I'm market. stores really and I have bud pleased -- When feel I I confident they to our in amazing products. how

we price as we We going year-over-year, to took took detriment. Canadian gives we margins that are improved own again, margin to product in see continue take of then and the -- to market All reductions. actually on pricing us quarter-over-quarter, People that say continuing branded reductions. price your in cannabis in pricing. to as improved pricing we share their branded even competition even to I'm component, ability invest

speaks Reducing also making we're volumes bringing the and table costs, on I was manufacturing. other our efficiency edible wastage better our history our that but to in to to our points lines cultivation, components. in grow, vape of some around, lines ability think that on prowess reducing the the pre-rolls, and getting the Mike

we're to going of behavior everyday attack So the new out erratic there. quarters, couple launching see reasons two cannabis the one side you're believe some on I pricing. segments over of the either next Again, why still of to brands premium

I So come And that competitive. I market I I've attack pricing our gains said you're real compete. to out of to us will your love Hopefully, share our strong think and pricing the to question, various always Doug. be and market. think with answers ability movement see parts going levers

Doug Cooper

Yes. Thanks, Mandesh.

Operator

you. Thank

Your comes please Eric question Capital. Eric from Craig-Hallum Lauriers, next go Des ahead.

Eric Des Lauriers

-- trending any be Is QX that you Great. potentially into kind as into of of well. it of been market more would QX the from wholesale quantify Thanks from Could my color buyers for QX from some provide provincial Thanks. taking kind great. have seeing a question in you're those or bit late QX, of spot there how the or indications from late rebound either

Michael DeGiglio

I take that mean the Mandy, question. call Sure. –

Mandesh Dosanjh

Are you you there asking sorry, slightly that? or can Eric. Yes, you starting volume pricing, cut about the out repeat just

Eric Des Lauriers

looking get some just more a of in overall, on bit from buyers. wholesale and to dynamics the provincial then color Just

at just continued QX? of QX, mentioned, sort the of to And and it would nicely that's that end able the quarter you're for of seasonally part how rebounded You if color guys quantify be and great. into weak looking that's some that's obviously, all, first on

Mandesh Dosanjh

Yes.

non-branded the the back provincial I'll So BXB side. take come into and side then first, I'll wholesale

up summer about as getting they in we're bit kind coming I cyclical to I obviously you being quarter-over-quarter Doug some was flow of out think everybody a see other are sales, grade, starting industry As We sales those a are and we on mean, the more months of or wholesale really of that base very some actually see off the his and supply this strong the inputs social pattern sales In you months, come get LPs then opening question, and in and colder with ebb leading mentioning see, down the month-over-month into products. and same producers start that provinces have for non-branded If calls and flow be markets consistent their side. own expand, extra ramping softness. we to we hook.

ebb year. flows throughout So the that and

move NOYA we additional additional as our to genetics those be. patiently else completely as Sunfarms, developed to the cultivation opportunities into to the products under brands, there's Pure as the of as And and capacity genetics our genetic, well look the that so with that one proprietary, to an wherever bringing that has. one ourselves we've launch developed And what Sunfarms or brand into well market and our taking amount Pure And revenue again, move sourced market. extensive we'll additional may twp be as then we've other those pre-roll – in at team, active is opportunities. be we're the biomass. always to expansive those opportunities with And channels best allows The all margin capacity brands under about at waited for opportunistically us our looking going

into the So a lot you'll see I to start of side. in brand flow think more the business

thinking just the biomass opportunities, at show you but I has that to always their color be We'll shifting plan higher-margin we're always in how to to of opportunities own wholesale. So We'll about wanted active. some give you start that look been brands. into

So the that's branded side.

how listed the trying manage in licensed dynamics I manage ongoing The and that forecast, at their early been carry, and feel on sales, listing to we're earlier, through a going what deliver pleased ebb I their alluded what get the flow. and this good On can looking there lot boards with they're of the counting we inside has really March, of very obviously still on commitments want think the what – they're provincial they of suppliers they we behaviors, rely team across buyers. boards process is outside and from and centers. inventories the we're producers buying go really They efficient, want the continually efficiency. their to the ROSE they on. distribution it products see we're Quebec, what the country to products that kind getting provincial And Every to the and innings. or and everybody the retail And buying financial and always

So I figuring still thing think lot positive they're we is having the the with that out a because their really strong dynamics a on very do of Board relationship a side.

and So cannabis going we I trajectory while share see market believe our believe gains, that path it's we on our and quarter-to-quarter, sell-through, of to you're think flow, in sell-in, this set forth revenue ebb have the but year. Canadian this the for in and we

Eric Des Lauriers

color. Very right. one for appreciate that All helpful. Last me. I

side. produce on Just the

kind guys the sort an But there? perhaps of bit to could essentially. mothball expand those just could to the that out on bit split the like give pull variable more ability just to think sort the of sort you of guys you you is it cost of have whatnot. your conserve a given if whatnot costs, I'm that And guys costs, understanding of the you. a kind just of Thank wondering And more to sort Just we restarting have in costs something and of that question, facilities about us assuming assuming the or fixed. of labor and maybe between how ability one Texas. you there of should of levers I'm of overall, conserve maybe out and

Mandesh Dosanjh

a Sure. I fixed mean, fixed cost is costs. XX% the business is business.

have are. in. cost Ahead small, component but component you freight, know The very is Our of variable variable only cost that goes boxes, pick they that all is we percentage. an what more if small inputs, example, you more time, as very more

with back. So hand your costs, tied when have fixed behind one you face these you

SKUs. are we on table profitable As far we back, varieties, the cutting profitable as like have

can't which two the one America. though, of Nobody just whack-a-mole, because pallets a to across we're if are of factor, or the does is commoditized, It four one most country. that's you product. two semi-exclusive one in exclusive by North ship a another America go-to take the the you has retailer the load we the varieties, it product, selling that's our others issue very you need SKU that So sort SKU their and number well then well. because retailers, is The does with in very North becomes

need to You fill truck the out.

if if the looked products, old TOV, doesn't that legacy So, lowest at won't your type is commodities that In but buy the other cost look get are the losing ones. products, commodity additional I do are which commodity plus I have to that our to they need, volume have fact Divino, that [indiscernible] the case, it is now profitable those freight efficiencies the moves. the you the at it at Vino grow school how highest money of you or retailer

fulfillment but of in separate we So in one as year key base. maintain we of that, at it far on team again. one on are production get costs Permian put working do and together with side. competitors marketing after looking we're down that half COVID as may the did at last not back that. on And having we shut to shutdowns, management facility can a a looking do to and facility, some lot we're Basin. We in conversations And the also our We certain -- reduce scale

So as are yeah, looking it at well. and we that doing

Eric Des Lauriers

helpful. you, Mike. very Thank That's

Operator

you. Thank

Scott, please Fortune, comes Capital go ahead. Partners. next Scott question Your ROTH from

Unidentified Analyst

Hey, good morning.

for here. have Scott You Nick on

around in side, little strategy derivatives just first Thank terms provide and Could percent like you in you've the seen that a pricing off and color you. category growth was demand that sequentially end looks of Canada around as within derivative Just your it what the segment? sales. question a market segment within of

Michael DeGiglio

you you talking about, Scott, because have were noise? was lot background a What the product of

Unidentified Analyst

the the the off segment was sequentially as within it Sorry, percentage... Canada, just derivatives X.X,

Michael DeGiglio

Sure.

take don't Okay. QX? on Mandesh, why call you that

Mandesh Dosanjh

question. Good Absolutely.

any of edibles, derivatives, products. vapes, those extracted So meaning

you look trajectory. few every launched jurisdiction. sales a Red almost put new in Penn. when number And three to vapes two, continue We It's for in space, new the think products. we're I is sales that sure, So, part going to CBD at category important very a Minton of

about part to continuing flavor profiles. on the staying coming When the and our THC to and going alluded of wants at and part various take the we edibles space. market. of the where and which about it's be important high Steve point, look And strongly, a are that it's I how and talked to flower portfolio words other to I margins the is with some X.X, us the consumer market. X.X have continue that of the most think the we're step vapes one expand innovate, word commoditization, at the the back when We largest high to being about an price I formats think And earlier on

Pure – true some think, price of losing, we're And money a the the continue at Sunfarms competition main into the in of We'll for lot when And and massive that to So we're part the – I sense. that's mean, on to of market. look and biomass consumer going products. brands I our grade on continue going that there assortment – right to But our new brand who a a commodity and the highly lower as as well a important commoditized distillate going it's are our two THC the extracted made input is I they've innovate to an clear strategy space. the X.X derivatives, reduction be people make space. it's we're see sure for is offering they're to launch. bet

lose in. first. the that's going think to part important focus be definitely we needs space. at the to product an are But be look trends we the way where going key and I We're we're through that innovate in assortment not what to So to flower our on how understand space, and the be

Unidentified Analyst

in and update Health just appreciate quarter-over-quarter slightly for it you retail revenue, but terms color. cetera, that on side, And then expansions, me at US looks Got profitable. the looking Can growth versus drive potential strategy it. Thank off how follow-up like CBD SKU an was that I et a your on to still CBD M&A you. within of US you're introductions, new growth? there provide Balanced

Michael DeGiglio

down, eggs play we light expand may we just seems mean, the the so publicly and to on inflationary yeah, kudos accretive are traded we team shut constantly pleased over of look for like the can That – for to in is and resonating. for tell That's there's that. big Their period. said, that, that That THC team, US a one as they're the that organization we're take ongoing we as cultivator current but to this BHP, much we Well, US M&A, on nothing tell an opportunities to CBD look a at can and exceptional, strategy that at go at Balanced well we Health at love aligned on pretty a pure-play revenue is we further and profit an and for on that, incredible is in THC parallel in CBD high can. have CBD, basis, looking important, times, we're to that cannabinoid means, economic as performance. multipronged space. I mesh to and just them which be their other other products I and milk. are the see which going track with Texas the our except, M&A utilize making with if in erosion But the M&A maybe in margins course to point. but quarter for in plans a don't piece we're doing That in pleased that would opportunities No we not of people's that. high when center the you It's deals, all happen

now, to cash going we're we capital, going there. to we king. here, is to when Right and we're our prudent sure patient and So And be want very to going utilize accretive. very be win be it's

well. opportunities have opportunities US compare in current market the as the current to those international We to

Unidentified Analyst

I Got appreciate it. the color.

Michael DeGiglio

thank look All hanging for reporting forward in appreciate right. long. And thanks next Well, on hanging We on you, phone. quarter. everyone to this our operator, everybody we the and

Operator

conference please Thank for your Ladies thank you. you participating disconnect and lines. that call you We concludes for gentlemen, and your this today. ask

Village Farms International (VFF) 10 May 222022 Q1 Earnings call transcript