Village Farms International (Otc) ((VFF)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Village Farms International’s recent earnings call painted a positive picture, highlighting significant achievements in profitability and international sales growth. The company showcased strategic partnerships and expansion plans in the Netherlands and Canada, despite facing challenges in the U.S. cannabis market and constraints on meeting demand. Overall, the sentiment was optimistic, driven by strong financial performance and strategic positioning.
Record Profitability and Revenue Growth
Village Farms reported record levels of profitability, with consolidated sales increasing by 12% year-over-year. The company achieved a consolidated net income from continuing operations of $9.9 million, or $0.09 per share. Adjusted EBITDA from continuing operations was $17.1 million, reflecting a record performance and improved sustainability.
Transformational Quarter with Strategic Partnerships
The company announced a significant transaction to privatize about one-third of its produce assets, forming a new partnership with proven private investment partners. This move generated $40 million in cash proceeds, which has strengthened the company’s balance sheet.
International Cannabis Sales Surge
International exports saw a remarkable increase of almost 700% year-over-year and over 120% sequentially from the first quarter. Village Farms has already achieved its full-year target of tripling 2024 international export sales by the halfway point of the year.
Expansion in the Netherlands and Canada
Village Farms announced plans to convert the remaining 550,000 square feet of its Delta 2 greenhouse in British Columbia to cannabis cultivation, with full production expected by the first quarter of 2027. Additionally, the Phase 2 facility in the Netherlands is set to be operational during the first quarter of next year, which will quadruple annual production capacity.
Successful Market Penetration in the Netherlands
The company has successfully penetrated the Dutch market, with its products now available in 66 of the 80 participating coffee shops, reflecting a market penetration of 82.5%.
U.S. Cannabis Business Challenges
The U.S. cannabis business continues to face hurdles due to various state actions restricting all intoxicating hemp-based products. Despite these challenges, the company managed to achieve a small positive adjusted EBITDA, thanks to improved gross margins.
Constraints on Meeting Demand
Village Farms is currently unable to fulfill all its commitments, leaving approximately $50 million of revenue on the table due to limitations in supply capacity.
Forward-Looking Guidance
During the earnings call, Village Farms highlighted its transformational quarter with record profitability and strong growth, particularly in its global cannabis operations. The company reported a 12% year-over-year increase in consolidated sales to $59.9 million and a significant improvement in net income from continuing operations to $9.9 million, or $0.09 per share. Adjusted EBITDA from continuing operations reached a record $17.1 million, or approximately 29% of sales, with an adjusted EBITDA margin up over 2,300 basis points. The Canadian cannabis segment saw a 10% sales increase to CAD 61.4 million, with international exports up 690% year-over-year. The gross margin for Canadian cannabis improved to 39%, at the top of their target range. The company also completed a transaction generating $40 million in cash proceeds, further strengthening their balance sheet to support growth investments.
In conclusion, Village Farms International’s earnings call reflected a positive sentiment with record profitability and strategic growth initiatives. The company is well-positioned to capitalize on its international expansion and partnerships, although challenges in the U.S. market and supply constraints remain. Investors can look forward to continued growth, supported by a strong financial foundation and strategic investments.