Village Farms International, Inc. (NASDAQ: VFF) (TSX: VFF) today announced its financial results for the third quarter ending September 30, 2022, as consolidated sales dropped by 2% to $71.1 million from $72.4 million in the 2021 third quarter. This missed the Yahoo Finance Average Analyst estimates for $76 million in sales. The consolidated net loss was ($8.7 million), or ($0.10) per share compared with a net income of $0.8 million), or $0.01 per share. This also missed the estimates for an earnings loss of ($0.09).
“The strong performance in our Canadian Cannabis business in the third quarter reflects the successful execution of our growth strategy and investments as we achieved another sales record, outstanding growth in retail sales, and our 16th consecutive quarter of positive adjusted EBITDA,” said Michael DeGiglio, Chief Executive Officer, Village Farms. “Our growth in retail branded sales continues to be driven by multiple factors. Pure Sunfarms, which remains the best-selling dried flower-brand nationwide, grew market share with consumer-preferred innovations. In Quebec, Rose LifeScience became the number two selling licensed producer in October, less than one year after our majority acquisition, as it launched new products across its brands, including the highly successful Promenade brand in collaboration with Pure Sunfarms. All of this contributed to Village Farms becoming the number one selling cannabis company in Canada across all product categories in October.”
Unlike many other cannabis companies, it wasn’t cannabis that brought down the overall sales figures for Village Farms, it was the produce. Sales fell from last year’s $41 million to $35.5 million and the company attributed this to lower volumes (including a lower percentage of higher-priced specialty tomatoes), and adjusted EBITDA was negative ($4.9 million) compared with $1.3 million.
“Our Fresh Produce business continues to be impacted by a number of significant pressures including input cost inflation, adequate supply of product, which has challenged our ability to pass on higher costs to customers, and the ongoing challenges of the Brown Rugose tomato virus that is impacting growers globally,” said DeGiglio. “We are encouraged by the progress of the operational review we initiated late summer of this year with the goal of optimizing the profitability of this business. We believe strongly in the potential of these operations, especially for their optionality and considerably greater value as part of our cannabis strategy in a national or Texas state legal cannabis market in which we can participate.”
Total cannabis segment net sales increased 14% year-over-year to $35.5 million, representing 50% of total Village Farms sales. Retail grew to become 81% of its business versus last year’s 59% for the same time period. Gross sales in cannabis rose from last year’s $36 million to this year’s $45 million.
The company’s total Canadian cannabis market share grew steadily throughout the quarter and continued in October, marking four straight months of expansion, with Village Farms becoming the third best-selling cannabis producer in Canada across all product categories for the third quarter and was the top-selling cannabis producer in Canada across all product categories in October.
DeGiglio said, “In our U.S. Cannabis business, Balanced Health Botanicals continues to perform well despite the challenging consumer environment. We remain focused on cultivating our customer base and managing our costs as we pursue new sales opportunities and introduce new products such as the recently launched second product in the Synergy+ line, Deep Sleep Synergy+.”
Village Farms reported that sales to Australia during the third quarter more than tripled from the first quarter of 2022 by both volume and dollars.
SG& A expenses grew to $16 million for the quarter versus last year’s $13 million. The cost of sales also grew from last year’s $54 million to this year’s $62 million.
“As our spending on major brand launches subsides and with completion of our investment in 100% hang-dry product, we remain focused on prudent cost management to further enhance profitability over the near- and long-terms and invest in future growth. We continue to refine our operating model to further expand our leading market share and profitability status. We expect to contribute to industry growth through consumer-led innovation like our new Soar brand being unveiled this week,” added DeGiglio.
Village Farms is also using the day to introduce Soar, a cannabis brand designed to deliver an elevated cannabis experience with limited quantity batches of exotic and unique genetics that are hand-harvested, hang-dried, and hand-detailed. Soar offers dried flower that is thoughtfully selected, thoroughly tended to, and carefully sorted to ensure only the best buds make it through to each finished 7g package. Based on the expression of cultivars and their distinctive aroma profiles, each strain is reviewed and assigned to an aroma collection—citrus, cake, fruit or gas—which plays an important role in understanding the cultivar and potential experience, and allows the consumer to choose the strain that appeals to them most.
“Soar is joining our family of brands, which includes our BC-grown flagship brand, Pure Sunfarms, and our newly introduced, bulk-sized value brand, the Original Fraser Valley Weed Co.,” says Mandesh Dosanjh, President, and CEO, Pure Sunfarms. “The Soar brand complements the portfolio by offering select cultivars chosen for their unique characteristics, hang-dried and presented through our aroma collections for an elevated dried flower experience. We’re excited about our newest addition to round out our offerings for the Canadian cannabis consumer.”