VFF Q3 2026 earnings call transcript, November 9, 2026

Good day and thank you for standing by. Welcome to the Village Farms International Third Quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Michael DiGiulio. Please go ahead.

Thank you, Tanya.

Thanks, Mike.

For those of you who are new to our story, there is essentially seasonality in our business related to changes in our growing climate for Delta throughout the year. Contracted produce sales from our Delta One greenhouse to our partner, Verdexa Holdings, always peak in the second and third quarters. Last year, they declined about 60% in Q4. And we would expect a similar trend this year in line with this typical seasonality. Additionally, while our international medical business is still relatively new, last year, European order volume slowed significantly over the holiday period in Q4 and resulted in a sequential revenue decline compared to the third quarter. While we haven't observed any material changes in international customer behavior in October, we think it's prudent to remind investors. that we may experience similar holiday period seasonality again in 2026. International shipment timing and order sizes can create great quarter to quarter variability in our financial performance. So we encourage investors to evaluate the performance of this business over a longer time horizon than one quarter. Back to you, Mike, for closing comments.

Thanks, Amit.

In summary, our Q3 results reflected. Another very strong quarter of financial performance without yet experienced material benefit from our expansion projects, as I mentioned. Year to date, we delivered double-digit growth in cannabis sales, nearly doubled international exports, delivered six straight quarters of positive net income as a pure-play global cannabis company, and we remain in excellent financial position with $80 million in cash to continue investing in our platform. Our competitive position in Canada's improving demand for our EU GMP-compliant product remains very strong, and we've, importantly, not lowered pricing. Our Delta II and chronogen expansions are on the cusp of continuing stronger revenues, and we're carefully laying the groundwork to continue scaling our footprint through our Delta I greenhouse and activation of our Texas assets. Now, for some... Last remarks on our view of the U.S. regulatory landscape following last week's midterm elections. U.S. voters overwhelmingly chose access to cannabis over prohibition. Candidates who supported sensible cannabis policy won across the country and across party lines. Incoming governors in Ohio, Iowa, Wisconsin, and Texas campaigned on cannabis reform, and newly elected senators in both parties did the same. In Massachusetts, roughly three-quarters of the voters chose to keep adult use legalization. In Idaho, voters defeated by a wide margin and measure that would have taken away their ability to enact future cannabis reform. Several states are now poised to take up more meaningful reforms, including Pennsylvania, Iowa, Kansas, Wisconsin, and Texas, where

voter opposition to the state's recent THC ban was a central issue in the race for Lieutenant Governor. The incumbent who championed the THC ban in Texas and was the largest roadblock for cannabis reform was defeated after telling voters to vote him out if they disagreed with a THC ban. Impact extends to Washington. Leadership is changing at the Appropriations Committee where

Texas and we are optimistic about what it means for patients, consumers, and responsible operators like Village Farms. Now in Texas specifically, we believe the outcomes of the midterms were as big of a move for that market as the April final rescheduling order was for medical operators across the U.S. There is considerable political pressure for Democrats in Texas to bring back THC and they now have the vote in the Texas House which flipped Democratic and potentially the Senate which shifted less Republicans to significantly reform its medical program and potentially even more towards full legalization. We believe it is likely we'll see meaningful changes during this upcoming legislative session and we're very encouraged by the things we're already hearing about how new leadership may be thinking about this major voter issue. VFF has been operating in Texas for over 30 years as one of the largest employers in two separate counties and we're uniquely positioned to quickly operationalize the critical infrastructure necessary to build a successful cannabis market in Texas. In response to the changing regulatory climate following the Texas midterms, we announced this morning that we are actively mobilizing plans to optionalize our standalone 30 acre 1.3 million square foot greenhouse and how in Monaghan's, Texas for cannabis production. Monaghan's is the youngest, most advanced production asset in our portfolio. I personally, along with our asset development and operational teams, have visited the site several times over the course of the past few months, and we have a clear and cost efficient plan that can bring this facility online within a 12 month time frame.

If Texas policy makers are truly serious about enabling the citizens affordable access to high- quality cannabis, they should not continue to ignore the operational expertise and infrastructure of village farms. As we have said many times in the past, we expect to be in Texas cannabis, and we clearly remain focused on pursuing all potential pathways to initiate our U.S. market entry with a commencement of production in Texas. Looking ahead, we believe we are still in the very early innings of global cannabis adoption. And that there is a long runway of global growth and opportunities for value creation for village farms. For nearly four decades, we have led in large-scale controlled environmental agriculture, and today we are one of the world's largest and lowest-cost producers of high-quality cannabis. Scale matters, but scale alone is not our only destination. We intend to evolve from being defined by what we grow to owning the capabilities that the... determine what is grown, how it performs, where it can be sold, and how much value it creates. We are focused on building a platform that expands globally and participates in new value pools as regulated markets evolve. While cultivation, product innovation, and distribution remain at the center of our engine today, around that core we see tremendous long-term potential for broader applications of cannabinoids across global... markets that will be driven by truly protectable intellectual property. In the coming years, our industry will drive advancement in scientific and analytical capabilities, accelerate innovation of novel products and commercialization opportunities, and advance development of botanical drugs for medical and therapeutic purposes. Our objective is to own more of the value, more of the intellectual property, and the economy's...

created from the plan, which will be sought by patients and consumers to build a more valuable cannabis company for our shareholders. The same framework is guiding our approach to M&A. We prefer organic growth opportunities, but we will pursue creative opportunities that accelerate these capabilities, and we will remain patient and disciplined on valuation and permissible regulatory frameworks. If a deal is a strategic... ...compelling to create long-term shareholder value, we simply won't do it. So I'd like to close with another acknowledgement and thanks to our teams around the world. You all continue to raise the bar for Village Farms in every market we operate, and it's because of you that we are building one of the most powerful and different types of cannabis platforms in global cannabis. With that, operator, we can open the call now. questions. Certainly. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile our Q&A roster.

Our first question will be coming from the line of Aaron Gray of AGP Alliance Global Partners. Your line is open, Aaron.

Hi, good morning.

Congrats on the quarter, and thank you for the question and the detailed remarks. First question I have is relating to the Germany pricing dynamics. Mike, appreciate the color you provide in terms of where you believe VFF stands and the broader market. Just going to maybe summarize. So it seems like even without clamping down on EU GMP compliance, you feel confident in your ability to compete in the international market. And then if greenwashing were more meaningfully cut off, as we've seen in some countries, you see that could prevent meaningful upside given the expected undersupply of fully EUG compliant product. So I just wanted to get some further color in terms of that's how you're seeing the current dynamics for international things. Yeah, I mean, we're very confident that the EUGMP compliant product will continue to gain traction going forward. So the regulators are showing. And there's been a couple of situations. I mean, Portugal, as you know, the country of Portugal took a position about a year ago due to a lot of product coming out of Portugal to elicit markets to really restrict growers from exports. That created a large inventory that has aged out. And we think that had some short-term impact. at the pharmacy level as well. So there are other dynamics. We've even heard, you know, everybody's trying to jump on a bandwagon. There's been a field flower trying to make its way through the process as well. So, you know, I think it's going to be, there'll be some headwinds going forward, but we're just going to stick to continuing to build out EU GMP. Anne, you want to give some color?

Yes.

Good morning, Aaron.

Just two more things. Just reiterating, we have not lowered our pricing on EU GMP. The biomass product, as number two, I think your analysis of supply-demand is very accurate. Obviously, the more sought-after EU GM products still has a very large backlog of demand behind it. Okay, great.

Thanks, Mike and Anne, for that. Second question from me, just in terms of capacity allocation. In your prior remarks, you mentioned that some of the initial half of second half... of Delta going to the Canadian market versus potentially international. Obviously, not all, but just allocating some there as you look to defend share. So maybe just talk about how you value your position in the Canadian market on a longer-term basis, particularly given you might be able to get some higher margin sales initially if you allocated it towards international. Thanks. Yeah, well, it's been a difficult balance. That's really why it led to over a year ago, the plan. to expand the Delta II facility, which is now, as we indicated, coming on board. So we're going to continue to balance the portfolio. But Canada is very important to us, as I mentioned. But we've made a statement years ago that we're only chasing profitable market share. So we continue to try to be more efficient in our portfolio going forward. And we believe, as I mentioned, there are some of our competitors that may be deciding not to pursue Canada. So we think with the growth we're having and the fact that the government, the first time in my tenure, is really starting to acknowledge the impact to the overall Canadian economy is getting behind, cutting back on the list of trades. So we think growth is in Canada. It's a very important market for us.

We think we'll have the capacity to continue to penetrate increases in the Canadian market. Okay, great.

Thanks very much for the color. I'll jump back in with you.

Next question will be coming from the line of Douglas Cooper of Beacon Securities. Your line is open, Douglas.

Hey, good morning, everybody, and congrats on a great quarter. Mike, I just wanted to sort of jump around into various geographies that just confirmed to follow on from Aaron. Can you confirm the number you just said earlier in your presentation about what percentage of EU GMP-certified product you believe Village has, what percentage of the overall market?

Good morning, Doug.

We do not put that out there. We gave you some numbers as to what we see happening on the macro scale, and you know the size of our footprint in Delta, but we don't confirm that number publicly. Okay, so you just wanted to, maybe I didn't quite hear it, so you just said that you have the largest single facility of EU GMP certified product. Is that correct? We believe we do. We believe we are the largest single facility. We just decided to make the campus EU GMP compliant, so even if it goes to other channels, including domestic. Okay. And what would it be? We've done a lot of work. I'll just add that. It wasn't just a quick decision. Quite a bit of work that our teams put in to scale that way. Okay. And sticking with the Delta complex, Mike, you talked about exercising the option for 25% conversion of D1 potentially. What else needs to be done before you actually put, I'm going to say shovels in the ground to convert 25% of that? And what would be the tonnage you would expect? From that, if it were converted in, how would you need to be that, make that EU GMP certified facility about 25%? Well, that 25% is actually bigger than the expansion of Delta II, which is 40 tons, so probably in the area of 50 to 60. We have the optionality to convert one quarter of it over a four-year period, so we just, just to be clear, we trigger the optionality. If we were going to convert it sometime next year for 28, no decision has been made, but we have the right to do that, so that's what it could lead to, because 700,000 square feet, the Delta II second half conversion was about 550,000, so doing the math would probably be about 50 metric tons for that.

And then Doug, I would just add that if it's concurrent with putting shovels in the ground, we'd be working on the processing side, where the EUGMP certification lies, and so we'd be running both of those in parallel, just like we've done throughout this year, as we add to the past. Mike, you said you thought to trim pricing at Troughton Q3? It was down 75% year-over-year. Was there any material change in pricing between Q3 and Q2, the prior quarter?

I don't think so. I think it was just a fall away of the demand, Doug, but no change in pricing. That's correct. Okay. And final one for me, just on the U.S. side, obviously you're very bullish about the progress in Texas. You don't have a license. I don't believe. So what does it take for you to actually get in the cannabis production space and be able to participate in that market if it opens up? Well, I just say that we plan to be in Texas one way or another. So how we do it, we'll have to see. We think there's going to be a number of regulatory changes in this session coming up in February to the T-Cup program, which may include increasing licenses. That could be a vector for us. That could be a vector for us. Another way to get into the market, but we're very confident that we can, and we'll pursue all permissible pathways for us, but we want to start getting this facility ready, so we're kind of going to run it in the parallel track as opposed to serial. The facility is there. It's just a matter of... sort of gearing it up and then providing conversion, and we may do that in phases as we go, not all at once. And how long would that take, and how much? Well, if you look at Delta II, the conversions are like six months, so we'd probably do some work to it ahead of time before we actually started the conversion on the growing systems. The unique thing about that area, which is very unique...

As you know, that part of Texas is about the lowest latitude in the United States, so you don't need supplemental lighting to run a cannabis crop through the winter. I mean, it can help increase yield, but it's not required. So we think we'll have even a cost advantage over our Delta facilities longer term, and that makes it very unique in that regard. Okay. Perfect.

Thanks very much.

Thanks.

Our next question will be coming from the line of Frederico Gomes of ATB Cormark. Your line is open, Frederico.

Yeah, good morning.

Thanks for the questions here, and congrats on the great quarter. I want to go back to the comment about EUGNP and the fact that your pricing has been relatively resilient and steady. I guess, could you talk about that? I mean, why is it? that from a pricing standpoint, EUGNP compliant product is more resilient compared to, I guess, greenwash product. And then second, I know that you mentioned the potential for tightening controls around the greenwashing, but are you actually seeing that happening? I mean, how likely is it to happen? And, you know, how likely is it that we could see, I guess, a product shortage of EUGNP compliant product at the source? Thank you. Well, I'll start it out, and then I'll hand it over to Anna. I think, you know, the program is really originally set up to have EUGNP certification at the source. So that's really what the program's about. There are other ways to get there in the supply chain, as I mentioned in my prepared remarks. There will probably always be a country trying to do that.

And there are distributors who, you know, in order to get the capacity they need are buying a GACP product and then converting it through the supply chain. So we think where, you know, anybody producing EUGMP product at the source is sort of the, is the standard, but there are other ways to do it. Anne, you want to add some color? Yeah, I just, I would just say that I think the wind seemed to be in favor of the EUGMP compliant product, as we've seen in the UK and in the Hessen state. And so we think that that's noteworthy, and frankly, what we've talked about for a couple of quarters now. So the demand profile is still there, supporting the price, Federico. And we think that that's, you know, how do you ensure an efficient supply chain, frankly, from the source, us, right through to the consumer. And then the supply chain cares very much about that. You want to add some color? Yeah, just to add a bit of color on that. I mean, the one thing is looking at price and one thing is looking at, you know, the level of scale of EU GMP compliant product that we produce that's low cost and high quality. And the supply chains are very complex. And there is a value to be ascribed. to being able to provide a large volume of EU GMP compliant product, as opposed to various small lofts that are often we see in the marketplace. And that's a competitive moat that we have. And we believe, and one of the key factors that we believe will maintain price as we look forward.

Great, thank you. You're welcome. As a reminder, to ask a question, please press star 11 from your telephone and wait for your name to be announced.

Thank you, and good morning, everyone. Mike, I guess a two-part question. Can you talk about how concentrated is your international business? Is it, you know, one, two customers, or is it a long list? Is, you know, one of your customers 50%, 60% of your sales? I don't know how much you can talk about that, but obviously, congrats on the $56 million year-to-date in international exports and 21 in the third quarter, but if you can talk about that. And then the second point, which I have asked in prior calls, you know, obviously, the power right now, it's on the supply chain. is your GMP compliant, low cost, high quality, and cultivation, which you have. But given everything that's happening on the M&A front, do you see a need now to start investing in route to market in markets like Germany and the UK? Thank you. Yeah, we don't really disclose, Pablo, how many customers we have, but it's more than one. No, just kidding aside, we have multiple customers in Europe, so. But I don't want to really disclose those numbers. And we see that increasing over the next couple of years. You know, we were planning, and this is one topic I didn't touch on, to enter some other countries in Europe. But to be honest with you, we're sort of curtailed that because we're capacity constrained in meeting the demand of current customers in the markets we're in. So I think that has a chance of opening. Opening up once again next year as this additional capacity comes on and that will increase the amount of distributors we work with. So that's that question. As far as M&A, you know.

Route to market question. Say again? Pablo asked us about the route to market, if we have any interest in pursuing that. Well, we do. I mean, you know, it depends how we look. I probably won't go too deep into this, but really look. With what. What's that landscape going to look like in two or three years from now, as opposed to right now? I think there may be some dynamics that the future could be somewhat different than it is today. That being said, valuation always plays a role in that. And I'll be honest with you. I think some values are crazy, for lack of a better term. So we're not going to do a deal that isn't accretive. Or does it make sense just for the sake of doing it? But we are always in discussions and looking at opportunities there. Vertical integration is part of our DNA. And at some point, we're going to get there one way or another. Okay, thank you. And then just one last question on the Netherlands. You know, some of your peers there are complaining about price compression. I don't know if you want to put that in context there. How bad is it? I know you're still capacity. Constraining that market. But as prices come down, doesn't that move, you know, I guess it gives the balance towards the more the lower cost greenhouse operators versus the indoor ones. But again, if you can give us some context there, that's the first part to the Netherlands question. And the second one, you know, I think we are down now to 70 coffee shops from the initial 85. So is that creating a problem? And how do you see that changing? Thank you.

Well, again, you know, let me answer the second question first. I mean, when we got involved in the Netherlands, there was a risk to it in that it's a four year deemed experiment. We knew that each year the Dutch government will publish their findings. We know that they want to move to a legalized regulated structure at some point. But it's a we can't we don't have a crystal ball to protect, you know, really

So, yes, some coffee shops dropped out. But as capacity increases, there could be some pricing pressure. There may be. But we feel we're in a in a pretty steady state for at least next year. And we'll reevaluate as far as your first question, which was price compression, price compression. Yeah. I mean, you know, I don't want to talk about our competitors necessarily. I mean, we've heard a lot of things sometimes. Question the source where it's coming from. But, you know, as Amit had said on the call, just having EUGMP compliant product at the source like we do is just one component of the success you need to have to be able to deliver large scale product and get it out the door in a consistent month to month, order to order basis is a huge undertaking. And I think it's very underestimated. by many others in the space. It is, you're talking pharmaceutical grade product that there is no higher standard that you need to meet day in and day out. So it's not just the fact that you have EUGMPs, the fact that you can deliver on these orders and you have an organization behind it to do it. So I think others are scrambling because they don't have EUGMP or they haven't been able to get certified. So they're looking at many other ways to circumvent the system. And I think there'll be a reckoning coming in the next year or two in which way it goes. That's the best color I can give you, Pablo. Okay, that's good. Thank you. And I would now like to turn the conference back to Mike DiGiulio for closing remarks.

Well, I just want to thank everybody's participation. I think it's very exciting times globally and now even more so in the U.S. I think the U.S. is going to go through quite a change in who the survivor is going to be. At some point, more states opening up, interstate commerce down the road. We certainly want to have scale and be a very low-cost producer. We thank you for... joining us today and look forward to a wonderful holiday season for everybody and updating in the new year.

Thank you, operator.

This concludes today's program.