Village Farms (VFF) Reports Q1 EPS of $0.08

Village Farms (NASDAQ: VFF) reported Q1 EPS of $0.08, versus $0.13 reported last year. Revenue for the quarter came in at $39.65 million, versus $38.62 million reported last year.

Management Commentary

"Pure Sunfarms continues to clearly set the standard in the Canadian cannabis industry for cultivation capabilities, best-in-class facilities and operations, cost of greenhouse cultivation, managerial acumen, brand performance and profitability, achieving its fifth consecutive quarter of net income and sixth consecutive quarter of positive EBITDA," said Michael DeGiglio, CEO Village Farms. "The first quarter of 2020 saw significant momentum in Pure Sunfarms' branded retail sales, with sales to provincial distributors increasing by 118% on a 179% increase in grams sold over the fourth quarter 2019. The significant increase was driven by Pure Sunfarms continued leading dried cannabis market share in Ontario, which was 14.3% for the first four months of 2020 – exceeding 20% in the month of April – as well as expansion into Canada's second largest province for cannabis sales, Alberta, in late February."

"We expect sales momentum to continue throughout this year as Pure Sunfarms pursues further growth in its market share and leverages its leading brand performance in dried cannabis in Ontario to capitalize on the expected continuing overall growth in the Canadian market, expansion in the number of retail stores, especially in Ontario, entry into additional provinces, and the introduction of new products, including cannabis oils and new product forms under Cannabis 2.0, which are targeted to begin in the summer of this year."

"Importantly, Pure Sunfarms continues to lead the Canadian cannabis industry in cost of cultivation in a greenhouse, which provides an unmatched advantage in addressing the market's demand for safe, high-quality product at an attractive price – and doing so profitability. This significant cost advantage, while continuing to elevate product quality, will enable Pure Sunfarms to continue to lead the transition of the existing illicit market to legal purchases, and Pure Sunfarms can and will be similarly aggressive on price with its future product offerings, always with the goal of profitability, continuing to raise the bar for commercial viability in the industry."

"In our U.S. CBD opportunity, despite the federal government's decriminalization of CBD, the industry remains very much at a standstill due to significant regulatory uncertainty resulting from the absence of clear direction from U.S. federal and state agencies around this huge economic opportunity. We, however, continue to be proactive in exploring opportunities that do exist within the current environment, engaging in market research and evaluating additional paths forward that we can act on prudently in the nearer term. Additionally, beyond CBD, our U.S. greenhouse operations – among the very largest and best located in the country – alongside our decades of experience as a vertically integrated supplier of consumer products to major retailers, and the invaluable experience we have gained through our integral role in building the premier cannabis operation in Canada, provides an unmatched advantage should high-THC cannabis be federally legalized in the U.S. We are increasingly optimistic at this prospect as we consider near-term need for governments to generate new sources of tax revenue going forward as the country emerges from the worst economic environment in our lifetimes."

"In our produce business, we are proud to have done our part to meet the significant consumer demand for safe, fresh, healthy produce during the first quarter due to the COVID-19 pandemic. Although tomato pricing was elevated during the first part of the quarter, we were only able to take partial advantage as we honored existing contracts with major customers at prices below market and volumes from our Texas facilities continued to be below normal production volumes. With our newest growing partners coming online this Spring, we have now replaced all of the capacity that was displaced by cannabis in Canada, and then some, which is an important next step toward our goal to return the produce business to positive EBITDA generation."

"We appreciate the continued support of our long-term lending partner, Farm Credit Canada, through the extension of our term loan, a continuing expression of their confidence in our business as we pursue these new high-growth opportunities in cannabis and CBD based on our proven track record in produce."

For earnings history and earnings-related data on Village Farms (VFF) click here.

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