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Village Farms International, Inc. (VFF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $82.6M (+11% YoY), but adjusted EBITDA declined to $(3.5)M due to a non-cash Canadian cannabis inventory impairment of $10.5M; excluding the impairment, adjusted EBITDA would have been $7.0M, the best in ~4 years .
  • Canadian Cannabis net sales rose 10% to C$48.0M; international medicinal sales grew 113% YoY, while ex-impairment gross margin was 33% and adjusted EBITDA margin 12%, signaling core margin strength despite the write-down .
  • Fresh Produce delivered strength: sales +17% to $43.3M, net income $1.9M, boosted by $3.5M other income from vendor settlements; Clean Energy contributed $0.4M net income in Q4 .
  • Management expects international medicinal export sales to triple in 2025 and has broken ground on Phase II in the Netherlands to quintuple annual production capacity by Q4 2025 (call remarks referenced “quadruple”)—both key catalysts for profitable growth .

What Went Well and What Went Wrong

What Went Well

  • International momentum: “Q4 exports to international medical markets were up 113% year-over-year,” with Germany, Australia, and the UK driving growth, and New Zealand added post year-end; management “confident…to at least triple…in 2025” .
  • Fresh Produce profit recovery: Q4 Fresh sales +17% to $43.3M, net income $1.9M, aided by $3.5M vendor settlements related to ToBRFV; adjusted EBITDA $4.1M .
  • Product innovation/brand strength: Launch of Super Toast All-In-One vapes in December—“quickly…#6 ranked vape nationally and #2 in Ontario over the past 3 months”—supporting regained market share in dried flower and pre-roll categories .

What Went Wrong

  • Non-cash inventory impairment: Canadian Cannabis took a C$15.0M (US$10.5M) impairment on non-flower manufactured products sourced primarily from third parties, driving Q4 gross margin down to 2% from 23% and adjusted EBITDA to (C$9.1M) .
  • Cash flow timing headwind: Canadian Cannabis Q4 cash from operations was (C$3.3M), negatively impacted by the timing of Q3 excise tax payments of C$24.1M and Q4 payments of C$20.7M both occurring in Q4 .
  • Consolidated profitability mixed: Despite YoY improvement in net loss (from $(25.5)M to $(8.6)M), consolidated adjusted EBITDA fell to $(3.5)M vs $(0.7)M; QoQ adjusted EBITDA declined from $5.3M in Q3 to $(3.5)M, largely due to the impairment .

Financial Results

Consolidated Results vs Prior Periods

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD millions)$74.225 $83.368 $82.554
Gross Margin ($USD millions)$11.006 $15.708 $6.931
Net Loss ($USD millions)$(25.483) $(0.820) $(8.629)
Adjusted EBITDA ($USD millions)$(0.658) $5.302 $(3.546)
EPS (Basic/Diluted, $)$(0.23)/$(0.23) $(0.01)/$(0.01) $(0.08)/$(0.08)
Operating Cash Flow ($USD millions)$(1.5) $4.3 $0.4

Notes: Excluding the US$10.5M Canadian Cannabis inventory impairment, Q4 adjusted EBITDA would have been $7.0M .

Segment Breakdown (Q4 2023 vs Q4 2024)

SegmentSales ($USD M) Q4’23Sales ($USD M) Q4’24Net Income ($USD M) Q4’23Net Income ($USD M) Q4’24Adjusted EBITDA ($USD M) Q4’23Adjusted EBITDA ($USD M) Q4’24
VF Fresh (Produce)$37.118 $43.300 $(6.967) $1.927 $(0.604) $4.148
Cannabis Canada$32.043 $34.202 $(0.996) $(6.580) $1.491 $(6.361)
Cannabis U.S.$5.064 $4.613 $(13.703) $(0.160) $0.437 $0.342
Clean Energy$0.000 $0.439 $(0.058) $0.417 $(0.058) $0.416
Leli$0.000 $0.000 $(0.225) $(0.316) $(0.038) $(0.142)
Corporate——$(3.534) $(3.917) $(1.886) $(1.949)

Canadian Cannabis KPIs (Channel Mix and Margins)

KPI (CAD unless noted)Q4 2023Q4 2024
Retail Branded Sales (C$M)C$56.1 C$55.8
Non-Branded Sales (C$M)C$7.9 C$9.5
International Sales (C$M)C$1.1 C$2.5
Excise Taxes (C$M)(C$22.2) (C$20.7)
Net Sales (C$M)C$43.6 C$48.0
Gross Margin % (CAD)23% 2%
Gross Margin % (ex-impairment)—33%
Adjusted EBITDA (C$M)C$2.1 (C$9.1)
Adjusted EBITDA (ex-impairment, C$M)—C$5.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
International medicinal export salesFY 2025Not previously quantifiedExpect to triple vs FY 2024Raised/new directional outlook
Leli Netherlands production capacityQ4 2025 (completion)Phase II not previously announcedPhase II to quintuple annual production capacity; completion expected Q4 2025New project (call said “quadruple”)
VF Clean Energy net incomeFY 2025Not providedOn track to deliver ~$2M net incomeNew numeric outlook
Canadian Cannabis operations2025Not providedOptimizing Pure Sunfarms and Rose to improve efficiency and profitabilityOperational initiative
US Cannabis manufacturing2025Third-party relianceBalanced Health gummies now manufactured in-house; extraction/vape moving in-houseOperational initiative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q3)Current Period (Q4 2024)Trend
AI/technology in Fresh ProduceImplementing AI to drive operational improvements Continued adoption of AI and automation for efficiency gains Strengthening
Supply chain/tariffs (produce)—Contingency plan for proposed Canada/Mexico tariffs; shift to Texas supply, pass-through 25% tariffs on imports if enacted New risk emerging
Product performance (Super Toast vapes)Supertoast brand third-fastest growing in H1’24 ; strength continued in Q3 All-In-One vapes launched; #6 national, #2 Ontario over past 3 months Positive momentum
International medicinal exportsOn track for YoY growth ; 111% YoY growth in Q3 113% YoY in Q4; New Zealand added; expectation to triple in 2025 Accelerating
Netherlands rec market (Leli)Production to start in Q4’24 ; cultivation commenced First harvest Dec’24; deliveries began Feb’25; Phase II expansion announced; coffee shop full legal supply targeted from April 7 Execution scaling
Canadian excise tax burden—~C$100M excise paid in 2024; Q4 taxes timing compressed into Q4 Persistent headwind
U.S. DEA rescheduling processParticipation planned in ALJ hearing Hearings stayed pending interlocutory appeal; company remains proponent of Schedule III Delayed regulatory timeline
Vertical integration (manufacturing)—Extraction/vape manufacturing moving in-house; gummies internalized Increased control/quality

Management Commentary

  • CEO: “Excluding [the] impact, Canadian Cannabis gross margin and Adjusted EBITDA margin in Q4 were 33% and 12%, respectively…[We] are confident we’re starting 2025 with good momentum to execute our profitable growth strategy.”
  • CEO: “We…the recent addition of New Zealand…have a strong pipeline…which give us confidence in our ability to triple international medicinal export sales in 2025.”
  • CEO: “We…broke ground on a Phase II expansion…in the Netherlands…complete in Q4 of this year and quintuple our annual production capacity.”
  • CFO: “If one were to exclude our fourth quarter inventory write-down, we would have reported adjusted EBITDA in the fourth quarter of $7 million…full year adjusted EBITDA…$12.2 million.”
  • CEO (Netherlands): “Initial feedback…is that our product is head and shoulders above expectations…pricing and margins are right in line with our forecast.”

Q&A Highlights

  • Impairment treatment and revenue impact: Management confirmed the C$15M impairment did not reduce revenue; suboptimal third-party vape/pre-roll inventory was written down/destroyed to protect brand quality .
  • Allocation strategy: Canada remains the foundation, but incremental capacity will prioritize profitable domestic high-quality flower and higher-margin international markets; intent is not to short-ship Canada .
  • Netherlands market structure: Of 10 licensees, 7 operating; government targeting April 7 for coffee shops to buy 100% from legal suppliers, subject to possible extension; demand strong for Leli product .
  • International route-to-market: Management signaled taking more control locally may be part of plans but withheld specifics due to competition; clarified tripling guidance applies to medicinal exports only (excludes Netherlands) .
  • Excise tax burden: CFO highlighted ~C$100M excise taxes paid in 2024, exceeding SG&A; reform would be welcome .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 revenue, EPS, and EBITDA was unavailable during this session due to SPGI request limits. We attempted to retrieve “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and “EBITDA Consensus Mean” but encountered a daily limit exceeded error. As a result, comparisons vs consensus cannot be provided in this recap [GetEstimates error].
MetricQ4 2024 ConsensusQ4 2024 Actual
Revenue ($USD millions)Unavailable$82.554
EPS ($USD)Unavailable$(0.08)
Adjusted EBITDA ($USD millions)Unavailable$(3.546)

Key Takeaways for Investors

  • Core cannabis margins are resilient ex-impairment: Canadian Cannabis ex-impairment GM 33% and EBITDA margin 12% suggest sustainable profitability when non-core inventory is excluded .
  • International expansion is the principal 2025 growth driver: medicinal exports grew triple digits in Q4, New Zealand added, and management expects a tripling in 2025—no excise taxes, higher margins .
  • Netherlands is scaling: first sales commenced Feb’25; Phase II expected to quintuple capacity by Q4’25 (call referenced “quadruple”)—positioning Leli as a meaningful profit contributor in a more favorable pricing/tax environment .
  • Fresh Produce recovery and Clean Energy contributions diversify cash generation: Fresh Q4 net income $1.9M aided by $3.5M settlements, and VFCE tracking to ~$2M net income in 2025 .
  • Excise taxes remain a significant drag and timing can distort quarterlies: Q4 cash flow in Canadian Cannabis was affected by paying Q3 and Q4 excise in Q4; ongoing reform could be a notable upside if enacted .
  • Operational focus on quality and vertical integration: Moving vape/extraction and gummies in-house to protect brand equity and margins is prudent and should reduce the risk of future write-downs tied to third-party products .
  • Near-term narrative drivers: execution on international orders, cadence of Netherlands ramp, any progress on Canadian excise reform, and clarity on U.S. regulatory timelines (DEA rescheduling) could move the stock .