- Canadian Cannabis Generates 13th
Consecutive Quarter of Positive Adjusted
EBITDA, Pure Sunfarms Remains
Top-Selling Brand of Dried Flower in
Ontario, Alberta and BC
- U.S. Cannabis 2 and
Village Farms Fresh (Produce) Each
Generate Positive Adjusted EBITDA
VANCOUVER, BC, March 1, 2022 /PRNewswire/ - Village Farms
International, Inc. ("Village Farms" or the "Company") (NASDAQ:
VFF) today announced its financial results for the three months and
year ended December 31, 2021.
All figures are in U.S. dollars unless otherwise
indicated.
Management Commentary
"In the fourth quarter, we once again saw strong
year-over-year growth in sales and adjusted EBITDA, with positive
adjusted EBITDA contributions from each of our Canadian Cannabis,
US Cannabis and Village Farms Fresh (Produce) businesses for the
second consecutive quarter," said Michael
DeGiglio, CEO, Village Farms. "Our results were driven
by the continued strong performance of our Canadian
cannabis operations, with Pure Sunfarms' leading market share in
the dried flower category and successful new product introductions,
as well as the first partial quarter contribution of Rose
LifeScience in Quebec, driving a
50% year-over-year increase in net revenue and 99% increase in
adjusted EBITDA. Gross margin remained at the top end of our target
range at 42%. With expanded production capacity and robust
product strategy, as well as the significant opportunities created
by the acquisition of Quebec-based
Rose and anticipated receipt of EU-GMP certification, we believe
2022 promises to take the scale and profitability of our Canadian
cannabis operations to a new level."
"The performance of our Canadian cannabis operations throughout
2021 contributed to a year that saw Village Farms overall deliver
growth in revenue and adjusted EBITDA of 58% and 89%, respectively,
supported by the profitable contribution of Balanced Health
Botanicals since its acquisition in August, and the
improvement in market pricing for Village Farms Fresh in the second
half of the year. 2021 was also a year in which we meaningfully
moved forward our growth strategies – in high and low-THC cannabis,
in North America and abroad –
which we expect will position Village Farms to build on our current
momentum for the next phase of profitable, outsized growth – in
2022 and beyond."
1.
|
Adjusted EBITDA is a
non-GAAP measure. See "Non-GAAP Measures" for a definition
and reconciliation of Adjusted EBITDA to net income (loss), the
nearest comparable measurement under GAAP.
|
2.
|
U.S. Cannabis segment
refers to our U.S.-based CBD, cannabinoid and hemp
businesses.
|
Fourth Quarter Highlights
With the acquisitions of Balanced Health and Rose LifeScience in
2021, we now organize our operating segments into Canadian Cannabis
(Pure Sunfarms; Rose LifeScience); U.S. Cannabis (Balanced Health
and VF Hemp); Village Farms Fresh (Produce) and VF Clean Energy.
For Consolidated Results see below.
Cannabis
- Total cannabis sales (Canadian and US) increased 168%
year-over-year to $34.4 million, and
represented 47% of total consolidated sales, increasing from 27%
for the fourth quarter of 2020; and,
- Total cannabis adjusted EBITDA increased 183% year-over-year to
$6.8 million.
Canadian Cannabis (Pure Sunfarms and Rose
LifeScience)
- Canadian Cannabis achieved strong year-over-growth in total net
sales and retail branded sales, while generating margins at the
high end of the Company's stated target range:
-
- 50% year-over-year increase in total net sales and 118%
year-over-year increase in Retail Branded Sales;
- 42% gross margin, above the Company's stated target range of 30
to 40%;
- 99% year-over-year increase in adjusted EBITDA, marking the
13th consecutive quarter of positive adjusted
EBITDA;
- Pure Sunfarms remained the top-selling brand* of dried flower
products in key markets:
-
- In Ontario (by kilograms sold
and dollars sold) for the fourth quarter 2021 and for the period
since Retail Branded sales launch in October
2019;
- In Alberta** for the fourth
quarter 2021 and monthly since October
2020 (by dollars sold);
- In British Columbia** for the
fourth quarter 2021 and monthly since October 2020 (by dollars sold);
- Pure Sunfarms launched 23 new SKUs across four product
categories; and,
- Village Farms acquired 70% ownership of privately-held,
Québec-based, Rose LifeScience, adding a substantial presence in
the Province of Québec as a cannabis supplier, producer and
commercialization expert.
*Based on OCS market
data for the quarter ended December 31, 2021.
|
** Market share
performance data cited has been calculated by Pure Sunfarms from
sales information provided by Buddi retail store data from over 300
retailers across Alberta and British Columbia as of December 31,
2021.
|
*** Market share
performance and data cited has been calculated by Pure Sunfarms
from sales information provided by OCS as of December 31,
2021.
|
Canadian Cannabis (Pure Sunfarms and Rose LifeScience)
Financial Summary for the Three Months and Year Ended December 31, 2021 and December 31, 2020 (Before Village Farms'
Proportionate Share)
(millions except %
metrics)
|
Three Months Ended
December 31,
|
|
|
2021
|
2020
|
Change of
C$
|
|
C$
|
US$
|
C$
|
US$
|
|
Total Gross Sales
1
|
$46.3
|
$36.7
|
$29.5
|
$22.7
|
+57%
|
Total Net
Sales
|
$33.8
|
$26.8
|
$22.6
|
$17.3
|
+50%
|
Gross Margin
2
|
42%
|
42%
|
39%
|
39%
|
+7%
|
SG&A
|
$9.2
|
$7.2
|
$5.8
|
$4.5
|
-57%
|
Share-based
compensation
|
$1.6
|
$1.2
|
$0.1
|
$0.1
|
N/A
|
Net
income
|
$4.4
|
$3.5
|
$1.4
|
$1.1
|
+215%
|
Adjusted EBITDA
3
|
$6.1
|
$4.9
|
$3.1
|
$2.4
|
+99%
|
Adjusted EBITDA
Margin 3
|
18%
|
18%
|
14%
|
14%
|
+33%
|
|
|
|
|
|
|
(millions except %
metrics)
|
Year Ended
December 31,
|
|
|
2021
|
2020
|
Change of
C$
|
|
C$
|
US$
|
C$
|
US$
|
|
Total Gross Sales
1
|
$164.4
|
$131.2
|
$99.1
|
$74.1
|
+66%
|
Total Net
Sales
|
$120.8
|
$96.4
|
$76.1
|
$56.9
|
+59%
|
Gross Margin
2
|
40%
|
40%
|
40%
|
40%
|
-1%
|
SG&A
|
$26.3
|
$20.9
|
$14.9
|
$11.2
|
-76%
|
Share-based
compensation
|
$3.5
|
$2.7
|
$0.1
|
$0.1
|
N/A
|
Net income
4
|
$11.5
|
$9.2
|
$13.8
|
$10.8
|
-17%
|
Adjusted EBITDA
3
|
$29.3
|
$23.4
|
$18.0
|
$13.3
|
+63%
|
Adjusted EBITDA
Margin 3
|
24%
|
24%
|
24%
|
23%
|
+3%
|
1.
|
Total Gross Sales for
Canadian Cannabis includes excise taxes which are excluded to
derive Total Net Sales.
|
2.
|
Gross margin for the
three months ended December 31, 2021 excludes the (C$1,082)
(US$861) reduction in cost of sales and for the year ended December
30, 2021 excludes the C$1,208 (US$980) charge, respectively,
inventory adjustment from the revaluation of inventory to fair
value at the acquisition date of November 2, 2020. Gross margin for
the three months and year ended December 31, 2020 excludes the
C$4,223 (US$3,295) charge inventory adjustment from the revaluation
of inventory to fair value at the acquisition date of November 2,
2020.
|
3.
|
Adjusted EBITDA and
Adjusted EBITDA Margin are not recognized earnings measures and do
not have a standard meaning prescribed in by GAAP. See "Non-GAAP
Measures" below.
|
4.
|
Net income includes
C$6,044 (US$4,348) of debt forgiveness income as an outcome of the
"Settlement Agreement" in March 2020 between Pure Sunfarms, Emerald
Health Therapeutics and the Company.
|
Canadian Cannabis (Pure Sunfarms) Sales Composition by
Product Group
|
Three months
ended
December 31,
|
Year ended
December 31,
|
Channel
|
2021
|
2020
|
2021
|
2020
|
Retail,
Flower
|
64%
|
57%
|
64%
|
54%
|
Retail, Cannabis
Derivatives
|
11%
|
12%
|
10%
|
5%
|
Wholesale, Flower and
Trim
|
25%
|
31%
|
26%
|
41%
|
U.S. Cannabis (Balanced Health Botanicals and VF
Hemp)
- Net sales of $7.5 million for the
three months ended December 31,
2021;
- Gross margin of 71% for the fourth quarter of 2021;
- Adjusted EBITDA of $1.9 million
for the fourth quarter of 2021; and,
- Expanded its product portfolio with the launch of its
innovative Synergy Collection, developed to enhance the multitude
of benefits offered by the hemp plant and other ingredients beyond
CBD alone.
Village Farms Fresh (Produce)
- Continued improved financial results with an 11% year-over-year
increase in sales and positive Adjusted EBITDA of $1.1 million for the three months ended
December 31, 2021.
Village Farms' Consolidated Financial Summary for the Three
Months and Year Ended December 31,
2021 and December 31, 2020 and
Corporate Highlights
($US millions except
per share
metric)
|
Three Months Ended
December 31,
|
Year Ended
December 31,
|
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
Sales1
|
$72.8
|
$47.4
|
+55%
|
$268.0
|
$170.1
|
+58%
|
Produce
|
$38.4
|
$34.5
|
+11%
|
$160.0
|
$156.9
|
+2%
|
Canadian Cannabis
|
$26.9
|
$12.8
|
114%
|
$96.5
|
$12.8
|
N/A
|
U.S. Cannabis
|
$7.5
|
$0.0
|
N/A
|
$11.3
|
$0.0
|
N/A
|
Clean Energy
|
$0.0
|
$0.1
|
N/A
|
$0.2
|
$0.4
|
-41%
|
Net Income
(Loss)1
|
$2.1
|
$7.0
|
-96%
|
($9.1)
|
$11.6
|
-178%
|
Income (Loss) Per
Share1
|
$0.03
|
$0.12
|
-83%
|
($0.11)
|
$0.20
|
-155%
|
Adjusted
EBITDA1, 2
|
$5.3
|
($0.5)
|
N/A
|
$14.0
|
$7.4
|
+89%
|
Produce
|
$1.1
|
($1.6)
|
+168%
|
($2.0)
|
$5.6
|
-136%
|
Canadian
Cannabis
|
$4.9
|
$2.4
|
+104%
|
$23.4
|
$8.8
|
+166%
|
U.S.
Cannabis
|
$1.9
|
$0.0
|
N/A
|
$2.6
|
$0.0
|
N/A
|
Clean
Energy
|
$0.0
|
($0.2)
|
N/A
|
($0.3)
|
($0.4)
|
+25%
|
Corporate
|
($2.6)
|
($1.1)
|
-136%
|
($9.7)
|
($6.6)
|
-47%
|
1.
|
Sales, Net Income,
Income (Loss) per share and Adjusted EBITDA includes results from
Pure Sunfarms, Balanced Health and Rose LifeScience pursuant to the
Company's statutory reporting requirements.
|
2.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standard
meaning prescribed by GAAP. For a definition of Adjusted EBITDA and
reconciliation to net income see "Non-GAAP Measures"
below.
|
Our Response to the Ongoing Coronavirus Pandemic
In March 2020, the World Health
Organization declared the outbreak of the COVID-19 virus a global
pandemic. This outbreak continues to cause major disruptions to
businesses and markets worldwide as the virus continues to spread.
Several countries as well as certain states and cities within
the United States and Canada have enacted temporary closures of
businesses, issued quarantine or shelter-in-place orders and taken
other restrictive measures. In response to the COVID-19 pandemic,
the Company implemented safety protocols and procedures to protect
its employees, its subcontractors, and its customers. These
protocols take into consideration guidance from state and local
government agencies as well as the Centers for Disease Control and
Prevention and other public health authorities.
In April 2020, the Government of
Canada announced the Canada Emergency Wage Subsidy ("CEWS") to help
Canadian businesses to keep employees on the payroll in response to
the challenges posed by the COVID-19 pandemic. During 2021 and
2020, Pure Sunfarms determined that it met the employer eligibility
criteria and applied for the CEWS and received C$871 and C$2,470
of wage subsidies during the years ended December 31, 2021 and 2020, respectively.
As of February 25, 2022, all of
the Company's operations are operating normally, however, the
extent to which COVID-19 and the related global economic crisis
affect the Company's business, results of operations and financial
condition, will depend on future developments that are highly
uncertain and cannot be predicted, including the scope and duration
of the pandemic and any recovery period, future actions taken by
governmental authorities, central banks and other third parties
(including new financial regulation and other regulatory reform) in
response to the pandemic, and the effects on our produce, clients,
vendors and employees. Village Farms continues to service its
customers amid uncertainty and disruption linked to COVID-19 and is
actively managing its business to respond to the impact.
Summary Statutory Results
(in thousands of U.S.
Dollars unless otherwise indicated)
1.
|
For the year ended
December 31, 2021, Pure Sunfarms is fully consolidated in the
financial results of the Company. For the period August 16, 2021 to
December 31, 2021, Balanced Health is fully consolidated in the
financial results of the Company. For the period November 15, 2021
to December 31,2021, Village Farms' share of Rose LifeScience's
financial results are fully consolidated in the financial results
of the Company with the minority non-controlling interest presented
in net loss attributable to non-controlling interests, net of
tax.
|
2.
|
For the period
January 1, 2020 to November 1, 2020, Village Farms' share of Pure
Sunfarms earnings are reflected in equity in earnings of
unconsolidated entities. For the period of November 2, 2020 to
December 31, 2020, Pure Sunfarms is fully consolidated in the
financial results of the Company.
|
3.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standardized
meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers. See
"Non-GAAP Measures" for a definition and reconciliation of Adjusted
EBITDA to net income (loss), the nearest comparable measurement
under GAAP. Management believes that Adjusted EBITDA is a useful
supplemental measure in evaluating the performance of the Company.
Adjusted EBITDA includes the Company's majority non-controlling
interest in Pure Sunfarms through November 1, 2020 and 100%
interest since November 2, 2020, 70% interest in Rose LifeScience
since acquisition, 65% interest in VFH and 60% interest in
AVGGH.
|
Discussion of Financial Results
A discussion of our consolidated results for the years ended
December 31, 2021 and 2020 is
included below. The consolidated results include all four of our
operating segments, produce, cannabis-Canada, cannabis-U.S. and clean energy, along
with all public company expenses. The remaining 41.3% interest in
Pure Sunfarms was acquired by Village Farms on November 2, 2020; from November 2, 2020 through December 31, 2020 and the year ended December 31, 2021, the operating results of Pure
Sunfarms are consolidated in our Consolidated Statements of Income
(Loss), and for the period January 1,
2020 to November 1, 2020, Pure
Sunfarms' results are included in income from equity method
investments in our Consolidated Statements of Income (Loss).
Village Farms acquired 100% of Balanced Health on August 16, 2021 and their operating results are
consolidated in our Consolidated Statements of Income (Loss) for
August 16, 2021 to December 31, 2021. The Company acquired 70% of
Rose LifeScience on November 15, 2021
and their operating results are consolidated in our Consolidated
Statements of Income (Loss) and the minority interest is presented
in Net Income (Loss) Attributable to Non-controlling Interests, Net
of Tax for November 15, 2021 to
December 31, 2021.
Under "Cannabis Segment Results - Canada", we also present a discussion of the
operating results of Pure Sunfarms, before any allocation to
Village Farms, which were not consolidated in our financial results
for the period of January 1, 2020 to
November 1, 2020 and were only
consolidated in our results for the year ended December 31, 2021 and the period November 2, 2020 to December 31, 2020. As a result of the Pure
Sunfarms Acquisition, Pure Sunfarms recognized an increase in the
fair value of its inventory on-hand on the acquisition date,
resulting in a $980 charge to cost of
sales for the year ended December 31,
2021 and a $3,295 charge to
cost of sales for the year ended December
31, 2020. This is a non-cash accounting charge to cost of
sales and should be adjusted for when analyzing the actual
operational results of Pure Sunfarms. The "Cannabis Segment Results
- Canada" also include the
operating results of Rose LifeScience, which are consolidated in
our financial results and the minority interest is presented in Net
Income (Loss) Attributable to Non-controlling Interests, Net of Tax
for November 15, 2021 to December 31, 2021.
Under "Cannabis Segment Results – U.S.", we present a discussion
of the operating results of Balanced Health for the period of
August 16, 2021 to December 31, 2021, which were consolidated in the
Company's financial results for the year ended December 31, 2021. We also present VF Hemp which
is a joint venture and their results are included in "(Losses)
Income from Equity Method Investments" for the year ended
December 31, 2021.
CONSOLIDATED RESULTS
Year Ended December 31, 2021 Compared to Year Ended
December 31, 2020
Sales
Sales for the year ended December 31,
2021 increased $97,934, or
58%, to $268,020 compared to
$170,086 for the year ended
December 31, 2020. The increase in
sales was primarily due to an increase in Canadian cannabis sales
of $83,656, produce supply partner
revenues of $15,897 and U.S. cannabis
sales of $11,345, partially offset by
our own produce revenues of ($13,011). The increase from Canadian cannabis
sales in 2021 as compared to 2020 was primarily due to the
inclusion of sales from Pure Sunfarms that was acquired on
November 2, 2020 and as such, 2021
includes twelve months of sales and 2020 includes two months of
sales. In addition, the sales from Rose LifeScience which was
acquired on November 15, 2021 are
also included in the Canadian cannabis sales for the year ended
December 31, 2021. The sales of Pure
Sunfarms and Rose LifeScience were fully consolidated in our
financial results from their acquisition dates. The produce supply
partner revenue increase in 2021 was mostly due to higher volumes,
with a 30% increase in tomato pounds sold, a 12% increase in pepper
pounds sold, a 31% increase in cucumber pieces sold and a 79%
increase in mini cucumber pounds sold. The increase from U.S.
cannabis sales in 2021 was due to the acquisition of Balanced
Health on August 16, 2021. The
decrease in our own produce revenues was due primarily to a (19%)
decrease in the average selling price of our produced tomatoes as a
result of a market supply overage in commodity tomatoes and an
overall slowdown of retail purchases for the year ended
December 31, 2021 as compared to the
year ended December 31, 2020.
The average selling price for all tomato pounds sold decreased
(13%) for the year ended December 31,
2021 compared to the year ended December 31, 2020, which was driven by a decrease
in the average selling price of commodity items, particularly
beefsteak and tomatoes-on-the-vine ("TOV"). Pepper prices decreased
(12%), cucumber prices increased 6% and mini cucumber prices
decreased (14%) for the year ended December
31, 2021 as compared to the year ended December 31, 2020.
Cost of Sales
Cost of sales for the year ended December
31, 2021 increased $63,715, or
40%, to $222,841 from $159,126 for the year ended December 31, 2020, due primarily to an increase
in Canadian cannabis cost of sales of $48,638, produce supply partner costs of
$13,288 and U.S. cannabis cost of
sales of $3,398, partially offset by
a decrease in our own produce production costs of ($2,094).
The increase from Canadian cannabis cost of sales was primarily
due to the inclusion of twelve months of costs for Pure Sunfarms in
2021 as compared to costs for the period of November 2, 2020 to December 31, 2020, along with the
post-acquisition costs from Rose LifeScience from November 15, 2021 through December 31, 2021. The increase in year-over-year
produce supply partner costs was due to higher volumes of tomatoes,
peppers and cucumbers which also drove higher freight costs and the
increase from U.S. cannabis cost of sales was due to the inclusion
of the cost of sales of Balanced Health from its acquisition date
of August 16, 2021. The reduction in
our own produce production costs was driven by lower costs at our
Texas facilities, primarily due to
a decrease in the cost per pound produced as facility management's
cost saving efforts were realized in 2021 despite supply chain
issues that worsened during the pandemic.
Gross Margin
Gross margin for the year ended December
31, 2021 increased $34,219, or
312%, to $45,179 from $10,960 for the year ended December 31, 2020. The positive increase in gross
margin for 2021 as compared to 2020 was driven by an increase of
$35,018 from the Canadian cannabis
segment, $7,947 from the U.S.
cannabis segment and $2,609 from our
produce supply partners, partially offset by lower gross margin
from our own produce production of ($10,917).
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended
December 31, 2021 increased
$27,298, or 143%, to $46,384 or 17% of sales from $19,086 or 11% of sales for the year ended
December 31, 2020. The increase
between comparable years was primarily due to the inclusion of the
selling, general and administrative expenses of the Canadian and
U.S. cannabis businesses post-acquisition along with an increase in
public company costs such as acquisition fees related to Balanced
Health and Rose LifeScience, investor relations, legal and
regulatory expenses, listing fees and the costs of Sarbanes-Oxley
compliance.
Share-Based Compensation
Share-based compensation expenses for the year ended
December 31, 2021 was $7,533 from $6,142
for the year ended December 31, 2020.
The incremental increase in share-based compensation is primarily
related to the vesting of performance share grants in 2021 that
were earned in the Canadian cannabis segment as Pure Sunfarms'
management participated in the Company's compensation plan for the
entirety of 2021 as compared to two months in
2020.
Gain on Settlement Agreement
On March 2, 2020, pursuant to the
settlement agreement with Emerald, Emerald transferred to the
Company 2.5% of additional equity in Pure Sunfarms. The Company
determined the fair value of the equity received from Emerald to be
$4,681. The Company recorded this
amount as a gain on settlement agreement.
Gain on Acquisition
On November 2, 2020, the Company
consummated the Pure Sunfarms Acquisition, pursuant to which the
Company acquired 36,958,500 Common Shares of Pure Sunfarms owned by
Emerald and increased the Company's ownership of Pure Sunfarms to
100%. The shares were acquired for a total aggregate purchase price
of C$79.9 million (US$60.0 million), satisfied through a
C$60.0 million (US $45.0 million) cash payment and the Promissory
Note. The acquisition is a business combination and has been
accounted for in accordance with the measurement and recognition
provisions of ASC Topic 805, Business Combinations. ASC Topic 805
requires that the purchase consideration be allocated to the assets
acquired and liabilities assumed in a business combination based
upon their estimated fair values at the date of acquisition. As
such, the Company recognized a gain of $23,631 due to the revaluation of its previously
held investment in Pure Sunfarms to its fair value at acquisition
date.
Loss on Disposal of Assets
The Company recognized a loss on disposal of assets of
($259) and ($922) for the years ended December 31, 2021 and 2020, respectively. The
loss in 2021 is primarily due to writing off the DutchCanGrow
minority investment and the loss in 2020 is primarily due to
shutting down two of the VFCE generators and fully depreciating the
assets in 2020.
Loss on Joint Venture Loans
The Company recognized a loss on joint venture loans of
($3,791) for the year ended
December 31, 2020. The loss in 2020
is due to writing down the inventory of VF Hemp to its net
realizable value in the fourth quarter of 2020. As a result of the
inventory write-down, the Company recognized an impairment of
($3,791) on the outstanding grid loan
with VF Hemp.
(Losses) Income from Equity Method Investments
Our share of losses from our equity method investments for the
year ended December 31, 2021 was
($308) compared to earnings of
$1,005 for the year ended
December 31, 2020. Our share of
income for Pure Sunfarms was presented in income from equity method
investments from January 1, 2020 to
November 1, 2020. Village Farms began
fully consolidating operating results of Pure Sunfarms on
November 2, 2020. VF Hemp was
presented in (losses) from equity method investments in both years
ended December 31, 2021 and 2020. For
information regarding the results of operations from our joint
ventures, see "Non-GAAP Measures - Reconciliation of U.S. GAAP
Results to Proportionate Results" below.
Net Loss Attributable to Non-controlling Interests, Net of
Tax
For the year ended December 31,
2021, the net loss attributable to non-controlling
interests, net of tax was $46. Due to
the acquisition of 70% of Rose LifeScience, the Company fully
consolidates the results of Rose LifeScience in the Company's
Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss). The 30% retained interest is presented as net loss
attributable to non-controlling interests, net of tax per GAAP.
Net (Loss) Income Attributable to Village Farms International
Inc.
Net (loss) for the year ended December
31, 2021 was ($9,079) in
comparison to net income of $11,608
for the year ended December 31, 2020.
Net (loss) was driven by a decrease in our operating loss of
($8,738) for the year ended
December 31, 2021 as compared to an
operating loss of ($14,268) for the
year ended December 31, 2020. The
2020 net income was significantly enhanced by the gain in
acquisition of Pure Sunfarms of $23,631 and the gain on the settlement agreement
with Emerald of $4,681, partially
offset by the write-off of ($3,791)
of the Company's loan to VF Hemp and loss on disposal of VFCE
assets of ($922).
Adjusted EBITDA
Adjusted EBITDA for the year ended December 31, 2021 increased $6,601 to $14,012
from $7,411 for the year ended
December 31, 2020, primarily as a
result of improved operating income of the Canadian and U.S.
cannabis segments, partially offset by a higher operating loss of
the produce segment and an increase in corporate expenses. See the
reconciliation of Adjusted EBITDA to net income in "Non-GAAP
Measures—Reconciliation of Net Earnings to Adjusted EBITDA".
CANNABIS SEGMENT RESULTS – CANADA
The Canadian cannabis segment currently consists of Pure
Sunfarms and Rose LifeScience. Pure Sunfarms' comparative analysis
are based on the consolidated results of Pure Sunfarms for the
years ended December 31, 2021 and
2020 and the three month periods ending December 31, 2021 and 2020 and September 30, 2021, not accounting for the
percentage owned by Village Farms. The Canadian cannabis segment
also includes the operating results of Rose LifeScience from
November 15, 2021 to December 31, 2021, which are consolidated in our
results for the year ended December 31,
2021 with the minority interest presented in Net Income
(Loss) Attributable to Non-controlling Interests, Net of Tax. See
"Non-GAAP Measures - Reconciliation of U.S. GAAP Results to
Proportionate Results" for a presentation of the Canadian cannabis
segment's proportionate results for years ended December 30, 2021 and December 31, 2020.
Year Ended December 31, 2021
Compared to Year Ended December 31,
2020
Sales
Canadian cannabis net sales for the years ended December 31, 2021 and 2020 was $96,434 (C$120,829)
and $56,875 (C$76,060), respectively, an increase of 70%. The
year over year change is comprised of a 94% increase in sales to
provincial boards (branded sales) and a 2% increase in wholesale
sales (non-branded sales). The net sales also include the addition
of Rose LifeScience net sales of $1,460 (C$1,865)
from November 15, 2021 to
December 31, 2021, which mostly
consist of sales of their own products and commission-based
sales.
For the year ended December 31,
2021, 64% of revenue was generated from branded flower and
pre-roll sales, with an additional 10% from branded cannabis
derivative products, which Pure Sunfarms launched in September 2020. For the year ended December 31, 2020, 54% of revenue was generated
from branded flower and pre-roll sales, with an additional 5% from
branded cannabis derivative products. Non-branded sales accounted
for 26% of revenue in 2021 as compared to 41% in 2020, as Pure
Sunfarms continued to transition from a predominantly wholesale
market supplier in 2019 to a mixed branded and wholesale market
supplier in 2020 and 2021.
On a combined basis, the net average selling price of branded
flower and pre-roll formats did not change from 2020 to 2021, due
primarily to a greater volume of pre-roll sales in 2021 which has a
higher selling price than flower. Excluding pre-roll formats, the
average net selling price of branded flower decreased by (4%) in
2021 as the retail market experienced general price compression.
The net average selling price of bulk non-branded flower and trim
decreased by (57%) largely due to an increased volume of trim sales
which are sold at a lower selling price relative to non-branded
flower.
Cost of Sales
Cost of sales for the years ended December 31, 2021 and 2020 was $59,224 (C$74,216)
and $37,525 (C$49,978), respectively, an increase of 58%. The
increase for 2021 as compared to 2020 was primarily driven by a
109% volume increase of branded flower and pre-roll sales which has
an incremental cost of production to manufacture over bulk product
sold in the wholesale channel and $1,120 (C$1,428) in
cost of sales for Rose LifeScience in 2021. During 2020, the cost
of sales also includes a $1,069
(C$1,412) inventory write down for
distillate oil purchased from third party extraction companies for
which the market value has dropped since the initial purchase as
well as a $3,295 (C$4,223) charge in the fourth quarter of 2020
resulting from the revaluation of inventory to fair value at the
acquisition date of Pure Sunfarms.
Gross Margin
Gross margin for the year ended December
31, 2021 increased $17,860
(C$20,531) or 92% to $37,210 (C$46,613)
from $19,350 (C$26,082) for the year ended December 31, 2020. Gross margin as a percentage
of net revenue of 39% in 2021 was higher than gross margin of 34%
in 2020. The gross margin improved in 2021 as increased output of
production had a favorable impact on cost of production and offset
the reduction in the selling price of flower and additional costs
associated with the manufacture of branded cannabis derivative
products in 2021.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended
December 31, 2021 increased 87% to
$20,937 (C$26,278) or 22% of 2021 net sales from
$11,207 (C$14,936) for the year ended December 31, 2020 or 20% of 2020 net sales. The
increase in 2021 was primarily due to higher Health Canada
regulatory fees, which are based on cannabis sales, Rose
LifeScience expenses of $491
(C$626), as well as incremental year
over year expenses for sales, marketing and additional headcount to
support the growth of the Canadian cannabis segment.
Share-Based Compensation
Share-based compensation for the years ended December 31, 2021 and 2020 were $2,738 (C$3,462)
and $61 (C$78) respectively. The 2021 increase reflects
the vesting of performance share grants in 2021 that were earned in
the Canadian cannabis segment as Pure Sunfarms' management
participated in the Company's compensation plan for the entirety of
2021 as compared to two months in 2020.
Net Income
Net income for the years ended December
31, 2021 and 2020 was $9,165
(C$11,498) and $10,857 (C$13,789)
respectively. The decrease between years is mainly driven by the
2020 gain on settlement of net liabilities from the Pure Sunfarms
Settlement Agreement, partially offset by the increase in operating
income of the Canadian cannabis segment for the year ended
December 31, 2021 as compared to the
year ended December 31, 2020.
Adjusted EBITDA
Adjusted EBITDA was $23,415
(C$29,264) for the year ended
December 31, 2021 and $13,329 (C$17,960)
for the year ended December 31, 2020.
The increase of $10,086 (C$11,304), or 76%, is primarily attributable to
significant revenue growth while improving gross margin between
years partially offset by a slight increase in selling, general and
administrative expenses as a percentage of net sales in 2021 as
compared to 2020. See the reconciliation of Adjusted EBITDA to net
income in "Non-GAAP Measures—Reconciliation of Net Earnings to
Adjusted EBITDA".
Three Months Ended December 31,
2021 Compared to Three Months Ended December 31, 2020
Sales
Canadian cannabis net sales for the three months ended
December 31, 2021 were $26,821 (C$33,810)
as compared to $17,303 (C$22,527) for the three months ended
December 31, 2020. The net sales
increase includes Rose LifeScience net sales of $1,460 (C$1,865)
from November 15, 2021 through
December 31, 2021 and was primarily
comprised of a 57% increase in branded sales and a 10% increase in
non-branded sales. For the three months ended December 31, 2021, 65% of revenue was generated
from branded flower and pre-rolls and 11% of revenue from Cannabis
Derivative Products as compared to 84% of revenue from branded
flower and pre-rolls and 8% of revenue from Cannabis Derivative
Products for the three months ended December
31, 2020. For the three months ended December 31, 2021, non-branded sales represented
24% of revenues compared to 8% for the three months ended
December 31, 2020. The Canadian
cannabis segment continues to experience strong demand for its
branded flower amidst what continues to be a congested market. The
increase in non-branded sales was largely attributable to the
certain opportunistic transactions available in the current period
not available in the comparison period.
Cost of Sales
Canadian cannabis cost of sales for the three months ended
December 31, 2021 was $14,791 (C$18,662)
as compared to $13,821 (C$17,951) for the three months ended
December 31, 2020. As a result of the
Pure Sunfarms Acquisition, Pure Sunfarms recognized a difference
between the fair value and book value of inventory on the
acquisition date, resulting in a $861
(C$1,082) reduction to cost of sales
in the fourth quarter of 2021 and a $3,295 (C$4,223)
charge to cost of sales in the fourth quarter of 2020. This is a
non-cash accounting charge to cost of sales and should be adjusted
for when analyzing the actual operational results of the Canadian
cannabis segment. The increase in cost of sales between the periods
includes $1,120 (C$1,428) of Rose LifeScience post-acquisition
costs of sales. Excluding the non-cash adjustment described above,
the cost of sales as a percentage of net revenue deceased due to
increased yields in cultivation which has had a downward impact on
the cost per gram.
Gross Margin
Gross margin for the three months ended December 31, 2021 was $12,030 (C$15,148)
or 45% of net sales as compared to $3,482 (C$4,576) or
20% of net sales for the three months ended December 31, 2020. This increase in gross margin
was largely due to an increase in branded sales and non-cash
accounting reduction to cost of sales in the fourth quarter of 2021
along with the non-cash accounting charge to cost of sales in the
fourth quarter of 2020. Gross margin as a percent of net sales
without the non-accounting charge was 42% for the fourth quarter of
2021 and 39% for the fourth quarter of 2020.
Selling, General and Administrative Expenses
Canadian cannabis selling, general and administrative expenses
for the three months ended December 31,
2021 were $7,277 (C$9,184), or 27% of sales compared to
$4,476 (C$5,846), or 26% of sales for the three months
ended December 31, 2020. The increase
in selling, general and administrative expenses as a percentage of
sales for the three months ended December
31, 2021 in comparison to the three months ended
December 31, 2020 was primarily due
to an increase in headcount to support the growth of sales and
inclusion of Rose LifeScience expenses of $491 (C$626).
Share-Based Compensation
Share-based compensation expenses for the three months ended
December 31, 2021 were $1,267 (C$1,602) as
compared to $61 (C$78) for the three months December 31, 2020. The 2021 increase reflects the
vesting of performance share grants in 2021 that were earned in the
Canadian cannabis segment by Pure Sunfarms' management.
Net Income
Canadian cannabis net income for the three months ended
December 31, 2021 was $3,514 (C$4,441) as
compared to net loss of $1,086
(C$1,379) for the three months ended
December 31, 2020. The higher net
income between periods was primarily driven by a higher operating
income in the fourth quarter of 2021 as compared to the fourth
quarter of 2020.
Adjusted EBITDA
Adjusted EBITDA for the three months ended December 31, 2021 and 2020 was $4,894 (C$6,147)
and $2,376 (C$3,083), respectively, representing an increase
of 106%. The higher adjusted EBITDA between periods was primarily
driven by an increase of branded sales and improved yields from
cultivation which lowered the cost of sales as a percentage of
revenue.
Three Months Ended December 31,
2021 Compared to Three Months Ended September 30, 2021
Sales
Canadian cannabis net sales for the three months ended
December 31, 2021 were $26,821 (C$33,810)
as compared to $27,393 (C$34,508) for the three months ended
September 30, 2021. The fourth
quarter of 2021 includes Rose LifeScience post-acquisition sales of
$1,460 (C$1,865). The sequential net sales decrease of
2% was comprised of a 7% increase in branded sales offset with a
33% decrease in non-branded sales. For the three months ended
December 31, 2021, 65% of revenue was
generated from branded flower and pre-rolls and 11% of revenue from
branded oils, edibles and vapes ("Cannabis Derivative Products") as
compared to 58% of revenue from branded flower and pre-rolls and 6%
of revenue from Cannabis Derivative Products for the three months
ended September 30, 2021. For the
three months ended December 31, 2021,
non-branded sales represented 24% of revenues compared to 36% for
the three months ended September 30,
2021. The Canadian cannabis segment continues to experience
strong demand for its branded flower amidst what continues to be a
congested market. The decrease in non-branded sales was largely
attributable to specific opportunistic transactions that were
available in the previous quarter.
Cost of Sales
Canadian cannabis cost of sales for the three months ended
December 31, 2021 was $14,791 (C$18,662)
as compared to $14,244 (C$17,947) for the three months ended
September 30, 2021. The fourth
quarter of 2021 includes Rose LifeScience post-acquisition sales of
$1,120 (C$1,428). As a result of the Pure Sunfarms
Acquisition, Pure Sunfarms recognized a difference between the fair
value and book value of inventory on the acquisition date,
resulting in a $861 (C$1,082) reduction to cost of sales in the
fourth quarter of 2021 and a $1,217
(C$1,534) reduction to cost of sales
in the third quarter of 2021. This is a non-cash accounting charge
to cost of sales and should be adjusted for when analyzing the
actual operational results of the Canadian cannabis segment. The
slight increase in cost of sales between the periods was driven by
the inclusion of the Rose LifeScience cost of sales in the current
period.
Gross Margin
Gross margin for the three months ended December 31, 2021 was $12,030 (C$15,148)
or 45% of net sales as compared to $13,149 (C$16,561)
or 48% for the three months ended September
30, 2021. The decrease in gross margin percentage between
sequential periods was largely due to a decrease in non-branded
sales and the inclusion of Rose LifeScience. However, this decrease
was somewhat offset by increased yields that continued to be
experienced throughout 2021 which in turn lowers our cost of
production and positively impacts gross margin.
Selling, General and Administrative Expenses
Canadian cannabis selling, general and administrative expenses
for the three months ended December 31,
2021 were $7,277 (C$9,184), or 27% of sales compared to
$5,324 (C$6,702), or 19% of sales for the three months
ended September 30, 2021. The
increase in selling, general and administrative expenses as a
percentage of sales for the three months ended December 31, 2021 in comparison to the three
months ended September 30, 2021 was
due to an increase in brand and commercial activities as well as
higher workforce and related employee expenses.
Share-Based Compensation
Share-based compensation expenses for the three months ended
December 31, 2021 were $1,267 (C$1,602) as
compared to $186 (C$234) for the three months September 30, 2021. The fourth quarter increase
reflects the vesting of performance share grants in 2021 that were
earned in the Canadian cannabis segment by Pure Sunfarms'
management.
Net Income
Canadian cannabis net income for the three months ended
December 31, 2021 was $3,514 (C$4,441) as
compared to net income of $5,287
($6,661) for the three months ended
September 30, 2021. The lower net
income between periods was primarily driven by lower non-branded
sales along with higher selling, general and administrative
expenses and share-based compensation expense.
Adjusted EBITDA
Adjusted EBITDA for the three months ended December 31, 2021 and September 30, 2021 was $4,894 (C$6,147)
and $8,627 (C$10,867), respectively, representing a decrease
of 43%. The lower adjusted EBITDA between periods was primarily
driven by a lower amount of non-branded sales and an increase in
selling, general and administrative expenses for the three months
ended December 31, 2021.
CANNABIS SEGMENT RESULTS – UNITED
STATES
The U.S. cannabis segment currently consists of Balanced Health
and VF Hemp. For the year ended December 30,
2021, U.S. cannabis financial results are based on the
consolidated results of Balanced Health from the closing date of
the acquisition of August 16, 2021,
as the results of Balanced Health from August 16, 2021 through December 31, 2021 are consolidated in the
Company's results. VF Hemp is a joint venture, and its results are
included in "Equity in Earnings of Unconsolidated Entities" for the
year ended December 31, 2021.
Sales
U.S. cannabis net sales for the period of August 16, 2021 to December 31, 2021 were $11,345. Over 99% of sales are generated in
the United States and gross sales
are composed of 79% from e-commerce sales, 15% from retail sales,
3% from shipping income and 1% from bulk sales. The loyalty program
impact contributed 2% of net sales as loyalty program customers
generate loyalty points that may be used when purchasing Balanced
Health products.
Cost of Sales
U.S. cannabis cost of sales for the period of August 16, 2021 to December 31, 2021 were $3,398. Cost of sales are attributed directly to
e-commerce, retail and bulk cost of sales with all other costs
categorized within other manufacturing costs of sales including
expenses such as warehouse expenses, freight and shipping
supplies.
Gross Margin
U.S. cannabis gross margin for the period of August 16, 2021 to December 31, 2021 was $7,947 or 70%.
Selling, General and Administrative Expenses
U.S. cannabis selling general and administrative expenses for
the period of August 16, 2021 to
December 31, 2021 was $5,604 or 49% of sales. As the U.S. cannabis
business derives a significant number of sales through its online
technology platforms, the primary expense categories within
selling, general and administrative include sales and marketing,
merchant fees, e-commerce support and IT services.
Share-Based Compensation
U.S. cannabis share-based compensation for the period of
August 16, 2021 to December 31 2021 was $158. The share-based compensation is due to the
cost of performance-based stock options for U.S. cannabis
management.
Net Income
U.S. cannabis net income for the period of August 16, 2021 to December 31, 2021 was $2,200 due primarily to the gross margin of
70%.
Adjusted EBITDA
U.S. cannabis adjusted EBITDA for the period of August 16, 2021 to December 31, 2021 was $2,363 and is due primarily to the operating
profit of Balanced Health offset by the loss from VF Hemp which is
presented in equity losses from unconsolidated entities in the
Consolidated Statements of Income (Loss).
Non-GAAP Measures
References in this MD&A to "Adjusted EBITDA" are to earnings
(including the equity earnings of the joint ventures, Pure Sunfarms
and VFH) before interest, taxes, depreciation, and amortization
("EBITDA"), as further adjusted to exclude foreign currency
exchange gains and losses on translation of long-term debt,
unrealized gains on the changes in the value of derivative
instruments, share-based compensation, gains and losses on asset
sales and the other adjustments set forth in the table below.
Adjusted EBITDA is a measure of operating performance that is not
recognized under GAAP and does not have a standardized meaning
prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers.
Investors are cautioned that Adjusted EBITDA should not be
construed as an alternative to net income or loss determined in
accordance with GAAP as an indicator of our performance. Management
believes that Adjusted EBITDA is an important measure in evaluating
the historical performance of the Company because it excludes
non-recurring and other items that do not reflect our business
performance.
We also present Adjusted EBITDA, earnings per share and diluted
earnings per share on a proportionate segment basis. Each of the
components of Adjusted EBITDA, on a proportionate segment basis
(which include our proportionate share of the joint ventures, Pure
Sunfarms and VF Hemp, which were accounted for as equity method
investments, as well as the proportionate share of Rose
LifeScience, in respect of which we have a 70% interest and the
remaining 30% is accounted for as a non-controlling interest), are
presented in the table "Reconciliation of U.S. GAAP Results to
Proportionate Results" below. We believe that the ability of
investors to assess our overall performance may be improved by the
disclosure of proportionate segment Adjusted EBITDA, income (loss)
per share and diluted income (loss) per share by providing
disclosure of our results that relate specifically to our share of
our investments, given that our equity-accounted joint ventures
represented a significant percentage of our net income in 2020 and
2019. We have presented a similar measure in 2021, which accounts
for VF Hemp and Rose LifeScience on a proportionate basis, for
comparability purposes.
Reconciliation of Consolidated Net Income to Adjusted
EBITDA
1.
|
For the year ended
December 31, 2021, Pure Sunfarms is fully consolidated in the
financial results of the Company. For the period August 16, 2021 to
December 31, 2021, Balanced Health is fully consolidated in the
financial results of the Company. For the period November 15, 2021
to December 31,2021, Village Farms' share of Rose LifeScience's
financial results are fully consolidated in the financial results
of the Company.
|
2.
|
For the period
January 1, 2020 to November 1, 2020, Village Farms' share of Pure
Sunfarms earnings is reflected in income from equity method
investments. For the period of November 2, 2020 to December 31,
2020, Pure Sunfarms is fully consolidated in the financial results
of the Company.
|
3.
|
See "Results of
Operations – Consolidated Results – Gain on Acquisition"
above.
|
4.
|
See "Results of
Operations – Consolidated Results – Gain on Settlement Agreement"
above.
|
5.
|
The purchase price
adjustment primarily reflects the non-cash accounting charge
resulting from the revaluation of Pure Sunfarms' inventory to fair
value at the acquisition date.
|
6.
|
The GAAP treatment of
our equity earning of Pure Sunfarms is different than under IFRS.
Under GAAP, the Emerald shares held in escrow are not considered
issued until paid for pursuant to the GAAP concept of 'hypothetical
liquidation'. As a result, under GAAP, our ownership percentage for
March through November of 2019 was higher than its economic
interest of 50%. Accordingly, for those periods with a higher
deemed ownership percentage, we received a higher allocation of
profits and losses during the periods in which there were
outstanding escrow shares that were not yet paid for by Emerald.
The effective profit and loss allocation – on a weighted average
basis in 2020 was 64.8%, and in 2019 was 57.9%.
|
7.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standardized
meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers.
Management believes that Adjusted EBITDA is a useful supplemental
measure in evaluating the performance of the Company because it
excludes non-recurring and other items that do not reflect our
business performance. Adjusted EBITDA includes the Company's
majority non-controlling interest in Pure Sunfarms through November
1, 2020 and 100% interest since November 2, 2020, 70% interest in
Rose LifeScience since acquisition, 65% interest in VFH and 60%
interest in AVGGH.
|
Reconciliation of U.S. GAAP Results to Proportionate
Results
The following tables are a reconciliation of the GAAP results to
the proportionate results (which include our proportionate share of
the equity method joint ventures of Pure Sunfarms, VF Hemp and
AVGGH and 70% ownership of Rose LifeScience, in respect of which we
have a 70% interest and the remaining 30% is accounted for as a
non-controlling interest). Pure Sunfarms was a joint venture until
the Company acquired 100% ownership on November 2, 2020. The Company acquired 70% of
Rose LifeScience on November 15,
2021. The tables reflect the full statements of income for
Pure Sunfarms, VFH and AVGGH multiplied by the ownership percentage
of the Company (versus presenting the results of these equity
method joint ventures in (Losses) Earnings from Equity Method
Investments) and the full statements of income for Rose LifeScience
for November 15, 2021 through
December 31, 2021 multiplied by the
70% ownership of the Company (versus presenting 100% of the results
in the consolidated statement of income and the minority interest
in in Net Income (Loss) Attributable to Non-controlling Interests,
Net of Tax):
1.
|
The adjusted
consolidated financial results have been adjusted to include our
share of revenues and expenses from Pure Sunfarms, Rose LifeScience
and VF Hemp on a proportionate accounting basis, on which
management bases its operating decisions and performance
evaluation. GAAP does not allow for the inclusion of the joint
ventures on a proportionate basis. These results include additional
non-GAAP measures such as Adjusted EBITDA. The adjusted results are
not generally accepted measures of financial performance under
GAAP. Our method of calculating these financial performance
measures may differ from other companies and accordingly, they may
not be comparable to measures used by other companies.
|
2.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standardized
meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers.
Management believes that Adjusted EBITDA is a useful supplemental
measure in evaluating the performance of the Company because it
excludes non-recurring and other items that do not reflect our
business performance. Consolidated Adjusted EBITDA includes our
majority non-controlling interest Pure Sunfarms, our 65% interest
in VFH and our 60% interest in AVGGH.
|
This press release is intended to be read in conjunction with
the Company's Consolidated Financial Statements ("Financial
Statements") and Management's Discussion & Analysis
("MD&A") for the three and year ended December 31, 2021 in the Company Form 10-K, which
will be filed on EDGAR (www.sec.gov/edgar.shtml) and SEDAR
(www.sedar.com) and will be available at www.villagefarms.com.
Conference Call
Village Farms' management team will host a conference call
today, Tuesday, March 1, 2022 at
8:30 a.m. ET, to discuss its
financial results. Participants can access the conference call by
telephone by dialing (416) 764-8659 or (888) 664-6392, or via the
Internet at: https://bit.ly/3rku2Cl.
For those unable to participate in the conference call at the
scheduled time, it will be archived for replay both by telephone
and via the Internet beginning approximately one hour following
completion of the call. To access the archived conference call by
telephone, dial (416) 764-8677 or (888) 390-0541 and enter the
passcode 003174 followed by the pound (#) key. The telephone
replay will be available until Tuesday,
March 8, 2022 at midnight (ET). The conference
call will also be available on Village Farms' web
site at http://villagefarms.com/investor-relations/investor-calls.
About Village Farms International, Inc.
Village Farms leverages decades of experience as a large-scale,
Controlled Environment Agriculture-based, vertically integrated
supplier for high-value, high-growth plant-based Consumer Packaged
Goods opportunities, with a strong foundation as a leading fresh
produce supplier to grocery and large-format retailers throughout
the US and Canada, and new
high-growth opportunities in the cannabis and CBD categories in
North America and selected markets
internationally.
In Canada, the Company's
wholly-owned Canadian subsidiary, Pure Sunfarms, is one of the
single largest cannabis operations in the world, the lowest-cost
greenhouse producer and one of Canada's best-selling brands. The Company
also owns 70% of Québec-based, Rose LifeScience, a leading
third-party cannabis products commercialization expert in the
Province of Québec,
In the US, wholly-owned Balanced Health Botanicals is one of the
leading CBD brands and e-commerce platforms in the country.
Subject to compliance with all applicable US federal and state laws
and stock exchange rules, Village Farms plans to enter the US
high-THC cannabis market via multiple strategies, leveraging one of
the largest greenhouse operations in the country (more than 5.5
million square feet in West
Texas), as well as the operational and product expertise
gained through Pure Sunfarms' cannabis success in Canada.
Internationally, Village Farms is targeting selected, nascent,
legal cannabis and CBD opportunities with significant medium- and
long-term potential, with an initial focus on the Asia-Pacific region and Europe.
Cautionary Statement Regarding Forward-Looking
Information
This Press Release contains forward-looking statements within
the meaning of the United States Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is
subject to the safe harbor created by those sections. This Annual
Report on Form 10-K also contains "forward-looking information"
within the meaning of applicable Canadian securities law. We refer
to such forward-looking statements and forward-looking information
collectively as "forward-looking statements". Forward-looking
statements may relate to the Company's future outlook or financial
position and anticipated events or results and may include
statements regarding the financial position, business strategy,
budgets, expansion plans, litigation, projected production,
projected costs, capital expenditures, financial results, taxes,
plans and objectives of or involving the Company. Particularly,
statements regarding future results, performance, achievements,
prospects or opportunities for the Company, the greenhouse
vegetable industry or the cannabis industry are forward-looking
statements. In some cases, forward-looking information can be
identified by such terms as "outlook", "may", "might", "will",
"could", "should", "would", "occur", "expect", "plan",
"anticipate", "believe", "intend", "try", "estimate", "predict",
"potential", "continue", "likely", "schedule", "objectives", or the
negative or grammatical variation thereof or other similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this report are subject to risks that
may include, but are not limited to: our limited operating history,
including that of our Pure Sunfarms Corp.("Pure Sunfarms") and our
start-up operations of growing hemp in the United States ("VF Hemp"); the legal
status of Pure Sunfarms cannabis business; risks relating to
obtaining additional financing, including our dependence upon
credit facilities; potential difficulties in achieving and/or
maintaining profitability; variability of product pricing; risks
inherent in the cannabis, hemp and agricultural businesses; the
ability of Pure Sunfarms to cultivate and distribute cannabis in
Canada; existing and new
governmental regulations, including risks related to regulatory
compliance and licenses (e.g., Pure Sunfarms ability to obtain
licenses for its Delta 2 greenhouse facility as well as additional
licenses under the Canadian act respecting cannabis to amend to the
Controlled Drugs and Substances Act, the Criminal Code and other
Acts, S.C. 2018, c. 16 (Canada)
(the "Cannabis Act") for its Delta 3 greenhouse facility), and
changes in our regulatory requirements; risks relating to
conversion of our greenhouses to cannabis production for Pure
Sunfarms; risks related to rules and regulations at the U.S.
federal (Food and Drug Administration ("FDA") and United States
Department of Agriculture ("USDA")), state and municipal levels
with respect to produce and hemp; retail consolidation,
technological advances and other forms of competition;
transportation disruptions; product liability and other potential
litigation; retention of key executives; labor issues; uninsured
and underinsured losses; vulnerability to rising energy costs;
environmental, health and safety risks, foreign exchange exposure,
risks associated with cross-border trade; difficulties in managing
our growth; restrictive covenants under our credit facilities;
natural catastrophes; the ongoing and developing COVID-19 pandemic;
and tax risks.
The Company has based these forward-looking statements on
factors and assumptions about future events and financial trends
that it believes may affect its financial condition, results of
operations, business strategy and financial needs. Although the
forward-looking statements contained in this report are based upon
assumptions that management believes are reasonable based on
information currently available to management, there can be no
assurance that actual results will be consistent with these
forward-looking statements. Forward-looking statements necessarily
involve known and unknown risks and uncertainties, many of which
are beyond the Company's control, that may cause the Company's or
the industry's actual results, performance, achievements, prospects
and opportunities in future periods to differ materially from those
expressed or implied by such forward-looking statements. These
risks and uncertainties include, among other things, the factors
contained in the Company's filings with securities regulators,
including this Annual Report on Form 10-K. In particular, we
caution you that our forward-looking statements are subject to the
ongoing and developing circumstances related to the COVID-19
pandemic, which may have a material adverse effect on our business,
operations and future financial results.
When relying on forward-looking statements to make decisions,
the Company cautions readers not to place undue reliance on these
statements, as forward-looking statements involve significant risks
and uncertainties and should not be read as guarantees of future
results, performance, achievements, prospects and opportunities.
The forward-looking statements made in this report relate only to
events or information as of the date on which the statements are
made in this report. Except as required by law, the Company
undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made or to reflect the occurrence of unanticipated
events.
|
Village Farms
International, Inc.
|
Consolidated
Statements of Financial Position
|
(In thousands of
United States dollars)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
53,417
|
|
$
|
21,640
|
Restricted
cash
|
|
5,250
|
|
4,039
|
Trade
receivables
|
|
34,360
|
|
23,222
|
Inventories
|
|
68,677
|
|
46,599
|
Other
receivables
|
|
616
|
|
145
|
Income tax
receivable
|
|
2,430
|
|
18
|
Prepaid expenses and
deposits
|
|
10,209
|
|
6,145
|
Total current
assets
|
|
174,959
|
|
101,808
|
Non-current
assets
|
|
|
|
|
Property, plant and
equipment
|
|
215,704
|
|
187,020
|
Investment in in
minority interests
|
|
2,109
|
|
1,226
|
Note receivable -
joint venture
|
|
3,256
|
|
3,545
|
Goodwill
|
|
117,533
|
|
24,027
|
Intangibles
|
|
26,394
|
|
17,311
|
Deferred tax
asset
|
|
16,766
|
|
13,312
|
Right-of-use
assets
|
|
7,609
|
|
3,832
|
Other
assets
|
|
2,581
|
|
1,950
|
Total
assets
|
|
$
|
566,911
|
|
$
|
354,031
|
LIABILITIES
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Line of
credit
|
|
$
|
7,760
|
|
$
|
2,000
|
Trade
payables
|
|
22,597
|
|
15,064
|
Current maturities of
long-term debt
|
|
11,416
|
|
10,166
|
Note
payable
|
|
—
|
|
15,314
|
Accrued
liabilities
|
|
14,168
|
|
10,367
|
Accrued sales
taxes
|
|
3,899
|
|
12,071
|
Accrued loyalty
program
|
|
2,098
|
|
—
|
Income tax
payable
|
|
—
|
|
4,523
|
Lease liabilities -
current
|
|
962
|
|
1,134
|
Other current
liabilities
|
|
1,413
|
|
1,641
|
Total current
liabilities
|
|
64,313
|
|
72,280
|
Non-current
liabilities
|
|
|
|
|
Long-term
debt
|
|
50,419
|
|
53,913
|
Deferred tax
liability
|
|
18,657
|
|
18,059
|
Lease liabilities -
non-current
|
|
6,711
|
|
2,863
|
Other
liabilities
|
|
1,973
|
|
1,633
|
Total
liabilities
|
|
142,073
|
|
148,748
|
Commitments and
contingencies
|
|
|
|
|
MEZZANINE
EQUITY
|
|
|
|
|
Redeemable
non-controlling interests
|
|
16,433
|
|
—
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Common
stock
|
|
365,561
|
|
145,668
|
Additional paid in
capital
|
|
9,369
|
|
17,502
|
Accumulated other
comprehensive loss
|
|
6,696
|
|
6,255
|
Retained
earnings
|
|
26,779
|
|
35,858
|
Total shareholders'
equity
|
|
408,405
|
|
205,283
|
Total liabilities and
shareholders' equity
|
|
$
|
566,911
|
|
$
|
354,031
|
Village Farms
International, Inc.
|
Consolidated
Statements of Income (Loss) and Comprehensive Income
(Loss)
|
(In thousands of
United States dollars, except per share data, unless otherwise
noted)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
72,808
|
|
$
|
47,364
|
|
$
|
268,020
|
|
$
|
170,086
|
Cost of
sales
|
|
(52,950)
|
|
(46,317)
|
|
(222,841)
|
|
(159,126)
|
Gross
margin
|
|
19,858
|
|
1,047
|
|
45,179
|
|
10,960
|
Selling, general and
administrative expenses
|
|
(16,135)
|
|
(6,410)
|
|
(46,384)
|
|
(19,086)
|
Share-based
compensation
|
|
(1,828)
|
|
(4,813)
|
|
(7,533)
|
|
(6,142)
|
Interest
expense
|
|
(876)
|
|
(783)
|
|
(2,835)
|
|
(2,056)
|
Interest
income
|
|
27
|
|
48
|
|
126
|
|
625
|
Foreign exchange gain
(loss)
|
|
159
|
|
744
|
|
(476)
|
|
(136)
|
Gain on settlement
agreement
|
|
—
|
|
—
|
|
—
|
|
4,681
|
Gain on
acquisition
|
|
—
|
|
23,631
|
|
—
|
|
23,631
|
Other income
(expense)
|
|
193
|
|
(43)
|
|
(161)
|
|
49
|
Loss on joint venture
loans
|
|
—
|
|
(3,791)
|
|
—
|
|
(3,791)
|
Loss on disposal of
assets
|
|
(219)
|
|
(916)
|
|
(259)
|
|
(922)
|
Income (loss) before
taxes and (loss) income from equity method investments
|
|
1,179
|
|
8,714
|
|
(12,343)
|
|
7,813
|
Recovery of income
taxes
|
|
983
|
|
2,183
|
|
3,526
|
|
2,790
|
(Loss) income from
equity method investments
|
|
(133)
|
|
(3,880)
|
|
(308)
|
|
1,005
|
Income (loss)
including non-controlling interests
|
|
$
|
2,029
|
|
$
|
7,017
|
|
$
|
(9,125)
|
|
$
|
11,608
|
Less: net loss
attributable to non-controlling interests, net of tax
|
|
$
|
46
|
|
—
|
|
$
|
46
|
|
—
|
Net income (loss)
attributable to Village Farms International, Inc.
shareholders
|
|
$
|
2,075
|
|
$
|
7,017
|
|
$
|
(9,079)
|
|
$
|
11,608
|
Basic income (loss)
per share
|
|
$
|
0.03
|
|
$
|
0.12
|
|
$
|
(0.11)
|
|
$
|
0.20
|
Diluted income (loss)
per share
|
|
$
|
0.03
|
|
$
|
0.11
|
|
$
|
(0.11)
|
|
$
|
0.19
|
Weighted average
number of common shares used in the computation of net income
(loss) per share (in thousands):
|
|
|
|
|
|
|
|
|
Basic
|
|
82,161
|
|
58,526
|
|
82,161
|
|
58,526
|
Diluted
|
|
82,161
|
|
61,490
|
|
82,161
|
|
61,490
|
Net income (loss)
attributable to Village Farms International, Inc.
shareholders
|
|
$
|
2,075
|
|
$
|
7,017
|
|
$
|
(9,079)
|
|
$
|
11,608
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
233
|
|
6,771
|
|
441
|
|
6,730
|
Comprehensive income
(loss)
|
|
$
|
2,308
|
|
$
|
13,788
|
|
$
|
(8,638)
|
|
$
|
18,338
|
Village Farms
International, Inc.
|
Consolidated
Statements of Cash Flows
|
(In thousands of
United States dollars)
|
(Unaudited)
|
|
|
|
|
|
|
|
Twelve Months
Ended
December 31, 2020
|
|
|
2021
|
|
2020
|
Cash flows
provided by (used in) operating activities:
|
|
|
|
|
Net income
(loss) attributable to Village Farms International, Inc.
shareholders
|
|
$
|
(9,079)
|
|
$
|
11,608
|
Adjustments to
reconcile net (loss) income to net cash (used in) provided by
operating activities:
|
|
|
|
|
Depreciation and
amortization
|
|
12,709
|
|
6,825
|
Amortization of
deferred charges
|
|
300
|
|
115
|
Share of loss
(income) from joint ventures
|
|
308
|
|
(1,005)
|
Loss on joint venture
loans
|
|
-
|
|
3,791
|
Interest
expense
|
|
2,835
|
|
2,056
|
Interest
income
|
|
(126)
|
|
(625)
|
Interest paid on
long-term debt
|
|
(3,306)
|
|
(1,295)
|
Gain on settlement
agreement
|
|
—
|
|
(4,681)
|
(Gain) loss on
disposal of assets
|
|
(259)
|
|
922
|
Gain on acquisition
of Pure Sunfarms
|
|
—
|
|
(23,631)
|
Interest paid on
finance lease
|
|
—
|
|
(4)
|
Share-based
compensation
|
|
7,533
|
|
6,142
|
Deferred income
taxes
|
|
(2,866)
|
|
(6,462)
|
Non-cash lease
expense
|
|
(1,351)
|
|
(1,150)
|
Other
|
|
366
|
|
—
|
Changes in non-cash
working capital items
|
|
(46,631)
|
|
13,072
|
Net cash (used in)
provided by operating activities
|
|
(39,567)
|
|
5,678
|
Cash flows used in
investing activities:
|
|
|
|
|
Purchases of
property, plant and equipment, net of rebate
|
|
(21,656)
|
|
(3,419)
|
Acquisitions,
net
|
|
(40,685)
|
|
(34,603)
|
Advances to joint
ventures
|
|
(20)
|
|
(177)
|
Purchases of
intangibles
|
|
—
|
|
(92)
|
Investment in joint
ventures
|
|
—
|
|
(11,713)
|
Investment in
minority interests
|
|
(1,109)
|
|
(1,226)
|
Net cash used in
investing activities
|
|
(63,470)
|
|
(51,230)
|
Cash flows
provided by financing activities:
|
|
|
|
|
Proceeds from
borrowings
|
|
19,669
|
|
10,619
|
Repayments on
borrowings
|
|
(9,454)
|
|
(6,292)
|
Proceeds from
issuance of common stock and warrants
|
|
135,000
|
|
57,212
|
Issuance
costs
|
|
(7,511)
|
|
(3,293)
|
Note payable paid to
Emerald Health
|
|
(15,498)
|
|
—
|
Proceeds from
exercise of stock options
|
|
199
|
|
425
|
Proceeds from
exercise of warrants
|
|
18,495
|
|
—
|
Share
repurchases
|
|
(5,000)
|
|
—
|
Payments on capital
lease obligations
|
|
(17)
|
|
(63)
|
Net cash provided by
financing activities
|
|
135,883
|
|
58,608
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
142
|
|
634
|
Net increase in
cash and cash equivalents
|
|
32,988
|
|
13,690
|
Cash and cash
equivalents, beginning of period
|
|
25,679
|
|
11,989
|
Cash and cash
equivalents, end of period
|
|
$
|
58,667
|
|
$
|
25,679
|
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SOURCE Village Farms International, Inc.