Village Farms — Q2 2026 Earnings Summary

Financial Performance

• Consolidated net sales increased 27% sequentially and 7% year-over-year to $64 million for the quarter; six-month net sales rose 15% year-over-year to $114.2 million.
• Net income for the quarter was $7.1 million ($0.06 per share), compared to $26.5 million ($0.24 per share) in the prior year period, which included $16.3 million from discontinued operations.
• Cannabis segment net sales grew 5% year-over-year to $53.5 million; gross margin expanded to 51% from 42% in the prior year period.
• Cannabis segment net income improved 21% year-over-year to $8.6 million.
• Adjusted EBITDA from continuing operations for the quarter was $15.3 million (29% of sales), up 16% from $13.1 million in the prior year period.
• Operating cash flow for the quarter was $8.9 million; six-month operating cash flow was negative $2.8 million due to working capital changes.
• Cash and cash equivalents totaled $73 million at the end of the quarter.
• Total liabilities were $109.8 million as of June 30, 2026, compared to $113.0 million at December 31, 2025.
• Long-term debt increased to $34.7 million from $28.8 million at the end of 2025.

Guidance and Future Outlook

• Netherlands operations are expected to ramp to full production capacity by the end of Q1 2027.
• Delta 2 greenhouse expansion in Canada is on track to reach a full 40-tonne production run rate by mid-2027.
• The company expects to enter multiple new European jurisdictions later in 2026.
• Management anticipates continued profitable growth regardless of the entry point and timing into the U.S. market.
• The company expects to grow its cash balance from positive operating cash flow through the remainder of the year.

Business Segments and Product Lines

• International export sales reached a record $20.9 million, growing 74% year-over-year and 43% sequentially.
• The company maintains a top five overall market share position in Canada and achieved top 10 market share in all major product categories for the first time.
• Delta, British Columbia facilities achieved record harvest yields in the first half of 2026, contributing to lower production costs.
• The Groningen facility in the Netherlands commenced cultivation in Q2, bringing maximum annualized capacity to approximately 10 metric tonnes.
• The Delta 2 expansion harvested its first crop in Q2 and is expected to yield approximately 15 metric tonnes of dried, trimmed flower in the second half of 2026.
• Total production capacity from the Delta campus is expected to reach approximately 160 metric tonnes of dried, trimmed flower annually upon full ramp-up.
• Canadian branded revenues were $23.0 million, while non-branded revenues were $3.0 million for the quarter.
• U.S. Cannabis segment sales were $3.2 million for the quarter.
• Netherlands branded sales were $3.3 million for the quarter.

Market and Competitive Landscape

• The company believes it remains the largest exporter of medical cannabis to Europe with a leading market share position in Germany.
• The company holds a leading share and distribution position in Germany and is gaining traction in convenience product categories in Canada.
• The company's Delta facility is the world's largest EU-GMP certified cannabis facility.
• The company was awarded "Producer of the Year" at the 2026 Business of Cannabis Awards in London.

Risks and Challenges

• Forward-looking statements note risks related to the legal status of cannabis and cannabinoid products in the United States and regulatory uncertainty.
• Risks include potential difficulties in achieving and maintaining profitability, variability of product pricing, and regulatory compliance.
• The company faces risks related to foreign exchange exposure, rising energy costs, and inflationary effects on cultivation and transportation costs.
• Potential risks include retail consolidation, technological advances, competition, and the ability to leverage current business relationships.
• Risks associated with the start-up of international production at Netherlands operations and the conversion of greenhouses to cannabis production in Canada and the U.S. are noted.

Management Commentary and Tone

• CEO Michael DeGiglio stated the results demonstrate the strength of the expanding global cannabis platform, driven by record cannabis revenues.
• Management highlighted the fifth consecutive quarter of positive net income and EPS since privatizing the legacy produce business.
• Excluding a one-time $4.3 million vendor settlement from the prior year, consolidated adjusted EBITDA increased meaningfully year-over-year.
• Management noted that favorable sales mix drove nine percentage points of cannabis gross margin expansion, resulting in strong operating leverage.
• The tone was confident regarding the company's position for continued profitable growth and its ability to grow market share in international markets.

Other Key Points

• On May 27, 2026, the company was awarded "Producer of the Year" at the 2026 Business of Cannabis Awards.
• On June 5, 2026, the company entered into securities purchase agreements for a registered direct offering of 7,500,000 common shares, yielding gross proceeds of approximately $15 million.
• The company continues to evaluate additional organic and acquisitive growth investments while remaining prudent regarding valuation.
• The company holds equity interests in cannabis businesses in Australia and Germany, and an equity interest in Verdexa Holdings.
• The Clean Energy division transforms landfill gas into renewable natural gas and receives royalties on all revenues generated.