10-Q: Village Farms Q3 2025: Cannabis Drives Profit Surge

Village Farms International reports significant profit growth in Q3 2025, driven by strong Canadian and Netherlands cannabis segment performance and strategic divestitures.

Summary

• Net income attributable to Village Farms International, Inc. shareholders was $10,217K for the three months ended September 30, 2025, compared to a net loss of $(820)K for the same period in 2024.
• For the nine months ended September 30, 2025, net income attributable to shareholders was $30,011K, a significant improvement from a net loss of $(27,221)K in the prior year.
• Adjusted EBITDA from continuing operations increased by 283% to $20,686K for Q3 2025, up from $4,675K in Q3 2024.
• Year-to-date Adjusted EBITDA from continuing operations surged by 530% to $41,246K for the nine months ended September 30, 2025, compared to $8,505K in 2024.
• Consolidated sales for Q3 2025 were $66,741K, an increase of 21% from $54,938K in Q3 2024.
• Gross profit for Q3 2025 was $31,938K, a 134% increase from $13,637K in Q3 2024.
• Canadian Cannabis net sales increased by 28% to $46,583K in Q3 2025, primarily due to a 758% increase in international export sales.
• Canadian Cannabis gross margin improved to 56% in Q3 2025, up from 26% in Q3 2024.
• Netherlands Cannabis (Leli Holland) commenced sales in Q1 2025, reporting $3,587K in sales for Q3 2025 with a 46% gross margin.
• U.S. Cannabis net sales decreased by 15% to $3,337K in Q3 2025, impacted by unregulated hemp-derived products and state restrictions.
• The Produce segment's gross margin improved to 16% in Q3 2025 from 10% in Q3 2024, despite a 10% sales decrease due to a commission charged on sales to Vanguard Food LP.
• Cash, cash equivalents, and restricted cash totaled $87,561K as of September 30, 2025, significantly up from $24,631K at December 31, 2024.
• Working capital increased to $100,219K at September 30, 2025, from $53,800K at December 31, 2024.
• A $10 million share repurchase program, authorizing up to 5,687,000 common shares, was approved by the Board of Directors on September 29, 2025.
• The company recorded a gain on sale of assets of $19,985K for the nine months ended September 30, 2025, related to the privatization of certain Fresh Produce segment assets.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance with significant increases in net income and Adjusted EBITDA, driven by robust cannabis sales and strategic divestitures. While the U.S. Cannabis segment faces headwinds, international expansion and operational efficiencies are positive. The share repurchase authorization also indicates management confidence.

Positives

• Net income attributable to shareholders increased significantly from a loss of $(820)K in Q3 2024 to a profit of $10,217K in Q3 2025, and from a loss of $(27,221)K to a profit of $30,011K YTD 2025.
• Adjusted EBITDA from continuing operations saw substantial growth, increasing by 283% in Q3 2025 to $20,686K and by 530% YTD 2025 to $41,246K.
• Canadian Cannabis segment sales grew by 28% in Q3 2025, driven by a remarkable 758% year-over-year increase in international export sales.
• Canadian Cannabis gross margin significantly improved to 56% in Q3 2025, up from 26% in Q3 2024, reflecting higher sales volume of bulk flower in international sales and a shift away from lower-value brands.
• The Netherlands Cannabis (Leli Holland) segment successfully commenced sales in Q1 2025, with Phase I operations now at full capacity, demonstrating strong profitability and cash flow generation.
• The Produce segment's gross margin improved to 16% in Q3 2025 from 10% in Q3 2024, attributed to reductions in labor costs and favorable utility rates.
• Cash, cash equivalents, and restricted cash increased substantially to $87,561K at September 30, 2025, from $24,631K at December 31, 2024, indicating improved liquidity.
• Working capital nearly doubled to $100,219K at September 30, 2025, from $53,800K at December 31, 2024.
• The Board of Directors authorized a $10 million share repurchase program, signaling confidence in the company's valuation and commitment to shareholder returns.
• Remediation of previously identified material weaknesses in internal control over financial reporting was completed as of March 31, 2025, enhancing financial reporting reliability.
• A favorable vendor settlement related to the Tomato Brown Rugose Fruit Virus (ToBRFV) infestation contributed to $4,169K in other income for the nine months ended September 30, 2025.

Negatives

• U.S. Cannabis segment sales decreased by 15% in Q3 2025 and 13% YTD, primarily due to the proliferation of unregulated hemp-derived products and new state regulations restricting sales.
• The U.S. Cannabis segment reported a net loss of $439K in Q3 2025 and $607K YTD 2025, and Adjusted EBITDA remained negative at $(332)K for Q3 2025 and $(173)K YTD 2025.
• Produce segment sales decreased by 10% in Q3 2025 due to a commission charged on sales as a result of the supply agreement with Vanguard Food LP.
• Canadian Cannabis branded sales decreased, reflecting a planned shift away from value-based product offerings, but also highlighting the impact of burdensome excise taxes ($15,712K in Q3 2025).
• A temporary re-existence of the previously identified material weakness in IT general controls for the Produce segment occurred from June 29 to August 12, 2025, due to the privatization transaction.

Risks

• Limited operating history in the cannabis and cannabinoids industry, including Pure Sunfarms, Rose LifeScience, Balanced Health Botanicals, and Leli Holland.
• Limited operational history of the Delta RNG Project in the energy segment.
• Uncertainty regarding the legality and regulatory status of cannabis in the United States.
• Risks relating to the integration of Balanced Health and Rose into the consolidated business.
• Risks relating to obtaining additional financing on acceptable terms, including dependence upon credit facilities and dilutive transactions.
• Potential difficulties in achieving and/or maintaining profitability.
• Variability of product pricing across segments.
• Risks inherent in the cannabis, hemp, CBD, cannabinoids, and agricultural businesses.
• Existing and new governmental regulations, including risks related to regulatory compliance and obtaining/maintaining licenses.
• Legal and operational risks relating to expected conversion of greenhouses to cannabis production in Canada and the United States.
• Risks related to rules and regulations at the U.S. Federal, state, and municipal levels with respect to produce and hemp, cannabidiol-based products commercialization.
• Retail consolidation, technological advances, and other forms of competition.
• Transportation disruptions affecting supply chains.
• Product liability and other potential litigation.
• Retention of key executives and labor issues.
• Uninsured and underinsured losses.
• Vulnerability to rising energy costs and inflationary effects on costs of cultivation and transportation.
• Recessionary effects on demand for products.
• Environmental, health, and safety risks.
• Foreign exchange exposure and risks associated with cross-border trade and potential for tariffs and other trade restrictions.
• Difficulties in managing growth across diverse segments and international operations.
• Restrictive covenants under credit facilities.
• Natural catastrophes impacting agricultural operations.
• Elevated interest rates affecting borrowing costs.
• Tax risks.
• Failure to realize the expected benefits of privatizing certain assets and operations of its Produce Segment (the 'Transaction').
• Limited control over partnership arrangements (Vanguard Food LP) and potential for non-performance, default, or bankruptcy of partners.

Future Outlook

The company expects international expansion to enhance profitability and expand its brand into emerging legal cannabis markets, leveraging higher margins in medical markets. Leli Holland plans to launch additional products for coffeeshops during Q4 2025, and its Phase II facility in Groningen is on track to be operational in Q1 2026, which is expected to quintuple total annualized production capacity to approximately 10,000 kilograms. The company has also begun expanding cultivation capacity in its Delta 2 greenhouse to meet increasing demand in Canadian and international export markets, projected to add 40 metric tons of annualized cannabis production. If awarded a Texas medicinal marijuana license, expected December 1, 2025, the company plans to establish an acceptable ownership structure and comply with regulatory requirements.

Management Comments

• Our vision is to be recognized as an international leader in consumer products developed from plants, whereby we produce and market value-added products that are consistently preferred by consumers.
• Our long-term objective for Pure Sunfarms is to be the leading low-cost, high-quality cannabis producer in Canada.
• Our long-term objective for our Canadian Cannabis segment is to garner and sustain a leading retail market share in Canada, as well as a leading exporter of medicinal cannabis, stemming from our position as a leading low-cost, high-quality cannabis producer in Canada and expand our Canadian success into growing international cannabis markets across the globe by becoming a leading exporter of medicinal cannabis.
• As a result of the typically higher margins in international medical markets, we expect international expansion to enhance our profitability while expanding our brand and experience into emerging legal cannabis markets.
• The Company believes that it remains the largest exporter of medical cannabis to Europe, and that it has gained market share sequentially in Germany in each of the past four quarters.
• Leli Holland products are now represented in 91% of participating coffeeshops; representing increased market penetration sequentially as compared to the second quarter.
• Construction of the Company's Phase II facility in Groningen remains on track to be operational in Q1 2026. When completed, the Phase II facility is expected to quintuple total annualized production capacity to approximately 10,000 kilograms.

Industry Context

The Canadian cannabis market continues to be characterized by intense competition and significant excise taxes, which the company addresses by focusing on low-cost, high-quality production and expanding into higher-margin international medical cannabis markets. The U.S. CBD market faces ongoing challenges from the proliferation of unregulated hemp-derived products and evolving state-level restrictions, impacting direct-to-consumer sales for Balanced Health. The company's entry into the Netherlands' Controlled Cannabis Supply Chain Experiment through Leli Holland represents a strategic move into a unique, regulated recreational cannabis market. The divestiture of certain produce assets allows the company to sharpen its focus on the global cannabis market, aligning with broader industry trends towards specialization and international expansion in the evolving cannabis sector.

Comparison to Industry Standards

• The Canadian Cannabis segment continues to maintain a top five overall market share position in Canada and the number two position in dried flower.
• The company believes it remains the largest exporter of medical cannabis to Europe and has gained market share sequentially in Germany in each of the past four quarters.

Management Changes

Corporate Governance

Legal Proceedings

• The company is engaged in legal proceedings in the ordinary course of business, but does not believe any current legal proceedings are material to its business.

Related Party Transactions

• The company leases its Rose office building from a company employee who also owns a minority interest in Rose, with payments of C$50K for Q3 2025 and C$164K for YTD 2025.
• A former employee related to a member of the executive management team received approximately $0 in salary and benefits during Q3 2025 and $99K during YTD 2025.

Stakeholder Impact

• Shareholders are positively impacted by the significant increase in profitability, the authorized share repurchase program, and the strategic focus on high-growth cannabis segments, though potential dilution from future financing remains a risk.
• Employees benefit from the hiring of a new Chief Information and Technology Officer, indicating investment in leadership and technology infrastructure.
• Customers can expect continued product innovation and expansion, particularly with new offerings in the Netherlands and a focus on product quality in Canada.
• Creditors benefit from amended credit agreements and new facilities designed to improve financial flexibility and covenant compliance, reducing default risk.
• The privatization of certain Produce segment assets impacts former employees and operations associated with those assets, while the remaining Produce segment continues to operate under a supply agreement with Vanguard Food LP.

Next Steps

• Expand cultivation capacity in the Delta 2 greenhouse to yield an incremental 40 metric tons of annualized cannabis production, increasing capacity by approximately 33%.
• Complete construction of Leli Holland's Phase II facility in Groningen, expected to be operational in Q1 2026 and quintuple total annualized production capacity to approximately 10,000 kilograms.
• Launch additional products for coffeeshops in the Netherlands during Q4 2025.
• If awarded a Texas medicinal marijuana license (expected December 1, 2025), work with the listing authority to structure an acceptable ownership structure and comply with all applicable regulatory requirements.

Key Dates

Recommendation

The company has demonstrated a remarkable turnaround in profitability, with net income and Adjusted EBITDA showing substantial year-over-year growth. This is primarily driven by the strong performance of its Canadian and newly operational Netherlands cannabis segments, which are benefiting from international expansion and strategic market positioning. The divestiture of certain produce assets has streamlined operations and generated a significant gain. While the U.S. CBD market remains challenging, the company's focus on higher-margin international cannabis markets and operational efficiencies is paying off. The authorized share repurchase program signals management's confidence in the company's valuation. The planned expansion of cannabis cultivation capacity and the upcoming Phase II facility in the Netherlands further support future growth. The remediation of internal control weaknesses also addresses a prior concern. Given the strong financial results, strategic clarity, and growth initiatives, the stock presents a compelling investment opportunity.

Keywords

Cannabis, Hemp, CBD, Produce, Greenhouse, Pure Sunfarms, Leli Holland, Balanced Health Botanicals, Clean Energy, SEC Filing, Quarterly Report, Financial Results, Adjusted EBITDA, International Sales, Share Repurchase, Corporate Governance, Risk Management, Agricultural Technology