Village Farms Posts Record $55 Million Cannabis Revenue on Exports

Village Farms International (NASDAQ:VFF) reported record cannabis revenue of $55 million for the third quarter, a 3% increase, as international exports rose 75% year over year to $20.8 million — matching the previous quarter's record and offsetting a Canadian trim market in which spot prices fell roughly 75%.

Consolidated net sales reached $66.9 million, up 5% from the second quarter and roughly flat against a year earlier. Net income from continuing operations came in at $10 million, or $0.08 per share, against $10.8 million, or $0.09 per share, a year ago. Adjusted EBITDA of $18.2 million rose 18% sequentially but declined from $20.7 million a year earlier. Consolidated gross margin fell to 44% from 48%.

What held the quarter together?

International demand continued to outpace available supply in Europe, executives said. President and CEO Michael DeGiglio said the company had held its pricing on EU GMP-compliant cannabis despite pressure reported elsewhere in the European market.

"We have not lowered pricing for our EU GMP-compliant product, and our pricing outlook remains favorable," DeGiglio said. Chief Operating Officer Ann Gillin Lefever added that demand for compliant product remains backed by a large backlog.

The average net selling price for international exports fell 9% year over year, which DeGiglio attributed to a shift toward bulk flower rather than price cuts. He noted that European pricing pressure has concentrated in product grown outside EU GMP conditions and certified later in the supply chain, and that regulators in the U.K. and Germany are tightening those conversion pathways — a change that could favor producers compliant at the source. That benefit, however, remains conditional on regulation the company does not control.

At home, the weaker spot market for trim drove the cannabis gross margin down to 48% from 55%, according to Interim Chief Financial Officer Hamid Shekarchi. The company expects trim conditions to begin normalizing in the fourth quarter, based on October orders and new supply agreements at higher contracted prices. That expectation rests on early order data, not a full quarter of results.

How are the Canadian and Dutch expansions progressing?

Canadian branded sales fell 6% year over year to $25.3 million on lower value-brand volumes, even as the channel's average net selling price rose 6%. Non-branded Canadian sales dropped to $3.3 million from $7.3 million, primarily on lower trim sales. DeGiglio acknowledged the company has not met its goal of growing Canadian sales in line with the market at a mid-single-digit pace in recent quarters. Most of the initial Delta 2 harvest has been allocated to Canada while the company balances domestic needs against international demand.

• Delta 2 completion: first quarter of 2027, reaching a 40-metric-ton annual run rate by mid-2027.
• Delta 1: the company exercised a contractual right to convert 25% of the greenhouse to cannabis during 2027, adding roughly 700,000 square feet. DeGiglio said no formal conversion decision has been made; if pursued, the area could yield about 50 metric tons annually.
• Netherlands: third-quarter sales fell sequentially to $2.8 million as propagation increased for the Groningen expansion. The facility is fully planted and should support stronger growth in the fourth quarter and through 2027.

What is the Texas plan?

DeGiglio said Village Farms is mobilizing to prepare its 30-acre, 1.3-million-square-foot greenhouse in Monahans, Texas, for cannabis production, potentially bringing it online within 12 months in phases. The company holds no Texas cannabis license. DeGiglio framed possible changes to the state's medical cannabis program — including additional licenses — as an expectation, not an announcement that access had been secured.

The U.S. Balanced Health Botanicals subsidiary is pursuing potential participation in a federal pilot program for CBD products, but management awaits clarity on a pending federal hemp ban before assessing the opportunity further.

What could unsettle the fourth quarter?

The company ended the quarter with approximately $80 million in cash, $39 million in long-term debt and an undrawn $10 million revolver, on $9.5 million of operating cash flow. Year-to-date capital spending totaled $17.3 million, mostly for Delta 2 and Groningen, both substantially complete.

Shekarchi cautioned that Delta 1 produce sales typically decline in the fourth quarter — they fell about 60% last year — and that European orders slowed over last year's holidays, causing a sequential drop in international revenue. He said the company had not observed material changes in international customer behavior in October, but similar seasonality could recur.

The export engine is running; the fourth quarter will test whether it outruns seasonal drag.