Village Farms International Reports First Quarter 2022 Financial Results

• Consolidated Revenue Increased 34% Year-Over-Year to $70.2 Million; Net Loss of $6.5 Million Primarily Due to Inflationary Pressures on Produce Business
• Canadian Cannabis Business Contributes Record 14^th Consecutive Quarter of Positive Adjusted EBITDA
• Pure Sunfarms Remains Top-Selling Dried Flower Brand in Ontario, Alberta, and British Columbia
• Integrations of Balanced Health Botanicals and Rose Lifescience Proceeding Well with Each Contributing Positive Adjusted EBITDA

Village Farms International, Inc. (“Village Farms” or the “Company”) (NASDAQ: VFF) (TSX: VFF) announced its financial results for the first quarter ended March 31, 2022.  All figures are in U.S. dollars unless otherwise indicated.

“The first quarter of 2022 once again demonstrated the strength and earnings power of both our Canadian and U.S. Cannabis businesses,” said Michael DeGiglio, Chief Executive Officer, Village Farms International.  “In what is a typically soft season for retail sales in Canada, both Pure Sunfarms and Rose gained share in their respective focus markets, and delivered a 14^th consecutive quarter of positive adjusted EBITDA for Canadian Cannabis.  Pure Sunfarms’ products continue to resonate with consumers, as our continued focus on quality, innovation, and new product launches strengthen what has become one of the most respected and trusted brands in the Canadian market.  In Quebec, we estimate that Rose is now a top-three Licensed Producer by sales following strong market share gains since its retail launch early last year. Rose is well-positioned to continue this momentum throughout 2022, further benefitting from the many opportunities for collaboration with Pure Sunfarms. With our Canadian Cannabis business continuing to grow sales and market share domestically, we look forward to capitalizing on Pure Sunfarms’ recent EU GMP certification to commence exportation to international markets.”

“Our U.S. Cannabis segment delivered a solid performance, highlighted by a strong gross margin and positive adjusted EBITDA contribution. The integration of Balanced Health into the Village Farms family is progressing very well and confirms our belief in both the potential within the existing cannabinoid business and the significant near- and long-term opportunities in both the low-THC and high-THC product categories.”

“As our Cannabis operations continued to deliver strong growth and profitability, Village Farms Fresh (Produce) faced one of the most difficult macro environments in its history.  Strong revenue growth was more than offset by the inflationary impact of freight, labor, fertilizer, packaging and other cost increases.  An industry-wide supply imbalance limited the producer’s ability to pass along pricing to customers. We are evaluating new initiatives, including marketing partnerships to build more scale, spread costs, and diversify product offerings.  However, even in the currently negative EBITDA environment, we maintain the highest conviction that our U.S. cultivation footprint is a powerhouse opportunity for legal recreational cannabis when we can participate.”

Mr. DeGiglio concluded, “Consumer takeaway trends during the first quarter further validated our brand and cultivation strategies. We expect continued momentum throughout 2022 and beyond as each of our cannabis businesses continues to launch innovative new products that address evolving consumer demand. We remain focused on seizing opportunities to continue to deliver top-tier profitability and market share in the high-growth global cannabis market.”

• Consolidated sales increased 34% year-over-year to $70.2 million from $52.4 million;
• Consolidated net loss was ($6.5 million), or ($0.07) per share, compared with ($7.4 million), or ($0.10) per share; and,
• Consolidated adjusted EBITDA was negative ($6.1 million) compared with positive adjusted EBITDA of $0.4 million.

• Total Cannabis segment net sales increased 65% year-over-year to $28.8 million, representing 41% of total Village Farms sales; and,
• Total Cannabis segment adjusted EBITDA increased 9% year-over-year to $2.7 million.

Canadian Cannabis (Pure Sunfarms and Rose LifeScience) Financial Summary for the Three Months Ended March 31, 2022 and March 31, 2021

• Canadian Cannabis net sales increased 25% year-over-growth with a gross margin of 34% (within the Company’s stated target range) and adjusted EBITDA of $2.1 million (C$2.7 million).

U.S. Cannabis (Balanced Health Botanicals and VF Hemp)

• U.S. Cannabis net sales were $7.0 million, with a gross margin of 67% and adjusted EBITDA of $0.6 million. There are no year-over-year comparisons since Balanced Health Botanicals was acquired by Village Farms on August 16, 2021.

• Sales increased 19% to $41.4 million, and adjusted EBITDA was negative ($6.2 million).

• Pure Sunfarms received EU GMP certification for its 1.1 million square foot Delta 3 cannabis production facility, permitting Pure Sunfarms to export EU GMP-certified medical cannabis to importers and distributors in international markets that require EU GMP certification;
• Pure Sunfarms launched 29 new SKUs across four product categories and remained the top-selling brand of dried flower products in key markets of Ontario, Alberta and British Columbia*;
• Based on third-party data, it is estimated Rose LifeScience is a top-three Licensed Producer in Quebec; and,
• The integrations of Balanced Health Botanicals (acquired in the third quarter of 2021) and Rose LifeScience (acquired in the fourth quarter of 2021) are proceeding well. Each company expanded its product offerings in the first quarter of 2022:
  • Balanced Health’s brand, CBDistillery, launched its hemp extract in more than 1,000 Pet Smart stores in the U.S. through its partnership with leading pet supplement brand, Zesty Paws; and,
  • Rose launched 14 new cannabis SKUs and shipments of own brands increased 85% compared to the fourth quarter of 2021.

_{*Based on OCS market data for the quarter ended March 31, 2022 and sales information provided by Buddi retail store data from over 300 retailers across Alberta and British Columbia as of March 31, 2022.}

The Company’s financial statements for the three months ended March 31, 2022, as well as the comparative periods for 2021, have been prepared and presented under the United States Generally Accepted Accounting Principals (“GAAP”). Balanced Health was acquired on August 16, 2021 and their results are presented in the operations of our consolidated wholly-owned subsidiaries for the three months ended March 31, 2022. The Company acquired 70% of Rose LifeScience on November 15, 2021 and their results are presented in the operations of our consolidated wholly-owned subsidiaries and the minority interest is presented in Net Income (Loss) Attributable to Non-controlling Interests, Net of Tax for the three months ended March 31, 2022.

(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)

We caution that our results of operations for the three months ended March 31, 2022 and 2021 may not be indicative of our future performance, particularly in light of the ongoing COVID-19 pandemic. We are currently unable to assess the ultimate impact of the COVID-19 pandemic on our business and our results of operations for future periods.

(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)