VFF

Good morning, ladies and gentlemen. Welcome to Village Farms International's first quarter 2026 financial results conference call. This morning, Village Farms issued a news release reporting its financial results for the first quarter ended March 31st, 2026. That news release, along with the company's financial statements, are available on the company's website at villagefarms.com under the Investors heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. Details of how to access the replays are available in today's news release. Before we begin, let me remind you that forward-looking statements may be made today during or after the formal part of this conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control.

These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks, uncertainties is contained in the company's various securities filings with the SEC and Canadian regulators, including its Form 10-K MD&A for the year ended December 31st, 2025, and 10-Q for the quarter ended March 31st, 2026, which will be available on EDGAR and SEDAR+. These forward-looking statements are made as of today's date and, except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio.

Thank you, Lateef. Good morning, thank you for joining us for our first quarter results call. With me today are Steve Ruffini, our Chief Financial Officer, and Ann Gillin Lefever, our Chief Operating Officer, and Sam Gibbons, our Senior Vice President of Corporate Affairs. I will begin with my customary view of our highlights from the quarter, then Steve will review the financials in more detail before I provide some last closing comments. Before we begin, though, a quick note to everyone on some changes to our SEC segment financial reporting after effectively becoming a pure-play cannabis company following the completion of our produce transaction last year. We're all in on global cannabis, one global company with purpose-built production facilities that serve our commercial sales channels. Accordingly, we have now realigned our operating structure and financial disclosures to reflect a singular, unified cannabis business with a single Cannabis Segment.

The change reflects the true nature and focus of our business today. Steve will address the new reporting in more detail momentarily. Let's move to our first quarter performance which reflects a strong start to the fiscal 2026 year for Village Farms. We are pleased to begin this year with continued momentum in our largest markets. We generated total net sales growth of 27% year-over-year, driven by our international business and continued leadership in Canada. In terms of sequential performance from Q4, revenue was up roughly 2%, which was in line with our expectations given our capacity constraints ahead of our expansion projects coming online during the second half of this year.

Consolidated adjusted EBITDA growth of 118% year-over-year significantly outpaced sales. We delivered a fourth consecutive quarter of positive net income, clearly demonstrating the sustainable profitability of our expanding global cannabis enterprise. The continued strength of our international medical business was once again a powerful driver of growth and profitability, with international export sales increasing 171% year-over-year and 60% sequentially to a record of nearly $15 million. I will note here, we achieved this record net of the orders initially expected to ship in Q4 that slipped into Q1, which we mentioned on our last call. The German market continues to stand out in terms of its contribution to our international sales.

We continue to have three of the top five leading cultivars in Germany and four of the top 10 through our distribution partners, we're capturing increasing share of the market, which continues to grow after the temporary decline we observed during fourth quarter. We mentioned on last quarter's earnings call that we anticipated returning to sequential growth in Germany during Q1, we did. Outside of Germany, we're experiencing steady performance in our other international markets, we continue to expect that we will enter multiple new jurisdictions during the remainder of the year. Our team has also begun to explore opportunities outside of flower for us to potentially export other form factors to our growing list of international partners.

I'll note that demand from our international customers continues to increase and that pricing for our EU GMP-compliant flower is holding steady. We are seeing price compression in many other parts of the supply chain. There have been several reports recently about declining pharmacy sales over the past year. While price normalization is a known trend in early-stage cannabis markets, key price differentiators are emerging in international markets that result from our ability to consistently deliver compliant product at industrial scale. We have good visibility and confidence that our pricing in Germany will remain relatively stable for the foreseeable future, which should give the investment community greater confidence in the continuing strength of profitability and our expanded capacity comes online and contributes to increased sales during the back half of this year.

Demand for our products continues to increase, and our partners are increasingly seeking our EU GMP-compliant product in the wake of stricter regulations and enforcement that are restricting the flow of non-compliant product in several jurisdictions. In response to increasing demand, we recently completed facility upgrades at our production campus in British Columbia, which significantly expanded our total production capacity for EU GMP-compliant cannabis. As a result, we now believe we operate the world’s largest EU GMP-certified cannabis facility, which further strengthens this competitive advantage to our business. Before I shift my discussion to operating highlights from other regions, I wanna make clear that our success in international markets did not happen overnight. Delivering consistent EU GMP-compliant product is a complex process requiring multiple disciplines to work perfectly.

Our team had the foresight to pursue EU GMP certification six years ago, and it was quite difficult to achieve, and it’s even harder to recertify, which we have also done. The investment is costly and time-consuming, and the learning curve to capably service these markets from an infrastructure, compliance, quality assurance, stability, product attributes, and supply chain excellence perspective is very steep. Not to mention the fact that our size, scale, and efficiency of operations are not easily duplicated. There has been speculation about the potential for U.S. cannabis exports following the recent order to reschedule medical cannabis. I will be clear that we are thrilled with the final order because we have built a compliant supply chain for medical cannabis that can succeed or be replicated with our assets in the United States.

In fact, if you extend the speculation of potential outcomes of the final order, we would be even more thrilled by continued progression towards free trade and open borders with Canada for imports of medical cannabis in the U.S. market in the future. Our viewpoint has always been that to be successful in plant-based consumer goods, you must simultaneously be a low-cost producer while delivering exceptional quality and value for customers. While we don’t disclose our cost of production, we can confidently say that we are one of the low-cost advanced greenhouse producers of cannabis in the world, and we work every day to continue driving our costs lower, and we continue to see opportunities to improve our cost of production.

I’ll now shift to review of our Q1 performance in the Canadian market, where we continue to benefit from the success of our shift towards higher-margin products last year. Branded sales were up about 5% year-over-year, with sequential performance in line with our expectations given seasonal and ongoing capacity constraints that we have discussed. I would also like to take the opportunity to acknowledge that while some of our competitors have shifted their focus away from the branded sales channel in Canada, we remain committed to servicing our Canadian customers. We’re very proud of the consumer and brand loyalty we developed in Canada over the past eight years, and we’ve been especially pleased to witness recent improvements of our performance in several of our targeted sales channel and product categories.

We continue to maintain a top five overall share position in Canada’s adult-use market and hold the number one market share position in dry flower, a seat we expect to occupy for the foreseeable future based on our current view of the competitive landscape. Notably, our flagship Pure Sunfarms brand achieved its 15th consecutive month of market share gains in the flower category during the month of April, and our Fraser Valley brand is also making similar strides in addition to several other wins for our team with recent product launches in the vape and infused pre-roll categories. I also think it’s important to point out that our team has achieved all of this organically with a strict focus on optimizing profitability and enhancing our balance sheet strength as compared to many of our competitors.

In March, we began planting the first half of our additional capacity at our Delta 2 greenhouse. We are realizing the benefits of having done this before and are thrilled with what we’re seeing so far from this first planting. Our first harvest is expected to occur the week of May 18th, and we expect initial contributions in sales in late second quarter or early Q3. As a reminder, the Delta 2 expansion will ramp up its expected 40 metric tons of annual capacity by mid-next year, which represents a 33% increase in our British Columbia cannabis production compared to fiscal year 2025, and we will continue to expect that we will harvest an incremental 15 metric tons of production from the expansion this year. All of this will drive economies of scale, cost efficiencies, and improve flexibility to meet demand across our various sales channels.

Turning now to our recreational cannabis business in the Netherlands, where I'll note that we believe the minor sequential sales decline we observe from our Drachten facility reflects typical Dutch consumer behaviors and seasonality following the holiday season. We recently hosted a ribbon-cutting ceremony for the celebration of the completion of construction of our phase II facility in Groningen on April 24th. We hope you were all able to see the video we shared on social media channels last week celebrating this important milestone. We're incredibly proud of this facility. We believe it to be one of the most advanced precision agricultural facilities, not just in the Netherlands, but potentially the world.

Our asset management and facilities development teams have been designing, building, and operating cultivation assets across the world for over 30 years, and the environmental HVAC and notably odor controls in this facility are truly next level. As a reminder to those of you who may not be aware, the Groningen facility has access to 3x our current electricity needs, and the building was designed to accommodate a second story if needed for expansion in the future. While we have previously communicated that we expected to have our first plants in the facility in late March, we are still awaiting final certification and regulatory approval to commence full operations, which we expect will occur over the next couple weeks.

We have received both written and verbal communication that formal approval documentation is forthcoming in May. We are looking forward to commencing all operations in Groningen before the end of Q2. I will also add that we don't expect the Netherlands delay to impact our sales outlet for the full year given the quality of plants we are seeing in our Delta 2 expansion in Canada. In summary, our first quarter was one of disciplined execution and performance that was in line with our expectations. We're experiencing no meaningful changes with respect to our medium and long-term outlook for the business. We believe we have one of the most attractive cannabis growth platforms in the world. We're looking forward to showcasing the combined strengths of our expanding footprint as the year progresses.

We'll start the year on strong footing and what we believe is a clear line of sight to continued profitable growth for the remainder of this year and through 2027. This concludes my introductory remarks. Now I'll turn the call over to Steve. Steve?

Thanks, Mike. With the start of a new fiscal year, as Mike noted earlier, the company realigned its global operating model enough as required its financial reporting. The company's operations are now organized, managed, and classified into one reportable segment, reflecting our global cannabis business. The company's remaining operations are now classified as other. We continue to report our consolidated segmented results in U.S. dollars and financial results for comparative prior periods have been adjusted accordingly. Starting this quarter, we are allocating costs for shared corporate services to the respective operating units. Most of these costs were previously recorded within our corporate unit. I'll start with a review of our consolidated Q1 results. Consolidated net sales increased 27% to $50.2 million, driven by the continued strong performance in our largest cannabis markets, as Mike discussed.

Consolidated net income from continuing operations improved to $2.7 million or $0.03 per share, compared with a net loss of $2.1 million or 2.2% per share loss in Q1 of last year. Consolidated adjusted EBITDA from continuing operations increased 118% to $9.9 million from $4.5 million in Q1 of last year, resulting in an adjusted EBITDA margin of 20%, up from 11.4% in Q1 of last year. As I mentioned last quarter, in 2025, we accrued Canadian corporate income taxes of CAD 16.4 million or $12.1 million, which was paid in February of this year, along with monthly prepayments towards 2026 Canadian corporate income tax.

In prior years, we did not pay income tax due to carryover tax losses, all of which we have now utilized. The impact of the large Canadian corporate income taxes in Q1 resulted in negative cash flow from operations of $16.8 million. Cash flow from operations was also impacted by non-cash changes in working capital, which reflects some investments made during the quarter to support our domestic business in Canada. I'll note that we expect to return to positive consolidated cash flow from operations during Q2 and through the remainder of this year. Turning now to our cannabis segment. Net sales were $49.9 million or a 27% increase versus Q1 of last year.

The year-over-year improvement was driven by the strong performance in our international medical exports, which increased 171% over Q1 of last year and 60% sequentially, predominantly from Village Farms taking larger share of Germany's growing market with continued stable performance in other markets, as well as a full quarter of performance from our Drachten facility in the Netherlands compared to a partial quarter last year. As Mike mentioned, we've experienced a slight delay in the commencement of operations in our phase II facility in the Netherlands, but continue to expect this facility will contribute to stronger sales and adjusted EBITDA performance as it continues to ramp during the second half of this year.

Cannabis gross margin was 43%, up from 39% in Q1 of last year, reflecting higher international export sales as well as a larger contribution from our Netherlands operations and benefits from our strategic shift toward higher margins products in Canada. This reflects another consecutive quarter of gross margin performance above our targeted 30%-40% range. SG&A as a percentage of sales was 30% level with Q1 of last year, reflecting the continued efficiency across our cannabis operations, offset by the ramp-up staffing to support the launch of our phase II facility in the Netherlands. Q1 adjusted EBITDA from continuing operations for cannabis improved 48% to $10.2 million from $6.9 million in Q1 of last year, resulting in an adjusted EBITDA margin of 20.5% of sales.

Q1 cash flow from cannabis operations was negative $11.8 million compared to positive $2.9 million. Excluding the impact of our tax payments I mentioned a moment ago, cash flow from operations would have been $4.1 million. I'll note that we believe we are the only major Canadian cannabis LP in the position of paying corporate income taxes, which is a testament to the strength of our operating capabilities and strong stewardship of capital on behalf of our shareholders and a sign of a sustainable long-term profitable business platform. As we do each quarter, I will point out that in Q1 we also paid Canadian excise taxes on our retail branded sales of CAD 15.9 million or nearly 40% of gross retail branded sales. Turning to the balance sheet.

We ended Q1 with cash of approximately $56 million, which includes restricted cash of $5 million, in a net cash position of $20 million. With expected strong cash flow from operations throughout the remainder of the year and taking into account the $15 million of income taxes, $9.2 million in capital expenditures, and $6.4 million of share repurchases in Q1, we expect to increase our cash balance from positive cash flow from operations through the remainder of this year. Our total debt at the end of Q1 was $36 million. We remain very comfortable with our debt level. During the quarter, we favorably amended and extended our loan agreement with Farm Credit Canada with an improved interest rate and extended the maturity date by nearly four years to February 2031. Finally, we continued to be active with our share repurchase program.

As a reminder, our board approved up to a $10 million buyback, but under Canadian statute, we could purchase up to 5% of our shares in a 12-month period. During Q1, we purchased over 2 million shares at an aggregate cost of $6.4 million, and during this second quarter, we completed the board-approved repurchase authorization in its entirety. Our board and management will continue to evaluate capital allocation decisions on a quarterly basis, and we expect to maintain a balanced approach to capital allocation to drive returns to shareholders. I will now turn the call back to Mike for some closing comments.

Thanks, Steve. In closing, our first quarter results again demonstrated the strength, durability, and scalability of our operating model as well as the world-class talent, expertise, and execution from our impressive global team. We believe we are positioned as one of the most attractive cannabis growth platforms internationally with a clear path to continued profitable growth in our existing markets. Before we open up the call to questions, I'd like to make some final comments regarding our perspective on rescheduling in the U.S. and how we are thinking about evaluating the many growth opportunities we see in front of us. As I mentioned earlier, we are thrilled with the rescheduling process, and the contents of the final order were more favorable than we were anticipating. This finally gives us the type of regulatory progress we need to start reevaluating our U.S. strategy.

A lot still remains unclear with how rescheduling is going to play out at the federal level, and a lot of uncertainty remains in the state of Texas. We are going to remain patient. Our interpretation suggests that if we were to obtain a state medical license with DEA approval, we may be able to maintain our Nasdaq listing, which we have both direct oversight and consolidate those financials in the same way we oversee and account for all our businesses. We support this structure for longer shareholder value creation. Without divulging sensitive non-public competitive information on the call, we can share with confidence that based on our ongoing conversations, we are emerging as a partner of choice and a potential acquirer of choice in the global cannabis industry. That also includes United States.

There are many operators of all sizes across the world who would love to become part of our proven and profitable global platforms, and there is an abundance of opportunity for us to consider. Having said that, I would also make it abundantly clear that we are not going to do deals just for the sake of doing deals. We believe good deals come from those who are prepared, patient, and selective. I remain one of our largest shareholders, and I often say that the best deals sometimes are the ones you don't make. We will be extremely cautious, prudent, and highly disciplined with respect to any strategic M&A activity that we consider, and we will only pursue opportunities that are strategically compelling, financially attractive, and supportive of long-term shareholder value creation.

This should not come as a surprise to anyone in the investment community who knows us well, but for those who don't, there's no greater way for me to illustrate our commitment to a disciplined, shareholder-friendly approach to M&A than to appoint our long-term CFO, Steve Ruffini, to lead this important function for us. Steve has been our CFO for over 17 years and has been instrumental in evolution to world leader in cannabinoid-based consumer packaged goods. He is invaluable and a trusted advisor to our board of directors and management team. He's also a large shareholder. Steve, on behalf of everyone at Village Farms, we thank you for your leadership in these past 17 years and for your strong stewardship of capital for shareholders.

We are honored for you that you've agreed to delay your retirement to step in this role, and we are all excited to continue working together. Thank you all. Operator, we'll take any calls.

As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, please standby. Our first question comes from the line of Aaron Grey of AGP. Your line is open, Aaron.

Hi. Good morning. Thank you very much for the questions. First I just want to talk about some of the commentary you made for international and some of the pricing dynamics with your outlook for 2026 as you bring additional capacity online from Delta 2 expansion. Can you provide, you know, some detail in terms of the confidence, where you're getting the confidence of your own price stability, you know, versus others calling out pricing pressure? Could you provide some color in terms of the degree of margin difference between Canada and the international exports, if you could just remind us of that? Thank you.

Sure. I'm not going to give you any color on the margin. That's, we keep that internal. Regarding price compression, as I said on the call, for our, specifically our EU GMP certified product, we have not seen really any margin compression. That's being driven, as I said, by our product and meeting all the attributes that are required. We've seen the compression for others tied to GACP, greenwashing, as I call it, the magic wand to try to get a compliant product. That's where that compression is coming from. For us, we feel, with our product specifically, as I said, Village Farms, we don't foresee much compression.

Okay, great. Appreciate that color. Steve, congrats on your time as CFO and best of luck in your next venture leading M&A. Next question on that front. You alluded to some of the opportunities that are coming up both in the U.S. with rescheduling as well as international, wanting to take a prudent approach. You know, how best to think about how aggressive you guys potentially get in acquisitions, you know, given you talked about potential exports in the U.S., potentially exporting from your Delta facility into the U.S., just given some of the pretty notable unknowns and what that could mean towards your current footprint and what you would need in addition.

How do we think about how aggressive you might get in M&A and what would be additive to your portfolio amid different potential outcomes of what reform could mean? Thank you.

Well, internally, we keep focusing on what we know is possible with the new order, not what is not possible, because the clarity will really probably start showing up in the next, between the next two to six months, and that's why we need to be patient. I've said all along that we do not want to make decisions that involve capital without knowing absolutely what the regulations are. You know, you learn from your mistakes, and we've always had that, but I'll just be very candid and upfront. When we acquired the CBD business some years ago, when it was rescheduled in 2017 under President Trump's descheduling order under the Farm Bill, it was very clear to us that CBD and other cannabinoids from hemp made it.

Well, when you see what's happening today, they're trying to put the toothpaste back in the tube, and here we sit and wait for November for some new clarity on what the future is. That's an example of not deploying capital without knowing for sure. We're not being prudent and patient because we're lazy. We want to know what the ground rules are before we move forward, and I think that clarity will be much clearer in three to six months. We predicted that once the executive order was final, there would be lawsuits, and as you know, SAM filed, and it's going to have to go through a number of gyrations of lawsuits. The DEA is starting a review at the end of June through mid-July. We're going to wait to see what the outcome is.

Where does the DEA pencil in support or non-support? That just gives you an example, Aaron, of why we need to be prudent. The other things is, you know, valuations. Sometimes I just scratch my head a lot on the valuations other companies are willing to pay for certain assets. There's a huge discrepancy between public company valuations and private company valuations. That's another example of not, you know, going after a shiny object and just paying, overpaying for it. I hope that gives you some color on that.

Absolutely. Appreciate the helpful detail there. I'll go and jump back in the queue.

Thank you. Next up, we have Federico Gomes of ATB Cormark Capital Markets. Federico, your line is open.

Morning, thanks for the questions here and congrats on a great quarter. Just wanna follow up on the on Germany. You know, you mentioned you're capturing increasing share of that market. You continue to see a stable pricing environment for your products specifically. Can you help us understand, you know, how are you being able to capture that share and keep that pricing stable? Is it related to the high quality of your product, maybe, that competitors, you know, can't compete at your price level or distribution relationships, or is it your brands? You know, if you just could provide more color there. Thank you.

Okay, I'll start it off, and then I'm gonna give Ann some time on that. As I said in my remarks, you know, it's been a six-year journey here. In order to, our focus has always been the high road. We have done nothing but EU GMP from the start. We didn't try to cut corners at all. We never did. As I said, taking GACP or non-EU GMP product and washing it through a facility to try to get compliant, you've seen how that sort of backfired with all the tens of millions of dollars that went into Portugal, even in Malta in the early years by so many companies spending money to circumvent strict EU GMP. Those products are the ones that are compressing down.

The market, we've seen regulators now providing very strict enforcement, not only in those other countries that are trying to supply Northern Europe, but in Canada as well. You know, that was our decision, and it was the right decision, and we're continuing to expand. Our campus is almost fully EU GMP compliant for the whole facility in British Columbia, which is an incredible achievement. Those other attributes I mentioned, this is almost pharmaceutical grade. There is no more stringent requirement than to meet these requirements, as I said, from stability testing that can take a year per strain to get to. Being able to actually execute and deliver products on time.

Without getting too deep into those key attributes that we've been able to achieve, that's really what's driving it. I hope that answers your question, Federico. Ann, do you wanna give some color?

There's not much to add. I think Mike covered it. The only thing I would say is wrap it all up into we have invested in our supply chain and not in just in the last year, but over multiple years. That gets us scale, consistency, and price. Layer on that, as you know, Federico, our belief in quality and leading with strains of high quality, which we try to do throughout the world. That just feeds into this supply chain as well.

Thank you. I appreciate that. The second question on the Netherlands, I guess you mentioned some seasonality in that market, but could you talk about, you know, the supply-demand dynamics there? Any, any updates? You know, has it changed? I think you mentioned in the past that the market was a little bit supply constrained. Is that still the case? As well as any commentary on pricing in the Netherlands. Thank you.

Yeah, go ahead.

Sure. I think all supply, all competitors are now fully up and running, supply has improved. That dynamic then plays out with some pricing softness across the category, which we did anticipate as we modeled the market. Nothing out of spec to what we anticipated.

Great. Thank you very much.

Thank you.

Thank you. Once again, to ask a question, please press star one one on your telephone. Our next question comes from the line of Pablo Zuanic of Zuanic & Associates. Your line is open, Pablo.

Hi, good morning. This is Milton on for Pablo. To start, regarding the Netherlands, could there be any changes to the pilot program after this summer's review? Please comment on market conditions in your pilot towns or the market size, growth trends, competitive dynamics, and pricing.

Well, I'll start off and then hand it over to Ann. My gut feeling is it can only be more positive after this one-year review, due to the fact that what we're hearing from the regulators is they're very satisfied. The amount of infractions are minimal. There's no one selling to the illicit trade. I think it's gonna be a positive report, based on the first year out. Doris to market, Ann?

Yeah.

You want to add some color?

Good morning, Milton. I'm not sure about the second part of your question. I might answer the first. You mentioned about dynamics in our specific market. I just maybe a pause here to say we sell throughout the Netherlands. We're not restricted to the market we produce in. It's a little bit of a different structure. If I missed the point of that question, feel free to clarify.

Just sort of any expansion on the competitive dynamics in your specific areas? Obviously, if you're throughout the Netherlands, which you are operating in, just the growth trends and market conditions you've been seeing? Obviously, you answered Federico, but any expansion would be helpful.

Well, I mean, it's a finite market, there's, as you know, 590 coffee shops in the Netherlands. About 80 are in this, first phase legalization. We sell almost all 80, maybe 75 of the 80 throughout the Netherlands, and those municipalities are scattered around the Netherlands. At this point, there is no indication that there will be added municipalities at the near future. That could come, at this point it's pretty finite. You have 10 license holders and about 80 of the participating coffee shops involved in it. As far as Ann touched on, I mean, when we did our model out, we modeled it out over four years and like any other market, there would be compression at that time.

I'll just illustrate that what we referred in the Netherlands is not really stores or dispensaries. These are coffee shops that have more of a lounge type of environment, and the government wants to continue that. Most municipalities do not want to move to a dispensary format, but keep it as a social, and combined with being able to purchase cannabis. Many of our consumers there buy daily. They don't buy, in fact, our biggest sales are 1 gram flower package, which of course, you know, is more expensive to produce, but that's what the consumers want. They like coming in every day and buying. Some of them or most of them stay in the coffee shop and others of course, leave.

Milton, the only thing I would just add in terms of your question around expansion and growth is we are seeing, and faster than we saw in other markets, we're seeing an expansion into other form factors, and that would be logical given that there already was a existing market in place. The consumer is sophisticated and we're getting great feedback from the coffee shop partners that we sell into and the consumer as to how our products are doing.

Thank you for that added color on the consumer behavior. Just one more follow-up on Germany. Assuming MSOs are allowed to export to Germany, do you believe they can be cost competitive?

You know, I don't wanna assume they can be or cannot be. I think, I'd rather the way we look at it is we know how difficult it is to scale up to that size to do it, and I'm not saying they couldn't do it. It's gonna take time. The regulatory process, you know, if the DEA allows exports, every single shipment will have to have DEA approval. There's a lot that's gonna go into it. I would just say that like us, we would look at I think you should look at what your cost of production is going to be further out, not just where it is today.

Milt, I would just add that Mike was pretty clear. We believe we're the world leader right now in cost of production, and we're not stopping at the current cost of production.

Amazing. Congratulations on the successful quarter. Thank you. That's all for us.

Thank you.

Thank you. As a reminder to ask a question, please press star one one on your telephone. That's star one one on your telephone to ask a question. I would now like to turn the conference back.

Okay, operator.

Oh, I'm sorry.

Yeah, I think that's it then, right?

Yes, sir. I would like to turn the call back over to Michael DeGiglio for closing remarks. Go ahead, sir.

All right. Thanks, operator. Thank you everyone for listening today. We look forward to reporting on the second quarter in August. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, ladies and gentlemen. Welcome to Village Farms International's Fourth Quarter and Year-End 2025 Financial Results Conference Call. This morning, Village Farms issued a news release reporting its financial results for the fourth quarter and year ended December 31, 2025. That news release, along with the company's financial statements are available on the company's website at villagefarms.com under the Investors heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay both by telephone and via the Internet, beginning approximately 1 hour following completion of the call. Details of how to access the replays are available in today's news release. Before we begin, let me remind you that forward-looking statements may be made today during or after the formal part of this conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks and uncertainties is contained in the company's various securities filings with the SEC and Canadian regulators, including its Form 10-K, MD&A for the year ended December 31, 2025, and which will be available on EDGAR and SEDAR+. These forward-looking statements are made as of today's date and except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio.

Thank you, Liz. Good morning, everyone, and thank you for joining us. With me today are Steve Ruffini, our Chief Financial Officer; and Gilan Lefever, our Chief Operating Officer; and Sam Gibbons, our Senior Vice President of Corporate Affairs. So I'm very excited to report our 2025 results, and I'll begin with a review of highlights for the full year and the fourth quarter. Then I'll turn the call over to Steve for a review of the financials before some last closing remarks. Our fourth quarter results again delivered strong profitability, gross margin and cash flow from operations, which contributed to record levels of performance for each of these metrics in fiscal year 2025. It was also a year that reflected the accumulation of many years of hard work and long-term strategic planning that has prepared us to capitalize on many of the catalysts that are now unlocking value for our stakeholders. Not only did we deliver record profitability and cash flow generation in 2025, but we did so with step function growth across several key metrics compared to 2024. We grew our global cannabis sales by 17% year-over-year with just a partial year of contributions from outstanding Netherlands business and international export sales increased more than sixfold as we continue to benefit from our leadership position as 1 of the world's largest EU GMP-certified cannabis operators. This resulted in consolidated and record consolidated performance, including net income from continuing operations of $21 million or $0.19 per share. a $49 million improvement compared to the prior year. Adjusted EBITDA from continuing operations of $50 million, another improvement of $48 million. and cash flow from continuing operations of $58 million, an improvement of $44 million compared to 2024. Our full year performance is a result of solid execution against our long-term plan and a strategy focused on improving margin performance, profitability and cash generation to enable additional growth investments across our platform. Those of you who follow us the longest know that we started with a crawl-walk-run approach to scaling out of cannabis business. And that's always been our view that we don't need to be first-mover advantage to build durable, defensible business models in our plant-based consumer goods. But what we do need is vision, patience, discipline and excellence in asset development operations and commercial activities, coupled with world-class people capable of leading us forward. We believe we demonstrated all of these qualities since we expanded the cannabis in 2018 and particularly in 2025. Since 2018, we've taken a methodical approach to scaling our capacity and capabilities in Canada, including early recognition of the potential power of EU GMP certification which we began pursuing nearly 6 years ago. We've now been EU GMP certified for over 4 years and international customers are increasingly seeking our products as more stringent regulations abroad -- have been restricting routes to market of other operators who can't meet our production and quality standards. The recent financial contribution from our Netherlands business are also making -- we're also making years in the making. We acquired our Netherlands license 5 years ago and have been very patient and prudent with respect to commercializing our operations and aligning our commencement of sales with the launch of the pilot program last April. We've modeled our business in an events to ensure return our investment in under a 4-year time line and our performance in 2025 clearly demonstrates Village Farms strong stewardship of capital on behalf of our shareholders, with positive net income for the year after only 3 quarters of revenue performance. And finally, our transaction this past May to privatize our legacy produce business also reflected many years of hard work and preparation, to achieve confidence that our cannabis business was ready to stand on its own and to structure transactions that enabled us to retain the attractive long-term optionality that we see for our portfolio of advanced greenhouse assets in Canada and Texas. All of these improvement important developments began unlocking value for our stakeholders in 2025 and provide more evidence of the success of our initial crawl, walk, run approach to scaling our operations. And now we believe we're ready to run as 1 of the world's largest and most respected scaled cannabis operators. Before I continue discussion on the fourth quarter, I'd like to, again, take an opportunity to acknowledge all our folks who are enabling our success. At [indiscernible] does take a village, and our people raised the bar considerably last year. Congratulations to all our team members around the world on a tremendous year. Now turning to the fourth quarter, which demonstrates our third consecutive quarter of positive consolidated net income from continuing operations, adjusted EBITDA and cash flow from operations.

Please standby.

Okay. Apologies, we lost connection. I'm not quite sure where we lost it. So I will back up a couple -- 30 seconds or so. And I apologize if I'm repeating certain things that were transmitted Talking about the Netherlands, our recent financial contribution to the Netherlands business are also many -- were many years in the making. We acquired the Netherlands license 5 years ago and have been very patient and prudent with respect to commercializing our operations and aligning our commencement of sales with the launch of our pilot program last April. We've modeled our business in Netherlands to ensure a return on our investment under a 4-year time line. and our performance in 2025 clearly demonstrates Village Farm's strong stewardship of the capital on behalf of our shareholders, with positive net income for the year after only 3 quarters. And finally, our transition this past May to privatize our legacy Produce business also reflected many years of hard work and preparation to achieve confidence that our cannabis business was ready to stand on its own and to secure a transaction that enabled us to retain the attractive long-term optionality that we see for our portfolio of advanced greenhouse assets in Canada and Texas. All of these important developments began unlocking value for our stakeholders in 2025 and provide more evidence of the success of our initial crawl walk run approach to scaling our operations. And now we believe we're ready to run as 1 of the world's largest and most respected scaled cannabis operators. Before I continue to discuss the fourth quarter, I'd like to again take an opportunity to acknowledge all our folks who are who are enabling our success. It truly does take a village and our people raised the bar considerably last year. Congratulations to all our team members around the world on a tremendous year. Now turning to the fourth quarter, which demonstrated our third consecutive quarter of positive consolidated net income from continuing operations, adjusted EBITDA and cash flow from operations and further evidence of our progress to become consistently and sustainably profitable for the long term. We saw year-over-year growth in net sales of 9%, just shy of $50 million. Net income from operations of $2.3 million, adjusted EBITDA of $8.6 million and operating cash flow of $11.4 million. Our Canadian cannabis sales once again led the way where we continue to maintain a top 5 overall market share position and as of the end of last month, continue to hold the #1 position in dry flower. Q4 sales grew 10% year-over-year, driven by a nearly 400% increase in international export sales. Retail branded sales were flat compared to Q4 last year, but with improved gross margins year-over-year, reflecting our success in shifting the business in Canada towards high-margin products throughout the course of the year. Gross margin performance in Canada, 43% was once again above our 30% to 40% target range for the fourth consecutive quarter and up meaningfully from Q4 last year. All of this translated to significant year-over-year improvements in profitability resulting in CAD 7.5 million in net income and adjusted EBITDA of CAD 14.3 million which is roughly 27% of sales and cash flow from operations increased to $21.5 million. Before I move on to discuss progress of our ongoing capacity expansion projects, I'd like to take some time to address some of the sequential variances in our fourth quarter results as compared to a record third quarter. We're thrilled to deliver record results every quarter, and frankly, we had demand from our customers to do so once again in Q4. However, near-term supply constraints are temporary holding us back -- and as some of you may be aware, the flow of cannabis in the province of British Columbia was impacted by a labor strike in Q4, which we estimate reduced our Q4 sales by approximately $2.5 million. As we noted in this morning's earnings release, our demand levels continue to meaningfully outpace our current supply capabilities. As some of you may recall, from our Q4 call last year, we entered 2025 with the leanest inventory position in more than 5 years. And for those of you who may be newer to our story, our Canadian cannabis business does experience seasonality due to variances in our growing climate throughout the course of the year. We typically experienced sequential declines in production and revenue during the fourth quarter, unless we've had new capacity come online, which tends to result in higher costs sequentially as compared to our third quarter. We also ended the fourth quarter after back-to-back quarters of record performance in which we continue to sell all the cannabis we produce. In addition to the nuances of inventory levels, seasonality and our temporary supply constraints, the nature of our international export sales has introduce an extra layer of potential variability and quarterly performance due to the timing of shipments and both the size of order flows and profitabilities of these sales. and we did have some international oils from Germany that we expected to ship in late Q4, and that got delayed to Q1. While we're operating with temporary supply constraints as we balance the increasing complex needs of our diverse customer base, importantly, -- the underlying fundamentals of our business remain very strong with continued strength of demand domestically in Canada and in our other international markets which will enable us to continue to drive profitable growth in 2026 and beyond. As we noted in this morning's earnings call, we are expecting to return to sequential growth in international exports in Q1 and continue to expect that we'll begin shipping to multiple new jurisdictions over the course of the next several months. Biomass constraints are a proverbial good problem to have in our circumstances, and it's 1 we're well down the road of addressing with ongoing capacity expansion projects. I'll now turn to some updates on these initiatives in Canada and the Netherlands. I'm pleased to report that our previously announced expansion of our Delta 2 facility remains on track and on budget. We actually began planting the first half of this expansion on March 2 and expect to start seeing early contributions of this additional capacity in late Q2. We expect to harvest an incremental 15 metric tons of production from this expansion during the remainder of this year, while we continue optional providing optimizing the second half of the expansion. Once we're operating at full capacity by mid '27, the D2 expansion will provide an incremental 40 metric tons of annual production compared to fiscal year 2025, which represents an increase of approximately 33%. In the Netherlands, our Phase 1 facility in [ Drafton ] continues to operate at full capacity with healthy growing margins even at limited scale, and we are also continuing to sell everything we produce. We are leveraging our experience in Canada to lead new product innovations and recently launched 10 new product offerings across multiple formats that are unique to this market. We are continuing to see strong pricing with participating coffee shops and believe we're well positioned to capture market share in premium product categories as our new Phase II capacity comes online. I will note that Q4 profitability in the Netherlands was impacted by increased operating expenses as we've recently been adding head count to prepare for the launch of our Phase 2 facility in Groningen which I'm pleased to report is nearing completion and also remains on time and on budget. We anticipate our first Groningen Phase II facility will be painted towards the end of this month with full capacity completion expected in Q2 as we put the finishing touches on some post-harvest and processing capabilities. The Groningen facility will ramp up to full capacity throughout the remainder of this year, at which point our total annual production capacity in the Netherlands will be approximately 10 metric tons. For comparative purposes, we had harvested just under 2 tons from Groningen fiscal year '25. Our capacity expansion products coming online in Canada and Netherlands will allow us to continue scaling profitably and increasing demand with -- and we believe the strength of our balance sheet will enable us to be opportunistic with respect to additional accretive organic and acquisitive growth investments in the future. We funded the majority of our ongoing Canadian and Netherlands expansions from cash on hand but we did recently amend and extend our Canadian credit facility with an incremental $15 million delayed draw term loan at an interest rate of just over 5%. We intend to utilize this incremental debt financing to make additional enhancements to our existing operations beginning with an incremental $3 million investment to expand our EU GMP capabilities throughout the remainder of this year. We ended the year with approximately $86 million in cash after completing a $3 million share repurchase during the fourth quarter, and we remain in an excellent position to continue creating value for shareholders and driving profitable growth in 2026 and beyond. So I'll close the call with some final thoughts on priorities for '26, but now I'll turn the call over to Steve for his review of Q4 financials. Steve?

Thanks, Mike. As a reminder, as of May 30, the majority of our legacy produce assets were privatized and are now classified as discontinued operations. Reported financial results for comparative prior periods have been adjusted accordingly. I'll start with a review of our consolidated Q4 results and a reminder that comparable performance to the fourth quarter of last year reflects the impacts of a $10.5 million noncash impairment charge during Q4 of 2024, and related to nonflower inventory purchased primarily from third parties that we determined did not meet our quality standards. Consolidated net sales increased 9% to $49.6 million, driven by growth in our Canadian cannabis segment as well as the third full quarter of contributions of recreational cannabis sales from our Phase 1 facility in the Netherlands. Net income from continuing operations improved to $2.3 million or $0.02 per share compared with a net loss of $5.7 million or $0.04 per share in Q4 of last year. Consolidated adjusted EBITDA from continuing operations was $8.6 million compared to negative $2.9 million in Q4 of last year. resulting in an adjusted EBITDA margin of 17.3% in the quarter compared with a negative 6.4% in Q4 of last year, which was driven by the noncash inventory impairment I just referenced. Our cash flow from operations improved to $11.4 million compared to $10.9 million in Q4 of last year. Turning now to our segmented results. I will start with Canadian cannabis, which I will discuss in Canadian dollars. Total net sales were $52.7 million for a 10% increase versus Q4 of last year. The year-on-year improvement was driven by the strong performance in our international medicinal exports, which increased 384% over Q4 of last year. For the year, Canadian Cannabis net sales were up 12% to a record $228 million. Canadian retail branded sales for the fourth quarter were $55.6 million, essentially flat with the fourth quarter of last year and reflects both the realignment of our product portfolio to higher-margin SKUs as well as biomass constraints. As Mike noted, our retail branded sales in Q4 were impacted by a labor strike in B.C. which we estimate negatively impacted the revenues by $2.5 million. Canadian cannabis gross margin was 43%, up from 3% in Q4 of last year, which was impacted by the inventory impairment. -- reflecting a higher proportion of higher-margin international export sales as well as our focus on higher-margin SKUs in the retail branded channel in Canada. This drove a full year gross margin of 44% and with both the fourth quarter and full year 2025 above the high end of our target range of 30% to 40%. SG&A as a percentage of sales was 22% and down from 28% last year as we continued to drive efficiencies throughout our Canadian cannabis operations. Q4 adjusted EBITDA from continuing operations for Canadian cannabis improved to $14.3 million from negative $9.1 million in Q4 of last year. resulting in an adjusted EBITDA margin of 27%. For the full year, adjusted EBITDA increased nearly $58 million to $67 million for an adjusted EBITDA margin of 29%. Q4 cash flow from operations increased $24.8 million to $21.5 million. For the full year, cash flow from operations increased $61.4 million to $77.5 million. Finally, as we do each quarter, I will point out that in Q4, we paid Canadian excise taxes on a retail branded sales of $21.5 million nearly 40% of retail branded sales and almost double our SG&A costs. I'd also like to discuss our Canadian income tax situation, which will impact our cash flow from operations in 2026. In 2025, we accrued Canadian income taxes of $16 million, which was paid as required in February 28 of this year. In prior years, we did not pay income tax due to carryover tax losses, all of which have now been utilized. I'll note that we are the only major Canadian cannabis LP positions, which is a testament to the strength of our operating capabilities and strong stewardship of capital on behalf of our shareholders and a sign of a sustainable, long-term, profitable business platform. Turning now to our recreational cannabis business in the Netherlands. Q4 saw our third full quarter of sales from our Netherlands operations. Sales were $3.3 million with adjusted EBITDA of $700,000 and which, as Mike noted, includes a sequential increase in operating expenses compared to Q3 as we began to ramp up staffing to support the launch of our Phase II facility. We continue to expect our Phase II facilities to drive a substantial increase in revenue and EBITDA performance in the Netherlands during the second half of this year. Turning now to our U.S. cannabis business. Q4 sales of $3.4 million continues to reflect the impact of various state actions and the ongoing proliferation of unregulated hemp products. Gross margin was down slightly year-over-year at 60%, resulting in a small negative adjusted EBITDA for the quarter. In our continuing produce operations, sales of $4.9 million were 21% lower than Q4 last year. reflecting the impacts of softer year-on-year pricing as well as the sales commission paid to our newly privatized produce business. In previous years, we were the exclusive sales agent for our produce as well as for others. Net loss from continuing gross operations was $1.6 million with adjusted EBITDA of negative $462,000. As a reminder, our produce operations moving forward will reflect contributions from our Delta One greenhouse as well as operating cost of our [ Monahans ] facility in Texas, which remains idle at this time. Our last tomato crop from the Delta 2 greenhouse was pulled in November to begin the conversion to cannabis. Turning to consolidated cash flows and the balance sheet. Total cash flow from operations to $11.4 million for the fourth quarter, bringing the total for the year to $58.1 million. We ended Q4 with cash of approximately $86 million which includes restricted cash of $5 million, putting us in a strong net cash position of $53 million. Our total debt at the end of Q4 was $34 million, and we remain very comfortable with our debt levels, inclusive of the incremental CAD 15 million delayed draw term loan that Mike mentioned earlier, of which we've drawn $5 million. Finally, we have been active with our share repurchase program that our Board approved at the end of September. As a reminder, the program provides the purchase of up to just under 5 million common shares or 5% of our issued and outstanding shares as of the date of the announcement. During Q4, we purchased just under 813,000 shares at an aggregate cost of $3 million. And we have continued the program activity into Q1 of 2026 with the repurchase of roughly 1.1 million shares at an aggregate cost of $3.7 million. Our management team and Board continue to believe this reflects a prudent and balanced approach to capital allocation to drive returns to our shareholders, and we expect to remain active in this regard in the near term. I will now turn the call back to Mike for some closing comments.

Thanks, Steve. So in closing, 2025 was a watershed year for Village Farms as we steadily and successfully executed on our strategy to scale our global cannabis platform, generating not just record results but a step function transformation and profitability and cash generation. Our performance in 2025 for a new baseline as we realize the benefits of our investments in capacity to continue transition demand growth into long-term sustainable growth in earnings and cash flow, and we are continuing to benefit from multiple catalysts and unlocking value for our stakeholders. Our focus remains on execution. -- but we are looking to the remainder of this year with a growth-oriented mindset. We are investing behind our proven teams with enhancement to our operating facilities and we expect to maintain a balanced approach to capital allocation to deliver value for our shareholders. We are continuing to capitalize on the opportunity to enhance shareholder value through our ongoing share repurchase program. We're also given prudent consideration to incremental -- incremental growth, accretive organic and acquisition growth investments. Our expanding global platform, combined with our strong balance sheet, industry-leading cost of capital, an incredibly talented global team, we believe we're well positioned for continued success in 2026 and beyond. With that, Liz, we're now ready to open the call for questions.

[Operator Instructions] Our first question comes from Frederico Gomes with ATB Capital Markets.

My first question is regarding your share repurchases. I guess, from a capital allocation standpoint, -- what does that tell investors in regards to how you view your current valuation and the trajectory of the business as well as the opportunities you see for maybe additional investments in the business and M&A. .

Well, the business always comes first, but we were very confident in the cash generation that we just reported and going forward -- so we felt it's not going to -- in the amount of share repurchase that was approved by more of $10 million. It's not going to meaningfully impact running the business or any opportunities we see for both internal investment or growth. So we've taken a balanced approach. We are always concerned with shareholder value. And at the time and currently, we thought it was prudent. So we have no necessary plans at this point for more once it goes, but we'll reevaluate it as we execute going forward.

Mike. I appreciate that. And then my second question is on Germany. So we saw, I guess, a sequential decline in import volumes in Q4 for that market according to the data from there. So I think that was impacted by some issues in Portugal and maybe the quota permits. But in terms of the growth and the demand coming from that market? I mean is there -- should investors be worried about growth there? Or are you continuing to see that increasing and the important volumes there increasing for that market?

Fred, it's Sam. Thanks for the question. So you're right, the official stats are that German imports fell 4%, and Canadian imports were down 11%. And you're right that there was regulatory uncertainty, and we think that, that caused pharmacies, distributors and importers to lower their inventories. But we are seeing that those concerns have since abated and we expect to return to growth in Q1. Also notably, we had, and as Mike noted, we had some orders in that got delayed to Q1. And just to give you context, if those hadn't been pushed, our performance in Q4 in Germany would have outperformed the market performance. So just a caution that the nature of the export market means that there's going to be variability, but we are continuing to experience increasing demand as regulators in Germany have now started to apply more stringent restrictions on the quality and routes to market. And frankly, that's where our model shines.

Our next question comes from Aaron Grey with Alliance Global Partners. .

Very much for the questions here, and thanks for the commentary and in terms of quantifying some of the shipment order delays. I wanted to kind of carry on from that in terms of some of the capacity constraints that you touch on in some of the near-term variability we understand the appeal of prioritizing international markets for the incremental capacity that we expect to come online with the Delta 2 ramping up. But I just want to get some further contents of how you look to utilize that capacity for international versus Canada? Is it still fair to say that predominantly, most of that will be for international. And could you talk about the lens of how you're looking to maybe see Canadian market share aspirations as you might be utilizing more the incremental capacity for international? .

Aaron, first, let me just clarify. I mean, Canada's first and foremost, that's our additional market where we're balancing all the time the demand we have from international and meeting our commitments in Canada. And I think we're doing a very good job at that, but it could have some variability month to month, but that's why we're making tremendous investments in additional capacity. And keep in mind that there's no stopping capacity in our footprint in Canada with current assets. So that's what we are measuring a lot of time. But I would not say international's priority over Canada, a bit equal.

Aaron, just a couple of things to add. We did regain our #1 flower share position in January. And we expect that to be something you'll continue to see in 2026. We had several significant restock during Q4 and new launches in Q4, which are starting to show up in Q1. And then with respect to our 3 primary brands, Pure Sunfarms brand, [indiscernible] dried flower for 12 consecutive months in 2025, and that was a sequential growth. It also -- our Fraser Valley brand grew share of dry flower consecutively between January and September, that short-term supply constraints did kick in for that brand in October, but it recovered by December. And then finally, our -- in our convenience category, we've had a very successful launch of Super Toast, Liquid diamonds, 510 Bates in Q4. and the team is constantly posting updates on the success of that basis point by basis point in market share. .

Yes. And 1 final point is for Canada and international with current assets, we have the capability of more than doubling our 2027 forecast where I mentioned the 40 additional metric tons in 2027.

Okay. And that's really helpful color in terms of how you're going to prioritize both markets there. Second question for me is kind of going back to some of the Village Farms grassroot talking about cultivation costs. I know you stopped disclosing cost per gram a while back, but it'd be great to get some color in terms of initiatives that you have to further lower the cost of production potentially leveraging innovation that exists in the broader produce segments, like I know you've spoken to in the past and then also potentially touching on expected savings from leveraging costs with the second half of Delta 2 facility coming online. .

Well, we're not going to get into the specifics, obviously, but we continue to improve our costs. Let's just say that, and we're very pleased with continuing reduction in costs. So when I touched on my comment, you have to look at the cost really over a full year. There is some seasonality low light, higher light, so on and so forth. But on an annual basis, we continue to drive those costs lower, just like Steve mentioned, on SG&A as well. So -- in fact, I would say it's exceeding the target of cost improvement in the company today.

That concludes today's question-and-answer session. I'd like to turn the call back to Mr. DeGiglio for closing remarks. .

Okay. I want to thank everyone for joining us today. It was a great year in 2025 and we look forward that would just be a short amount of time before we be reporting our first quarter and look forward to that day in early May. Thank you, operator.

This concludes today's conference call. Thank you for participating. You may now disconnect.