We now have Sam Gibbons with Village Farms International.
Thank you. Good afternoon. My name's Sam Gibbons. I'm the Senior Vice President of Corporate Affairs and Investor Relations at Village Farms. Today, I'm standing in for our CEO, Mike DeGiglio. He couldn't be here, but I'm going to start off with a story, one of my favorite stories about Mike, which dates back to a large industry conference here in Toronto about eight years ago, where Mike delivered a fairly blunt assessment of what it was going to take to be successful in the cannabis industry long term. At the time, that message was delivered to a group of industry participants and capital markets participants who had, for the most part, already preordained a set of long-term winners. Fast-forward eight years later, most of those folks are not around. Village Farms is now a top 10 global cannabis operator.
We are a $310 million U.S. market capitalization as of close on Monday. We are one of the world's largest scaled asset portfolios to continue scaling with increasing global demand for cannabis. About 40% of our sales are coming from high Oops, excuse me. About 40% of our sales are coming from high-growth markets internationally. We are profitable. We are sustainably profitable. It's about $23 million in trailing 12-month net income. We have a strong balance sheet with a net cash position of about $33 million, which is enabling us to make growth investments across our platform. We've got a growth outlook. We've got about 100 metric tons of new production capacity coming online between now and the end of calendar year 2028, which positions us to continue to take advantage of increasing global demand for regulated cannabis.
Before we get into more of the details on the business, I just want to give you all a quick rundown on how Village Farms came to be today. We were founded in 1989, and initially, we just began constructing greenhouse assets kind of up and down the eastern seaboard of the United States. We weren't quite operating those at the time, but these were co-gen facilities with local utilities. Over time, we did begin to operate these facilities. Initially, we began in long-stem roses and cut carnations, and eventually, as the North American consumer started to demand year-round fresh produce instead of seasonally grown crops, we moved to the produce industry, where most of our legacy was formed in fresh produce. In the 1997 timeframe is really when we began to recognize the key to long-term success is to be large-scale, low-cost.
We developed, at the time, the largest greenhouse facility in the U.S. in West Texas. That's the GATES Marfa facility you see there in the middle. In 2006, we merged with the largest Canadian greenhouse operator at the time, which is in south of Vancouver in Delta, B.C. Those are the Delta 1, 2, and 3 greenhouses you see in the bottom left of that middle section. In 2017, when Canada legalized cannabis, we began converting our Delta footprint to cannabis production. Since then, we've built some custom, purpose-built cannabis facilities in the province of Quebec, which is important for us to have that asset to be meaningful in the Quebec market. We recently completed the construction on a state-of-the-art facility in Groningen, Netherlands, which is serving as our European headquarters. That facility will be fully ramped by the end of Q1 of next year.
That's the footprint today. The pictures you see here that are in color are the assets that we still own today. The GATES facility, the Marfa facility, we own about half of that acreage. As we'll get into in a little bit later here, we divested our legacy produce business last year. We are now a standalone global cannabis pure play company. Just spend a couple minutes talking about the global cannabis opportunity and the markets where we play and the markets where we have assets. We are a Canadian LP. We have a top five market share in the Canadian market, which is growing single digits. About 70%-75% of the Canadian cannabis market is in the legal channel. We have seen some headlines recently.
The government is committed to enforcement, stricter enforcement on the illicit market, which would be great for all the legal participants. This market will continue to grow. We are not permitted to be vertically integrated in Canada, but that is an opportunity for us in some of these international markets that we'll talk about. The U.S. is obviously the big enchilada. It's where everybody wants to be. It's where we intend to be someday as well. We do have assets there, as I've discussed. But today, it's bifurcated into a state legal channel that's a little over $30 billion in sales today, and a hemp-derived intoxicating THC market, which was, depending on who you ask, inadvertently legalized under the 2018 Farm Bill. These two markets are roughly the same size. They've both become powerful lobbying groups in their own right.
We'll see what's going to happen with a pending ban of hemp-derived THC products on December 11th. That'll have a huge impact on how the U.S. market behaves, how growth looks in the legal state channel in the coming future. As I mentioned earlier, we do have 2.2 million square feet of assets in West Texas. We believe those assets would represent about a $400 million U.S. revenue opportunity if and when we are able to participate in a permissible regulatory environment. The international markets is where most of the growth is today. We are the largest exporter of medical cannabis to Europe. There's a real opportunity here where over the course of the next few years, we could feasibly double our total addressable market for our products coming out of our Delta facilities into these international markets.
So we will talk a little bit more about the growth there in the coming slides. The Village Farms platform is one of the world's largest scalable platforms to capitalize on increasing demand for regulated cannabis. Today, it is about 7.2 million square feet of production assets. We are winning market share globally with demand levels that continue to outpace our current supply, which is why we are in the process of expanding that supply in Canada by about 33%. Our mega-scale greenhouse assets in the U.S. provide us the opportunity to replicate the success we have had in Canada. We have got a track record in plant-based consumer goods through our almost 40-year history in the produce industry. We have got cost of production, quality of product, and more importantly in today's world, compliant production capacity that is creating durable competitive advantages for us in these international markets.
This next slide provides a brief kind of history of the evolution of the build of the cannabis business. Early 2021 was the first quarter we started consolidating those results in our financials, but we were participating in cannabis back in 2018. What you see here is a nice steady progression as we have scaled this business. In April of 2025, we got to a point where we felt like the cannabis business was ready to stand on its own, and we divested our legacy produce business in a transaction with a couple of private equity firms. As you see, since then, most of the business is cannabis sales. I will also point out a couple other things on just the development here.
We had a very early lens and early commitment to international exports and to building the business and the assets in the right way to enable us to be successful with the highest standards of compliance and product quality. We started working on our EU GMP certification in mid-2020, got the first one in 2022. We were re-certified in 2024, and after some facility upgrades that we made earlier this year, our Delta production site is now the world's largest EU GMP-certified production facility in the world. Just a couple more notes on that transaction I mentioned in April of last year. We sold about 40 acres of our Texas greenhouse capacity to this new entity called Verdexa Holdings, which we do own 37, almost 38% of. Since the closing of that transaction, Village Farms has been one of the most profitable cannabis companies in the world.
What you see on the chart here is the top 10 global cannabis operators by market capitalization, net profit margin from continuing operations since the closing of the Verdexa transaction. I will point out too, the transformation from a profitability standpoint is not just divesting produce. It is the rapid development of these international markets where we are uniquely positioned to win, and also just continued operational excellence and continuing to lower our cost of production and getting operating efficiencies in our facilities.
I have talked a little bit about EU GMP certification so far and our cost excellence, but this slide, I will just provide a couple more specificity on the Delta production facility. See if this laser pointer works here. I guess not, but the top four quadrants of the footprint here are our Delta 2 and Delta 3 greenhouses, and these are the assets that are under cannabis production today.
The big greenhouse, Delta 1, is 60 acres. It is bigger than Delta 2 and Delta 3 combined. We are contracted with Verdexa for a supply agreement for produce, but we have the option of converting that facility 25% per year for the next several years if we elect to do so to continue scaling our cannabis business. The D2 greenhouse, we are in the process of completing the conversion of the second half of the second half of that D2 greenhouse, so one of those four quadrants in D2 is being converted to cannabis today. That will be complete around the end of this year and fully ramped by the middle of next year, and that expansion project will yield about an incremental 40 metric tons of production capacity coming out of Delta, and that is 40 metric tons of dried, trimmed flower. It does not include trim.
This is a product that is ready to go to consumer or patient without any further processing along the way. So in total, this campus will yield about 160 metric tons of production with considerable room for us to continue scaling with increasing global demand. A little bit more on just kind of the domino effect that is occurring across these international markets today. Europe is really kind of undergoing the domino effect that the U.S. has experienced over the course of the last 10 years as countries are increasingly embracing the benefits of regulated cannabis. While we are not representing approximate market sizes in this slide, what we are trying to communicate here is jurisdictions where you have an emerging market, where the market is generally accessible or is about to become more accessible.
The markets in orange are where you have a much larger footprint, where a more robust, mature market has emerged. Europe has opened up. As I mentioned, we are the largest exporter of cannabis to Europe. We do expect to be in multiple new European jurisdictions in the coming months. Today, we export to Germany, Australia, New Zealand, and the U.K., but more on the way there. As you can see, we have an international business that is approaching $100 million U.S. revenue run rate, with a lot of attractive room for growth with the expansion projects we have mentioned coming online. We are not just expanding production capacity in Delta, B.C. We are expanding production capacity in our Netherlands business as well. This is about a five times increase in our production capacity that will be coming online in the early part of next year.
Will take us to about 10 total metric tons of production in the Netherlands. Before I continue, I want to make it clear that it is not just about how much stuff you can grow. It really is paramount to have good quality and consistency in our product. This slide just shows our brand portfolio in Canada and across the world. We are a perennial leader in dried flower formats here in Canada. Our Super Toast brand recently became our first nationally distributed brand across the country. It is more of a convenience-focused brand, where we are trying to increase our market share in vapes and other convenience formats. Then we have a few brands that are specifically distributed in Quebec. Our CBDistillery brand is our U.S. CBD. It is a direct-to-consumer e-commerce platform for CBD business in the U.S. But quality is paramount.
It's not just about how much you can grow. You've got to be able to deliver consistent quality that consumers love. We talked a little bit about the U.S. opportunity, the Texas assets representing about a $400 million revenue opportunity in the U.S. CBD business. Beyond the rescheduling proceedings that are ongoing for Schedule I in the U.S., there is also a Medicare pilot for CBD products that's underway. It's been a little slow to get off the ground with this pending hemp ban. We'll see how that plays out, but there is a potential where CBD products can make their way into the Medicare channel in the United States and could become a meaningful business long term if those products are ultimately protected before this ban goes into effect. Lastly, I'll just make a quick note on our clean energy business.
This is a very small part of the company, but it really kind of brings us back to our roots on the early days of co-gen facilities. The clean energy subsidiary probably spits off about $2 million in net income a year for us, so it's a nice incremental driver of profitability for us. It's pretty low maintenance. We've just got one guy essentially running that with our partner, Terreva Renewables, who's based in Atlanta. Just a quick look at financial and operational highlights here. We've continued to steadily grow this business without having the benefit yet of the increased production capacity that I've talked about today. I think that's a really important note to make. We've talked about the rapid growth in international markets. We expect that we're going to be well-positioned to continue to grow in those markets over time.
On the bottom right, as just a more visual representation of the capacity build that's coming online over the course of the next couple years, which will provide us with nice incremental growth through 2028. The next slide is sequential quarterly performance dating back to the closing of the Verdexa transaction, which we've discussed. What I want to highlight here is that we've been producing year-over-year improvements in revenue and adjusted EBITDA without yet having the benefit of that increased production capacity. The one quarter I will caveat is the most recent quarter, where there was a one-time impact in the prior year quarter. We had about a $4.4 million vendor settlement that was a positive impact in the prior year quarter, but if that had not occurred, we would have also driven a year-over-year improvement in our adjusted EBITDA performance. A Q2 performance summary.
You can see our gross margins here are actually stronger than that year-to-date, sorry, trailing 12 months chart I showed previously. I'd also point out here, we have had some incremental OpEx in this most recent quarter ahead of the ramp-up of our Netherlands business. We've also had the anniversary of the produce transaction in Q2 of 2025, which provided about, it was about a $20 million gain in Q2 of 2025. The variance you see in the most recent Q2, the negative variance you see on most recent Q2 is strictly related to that transaction closing in Q2 of last year. What's ahead for us? We've said we continue to expect that we're going to grow with the Canadian market, which is mid-single digits. We expect to increase demand from our existing international customers.
We expect to onboard new international customers and markets as we've discussed. We've got the participation of, a potential of that participation in the CBD Medicare pilot program. We've talked about the expansion projects we have coming online. We funded most of this just from cash on hand and our own cash flow. We've got plenty of opportunity to continue scaling our platform with increasing global demand over time. We've talked too recently about our interest in looking at strategic M&A. We've built Village Farms into what it is today almost entirely organically, but our former CFO, Steve Ruffini, has stepped into a new role to lead M&A. We will be extremely patient and prudent with our approach to those things. We're focused on things that are going to build durable, long-term value in this industry and drive returns to shareholders.
I think I'd just add that with the asset portfolio we have, with the track record and execution that we've demonstrated, it's clear to us that we've started to emerge as a partner and an acquirer of choice in the global cannabis industry. Just a quick view at the balance sheet and net cash position of $33 million, as I mentioned. About 122 million shares outstanding. We do have some warrants that expire in Q2 of 2028. If those are fully exercised, that would bring a little over $25 million in incremental cash onto our balance sheet. I'll just lastly point out that through the first six months of this year, we've paid about $17 million in Canadian income taxes. Today, we are the only Canadian LP that's paying Canadian income taxes. We've also had the CapEx projects we've mentioned, $15 million.
We did a $7 million share repurchase, and in June of this year, we did a $15 million private placement with two U.S. institutional investors. Those filings were filed in August, and Citadel was the lead participant on that. Citadel is now a 5.5% owner of Village Farms. Insider ownership is about 10%. Our institutional ownership is probably about 25% with public filers, but given some of the large Canadian funds that have been holding the shares closely and are big fans of Village Farms, I'd estimate our institutional and insider ownership is over 40%. I'll leave it there, just with some summary highlights on the screen of why we believe we are one of the most attractive investment opportunities in global cannabis, and we'll open it up for some questions.
There's been a lot of change scheduled.
Yep.
A lot of the U.S. players are going to talk about price cap. They are already there. How durable do you think that advantage is, and what do you think it is? Do you think that Europe's CTA-
Yeah.
How long do you think it is going to take?
Yeah, the question was about how we feel about the durability of our competitive advantage with some U.S. operators talking about having interest in Europe. We think it is extremely durable. Yes, it is possible to get EU GMP certifications. The process does take up to two years to get, but we are not as much worried about more EU GMP certification when we know that we are one of the world's lowest-cost producers. You can get the certification all you want, but are you going to have demand for your product if you cannot continually, consistently deliver quality product at an affordable price that consumers love? So we feel great about our competitive position there. I think I got all of that.
Well, I guess the price difference with your own cost is during a high-cost umbrella. What do you see in the long term with your own price gap?
It's a tricky question. We've seen most of these markets in the U.S. and Canada mature over time. Price compression happens as more supply comes online. We certainly expect those things to happen over time. We've been just on the record the last couple quarters saying we feel confident in our ability that the pricing of our EU GMP-compliant capacity will be relatively stable here for the foreseeable future. Any other questions? Yep.
Do you sell to others, to other wholesalers, or do you sell directly to the pharmacy?
Yeah, we work with a network of distributors and pharmacy networks in Europe. We're not in the habit of disclosing those folks by name, but we've got relationships with many operators in those markets. Yep. Yeah, we don't give guidance. It's something that we may consider doing. I think our view has been we want to get through the completion of these capacity expansion projects and have clear sight of visibility on those operations performing the way we expect before we may do that. I'd leave it there, but I'd say that, as we discussed, the relative expectation for relative stability in our international business compared to where we are seeing price compression in other parts of the market, I think positions us well to maintain relative strength and margin performance. Yep.
Capacity expansions. How does the metric ton number translate into revenue? What's the How does variables product? How much revenue capacity?
Yeah, I could point you to our If we just flip back to the historical financials from 2024, I mean, these numbers have changed a little bit, but we didn't have any meaningful capacity come online in 2025 besides about 2 tons of production in the Netherlands. So the bulk of that 2024 number would represent predominantly our Delta production facilities, which at the time was about 120 metric tons. It's not a perfect answer because we're not necessarily selling 120 tons every year. There's variances in timing depending on when harvests are completed. But I think that would be probably the easiest way I could show you visually, based on the production levels we had in 2024. I'm not going to do that math on the webcast, but that's Yeah. Yep.
Which markets are you considering M&A in? Canada?
There's a Yeah, sorry, I haven't been repeating the questions. The question was, which markets are we considering M&A? The opportunity set is global. I think we've got attractive options pretty much everywhere.
Distributors?
Yeah, it's a very wide opportunity set. There's a lot of attractive opportunities that we haven't really gotten into specifics besides saying we feel like we're going to have attractive looks on a lot of things that could drive incremental value for us long term.
That is our program coming along.
Do we have time for one more, or we I am sorry. We are toast, but I am happy to talk at the back of the room. Thank you all for listening today. We will see you out there.