Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2025 (our "Annual Report on Form 10-K"). This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements. We encourage you to review the risks and uncertainties described in “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K, and in Part II, Item 1A of this Quarterly Report. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.
EXECUTIVE OVERVIEW
Village Farms International, Inc. (“VFF”, together with its subsidiaries, the “Company”, “Village Farms”, “we” “us” or “our”) is a corporation existing under the Business Corporations Act (Ontario). The Company’s principal operating subsidiaries are Pure Sunfarms Corp. (“Pure Sunfarms” or “PSF”), Balanced Health Botanicals, LLC (“Balanced Health”), Rose LifeScience Inc. (“Rose LifeScience” or “Rose”), Village Farms International B.V. (“VFN”), Village Farms Canada Limited Partnership (“VFCLP”), Village Farms L.P. (“VFLP”), and VF Clean Energy, Inc. (“VFCE”).
Village Farms' mission is to apply decades of innovation in intensive agriculture to lead a sustainable path forward for the global cannabis industry. To do so, we leverage a proven track record of asset investment and development and cultivation expertise and experience in controlled environment agriculture to produce branded and wholesale cannabis products for global markets with legally permissible regulatory frameworks.
In Canada, we converted two large-scale, advanced greenhouse facilities to cannabis production to serve the Canadian legal adult use (recreational) market and international medical markets through exportation. Through our ownership of VFN, we hold one of ten licenses to cultivate and distribute cannabis legally in the Netherlands under that country’s Controlled Cannabis Supply Chain Experiment. In the U.S., Balanced Health is our industry-leading cannabinoid business, extending our portfolio into cannabidiol (“CBD”) and hemp-derived consumer products, and the Company also owns 2.2 million square feet of advanced greenhouse facilities in Texas which may be converted to cannabis production in the future if and when permissible by all regulatory authorities.
Our focus for Cannabis is to produce high quality cannabis, leveraging our low-cost production to provide preferred products at an attractive price that address the preferred consumer segments in the market. This market positioning, combined with our cultivation expertise, has enabled us to evolve into a leading producer of dried flower nationally and one of the few Canadian licensed producers with consistently strong operating results.
Through strategic and disciplined organic growth, expansion of export markets and/or acquisitions, we intend to participate in other international markets where cannabis attains legal status. In September 2021, our Canadian Cannabis business began exporting cannabis products to Australia for that country’s medical market. In March 2022, our Canadian business received European Union Good Manufacturing Practice (“EU GMP”) certification for our 1.1 million square foot Delta 3 cannabis facility located in Delta, British Columbia (“B.C.”) which permits us to export EU GMP-certified medical cannabis to importers and distributors in international markets that require EU GMP certification. In late 2022, we commenced exports to Israel. In 2023, we began exporting cannabis products to Germany and the United Kingdom for the medical markets in those countries. In 2025, we began exporting cannabis products to New Zealand. As a result of the typically higher margins in international markets (predominantly due to lower taxation compared with Canada), we expect international expansion to enhance our profitability while expanding our brand and experience into emerging legal cannabis markets.
We also cultivate tomatoes and market them through Village Farms Fresh (a Vanguard Holdings Company) under the Village Farms Fresh (“VF Fresh”) brand, which sells to mass retail grocery stores and food distribution companies.
Change in Our Operating Segments
During the first quarter of 2026, the Company realigned our structure toward a unified cannabis operating model, including changes and additions to our leadership team, to gain operational efficiencies and better align our resources with customer and market opportunities. As a result of the reorganization, the Company revised its reportable segment structure to reflect how the Chief Executive Officer, as chief operating decision maker ("CODM"), manages the business, allocates resources, and assesses performance.
Therefore, the Company's operations are now organized, managed and classified into one reportable segment - Cannabis. The Company’s remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Other.
18
Cannabis Segment
Our Cannabis segment includes wholly owned Pure Sunfarms, VFN, Balanced Health, and an 80% ownership interest in Rose LifeScience.
Pure Sunfarms is one of the single largest cannabis growing operations in the world, one of the lowest-cost greenhouse producers and owns several of the leading flower brands in Canada. We leverage our 30 years of experience as a vertically integrated greenhouse grower for cannabis growth opportunities in Canada with commercial distribution in all Canadian provinces and territories. Our long-term objective for Canada is to be the leading low-cost, high-quality cannabis producer.
Our Netherlands cannabis reporting unit is comprised of wholly owned subsidiary, VFN. Through VFN, we hold one of ten licenses to cultivate and distribute recreational cannabis legally in the Netherlands under that country’s Closed Supply Chain Experiment program, with sales commencing in February 2025.
Rose is one of the top-selling licensed producers of cannabis in the Province of Quebec, as well as a prominent cannabis products commercialization expert in Quebec, acting as the exclusive, direct-to-retail sales, marketing and distribution entity for some of the best-known brands in Canada, as well as Quebec-based micro and craft growers.
Balanced Health is one of the leading cannabinoid brands and e-commerce platforms in the United States. Balanced Health develops and sells high-quality CBD and hemp-based health and wellness products, distributing its diverse portfolio of consumer products through its top-ranked e-commerce platform, CBDistillery.
Corporate and Other
Other is comprised of the previously reported Produce and Clean Energy segments and includes operations that are not reported in the Company’s Cannabis segment.
Corporate expenses reflect the operations costs that are not allocated to our reporting units.
Recent Developments and Updates
Cannabis
• Surpassed the high end of its targeted gross margin range for cannabis of 30-40% for the fourth consecutive quarter; and recorded positive EPS from continuing operations for the fourth consecutive quarter.
• Maintained a top five overall market share position in the Canadian market, and continued to hold the number one market share position in dried flower. The Company’s Pure Sunfarms brand expanded its market share position for the 15th consecutive month in April, reflecting improving consumer preference for the Company’s strains following recent introductions of packaging innovations that showcase the Company’s flower quality and aromas 1 .
• International export sales from Canada increased 171% year-over-year to a record high of $14.6 million. The Company believes it remains the largest exporter of medical cannabis to Europe, with three of the top five leading cultivars in Germany and four of the top 10 through our distribution partners 2 .
• The Company recently completed facility upgrades at its 4.8 million square foot production campus in Delta, British Columbia, the Company now believes it operates the world’s largest EU-GMP certified cannabis facility.
• Began planting the first half of its Delta 2 greenhouse expansion in Canada, which is expected to begin contributing to sales late in the second quarter of 2026. The full expansion is expected to yield an incremental 40 metric tonnes of annualized cannabis production, expanding Canadian capacity by approximately 33% once completed in 2027.
• The Company expects to commence all operations at its Phase II facility in the Netherlands during Q2 and ramp to full capacity by the end of 2026. Once operating at full capacity, the Phase II facility is expected to quintuple total Netherlands production to approximately 10 metric tonnes annually.
1. Based on estimated retail sales from HiFyre, other third parties and provincial boards.
2. Based on Company estimates and rankings compiled by German outlet Flowzz.
Corporate and Other
• Began a succession planning process for our Chief Financial Officer, Steve Ruffini, who will remain as CFO until a permanent replacement has been identified. Mr. Ruffini will remain an employee of the Company to help ensure a smooth transition of his CFO responsibilities, and he is expected to be appointed to a new leadership position focused on evaluating strategic M&A opportunities.
• Favorably amended and extended its loan with its long-term lender, Farm Credit Canada (FCC). The Company improved the interest rate on the loan by 50 basis points and extended the maturity date by four years to February 3, 2031. The FCC
19
loan carries a variable interest rate currently below 7.0%, with a current balance of US $15.4 million. All other material terms of the loan remain unchanged.
• On April 23, 2026, President Trump issued an executive order to (1) immediately place both FDA-approved products containing marijuana and marijuana products regulated by a state medical marijuana license in Schedule III of the Controlled Substances Act, and (2) initiate an expedited administrative hearing process to consider the broader rescheduling of marijuana from Schedule I to Schedule III, which is expected to commence on June 29, 2026. We believe we are poised to benefit from President Trump's Executive Order, which, if the broader rescheduling is enacted as anticipated, would represent a consequential step in modernizing U.S. cannabis policy and support the development of a regulatory framework more aligned with international drug policies.
Presentation of Financial Results
Our results of operations for the three months ended March 31, 2026 and 2025 presented below reflect the operations of our consolidated wholly-owned subsidiaries and our 80% ownership interest in Rose LifeScience.
Foreign Currency Exchange Rates
All currency amounts in this Quarterly Report are stated in U.S. dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “$” are to U.S. dollars. The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of March 31, 2026, March 31, 2025, and December 31, 2025. Transactions affecting the shareholders’ equity (deficit) are translated at historical foreign exchange rates. The condensed consolidated statements of operations and comprehensive income (loss) and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period.
The exchange rates used to translate from Canadian dollars to U.S. dollars is shown below:
As of
March 31, 2026
March 31, 2025
December 31, 2025
Spot rate
0.7177
0.6966
0.7294
Three-month period ended
0.7289
0.6965
N/A
20
Consolidated Results of Operations
(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)
Three Months Ended March 31,
2026
2025
Sales
$
50,238
$
39,680
Cost of sales
(29,252
)
(25,501
)
Gross profit
20,986
14,179
Selling, general and administrative expenses
(15,942
)
(14,619
)
Interest expense
(523
)
(701
)
Interest income
608
75
Foreign exchange (loss) gain
(548
)
(84
)
Other (loss) income
(184
)
22
Income (loss) before taxes and equity method investment income
4,397
(1,128
)
Provision for income taxes
(1,668
)
(983
)
Equity method investment income, net of tax
—
—
Income (loss) from continuing operations
2,729
(2,111
)
(Loss) Income from discontinued operations, net of tax
—
(5,004
)
Income (loss) including non-controlling interests
2,729
(7,115
)
Less: net (income) loss attributable to non-controlling interests, net of tax
188
412
Net income (loss) attributable to Village Farms International, Inc. shareholders
$
2,917
$
(6,703
)
Adjusted EBITDA from continuing operations
$
9,890
$
4,546
Basic income (loss) per share attributable to Village Farms International, Inc. shareholders from:
Continuing operations
$
0.03
$
(0.02
)
Discontinued operations
-
(0.04
)
Basic income (loss) per share attributable to Village Farms International, Inc. shareholders
$
0.03
$
(0.06
)
Diluted income (loss) per share attributable to Village Farms International, Inc. shareholders from:
Continuing operations
$
0.02
$
(0.02
)
Discontinued operations
$
—
$
(0.04
)
Diluted income (loss) per share attributable to Village Farms International, Inc. shareholders
$
0.02
$
(0.06
)
Segment Results of Operations
During the first quarter of 2026, the Company revised its reportable segment structure - Cannabis - to reflect how the CODM manages the business, allocates resources, and assesses performance.
The Company’s remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Other.
Segment reporting is prepared on the same basis that the Company’s Chief Executive Officer, who is the CODM, manages the business, makes operating decisions and assesses performance. The Cannabis segment, which is comprised of the previously reported Canadian Cannabis, U. S. Cannabis, and Cannabis - Netherlands segments, produces and supplies cannabis and CBD-based health and wellness products to be sold to consumers via provincial governments, coffee shops, licensed providers, and direct to consumers in the United States.
Other is comprised of the previously reported Produce and Clean Energy segments and includes operations that are not reported in the Company’s Cannabis segment.
Corporate expenses reflect the operations costs that are not allocated to our reporting units.
21
(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)
For The Three Months Ended March 31, 2026
Cannabis
Other
Corporate
Consolidated
Sales
$
49,744
$
494
$
—
$
50,238
Cost of sales
(28,436
)
(816
)
—
(29,252
)
Selling, general and administrative expenses
(14,820
)
(512
)
(610
)
(15,942
)
Other expense, net
(311
)
(222
)
(114
)
(647
)
Income (loss) before taxes and equity method investment income
6,177
(1,056
)
(724
)
4,397
Provision for income taxes
(1,585
)
(83
)
—
(1,668
)
Equity method investment income, net of tax
—
—
—
—
Income (loss) including non-controlling interests
4,592
(1,139
)
(724
)
2,729
Less: net loss attributable to non-controlling interests, net of tax
188
—
—
188
Net income (loss)
$
4,780
$
(1,139
)
$
(724
)
$
2,917
Adjusted EBITDA from Continuing Operations (1)
$
10,196
$
(23
)
$
(283
)
$
9,890
Basic income (loss) per share
$
0.05
$
(0.01
)
$
(0.01
)
$
0.03
Diluted income (loss) per share
$
0.04
$
(0.01
)
$
(0.01
)
$
0.02
For The Three Months Ended March 31, 2025
Cannabis
Other
Corporate
Consolidated
Sales
$
39,227
$
453
$
—
$
39,680
Cost of sales
(23,958
)
(1,543
)
—
(25,501
)
Selling, general and administrative expenses
(11,736
)
(743
)
(2,140
)
(14,619
)
Other (expense) income, net
(202
)
(526
)
40
(688
)
Income (loss) before taxes and equity method investment income
3,331
(2,359
)
(2,100
)
(1,128
)
Provision for income taxes
(895
)
(69
)
(19
)
(983
)
Equity method investment income, net of tax
—
—
—
—
Income (loss) from continuing operations
2,436
(2,428
)
(2,119
)
(2,111
)
Income from discontinued operations net of tax
—
(5,004
)
—
(5,004
)
Income (loss) including non-controlling interests
2,436
(7,432
)
(2,119
)
(7,115
)
Less: net loss attributable to non-controlling interests, net of tax
412
—
—
412
Net income (loss)
$
2,848
$
(7,432
)
$
(2,119
)
$
(6,703
)
Adjusted EBITDA from continuing operations (1)
$
6,889
$
(332
)
$
(2,011
)
$
4,546
Basic income (loss) per share from continuing operations
$
0.03
$
(0.03
)
$
(0.02
)
$
(0.02
)
Basic income per share from discontinued operations
$
-
$
(0.04
)
$
-
$
(0.04
)
Basic income (loss) per share
$
0.03
$
(0.07
)
$
(0.02
)
$
(0.06
)
Diluted income (loss) per share from continuing operations
$
0.03
$
(0.03
)
$
(0.02
)
$
(0.02
)
Diluted income per share from discontinued operations
$
-
$
(0.04
)
$
-
$
(0.04
)
Diluted income (loss) per share
$
0.03
$
(0.07
)
$
(0.02
)
$
(0.06
)
(1) Adjusted EBITDA from continuing operations is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA from continuing operations is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect our business performance. Adjusted EBITDA from continuing operations includes the Company’s 80% interest in Rose LifeScience.
We caution that our results of operations for the three months ended March 31, 2026 and 2025 may not be indicative of our future performance.
22
RESULTS
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Sales
Sales for the three months ended March 31, 2026 and 2025 were as follows:
Classification
March 31, 2026
March 31, 2025
Cannabis:
Canadian Branded (1)
$
23,848
$
22,761
Canadian Non-Branded
5,377
6,279
International Exports
14,581
5,388
U.S. Cannabis
3,133
3,904
Netherlands Branded
2,663
486
Other
142
409
Total Cannabis
49,744
39,227
Other
Produce
108
27
Clean Energy
386
426
Total Revenue
$
50,238
$
39,680
(1) Canadian Branded revenues are shown net of excise tax on products. Excise tax on products was $15,903 and $13,947 for the three months ended March 31, 2026 and 2025, respectively.
The increase in consolidated revenues of $10,558, or 27%, was primarily due to an increase in International Exports of $9,183, or 171%, driven by continued growth in export volumes to Germany, partially offset by a decrease in the net average selling price of 12% due to a shift in product mix in favor of bulk flower over packaged flower. For the three months ended March 31, 2026, International Export sales represented 29% of revenue, compared with 14% of revenue for the three months ended March 31, 2025.
Canadian Branded Sales increased by $1,087, or 5%, to $23,848, or 47% of sales, from $22,761, or 57% of sales, primarily due to an increase in volume while the average net selling price remained in line with the prior period.
Netherlands Branded sales increased by $2,177 over the prior year, as the prior year only had one month of sales.
Canadian Non-Branded sales decreased by $902, or 14%, due to a decrease in volume.
Sales for U. S. Cannabis decreased by $771, or 20%, due to lower direct-to-consumer sales resulting from the proliferation of unregulated hemp-derived products on the market and the continuing effect of changes in state regulations restricting sales.
We continue to pay a burdensome excise tax on our Canadian Branded sales (sales to provincial distributors). For the three months ended March 31, 2026, the Company incurred excise duties of $15,903, or 40% of gross Canadian Branded sales, compared with $13,947, or 38% of gross Canadian Branded sales, for the three months ended March 31, 2025. The increase of $1,961, or 14%, was due to an increase in kilograms sold in the Canadian Branded channel. The Canadian excise duty is our single largest cost of participating in the branded adult-use market in Canada.
Cost of Sales
Cost of sales for the three months ended March 31, 2026 were $29,252 compared with $25,501 for the three months ended March 31, 2025. The increase of $3,751, or 15%, was primarily due to a 27% increase in sales, partially offset by a favorable shift in International Export sales mix in favor of bulk flower, which has a lower average cost per gram over other packaged products.
Gross Profit
Gross profit for the three months ended March 31, 2026 was $20,986 compared with $14,179 for the three months ended March 31, 2025. The increase of $6,807, or 48%, was primarily due to higher sales volumes of International Exports as well as lower sales of value brands within the branded sales category.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March 31, 2026 were $15,942 (32% of sales) compared with $14,619 (37% of sales) for the three months ended March 31, 2025.
Cannabis SG&A increased by approximately $3,084, or 26%, primarily due to higher commercial and marketing expenses and an update to the Company's transfer pricing policies.
Interest Expense
23
Interest expense for the three months ended March 31, 2026 was $523 compared with $701 for the three months ended March 31, 2025 due to a decrease in the average debt balance and a decrease in interest rates from the prior year.
Interest Income
Interest income for the three months ended March 31, 2026 and was $608 compared with $75 for the three months ended March 31, 2025 due primarily to an increase in the average cash, cash equivalents, and restricted cash.
Other (Loss) Income
Other income for the three months ended March 31, 2026 was $173 compared with other loss of $22 for the three months ended March 31, 2025.
Income (Loss) Before Taxes and Equity Method Investment Income
Income before taxes for the three months ended March 31, 2026 was $4,397 compared with a loss before taxes of $1,128 for the three months ended March 31, 2025. The change of $5,525 was primarily due to the improved gross profit.
Income (Loss) from Discontinued Operations, Net of Tax
Income (loss) from discontinued operations, net consists of the following:
For the Three Months Ended March 31,
2026
2025
(Loss) income from discontinued operations, net of tax
$
0
$
(5,004
)
Net (loss) income from discontinued operations, net of tax
$
—
$
(5,004
)
Net Income (Loss) Attributable to Village Farms International, Inc. Shareholders
Net income attributable to Village Farms International, Inc. shareholders for the three months ended March 31, 2026 was $2,917 compared with a net loss of $6,703 for the three months ended March 31, 2025. The increase of $9,620 was primarily due to the higher sales and the improved gross margin during the three months ended March 31, 2026, as well as the negative impact of the loss from discontinued operations in 2025 of $5,004, partially offset by an increase in the provision for income taxes of $1,360.
Adjusted EBITDA from Continuing Operations
Adjusted EBITDA from Continuing Operations for the three months ended March 31, 2026 was $9,890 compared with $4,546 for the three months ended March 31, 2025. The increase of $5,344, or 118%, was driven primarily by higher sales and higher margins in Cannabis. For additional information, refer to the reconciliation of Adjusted EBITDA from Continuing Operations to net income (loss) in “Non-GAAP Measures—Reconciliation of Net Income (Loss) to Adjusted EBITDA”.
Liquidity and Capital Resources
Capital Resources
At March 31, 2026, cash, cash equivalents, and restricted cash were $55,527 and working capital was $88,828, compared with cash and cash equivalents of $86,252 and working capital of $95,851 at December 31, 2025. We believe that our existing cash, cash generated from our operating activities and the availability under our Pure Sunfarms Revolving Credit Facility (as defined below), will provide us with sufficient liquidity to meet our working capital needs, repayments of our long-term debt and future contractual obligations and fund our planned capital expenditures for the next 12 months. An additional potential source of liquidity is access to capital markets for additional equity or debt financing. We intend to use our cash on hand for daily operational funding requirements.
(in thousands of U.S. dollars unless otherwise noted)
Maximum Availability
Outstanding as of March 31, 2026
FCC Term Loan
$
15,365
$
15,365
Pure Sunfarms Term Loan Facility
$
20,384
$
20,384
Pure Sunfarm Revolving Credit Facility
C$
10,000
$
—
The Company is required to comply with financial covenants. At March 31, 2026, the Company was compliant with all of its financial covenants. We can provide no assurance that we will be in compliance, or receive a waiver for any non-compliance of the financial covenants. See “Risk Factors—Business and Operational Risk Factors—We are subject to restrictive covenants under our Credit Facilities” in our most recently filed Annual Report on Form 10-K.
24
Accrued interest payable on the Credit Facilities and Pure Sunfarms Loans as of March 31, 2026 and December 31, 2025 was $172 and $166, respectively. These amounts are included in accrued liabilities in the accompanying Condensed Consolidated Statements of Financial Position.
FCC Term Loan
The Company has a term loan financing agreement with Farm Credit Canada ("FCC"), a Canadian creditor (the “FCC Term Loan”). On March 30, 2026, the Company extended the maturity date of the FCC Term Loan to February 3, 2031 and reduced the applicable margin on the annual interest rate by 50 basis points. The non-revolving variable rate term loan has a balance of $15,365 on March 31, 2026 and $15,855 on December 31, 2025. The outstanding balance is repayable by way of monthly installments of principal and interest, with the balance and any accrued interest to be paid in full on February 3, 2031. As of March 31, 2026 and December 31, 2025, borrowings under the FCC Term Loan agreement were subject to an interest rate of 6.84% and 7.45% per annum, respectively.
As collateral for the FCC Term Loan, the Company has provided promissory notes, a first mortgage on the VFF-owned Delta 1 and Monahans greenhouses, and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and has granted security interests in respect of the FCC Term Loan. The carrying value of the assets and securities pledged as collateral as of March 31, 2026 and December 31, 2025 was $66,682 and $84,653, respectively.
On April 10, 2025, the Company entered into the A&R Credit Agreement with respect to the FCC Term Loan. Among other things, the A&R Credit Agreement (i) adds the Company as a new borrower, (ii) adds VF Clean Energy, Inc. as a new guarantor, and (iii) replaces the fixed charged ratio covenant with a more favorable liquidity ratio covenant.
Pure Sunfarms Loans
On April 17, 2025, the Company entered into a secured credit facility with a Canadian chartered bank as administrative agent with an aggregate borrowing capacity of C$37.4 million, consisting of a maximum C$10.0 million revolving credit facility (the “Pure Sunfarms Revolving Credit Facility”), and a C$27.4 million term loan facility (the “Pure Sunfarms Term Loan Facility”, and collectively with the Pure Sunfarms Revolving Credit Facility, the “Pure Sunfarms Secured Credit Facilities”). The Pure Sunfarms Secured Credit Facilities are secured by the Delta 2 and Delta 3 greenhouse facilities. The Pure Sunfarms Secured Credit Facilities are being used for working capital and other general corporate purposes, and was also used to replace, and repay remaining outstanding balances on, the Company’s (i) Pure Sunfarms Loans and (ii) the PSF Revolving Line of Credit. The credit and guarantee agreements related to the Pure Sunfarms Loans and the PSF Revolving Line of Credit were likewise terminated.
On February 20, 2026, the Company amended and extended its Pure Sunfarms Secured Credit Facility, which increased loan commitments with existing lenders by C$15 million and extending maturities one year to February 2029. The incremental debt financing comes in the form of a delayed draw term loan, from which the Company drew an initial CAD $5 million on February 20, 2026. All other terms of the credit facility loans remain unchanged.
The Pure Sunfarms Revolving Credit Facility can be drawn for advances of up to C$10.0 million. The outstanding amount of the Pure Sunfarms Term Loan Facility was $20,384 as of March 31, 2026 and is repayable, on a quarterly basis, in an amount equal to C$1.07 million. Any amount remaining unpaid will be due and payable in full on the maturity date, which is on February 7, 2029.
The loans under the Pure Sunfarms Secured Credit Facilities accrue interest at a rate equal to, at the Company’s option, (a) the Canadian Prime Rate plus the applicable margin, or (b) the Canadian Overnight Repo Rate Average plus the applicable margin. The applicable margin for the Pure Sunfarms Secured Credit Facility is determined based upon the leverage ratio.
The Pure Sunfarms Secured Credit Facilities also contain customary covenants, customary representations and warranties, affirmative covenants, financial covenants and events of default.
Summary of Cash Flows
For the Three Months Ended March 31,
(in Thousands)
2026
2025
Cash, beginning of period
$
86,252
$
24,631
Net cash flow provided by (used in):
Operating activities
(16,763
)
(3,767
)
Investing activities
(9,227
)
(1,549
)
Financing activities
(3,704
)
(1,384
)
Discontinued operations
—
(2,900
)
Net cash decrease for the period
(29,694
)
(9,600
)
Effect of exchange rate changes on cash
(1,031
)
93
Cash, end of the period
$
55,527
$
15,124
25
Operating Activities - Continuing Operations
For the three months ended March 31, 2026 and 2025, cash used in operating activities were ($16,763) and ($3,767), respectively. The operating activities for the three months ended March 31, 2026 consisted of ($24,390) in changes in non-cash working capital items and $7,672 in changes before non-cash working capital items, while operating activities for the three months ended March 31, 2025 consisted of ($5,729) in changes in non-cash working capital items and $1,962 in changes before non-cash working capital items. The decrease when comparing the change in non-cash working capital items for 2026 with 2025 was primarily due to income tax payments of approximately $15 million.
Investing Activities - Continuing Operations
For the three months ended March 31, 2026 and 2025, cash used in investing activities were ($9,227) and ($1,549), respectively. The increase in investing activities for the three months ended March 31, 2026 was primarily due to capital expenditures made for the conversion of the Delta 2 greenhouse for cannabis cultivation and VFN Phase II indoor cultivation facility in the town of Groningen.
Financing Activities - Continuing Operations
For the three months ended March 31, 2026 and 2025, cash used in financing activities were ($3,704) and ($1,384), respectively. For the three months ended March 31, 2026, cash used in financing activities consisted of share repurchases of ($6,368) and debt repayments of ($1,208), partially offset by proceeds from borrowings of $3,589 and $469 in proceeds from the exercise of warrants and options. For the three months ended March 31, 2025, cash flows used in financing activities consisted of debt repayments of ($1,384).
Contractual Obligations and Commitments
We expect to meet our contractual obligations and commitments using our working capital and our other resources described under “Capital Resources” above. Other than with respect to our long-term debt described above and our Canadian and Netherlands expansion projects, we currently do not have any material cash requirements in the near future.
Non-GAAP Measures
References in this Management’s Discussion and Analysis to “Adjusted EBITDA from continuing operations” are to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as further adjusted to exclude foreign currency exchange gains and losses, share-based compensation, gains and losses on asset sales and the other adjustments set forth in the table below. In addition, we present below “Adjusted EBITDA from continuing operations – Constant Currency” which excludes the effect of foreign currency rate fluctuations. See “—Constant Currency” below. Adjusted EBITDA from continuing operations and Adjusted EBITDA from continuing operations - Constant Currency are measures of operating performance that are not recognized under GAAP and do not have a standardized meaning prescribed by GAAP. Therefore, these non-GAAP measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that our non-GAAP measures should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of our performance. Our non-GAAP measures are used as additional measures to evaluate our operating and financial performance. Management believes that our non-GAAP measures are important measures in evaluating the historical performance of the Company because it excludes non-recurring and other items that do not reflect our business performance.
Reconciliation of Adjusted EBITDA from Continuing Operations to Net Income (Loss)
The following table reflects a reconciliation of Adjusted EBITDA from continuing operations to net income (loss), as presented by the Company:
For the Three Months Ended March 31,
(in thousands of U.S. dollars)
2026
2025
Net income (loss) from continuing operations
$
2,917
$
(1,699
)
Add:
Amortization and depreciation
4,303
4,439
Foreign currency exchange loss (gain)
548
(18
)
Interest (income) expense, net
(85
)
626
Provision for income taxes
1,668
983
Share-based compensation
376
145
Deferred financing fees
72
—
Loss on disposal of assets
118
—
Adjustments attributable to non-controlling interest
(27
)
70
Adjusted EBITDA from continuing operations (1)
9,890
4,546
26
(1) Adjusted EBITDA from continuing operations is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations presented may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA from continuing operations is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect the underlying business performance of the Company.
Reconciliation of Adjusted EBITDA from Continuing Operations for the Cannabis Segment to Segmented Net Income (Loss) for the Cannabis Segment
The following table reflects a reconciliation of Adjusted EBITDA from Continuing Operations for the Cannabis segment to net income (loss) for the Cannabis segment, as well as reconciliation to such measures for the Company on a Consolidated basis:
For The Three Months Ended March 31, 2026
(in thousands of U.S. dollars)
Cannabis
Other
Corporate
Total
Net income (loss) from continuing operations
$
4,780
$
(1,139
)
$
(724
)
$
2,917
Add:
Amortization and depreciation
3,502
777
24
4,303
Foreign currency exchange gain
75
80
393
548
Interest expense (income), net
19
176
(280
)
(85
)
Provision for income taxes
1,585
83
—
1,668
Share-based compensation
72
—
304
376
Deferred financing fees
72
—
—
72
Loss on disposal of assets
118
—
—
118
Adjustments attributable to non-controlling interest
(27
)
—
—
(27
)
Adjusted EBITDA from continuing operations (1)
10,196
(23
)
(283
)
9,890
For The Three Months Ended March 31, 2025
(in thousands of U.S. dollars)
Cannabis
Other
Corporate
Total
Net (loss) income from continuing operations
$
2,848
$
(2,428
)
$
(2,119
)
$
(1,699
)
Add:
Amortization and depreciation
2,938
1,457
44
4,439
Foreign currency exchange loss (gain)
(51
)
48
(15
)
(18
)
Interest expense (income), net
141
509
(24
)
626
Provision for (recovery of) income taxes
895
69
19
983
Share-based compensation
48
13
84
145
Adjustments attributable to non-controlling interest
70
—
—
70
Adjusted EBITDA from continuing operations (1)
6,889
(332
)
(2,011
)
4,546
(1) Adjusted EBITDA from continuing operations is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations presented may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA from continuing operations is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect the underlying business performance of the Company.
Adjusted EBITDA from Continuing Operations – Constant Currency
To supplement the consolidated financial statements presented in accordance with U.S. GAAP, we have presented constant currency adjusted financial measures for sales, cost of sales, selling, general and administrative, other income (expense), income (loss) from continuing operations, income (loss) from consolidated entities, net income (loss), and Adjusted EBITDA from continuing operations for the three months ended March 31, 2026, which are considered non-GAAP financial measures. We present constant currency information to provide a framework for assessing how our underlying operations performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period income statement results in currencies other than U.S. dollars are converted into U.S. dollars using the average exchange rates from the three month comparative period in 2025 rather than the actual average exchange rates in effect during the current period. All growth comparisons relate to the corresponding period in 2025. We have provided this non-GAAP financial information to aid investors in better understanding our performance without taking into account the effect of exchange rate fluctuations. The non-GAAP financial measures presented in this Quarterly Report should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP.
The tables below set forth certain measures of consolidated results from continuing operations on a constant currency basis for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 on an as reported and constant currency basis (in thousands):
27
As Reported
As Adjusted for Constant Currency
For the Three Months Ended March 31,
As Reported Change
For the Three Months Ended March 31,
Constant Currency Change
2026
2025
$
%
2026
$
%
Sales
$
50,238
$
39,680
$
10,558
27
%
$
48,287
$
8,607
22
%
Cost of sales
(29,252
)
(25,501
)
(3,751
)
(15
%)
$
(28,111
)
(2,610
)
(10
%)
Selling, general and administrative expenses
(15,942
)
(14,619
)
(1,323
)
(9
%)
$
(15,425
)
(806
)
(6
%)
Other (expense) income, net
(647
)
(688
)
41
6
%
$
(635
)
53
8
%
Income (loss) before taxes and equity method investment income
4,397
(1,128
)
5,525
490
%
$
4,116
5,244
465
%
Income (loss) from continuing operations
2,729
(2,111
)
4,840
229
%
$
2,553
4,664
221
%
Income (loss) from discontinued operations, net of tax
—
(5,004
)
5,004
100
%
—
5,004
100
%
Income (loss) including non-controlling interests
2,729
(7,115
)
9,844
138
%
$
2,553
9,668
136
%
Net income (loss) attributable to Village Farms International, Inc. shareholders
2,917
(6,703
)
9,620
144
%
$
2,733
9,436
141
%
Adjusted EBITDA - Constant Currency (2)
9,890
4,546
5,344
118
%
$
9,459
4,913
108
%
(1) Adjusted EBITDA from continuing operations- Constant Currency is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations- Constant Currency may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA - Constant Currency is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect the underlying business performance of the Company.
Recent Accounting Pronouncements Not Yet Adopted
No accounting pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Company’s condensed consolidated financial statements.
Critical Accounting Estimates and Judgments
Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Interim Financial Statements, which have been prepared in accordance with U.S. GAAP and are included in Part I of this Quarterly Report on Form 10-Q. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, including the potential future effects of macroeconomic trends and events, such as inflation and interest rate levels; supply chain disruptions; uncertainty from potential recessionary effects; climate-related matters; market, industry and regulatory factors; global events, and public health matters. These estimates form the basis for making judgments about our operating results and the carrying values of assets and liabilities, that are not readily apparent from other sources. Given that management estimates, by their nature, involve judgments regarding future uncertainties, actual results could differ materially from these estimates if conditions change or if certain key assumptions used in making these estimates ultimately prove to be inaccurate. Our accounting policies and critical accounting estimates are reviewed periodically by the Audit Committee of the Board of Directors.
As described in Note 5, Goodwill and Intangible Assets, in our Unaudited Condensed Consolidated Interim Financial Statements included in Part 1 of this Quarterly Report on Form 10-Q, during the three months ended March 31, 2026 and 2025, the Company considered qualitative factors in assessing for impairment indicators for the Canadian Cannabis reporting unit. As part of this assessment, the Company considered both external and internal factors, including overall financial performance and outlook. At March 31, 2026, the Company concluded that no impairment indicators existed as no events or circumstances occurred that would, more likely than not, reduce the fair value of the goodwill and intangible assets for its operating unit to be below their carrying amounts. At March 31, 2026, the carrying value of goodwill associated with our Canadian Cannabis reporting unit was $43.7 million and the carrying value of intangible assets associated with our Cannabis reporting unit was $22.5 million.
We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
28
Item 3. Quantitative and Qualitati ve Disclosures About Market Risk
Interest Rate Risk
As of March 31, 2026, our variable interest rate debt was primarily related to our Credit Facilities and Term Loans. Outstanding borrowings under our Credit Facility and Term Loans bear interest at either the (a) Secured Overnight Financing Rate (“SOFR”) or (b) Canadian Prime Rate, as defined in the agreement, plus an applicable margin. As of March 31, 2026, we had approximately $35,749 in aggregate principal amounts of our Term Loans with a weighted average interest rate of 5.7%. The current interest rates for outstanding revolving loans under our Credit Facility and Term Loans reflect basis point decreases of approximately 2.1% over the comparable period in 2025.
Our interest expense is affected by the overall interest rate environment. Our variable rate interest debt subjects us to risk from increases in prevailing interest rates. This risk increases in the current inflationary environment, in which the Federal Reserve may increase interest rates, resulting in an increase in our variable interest rates and related interest expense. An additional 50 basis point increase in the applicable interest rates under our Credit Facility and Term Loan would have increased our interest expense by approximately $43 and $50 for the three months ended March 31, 2026.
While we cannot predict our ability to refinance existing debt or the significance of the impact that interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis.
Foreign Exchange Risk
As of March 31, 2026 and 2025, the Canadian/U.S. foreign exchange rate was C$1.00 = US$0.7177 and C$1.00 = US$0.6966, respectively. If all other variables remain constant, an increase of $0.10 in the Canadian dollar would have the following impact on the ending balances of certain statements of financial position items at March 31, 2026 and 2025 with the net foreign exchange gain or loss directly impacting comprehensive income (loss):
March 31, 2026
March 31, 2025
Financial assets
Cash and cash equivalents
$
4,840
$
1,535
Trade receivables
3,862
4,180
Inventories
5,319
5,626
Prepaid and deposits
331
176
Financial liabilities
Trade payables and accrued liabilities
(4,621
)
(4,334
)
Loan payable
(2,865
)
(2,750
)
Net foreign exchange gain
$
6,866
$
4,433
Our exposure to foreign exchange risk and the impact of foreign exchange rates are monitored by the Company’s management but generally the Company tries to match its sales (trade receivables) and vendor payments (trade payables) such that the net impact is not material.
Other than the interest rate risk and foreign exchange risk discussed above, there have been no material changes to our market risks from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.