Village Farms Sales Jump 12 Percent

Key Points

• GAAP earnings per share rose to $0.24 in Q2 2025, a sharp turnaround from last year and well above analyst expectations for both GAAP EPS and revenue.

• GAAP revenue increased 12.0% to $59.9 million in Q2 2025, also exceeding consensus GAAP estimates.

• GAAP net income climbed to $26.5 million in Q2 2025, reflecting record profitability and strong cash generation.

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Village Farms International (NASDAQ:VFF), a diversified greenhouse grower and international cannabis producer, reported GAAP results for Q2 2025 on August 11, 2025. The company posted GAAP earnings per share of $0.24, a sharp swing from a GAAP net loss last year to net income and a substantial GAAP EPS beat over the analyst consensus of a slight loss. GAAP revenue reached $59.9 million, also exceeding the GAAP average forecast of $56.4 million. Record GAAP net income and an increase in adjusted EBITDA margin were central themes, driven by a focused shift to higher-margin cannabis exports and the streamlining of the company's produce operations. The quarter stands out as a major turning point for Village Farms following its strategic exit from most of its legacy produce segment. Overall, the period marks a significant improvement in both financial performance and operational execution over the prior year.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Strategic Priorities

Village Farms International is rooted in controlled-environment agriculture, initially building its expertise in growing greenhouse tomatoes, cucumbers, and peppers. In recent years, it has pivoted toward cannabis production in both Canada and international markets, including a presence in the growing medical and recreational sectors.

The company organizes its business into four primary segments: produce, Canadian cannabis, U.S. cannabis, and clean energy. Key success factors include maximizing greenhouse efficiency, adapting rapidly to changing regulations, and moving the company’s cannabis sales toward premium, higher-margin export opportunities while maintaining brand leadership in its home markets.

Quarter in Review: Financial and Operational Highlights

This quarter, Village Farms underscored a new phase following the closing of its large produce segment divestiture. The remaining produce operations, now much smaller, generated $8.6 million in GAAP sales and produced a $4.3 million GAAP profit, helped by a vendor settlement. The company retained a 37.9% equity stake in the new Vanguard Food LP, giving it indirect exposure to the produce industry, while freeing up management and capital to focus on cannabis.

The Canadian cannabis business remained the largest and most profitable segment, showing notable gains in both gross margin and profitability. Net sales in Canada were $44.5 million (GAAP), up 9%, with gross margin rising to 39% from 26% in the prior year. Net income for the Canadian cannabis segment was $6.5 million (GAAP), while adjusted EBITDA (non-GAAP) more than doubled year over year, reflecting a planned shift toward higher-margin products and increased international sales. Canadian cannabis cash flow from operations increased 233% year-over-year to $18.0 million. Importantly, the company maintained a top-three overall market share in Canada year-to-date through July 2025 and maintained its number one spot in dried flower sales, demonstrating continued brand strength despite reducing lower-margin product sales.

International sales increased 690% year-over-year, with medical cannabis exports from Canada surged 690% year-over-year, reaching C$16.6 million in international sales. This performance allowed the company to reach its full-year export target within the first half of FY2025. Management attributed much of the margin expansion in Canada to the increase in international sales, with planned declines in retail-branded sales (down 20%) and non-branded wholesale sales decreased 15% (in Canadian dollars) offset by the rapid growth in international exports.

The U.S. cannabis segment stabilized profitability, even as net sales (GAAP) declined slightly to $3.8 million. Gross margins improved. This segment, which focuses on hemp and cannabidiol (CBD) products, has been hampered by regulatory uncertainty and limited growth catalysts, but cost management improved results. In the Netherlands, the company launched adult-use cannabis products, quickly capturing over 80% of eligible coffee shops in the regulated pilot market and generating $2.5 million in net sales with positive net income and adjusted EBITDA, despite being in an early ramp-up stage. The clean energy segment posted profits from landfill gas-to-energy projects.

Across the business, Village Farms reported a GAAP end-of-quarter cash balance of $60.0 million, up from $24.6 million as of Q4 2024. Operating cash flow from continuing operations in the first half of FY2025 was $22.3 million, supporting continued investment in greenhouse expansion and new cannabis cultivation. Total debt at quarter’s end stood at $39.1 million as of June 30, 2025, and the company noted improved lending terms after refinancing core cannabis loans.

Business Model, Product Families, and Recent Moves

Village Farms is leveraging its greenhouse production expertise to support both its produce and cannabis operations. The remaining Canadian produce facilities now mainly supply the new Vanguard partnership, with the option for eventual conversion to cannabis as regulations evolve. The company’s Canadian cannabis portfolio, sold under brands such as Pure Sunfarms, remains focused on dried flower (which refers to traditional smokable cannabis buds) and has been supported by added product innovations, like new windowed packaging, and research on the consistency of tetrahydrocannabinol (THC) levels.

Cannabis exports from Canada, primarily intended for medical use in regulated overseas markets, are now a core growth driver. These exports are high-margin. In the Netherlands, the company is among the limited licensed suppliers for adult-use cannabis in a pilot market that captures significant coffee shop demand. U.S. operations supply hemp-derived CBD wellness products in select states, facing slow but steady recovery. Meanwhile, the clean energy arm provides a recurring revenue stream from a royalty arrangement based on landfill-derived natural gas, utilized for power and heat generation.

The company received $40 million in cash proceeds from the produce sale, with future upside tied to its Vanguard Food LP equity. Investments in greenhouse expansion are intensifying, including the Delta 2 facility in Canada, which is set to add significant cannabis production capacity in 2026, with Board approval for an expansion expected to yield an incremental 40 metric tons of annualized cannabis production. Notably, new investments were made to ramp up the next phase in the Netherlands, with completion of the Phase II facility expected in Q1 2026 and projected to quintuple current production capacity, further extending the company’s international reach.

One-time events included the vendor settlement that boosted results in produce, as Village Farms continues to reinvest cash into business development and growth initiatives. No unusual charges or major impairments were cited for the quarter.

Outlook and Focus Areas for Investors

Looking ahead, management sees the trends established in the second quarter as sustainable. The company anticipates maintaining strong performance in international cannabis exports over the rest of fiscal 2025 and expects its Netherlands operation to deliver much higher output after the next expansion phase (the Phase II facility in Groningen, expected to be completed in Q1 2026) becomes operational. Management expressed continued focus on profitable organic growth and maintaining balance sheet strength as the company invests in new opportunities.

Investors will want to monitor several key factors in coming periods: the pace of development in new international markets like the Netherlands, and another important area is the company’s ability to defend its Canadian cannabis market share year-to-date through July 2025, despite planned retail sales reductions. Village Farms’ exposure to the produce segment now comes through its minority stake in Vanguard Food LP, with value generation dependent on the success of this new partnership.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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