Village Farms International (VFF) Reports Strong Second Quarter 2019 Results

The following results reflect the Company’s proportionate share of the Pure Sunfarms joint venture operations, as this is the basis on which management bases its operating decisions and performance.  For a reconciliation to the results in accordance with International Financial Reporting Standards (“IFRS”) refer to the “Reconciliation of IFRS to Proportionate Results” as presented below and in Management’s Discussion & Analysis (“MD&A”).

(in thousands of U.S. Dollars unless otherwise indicated)

Financial Highlights
(All amounts in U.S. Dollars unless otherwise indicated.)

Cannabis

For the three months ended June 30, 2019, there were no comparable results for the three months ended June 30, 2018 as no production existed.

The Company’s 50% share of sales of Pure Sunfarms for the three months ended June 30, 2019 was $12,122.  Total Pure Sunfarms sales consisted of close to 8,000 kilograms sold at an average selling price of over $3 per gram (CAD$4 per gram) during the three months ended June 30, 2019.

The Company’s 50% share of cost of sales of Pure Sunfarms for the three months ended June 30, 2019 was $1,978.  The cost per gram for the three months was about half of that from the three months ended March 31, 2019, the decrease is due to higher production and a reduction of seasonal cost (i.e., electricity) resulting in a cost per gram of approximately $0.49 per gram (CAD $0.65).

The Company’s 50% share of selling, general and administrative expenses of Pure Sunfarms for the three months ended June 30, 2019 was $893.

The Company’s 50% share of net income for the three months ended June 30, 2019 was $13,962 compered to a loss of ($237) for the three months ended June 30, 2018.

The Company’s 50% share of EDITDA for the three months ended June 30, 2019 was $9,447 compared to ($275) for the three months ended June 30, 2018.

For the six ended months ended June 30, 2019, there were no comparable results for the six months ended June 30, 2018 as no production existed.

The Company’s 50% share of sales of Pure Sunfarms for the six months ended June 30, 2019 was $17,523.  Total Pure Sunfarms sales consisted of close to 11,600 kilograms of flower and trim during the six months ended June 30, 2019, at an average sales price of approximately $3 per gram (CAD $4 per gram).

The Company’s 50% share of cost of sales of Pure Sunfarms for the six months ended June 30, 2019 was $3,887 (based on total grams sold of close to 11,600 kilograms), or approximately $0.67 per gram (CAD$0.82 per gram).

The Company’s 50% share of selling, general and administrative expenses of Pure Sunfarms for the six months ended June 30, 2019 was $1,393 and primarily consisted of personnel costs.

Income from operations for the Company’s 50% share of Pure Sunfarms was $22,509 for the six months ended June 30, 2019.  This income was generated by continuing strong wholesale pricing and six-month cost of sales of cost of $0.62 (or CAD$0.82) per gram sold.

The Company’s 50% share of net income for the six months ended June 30, 2019 was $18,260 versus a loss of ($275) for the six months ended June 30, 2018.

The Company’s 50% share of EBITDA for the six months ended June 30, 2019 was $12,671 versus ($502) for the same period in 2018.

Produce

For the three months ended June 30, 2019 compared to the three months endedJune 30, 2018.

Sales for the three months ended June 30, 2019 decreased by ($710), or (2%), to $41,329from $42,039 for the three months ended June 30, 2018.  The decrease in sales for the three months ended June 30, 2019 is primarily due to a decrease in the Company’s production of (9%) partially offset by an increase in supply partner revenue of 14%.

Cost of sales for the three months ended June 30, 2019 increased by ($3,113), or (8%), to $44,263 from $41,150 for the three months ended June 30, 2018; primarily due to an increase of ($1,447) in contract sales cost (due to the increased volume) and an increase in cost per pound from the Texas facilities.  The decrease in production caused an increase in cost per pound as a majority of the production costs are fixed so as production decreases cost per pound increases.

EBITDA for the three months ended June 30, 2019 decreased by ($3,690) from the three months ended June 30, 2018, primarily as a result of a decrease in income from operations, due to a decrease in sales and an increase in cost per pound for product produced as the fixed costs were spread over less pounds.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018.

Sales for the six months ended June 30, 2019 increased by $1,690, or 2%, to $73,219from $71,529 for the six months ended June 30, 2018. The increase in sales for the six months ended June 30, 2019 is primarily due to an increase in supply partner revenue of 16% partially offset by a decrease in the Company’s production of (12%).

Cost of sales for the six months ended June 30, 2019 increased by $8,792, or (13%), to $75,845 from $67,053 for the six months ended June 30, 2018; primarily due to an increase of 25% in contract sales cost and an increase in cost per pound from the Texasfacilities due to lower production.

EBITDA for the six months ended June 30, 2019 decreased by ($7,650), from the six months ended June 30, 2018, primarily as a result of a decrease in income from operations, which resulted in decreased sales and an increase in cost per pound for product produced as the fixed costs were spread over less pounds.

Non-IFRS Measures

References in this MD&A to “EBITDA” are to earnings before interest, taxes, depreciation, amortization, foreign currency exchange gains and losses on translation of long-term debt, unrealized gains on the changes in the value of derivative instruments, unrealized change in biological asset, stock compensation, and gains and losses on asset sales.  EBITDA is a cash flow measure that is not recognized under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of the Company’s performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows. Management believes that EBITDA is an important measure in evaluating the historical performance of the Company.

Reconciliation of Net Income to EBITDA

The following table reflects a reconciliation of net income to EBITDA, as presented by the Company:

Reconciliation of IFRS to Proportionate Results

The following tables are a reconciliation of the IFRS results to the proportionate results (which include the Company’s proportionate share of the Pure Sunfarms operations):

Conference Call

Village Farms’ management team will host a conference call Tuesday, August 13, 2019 at 11:00 a.m. ET (8:00 a.m. PT) to discuss its second quarter 2019 financial results.  Participants can access the conference call by telephone by dialing (647) 427-7450 or (888) 231-8191, or via the Internet at: https: //bit .ly /334YIJG.

For those unable to participate in the conference call at the scheduled time, it will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial (416) 849-0833 or (855) 859-2056 and enter the passcode 1676417 followed by the pound key. The telephone replay will be available until, August 20, 2019at midnight (ET).  The conference call will also be archived on Village Farms’ website at http:// villagefarms .com /investor-relations/investor-calls.

About Village Farms International, Inc.

Village Farms is one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada. Village Farms produces and distributes fresh, premium-quality produce with consistency 365 days a year to national grocers in the U.S. and Canada from more than nine million square feet of Controlled Environment Agriculture (CEA) greenhouses in British Columbia and Texas, as well as from its partner greenhouses in British Columbia, Ontario and Mexico.  The Company is now leveraging its 30 years of experience as a vertically integrated grower for the rapidly emerging global cannabis opportunity through its 50% ownership of British Columbia-based Pure Sunfarms Corp., one of the single largest cannabis growing operations in the world.  The Company also intends to pursue opportunities to become a vertically integrated leader in the U.S. hemp-derived CBD market, subject to compliance with all applicable U.S. federal and state laws, Village Farms has established two joint ventures, Village Fields Hemp USA, LLC, and Arkansas Valley Green and Gold Hemp LLC, for multi-state outdoor hemp cultivation and CBD extraction and plans to pursue controlled environment hemp production at its Texasgreenhouse operations, which total 5.7 million square feet of production area, subject to legalization of hemp in Texas.

Cautionary Language

Certain statements contained in this press release constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Forward-looking statements may relate to the Company’s future outlook or financial position and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected production, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the Company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Company, Pure Sunfarms, the greenhouse vegetable industry or the cannabis and hemp industries are forward-looking statements. In some cases, forward-looking information can be identified by such terms as “outlook”, “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, “objectives”, or the negative or grammatical variation thereof or other similar expressions concerning matters that are not historical facts.

Although the forward-looking statements contained in this press release are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the Company’s control, that may cause the Company’s or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors contained in the Company’s filings with U.S. and Canadian securities regulators, including as detailed in the Company’s annual information form and management’s discussion and analysis for the year-ended December 31, 2018.

When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future results, performance, achievements, prospects and opportunities. The forward-looking statements made in this press release only relate to events or information as of the date on which the statements are made in this press release. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.