Village Farms International, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing reports annual results; it does not provide a clear standalone Q4 income statement. Financial figures below are in U.S. dollars unless stated otherwise.
Business context
Village Farms operates greenhouse produce, Canadian cannabis, U.S. cannabinoid/CBD, and clean-energy businesses. During 2021, it acquired 100% of Balanced Health Botanicals (CBD products) and 70% of Rose LifeScience (Quebec cannabis), and owned 100% of Pure Sunfarms. The Company also held a 65% interest in VF Hemp, which was not cultivating hemp pending FDA clarity on CBD.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $268.0 million | $170.1 million |
| Gross profit | $45.2 million; 16.9% margin | $11.0 million; 6.4% margin |
| SG&A | $46.4 million; 17.3% of revenue | $19.1 million; 11.2% of revenue |
| Net income (loss) attributable to Village Farms | $(9.1) million; $(0.11) per diluted share | $11.6 million; $0.19 per diluted share |
| Adjusted EBITDA (non-GAAP) | $14.0 million | $7.4 million |
| Cash flow from operations | $(39.6) million | $5.7 million |
| Cash and cash equivalents at year-end | $53.4 million | $21.6 million |
| Working capital | $111.5 million | $29.5 million |
| Total debt, including drawn line of credit | $61.8 million | $66.1 million |
Year-end restricted cash was $5.3 million, bringing cash, cash equivalents and restricted cash to $58.7 million. Current maturities of long-term debt were $11.4 million; long-term debt was $50.4 million. The $7.8 million line-of-credit balance is included in current liabilities and total debt. The Company reported total assets of $566.9 million and total liabilities of $142.1 million.
Material changes versus prior year
- Revenue rose 58%, principally reflecting a full year of consolidated Pure Sunfarms results versus two months in 2020, plus the late-2021 acquisitions of Rose and Balanced Health. Produce supply-partner revenue increased, while revenue from Village Farms’ own produce declined.
- Gross margin increased to $45.2 million, led by Canadian cannabis. Own-produce gross margin fell by $10.9 million, as lower tomato prices and softer retail purchases weighed on results.
- SG&A more than doubled, reflecting acquired businesses, acquisition costs, regulatory and legal expenses, and higher public-company compliance costs.
- Net results shifted to a loss from income. FY2020 included a $23.6 million Pure Sunfarms acquisition gain and a $4.7 million settlement gain; FY2021 did not. FY2021 also included a $1.4 million adjustment for Texas storm-related utility costs in the company’s Adjusted EBITDA reconciliation.
- Operating cash flow fell to a $39.6 million outflow, largely due to a $47.1 million use of cash from changes in non-cash working capital, including higher inventory and receivables.
Outlook, commentary, risks and unusual items
- Management said cash, operating cash generation and credit facilities were expected to cover working capital, debt service, contractual obligations and planned capital expenditures for the next 12 months. This is forward-looking and depends on business performance and access to financing.
- Canadian cannabis remains exposed to industry oversupply, price compression, competition, changing provincial distribution and strict licensing and marketing rules. Pure Sunfarms’ branded share grew, but average selling prices for branded flower excluding pre-rolls fell 4%; bulk non-branded flower and trim prices fell 57%.
- Produce faces commodity-price volatility, customer concentration, rising labor and energy costs, weather and crop risks, and cross-border trade exposure. The top ten produce customers represented approximately 59% of produce revenue in 2021.
- The Company was out of compliance with one FCC Term Loan financial covenant at December 31, 2021; FCC waived the breach after year-end. Management and the auditor identified a material weakness in controls over covenant calculations. Management concluded internal control over financial reporting was ineffective; the auditor’s financial-statement opinion was unqualified, but its ICFR opinion was adverse.
- Debt facilities contain financial and other covenants, and a future breach without a waiver could accelerate repayment. Pure Sunfarms’ facilities mature in February 2024; the FCC Term Loan matures in April 2025.
- The Delta renewable natural gas project was delayed by permitting and zoning processes. The Company expected approvals in Q2 2022 and commercial start-up in mid-2023; these are expectations, not guarantees.
- Village Farms holds an option, exercisable at its discretion through September 2026, to acquire 80% of Netherlands-based Leli Holland. The filing says the option had not been exercised by the filing date; exercising it would require additional investment and project development.
- Rose’s sellers retained 30%. The agreement provides Village Farms with call-option rights, including a potential partial purchase window in 2022–2023 and a broader window in 2024–2025; the sellers have specified put rights. Pricing is tied to Rose’s adjusted EBITDA, with certain liquidity-event minimums.
- COVID-19 negatively affected Canadian and U.S. cannabis operations and could continue to affect results. Other material risks include FDA uncertainty for CBD, U.S. federal/state cannabis law conflicts, acquisitions and integration, and possible future financing needs.
Important facts for investors to verify
- Whether operating cash flow improves as the elevated inventory and receivables are converted to cash, and how much of Adjusted EBITDA translates into cash available for debt service.
- Progress on remediating covenant-calculation controls, and compliance with the FCC covenant at the next annual test.
- Underlying profitability excluding acquisition-related accounting effects and FY2020 gains; Adjusted EBITDA is a non-GAAP measure and is not directly comparable across issuers.
- Acquisition performance and integration costs for Balanced Health and Rose, including the potential cost and timing of acquiring Rose’s remaining interest.
- Actual permitting, financing and construction milestones for the Delta RNG project, and whether the Leli option is exercised.
- Reported cash figures distinguish $53.4 million of cash and cash equivalents from $58.7 million including restricted cash; confirm liquidity available for general use.