Investor Presentation January 2018 September 2017
Forward looking statements 2 This presentation contains certain "forward looking statements". These statements relate to future events or future performance and reflect the Company's expectations regarding its growth, results of operations, performance, business prospects, opportunities or industry performance and trends. These forward looking statements reflect the Company's current internal projections, expectations or beliefs and are based on information currently available to the Company. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict" , "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and Canadian sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Company's current annual information form for the year ended December 31, 2016 and the most recent management's discussion and analysis for the quarter ended September 30, 2017, which is available electronically at www.sedar.com. Actual results may differ materially from any forward looking statement. Although the Company believes that the forward looking statements contained in this presentation are based upon reasonable assumptions, you cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this presentation, and other than as specifically required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances.
Market Facts 3 (As of January 19, 2018) MANAGEMENT LISTING MARKET SHARES 52-WEEK & BOARD PRICE SYMBOL CAPITALIZATION OUTSTANDING HIGH/LOW OWNERSHIP ~ C $344 M TSX:VFF C$8.19 42.0 M C $9.80 ~27% (basic) (basic) OTCBB: VFFIF ~ C $369 M 45.0 M C $1.40 (diluted) (diluted) Listed on the TSX since 2006
Industry Leader in Large-Scale, High Tech, Low-Cost Greenhouse Growing 4 MASTER GROWER OWN TEAM WITH TECHNOLOGICALLY 10.5 M sq. ft. 750 YEARS ADVANCED (240 ACRES) OF GREENHOUSE FACILITIES OF EXPERIENCE GREENHOUSE CAPACITY 2016 REVENUE 1 C$209 M INDUSTRY LEADER 30 YEARS 2016 EBITDA 1 IN PRODUCT C$12.6 M QUALITY & SAFETY IN OPERATION 1. Converted to Canadian dollars at $0.75.
Premium Produce Grown In the Most Sustainable, Resource-Efficient Manner 5 Vertically-integrated provider of premium produce to grocers across North America Greenhouse growing produces a more Strategically located greenhouses and consistent, higher quality product that customers logistics and distribution chain ensure demand and that commands a premium price the freshest, highest quality produce Exclusive varieties address consumer demand Marquee customers across in the specialty growth segment the U.S. and Canada
Strategically Located Operations and Distribution Network 6 British Columbia VF Owned Ontario 3 facilities / 110 acres Partner (4.8 M sq. ft.) Greenhouses Ontario: 70 acres Texas VF Owned British Columbia: 25 acres Mexico: 4 facilities / 50 acres 130 acres Mexico (5.7 M sq. ft.) Our logistics and distribution chain ensures the freshest, highest-quality produce reaches consumers across Canada and the U.S.
Financial Profile 7 (All figures in Canadian dollars unless otherwise stated) At September 30, 2017 FY 2016 Cash: C$5.5 M (US$4.3 M) Revenue: C$209 M (US$156 M) Long-Term Debt: C$55.0 M (US$43 M) EBITDA: C$12.6 M (US$9.4 M) Margin: 6% EBITDA (C$ MILLIONS) REVENUE (C$ MILLIONS) $14.1 $13.8 $15 $12.6 $250 $11.3 $211.8 $209.1 $10.1 $196.9 $200 $10 $158.9 $147.2 $150 $100 $5 $50 $0 $0 2013 2014 2015 2016 LTM Q3/17 2013 2014 2015 2016 LTM Q3/17 LTM Net Income of C$6.4 M and LTM EPS of C$0.16
PURE SUNFARMS CANNABIS JOINT VENTURE: A TRANSFORMATIONAL OPPORTUNITY Low Cost, Industry-Leading Scale with Speed To Market
Ability to Capitalize on Market Opportunity 9 Transformational Market Need Opportunity Canadian Cannabis demand Apply low-cost, high tech estimated to grow to greenhouse growin ing expertis ise ~734,000 kg by 2021 1 4.8 M sq. ft. of existing greenhouse capacity Projected near-term shortfall of (potential yield of 300,000 kg ) supply based on current capacity and market demand Potential to address substantial portion of the market 1. “Legalized Cannabis: Fiscal Considerations” – Office of the Parliamentary Budget Officer, Government of Canada (2016)
Complementary Partners 10 50% Ownership 50% Ownership Joint Venture: Pure Sunfarms Large-scale, high-quality, low-cost High-tech, low-cost cannabis production Cannabis industry compliance greenhouse growing & and licensing expertise agricultural product Pure Sunfarms will safety expertise Cannabis IP, including portfolio sell dried cannabis of high-quality genetics Initial Contribution: and develop and sell 1.1 M sq. ft. (25 acre) Initial Contribution: its own extraction- greenhouse (leased to $20 M cash based products Pure Sunfarms) Options for an additional 3.7 M sq. ft. (85 acres) of growing capacity
Leaders in High-Tech, Low-Cost Greenhouse Growing 11 750 years of combined master grower experience from around the world 30-year proven track record of operating mega-scale greenhouses Decades as an industry leading, fully integrated produce distributor Cannabis is an agricultural product like any other
The Pure Sunfarms Advantage 12 Pure Sunfarms greenhouses will be operated by veteran Village Farms personnel Extensive experience Use of existing, Long-established, developing, launching and state-of-the-art greenhouses experienced workforce ramping up new crop lowers costs and provides of ~600 at BC facilities operations (with record yields) speed to market Agricultural product Access to low-cost electricity Proven operating systems safety expertise/North and no requirement to build and decades of experience America leader in pesticide co-generation managing the local climate registrations Significantly de-risked operations
GOAL: Be the Low-Cost, High-Quality Cannabis Producer in Canada 13 Ingrained culture of high-quality, low-cost production built over decades conservative target of <$1.00/gram 1 Greenhouse growing provides significant capital and operating cost efficiencies vs. industry avg. of $2.20/gram 1 • Lower energy needs • Greater economies of scale • Allows for greater scale Conversion of existing state-of-the-art greenhouses with significant scale minimize capital costs 1. Four largest LPs – ACB, APH, LEAF, WEED. Source: Public company filings and independent analyst. Village Farms is one of the lowest-cost greenhouse growers of tomatoes & cucumbers in Canada/U.S.
Substantial Production with Significant Expansion Opportunity 14 D3: 1.1 M ft 2 (24 MW secured) D2: 1.1 M ft 2 (24 MW secured) D1: 2.4 M ft 2 Estimated Demand by 2021: ~734,000 kg 1 Estimated Demand Estimated by 2021 : Existing Industry Capacity: ~120,000 kg Pure Sunfarms has options for Delta 1 and Delta 2 Pure Sunfarms has options for Delta 1 and Delta 2 to potentially address substantial portion of overall market 1. “Legalized Cannabis: Fiscal Considerations” – Office of the Parliamentary Budget Officer, Government of Canada (2016) .
Phase 1: Delta 3 Greenhouse 15 1.1 M sq. ft. of greenhouse capacity (25 acres) conservative projected yield of 75,000 kg annually potential to generate revenue of 10-15x that of produce projected EBITDA margins of >50% vs. mid-single digits for produce in Canada Significantly more profitable use of existing greenhouse assets
Critical Path and Key Milestones 16 Commence Complete Initiate File Conversion Conversion Generate Obtain Obtain Cultivation Cultivation of Delta 3 to of Full First Cultivation Selling 250,000 ft 2 License License Cannabis Cannabis License License Process Application Licensing of Quadrant 1 Revenue Standards of Delta 3 ✓ ✓ ✓ Expect to begin June September October Target: Target: commercial production 2017 2017 2017 February 2018 March 2018 prior to July 1, 2018 Target: 75,000 kg of production in 2020
Delta 3 Greenhouse: Phased Conversion Expedites Cash Flow Generation 17 Quadrant 4 ~250,000 sq. ft. 18,750 kg/yr Quadrant 3 ~250,000 sq. ft. 18,750 kg/yr Quadrant 2 ~250,000 sq. ft. 18,750 kg/yr Quadrant 1 Estimated Demand Installation of ~250,000 sq. ft. lighting by 2021 : 18,750 kg/yr July 1 March Oct. March 1 Oct Sept. 2018 2019 2020 2017 Target Sales 7- 8,000 kg (6 mos. post July 1) 35 – 40,000 kg 75,000 kg Conversion Commercial Production
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