Investor Presentation May 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, 2017 and the most recent management's discussion and analysis for the quarter ended March 31, 2018, 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 May 15, 2018) MANAGEMENT LISTING MARKET SHARES 52-WEEK & BOARD PRICE SYMBOL CAPITALIZATION OUTSTANDING HIGH/LOW OWNERSHIP ~ C $246 M TSX:VFF C$5.79 42.5 M C $9.80 ~26% (basic) (basic) OTCQX: VFFIF ~ C $260 M 45.0 M C $1.60 (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 2017 REVENUE 1 C$206 M INDUSTRY LEADER 30 YEARS 2017 EBITDA 1 IN PRODUCT C$9.6 M QUALITY & SAFETY IN OPERATION 1. Converted to Canadian dollars at $0.77.
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: 35 acres Mexico: 4 facilities / 70 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 March 31, 2018 FY 2017 Cash: C$5.0 M (US$3.9 M) Revenue: C$206 M (US$158 M) Long-Term Debt: C$49.7 M (US$35.9 M) EBITDA: C$9.6 M (US$7.4 M) Margin: 5% EBITDA (C$ MILLIONS) REVENUE (C$ MILLIONS) $14.1 $13.8 $15 $12.6 $250 $209.1 $205.7 $10.1 $196.9 $9.6 $200 $10 $158.9 $147.2 $150 $100 $5 $50 $0 $0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2017 Net Income of C$5.0 M and EPS of C$0.13
VILLAGE FARMS’ 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 shortfall of supply (potential yield of 300,000 kg ) 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 A vertically High-tech, low-cost Cannabis industry compliance greenhouse growing & integrated large- and licensing expertise agricultural product scale, low-cost safety expertise Cannabis IP, including portfolio supplier of high- of high-quality genetics Initial Contribution: 1.1 M sq. ft. (25 acre) quality cannabis Initial Contribution: greenhouse (leased to C$20 M cash 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 production ramp up and ongoing 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 $2.10/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.
Phase 1: Delta 3 Greenhouse 14 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 15 Commence Complete Initiate File Conversion Conversion Commence Obtain Obtain Cultivation Cultivation of Delta 3 to of Full Commercial- Cultivation Selling 250,000 ft 2 License License Cannabis Scale License License Process Application Licensing (Quadrant 1) Production Standards of Delta 3 ✓ ✓ ✓ ✓ ✓ ✓ June September October March April May Summer 2017 2017 2017 2018 2018 2018 2018 2018: Additional focus on product development and development of marketing strategy
Delta 3 Greenhouse: Quadrant 1 Conversion 16 Meticulous attention to the growing environment and systems, processing areas and production ramp up Growing system with automation proven in different crops to provide optimal efficiencies Industry-leading HVAC systems based on extensive climate management experience, with technically advanced data systems High-tech light deprivation/supplementation systems with individual control of 17 grow rooms Configured for continuous weekly harvesting year round
Phased Conversion Expedites Cash Flow Generation: Accelerated Plan 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 Installation of Estimated Demand ~250,000 sq. ft. lighting by 2021 : 18,750 kg/yr Feb Oct. July 1 Sept May Sept Oct 2017 2018 2019 2020 Target Prod’n Target 7,000 - 8,000 kg (6 mos. post July 1) 46,000 – 52,000 kg 75,000 kg Conversion Commercial Production Expect entire 1.1 M sq. ft. of Delta 3 facility to be in production in Q4 2018
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