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What to Like (and Dislike) About Village Farms' Q4 Results

By Keith Speights - Updated Mar 16, 2021 at 12:13PM

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The company's revenue soared, but not by enough to make analysts happy.

Village Farms International (VFF 4.10%) has been a monster winner so far in 2021. The greenhouse grower's shares have skyrocketed 72% year to date as of the market close on Monday. But that momentum might have hit a speed bump.

The company announced its fourth-quarter and full-year results before the market opened on Tuesday, and the cannabis stock slid 9% in early trading. Here are the highlights from Village Farms' quarterly update.

Shadow of a dollar sign over marijuana leaves.

Image source: Getty Images.

By the numbers

Village Farms reported revenue in the fourth quarter of $47.4 million, a 43% year-over-year jump. This result came in well under the consensus analysts estimate of $53.1 million. 

The company announced fourth-quarter net income of $7 million, or $0.12 per share. This reflected significant improvement over the net loss of $7.2 million, or $0.15 per share, in the prior-year period. It also beat the average analyst estimate for EPS of $0.01.

Village Farms generated a loss of $0.05 per share in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). This compares to an adjusted EBITDA loss of $7.50 in the prior-year period.

Behind the numbers

The big story for Village Farms in the fourth quarter was its Pure Sunfarms cannabis operation. Village Farms completed the acquisition of Pure Sunfarms in November 2020.

Pure Sunfarms' gross sales more than doubled year over year in the fourth quarter to $22.7 million, and net sales soared 86% to $17.3 million. The business delivered its eighth consecutive quarter of profitability (excluding a $3.3 million noncash charge related to its acquisition of the remaining interest in Pure Sunfarms). It also achieved its ninth consecutive quarter of positive adjusted EBITDA.

This growth isn't surprising considering the commercial success of Pure Sunfarms' cannabis products. It ranked as the top-selling brand among dried flower products at the Ontario Cannabis Store for the fourth-quarter and full-year 2020.

But Village Farms still generates more than half of its total revenue from its greenhouse produce business. Produce sales rose nearly $1.5 million primarily due to higher prices for tomatoes.

Looking ahead

Village Farms' strong stock performance in February stemmed in part from the company's announcement that it launched its first cannabis-infused edible products in Canada. Look for solid growth in the Canadian Cannabis 2.0 derivatives market this year. 

The company plans to begin cultivation in its Delta 2 greenhouse in the second half of 2021. This will enable Pure Sunfarms to meet growing demand for its products. 

CEO Michael DeGiglio also said that Village Farms expects to meaningfully advance its international cannabis strategy this year. He added that the company would pursue "select emerging markets with significant long-term potential."

Despite Village Farms' mixed fourth-quarter results, its prospects appear to remain strong.

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