Good morning, ladies and gentlemen. Welcome to the Village Farms International Third Quarter 2023 Financial Results Conference Call. This morning, Village Farms issued a news release reporting its financial results for the third quarter ended September 30, 2023. That news release, along with the company's financial statements are available on the company's website at villagefarms.com under the Investors heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay, both by telephone and via the internet, beginning approximately one hour following completion of the call. Details of how to access the replays are available in today's news release. Before we begin, let me remind you that forward-looking statements may be made today during or after the formal part of this conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks, and uncertainties is contained in the company's various securities filings with the SEC and Canadian regulators, including its Form 10-K MD&A for the year ended December 31, 2022 and 10-Q for the quarter ended September 30, 2023, which will be available on EDGAR and SEDAR+. These forward-looking statements are made as of today's date. And except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead.

Thank you, Liz. Good morning, and thank you for joining us for today's call. Alongside me are Steve Ruffini, our Chief Financial Officer; Ann Gillin Lefever, Vice President of Corporate Affairs; and Patti Smith, Vice President of Corporate Control. As usual, Steve and I will review the operating highlights and financial results for the quarter before opening the call for questions. In the third quarter, I am pleased with the contributions from each of our businesses, especially the overall improvement in profitability and cash flow, which showcases our sustainable business model. We generated positive cash flow in every operating segment, representing net cash flow, unadjusted, not just from operations. Each of our Canadian and US cannabis businesses achieved a positive adjusted EBITDA and net income. Our fresh produce operations also experienced significant year-over-year improvement, with positive adjusted EBITDA. I'm pleased with the trends observed at the retail shelf, which are a testament to how well our efforts resonate with consumers. For October, we regained the number two share nationally in Canadian cannabis, having improved from the number four position at the beginning of the quarter. The consolidated results show a narrowing of our net loss to just $0.01 per share, continuing our trend of positive adjusted EBITDA and cash generation on a consolidated basis. These achievements are a direct result of the hard work, commitment, and contributions from our team members, and I am grateful for the Village Farms team's determination and confident in our ongoing execution. Focusing on our Canadian cannabis business, we are demonstrating what we believe to be the most sustainable and profitable model in the Canadian industry. Notable highlights for Q3 include another quarter of positive adjusted EBITDA and cash flow generation due to our focus on operational efficiencies. This allows us to reinvest organically in both the Canadian and international markets as they become accessible. For Village Farms, organic reinvestment is essential. We aim to build competitive advantages and capabilities to drive future growth, focusing on cultivation, production, branding, innovation, and consumer needs. Our reinvestment efforts this quarter included launching new brands and products, continuous quality improvements, and developing our international business, all contributing to our market share rankings and profitability. Our increased focus on new product introductions is resulting in profitable market share gains. We avoid chasing unprofitable market share, which sometimes requires prioritizing profitability and cash flow over top-line growth. The pace of new product launches I mentioned in our last call continued in Q3, with noteworthy introductions such as our new super brand, Super Toast, which caters to consumer preferences, along with new strains across our flower brands. The Soar brand has also been successful, quickly ranking among the top three premium dry flower brands nationally after its launch one year ago. One of Soar’s exclusive cultivars, Pineapple God, was one of the best-selling premium dry flower products nationally in Q3. We also launched Fraser Valley Strawberry Amnesia, the largest launch in BC history, which became the top SKU in Ontario. In addition to cash flow generation, our efforts are yielding results on the retail shelf. Year-to-date, we rank as the number three licensed producer nationally and have moved up to the number two position in October. In Q3, we were the second top-selling producer of dry flower nationally, trailing only a competitor who achieved their position through acquisitions. I have challenged our team to reclaim the top position in flower through organic growth, and the latest data indicates we are competitive for that number one spot. I also want to highlight the significant contributions to our market share growth by brand, product, and geography, including ROSE LifeSciences, which holds the number two market share position in Quebec and is the fastest growing producer in that province. ROSE has proven to be an incredibly successful acquisition in Canada, largely due to our strategic focus on driving shareholder value and the strong collaboration between the Pure Sunfarms and ROSE teams. In Q3, we also saw an increase in bulk non-branded sales, which reflects a strategic decision to return to this channel as supply dynamics improve profitability. This occurred alongside our return to the number two ranking nationally in branded sales, showcasing our leadership in cultivation, commercialization, and innovation for multiple growth opportunities. International sales contributed less in Q3 compared to the first two quarters of the year, reflecting the nascent stage of our industry. However, year-to-date international sales have increased significantly compared to last year, which highlights the growth potential we expect from these markets, typically characterized by higher margins than the Canadian market. As we expand our customer base in new geographies, we anticipate more predictable growth in this business. Recently, the Netherlands government provided positive updates regarding its legal recreational cannabis program, clarifying our plans for Leli Holland, one of the licenses permitted to participate in the program. We are moving forward and eager about the prospects of this fully integrated supply model. Turning to US cannabis, Balanced Health Botanicals has shown stable performance, generating positive net income, adjusted EBITDA, and positive cash flow once again this quarter. Last month, we launched a new visual brand for CBDistillery, which includes a revamped website that highlights wellness and product attributes. Despite challenges in the US CBD market, we are focused on achieving profitability and cash flow generation, maintaining our belief in the potential of this business with an improving regulatory environment. Now, moving on to fresh produce, our Q3 performance shows progress toward achieving sustainable long-term profitability. We are effectively managing the higher cost environment we are currently experiencing and making steady progress in managing the Brown Rugose virus through enhanced operating procedures and the introduction of virus-tolerant and resistance strains. We are also benefitting from higher pricing, resulting in positive adjusted EBITDA from fresh produce, contributing to an overall improvement of $5 million over Q3 last year and more than $22 million year-to-date. This marks a promising start for fresh produce, and our next goal is to achieve sustainable profitability and cash flow generation, which I am confident we can accomplish. I will now turn the call over to Steve for a more detailed financial review.

Thanks, Mike. As Mike noted, another quarter of solid performances from each of our businesses. Consolidated net loss for the quarter narrowed to $1.3 million or a $0.01 earnings per share from a net loss of $8.7 million or $0.10 per share for the same period last year. Notably, each quarter of this year has posted a sequential improvement over the prior. Consolidated sales for Q3 were $69.5 million compared with $71.1 million. The 2% decrease was largely the result of slightly lower cannabis sales compared to the same period last year, as well as the small negative impact on FX due to a stronger US dollar in Q3 2023 versus Q3 2022 as the USD is our reporting currency. We delivered another quarter of positive consolidated adjusted EBITDA in Q3 at $3.2 million, up $5.4 million improvement from the negative $2.2 million in Q3 last year. The improvement was driven mainly by fresh produce but also higher EBITDA from our US cannabis business as well as lower corporate costs. I will now turn to our Canadian cannabis results. As usual, I will discuss these in Canadian dollars to assist in year-over-year comparisons, absent the impact of exchange rate fluctuations. As Mike noted, our Canadian cannabis operations delivered another quarter of positive EBITDA, as well as positive cash flow and positive earnings. Total Canadian cannabis sales were 38.7 million compared with 39.8 million for Q3 last year. Breaking these down into its component parts, retail branded sales, which comprise about 80% of total Canadian cannabis sales for Q3 were $31 million, down slightly from 32.8 million in Q3 2022. International exports from Canada were down slightly to 900,000 compared to 1.1 million in Q3 last year. Export sales for the year-to-date were up 162% compared to the same period last year. As I mentioned last quarter, we are seeing an increase in inquiries in sales for non-branded or wholesale product due to what we believe is less availability, a consistent high-quality biomass as many producers have been moving to asset-light models or have sold through inventories to generate cash. That translated into higher non-branded sales for Q3 of $6 million, which was up from both $4.9 million in Q3 last year and $3.9 million for Q2 of this year. Pricing in this channel has improved. While demand is up, we continue to be very strategic and selective around our non-branded sales. Gross margin for Canadian cannabis for Q3 were 35% compared with last year's 32%. Last year's gross margins figure of 32% excludes the impact on our reported Q3 2022 margin of 27% due to the impact of acquisition accounting and inventory adjustments in our Q3 2022 results. The year-on-year increase is primarily due to a continuing lower book cost per gram as well as a slight favorable exchange rate fluctuation. As we have stated since our entry into the cannabis space, we will continue to improve our operational efficiencies as we learn, innovate and broaden our cannabis experience expertise. Selling and general, administrative expenses for Canadian cannabis for Q3 were $10.2 million, down from $10.5 million both in Q3 last year and Q2 this year. As a percent of sales, SG&A for Q3 was unchanged at 26%. Canadian cannabis adjusted EBITDA was $6.2 million compared with $6.7 million for Q3 last year as well as Q2 of this year. As already noted, adjusted EBITDA for the year-to-date is up 37% for a 400 basis point expansion into EBITDA margin to 16%. Canadian cannabis net income was $3.8 million, up significantly from net income of $200,000 for Q3 last year, more than double the $1.7 million for Q2 of this year. Cash generation after all capital expenditures and debt service payments was also positive at $5.1 million, up meaningfully from $1.3 million last year. As Mike noted at the onset, we have stabilized our US cannabis business and that is reflected in the financial results. US cannabis sales, which were generated entirely by Balanced Health Botanicals, were $5 million, down slightly from $5.1 million for Q3 last year. US cannabis gross margin was 64% compared with 69% Q3 last year, primarily due to the ongoing transition of our customers from tinctures to gummies, partly due to the success of our Synergy+ line. Adjusted EBITDA for US cannabis was positive $200,000, a slight improvement over what was essentially breakeven performance in Q3 last year. Finally, US cannabis generated net income of $79,000 as well as positive cash flow in the quarter. Turning now to fresh produce. We delivered a positive EBITDA quarter, which I had not projected when asked during our Q2 earnings call in August. This is a result of improved pricing in the later half of our third quarter and better volumes from our third party supply partners as we slowly but surely regain our volume after losing two key third party suppliers to the end of calendar year 2022. Produce sales were up slightly year-over-year to $35.7 million with a strong increase in sales from our own greenhouses being substantially offset by a decrease in supply partner revenues versus last year. Sales from our own production increased 28%, which was driven by a 26% increase in the average selling price and an 8% increase in pounds produced. While there is a lot of good operational news in our third quarter report, I do want to note that our VF Fresh gross margin was positive $1.5 million for a 4.2% gross margin, versus reporting gross margin losses in this business line every quarter since Q4 2021 when we reported a positive gross margin percentage of 6.8%. Fresh produce delivered another quarter of positive adjusted EBITDA nearly $800,000, that's a $5.7 million improvement over Q3 last year, which brings the year-to-date improvement to $22.5 million. As Q4 is typically a seasonally stronger quarter for fresh, we expect to achieve positive gross margin in EBITDA in Q4. I will note, however, that we are still dealing with some inflationary pressures on some input costs, which are challenging to pass on to our big box retail customers. Q3 net loss for fresh produce also improved significantly to a loss of $950,000 from a loss of $4.6 million for the same quarter last year. I am pleased to report a positive cash flow from fresh produce, which benefited from the receipt of a vendor settlement in Q3 that we reported in our earnings of Q2. As we look ahead to next year, we have made the strategic decision to deploy half of our Delta 2 facility not currently being used to grow cannabis to grow tomatoes, at least for the 2024 calendar year. Health Canada now permits other crops to be grown in licensed facilities, which was not allowed since the inception of the cannabis regulations. This pivot is due to a number of factors. One, the change in the regulations. Two, the continuing improvements in our cannabis yields, hence one of the key reasons for our cost of sales decreasing. And three, historically, our tomato operations in Delta 2 were profitable. The additional production is expected to contribute incremental cash flow and profitability to our VF Fresh division. This change will have no impact on our ability to meet expected cannabis demand, and is, in fact, a great opportunity for us to utilize what has been an idle area in our greenhouses to generate profitable revenues in this swing space now that regulations allow us to grow cannabis with other crops within a licensed facility.

Thanks, Steve. For 30-plus years, we have built Village Farms with a deep and reverent respect for cultivation as the core from which to build our business. Some refer to us as farmers. More recently, we were described as low-cost or value growers who had no clue how to build brands. This quarter and, in fact, 2023 year-to-date challenges this simplistic viewpoint. It shows how deep experience and resulting competitive advantage in cultivation is enabling, indeed funding, leadership roles in critical areas that separate the best consumer goods companies from everyone else. Getting cultivation right, as we are proving out, is providing us with bandwidth to innovate in other critical functions that are now driving sustainable, profitable market share and cash flow. Importantly, these are the same pillars of success that will be the foundation as we look to expand our Canadian model as new cannabis markets open around the world. It's a continuing growth opportunity we farmers are very excited about. So operator, I'll turn it over to you for any questions at this point. Thank you.

Our first question will come from Aaron Grey with Alliance Global Partners.

Mike, I want to kind of jump off where you left off in terms of kind of proving out that CPG capability and going on beyond just kind of the produce that you had mentioned. So if you can speak to how you're viewing brand architecture today, particularly with the launch of value brand Fraser Valley, which we understand was necessary to compete with some of the pricing pressure. Some of the third-party does imply some of the mix shift from Pearson Farms to Fraser. So I just want to get some color in terms of how you're seeing the premium mainstream value mix evolving within the category and then as well within your own portfolio as we continue to see the industry evolve here?

Yes, it's somewhat is testing. I mean, we really focus on consumer insights before we launch our brand. So clearly, with Fraser Valley, that was a segment, especially on the West Coast, but now resonates on the East Coast or at least in Ontario where we had sort of the number one launch there with Fraser Valley. And then the quality of Fraser Valley is just exceptional. So the quality and the pricing resonated well and it's become a strong player for us. But equally, we launched Soar a year ago, which is in that premium category and we never expected the premium category to be more than 5% or 10% with the current economic situation, but it's doing very well. And then third, that's put some pressure on our Pearson Farm brand. But I think it's an ebb and flow, and the economy has a lot to do with it. So we continue to innovate. The other side of it is really newness within those brands. And keep in mind that ROSE LifeScience has a number of brands that are resonating very well, not just in Quebec but in other provinces going forward. And now we continue to drive newness innovation. We need to know where we're going to be in 2025 right now with our launches. And it takes a lot of energy, a lot of effort, a lot of time and money, you have to continue to trial. And we're actually working on some very unique things, which we'll probably talk about in the next quarter going forward. But I hope that gives you some color.

And then same question for me on non-branded sales. We saw a nice uptick sequentially. So was that driven more by a one-off sale? Is there a new line of business you expect to generate from there on a reoccurring basis? You kind of alluded to that in prepared remarks. So just fair to say, some of that increase in mix. And then also on the other part of that on gross margin. Some of the pressure we saw in that sequentially, was that driven by some of the non-branded mix? So just how we think about that sales going forward in terms of new generating business on a reoccurring basis, and then how any type of gross margin impact we have there?

No, actually, we are very satisfied with the gross margin on our B2B business. We made a strategic decision at the beginning of this year to open up and prove our strength as a branded company to both our internal teams and external consumers and distributors. We've maintained a strong focus on branding, but we are also concentrating on cash flow generation. We decided to expand our B2B business because we have the capacity and the margins are good. The changes in margin are not driven by this. We've been observing the industry dynamics, with a lot of flower available, which has led some companies to shift to a lighter asset model. If we can enhance profitability, revenue, and sales, we're committed to pursuing that business. For international markets, which also fall under B2B, this aligns well with our strategy, and we will continue to move forward in B2B.

Our next question will come from the line of Eric Des Lauriers with Craig-Hallum.

I was hoping you could drill in a bit more into some of the changes in produce this quarter. So I was thinking of some moving parts here. One of the profitability drivers here is the increase in volumes it sounds like. I am wondering if you could also just help us to understand or perhaps just kind of drill in a bit more deeply into some of the operational improvements that you have made. I know recently you have kind of spoken about AI investments for produce. If you could kind of just give us an update overall on the operational improvements that you have made in that segment and sort of how to think about perhaps the difference in operating expenses versus cost of goods sold kind of going forward, where should we look to see some of that improvement going forward? Thanks.

Last year was the toughest we've experienced in produce in 33 years, primarily due to a combination of severe factors. We faced significant inflationary pressures that began after COVID, with diesel fuel costs skyrocketing as we shipped over a thousand trucks a year. Fertilizer prices surged by 65% to 70%, packaging costs rose across the board, and labor expenses increased drastically due to annual hikes from the Department of Labor, even affecting our foreign worker program. All of this occurred while we were managing challenges from viruses, bacteria, and insects, making it one of the most daunting situations I've seen. On a positive note, we're continuously developing more varieties that are tolerant to these viruses, with some even showing complete resistance after a long breeding process. We've also implemented AI systems that assist our growers by monitoring thousands of data points around the clock, which has been a tremendous advantage. This year, we invested nearly $4 million in new technology aimed at reducing labor costs, and much of that equipment is currently being installed, which will provide benefits in 2024. Our improved yields are a direct result of both reduced virus impacts and the efficiency gained from our AI system. Moreover, our profitability is closely tied to our third-party growers, but we unfortunately lost two due to the virus—one transitioned to berries, and the other went out of business. We're working to rebuild those relationships and are optimistic about our progress. I visited Mexico recently to strengthen our connections, believing that a combination of efforts will drive our success. We are committed to improving gross margins and recognize that achieving higher prices, rather than merely undercutting competitors, is essential for industry stability, which appears to be gaining traction among our peers. While the agricultural sector is subject to fluctuations, I believe we are moving in a positive direction. Achieving a $22 million turnover in a single year is no small feat, especially in agriculture. I hope this provides the clarity you were looking for, Eric.

Can you elaborate on that a bit more? Considering that we are dealing with commodities and pricing is not controlled by anyone, do you believe that once this new technology is fully implemented in 2024, you will have what it takes to operate a sustainably profitable business? Or are there additional areas you might explore to reduce costs before feeling secure that you are on solid ground with what you can control?

Yes, I do. The only uncertainty would be the direction of inflation. Our interest rates on loans have significantly increased over the years, and every area has been negatively impacted. Even though the interest rate we pay on our produce business isn’t directly linked to operational efficiencies, it is important. I believe 2024 will be a crucial year for us to achieve sustainable profitability moving forward. I feel confident about that.

And just last question from me. Just looking for an update on the potential sale of the greenhouse in Texas.

Don't have anything to report. We're working on it. We're not just sitting on our laurels. But I think, with the economy the way it is, some other things that have happened in the industry, we just have to be patient. But as you can see, what Steve reported, where our cash position is and our working capital. So that will eventually go, and it'll be a nice day that we'll have to reinvest hopefully in 2024.

Our next question comes from the line of Mike Regan with Excelsior Equities.

We've noticed that several of your competitors are beginning to reduce capacity in Canada, and it's intriguing that some of the cannabis swing capacity may be transitioned to growing tomatoes. Are you observing any effects from this reduced capacity that would allow you to potentially increase your own capacity, or is it more that your yield improvements mean you don't need to expand capacity and can instead maintain a lean operation to generate cash?

Yes, we're finally seeing change; sometimes there’s a domino effect. Perhaps 2024 will be a significant year regarding the excess capacity we've observed for many years in the Canadian market. Many companies have publicly announced they won't participate in the Canadian cannabis retail market and may focus on international or alternative cannabis markets. Some have signaled they will adopt a light asset model, which is acceptable. We have no judgment on that. However, if they are potential customers, we would be open to mutually beneficial partnerships because our primary goals are to achieve positive cash flow and increase revenues while pursuing our own expansion and profitable market share. We are indeed witnessing some shifts. The approach of many companies trying to generate cash without profitability is not sustainable, and change is necessary. We're committed to being part of that transformation. Additionally, we have excess capacity; as Steve mentioned, our yields are improving. We pointed out five years ago that cultivation is a continuous improvement process, and as you enhance your skills, you can increase yields, which in turn lowers costs. We are in a strong position with available square footage. Now that we've achieved profitability and a solid market share in Canada, we're focused on international expansion. Some companies may have ventured international before getting Canada right, but we opted to perfect our Canadian operations first. We're eagerly anticipating increased international market penetration in 2024, and we have the capacity to support that growth. We believe we can meet our own demand, engage in B2B opportunities, and significantly expand our international operations heading into 2024 and 2025.

As a quick follow-up, we've discussed how Ontario has altered the pricing structure for licensed producers and retailers, which benefits them. It's still early, but can you share any insights on how these pricing changes and volume shifts are manifesting in Ontario at this time?

As you point out, the markup changed at the end of September, so really no impact on Q3 at all. We have great transparency with the pricing structure in Ontario and some of the other provinces to date, so it's been a whole month. We have benefited from the change. We've decided as a company to keep our pricing the same at retail. So we effectively, the way it works, we'll realize a 100% of the margin decreased by OCS. So we'll see a 3% to 5% increase in our margins in OCS. What other LPs are doing or not doing, we think most will follow us. But it remains to be seen whether people will chase prices down or we have decided to keep the margin to ourselves.

Our next question will come from Eric Livshits with ATB Capital Markets.

So given the positive cash flow generation this quarter, I am just wondering, do you see this as somewhat of a turning point in cash flow generation for the company, or should we expect cash flows to kind of just be more bumpy in the quarters ahead? Thank you.

Well, I think they may be somewhat lumpy in the quarters ahead, but on the positive side, that's how focus is positive cash generation. If our market share slips, it’s because we don't deem it profitable market share. We are just not gonna chase it. Those days, I think, are over, and we could see what that's done to a number of companies just chasing unprofitable market share. So with our very parochial focus on profitable market share, I think we are going to stay positive. We are driving our costs down. Now it may not be steady every single quarter but probably won't be. But I think, overall, on an annual basis, we can say we are going to be to the positive side.

I would now like to turn the call back to Ann for another question.

Thanks, Liz. Before we conclude, we wanted to highlight a question that came in via email, related to the Canadian distribution model and the purchasing policies of large provincial buyers. It’s a great multi-part question from a clearly engaged shareholder that we appreciated getting. What the question boils down to is, whether we and other LPs are missing out on sales due to the ordering practices of the provincial buyers?

Thanks, Ann. And the answer to that, the short answer is no. We have excellent relationships with all the provinces and territories we supply. We know all boards are working hard to ensure market demand is met with their supply, and we are working closely with them to provide much more accurate forecasting and trying to maximize product penetration to meet their demand. So I think it is a synergistic opportunity for us. And it’s still a nascent industry. So we are not always getting it right, but we are working together and getting better together to the benefit of us but ultimately to the benefit of the consumer. So hope that suffices. So thank you, Liz, and thanks everyone for joining us today. We look forward to speaking to you on our next call going forward for year-end and fourth quarter. Thank you all.

This concludes today's conference call. Thank you for participating. You may now disconnect.