Investor Presentation February 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 February 2, 2018) LISTING SYMBOL PRICE MARKET CAPITALIZATION SHARES OUTSTANDING 52-WEEK HIGH/LOW MANAGEMENT & BOARD OWNERSHIP TSX:VFF OTCBB: VFFIF C$7.18 ~ C $304 M (basic) ~ C $323 M (diluted) 42.3 M (basic) 45.0 M (diluted) C $9.80 C $1.50 ~27% Listed on the TSX since 2006
Industry Leader in Large-Scale, High Tech, Low-Cost Greenhouse Growing 4 OWN 10.5 M sq. ft. (240 ACRES) OF GREENHOUSE CAPACITY TECHNOLOGICALLY ADVANCED GREENHOUSE FACILITIES MASTER GROWER TEAM WITH 750 YEARS OF EXPERIENCE INDUSTRY LEADER IN PRODUCT QUALITY & SAFETY 30 YEARS IN OPERATION 2016 REVENUE 1 C$209 M 2016 EBITDA 1 C$12.6 M 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 consistent, higher quality product that customers demand and that commands a premium price Exclusive varieties address consumer demand in the specialty growth segment Strategically located greenhouses and logistics and distribution chain ensure the freshest, highest quality produce Marquee customers across the U.S. and Canada
Strategically Located Operations and Distribution Network 6 British Columbia VF Owned 3 facilities / 110 acres (4.8 M sq. ft.) Texas VF Owned Ontario Partner Greenhouses Ontario: 70 acres British Columbia: 25 acres 4 facilities / 130 acres (5.7 M sq. ft.) Mexico Mexico: 50 acres 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) FY 2016 Revenue: C$209 M (US$156 M) EBITDA: C$12.6 M (US$9.4 M) Margin: 6% REVENUE (C$ MILLIONS) At September 30, 2017 Cash: C$5.5 M (US$4.3 M) Long-Term Debt: C$55.0 M (US$43 M) EBITDA (C$ MILLIONS) $250 $200 $150 $147.2 $158.9 $196.9 $209.1 $211.8 $15 $10 $13.8 $10.1 $14.1 $12.6 $11.3 $100 $5 $50 $0 2013 2014 2015 2016 LTM Q3/17 $0 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 Market Need Canadian Cannabis demand estimated to grow to ~734,000 kg by 2021 1 Projected near-term shortfall of supply based on current capacity and market demand Transformational Opportunity Apply low-cost, high tech greenhouse growing expertise 4.8 M sq. ft. of existing greenhouse capacity (potential yield of 300,000 kg) 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 High-tech, low-cost greenhouse growing & agricultural product safety expertise Initial Contribution: 1.1 M sq. ft. (25 acre) greenhouse (leased to Pure Sunfarms) Joint Venture: Pure Sunfarms Large-scale, high-quality, low-cost cannabis production Pure Sunfarms will sell dried cannabis and develop and sell its own extractionbased products 50% Ownership Cannabis industry compliance and licensing expertise Cannabis IP, including portfolio of high-quality genetics Initial Contribution: $20 M cash 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 Use of existing, state-of-the-art greenhouses lowers costs and provides speed to market Extensive experience developing, launching and ramping up new crop operations (with record yields) Long-established, experienced workforce of ~600 at BC facilities Proven operating systems and decades of experience managing the local climate Access to low-cost electricity and no requirement to build co-generation Agricultural product safety expertise/north America leader in pesticide 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 Greenhouse growing provides significant capital and operating cost efficiencies Lower energy needs Greater economies of scale Allows for greater scale conservative target of <$1.00/gram 1 vs. industry avg. of $2.20/gram 1 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 by 2021: Estimated Existing Industry Capacity: ~120,000 kg Pure Sunfarms has options for Delta 1 and Delta 2 to Pure potentially Sunfarms address has substantial options for portion Delta of 1 and overall Delta market 2 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 Initiate Cultivation License Process File Cultivation License Application Commence Conversion of Delta 3 to Cannabis Licensing Standards Obtain Cultivation License Complete Conversion of Full 250,000 ft 2 of Quadrant 1 of Delta 3 Obtain Selling License Generate First Cannabis Revenue June 2017 September 2017 October 2017 Target: February 2018 Target: March 2018 Expect to begin commercial production 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 ~250,000 sq. ft. 18,750 kg/yr Target Sales Sept. Installation of lighting Estimated Demand by 2021: March 1 July 1 Oct March Oct. 2017 2018 2019 2020 7-8,000 kg (6 mos. post July 1) 35 40,000 kg 75,000 kg Conversion Commercial Production
Positioned to be a Leading Producer in Canada 18 Pure Sunfarms can quickly become one of the largest producers of cannabis in Canada Existing LPs will attempt to meet demand through greenfield development requiring hundreds of millions of dollars Existing and Announced Future Capacity of Top 10 Public LPs by Funded Future Capacity 388,000 Existing Capacity (kg) Future Capacity (kg) 300,000 227,000 194,000 123,000 89,000 76,000 62,000 58,000 57,000 54,000 Pure Sunfarms (VFF JV) Market Cap (C$M) n/a $4,894 $4,378 $2,360 $571 $1,590 $660 $1,397 $260 $527 $815 Capacity Growth 12x 28x 22x 34x 7x 15x 12x 45x 21x 2x At Feb. 2/18. Market cap fully diluted. Source: Research analyst estimates/company filings based on last reported capacity and disclosed growth strategy. Pure Sunfarms will be a large-scale producer of cannabis
Compelling Value Proposition 19 Comparative Value: 2020 Planned Production Capacity Top 10 LPs by planned 2020 produciton 2 ~71,000 kg average Planned Production 37,500 kg 50% of Delta 3 production 150,000 kg 50% of production at all three facilities ~$1,745 M Market Cap 1 ~$323 M ~$323 M average ~$24.60 average Market Cap/Gram of Planned Production ~$8.60 ~$2.15 1. Fully diluted. At Feb 2, 2018. 2. WEED, ACB, APH, THCX, LEAF, FIRE, MJN, WMD, OGI, TRST. PLUS produce business
Illustrative Financial Impact 20 Targeted Output in 2020: 75,000 kg (Delta 3 Only) Price $8.00/gram $6.00/gram $4.00/gram $2.00/gram Pure Sunfarms Revenue $600.0 M $450.0 M $300.0 M $150.0 M Pure Sunfarms EBITDA (Target production cost: $1.00/gram) $525.0 M $375.0 M $225.0 M $75.0 M Village Farms Share of EBITDA (50%) $262.5 M $187.5 M $112.5 M $37.5 M Multiple of Village Farms 2016 EBITDA 21x 15x 9x 3x Total Potential Output: 300,000 kg (All Three Facilities) Price $8.00/gram $6.00/gram $4.00/gram $2.00/gram Pure Sunfarms Revenue $2,400.0 M $1,800.0 M $1,200.0 M $600.0 M Pure Sunfarms EBITDA (Target production cost: $1.00/gram) $2,100.0 M $1,500.0 M $900.0 M $300.0 M Village Farms Share of EBITDA (50%) $1,050.0 M $750.0 M $450.0 M $150.0 M Multiple of Village Farms 2016 EBITDA 84x 60x 36x 12x Significantly more profitable use of existing greenhouse assets
JV Provides Strengthened Ability to Execute on Produce Growth Strategy 21 Village Farms will continue to be one of the largest, highest-quality, lowest-cost greenhouse growers of produce serving national grocers in the U.S. and Canada Organic initiatives to expand capacity at U.S. operations Well positioned to lead consolidation of a fragmented industry Only greenhouse grower in North America to have completed a major acquisition
Investment Proposition: A Significantly De-Risked Cannabis Opportunity 22 30 year track record of success as a large-scale, lowcost grower of high-value agricultural products Positioned to be one of the largest producers in Canada with the goal and capability to be the low-cost producer Use of existing greenhouse facilities for cannabis production provides advantage of speed to market to address near-term supply shortfall Solid underlying produce business Key JV Metrics 50% Ownership of Pure Sunfarms Annual Output: Delta 3 Facility: 75,000 kg All Facilities: 300,000 kg Production Cost: <$1.00/gram EBITDA Margin: >50% Growth opportunities in both existing produce and cannabis JV
Investor Presentation February 2018 September 2017