Investor Presentation October 2017 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 and management's discussion and analysis for the year ended December 31, 2016, 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 September 29, 2017) MANAGEMENT LISTING MARKET SHARES 52-WEEK PRICE & BOARD SYMBOL CAPITALIZATION OUTSTANDING HI/LOW OWNERSHIP TSX:VFF CDN$2.59 ~CDN$101M CDN$2.90 39.1M ~30% OTCBB:VFFIF (basic) CDN$1.26 41.4M (diluted)
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$209M INDUSTRY LEADER 30 YEARS 2016 EBITDA 1 IN PRODUCT C$12.6M 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 (4.8M sq. ft.) Greenhouses Ontario: 65 acres Texas VF Owned British Columbia: 25 acres Mexico: 4 facilities / 50 acres 130 acres Mexico (5.7M 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 June 30, 2017 FY 2016 Cash: $7.1 M (US$5.4 M) Revenue: $209 M (US$156 M) Long-Term Debt: $55.5 M (US$44M) EBITDA: $12.6M (US$9.4) Margin: 6% EBITDA (C$ MILLIONS) REVENUE (C$ MILLIONS) $14.1 $13.8 $15 $12.6 $250 $10.6 $209.1 $205.5 $10.1 $196.9 $200 $10 $158.9 $147.2 $150 $100 $5 $50 $0 $0 2013 2014 2015 2016 LTM Q2/17 2013 2014 2015 2016 LTM Q2/17 LTM Net Income of $4.2 M and LTM EPS of $0.10
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 ~600,000 kg by 2021 1 4.8M 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. Medical and non-therapeutic adult use markets. Does not include export market Source: Deloitte Report: “Recreational Marijuana – Insights and Opportunities. .
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 Pure $20M cash based products Sunfarms) Options for an additional 3.7 M sq. ft. (85 acres) of growing capacity
Leaders in High-Tech, Low Cost Greenhouse Growing 11 Passionate about growing Deep Greenhouse Combined 750 years of master grower experience from multiple growing regions around the world Growing Have achieved record production yields for the industry Experience Experts in agricultural product safety • Pesticide registrations • Biological control Advanced Leader in agricultural research and foremost in North America for developing improvements Greenhouse in greenhouse production technology Technology Applied Research Division continually making advancements in Climate Engineering, Plant Biology & Pathology, Entomology, and Ecology Cannabis is an agricultural product like any other
Advantages of Greenhouse Growing/Use of Existing Large-Scale Facilities 12 Greenhouse Growing Proven at a Greenhouse systems and controls create a good growing climate for the crop Large Scale in almost any location. Greater Energy Using all available natural sunlight results in significantly lower energy needs (far Efficiency less artificial lighting, with little to no heat extraction requirements). Use of Existing Large-Scale Facilities Speed to Existing state-of-the-art greenhouses are significantly quicker to bring into Market production than new construction. Management/growing teams at established greenhouses know their systems, have Experience is years of experience managing local climate conditions and, most importantly, have an Asset established labor workforces with an ingrained quality culture.
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 $2.25/gram 2 • Lower energy needs • Greater economies of scale • Allows for greater scale Existing state-of-the-art greenhouses with significant scale minimize capital costs 1. Includes depreciation expense. 2. Source: Public company filings and Office of the Parliamentary Budget Office - Legalized Cannabis: Fiscal Considerations. 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
Step-Function Future Growth Opportunity 15 4.8M sq. ft. Delta 3 Delta 2 Delta 1 1.1 M sq. ft. 2.6 M sq. ft. 1.1 M sq. ft. (25 acres) (60 acres) (25 acres) (110 acres) of total growing capacity conservative projected yield of 300,000 kg Pure Sunfarms has options for Delta 1 annually and Delta 2 greenhouses
Critical Path and Key Milestones 16 Commence Complete Initiate File Conversion Obtain Conversion Obtain Generate Cultivation Cultivation of Delta 3 to Cultivation of First Selling First License License Cannabis License Quadrant of License Cannabis Process Application Licensing Delta 3 to Revenue Standards Licensing Standards Expect to begin commercial June September October Target: 2017 2017 2017 February 2018 production prior to July 1, 2018 1. Subject to receipt of cultivation and sales licenses. Target: 75,000 kg of production in 2020
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