Good morning, ladies and gentlemen. Welcome to the Village Farms International Second Quarter 2025 Financial Results Call. This morning, Village Farms issued a news release reporting its financial results for the second quarter ended June 30, 2025. 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 1 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 are 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, 2024, and 10-Q for the quarter ended June 30, 2025, 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.

Well, thank you, Tanya. And good morning and thank you for joining us today. With me are Steve Ruffini, our Chief Financial Officer; Ann Gillin Lefever, our Chief Operating Officer; Patti Smith, our Corporate Controller; and Sam Gibbons, Senior Vice President, Corporate Affairs. I'll begin with a brief summary of recent events and our second quarter highlights, and then I'll hand the call over to Steve before some last closing comments. The second quarter was transformational. It was a transformational quarter for Village Farms, just to be clear, operationally and financially with record levels of profitability that demonstrate the improving earnings power of our business and continued success in scaling a profitable global cannabis enterprise. During the quarter, we announced and then quickly closed the transaction to privatize about 1/3 of our produce assets and operations through the formation of a new partnership with proven private investment partners. Most on this call are familiar with the details of the new Vanguard partnership, and they are available in our various communications and filings, so I won't repeat them here. But I do want to take the opportunity to reiterate what all this means for Village Farms, our future prospects, our partners and team members and, of course, our shareholders. First, we believe we have dramatically improved the long-term upside potential of our 36-year legacy in the produce industry. As a private company with access to significant financial resources that will add -- that will add additional acquisitions in the future. Our commitment and experienced partners have created significant value for their shareholders in the past, and we are positioned to participate in this renewed opportunity through our near 38% equity ownership interest. Second, we believe Village Farms has transformed into one of the most attractive platforms for revenue growth and margin…

Thanks, Mike. With the produce privatization transaction closing on May 30, some of our produce assets were privatized and are now classified as discontinued operations. The reported financial results for comparative prior periods have been adjusted accordingly. Our ongoing investment in the new produce partnership is recorded as an investment on our balance sheet and the operational results of the produce partnership are not included in our financial results. We recorded a gain on the sale of these produce assets, net of tax of $19.1 million during the quarter. Results from continuing operations are composed of our cannabis and Clean Energy businesses, neither of which changed following the transaction as well as the results of our Canadian produce operations that we retained. I'll start with a review of our consolidated results. Consolidated net sales increased 12% to $59.9 million, mainly due to growth in our Canadian Cannabis segment and the first full quarter of sales from our recreational cannabis sales in the Netherlands. The increase in sales was matched by improved profitability across all segments. On a continuing operations basis, net income improved to $9.9 million or $0.09 per share compared to a net loss of $16.6 million or $0.15 per share in Q2 of last year. Consolidated adjusted EBITDA from continuing operations, excluding our gain on sale, was $17.1 million compared with $2.9 million in Q2 of last year. Our adjusted EBITDA margin of 28.6% of sales compared to 5.4% of sales in Q2 of last year, which, as Mike mentioned, is a record performance for the company. Turning now to our cannabis businesses. I will start with our Canadian cannabis segment, which I will discuss in Canadian dollars for comparative purposes. Total net sales were CAD 61.4 million or a 10% increase versus Q2 last year, driven mainly…

Thanks, Steve. So in my closing remarks, once again, our Q2 results reflect an exciting beginning for Village's next chapter, which is one we believe we can generate significant value for our shareholders. For anyone listening to today's call may be new to our story, I'd like you to know that I am firmly aligned with our shareholders as I remain Village Farms' founder and largest shareholder, and we are intensely focused on protecting and enhancing our shareholders' interest. We have been hypersensitive to dilution, and we moved mountains recently to avoid a reverse stock split and retain our compliance with NASDAQ's listing requirements. And by the way, we've done this twice in the last 2 years without any share consolidation, and now our future has never looked brighter. I encourage anyone new to our story or our industry to take a look at our comparison of shares outstanding compared to our peers over the past several years. I think you'll find it pretty quickly that we take our fiduciary responsibility to our shareholders quite seriously. In closing, we have transformed our company into a powerful global cannabis platform with a proven team of cannabis leaders, an unmatched portfolio of assets, a track record of operational success, steadily expanding exposure to both international medical and recreational markets and a tremendous upside potential from our ownership position in our private equity-backed produce partnership and expansive U.S.-based greenhouse assets and operations. While we are currently benefiting from multiple catalysts unlocking value for our stakeholders, but we also see significant potential for additional long-term value creation through these additional pathways to value creation, which provide investors with a unique upside potential in an investment opportunity. We have retained full control of Canadian greenhouse assets in Delta, British Columbia as well as our Permian…

[Operator Instructions] Our first question will be coming from Aaron Grey of Alliance Global Partners.

Congrats on the strong quarter on all fronts. First question for me. I just want to speak to your decision to expand Delta 2 facility, obviously speaks to your confidence in the market opportunities. So based on the quarter, obviously, it appears a lot of this was driven by potential international market opportunities. But if you could offer some more color in terms of what went into the decision. I know it's something you've been thinking about for some time. So -- is it more so a combination of what you're seeing on the international markets, also wanting to maintain where you hold within the Canadian market today? Is it more your branded sales versus B2B opportunities? And then maybe more broadly in terms of pricing expectations that you're seeing going forward for the next few years, given it won't be coming online until 2027 for a full ramp?

Thanks, Aaron. Look, for one, it's a very low-dollar investment for us. So we're not building new assets. Our business model was predicated on converting existing assets. So this is not like we're going out and building a new $100 million facility. This is a USD 7 million investment. The asset is there, and we're just converting it to cannabis. So that risk and investment is fairly low for us. Secondly, the way we've designed our facilities, we have many, many separate grow rooms. So -- so with that, we can alter the amount of capacity coming out. We can decrease grow rooms by 3, 4, 5, we can increase it. And we've demonstrated that we've always been prudent with matching supply with demand, unlike many others. And you've seen that oversupply in Canada, which is really from the smoke and mirror days of Canada back in 2019 and '20. We were never really caught up in that. So we're not really worried about it. There's always ebb and flow to supply and demand, and we can adjust accordingly. Right now, though, we're not fulfilling our commitments. We're probably leaving around $50 million of revenue on the table right now. So we have to manage our business and fulfill our customers needs. And we're not concerned with the risk of being in an oversupply position.

That's really helpful color there. And on that front, I will switch to international for a bit. Really strong quarter there coming in above your expectations already hitting the mark for tripling for the year in the first half. So maybe just some more color in terms of some of the strong drivers in 2Q for international. I think you mentioned Germany was a standout also within the U.K. And then for the back half guidance, I think you said 2H would roughly match 1H. So maybe speaking towards what you just alluded to in terms of having to allocate some products. Is that just your need to maybe manage to why maybe it doesn't hold to the 2Q rate but holds to the 1H rate in 2H. So just any kind of commentary in terms of what drove 2Q and the expectations for 2H for international.

Okay. I'm going to let Ann comment. Go ahead, Ann.

So I think we did purposely say Germany and U.K. and onboarding new customers has been the driver. We're our growth aligns with where the growth of international markets is hottest. So we're there, and the team has done a great job of working very closely with some trusted distributor partners that we've been working with for some time. And I think it's also important that Canada is really leading this initiative, Canadian LPs, and we're proud to be part of that group. Your second question with respect to outlook, we're geared up for continued growth. We're not going to guide as to what it's going to be. We were obviously off on our first half guidance. But the one thing I would just say is it's an area where a lot of folks are getting involved. And so we're going to continue to participate in the growth of the market, and there will be others that we know are adding capacity to be there with us. So that's important. And then concurrently, we'll continue to support our retail partners in Canada. That's a critical and very much an important channel for us as well.

And our next question will be coming from Doug Cooper of Beacon Securities.

Terrific work on the quarter. Steve or Mike, I just want to confirm the numbers by segment, if I could. So Canadian cannabis, USD 11.9 million of EBITDA, let's call it U.S. cannabis, small positive. The Netherlands, USD 1.2 million, that gets me $13.1 million. You announced $17.1 million of EBITDA. So I guess the question is -- what was it, vendor settlement, $4.3 million. Would -- do I exclude that? I'm assuming I exclude that on an ongoing basis. So that would imply EBITDA from the produce sector in Canada was $2.1 million.

Well, the adjusted EBITDA from continuing operations for produce was $6.4 million and includes the $4.3 million, because the vendor settlement was prior losses for those continuing asset. All of our greenhouses experienced the brown -- and this settlement pertains to the assets that we retained.

But that's nonrecurring, correct?

It's nonrecurring, but I also said that these assets that we've retained generally have their highest revenue and highest EBITDA in the third quarter.

Right. Okay. So just maybe you can just -- in general then, if we're looking to model the company out, it just has -- going forward, it's just going to be D1 essentially, right? So on an annual basis, you expect that to be.

In 2026, yes. For 2025, D2 is a contributor -- a positive EBITDA contributor to our business.

Yes, yes, I'm just thinking about 2026. So 2026 and beyond, this is a net income positive business on an annual basis, correct?

Yes. Every year [Technical Difficulty] gross year.

And as well, the $9.9 million of profit, that's pretax, correct?

Yes.

Okay. And that also includes the settlement gain, correct?

Yes.

Okay. Okay. I just want to touch on maybe just what Aaron talked about just in the Canadian cannabis market. We've seen a number of your competitors continue to report revenue down year-over-year in the Canadian cannabis rec market. Who's left? And maybe that speaks to, Mike, your positive supply-demand dynamics that you referred to.

Well, Doug, my mom always said, if you can't say anything, good, don't say anything at all. So I'd rather not talk about our competitors.

Okay. Maybe just a comment about the dynamics, how the Canadian rec market dynamics look right now. Like the $40 million of excess?

I'll let Ann talk.

I'll help you out here, Doug. So funny enough, even though we've seen pricing strengthen in the wholesale markets for well over a year now, we're only seeing it stabilize, which is good news in the Canadian retail environment, but we're not yet seeing pricing at the retail market level, which tells us there's still plenty of supply or suppliers to the market who are probably trying to take cash proceeds out or take market share. I think it is fair, though, that among those that are reporting, you are seeing improving profitability. You're seeing folks focus on the portfolio and where they're making profits versus not. And I think that's -- to use an adage, you're starting to see the cream rise to the top within the Canadian producers. So I think there's a lot of good players that we respect. We love having that group with us in the market. And I think if we can just start to see some normal market dynamics, supply/demand and price respond, I think that will be a positive. And I think that's important as Canada continues to lead the global market.

Okay. Just as we look forward into 2026 or 2027, international sales as a percentage of total cannabis -- Canadian cannabis revenue, would you think it looks somewhat similar to what you just reported in Q2? Or what do you think the SKU is not included in the Netherlands business?

I would say the easiest bet is to say it could be where it is. The challenge is that the growth is still a little bit hotter overseas than in Canada. So keeping pace with market growth or exceeding it would mean you'd kind of have a similar mix in 2027...

If I can add some color. I mean, you have -- at some point, Canadian LPs have to be profitable. I mean the day is going to come when you're measuring the fundamentals and you just can't keep raising capital and continuing to fund operations. Like any other normal business, you have to be profitable at some point. So the question is how long can they go continuing with ATMs and so on to continue to flourish or continue to exist, I should say. So who knows what the next couple of years, the dynamics will be in Canada. We'll have to wait and see.

Okay. And just on the balance sheet, obviously, a tremendous improvement there. Are you seeing any M&A opportunities, whether it be in the Netherlands or Canada?

Well, first of all, we are so proud that we are predominantly growing organically. We always have everything we're doing on the international markets, we've done organically. We haven't purchased any companies to get where we are in international today because I think it's easy for companies to purchase a company and then spend a huge amount on M&A and then be able to say, well, I'm #1 market share, I have these revenues. We don't do that. But that's not to say that M&A isn't on our list. It would have to be very accretive or very strategic. And so far, we continue to not see that happening. I think we're the partner of choice for a lot of the European companies we're working with. So M&A is not off the table. Certainly, in the Netherlands. If we look at the U.S., I think M&A will play a role in the U.S. when and if we can enter that market. But right now, in Canada, unless there's a very strategic reason tied to maybe technology or something else, I just don't see us looking at that in the near term.

Okay. Final one for me, just on market looks to be up significantly this morning based on some reporting that descheduling is sort of returning to favor in the U.S. administration. Thoughts on that and thoughts on what the implication is for your Texas greenhouse that didn't -- that remains in the portfolio?

Well, look, the largest market in the world is the U.S., and I think everyone is feeling the momentum today. It's not if, it's just when. And we have worked very hard over the last couple of years to continue to look at options A, B and C for our entry point to the U.S. outside of what we're currently in, which is on the cannabinoid side because that is legal and accepted by the NASDAQ. Schedule III comes, I think it's a stepping stone to SAFE Banking. I still believe that a lot of the U.S. model is experimental. And what I mean by that is if it changes and at some point, even interstate commerce occurs, I think at that time, large-scale, low-cost, just like the winning formula in Canada and other places has to prevail. So I think there'll be a change in the market. Again, with our Texas assets to go out and spend hundreds of millions of dollars to build the capacity we currently have the optionality on, we're ready to go there, whether that's a stepping point in Texas. And Texas alone could be a very huge market as our entry point. And as I said earlier, M&A is on the table for the U.S. market. But we -- the timing, like we were very frustrated with the last administration making campaign promises and doing nothing. But on the other hand, the timing really worked out for us because it continued to strengthen our position in Canada as a top-tier player. And more importantly, it allowed us in those last few years to have a footprint in the first adult-use recreational market in Europe, which could be which we could leverage up that into other countries in the future should they go rec. Secondly, it allowed us to take a very commanding position in the international medicinal market without being diluted on our U.S. strategy. So that foundation is in place now. We just got to keep executing and building upon it. And the timing is actually better for us as the U.S. looks to open up. So we feel from a timing perspective, we're in a very good place.

And just to be clear, the U.S. federal rescheduling, does that have to follow suit in Texas? Or can they somehow opt out of that?

Well, it's interesting. Texas as the Republic of Texas, they do have a mandate that they have to follow federal guidelines. So it's been kind of nebulous for lack of a better term in Texas these days. But they do have to follow those guidelines. And there's going to be a lot of swinging going on until it stabilizes in the next couple of years. So Texas would have to follow that. And the other thing on descheduling to 3 as medical, it could open up the doors for us to export medical marijuana from Canada to the United States, which is a whole another conduit that no one else is really thinking about right now. So we think we're in a good way. So -- but for Texas, we love Texas. We've been there, as I said in my remarks, 20 years. We'll see what happens with the TCUP licensing here in the next month. So -- and we've always been patient. I think that's one of the virtues of Villages, we're patient. We don't react to we know what the game rules are, what the regulations are. We just -- we're not here to waste money and have sun cost. So yes, I feel like we're in a good position be it Texas or the U.S. as a whole.

[Operator Instructions] Our next question will be coming from Frederico Gomes of ATB Capital Markets.

Congrats on the great quarter here. First question on your Canadian cannabis gross margins, very strong there. I guess, on the high end of your 30% to 40% range. But do you think there is upside to those margins, considering what you're seeing in international? Could we be at a point here where we could see your target range moving above that 40% level?

With the SKU mix and the customer mix, it's possible. With respect to some markets, we believe could be more lucrative like the U.K. Again, that's an emerging market, and we'll see, but that certainly is possible. We could be reporting higher numbers.

I would also just say that as we add unit volume to our existing footprint, that improves our cost base. And so you're seeing some of that in the margins as well. And the team on the ground has worked very hard on continuous improvement as well. So those are also contributing. And just the last thing I would add is the price equation in some of our newer markets is still settling out. And so I think we're being prudent by just keeping this price -- this gross margin range as we know the story of Canadian cannabis price compression, and we're prepared for it.

Appreciate that. And then just talking about growth, I guess, for the second half of this year. I guess just thinking that you're seeing more demand than you can supply at this point, which I think is a good problem to have. But in terms of drivers for growth in the second half, how should we think about that?

Well, I think the second half, we feel -- we just don't want to get ahead of ourselves. That's the main thing. So we're basically saying that for the remainder of the year, we think we'll be tracking pretty similar and with maybe the exception of Leli, who's continuing to ramp up. As you know, we just got in production. We're approaching fully ramp-up and diversifying the SKUs there. So we think we'll see continuous growth there and coupled with quadrupling our capacity for next year, we see that as a strong ramp-up internationally. But I think right now, we're pretty constrained for anything more than we've seen in the first half.

I would now like to turn the call back to Mike for closing remarks.

Well, thanks, everyone, for participating today. We really appreciate listening to our second quarter results. We are excited about the future and very much look forward to further communication and reporting our third quarter here in November. Thank you, operator.

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