Thank you, Liz. Good morning, everyone, and thank you for joining us for our second quarter results.

With me today are Stephen Ruffini, our Chief Financial Officer, and Ann Gillin Lefever, our Chief Operating Officer, and Sandy Gibbons, our Senior Vice President, Corporate Affairs and Investor Relations. I will begin with my customary view of our highlights from the quarter, then Stephen will review the segments and financials in more detail before I make some last closing comments.

Our second quarter results continue to demonstrate the strength of our expanding global cannabis platform, driven by record cannabis revenues as we continue growing in target markets and product categories in the countries we currently operate in. We delivered our fifth consecutive quarter of positive net income and earnings per share since we privatized our legacy produce business last year.

As we noted in this morning's press release, we're having a record year of production in our Delta, British Columbia facilities, which has contributed to stronger margin performance. Consolidated net sales growth was strong, and we achieved record cannabis harvest yields from our Delta facilities through the first half of 2026, without including the first harvest from our Delta 2 expansion.

Record yields, combined with greater operating efficiencies, have resulted in lower cost of production, and favorable sales mix also helped drive nearly 10 percentage points of year-over-year gross margin expansion, which translated to strong operating leverage as adjusted EBITDA and net income both meaningfully outpaced total sales growth. I will also note that when excluding a one-time $4.3 million vendor settlement, which was tied to our legacy produce business, our EBITDA received in the second quarter of last year as a comparison, consolidated adjusted EBITDA increased meaningfully year-over-year to $15.4 million with a record Q2 cannabis segment performance.

Moving on, in Canada, we gained traction on our efforts to grow market share in convenience product categories, and for the first time, our brands have achieved top 10 market share in all major categories with continued growth in vapes and infused pre-rolls. We discussed our focus on strengthening our position in convenience product categories for several quarters, and we're encouraged by this progress, which has been entirely organic and builds in-house capabilities which we'll apply to non-Canadian markets as well in the future.

It was also another record quarter of international export sales, which grew 74% year-over-year and 43% sequentially as we continue to benefit from our competitive advantage with the world's largest EU-GMP-certified cannabis facility. We discussed on last quarter's call that we believe EU-GMP-certified product is a competitive advantage, which drives strong growth and profitability, and we're pleased to prove it with today's results.

This is an underappreciated Village Farms strength, strategically built over the past five years into the supply chain for all international customers. Without giving complete details for competitive reasons, our own sales mix of GACP to EU-GMP-certified product has improved significantly since we completed the facility upgrades we discussed last quarter.

As we stated, these upgrades made our Delta campus the world's largest EU-GMP-certified facility by total compliant product volume, and our higher sales mix of EU-GMP-certified product improved our margins during the second quarter. Some of our peers have discussed these challenges on their earnings call publicly for the first time over the last couple weeks, and we've been saying demand for EU-GMP-compliant product is continuing to increase.

Importantly, the German market continues to grow, and so has our share of the total market thus far in 2026. We most recently held four of the top 10 market share strains, and based on our own internal research, we believe we have the widest pharmacy distribution of any cultivator with product in Germany today.

We have a strong, growing share of Europe's total addressable cannabis market, and we remain very excited about the opportunities we see in the UK and Australia, and we continue to expect that we will enter new European jurisdictions in the second half of this year. For a quick reminder about Delta 2 expansion project, the Delta 2 expansion is the conversion of the second half of the 1.1 million square foot Delta 2 greenhouse.

As previously stated, we are completing the conversion in phases, one half of the expansion at a time. The first half is completed and in production, and the second half conversion will commence on September 1st.

We continue to expect that we will harvest an incremental 15 metric tons of production from this D2 expansion this year, with an additional 25 tons harvested from the expansion in 2027. We will be on a full 40 metric ton run rate starting with the third quarter of '27 and with the full 40 tons of incremental capacity available beginning fiscal 2028.

Once completed, the D2 expansion will bring our total annualized production in Delta to approximately 160 metric tons of dried trimmed flower annually. All of this will drive further economies of scale, cost efficiencies, and improved flexibility to meet demand from our customers, consumers, and patients in Canada and around the world where we operate.

As a reminder, any future conversion of our Delta 1 greenhouse would more than double our annualized production capacity. Turning now to our recreational cannabis business in the Netherlands, we are continuing to maintain strong distribution with participating coffee shops and have been focused on expanding our product assortment to create more value for coffee shop owners who are looking to differentiate their menus.

We remain incredibly excited about the Netherlands market, and feedback from participating municipalities and coffee shop owners about the pilot program has been overwhelmingly positive thus far. The government is expected to issue a report with an internal review of the program later this summer, and we're quite optimistic that this will also reflect positively on the program.

As we discussed on last quarter's call, we experienced a slight delay with final approvals of our Phase 2 facility, but we did begin cultivating in the Groningen facility in Q2. Groningen is expected to ramp up to its full production capacity over the course of the next few quarters, positioning us for another step function of growth next year.

We're committed to being a strong community partner and employer, and believe there is tremendous long-term upside potential for Village Farms in the program if it is ultimately expanded, which could increase the total addressable market in the Netherlands for our products by nearly tenfold compared to where we are today. In summary, we are pleased with our second quarter results, which continue to reflect our disciplined execution.

We closed the second quarter in a strong position with $73 million in cash after completing the previously disclosed equity placement with US institutional investors. We believe increasing institutional ownership alongside the support of retail shareholders will be critical for the global cannabis industry to succeed, and we believe both will benefit long term from their investment in Village Farms.

With capital expenditures from our Canadian and Netherlands expansions nearly complete, we are in an excellent position to deliver stronger free cash flow and continuing growing of our cash balance during the second half of this year. This concludes my introductory remarks, and now I'll turn the call over to Stephen.

Stephen?

Thanks, Michael. I'll start with a review of our consolidated Q2 results.

All figures referenced reflect US dollars unless otherwise noted. Consolidated net sales increased 27% sequentially and 7% year-over-year to $64 million, driven by continued international growth.

Consolidated net income from continuing operations was $7.2 million or 6 cents per share. The unfavorable variance compared to last year was the result of a one-time vendor settlement of $4.3 million received in the second quarter of last year.

Excluding this impact, net income from continuing operations would have increased significantly as a result of our record Q2 performance. Consolidated adjusted EBITDA from continuing operations was $15.4 million or 24% of sales, compared to $17.1 million or 28.5% of sales in Q2 of last year, with the unfavorable variance similarly driven by last year's vendor settlement.

Excluding this impact, consolidated adjusted EBITDA would have increased approximately 20%. Turning now to our cannabis segment, total net sales was $53.5 million for a 5% increase versus Q2 of last year.

The year-on-year improvement was driven by the strong performance in our international medical exports, which increased 74% over Q2 of last year and 43% sequentially, predominantly from Village Farms taking a larger share of the German market. As we discussed last quarter, we experienced a slight delay in the commencement of operations at our Phase 2 facility in the Netherlands, but Q2 sales increased 35% year-over-year to $3.3 million.

Drachten is now operational and will begin contributing to stronger growth. As Michael mentioned, we expect Drachten to ramp to full production capacity by the end of Q1, positioning for continued growth through 2027.

Cannabis gross margin was 51%, up 900 basis points from 42% in Q2 of last year, reflecting a favorable product mix, increased operating efficiencies, and a lower cost of production at our Delta production campus. Total SG&A as a percentage of sales was 28%, compared to 23% in Q2 of last year, reflecting an update to the company's transfer pricing policies, as well as higher commercial and marketing expenses.

The update to our transfer pricing policies is directly attributable to the sale of our produce business a year ago, a higher percentage of our corporate expenses are now directly allocated to our cannabis business versus prior years. Q2 adjusted EBITDA through continuing operations for cannabis improved 16% to a record of $15.3 million, up from $13.1 million in Q2 of last year, resulting in an adjusted EBITDA margin of 29%.

Q2 cash flow from cannabis operations was positive $8.9 million, compared to a positive $19.2 million in Q2 of last year, the variance driven by Canadian income tax payments, which did not occur during the prior year, as well as changes in non-cash working capital items as terms on export sales are generally longer than in the Canadian market, and as we expand our production footprint in Delta 2. We believe we are the first and only major Canadian public cannabis LP in the position of paying corporate income taxes, which remains a testament to the strength of our operating capabilities and a sign of a sustainable, long-term profitable platform.

As we do each quarter, I will point out that in Q2, we also paid Canadian excise taxes on our retail branded sales of $15 million, nearly 40% of gross retail branded sales. Turning to the balance sheet, where I'll note that we no longer carry a restricted cash balance after the completion of the one-year escrow period as part of our produce transaction last May.

We ended the first half of the year with cash of approximately $73 million. For the first six months, we generated close to $21 million from continuing operations before working capital adjustments.

Working capital adjustments were significant in the first six months of this year, in particular due to the payment of essentially a full year and a half of Canadian income taxes, totaling $17 million, and that's in US dollars. During the first six months, we also spent $15 million in CapEx, paid $31 million in excise taxes, as well as $7 million in share buybacks, and completed a $15 million equity placement with two key US institutional investors.

We remain very comfortable with our long-term debt level, which was approximately $40 million at a blended interest rate of 5.6% as of June 30th, 2026. During the quarter, we drew down an incremental, in Canadian dollars, $8.3 million on our Pure Sunfarms credit facility to support our Delta facility upgrades and technology enhancements.

We're in a net cash position of $33 million, and as Michael mentioned, we expect to grow our cash balance through the remainder of the year with stronger free cash flow during the second half. Our board and management will continue to evaluate capital allocation decisions on a quarterly basis, and we expect to maintain a balanced approach to capital allocation to drive returns to shareholders.

I will now turn the call back to Michael for some closing comments.

Thanks, Stephen. Before we open the call to questions, I'd like to recognize the continued execution of our team members around the world.

Our team have undertaken significant development projects this year while continuing to deliver outstanding results. Personally, thank all our folks who continue to lead us forward.

In closing, we feel we've had an excellent first half of 2026, and we're proud to continue demonstrating the strength and durability of our global operating model. With industry-leading profitability and a global cannabis business that is approaching 50% of revenues from growing international markets, we're positioned for continued profitable growth regardless of our entry point or timing into the US market.

We remain encouraged by what we see in the US regulatory landscape, and we're pleased to see that the US Congress provided an extension for full-spectrum CBD products into December, which will give them time to potentially find a workable, permanent solution. As we've never engaged in the production of synthetic cannabinoids or related products, and BHB, CBD distillery, has always operated to the highest standards.

We're incredibly proud of that team, and still see a lot of opportunity for BHB, depending on how things settle out. We're looking forward to the rules of engagement being finalized so we can start planning accordingly.

I will reiterate something I mentioned last quarter: we are pleased that we've become a partner of choice and are recognized as a strong leader in the global cannabis industry. We will only pursue opportunities that are strategically compelling and supportive of long-term shareholder value creation.

We have a considerable upside potential in our Netherlands business, Canadian and US assets, and ownership interest in Vext, and we believe Village Farms remains one of the most attractive cannabis growth platforms and investment opportunities in the world. Liz will now take time to answer some questions.

Good morning. Thank you for the questions and congrats on the strong quarter.

Want to talk a little bit more about international and the medium-term opportunity. Maybe give some color in terms of some of the demand-supply bottlenecks you might have near term, and as those get alleviated, as 1H and 2H expansion for Delta 2 are completed.

Then maybe just talk about long-term, your confidence to remain with the competitive advantage, even with potential for US exports. Thank you.

Okay. Good morning, Aaron.

A few questions in there. We remain confident that we'll continue to expand.

As I said in my call, we still have Delta 1 availability behind the expansion of Delta 2, and that's a 33% increase with the expansion, bringing us to that 40 incremental metric tons going forward. We don't talk much about Delta 1, but that is always a possibility for us, and it's even a possibility for export to the US market, depending on how things shape out in the future.

We think we can continue to meet our EU-GMP growth as well going forward, and we feel confident about Germany continue to grow going forward. As far as pricing, we haven't seen a decline in our pricing.

There have been a decline in the non-compliant, to speak, products that are flowing into Germany from multiple parts of the world. You really need to be a EU-GMP-compliant partner, and I can say this: as far as your question for the US, I'm not saying US single-state, multi-state operators won't be there, but I can tell you from our experience in the last six years, it is not easy.

It's just not a matter of getting a DEA export license, not just getting there on your initial certification, but maintaining it is even more difficult. I wish everybody luck, and as far as I'm concerned, we may be a US exporter of EU-GMP in the future as well.

I think we have a great position right now that we can continue to build on. I think we're in a strong position going forward over really anybody who wants to focus on EU-GMP for the European market.

Great. Thank you very much for that detail.

A second question for me, just talking about the EBITDA margin profile. We've seen some nice expansion the past two quarters.

How best to think about the long-term EBITDA margin aspirations as we think about all the puts and takes of your sales growth opportunities and potential broader pricing pressure within cannabis? Thank you.

Aaron, Stephen. Our continued long-term focus has been 30 30% to 40% for a gross margin.

Our EBITDA margin, certainly in the mid-20s is possible. We continue to be very focused on managing our costs.

Obviously the EBITDA margin and gross margin are also somewhat dependent on demand and supply. As more people enter the market, there could be some pricing pressure, but as Michael mentioned, we're continuing to see very strong pricing for our EU-GMP, and we'll continue to get some economies of scale as we expand our Delta facility platforms over the ensuing years.

If I can add to that, just with the increase in our gross margin, it really doesn't clearly show the efficiency of our operation, because complying with EU-GMP significantly increases your costs of production. When you're looking at others who may start to index on EU-GMP out of the US, they should plan for much greater costs of production and overall costs to get there.

That's not really identifying in our numbers. It just shows the power of large-scale, efficient operations.

The bigger we get, the lower we believe our costs will be going forward. We see that as a great advantage.

You really need a large-scale footprint to index. Thanks, Aaron.

Great color. Appreciate that.

I'll jump back in the queue.

Hey, good morning, guys. Terrific work on the quarter.

Couple things. In Germany, you're up 70-odd percent year-over-year, up 43% sequentially.

What did the market grow? Therefore, what kind of market share did you gain, you think?

Hi Doug, good morning. It's really hard to know.

There was some indication of that being tracked in Germany, which is not really happening. We have to really rely on internal numbers.

Those numbers have been anywhere from sort of 8% to 15% internally, but I can't really verify it, probably won't go there right now. I can tell you that we have four of the 10 top strains, and with the percentage of growth, I think that outweighs others as far as the growth potential.

Ann, do you want to put some color on it?

Doug, I agree. It's hard to quantify the growth, but for us, we do monitor our distribution penetration, and we have been growing in locations where we're distributing, or where our cultivars are distributed.

That's good color. I guess, how do investors view the visibility of growth in Germany?

Obviously it's a big part of your growth and margin expansion story, looking out into 2027 and beyond, how do we get comfort that they're going to continue to grow as much as they have been?

I think projections are pretty astronomical over the next five to six years towards 8,000 tons, even if it was half of that, it would be a huge upside. Patient enrollment overall is still very low.

It's probably in the single digits, so...

Low single digits, very low single digits.

Low single digits. I think we're very confident that the growth will continue at least for the foreseeable future, at least five years, maybe longer.

Do you foresee ultimately getting a footprint in Europe to feed that demand?

Probably talk to you offline on that one.

Okay. Couple quick ones, CapEx remaining for second half of '26 and '27?

We really don't have anything on the front burner right now for CapEx internally. We've spent most of the CapEx.

Now, even though we indicated that we're breaking ground on the second half of Delta 2 August 1st, we've procured all the material we need, The Netherlands is fully built out, there's really nothing right now that we're looking at.

Okay. Final one if I could, just on the produce side.

Or produce and other I guess, I see that gross margin expanded to 26% from 11% last year. I know it's not a huge part of your business anymore, but just what do you attribute that improvement in profitability to?

Pricing was very strong in Q2, as well as we had strong production and we had strong pricing. It's, as we've said for years, Doug, it's a commodity-driven business, and demand was strong, in particular in April and May, and we had very good early production out of Delta 1, which I continue to believe is one of the most profitable, or if not the most profitable greenhouse in North America.

Obviously, everyone else's private, I can't prove that. Someday, hopefully, we can prove that with cannabis.

One of the catalysts real quick was under the US Trump administration has been this suspension agreement with Mexico for 22 years, and that suspension was stopped, which increased a 17% tariff on Mexican imports of tomatoes. As Stephen said, price, demand, that helped drive that balance better in favor of pricing in the USA.

That occurred about a year ago, and seeing less capacity coming out of Mexico in that business.

Right. Excellent.

Thanks, gentlemen and ladies.

Thanks, Doug.

Thanks. Good morning, thanks for taking my questions, and congrats on the great quarter here.

I want to ask, going back to margins, pretty impressive this quarter. You referenced, I guess, your long-term target of 30% to 40% again, but how sustainable do you think those high-40s margins are short term, especially as you increase the sales mix towards international, maybe reaching that 50% that you mentioned?

That's number one. Then secondly, obviously, I guess a portion of that's not only sales mix, but cost of production, and you mentioned continued improvements there.

Can you maybe just elaborate on that? What's driving that continued improvement, and how can you be more efficient as you scale?

Thank you.

There's a number of drivers, but not just on pricing, which we see for the foreseeable future, we see maintaining our margins in Germany. We feel very confident about that.

We've always mentioned for many years about continuous improvement and continuing to drive our costs down. That's number one and most prudent: you have to drive your costs down.

The first half of this year demonstrated that we are able to continue to drive our costs of production down. That's a factor of yield increases, more efficiency in how we operate.

That showed strongly this first half of the year. In our long history of growing multiple crops, there's no end to increasing efficiency.

You have to take that into account. If you look at Canada, I think Canada's become somewhat of a mature market now 10 years later.

It's got single-digit growth, and at some point, the pricing more or less is plateauing, depending on convenience brands, pure flower, but it's not going to have great changes, I think, over the long term. We feel pretty comfortable.

We've always said our target margin is 30% to 40%, but that doesn't mean that we're not going to try to do better, as we've demonstrated this quarter. Scale matters.

You can't get around it. It's ultimately a fixed-cost business.

The variable component is very, very small, at least on the cultivation side. The larger you can get, you can really hammer down your costs of production.

Thank you, Michael. Appreciate that.

Then secondly, you mentioned that pricing is maybe plateauing in Canada. Can you comment on how the domestic prices have evolved recently?

I know that we talked about how international is maybe benefiting domestic prices, but anything on the recent trends in terms of pricing domestically? Thank you.

Ann?

Yeah. Good morning, Frederico.

A couple of things: we are seeing some more supply come back into the Canadian market. We think it's tied to the testing requirements that the international markets have, as well as some crackdown on greenwashing.

Within the flower category in particular and some of the close derivatives, we're seeing a little bit of a mix emerging towards the lowest value segment, which we think is, again, folks using that outlet to raise cash on by existing biomass. We're continuing to invest.

As Michael highlighted in the remarks, we've spent a lot of time building into our convenience categories, and so we see those plus the dominant position we have with flower as a way for us to continue to drive the mix and price in the market.

Thank you. Appreciate that.

Thanks, Frederico.

Good morning, everyone, and congratulations on the very strong export numbers. Look, the first question, Michael, and I think we've talked about this before, if you can give more color about your route to market in Europe, or is it pretty much an FOB model in which you sell to distributors and they take care of the distribution and selling to pharmacies, or color in terms of how your company is involved in that selling effort?

That would help. By the same token, whether at some point you see opportunities to sell branded product there.

Now, the second part to that question is as you expand your scale and your capacity, does that model hold, or do you need to invest in downstream assets to gain more control of your distribution in Europe? Thank you.

On the branded question, I would say absolutely. As I said, we know our strains, we have four of the top 10, our brands is in work.

That is part of the future. Absolutely there.

As far as downstream, yeah, we sat back and watched what others have done. If you really look at, say, Germany as an example, going back eight to 10 years, the evolution is pretty incredible, from Malta to Portugal to others building small assets in Germany.

We don't think they've ever made money. We've watched all this capital over many years being spent with really no return.

Now, of course, the GACP magic wand approach is not really working. As Ann mentioned, that's why we see more capacity in the Canadian market, because this is a pharmaceutical-grade cannabis product, and regulators are coming down on those who can't meet that uniform criteria as EU-GMP, and that we've never strayed away from that.

To answer your question, as we've sat back and looked at the landscape, who's developing, we've looked at valuations, for example, in some cases, we puked when we saw some of these ridiculous valuations. We're taking our time, but I would say yes, we see ourselves being much more vertically integrated in the European theater going forward for sure.

As far as your first question, what was your first question? I'm sorry.

I'll jump in,

it was...

Go ahead, Ann.

Pablo, you asked about our route to market specifics. I just want to roll back a little bit and say right now the playbook in international is not unlike how we set up in Canada.

We were initially very much B2B oriented, and then as we got essentially the cost of goods sold right, the COGS line, we started to invest in the SG&A. I think you should expect us to do that.

There's some great distributor partners around the world, frankly. We've stayed focused on getting the best quality product into the market as our first step.

Yeah. No, that's great color, thank you.

I'm sure you heard in the Curaleaf conference call, they mentioned you're a key supplier of theirs. I don't know if that's already happening or it's in the future, but congrats for that.

Look, and on the same topic, when I try to think of your $21 million number for the quarter, in very simplistic terms, I would call that an FOB number, and what some of your peers, larger Canadian peers report, it's pretty much a landed, almost to pharmacy, number, right? The numbers are not comparable.

I don't know if you have a way to calculate this, but are you already the largest Canadian exporter by volume, or am I exaggerating there?

We think we are, the largest Canadian exporter by volume.

Okay. Thank you.

Look, and the last question, moving on to Texas, with the 12 licenses already issued, provisional licenses, is that door pretty much shut? Is that window for Village Farms to win a license through the process, is that window shut, and the only option for you to enter Texas is by buying one of those 12 licenses?

Thank you.

I would say no. As you pointed out, these are conditional licenses, they're not licenses yet.

There's a lot of noise out there of what people are doing, and we know Texas well, one, to answer your question, I don't necessarily think that it's 100% sure we won't get a license. We've spent a lot of time and done a lot of homework on who've received them, and I think it's still yet to be determined what the final number of those licenses will be.

I can say one way or another, we plan to be in Texas, and just kind of leave it at that at this point.

So. Understood.

Thank you.

Thank you, Pablo.

Thank you, everyone, for participating in today's second quarter call, and we very much look forward to reporting come November for our third quarter. Have a great week.

Bye.