Investor Presentation March 2018 September 2017 Forward Looking - - PowerPoint PPT Presentation

September 2017 Investor Presentation

March 2018

Forward Looking Statements

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. 2

Market Facts

PRICE

TSX:VFF OTCBB: VFFIF C$7.78

MARKET CAPITALIZATION

~ C $327 M (basic)

SHARES OUTSTANDING

42.0 M

(basic)

45.0 M

(diluted)

52-WEEK HIGH/LOW

C $9.80 C $1.58

MANAGEMENT & BOARD OWNERSHIP

~27%

3

LISTING SYMBOL

(As of March 5, 2018)

~ C $350 M (diluted) Listed on the TSX since 2006

Industry Leader in Large-Scale, High Tech, Low-Cost Greenhouse Growing

10.5 M

(240 ACRES) OF GREENHOUSE CAPACITY

TECHNOLOGICALLY ADVANCED

GREENHOUSE FACILITIES

IN PRODUCT QUALITY & SAFETY

750 YEARS

OF EXPERIENCE

• sq. ft.

30 YEARS

IN OPERATION 2016 REVENUE1 2016 EBITDA1

C$209 M C$12.6 M

4

• 1. Converted to Canadian dollars at $0.75.

MASTER GROWER TEAM WITH INDUSTRY LEADER OWN

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

Premium Produce Grown In the Most Sustainable, Resource-Efficient Manner

5

Strategically Located Operations and Distribution Network

3 facilities / 110 acres (4.8 M sq. ft.)

British Columbia

VF Owned 4 facilities / 130 acres (5.7 M sq. ft.)

Texas

VF Owned

Ontario

Our logistics and distribution chain ensures the freshest, highest-quality produce reaches consumers across Canada and the U.S.

6

Partner Greenhouses

Ontario: 70 acres British Columbia: 25 acres Mexico: 50 acres

Mexico

Financial Profile

7

(All figures in Canadian dollars unless otherwise stated)

At September 30, 2017

Cash: C$5.5 M (US$4.3 M) Long-Term Debt: C$55.0 M (US$43 M)

FY 2016

Revenue: C$209 M (US$156 M) EBITDA: C$12.6 M (US$9.4 M) Margin: 6%

EBITDA (C$ MILLIONS)

$13.8 $10.1 $14.1 $12.6 $11.3 $0 $5 $10 $15 2013 2014 2015 2016 LTM Q3/17

REVENUE (C$ MILLIONS)

$147.2 $158.9 $196.9 $209.1 $211.8 $0 $50 $100 $150 $200 $250 2013 2014 2015 2016 LTM Q3/17

LTM Net Income of C$6.4 M and LTM EPS of C$0.16

LICENSED CANNABIS JOINT VENTURE:

A TRANSFORMATIONAL OPPORTUNITY

Low Cost, Industry-Leading Scale with Speed To Market

Projected shortfall of supply based on current capacity and market demand Apply low-cost, high tech greenhouse growin ing expertis ise

4.8 M sq. ft. of existing

greenhouse capacity (potential yield of 300,000 kg)

• 1. “Legalized Cannabis: Fiscal Considerations” – Office of the Parliamentary Budget Officer, Government of Canada (2016)

Market Need Transformational Opportunity

Canadian Cannabis demand estimated to grow to

~734,000 kg by 20211

Potential to address substantial portion of the market

9

Ability to Capitalize on Market Opportunity

Complementary Partners

Initial Contribution:

1.1 M sq. ft. (25 acre) greenhouse (leased to Pure Sunfarms)

50% Ownership Initial Contribution:

C$20 M cash

High-tech, low-cost greenhouse growing & agricultural product safety expertise Cannabis industry compliance and licensing expertise

Large-scale, high-quality, low-cost cannabis production

50% Ownership

Options for an additional 3.7 M sq. ft. (85 acres) of growing capacity

10

Cannabis IP, including portfolio

• f high-quality genetics

Will sell dried cannabis and develop and sell its own extraction-based products

Leaders in High-Tech, Low-Cost Greenhouse Growing

750 years of combined master

grower experience from around the world

Cannabis is an agricultural product like any other

11

30-year proven track record of

• perating mega-scale greenhouses

Decades as an industry leading,

fully integrated produce distributor

Extensive experience developing, launching and ramping up new crop

• perations (with record yields)

The Pure Sunfarms Advantage

Long-established, experienced workforce

• f ~600 at BC facilities

Proven operating systems and decades of experience managing the local climate

12

Use of existing, state-of-the-art greenhouses lowers costs and provides speed to market Agricultural product safety expertise/North America leader in pesticide registrations Access to low-cost electricity and no requirement to build co-generation

Pure Sunfarms greenhouses will be operated by veteran Village Farms personnel

Significantly de-risked operations

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

GOAL: Be the Low-Cost, High-Quality Cannabis Producer in Canada

Conversion of existing state-of-the-art greenhouses with significant scale minimize capital costs

conservative target of

<$1.00/gram1

• vs. industry avg. of

$2.10/gram1

Village Farms is one of the lowest-cost greenhouse growers

• f tomatoes & cucumbers in Canada/U.S.

13

1. Four largest LPs – ACB, APH, LEAF, WEED. Source: Public company filings and independent analyst.

Phase 1: Delta 3 Greenhouse

>50%

1.1 M sq. ft. of greenhouse capacity

75,000 kg annually

projected EBITDA margins of

• vs. mid-single digits for produce in Canada

potential to generate revenue of

10-15x that of produce

Significantly more profitable use of existing greenhouse assets

14 (25 acres)

conservative projected yield of

Critical Path and Key Milestones

June 2017

File Cultivation License Application

September 2017 March 2018

Initiate Cultivation License Process

Expect to begin commercial production prior to July 1, 2018

Target: 75,000 kg of production in 2020

15 Commence Conversion

• f Delta 3 to

Cannabis Licensing Standards

October 2017

  

Obtain Cultivation License Complete Conversion

• f Full

250,000 ft2

• f Quadrant 1
• f Delta 3

Target: March 2018

Obtain Selling License Generate First Cannabis Revenue



Phased Conversion Expedites Cash Flow Generation

16

Estimated Demand by 2021:

Sept.

Quadrant 4

Oct July 1 March 1

Quadrant 3 Quadrant 2 Quadrant 1 2017 2018 2019 2020

~250,000 sq. ft. 18,750 kg/yr

Conversion Commercial Production

7- 8,000 kg (6 mos. post July 1) 35 – 40,000 kg Target Sales

~250,000 sq. ft. 18,750 kg/yr ~250,000 sq. ft. 18,750 kg/yr ~250,000 sq. ft. 18,750 kg/yr

75,000 kg March Oct. Installation of lighting

Significant Expansion Opportunity

Pure Sunfarms has options for Delta 1 and Delta 2

17

Estimated Demand by 2021:

Estimated Existing Industry Capacity:

~198,000 kg

Estimated Demand by 2021:

~734,000 kg1

• 1. “Legalized Cannabis: Fiscal Considerations” – Office of the Parliamentary Budget Officer, Government of Canada (2016)

.

D3: 1.1 M ft2 (24 MW secured) D2: 1.1 M ft2 (24 MW secured) D1: 2.4 M ft2

Pure Sunfarms has options for Delta 1 and Delta 2 to potentially address ~1/2 of overall market

300,000 276,000 229,000 150,000 147,000 122,000 82,000 52,000 44,000 41,000 38,000 Pure Sunfarms

Positioned to be a Leading Producer in Canada

Pure Sunfarms will be a large-scale producer of cannabis

Existing and Announced Future Capacity of Top 10 Public LPs by Funded Future Capacity

At March 5/18. Market cap fully diluted. Source: Research analyst estimates/company filings based on last reported capacity and disclosed growth strategy.

Market Cap (C$M) n/a $7,445 $2,656 $842 $2,255 $5,877 $605 $879 $459 $734 $265 Capacity Growth 6x 7x 42x 9x 7x 5x 2x 44x 8x 29x

Existing Capacity (kg) Future Capacity (kg)

Existing LPs will attempt to meet demand through greenfield development requiring hundreds of millions of dollars Pure Sunfarms can quickly become one of the largest producers of cannabis in Canada

18

(VFF JV)

Compelling Value Proposition

PLUS produce business Comparative Value: 2020 Planned Production Capacity

37,500 kg

50% of Delta 3 production

~$350 M ~$9.30 ~$18.85

average

~$2,200 M

average

~116,600 kg

average

• 1. Fully diluted. At March 5, 2018.
• 2. WEED, APH, THCX, LEAF, ACB, OGI, TRST, ABCN, FIRE, WMD.

Planned Production Market Cap1 Market Cap/Gram of Planned Production

Top 10 LPs (planned 2020 produciton2)

19

150,000 kg

50% of production at all three facilities

~$350 M ~$2.30

Illustrative Financial Impact

Significantly more profitable use of existing greenhouse assets

20

Targeted Output in 2020: 75,000 kg

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 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

Total Potential Output: 300,000 kg

JV Provides Strengthened Ability to Execute on Produce Growth Strategy

Organic ic in initia itiatives es to

• exp

xpand capacit ity at t U.S .S. op

• perati

tions Well ell pos

• sit

itioned to

• lea

lead con

• nsolid

idation of

• f a fr

fragmen ented in industry

• Only

ly gr greenhouse gr grower in in North Americ ica to

• have

com

• mple

leted a majo jor acq cquisiti tion

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

21

Investment Proposition: A Significantly De-Risked Cannabis Opportunity

Positioned to be one of the largest producers in Canada with the goal and capability to be the low-cost producer

22

Use of existing greenhouse facilities for cannabis production provides advantage of speed to market to address near-term supply shortfall Growth opportunities in both existing produce and cannabis JV Solid underlying produce business Key JV Metrics Annual Output: Delta 3 Facility: 75,000 kg All Facilities: 300,000 kg Production Cost: <$1.00/gram EBITDA Margin: >50% 50% Ownership of Pure Sunfarms 30 –year track record of success as a large-scale, low- cost grower of high-value agricultural products

September 2017 Investor Presentation

March 2018