Good morning, ladies and gentlemen. Welcome to Village Farms International’s First Quarter 2020 Financial Results Conference Call. Yesterday, Village Farms issued a news release reporting its financial results for the first quarter ended March 31st, 2020. That news release along with the company's financial statements are available on the company's website at villagefarms.com under the Investor's 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 one hour following completion of the call. Details of how to access the replays are available in yesterday'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 the 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 is contained in a company's various securities filings with the SEC and the Canadian regulators, including its Form 10-K for the year ended December 31st, 2019 and the Form 10-Q for the quarter ended March 31st, 2020, which is 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 company 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, Mr. DeGiglio.

Thanks, Michelle and thank you to everyone for joining us today. With me for today's call is Village Farms’ Chief Financial Officer, Steve Ruffini.The agenda for today's call, I'll start with a review of the highlights of the quarter most notably the fifth consecutive quarter of profitability for Pure Sunfarms as we saw a significant quarter-to-quarter ramp up in retail branded sales. Steve will then review our financial results and I'll return and discuss why we remain so confident in the future of our company, and then be happy to take questions.But before I start, I just -- before I review this quarter, I'd like to provide an update with respect to our operations during COVID-19 pandemic. We are grateful to report that all of our Village Farms and Pure Sunfarms facilities whether Canada, U.S., or Mexico remain fully open and operational as they have throughout the pandemic.The health and well-being of our employees, customers, vendors, partners, and their families continues to be our top priority. We're continuing to adhere to additional health and safety practices as per municipal, state, provincial, and federal health authority recommendations over the above the already very high standard of hygiene practices and protocols already in places as a highly regulated food producer.We have always taken our role as one of the largest suppliers of year-round fresh quality produce in North America and the consumers we sell this very seriously bringing that same dedication to Pure Sunfarms. But never have we taken our role more seriously than during the current environment and I'd like to acknowledge all of our employees companywide who are working tirelessly to ensure health and safe produce is getting to our retail partners. And in particular, I'd like to thank all those who played a role in helping us feed over…

Thanks Mike. For those new to the Village Farms story, our cannabis joint venture with Pure Sunfarms cannot be consolidated for accounting purposes even though we own the majority of it, as the Pure Sunfarms board is jointly controlled. That said, we continue to provide full results for Pure Sunfarms to the investment public, so you can do comparisons with the other public Canadian licensed producers.The Pure Sunfarms March 31 balance sheet and Q1 income statement is contained in footnote number 6 in our financial statements. It is in U.S. dollars rather than Canadian dollars as Village Farms is required to report factorial results in U.S. dollars.In an attempt to help the readers, we included the financial summary in our press release in both Canadian dollars and US dollars. Unfortunately, we did not translate two figures correctly, while the Pure Sunfarms net sales figure for Q1 is correct in at US$13.1 million. The breakout between retail and wholesale was not, the retail or branded sales figure should be in US$6.2 million, and the wholesale in U.S. dollars should be 6.9 million. The Canadian figures as shown in the press release are correct.As stated in our April earnings call, Pure Sunfarms experienced significant quarter-on-quarter growth in terms of sales and volume to provincial governments, with provincial sales of 8.5 million in the quarter against Q4 2019 sales of approximately 3.9 million or up 118% increase and that was primarily driven by the increase in volume of 179% going from 1,100 -- roughly 1100 grams in Q4 2019 to over 3,000 kilograms in the first quarter of 2020. This revenue represents sell in, in Q1 2020 versus sell in Q4 of 2019.As Mike said, Q1 of 2020 benefit from the initial sell into Alberta and the selling of the large format to…

Okay. Thank you, Steve. So in conclusion, here we are a little over a year and a half into the legalized market for recreation -- recreational cannabis in Canada. Amidst of market that has been slower to develop than expected and smaller economies than originally expected. But with just as much long term potential, the industry is now really segmenting into leaders, survivors and everyone else.From day one, we can see that in built Pure Sunfarms and not just be a leader in the cannabis industry, but to beat the leader. We focus first on getting the cultivation underpinnings right providing the lowest cost of cultivation in the industry. We've done it's done what we believe is the best management team in the business. And then that team launch would immediately became and has consistently been the top selling dried cannabis brand and Canada's largest market.So I'm going to come back to something you've heard me say before, it's Ferraris famous mono that we are the competition. And yes, it's a bold statement, but one that I'm proud to simply make about Pure Sunfarms not with arrogance, but with confidence. It's the confidence that, I've had since day one about 30 years ago in a large scale, low cost cultivation, knowledge experience and DNA operational know how on best in class facilities and operation, and it's the confidence I have today based on consistently being the top selling dried cannabis in Ontario having the lowest costs of greenhouse cultivation in the country, and quarter-after-quarter generating profitability.No one knows exactly what the next 6 months to 12 months look like the unprecedented withdrawals of financial guidance by public companies even the largest and most mature it's evidence that. That said, I am comfortable with where our businesses are today and I remain very common what lies ahead. While the Canadian cannabis industry will likely see some choppiness in the near term to the effects of the pandemic Pure Sunfarms has a number of catalysts that directly leverages leading brand performance.The build out of retail store network in Ontario, further expansion across Canada and the introduction of new products, including Cannabis 2.0 that make for a very exciting 2020 and beyond.So, thank you for listening. And we'd be happy to take some questions, if anyone has. Operator?[Operator Instructions] The first question comes from Aaron Grey from Alliance Global Partners. Your line is open.

Hi, guys. Thanks for the questions. And congrats on the quarter and the strong market share momentum heading in April. Just a first one from me, just in terms of, the commentary on the price per gram for adult-use, just as you know, we look to have these large formats that's kind of become a higher portion of the mix going forward. How should we think about that, $2.8 per gram, kind of trending? And how much does that kind of come down as we look to modeling out going forward? Thank you.

I think probably not going to answer that directly. But I think in general, that's our philosophy is, as I clearly said, it's we have to be competitive, but the legacy business and pricing will just come down as we see that penetration. And, you know, to the point where we believe the penetration rate will increase. And we're going to remain with that strategy as we launch these other products this summer. And I think it'll be much clearer, maybe when we report the third quarter how that's going to look.

All right. Great. Thanks for that. And then the second question is just on 2.0 and the plans for launch this summer, you know, while I can certainly appreciate for competitive reasons, I don't want to, disclose too much. Could you maybe instead just talk about, you know, what you're seeing right now in the marketplace and maybe the opportunities you see specifically in oils or vapes edibles, you know, for Pure Sunfarms, specifically given you know, how well, you execute on the second mover advantage in Cannabis 1.0. So any commentator on your view of the competitive landscape and 2.0 products would be helpful? Thanks.

Well, I think the you know the management team at Pure Sunfarms sat back and watched as they've done before, what was working from others and what was not working. So that's proven to be a positive for them. And in terms of not just the performance of the product but where the pricing needs to be and I think as they launch their first product, and I'm not going to say what it is, I think you'll see the same aggressive pricing strategy that they launched when they started retail sales in the fourth quarter. So, again that, that will show clear when we report the second quarter. Thank you.

Great. Thanks for that and best of luck.

Thank you.

Your next question comes from Andrew Partheniou from Stifel. Your line is open.

Hey, thanks. And congrats on a good quarter. So I'd like to talk a little bit about the supply chain dynamics. At the beginning of this year, we were and the launch of 2.0 products we were hearing that overall prevented distributors were you know, changing their ordering dynamics and ordering more frequently but let's volume in order to be closer to just in time type of ordering dynamic? And just wondering now with COVID have you seen any changes and in that sense perhaps volumes increasing or higher frequency in ordering?

No, I think, there is so many moving parts; it's really hard to get a handle on it. But I would probably say that, like many other consumer products, there was a higher purchase towards the end of the first quarter. But I think that's going to thin out. My view is that it's going to probably contract somewhat in the second quarter, and then probably get back on track in the third and fourth quarter. I think, if you look at Ontario, sales aren't quite even bad to the level they were in January. So I think, it's still -- we still need to get through the second quarter because it's kind of give the provincial governments time to move through the inventory assess what they have, before they start replenishing.

Okay. Thanks. And maybe if I can dive a little deeper towards your comment on Ontario. Are you able to maybe give a little bit more color and, and how click and collect and delivery is doing? I know you just said that they're not back towards the level in January, but could you give it a little bit of color in terms of the types of magnitude or potentially, are they suffering from lack of inventory or is it just not being able to fulfill demand as quickly as before?

In resistance Steve, we were a bit removed from those levels of details. Actually from a delivery perspective, I was quite excited about it. One of the advantages the legacy business has, the dealer is no longer a rep, he delivers it to the house, so which is what was happening. So actually, the development of them closing, freaking us all out closing the stores, and then changing their minds and having store pickup and home delivery. Hopefully, home delivery continues, when things go back to when everything is normal. So, we don't have specifics for that, but I think it's also benefited a large format as well. People want to make less trips to go out. So hopefully, it turns out to be a long-term benefit for the legal industry.

Great. Thanks for taking my question again.

Your next question comes from Doug Cooper from Beacon Securities. Your line is open.

Hi, good morning, guys, and congratulations on a great quarter. Just want to follow-up your comments of 20% market share of the OCS in April. Can you talk a little bit about the breadth of redistribution beyond the OCS in Ontario?

Doug, Steve here. We don't -- unfortunately, other provincial governments don't provide that to Pure Sunfarms. So I did pure conjecture. I know other people say they're X percent of the total market, but we've asked Pure Sunfarms what the market share is in these other provincial sales and they said they don't have the information. So we can't --we're not going to report, what we can't support.

Right. What about just how many doors are you -- how many actual retail stores is your product available in Ontario of the actual retail stores? What percentage?

I don't know. I haven't asked the Pure Sunfarms team. I think they might know that. I can get back to you, maybe but I don't know.

Okay. Do you just in terms of the large format, can you just remind us what the THC level is in that, is it sort of 18% to 22%? Is that the sort of range?

Yeah. I think, we don't want to be looking very somewhat, but I mean that 28 packs in Indica and that's the sweet spot there is probably in 15 to 16 range and we're always striving to get that balance better and improve on that. But for the most part, that's the current range and it's in and been well accepted there.

Okay. Can you talk about there's some other kind of value packs are being offered in the marketplace. What is there with the price advantage or the, that you have over those other value packs? In terms of well, I guess in terms of where the retail is pricing them?

Well, I think what we've heard from Ontario set the lowest price, we have the lowest price, they are selling at the lowest price they've come off 25% as I said and our product is being sold at the lowest price. But I think the key difference with anyone else is we're profitable doing it.

Right. Is it retail and just remind us, is it around $99 before HST, is that where we are at?

Yes.

Okay. I think you guys mentioned, I must have missed it on the call and the strategy for opening up D2 given this environment?

We're going to wait and see what transpires here. I mean, look, we don't know there's so many moving parts I mean, where the pandemic changes or what happens in the fall. So we want to be very cautious because till there is a resurgence of the bricks and mortar stores. We don't want to have an overcapacity is the prudent thing to do. And we're actually will monitor even Delta 3. We're very focused on having our capacity meet our demand. And we can even, cut that back. Remember, Delta 3 has 16 grow room, so we wanted to cut that back to 14 or 13 we could. And then half of Delta 2 is ready to go.So we can move that going forward towards year ends or the beginning of the year, as we see where the market go. So the good news is long-term, we can double our capacity with the same cost structure, which I think is now starting to prove how it differentiates us from the competitors and get to a double capacity going forward. And at the same time, if we have to curtail with 16 grow rooms in Delta 3, we can adjust that pretty quickly. As it's an eight-week cycle for us inside the flower, so but we just got a monitor it because it's really hard to see what the demand is going to be in the current situation.

Your next question will come from Rahul Sarugaser from Raymond James. Your line is open.

Morning, Mike and Steve. Thanks so much for taking my questions. And let me reiterate, congrats on a strong quarter and also really like six straight quarters of positive EBITDA, that's really unprecedented industry, so anyway huge congratulations to you and even the team. So, there's been a lot of questions on the retail and of course, that's really important. I wanted to sort of focus on your product split. We saw that there's been a real reemergence of wholesale, almost about a 50-50 split between your adult use and wholesale, so where do you see that wholesale going, you seen that being durable, do you see that being a potentially larger proportion of your revenue, particularly as the market continues to sort of be slow? And then sort of as a follow-up to that, Mike who do you see as the primary buyers, are the extractors, are there other LPs, because that really kind of speaks to the competitive advantage that you guys are building?

Yeah, I think, our strategy is to be a fully vertically integrated company. So that ultimately it means that we want to control our whole production and everything we do into cannabis to point out ourselves. So yeah, I think the retail at the end of the day, we're shooting to be very high percentage of retail at the 60%, 70% level of our website. So to the extent that wholesale is there and always going to have to have another outlet because of quality consistency, that's just the way it is still a farm product. Right. But I don't know what the future is going to hold on wholesale. I mean, I think it would probably be working more with extractors for the foreseeable future.Believe it or not, there are other LPs that are asking us for product and I'm a little bewildered by it, but maybe it has to do with cost structure. But I think as this contraction takes place in the industry, at some point, that's going to really change what the dynamics between wholesale and retail for us are.Everybody's still in the game right now, even with tremendous losses on a quarterly basis that we're seeing because basically, as long as they're able to get financing, it's just, there's like 50 plus suppliers in the industry. It's just way too many and I think that's going to have a very impact on the wholesale dynamics. So I would think retail answer your question more or less, retail and we're shooting at retail is the largest percentage of our overall revenues.

Great. That's really helpful. And then sort of moving forward now to Cannabis 2.0. So you guys, as you said Mike, as a second mover, you were able to use your cost advantage to drive -- grabbing market share in the whole flower segment. And what we're also seeing is likely in the wholesale segment overtime and again like you said, you're able to actually do that profitably.When it comes to Cannabis 2.0, the cost of goods of flower is less of a key component, whereas formulation and intellectual property tends to be a driver of cost of goods. So how do you -- how are you managing your strategy in Cannabis 2.0, when your cost advantage of cultivation is not as strong as it is in Cannabis 1.0?

Yeah. I think, yes, you would agree it's an ingredient. But what we've done is like we've done in the past with Pure Sunfarms has done and I think they've been brilliant about it. They've watched everybody else position, pick a product, I don't know, chocolate baits, whatever and see how they position the pricing and then they've come back in and analyze where they can be overall. So I think more importantly, at the end of the day, I know they can be much more aggressive and that's why they wait to see where the market is and the pricing structure. And then that evaluation and I've seen that as shown that they can be very aggressive over the competition.So even though it may be an ingredient, it's still that -- it still adds up to having an advantage and keep in mind, that the margins that, the margin of 70% or 80% are just not realistic. I mean, at the end of the day, it's a CPG product and as it matures out, I think it's going to have typical average CPG margins in the 30%, 40% range and I think we're going to compete very well there. So, again, I think it's a great question that can be better answered on the third quarter conference call.

Right, terrific. Okay, thanks. Thanks again and congratulations again.

Thank you.

Your next question will come from Scott Fortune from ROTH Capital Partners. Your line is open.

Good morning. Thank you and congrats on the quarter. My lot of the questions has been answered, but I don't know if you break it down business coming from Ontario and the different provinces, can you provide just a little bit color from Alberta NPC as far as the ramp or reorders are going there compared to what you experienced in Ontario at all, just kind of the throughput and reorders velocity from that standpoint?

Yeah, I mean, the reorders are coming in and that's something actually Scott that we're looking at is, what's unique about at least from my experience, unlike dealing with large retailers here in Canada, U.S. where we're rolling out our forecasts and what we're going to be doing a year ahead of time, it's really not that way currently in the cannabis sector in Canada.So, it's hard to get more of a handle on these projections going forward. But we are sitting in a good position in British Columbia and we just started with Alberta recently, so I think it's too early to say that was something that finally we got going actually in the first quarter. So probably just feel better to answer that question when we get some traction towards reporting the second quarter.

Okay. And then I know you guys are continuing to explore the other provinces Congrats on Saskatchewan, Quebec and Manitoba two other large provinces, even Yukon?

Well, obviously, the apple of their eye is Quebec, but hopefully that will happen sometime soon, but I don't know. We're not, Mike and I are not involved in the day-to-day, but that I know there is ongoing discussion there.

I've asked about the Yukon too? Okay. That's it for me. Thanks.

Thanks, Scott.

And our final question for today will come from Eric Des Lauriers from Craig-Hallum Capital. Your line is open.

All right. Thanks for taking my questions, guys. First thing for me, a bit of a follow-up on the previous question, I'm just wondering if you guys have noticed any change in regulators appetite to either sign additional supply agreements or to license additional retail stores in light of COVID just any, any kind of impact that COVID may have on regulators signing new supply agreements or opening retail stores, from you guys point of view?

No, not tied to regulation that we're aware of just -- it's just kind of compressed and slow things down. So, but we haven't seen anything unusual just to slow down because the essential business issues in general. So we have and just like in the U.S., we have but I will want to say with the U.S., I know that for your question, but we're starting to see some political flavor towards looking at the criminalization of cannabis I think due to the pandemics, probably not the way we want them to get there. But again, that's a big possibility for Village Farms in the future, should that happen in the next year or so. And so that's a regulatory issue that we're looking very clearly in the U.S. that would be beneficial to us going forward.

Okay. That makes sense. And then last one for me, great to see the kind of impact that your low cost bulk product has had in the market right now. Great demand, obviously seeing increased market share. You guys mentioned that you have new bulk products coming out this Sativa blend as well as some 14-gram products. Anything you can share on sort of when you expect that to maybe hit your guys retail sales?

It's launched. I mean, it launched we haven't seen POS data, but I think the initial shipments have shipped in to whichever provincial governments are taking it. So we'll have more to report on that, but, hopefully that does go on this garner Pure Sunfarms additional market share in the market, those cues are in.

Alright. Great. That's helpful. Well, thanks again and congrats, guys and best of luck.

Thanks, Eric.

Thank you, Michelle.

You're very welcome.

Thank you, everyone. That concludes the calls and thank you for participating today. It's much appreciated and wishing everybody be safe. Thank you.

Thank you, everyone. This will conclude today's conference call. You may now disconnect.