Village Farms International (NASDAQ:VFF) reported higher second-quarter sales and record cannabis segment adjusted EBITDA, supported by international medical cannabis exports, improved production yields and a more favorable sales mix.

President and CEO Michael DeGiglio said the company recorded its fifth consecutive quarter of positive net income and earnings per share since it privatized its legacy produce business last year. He said record production at the company’s Delta, British Columbia, facilities contributed to stronger margins, while operating efficiencies and lower production costs supported earnings growth that outpaced revenue growth.

“Our second quarter results continue to demonstrate the strength of our expanding global cannabis platform, driven by record cannabis revenues,” DeGiglio said.

Chief Financial Officer Stephen Ruffini said consolidated net sales rose 27% sequentially and 7% from a year earlier to $64 million. Net income from continuing operations was $7.2 million, or $0.06 per share.

Consolidated adjusted EBITDA from continuing operations totaled $15.4 million, equal to 24% of sales, compared with $17.1 million, or 28.5% of sales, in the prior-year quarter. Ruffini said the year-over-year comparison was affected by a $4.3 million one-time vendor settlement received in the second quarter of 2025 that was tied to the company’s legacy produce business. Excluding that item, adjusted EBITDA would have increased approximately 20%, he said.

The cannabis segment generated $53.5 million in net sales, up 5% year over year. Segment adjusted EBITDA increased 16% to a record $15.3 million, producing a 29% adjusted EBITDA margin.

Cannabis gross margin expanded to 51% from 42% a year earlier. Ruffini attributed the 900-basis-point increase to favorable product mix, increased operating efficiencies and lower production costs at the Delta campus. Selling, general and administrative expenses represented 28% of cannabis sales, compared with 23% a year ago, partly reflecting a revision to transfer-pricing policies following the produce-business sale and higher commercial and marketing costs.

Village Farms ended the first half with approximately $73 million in cash. The company generated nearly $21 million from continuing operations before working-capital adjustments during the first six months, Ruffini said. Those adjustments included $17 million in Canadian income-tax payments, $15 million in capital expenditures, $31 million in excise taxes and $7 million in share repurchases. The company also completed a $15 million equity placement with two U.S. institutional investors.

Long-term debt stood at approximately C$40 million as of June 30, at a blended interest rate of 5.6%. During the quarter, the company drew an additional C$8.3 million on its Pure Sunfarms credit facility for Delta upgrades and technology enhancements. Ruffini said Village Farms was in a net cash position of C$33 million and expects to grow its cash balance through the remainder of the year as free cash flow improves in the second half.

International medical cannabis exports increased 74% from the prior-year quarter and 43% sequentially, primarily because Village Farms captured a larger share of the German market, according to Ruffini. DeGiglio said the company’s Delta campus has become the world’s largest EU GMP-certified cannabis facility by compliant product volume following facility upgrades.

DeGiglio said the company’s mix of EU GMP-certified product improved during the quarter and helped lift margins. He said demand for EU GMP-compliant cannabis is increasing, while pricing for the company’s products has not declined. He added that products not meeting those standards have faced pricing pressure in Germany.

The company said it recently held four of the top 10 market-share strains in Germany and, based on its internal research, believes it has the broadest pharmacy distribution among cultivators currently selling products there. Village Farms also expects to enter additional European jurisdictions during the second half of 2026 and cited opportunities in the United Kingdom and Australia.

During the question-and-answer session, DeGiglio said Germany’s market data remains difficult to independently verify, although he described Village Farms’ internal estimates of market share as ranging from roughly 8% to 15%. He said patient enrollment remains in the low single digits and that management expects German market growth to continue for at least the next five years.

The first half of Village Farms’ Delta 2 expansion has been completed and is producing cannabis. Conversion of the second half is scheduled to begin Sept. 1. The company expects the project to provide an incremental 15 metric tons of production in 2026 and another 25 metric tons in 2027. It expects to reach a full incremental 40-metric-ton annual run rate beginning in the third quarter of 2027, with the capacity fully available in fiscal 2028.

Once completed, the Delta 2 project is expected to bring annualized Delta production capacity to approximately 160 metric tons of dried trim flower. DeGiglio said a potential future conversion of the Delta 1 greenhouse could more than double annualized production capacity.

In the Netherlands, cannabis sales rose 35% year over year to $3.3 million despite a delay in final approvals for the company’s Phase II facility. DeGiglio said cultivation began at the Groningen facility during the second quarter. Ruffini said Roteghem is now operational and is expected to reach full production capacity by the end of the first quarter, positioning the business for stronger growth through 2027.

Management said it is expanding product assortment for participating coffee shops in the Netherlands and remains optimistic about the long-term potential of the country’s regulated cannabis pilot program. DeGiglio said an expansion of the program could increase the company’s addressable Netherlands market by nearly tenfold.

Village Farms said capital expenditures related to its Canadian and Netherlands expansions are nearly complete. DeGiglio told analysts that the company has already procured materials needed for the remaining Delta 2 work and does not currently have other major internal capital projects on the “front burner.”

Ruffini said management continues to target gross margins of 30% to 40% over the long term, while EBITDA margins in the mid-20% range are possible. DeGiglio said larger-scale production should create further cost efficiencies, though EU GMP compliance also raises production costs.

DeGiglio said the company remains encouraged by the U.S. regulatory environment and noted Congress extended the period for addressing full-spectrum CBD products through December. He said Village Farms has not produced synthetic cannabinoids and is awaiting finalized rules before planning further around its Balanced Health Botanicals business.

Village Farms International, Inc is a North American agricultural company specializing in greenhouse cultivation of fresh produce and cannabis. Through its wholly owned operations, the company grows a variety of high-quality vegetables, including tomatoes, cucumbers and sweet peppers, using controlled-environment agriculture techniques designed to maximize yield and sustainability. Village Farms leverages advanced climate and hydroponic systems to deliver consistent year-round supply to major grocery retailers across the United States and Canada.

In its produce segment, Village Farms operates large-scale greenhouse facilities in Texas and Canada.