Q1 2025 Village Farms International Inc Earnings Call
Unknown Executive, Michael DeGiglio
John , John , John
Speaker Change: Good morning, ladies and gentlemen, welcome to Village Farm International's first quarter 2025 financial results conference call. Yesterday, Village Farms
Speaker Change: It sued a news release reporting its financial results for the first quarter and it March 31, 2025.
Speaker Change: 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.
Speaker Change: 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 the completion of this call details of how to access the replays are available in today's news release.
Speaker Change: 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. [inaudible]
Speaker Change: 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 different materially from those expressed or implied in forward-looking statements.
Speaker Change: A summary of these underlying assumptions, risks and uncertainties is contained in the company's various securities, filings with the SEC and Canadian regulations.
Speaker Change: including its Form 10K and MDNA and for the year ended December 31st, 2024 and the 10Q for the quarter ended March 31st.
Speaker Change: 2025, which will be available on Edgar and Cedar. Plus, these forward-looking statements are made as of today's date, except for as required by applicable securities law.
Speaker Change: 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, Mr. DeGiglio.
Michael DeGiglio: Thank you, Jonathan, and good morning and thank you for joining us today with me.
Michael DeGiglio: Today, our Steve Ruffini, our Chief Financial Officer, Ann Gillin Lefever, our Chief Operating Officer, Patty Smith, our Corporate Controller, and Sand Gibbons, our Senior Vice President of Corporate Affairs.
Michael DeGiglio: Before we get into the details of our Q1 results, I'd like to spend a few minutes discussing our announcement yesterday that we have signed a definitive agreement to execute a transformative transaction for our company.
Michael DeGiglio: Under that agreement we will privatize the majority of our fresh produce division into a new joint venture backed by private investment firms including sweat equities to be called Vanguard Foods LP.
Michael DeGiglio: We will retain a 37.9% ownership interest in Vanguard and receive $40 million in cash proceeds.
Michael DeGiglio: This transaction will drastically improve the upside potential for our 36-year legacy in the produce business as a private company with committed experience industry partners who have created significant value for their shareholders in the past.
Speaker Change: We are extremely excited about this joint venture and department with Charlie Sweat from Sweat Acres to transform the trajectory of our pros business and create a premier branded CPG Fruits company supporting healthy lifestyles and sustainable farming practices.
Speaker Change: But those of you who are less familiar with the produce industry.
Speaker Change: Charlie Sweat, completely revolutionized the organic salad category during his tenure at Earthbound Farms, an organic produce company that he grew from 10 million to over 540 million in revenues during his 15-year tenure before selling the business for $600-$600.
and complete, effectively, with our largest competitors in the marketplace.
Speaker Change: and Vanguard will be backed up by additional countless support from our private equity partners to execute a roll-up strategy of other leading produce brands and assets in North America.
Speaker Change: Under the terms of the agreement, we will contribute, Al-Texas-based, Forty Acre, Mar-Pretto, and our Forty Acre, Fort Davis Facility.
Speaker Change: All about fresh produce related intellectual property, except for the Village Farms name, and transfer all of our produce distribution facilities, employees, and operational control of these facilities to Van Grades.
Speaker Change: I will represent Village Farms interest on Vanguard's board and initially serve as interim CEO , Village Farms CFO , Steve Ruffini will also be appointed to Vanguard's board.
Speaker Change: We will retain full ownership of all our Canadian greenhouse assets in Delta, British Columbia, as well as our March for one and Permian Basin Montaghan's facility for future cannabis market optionality.
Speaker Change: These assets represent an incremental near five million square feet of future expansion potential for cannabis, providing a clear runway to expand cannabis cultivation by more than 220 percent compared to our operational capacity today through our own greenhouse assets.
Speaker Change: In addition to drastically improving the long-term upside potential of our produce business.
Speaker Change: This split of producing cannabis business acknowledges the strength of our cannabis business as one of the largest and most respected scaled cultivators and markers of cannabis on the planet.
Speaker Change: This success grew from the lessons learned and expertise shared from about 36 years in controlled environmental agriculture, which we carefully applied to the launch of the cannabis business some eight years ago now.
Speaker Change: Now is the time to focus on executing our global cannabis growth strategy and invest our improved care flow to continue supporting this growth while ensuring that we maintain substantial future expansion potential as markets continue opening up to cannabis.
Speaker Change: By privatizing one-third of our greenhouse assets and operations, we've generated 40 million in cash, created a greater upside potential for our ownership interest in the produce industry, with committed private equity partners, significantly improved the forward visibility into our financial performance.
Speaker Change: And transformed our company into one of the most attractive platforms for revenue growth and margin expansion across the global cannabis industry.
Speaker Change: For comparative purposes, our market cap was less than $80 million as of the market close yesterday.
Speaker Change: We expect this transaction to close during the second quarter at which time we plan to provide the investment community with additional details surrounding our pro-former financial performance and outlook.
Speaker Change: Now, let's move to a summary of our Q1 performance which reflects an excellent start in 2025 about performer operations.
Speaker Change: Canadian Canada has had one of the strongest courtes over the last three years as we continue to successfully execute on our strategy to leverage our experience and leadership in Canada into other international markets as we remain focused on profitability.
Speaker Change: High Margin Medical Export Sales from Canada for Q1 Group, 285% year-over-year, as the business continues to gain momentum.
Speaker Change: We continue to benefit from the addition of our fifth market, New Zealand, as well as continued growth in existing markets in Germany, the UK and Australia, placing us firmly on track to achieve our stated goal of at least tripling our medical export sales this year.
Speaker Change: Lower retail branded sales in Q1 were expected, and also reflect our focus on improving profitability. Specifically, our conscious decision to move away from lower tier categories that don't align with the quality of our flower and longer term global strategic objectives.
Speaker Change: We also continue to be optimistic about our wholesale channel in Canada, again with a focus on profitability.
Speaker Change: While sales have been relatively steady for the last four quarters, gross margin on those sales for Q1 was up dramatically compared to Q1 of last year.
Speaker Change: As we discussed on last quarter's call, we felt we were entering 2025 with a very healthy inventory position.
Speaker Change: which would enable our teams to focus on quality and profitability and we are seeing the impact meaningfully in Q1 results and we expect this trend to continue.
Speaker Change: All of this contributed to the expansion of our gross margin for Canadian cannabis from 25% in Q1 of last year to 36% in line with our targeted range of 30% to 40% gross margin.
Speaker Change: and given the more favorable margin profile of our international medical sales, we anticipate that we'll be able to sustain this range for the foreseeable future.
Speaker Change: These favorable impacts drove strong increases in adjusted EBITDA and net income of 75% and 291%, respectively, to 9.6 million and 4.3 million in Canadian dollars with another quarter of positive cash flow from operations.
Speaker Change: Q1 also marked the first court of revenue contribution from our lately Holland subsidiary in the Netherlands, which you will now see broken out as a separate segment in our reporting financial.
Speaker Change: Sales of nearly a half a million dollars reflected approximately one month of revenue, importantly pricing, which is very attractive relative to Canada, continues to be in line with our expectations, Adjusted EBITDA was essentially break even with just one month of revenue.
Speaker Change: We are now well underway on construction of phase two of our Netherlands operation.
Speaker Change: A brand new state-of-the-art indoor facility in the town of Groganen. This facility, which we expect will be completed in the Q1 of next year, will quadruple our annual production capacity.
Speaker Change: He's been the more favorable marching profile of our Netherlands recreational sales. The completion of our phase two facility is expected to enable us to drive a strong year of profitable growth in 2026.
Speaker Change: In summary, we feel very good about our start to the fiscal year of 2025. We are seeing our prioritization of more profitable sales reflected in our financial results across our cannabis business. We continued momentum in international export sales in Leighly Holland.
Speaker Change: Our joint venture for fresh produce will afford us greater focus and resources to execute our global cannabis strategy.
Speaker Change: and the naveless that generates stronger cash flows to continue to fuel that growth, all while retaining a meaningful ownership position and what we believe is a very attractive opportunity to realize significant long term value with the sport about standing private equity partners.
Speaker Change: So, this concludes my prepared remarks and I'll now turn the call over to Steve to review the financials before I make some glass closing comments. Steve. Thanks, Mike. I'll start with a review of our consolidated results. We appreciate the substantive nature of the Vanguard transaction.
Unknown Executive, Michael DeGiglio
Speaker Change: We'll have on our financial results and after closing we will provide performance results for the full year 2024 and the first quarter of 2025.
Speaker Change: As our Canadian produce assets do not generate much operational activity due to seasonality in Q1, while not official, one could eliminate the BF Fresh column in a reported segmented results, and ascertain the substantive nature
Improvement in our reported results. Consolidated revenues.
Speaker Change: US$77 million were roughly in line with our prior year first quarter revenues of $78 million. The slight decrease of 1% is due to lower Canadian cannabis revenues which were negatively impacted by a stronger US dollar in Q-125 versus Q-120-24.
Speaker Change: Our net loss of 6.7 million or 6 cents per share was lower than our prior year first quarter loss of 2.9 million or 3 cents per share solely due to our weaker year-on-year performance
Speaker Change: R.V.F. fresh and consolidated results were negatively impacted by a 4.3 million
Speaker Change: Incremental non-cash accounting charge to our VF-Fresh cost of sales due to the impact of the death storms that occurred at our Texas facilities in March and April .
Speaker Change: Our actual cultivation costs were in line with our budget and prior year expenditures. As a reminder, our tomato crops are annual crops and we harvest them once a year.
Unknown Executive, Michael DeGiglio
Speaker Change: Full Crop Yield, which requires us to take an incremental charge to our cost of sales to catch up our full crop cost through March 31st, based on our latest crop forecast.
Speaker Change: The dust storms were a first for Village Farms and had a significant impact at our Fort Davis facility, resulting in a 31% increase in our cost per pound from just that one facility.
Speaker Change: $3 $6 million in Q1 of last year. The decrease in our adjusted EBITDA was driven entirely by our fresh produce segment.
Speaker Change: Turning natural candidates businesses I will start with Canadian candidates, which I will discuss the Canadian dollars.
Speaker Change: I will add here that the change in the.
Speaker Change: Exchange rate compared to Q1 of last year did have an impact on our reported results, which are reported in U S dollars net.
Speaker Change: Net sales were $50 million, which was roughly in line with Q1 last year, driven mainly by the strong growth in international sales.
Speaker Change: We benefited from the continued momentum in our international medicinal export sales, particularly in Germany, and the German market as we expanded our customer base.
Speaker Change: As that market continues to grow as well as adding new markets like New Zealand, resulting in the 285% increase in exports in Q1 last year.
Speaker Change: From last year in fact, our international first quarter sales of $7 $7 million or nearly as much as our entire 2020 for international sales of $8 4 million.
Speaker Change: Non branded sales were up 3% year over year to $9 million as we continue to be opportunistic where possible to align supply with demand, notably as Mike mentioned at much higher margins.
Speaker Change: As a reminder that up until this quarter for most of the past two years, we have been selling off lower margin skus and non spec inventory and unfavorable margins to convert inventory to cash.
Speaker Change: Consistent with our focus on profitable growth retail branded sales were 22% lower than in Q1 last year at $32 7 million.
Speaker Change: With the decrease reflecting a shift away from value offerings I.
Speaker Change: E lower margin value brands with a strict focus on higher margin branded sales as well as the international medicinal market.
Speaker Change: Canadian cannabis gross margin was 36% up from 25% in Q1 last year, well within our target range of 30% to 40% and demonstrating the positive result of our expanded medicinal export sales.
Speaker Change: As well as our focus on higher margin the higher margin.
Speaker Change: Business in Canada, as well as continued progress in realizing production efficiencies.
Speaker Change: SG&A expense as a percentage of sales for Q1 was 25% compared to 21% in Q1 last year, the increase being primarily key account spends.
Speaker Change: Which one which while it is in SG&A cost is tied to branded sales.
Speaker Change: Q1, adjusted EBITDA for Canadian cannabis was $9 6 million or as a percentage of net sales over 19.
Speaker Change: 19% up very healthy, 75% from Q1 of last year due mainly to improved margins.
Speaker Change: Finally, as we do each quarter I will highlight that in Q1, we paid excise taxes on retail branded sales of $20 million. Another direct cost of branded sales or nearly 40% of branded retail revenues and more than double our SG&A.
Speaker Change: With the recent Canadian election behind Us, we renew our call in favor of excise tax reform to support the many benefits.
Speaker Change: The sustainable legal domestic Canadian cannabis industry.
Speaker Change: This quarter also saw the initial contribution from our first international recreational.
Speaker Change: Canada sales through our Lely Holland operations in the Netherlands.
Speaker Change: Which started partway through the quarter in late February.
Sales were 485000, and adjusted EBITDA was 77, reflecting an adjusted EBITDA margin of 15, 8%.
Speaker Change: Not many startup operations have such nice margins, which is a testament to our ability to bring our canvas knowledge and cultivation expertise into new markets.
Speaker Change: Turning to our U S canvas business, although Q1 sales of $3 9 million continued to trend lower due to continuing state level actions to deal with unregulated hemp products, which in some states has resulted in all intoxicating hemp based products being banned we continue to generate a healthy gross margin of 66.
Speaker Change: Percent and returned this segment back to positive adjusted EBITDA.
Speaker Change: We believe we have stabilized this business segment, even with the regulatory headwinds and we're looking.
Speaker Change: And we're working on a number of initiatives to reinvigorate sales on our responsible GMP produced natural hemp products as we await improved regulations with some states now requiring GMP standards, which is a welcome regulatory change as one of the few.
Speaker Change: <unk> G&P producers.
Speaker Change: Finally.
Speaker Change: Those farms clean energy generated 300000 net income from royalty payments we received.
Speaker Change: <unk> partner, providing a healthy stream of incremental profits for the company.
Speaker Change: Turning to consolidated cash flows and the balance sheet total cash flow from operations was negative $6 4 million in the first quarter.
Speaker Change: Partially due to the timing of government payments, which will normalize over the full year.
Speaker Change: We ended Q1 with a cash 15 million and working capital of $50 million, we remain comfortable with our net debt level of $19 3 million when the vanguard transaction closes, which will require us to at least pay off our operating produce.
Speaker Change: Line of $5 million will be in a net cash position.
Speaker Change: Total term debt at the end of Q1 was $34 million.
Speaker Change: Subsequent to quarter end, we amended our loan with.
Speaker Change: Farm credit, Canada to improved financial covenants. These changes reflect the considerable expansion in growth of our business since entering into the original agreement in 2013. The FC C loan matures in May 2027.
Speaker Change: We also refinanced our three Canadian cannabis term loans consolidating them into a single facility with two of our existing lenders with a 50 base basis point decrease in the interest rate.
Speaker Change: More attractive financial covenants and a new maturity date of February 2028.
Speaker Change: In closing, we feel very good about our financial position and performance of our cannabis businesses and believe the new ownership structure of our fresh produce business will allow us to realize more meaningful long term value creation as we focus more of our human capital and financial resources on our cannabis businesses.
Speaker Change: I will now turn the call back to Mike Mike Thanks, Steve to reiterate Vanguard transaction monetize as one third of our greenhouse assets positions our protein business to thrive as an independent private entity.
Speaker Change: Change is significant expansion potential for us to continue building, our leadership position and reputation in one of the largest and most respected scale cultivators and marketers of Kansas.
Speaker Change: On the planet village farms is all into the future cloud academies globally and we're excited to write this next chapter.
Speaker Change: We've never had a clearer path to drive.
Speaker Change: Stronger revenue growth margin expansion and cash flow generation, which we believe will drive very strong return to shareholders in the future.
Speaker Change: Thank you operator, we'll take questions now.
Speaker Change: Certainly and our first question comes from the line of Frederic <unk> from ATB capital markets. Your question. Please.
Speaker Change: Hi, good morning.
Frederic <unk>: Thanks for taking my questions and congratulations on the.
Speaker Change: The transaction in the results as well.
Speaker Change: I guess, the first question talking about the balance sheet.
Speaker Change: As you mentioned Steve.
Speaker Change: We did transaction here you would be in a net cash position will be strong balance sheet and really focus on your candidates platform. So I'm curious about.
Speaker Change: What are you thinking about capital location here. In addition to the expansion that is already undergoing in the Netherlands.
Speaker Change: Okay.
Speaker Change: Well right now.
Speaker Change: We are very happy and building a war chest so to speak.
Speaker Change: We continue to monitor the U S market for Optionality going forward, we think it's going to be exciting when and if that.
Speaker Change: That day, or Paris, and hopefully it will be in the next couple of years. So that's the market, we really want to eyeball.
Speaker Change: And keep close to so I think we're very happy with organic growth as opposed to Nonorganic growth Nonorganic growth is tough.
Speaker Change: Bringing in companies that may be not don't have tremendous value.
Speaker Change: Accretive value for us So I think we're going to see where we go build our infrastructure for the rest of the year and.
Speaker Change: Wait and see what happens I think.
Speaker Change: We are we started this year sort of.
Speaker Change: Very balanced on our inventory levels and in fact, we are short of capacity. So I think we will look at further expansion that's on our radar screen.
Speaker Change: Producing cannabis in Canada.
Speaker Change: Current facilities for.
Speaker Change: 2026, and beyond and we will make that decision here probably in the next quarter.
Speaker Change: And then we wanted to get lately phase two as I stood up and running so I think we're in a good position.
Speaker Change: We'll just leave it at that for it.
Speaker Change: Great I appreciate that color.
Speaker Change: Second question on your.
Speaker Change: Non branded.
Speaker Change: <unk>.
Speaker Change: You mentioned the <unk>.
Speaker Change: Financials here you saw a good average selling price increase here in both flower and bulk trim pretty strong prices.
Speaker Change: <unk> continued to see prices, including in Canada on the non branded channel do you think that.
Speaker Change: There is further upside here for wholesale.
Dan: Good morning, Dan.
Speaker Change: We are seeing.
Speaker Change: Net pricing certainly on a year over year basis.
Speaker Change: Curve.
Speaker Change: Yes.
Speaker Change: Shorten a little bit in terms of month to month.
Speaker Change: Prior period comparison, but overall year over year.
Speaker Change: I think thats a function of both a reduction in.
Speaker Change: Excess supply.
Speaker Change: Adam.
Speaker Change: But with that said umbrella as well as the demand that we're seeing that others are seeing from international market.
Speaker Change: The demand has tightened sorry supplies tightened up and Thats helped pricing.
Speaker Change: Perfect. Thanks for that I'll hop back in the queue. Thanks.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question comes from the line of Douglas Cooper from Beacon Securities. Your question. Please.
Douglas Cooper: Hey, good morning, guys and congratulations on the transaction that looks fantastic.
Speaker Change: Just to be clear what are you left with after the.
Douglas Cooper: <unk> moved from stopping to vanguard, so you'd be left with D. One in Delta I'm, just talking to the prototype.
Speaker Change: And then a couple of assets in Texas.
Speaker Change: Yeah, Deane, one in Delta, which will continue to produce produce.
Speaker Change: Foreseeable future as you know <unk> to <unk> <unk>.
Speaker Change: Half producing.
Speaker Change: Cannabis I just meant.
Speaker Change: I mentioned that we're looking at that full conversion of <unk> to that decision will be made and if that occurs then.
Speaker Change: <unk> will really be only only cannabis producing facility.
Speaker Change: However that being said, we continue to own the asset of Mara for one which you'll be lease triple net lease to vanguard and continue to own a monahan facility.
Speaker Change: Which won't be producing produce anytime soon so I hope that.
Speaker Change: So yes, so the only produce that we'll see on the financial statements post the transaction with Vanguard will be coming out of Google one.
Speaker Change: Correct.
Speaker Change: Mike is that profitable.
Speaker Change: That segment.
Speaker Change: He wanted to profitable.
Speaker Change: Yes, it's always been profitable and so our most profitable facility.
Speaker Change: Okay.
Speaker Change: Okay.
And so I know, Steve you guys talked about pro forma.
Speaker Change: Youll release those in in Q2 sometime.
Speaker Change: But ballpark figure.
Speaker Change: I've got Canadian cannabis use cannabis and in the Netherlands.
Speaker Change: At 30, just correct me. If these numbers are $39 million U S in revenue and $6 9 million of EBITDA in the quarter.
Speaker Change: Yes, Thats correct okay.
Speaker Change: And then what.
Speaker Change: Actual.
Speaker Change: Right.
Speaker Change: Net.
Speaker Change: Hi.
Speaker Change: Three.
Speaker Change: <unk> group's third profitable on a net income basis right.
Speaker Change: Yes. This quarter. They are I mean, obviously accounting charges can impact net income, but yes.
Speaker Change: I look at our operating they're all positive operating income look at that month.
Speaker Change: Okay.
Speaker Change: And.
Speaker Change: And then you'll be in a net cash position as you talked about to the tune of about $15 million.
Speaker Change: Hi.
Speaker Change: Be higher than that.
Speaker Change: I think we gave a number we didn't give a number but higher than that number okay.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: And then what do you have.
Speaker Change: So we focus on the Canadian or the cannabis segment of the operation.
Speaker Change: To.
Speaker Change: A further question earlier against the focuses in the Netherlands.
Speaker Change: Are you seeing any M&A opportunities in Canada. However are just going to focus on primarily the wholesale and the international and slashed Netherlands.
Speaker Change: Yeah for the foreseeable future that's what we're going to do focus on our organic growth in Canada continue our export driving our export sales and focus on building out the Netherlands Okay.
Speaker Change: This is my last one Netherlands. So can you just remind us phase one what is the.
Speaker Change: Yeah.
Speaker Change: What is the capacity.
Speaker Change: Potential sales there.
Speaker Change: You talked about phase two I think was.
Speaker Change: Four times that capacity once it's up and running can you just sort of walk you through ma'am.
Speaker Change: Yes, it's quadrupling, our current footprint almost five times actually.
Speaker Change: And what would be the footprint.
Speaker Change: In page, one and what is it post phase II.
Speaker Change: Post phase II will be producing.
Speaker Change: Around 10% to 12.
Speaker Change: <unk> thousand kilos.
Douglas Cooper: On an annualized basis and Doug the current facilities 2002.
Speaker Change: Can you talk about I guess.
Douglas Cooper: And pricing in the Netherlands.
Douglas Cooper: Stable.
Douglas Cooper: Little bit of a price very.
Speaker Change: It's very stable, but rather than say, it's in line with what we.
Speaker Change: I expect that model, so far team's done a great job.
Speaker Change: Delivering against.
Speaker Change: That expectation producing great quality flower already okay.
In terms of the coffee houses who are on the program or they all just maybe talking about the demand side of the market and how it's progressing what the coffeehouses coming online.
Speaker Change: Yes.
Speaker Change: 590, <unk> chefs about 80.
Speaker Change: In phase one legalization then as of April 7th last month to spend data they can only buy a legal product and.
Speaker Change: Of the 10 licenses has issued only seven are producing so we arent. So yes, there is a need for additional capacity for sure.
Speaker Change: Okay.
Speaker Change: Okay excellent thanks, guys.
Speaker Change: Thanks, guys.
Speaker Change: Thank you and as a reminder, ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone. Our next question comes from the line of Pablo <unk> from Zelman <unk> Associates. Your question. Please.
Speaker Change: Okay.
Speaker Change: Yes, good morning, everyone in the first congratulations on the on the Bravo spin can I just ask a couple of questions. There probably you can turn them into a $40 million.
Speaker Change: What valuation metric was used for that.
Speaker Change: And then bigger picture.
Speaker Change: Why not spin everything all the protein distributions I realize that you want to keep that takes us optionality, but maybe if you can discuss your thought process in terms of why these assets specifically and not.
Speaker Change: Thank you.
Speaker Change: While the transaction actually Pablo is at $80 million with $40 million of cash that's where we are reporting for those assets and I'm not going to get into the details I could talk to you separately offline about it but the company did have a fairness opinion on it. So it was really structured as an $80 million and I'll explain that to you separately.
Speaker Change: With 40 in cash 40, and equity of those assets and.
Speaker Change: You have to understand this was very important structure for us because we wanted to maintain optionality for cannabis.
Speaker Change: <unk>.
Speaker Change: And more importantly find the right operating partners to work with those two is what we were focused on for the last couple of years and in the end. We're very pleased with how the structure is again, giving us optionality.
Speaker Change: Both in Canada, and the us for the future of cannabis.
Speaker Change: And.
Speaker Change: Having great partners that can continue to roll up.
Speaker Change: The produce industry and hopefully that equity will be works a great deal with shareholders in the future.
Speaker Change: No of course, and then just just to verify I know you said, it's about one third of the Proteus assets, but in terms of revenue, it's a little more than that right I think the press releases the Canadian revenues of $25 million, but the total is 169 it was like 84% of the avenues being spun.
Speaker Change: While the revenue is going over to vanguard with the exception of the revenue that is generated out of Delta one so delta one we tied up exclusive marketing agreement with Vanguard just like we have.
Speaker Change: Our existing revenues prior to this deal comes from third Party partners in Mexico, and Canada. So we've entered into a marketing agreement. So we will book those revenues going to ban and vanguard will be selling that to our retail customers.
Speaker Change: So the retail customers based on a marketing agreement and we will book those revenues, but we are in a minority position.
Speaker Change: Okay. Thank you and then just two more quick questions. One in the case of Holland have the coffee shops.
Speaker Change: In the pilot began to buy only exclusively from the licensed producers or are they still being allowed to buy from the gray market because.
Speaker Change: The date keeps on moving it seems right. If you can clarify that and then maybe if we're suddenly going legal jargon.
Speaker Change: So only for the legal market as of April 11, seven.
Speaker Change: Uh huh.
Speaker Change: Yes.
Speaker Change: Okay. Thank you and then the last one Steve in terms of what you talked about GMP and vessel <unk>.
Speaker Change: Your manufacturing hold yet gummies in house could you offer to that.
Speaker Change: Could you offer co manufacturing services to other companies. So there I know, it's a very volatile industry. We don't know what's going to happen at the state level, but it seems that you have a unique opportunity there to use your capacity not to make just your own gummies, but also to co manufacture for other people is that an opportunity.
Speaker Change: Yes, it's an opportunity we've had discussions with others about that.
Speaker Change: Thank you.
Bob: Thanks, Bob.
Speaker Change: Thank you and our next question comes from the line of John Chapman from Alliance Global Partners. Your question. Please.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: John Chapman Your line is open.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: John Chapman Your line is open.
Yes.
Speaker Change: Okay.
Speaker Change: Once again, ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
Speaker Change: Yeah.
Speaker Change: And this does conclude the call.
Mike: A question and answer session of today's program I'd like to hand, the program back to Mike for any further remarks.
Mike: Thank you Jonathan let's just once.
Mike: Once again, thank everybody for attending today's call and look forward to reporting our second quarter in August. Thank you.
Mike: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Mike: Okay.
Mike: Okay.
Mike: Okay.
Mike: Okay.
Mike: Okay.
Mike: Okay.
Mike: Okay.
Mike: Yes.
Mike: Yes.
Mike: Okay.
Mike: Okay.
Mike: Okay.
Mike: [music].
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