Q4 2023 Village Farms International Inc Earnings Call

Participants

Michael DeGiglio; Chief Executive officer; Village Farms International, Inc

Steve Ruffini; Chief Financial Officer; Village Farms International, Inc

Eric Des Lauriers; Analyst; Craig Hallum Capital Group.

Mike Regan; Analyst; Excelsior Equities

Aaron Grey; - Analyst; Alliance Global Partners

Eric Livshits; Analyst; ATB Capital Markets

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to Village Farms International's Fourth Quarter and Year End 2023 financial results conference call. This morning, Village Farms issued a news release reporting its financial results for the fourth quarter and year ended December 31st, 2023. The news release, along with the company's financial statements, are available on the Company's website at Village Farms.com under the Investors 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 today'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 this 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 the Company's various securities filings with the SEC and Canadian regulators, including its Form 10-K MD&A for the year ended December 31st, 2023, which it will be available on EDGAR and CEDAR plus. These forward-looking statements are made as of today's date and except as required by applicable security laws, we undertake no obligation to publicly publicly update or revise any such statements.
I would now like to turn the call over to Michael to Giulio Chief Executive Officer of Village Farms International. Please go ahead.

Michael DeGiglio

Mr. the earlier picture. Good morning and thank you for joining us today. With me are Steve were freely our Chief Financial Officer. And given the fever, our Executive Vice President of Corporate Affairs, and Patty Smith, Vice President, Corporate Controller.
Today, I'm going to cover three topics going forward. First, I'm going to spend a few minutes on the fourth quarter and full year. Second, I will discuss some strongly positive improvements in our business model and Ferat. I'd like to comment on recent developments in the Canadian cannabis landscape. First, with respect to the year, we delivered positive consolidated adjusted EBITDA with positive contributions from each business. This was a key goal in 2023, which was owned by all our employees. And I thank them for their contribution, and they have challenged them to raise the bar even more in 2024.
Some quick highlights, we have restored our fresh produce business with EBITDA. Now closer to breakeven on an ongoing basis. That's a $25 million improvement in adjusted EBITDA of 12 months. We are now focused on long-term profitability and cash flow. Our US. cannabis business continues to deliver steady performance with positive adjusted EBITDA positive cash flow.
We may be the only major CBD hemp player, not bleeding cash write down the US market. The team has succeeded in establishing a strong and stable platform to leverage as opportunities in the US. cannabis industry open up our expertise and a portion of our Texas space assets remain a transformational opportunity to replicate our Canadian success in the next generation of US high THC cannabis regulations.
In our Canadian cannabis business, our sales growth accelerated again, we delivered our best ever quarter in retail branded sales and in total net sales. This means in Q4, we reclaimed the number two national market share position across all categories, and we are steadily closing the gap on the number one position. Importantly, brand extensions beyond Pure Sunfarms like Fraser Valley store super cells and pure lane are adding market share gains across different price segments and form factors outside of Canada, we are pursuing opportunities in new emerging cannabis markets. Nine of the country's best-selling strains in Canada are now being sold across four international medical markets, including the UK, which we added at the end of 2023.
We are excited about the recent German market developments and have a strategy in place to accelerate international export sales in current markets while expecting to launch products in additional European markets this year. Earlier this year, we started the build-out of our first production facility in the Netherlands. We are proud to be the only North American participant in this large limited licensed country, the first major recreational cannabis market in Europe. Production is targeted to begin later this year with first sales expected in early 2025.
Moving to topic two operational improvements that we have direct that have had a direct impact on our go-forward profitability and cash flow during one of the most challenging years on record for Village Farms in 2022, driven largely by a tough macro environment and a destructive tomato virus.
We took a hard look at every business we challenge the assumptions behind our growth projections in light of changing industry and capital market trends. To summarize against what we expected to be challenging 23 conditions in each of our industries, we prioritize what we could control, generating cash flow and gaining profitable market share.
When we started drilling down on the cash flow generation goals, we could not ignore working capital and in particular inventory levels within the Canadian cannabis business, our Canadian cannabis team assess market conditions and made a brilliant move to monetize non-brand spec inventory to capitalize on the light the tightening of biomass supply and improved pricing as many large-scale competitors shuttered cultivation facilities and move to a lighter asset model.
In doing so, we have improved the overall quality of our inventory freshness, and we have moved our operating model to a higher cash conversion, higher inventory turn operation going forward. We have also better visibility into profitable strategic cultivation opportunities as biomass supply conditions in Canada appear to be tightening. This pivot is temporarily impacting our Q4 Canadian cannabis gross margin and adjusted EBITDA results that otherwise would have been in line with consensus. Steve will describe further on this shortly.
As we see cultivation go offline across the industry and inventories tightening, we expect positive market dynamics to benefit our business in fresh. The leadership team has embarked on similar improvements with respect to customer profitability and continued cost improvement mentality while executing on a plan to improve our yields.
And turning to our U.S. cannabis business. A major operational improvement is the transition of all our gummy production in house, which is nearing completion. The initiative is supported by our current sales in the U.S. CBD market where gummies is a preferred form factor and in further any further positions us to be ready for whenever the FDA whenever the FDA visit CBD, which we expect will focus on stringent GMP standards for cannabis derived products, including have to which our products already adhere to 100%. Most of our competitors did not adhere to the standards. We expect to be producing 100% of our gummy products in house by the second quarter, which will ensure we do not forfeit sales due to stock out conditions as we did in 2023.
Finally, I wanted to turn to recent develops in the Canadian cannabis industry. This is our 5th year of cannabis operations. I want to remind everyone that we have achieved with that being first to market with one Act, which is one acquisition have been a good one. We have executed on our original thesis, leveraging our 30 years of leadership and controlled environment agriculture into a leading profitable cannabis company.
As I look ahead to the first time, I'm optimistic about the potential for favorable changes in the industry and there are several I'll start with excise tax reform where there are two discussions currently ongoing first, and we believe most importantly, other reports that Canadian tax authorities are implementing much more aggressive collection efforts for ballooning delinquent payments. We fully support this effort to level the playing field for all producers and to strengthen sustainable industry operating models are so ready.
Industry fallout which will benefit Village Farms as a leading profitable operator with a strong balance sheet.
Second, a review of the onerous excise tax that was recently included for the first time in recommendations for the federal budget to be tabled on April 16th. We recommend those that have worked tirelessly on this effort, including industry groups like C. three and I sit and stand ready to continue to work together to come to an equitable solution, which results in a thriving Canada leading cannabis industry, which invests in long-term employment, local municipalities and ultimately pays income taxes, which we all know is a true measure of a successful business. Canada was the first major developed country to legalize cannabis, and now as a global leader has the unique opportunity to work alongside its leading license producers to invest in its strong future.
Second development in Canada and the Canadian industry that I want to highlight as an emerging improvement in the levels of biomass supply. We think there are several factors the shift of many of our peers to asset-light models, better demand forecasting as the industry matures, focus on working capital are factors which each LPs control the decision on excise tax also help as do the ongoing conversions conversations rather with video boards who are aligned on supporting sustainable business models. So, this is a positive for pricing and industry profitability.
And our Canadian cannabis business as we continue to widen the gap has a low cost, high consistency quality cultivated with top market share. This includes pricing at retail, where we're seeing some recent stabilization. We view these developments positively as it stands as a validation of our founding thesis, quality, low-cost cultivation at scale is incredibly difficult.
Our three decades of experience is evident in our profitable, profitable position, leading market share. Human can have been able to meet this incredibly difficult challenge. I see this as the next leg of growth for the Canadian cannabis industry, and we will take full advantage to extend, extend our lead going forward.
And now, Steve, I'll turn it over to you.

Steve Ruffini

Thanks, Michale. Starting with the consolidated numbers for Q4, sales were up 7% to $74.2 million. Net loss narrowed to negative $22.5 million or $0.2 per share, a $27 million improvement from last year. Both the fourth quarter of 2023 and 2022 were impacted by noncash goodwill impairments on our US. cannabis division of $14 million and $13.5 million respect, respectively.
Our consolidated adjusted EBITDA improved $11.1 million year-over-year to negative 700,000 with respect to adjusted EBITDA, I will note here that based on feedback and guidance from the SEC during 2023, we no longer add back inventory write-downs to our adjusted EBITDA calculation previously reported 2022 adjusted EBITDA figures for Q4 and the full year have been adjusted to reflect this change.
There were no inventory write-downs in any of our divisions in Q4 or for the entirety of 2023 dirt drilling down and on Canadian campus results, which I will reference in local currency Canadian dollars in Q4. As Mike mentioned, we delivered record net sales and another quarter of positive adjusted EBITDA and positive cash flow. Net sales increased 14% year-over-year to $43.6 million of this total retail branded sales were up 4% to $33.9 million, a new quarterly record. We have continued to see strong branded sales carryover into early 2024 with some sizable restocking orders from some of our large provincial customers.
Non-branded sales continued the growth we saw in Q3 at $7.9 million thereof fourfold from Q4 last year and up 27% sequentially. Some additional color on this growth during the second half of 2023, wholesale demand firmed up, which gave us a window to strategically capitalize and moving some of our non-branded inventory.
It was a good time to be in the market with biomass that is not designated for our branded or other growth areas for context, during the fourth quarter, we sold roughly 3.5 times more non-branded biomass volume than the average of the prior three quarters of 2023. Also, for context, without these sales, our gross margin on Canadian cannabis would have been more in line with analysts' consensus estimates for the quarter.
So, if you're thinking that we cleaned up our balance sheet this quarter, you would be correct. International sales for Q4 were $1.2 million compared with $3.2 million in Q4 of last year. Sales in this growth area of our business continue to be lumpy as we're selling into what are essentially startup mode medical markets. We stand by our goal for sales outside of Canada to contribute 10% of total sales as we continue to build commercial relationships in these markets.
Turning to operating profit and cash flow, our Q4 Canadian cannabis gross margin of 23% was below our target due to the heavier weight of nonstrategic, lower margin biomass that we sold during the quarter. For context, in Q4, 30% of our sales volume was sold below our target gross margins of 30% to 40%. Our branded sales can continue to be within our target gross margin range. We are continuing to take advantage of the favorable market conditions to monetize non-branded spec biomass, which will drive additional cash generation with some continued effect on gross margin percentage in the early part of 2024. But we do expect to deliver Q1 in the low range of our traditional target gross margin of 30% to 40%.
Another highlight of the quarter is our continuous cost management mindset with SG&A expenses of $9.1 million, down $1 million year-over-year was a 400-basis point improvement as a percent of sales. While our non-branded spec sales in Q4 did enhance our SG&A as a percentage of sales figure.
We are expecting continuation of our cost management with the expectation that our 2024 SG&A to sales ratio be a couple of hundred basis points less than our full year ratio of 25.6 in 2023, our Q4 Canadian cannabis adjusted EBITDA of two point was $2.1 million for the quarter is an improvement from Q4 of 2020 two's restated adjusted EBITDA. As with gross margin, adjusted EBITDA was impacted by the opportunistic close-out of sales.
I discussed, we estimate these sales reduced adjusted EBITDA by $1.7 million. Mike noted our focus on cash flow generation, another area in which we believe our Canadian cannabis division is in a leadership position. For the full year 2023 Canadian cannabis generated strong cash flow from operations of $18.2 million, which is close to our Canadian cannabis full year EBITDA of $20 million with capital expenditures of $1.1 million and principal debt repayments of $9.9 million for a net cash generation of $7.2 million.
I will now turn to our US. cannabis business. Q4 sales and gross margin were roughly in line with those of last year at $5.1 million or 66%. Adjusted EBITDA doubled to a small but positive 400,000 net loss, which includes a to $14 million impairment charge improved year-over-year. While we acknowledge the accounting rules through driving the impairment charge. It is primarily driven by the ongoing lack of growth in this segment as we continue to await FDA clarity on the commercial commercialization of CBD.
Even so we continue to generate positive cash flow for both the fourth quarter and the full year. Moving to fresh produce sales for Q4 increased to $37.1 million. Gross margin was in positive territory for the second consecutive quarter at 800,000, while adjusted EBITDA was a negative 600,000 in Q4, which was slightly below our Q3 forecast for the fourth quarter because the seasonal improvement in winter pricing, which normally kicks in in December was delayed with pricing firming up in January, especially on smaller tomatoes, which continued into early March, and we are expecting another quarter of substantive year-on-year improvement.
And for this division for the year, fresh produce adjusted EBITDA delivered a remarkable $25 million improvement and as noted earlier, ended the year in positive territory, Q4 net loss from fresh produce has improved by over $16.5 million to negative$ 4 million. That brings the total improvement for the year to $32.3 million.
Switching to cash flow, consolidated cash flow from the U.S. operations for the quarter was negative $1.5 million. This was primarily the result of an increase in accounts receivable due to our higher sales, which resulted in a net use of working capital of over $2 million in the quarter. Our capital expenditures for the quarter of $1.7 million or roughly 30% of our total 2023 CapEx spend was primarily for enhanced operational Pakcom equipment for our Texas greenhouses, which will lower our labor costs in 2024 with an expected payback period of 18 months. We have also invested CapEx of roughly $1 million for our legally Holland project in the Netherlands. Finally, we paid $1.4 million in recurring quarterly principle payments, resulting in a net decrease in our consolidated cash for the quarter of $5.2 million.
Looking ahead to 2024 the first quarter is seasonally our toughest working capital quarter for produce as we gear up our Canadian produce assets, i.e., build inventory in the form of tomato plants in the Delta One and Delta two facilities, both of which are about to start harvest. So, cash flow from these facilities will start in late April.
Our Texas crops are performing well into the 2023, 2024 crop season. Our Canadian operations are having a strong quarter of cash generation cash generation as a result of our strong fourth quarter sales and early 2024 sales. Our primary capital spend for this year will be our lead project, which we are forecasting to finance 100% from our existing cash in 2024.
Operating cash flow, we ended Q4 with $35.3 million in cash and working capital decreased slightly to $79.6 million, both much improved from the end of 2022. Total term debt at the end of Q4 was $48 million composed of $23 million of fresh produce debt, which is due in May 2027 and $25 million of cannabis debt, which matures starting in February 2026, our total net debt is $13 million, a level that we are very comfortable with.
And now I'll turn the call back to Mike.

Michael DeGiglio

Thanks, Steve. So I want to reiterate a few comments before the Q&A and why I remain so optimistic as Village Farms' founder, CEO, and largest shareholder one, we are executing on our original thesis that we would build a profitable cannabis company by replicating our best-in-class 30 plus years in agriculture expertise. We have started 2024 with a tremendous amount of momentum.
Second, we are growing our share of the expanding Canadian cannabis market at the end of February, the gap between our number two overall position and the number one ranked LP. has shrunk to less than 300 basis points, and we are not done.
Our target still remains 20% market share. Three, our profitable growth model is uniquely positioned to benefit from improving supply dynamics, stabilizing pricing and excise tax enforcement currently underway within the Canadian market. And finally, we are driving the next level Village Farms' growth.
We are pursuing emerging opportunities in medical markets such as Germany and the limited license country of the Netherlands. We stand at an incredible vantage point. And as I tell my senior management team go crashing with that, Shannon, we'll turn it over to Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Eric Des Lauriers from Craig Hallum Capital Group.

Eric Des Lauriers

Thank you for taking my questions. First one from me is just on the US. cannabis side with the vertical integration of the gummy production, can you just talk about how that may or may not impact either gross or EBITDA margins going forward? Just kind of how to think about that change in the business model.

Michael DeGiglio

Thank you in allows us, it will essentially allow us to sustain our existing gross margins. We have seen consumers switch from from tinctures, which had a higher gross margin on the gummies traditionally. But by in-sourcing it, we've been able to improve on by not outsourcing our gummies, our own gross margin on our gummies. So we believe we'll continue to sustain our we have high 60% gross margin on and we have additional capacity on that machine as well. So, we're looking at opportunities to to assist others as well.
Okay, great. That's very helpful. Thank you. And then my other question. I'm just kind of trying to put all these pieces together in terms of margins on the Canadian cannabis side. So that's great to hear that we have some reduced biomass levels, kind of tightening supply sort of playing too your strength here?
At the same time, we've had some of these opportunistic and wholesale sales, which you know, certainly makes sense as you mentioned, improving quality of inventory, improving the balance sheet, etcetera. So, you mentioned if I heard correctly that Q1, although there's still some, I guess, elevated wholesale sales you do expect gross margins to sort of come back to that historical level of between 30% and 40%? Is there anything to consider with respect to EBITDA margins potentially some of some ongoing inventory write-downs that you're no longer adding back? Or just I'm just wondering how we should be thinking about EBITDA margins in this sort of new normalized environment?
Thank you.

Steve Ruffini

Eric, this is Steve. We're most of our inventory is spoken for. We're not anticipating any inventory write-downs. It is ag. So things happen. But with our existing inventory on as of today on?
No, no risk of any write-downs. We continue to move some of the out of spec, which is generally lower potency, smaller, Budd, but we have seen increased demand for that and increased demand and increased pricing because we think it's an indication that the market is short on and we're very comfortable in giving the range that we did that we'll be able to even with these opportunistic movements in the non-brand spec inventory in Q1 to maintain our gross margins in the 30% to 40% range it's great to hear your thoughts again, and thanks for taking my questions.

Operator

Thank you.
Mike Regan from Excelsior Equities

Mike Regan

Everyone. Thanks for taking the question. So I guess, can you give us maybe a sort of a civics lesson on how exactly the Canadian governmental process would work on the potential 10% ad valorem change. And we have the Standing Committee on Finance recommended. The tax change unanimously has been can be tabled for April 15th. And I think the tank added the word near for when these changes could potentially come. So that's used to help us understand what the process is and what we should be looking for on that change?

Michael DeGiglio

Yes, I think like we're not necessarily we don't have any idea what the Canadian government's timing is. So we just have no way to get around it, but we just reflected that there is conversation going on and there are recommendations now could happen this year. It may not could happen in the fall or even less next year. But that trend is going there. And the reason we mentioned it, it's a profound difference for us. Profound, as you know, cannabis last year paid more tax to the government than all beer and wine combined So at some point, it will happen and the impact for the industry and for us is huge. So that's why we brought it up, but we can't necessarily say it will happen anytime. So we don't have any color on that.

Mike Regan

Okay. But I guess during the process, I mean, basically what the parliament it's been, it will be tabled for Parliament and then they decide whether they'll passed the law and accepting or rejecting the recommendation. Is that basically how it would work?

Steve Ruffini

Yes, this is Steve. That's basically how it will work, and we do appreciate your work and analysis on the as Mike mentioned, the substantive impact on our cash flow and EBITDA. You've done good, good, good work on that.

Mike Regan

Well, thank you, I guess in terms of how I guess into that actual impact, I mean, just using the 2023 numbers, we basically sold $150 million of branded cannabis and paid$58 million of excise taxes on it for a net revenue of $92 million. So if that tax became a 10% ad valorem would be 10% of 150.
Right? So that would that 58 would go to 92 and the delta would then push up the net revenues that basically how I'm thinking about the accounting correctly were where we are.

Steve Ruffini

You are paying obviously excise tax on the branded sales. You have to exclude non-branded sales for from your calculations, but by looking looking at your report, you've essentially you've done the calculation and we're comfortable with. It's the numbers that you provided.

Mike Regan

Great. Thanks a lot.

Operator

Aaron Grey from Alliance Global Partners

Aaron Grey

Good morning and thank you for the questions here. And first one for me. Just in terms of some of the enforcement of taxes owed and garnering the payments. I think what impact you think that could have in terms of some accelerated shakeout in the market and have you already started to see some of that in terms of maybe the purchasing patterns of some of the provincial boards as they look to increase the amount that they buy from LPs that they know, are in good standing with the CRA and shift away from some of those on that they may have been asked to garnish wages.

Steve Ruffini

They see that they owe taxes to NCRIC. Thank you. I didn't hear the second part of your question. We don't know for sure if they're going to shy away from those specific providers, most boards, I think have indicated that they are willing and will collect taxes. So that's a strong move towards enforcement and collection, which we think will put pressure on those companies that are linked with the number is ballooning. It's approaching $300 million and that's a big number.
Now. It may force companies into bankruptcy. I think we've seen some Canada, unlike the United States, you can you can scrub your taxes through a bankruptcy, but we think there's discussions going on in Canada where we are.
How can I may take your license away or the Board's well issue orders if that happens because it's really an unfair way to not pay your taxes. So there's a lot of things in motion. And I think over the next couple of months, we'll get better color or color on it as this sort of aggressive move by the tax collectors was very recent the last four to six weeks or so more to come on that.

Aaron Grey

Okay, great. Thanks. And then just in terms of international growth opportunities in a big one potentially coming with the expected German reform and where it offers opportunity to meaningfully grow the medical market.
Can you speak to your plans more to capitalize on the opportunity, particularly just given it seems the initiative to increase doctor and patient awareness of the brand, given the dynamics of, you know, being prescribed specific brand versus just a broad medical prescription, we can go to a single store and buy it.
So just given that backdrop, how do you plan to potentially make investments ahead of the market to really capitalize on the opportunity that potentially there's a thing?

Michael DeGiglio

Yes. I think we're going to go work with distributors, either we're talking so many distributors are growing array of countries, even countries. They are looking at legalizing in the next 12 to 15 months. So the way we'll look at that as having partners in each country and maybe there would be multiple partners that would cover a number of different countries saying the EUVES. that's worked for us well in Australia.
And as you know, in the EU, we did issue our strains. So we're going to invest more in sort of taking our strains to a more global platform going forward, how we measure that. So that medicinal growth for us is a key priority for this year, and that's we now have formed a separate entity for international export is being headed by somebody very qualified.

Aaron Grey

And I think that coupled with our footprint in the Netherlands for recreational, I think, will help springboard us where Germany may go in the next or third gyration of their the scheduling, the class and the legalization IE. will you have to cultivate in country like the Netherlands?

Steve Ruffini

So a lot of moving parts but we're very focused on it. We continue to be frustrated at the US market and nothing happening. And of course, that optionality that we've talked about for years is very strong. And very alive for us. But in the meantime, we're not going to sit here and wait.
We think there's a great opportunity internationally and where we wanted to wait till, we can make very solid ground in Canada, be cash flow positive in Canada, EBITDA, positive number two, market share across the board. So we feel now is the right time for us to aggressively pursue international opportunities while we continue to drive forward in Canada and we like where we stand. So more wanted that to come.

Aaron Grey

Okay, great. Look forward to it. Thanks very much for the answers, and I'll jump back in the queue, please.

Operator

Thank you. Our next question comes from the line of Pablo Zuanic with Xantic and Associates. Your line is now open.

Good morning, everyone. Thank you, Mike, in terms of the 20% share target you mentioned, is that for flower or across all formats, if you can clarify that and as you do that.
Maybe a two-part question. And as you've been narrowing the share gap with the industry leader, can you talk about, you know, more and more color in terms of formats and provinces where there's still room for opportunity. And along those lines, you know, infused pre-rolls, large-size vape all-in-ones are big drivers of our market growth. How are you performing there. And in terms of what you can disclose, what plans you may have there just understand better the share momentum.Thank you.

Michael DeGiglio

Thanks, Bob. You have a 20% was something we put out and we still we're steadfast on, and we believe at some point we can get there and that's across all formats. And of course, flower, we still remain number one, and there's been some shrinking of flower overall, but we almost consider pre-rolls and flower just in another form. So I think our focus will be on flower and pre-rolls infused pre-rolls vapes. That's really where we think the large part of the market is going to be. We're not doing anything right now in beverage.
No, I think we probably see that on Horizon and you know, and we continue to make strides as we a big year for us to continue to go forward. Innovation is at the top of that freshness. Yes, you know, it's difficult. As I said in my remarks, it's difficult to execute across the board where you have the right cost of production in order to generate positive cash flow and positive EBITDA meeting, consumer needs, understanding what the is looking for being able to invest heavily in product development. We've always said we need to know what we're launching in 26 right now and plan for that. So so that's where we stand with Delta to. Actually, we've turned that back on and we see good things coming ahead there for us going forward.

So can you share some color at the provincial level? I mean, this has been quite varied according to higher data and no significant variance in terms of your penetration by province, continued color there in terms of what opportunities lie? Thank you.

I'm sorry, we missed your question.You asked it again

now in terms of provinces where it is BC Alberta, Ontario, whether you can give any color in terms of the momentum in share when I look at if I have data or withdrawal or there seems to be significant variance in terms of the company's share penetration across provinces. I don't know if those numbers are right, but whether you can give some color in terms of your room to increase our share across the various provinces, but maybe if you can give that type of quarter.

Thanks, fabulous. And it's a great question. And you are correct. We have a strongest share in Ontario, and it tapers off from there. And this is something that Oracle and his team are very focused on. Some of there are nuances in each province as we get closer and closer to understanding what drives consumption. It does vary and they're really on to addressing each provinces variances quite directly. So I think that's a place that you're going to see some share improvement going forward.

Okay, thank you. And then just one follow up, Mike, on the on international side, I guess again a two-part question. Oh, you had export number $1 million to $2 million per quarter. That's in the range recently. But Tom, I understand that a good chunk of your wholesale business, not branded domestic gets re-exported. I don't know if you can if you can give some color on that number. It will be like half one quarter. I don't know if you have visibility on that, but also related to that you know, when you look at opportunities in Germany, do you need to get wise in the question came up before, but you need to get more aggressive in terms of going deeper there in terms of finding various importers or even selling branded product there? How are you thinking about that?

Michael DeGiglio

Thank. Yes, we are very aggressive and we will get more aggressive but you know, with these companies, as Steve had mentioned, a lot of them are starting up and they don't have the wherewithal, the balance sheet. So we're working with a number of country companies, distributors actually in Germany and very sound in the UK. So I think that's going to start showing more so but we are aggressive about it. We're increasing our staff and going forward.
But look, I would probably say I wouldn't be surprised if across the board, we approach a third of a third of the cannabis that's being exported in one form or another through us or through others is in the international market today today. So we made a decision that with the capital markets the way they are not knowing what the future is.
We want to continue to generate earnings. So, we can plow that back into expansion, like Steve mentioned lately, how and where funding that completely ourselves. So right now that B2B business, especially on the international side, is interesting for us, but it's on a parallel track with us developing our own brands internationally as well.
So, we like that that sweet spot right now building out, but keeping our balance sheet strong and generating cash flow. But I would say probably 35% of the exports to internationally are probably coming to Pure Sunfarms. Thank you.

Operator

Eric Livshits from ATB Capital Markets

Eric Livshits

Hi, Eric. Listen for Federico Gomez. So what kind of impact do you potentially see in recent developments in Germany and the Netherlands having on near term international sales? And you mentioned that you are looking at expanding to other European markets. Would you be able to provide some color on what other markets you currently find attractive? Thank you.

Steve Ruffini

Well, it's the markets have become legal. I mean, like Denmark, some of these markets are much smaller than others of you know, Germany is just the well, but Switzerland, there are markets talking about recreational as well. So the Netherlands for us as being the only North American company that has one of the 10 licenses. We love how the Netherlands has set it up when we look at how we operate in Canada. The Netherlands is a limited license country.
And if you look at the US where the greatest margins are by the LPs in the U.S., they're in limited license states so take that same philosophy to the Netherlands, 10 license holders, no excise tax. The Dutch government wants a whole pricing.
Our pricing very the margins. We expect there are very high packaging is clear packaging. There's certainly advantages. And I think the Netherlands, as they do many things, well, we'll do this very well going forward. So we expect further growth and endeavors beyond this first study cultivation facility going forward, we think that would be a definite springboard for us for other recreational markets that emerge in the EU going forward. So we're pursuing both sides.
We think MediciNova and certain countries will continue on even if there's a recreational program more so than we've seen in other states in the U.S. or in Canada. So we have sort of a two-pronged approach, but there are many EU countries talking watching what Germany is doing the Netherlands and moving the needle in that regard over the next one or two years.

Operator

Thank you. And I'm showing no further questions at this time. I'd like to hand the call back over to Michael to Giulio for closing remarks.

Michael DeGiglio

Thanks, Sharon, and thank you to everyone for joining us today. We look forward to speaking to you on our next call in May. Thank you.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.