CALGARY, AB – High Tide Inc., A high-impact, retail-forward enterprise built to deliver real-world value across every component of cannabis, released its financial results for the third fiscal quarter of 2024 ended July 31, 2024. The full set of condensed interim consolidated financial statements for the three and nine months ended July 31, 2024 and 2023, and the accompanying management’s discussion and analysis can be accessed by visiting the Company’s website.
Third Fiscal Quarter 2024 Financial Highlights
Revenue increased to $131.7 million in the third fiscal quarter of 2024, an all-time record, compared to $124.4 million during the same period last year, representing an increase of 6% year-over-year and sequentially
Gross profit increased to $35.5 million in the third fiscal quarter of 2024, compared to $34.6 million during the same period last year, representing an increase of 3% year-over-year and was consistent sequentially
Gross profit margin in the three months ended July 31, 2024, was 27%, compared to 28% in the same period last year and sequentially
18th consecutive quarter of positive Adjusted EBITDA6, which was $9.6 million in the third fiscal quarter of 2024 compared to $10.2 million during the same period last year, which included a $2.4 million positive impact from the removal of the SRF in Manitoba and compared to $10.0 million sequentially. Prior to customary adjustments, the Company generated $8.9 million in EBITDA, which is the highest of any quarter in the Company’s history
Adjusted EBITDA margin was 7.3%, which increased from 6.3% during the same period last year, excluding the impact of the SRF and was 8.1% sequentially
Given the strong cost controls the Company has been implementing, general and administrative expenses represented 3.7% of revenue in the third fiscal quarter of 2024, which improved from 5.2% during the same period last year and 4.5% sequentially and was the lowest level in four years
Salaries, wages, and benefits represented 13% of revenue in the third fiscal quarter of 2024. This marked an increase compared to 11% during the same period last year and 12% sequentially driven by the 11 organic store openings during the quarter, which need significant staffing requirements while ramping up to maturity
The Company generated positive net income of $0.8 million in the third fiscal quarter of 2024. Net income improved from $(3.6) million in the same period last year and from $0.2 million sequentially. Income from operations was $3.1 million, marking sizeable improvements from $(0.7) million during the same period last year and from $2.0 million sequentially
Earnings per fully diluted share were $0.01 in the third fiscal quarter of 2024, compared to $(0.04) in the same period last year and $(0.00) sequentially
Cabanalytics Business Data and Insights platform, advertising revenue, and other revenue, which includes management fees, interest income, and rental income, was $9.0 million, an all-time record, for the third fiscal quarter of 2024, compared to $6.7 million in the same period last year, and $9.0 million sequentially, representing an increase of 36% compared to the same period last year and was up 1% sequentially
Cash and cash equivalents as of July 31, 2024 totaled $35.3 million, an all-time record, compared to $25.7 million as of July 31, 2023 and $34.5 million as of April 30, 2024 representing an increase of 37% from the same period last year and 2% sequentially
“Over the last year, the High Tide team has presented investors with compelling proof points as to how we’re different than other retailers, and our third quarter results offer even further evidence of this. Our numbers continue to drive home the fact that we are a well-managed, innovative company that has grown responsibly while continuing to build value for shareholders. Numbers don’t lie and this quarter’s record revenue, positive net income and free cash flow, for the fifth consecutive quarter, sit in stark contrast to some of our big-name competitors recently filing for bankruptcy protection or shutting down completely. Unlike these competitors, we are generating strong free cash flow from our operations, which has been powering our organic growth trajectory in recent months. This has allowed us to grow our cash on hand balance to $35.3 million, the highest ever,” said Raj Grover, Founder and Chief Executive Officer of High Tide.
“With 21 new Cabanas launched from the profits of our existing store network, we have already surpassed the low end of our previously communicated target of adding 20 to 30 new sites this year. Given our current momentum, I believe we can approach the high end of this projection. This rapid store growth and a 118% jump in same store sales since the launch of our innovative and disruptive discount club model has contributed to our significant increase in market share, which has reached 12% across the five Canadian provinces where we operate, up from 5% three years ago. Our Cabana Club has attracted over 1.55 million members, including 57,000 paid members, into our ELITE program, which continues to grow at its fastest pace for the fourth consecutive quarter despite an overall slowdown in Canadian cannabis sales. Additionally, we continue to have global aspirations to bring our winning model to emerging legal cannabis jurisdictions. We’ve already started the work of integrating and building Cabana Club into a global cannabis community. I look forward to sharing some very exciting news about this transformation in the coming weeks,” added Mr. Grover.
Third Quarter 2024 Operational Highlights
- The Company opened 11 new Canna Cabana locations – 4 in Alberta, 1 in Saskatchewan, and 6 in Ontario
- On May 1, 2024, the Company announced the appointment of Mayank Mahajan to the role of Chief Financial Officer
- The Company welcomed the announcement by Alberta Gaming Liquor and Cannabis (AGLC) that it has amended its Retail Cannabis Store Handbook to allow private label cannabis sales
- The Company entered into a binding subscription agreement with arm’s length institutional credit providers for $15 million in debt financing
- The Company held its Annual General and Special Meeting of Shareholders, where all members of the Board of Directors were re-elected with near unanimous support
Subsequent Events
- The Company opened 3 new Canna Cabana locations in Ontario
- The Company closed its previously announced asset purchase, pursuant to an asset purchase agreement dated June 25, 2024, whereby High Tide acquired a retail cannabis store in Mississauga, Ontario, for $600,000 in cash
- The Company grew its World Vision sponsorship support to 366 children internationally after committing to sponsoring two additional children for every new store that opens in Canada
- The Company announced the initial closing of its previously disclosed $15 million subordinated debt facility
- The Company announced the re-launch of the website of its flagship Canadian bricks-and-mortar retail brand, Canna Cabana, which represents more than 90 per cent of High Tide’s revenue
- Fastendr retail kiosks have been installed in 140 Canna Cabana locations, up from 130 in the previous quarter, with all remaining installations expected to be completed by the end of September
- The Company announced the launch of Queen of Bud branded white label products in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario
- The Company announced that it has entered into a joint venture with Positive Intent Events (PIE) to establish a leading position in Canada’s nascent cannabis hospitality sector. The announcement followed Alberta’s announcement to allow cannabis pop-ups at adult-only events
Outlook
Through its Canna Cabana brand, High Tide is the largest cannabis retailer in Canada and the second largest globally by store count, with 183 current operating locations. At the beginning of 2024, the Company set a goal of adding 20-30 locations over the course of the calendar year. The Company has already surpassed the lower end of this range, and given the continued momentum, it believes it can now reach the higher end of this range. The growth in the Company’s retail network through calendar 2024 has been largely organic and financed via internal cash flows which it expects to continue throughout the remainder of the year.
The Company’s Cabana Club loyalty program continues to expand at a rapid pace across Canada, currently exceeding 1.55 million members, which is up 41% over the past year. Long term, in Canada, the Company aims to exceed 2 million members. ELITE, the paid membership tier, continues to break quarterly growth records and has now reached 57,000 members, with additional members being onboarded daily. ELITE members tend to shop more frequently and in larger quantities than base tier members.
The Company’s market share in dollars during the first two months of the quarter rose to 12% from 10% a year ago while only representing 5% of the bricks-and-mortar store count in the provinces where it operates. The Company anticipates its market share trajectory to continue trending upward, given its robust organic store pipeline and continued competitor closures. As previously communicated, the Company’s long-term goal is to hit 15% market share in the provinces where it operates and to reach 300 Canna Cabana locations nationwide.
Given Alberta’s recent decision to allow the sale of white label products, The Company has begun to sell several new lifestyle accessory SKUs related to the recently acquired Queen of Bud brand and has unveiled additional cutting-edge Queen of Bud cannabis products that will launch in the coming weeks across Ontario, Manitoba, Saskatchewan and Alberta.
The Company has been free cash flow positive over the past five quarters, having generated approximately $26 million during this period. Although the quantum of free cash flow generation can vary significantly in any given quarter, the Company expects to remain free cash flow positive using cash generated from operations to fuel organic growth. This cash generation helped drive a record cash and cash equivalents of $35.3 million at the end of the quarter. The Company believes its financial profile is healthier than it has ever been. At the end of the quarter, the Company’s balance sheet was further strengthened by the initial closing of a $15 million debt facility.
The Company continues to monitor legislative and regulatory developments in Germany, particularly those related to potential commercial sale pilot projects, with a goal of entering Europe’s largest market as soon as possible.
ATM PROGRAM QUARTERLY UPDATE
Pursuant to the Company’s at-the-market equity offering program that allows the Company to issue up to $30 million (or the equivalent in U.S. dollars) of common shares from the treasury to the public from time to time, at the Company’s discretion and subject to regulatory requirements, as required pursuant to National Instrument 44-102 – Shelf Distributions and the policies of the TSX Venture Exchange (TSXV), the Company announces that, during its third fiscal quarter ended July 31, 2024, the Company issued an aggregate of 1,055,900 Common Shares over the TSXV and Nasdaq Capital Market, for aggregate gross proceeds to the Company of $3,151.
Pursuant to an equity distribution agreement dated August 31, 2023, entered into among the Company, ATB Capital Markets Inc. and ATB Capital Markets USA Inc., associated with the ATM Program, a cash commission of $47 on the aggregate gross proceeds raised was paid to the Agents in connection with their services under the Equity Distribution Agreement during the third fiscal quarter ended July 31, 2024.
The Company intends to use the net proceeds of the ATM Program, if any, and at the discretion of the Company, to fund strategic initiatives it is currently developing, to support the growth and development of the Company’s existing operations, funding future acquisitions as well as working capital and general corporate purposes.
Common Shares issued pursuant to the ATM Program are issued pursuant to a prospectus supplement dated August 31, 2023 to the Company’s final base shelf prospectus dated August 3, 2023, filed with the securities commissions or similar regulatory authorities in each of the provinces and territories of Canada and pursuant to a prospectus supplement dated August 31, 2023 to the Company’s U.S. base prospectus dated August 3, 2023 included in its registration statement on Form F-10 and filed with the U.S. Securities and Exchange Commission (SEC). The Canadian Prospectus Supplement and Canadian Shelf Prospectus are available for download from SEDAR+, and the U.S. Prospectus Supplement, the U.S. Base Prospectus and Registration Statement are accessible via EDGAR on the SEC’s website.
The ATM Program is effective until the earlier of (i) the date that all Common Shares available for issue under the ATM Program have been sold, (ii) the date the Canadian Prospectus Supplement in respect of the ATM Program or Canadian Shelf Prospectus is withdrawn and (iii) the date that the ATM Program is terminated by the Company or Agents.
ABOUT HIGH TIDE
High Tide, Inc. is A leading community-grown, retail-forward cannabis enterprise engineered to unleash the full value of the world’s most powerful plant and is the second-largest cannabis retailer globally by store count. High Tide (HITI) is uniquely-built around the cannabis consumer, with wholly-diversified and fully-integrated operations across all components of cannabis.
