High Tide Releases Audited 2023 Financial Results

High Tide Inc. the high-impact, retail-forward enterprise built to deliver real-world value across every component of cannabis, filed its year-end audited 2023 financial results on January 29, 2024, the highlights of which are included in this news release. The full set of audited consolidated financial statements for the fiscal years ended October 31, 2023, and 2022 (the “Financial Statements”) and accompanying management’s discussion and analysis can be accessed by visiting the Company’s website at www.hightideinc.com, its profile pages on SEDAR+ at www.sedarplus.ca, and EDGAR at www.sec.gov.

2023 Fiscal Year and Fourth Fiscal Quarter – Financial Highlights

• Revenue increased by 37% to $487.7 million for the year ended October 31, 2023, and increased sequentially by 2% to $127.1 million in the fourth fiscal quarter of 2023

• Free cash flow increased from $4.1 million in the third fiscal quarter of 2023 to $5.7 million in the fourth fiscal quarter of 2023, representing an increase of 40% sequentially. Annualizing this quarter’s performance results in a free cash flow yield of 11% on the Company’s enterprise value as of the close of January 26, 20245

• Gross profit increased by 30% to $131.3 million for the year ended October 31, 2023. Gross profit for the fourth fiscal quarter of 2023 was $33.0 million, representing an increase of 12% year-over-year and 3% sequentially, excluding the one-time $2.4 million impact from the repeal of Manitoba’s SRF in the third fiscal quarter of 2023

• Gross margin was 27% for the year ended October 31, 2023. Gross margin for the fourth fiscal quarter of 2023 was 26%, fairly consistent versus 27% in the fourth fiscal quarter of 2022 and equal to the third fiscal quarter of 2023, excluding the impact from Manitoba’s SRF

• Adjusted EBITDA⁶ was a record $30.6 million for the year ended October 31, 2023, up 110% year-over-year, and was also a record at $8.4 million for the fourth fiscal quarter of 2023, up 7% sequentially,² and was up 67% versus the fourth fiscal quarter of 2022. Adjusted EBITDA margin for the year ended October 31, 2023 was 6.3%, versus 4.1% for the year ended October 31, 2022. Adjusted EBITDA margin in the fourth fiscal quarter of 2023 was 6.6%, which compares to 4.6% in the fourth fiscal quarter of 2022 and 6.3%² in the third fiscal quarter of 2023

• Salaries, wages and benefits represented 11.6% of revenue for fiscal 2023, compared to 12.3% in fiscal 2022. In the fourth fiscal quarter of 2023, salaries, wages and benefits represented 11.6% of revenue, compared to 12.1% in the fourth fiscal quarter of 2022, and 11.1% in the third fiscal quarter of 2023

• General and administrative expenses represented 5.5% of revenue for fiscal 2023, compared to 7.3% in fiscal 2022. In the fourth fiscal quarter of 2023, general and administration expenses represented 5.3% of revenue, compared to 7.4% in the fourth fiscal quarter of 2022 and was consistent with the prior quarter

• Revenue from the Cabanalytics Business Data and Insights platform, including ad revenue, was $26.3 million for fiscal 2023, compared to $21.7 million for fiscal 2022, representing an increase of 21% year-over-year. Cabanalytics revenue grew to $6.8 million in the fourth fiscal quarter of 2023, representing an increase of 3% sequentially

• The Company’s locations generated same-store sales growth of 13% year-over-year and 3% sequentially. Over the last eight quarters, the Company’s same-store sales are up a remarkable 110%

• During the fourth fiscal quarter of 2023, the Company completed its annual impairment testing. Driven primarily by a global post-pandemic slowdown in e-commerce sales, to which the Company’s e-commerce assets have not been immune, the Company experienced non-cash impairment charges primarily relating to goodwill of $34.3 million. However, these assets represent less than 9% of the Company’s consolidated revenues for the fourth fiscal quarter of 2023. Loss from operations was $34.2 million in the fourth fiscal quarter of 2023. Excluding the impact of these non-cash charges, the Company generated positive income from operations in the fourth fiscal quarter of 2023

• Cash on hand as of October 31, 2023, was a record $30.1 million, compared to $25.1 million as of October 31, 2022, and $25.7 million as of July 31, 2023

“Once again, the High Tide team has demonstrated that it is amongst the best in the business by delivering a second consecutive quarter of record free cash flow, clocking in at $5.7 million for the fourth quarter, representing an increase of 40% from the third quarter. This places us amongst an elite group of publicly traded cannabis companies anywhere to consistently generate meaningful amounts of free cash flow while continuing to grow our business. Our operational prowess is starting to get noticed by the capital markets, as witnessed by the fact that High Tide closed 2023 as Canada’s top-performing cannabis stock, even outperforming several ETFs and MSOs. We did this all while simultaneously reducing our debt to a very manageable debt to 2023 Adjusted EBITDA ratio of just 0.9, while adding 13 stores and breaking revenue records since inception and Adjusted EBITDA records for five straight quarters,” said Raj Grover, Founder and Chief Executive Officer of High Tide.

“Looking ahead, we see ample opportunities to build on our success in the Canadian market, where our Cabana Club membership is showing no signs of slowing down and now stands at over 1.28 million Cabana Club members. ELITE, our paid membership tier, grew at its fastest pace since inception, up 9,200 members versus September 14, 2023, and has now surpassed 28,000 members. Ontario’s recent decision to double its provincial retail cannabis store cap to 150 is a game changer for High Tide as we hope to meaningfully increase revenues over the next several years and now adjust our long-term growth target to 300 bricks-and-mortar stores in Canada, further solidifying our position as the country’s largest non-franchised cannabis retailer.

“While we remain focused on our core Canadian business, like any forward-thinking company, we are always looking at what opportunities may exist to expand our Canna Cabana brand internationally. We are seeing momentum regarding cannabis rescheduling in the United States, which could potentially pave a path for major U.S. exchanges to allow listed companies to engage in plant-touching business. We are also keenly following developments in Europe, particularly Germany, where adult use pilot projects focused on specialty cannabis shops could be possible in 2025. These global opportunities, combined with an improved regulatory environment across many Canadian provinces, gives me confidence that 2024 will be yet another stellar year for High Tide as we work towards our ambition of building a top-tier global adult-use cannabis brand,” added Mr. Grover.

Fiscal Fourth Quarter 2023 – Operational Highlights (August 1 – October 31)

• Organic retail store expansion continued with 3 new Canna Cabana locations in Alberta and Ontario

• The Company filed a $100 million final short form base shelf prospectus and subsequently established an at-the-market (ATM) equity offering program that allows the Company to issue up to $30 million (or the equivalent in U.S. dollars) of common shares from treasury to the public from time to time, at the Company’s discretion subject to regulatory requirements. The Company notes that its previous ATM program expired with approximately 75% of the facility undrawn

• Launched the “Altogether Magazine” (Cabanalytics Consumer Insights or CCI) to over 1.1 million ELITE and Cabana Club members

• The Company ranked 38th out of 425 in the Globe and Mail’s annual ranking of Canada’s “Top Growing Companies,” with 1,040% revenue growth over three years. This marks the third year in a row the Company has earned a spot on this prestigious list

Subsequent Events (November 1 – present)

• As of January 29, 2024, memberships in the Cabana Club loyalty program increased to over 1.28 million, up from 950,000 members as of January 30, 2023, and 1.1 million as of September 14, 2023, representing an increase of 35% year-over-year and 16% sequentially

• As of January 29, 2024, ELITE memberships have grown to over 28,000 members, up from 18,800 as of September 14, 2023, representing an increase of 49% sequentially

• The Company opened 7 new stores: 1 in British Columbia, 2 in Alberta, 1 in Saskatchewan, 1 in Manitoba and 2 in Ontario

• The Company entered Ontario’s third-largest city, Mississauga, after spearheading efforts to convince city council to opt-into cannabis retail sales

• The Company successfully completed a restructuring of approximately $8.9 million of the Company’s outstanding debt held by a key industry lender under a senior secured convertible debenture issued on July 23, 2020, as amended, maturing on January 1, 2025. With this move and a subsequent cash payment, the current balance remaining on this debenture is $1.0 million

• The Company reported that certain officers, directors, and consultants led by the Company’s Founder and Chief Executive Officer, in the aggregate, acquired 125,917 common shares in the capital of High Tide on the open market between November 20 and November 21 at an average price of $1.88 per Common Share. These purchases come in addition to similar insider buying of shares, which occurred in March 2023

• The Company grew its World Vision sponsorship support to 326 children internationally after committing to sponsoring two additional children for every new store that opens in Canada

Outlook
High Tide, through its innovative discount club model, maintains its status and leadership position as the largest non-franchised retail cannabis chain in Canada. The Company has exceeded its initial projections, and its Cabana Club now has a membership base of over 1.28 million across Canada. The Company has also accelerated the momentum behind its paid ELITE membership program by offering attractive consumer-focused incentives, which, combined with its industry-low pricing and leading selection, have resulted in a paid membership base of over 28,000. As the Company continues to expand its ELITE-focused consumer offerings, sustained growth in ELITE membership is expected moving forward.

During the second half of fiscal 2023, the Company generated a record $9.7 million in free cash flow. This cash flow profile will allow the Company to reaccelerate the pace of organic store openings. This phenomenon has already begun, as demonstrated by the Company adding eight stores in the last five months of calendar 2023. Having ended fiscal 2023 with a record cash balance while making meaningful strides in reducing debt subsequent to the end of the fiscal year positions the Company well to continue its expansion initiatives across Canada.

Ontario’s recent decision to double its retail cannabis store cap from 75 to 150 stores per entity is welcome news. It will have a positive impact as it brings the province closer to Alberta and Saskatchewan, two provinces that don’t have a store cap and have greater success at illicit market capture. This change also creates a significant growth opportunity for High Tide. Currently, the Company has 54 stores in Ontario, which generated an average annual run rate that was 3.2 times the Company’s provincial peers’ during the month of October 2023. Accordingly, the opportunity to now add an additional 96 locations will help meaningfully boost the Company’s revenues and growth trajectory. With this regulatory change now in place, the Company anticipates opening an additional 20-30 stores in this calendar year and has updated its long-term growth target in Canada to 300 stores. Although the quantum of free cash flow generation may vary meaningfully in any one quarter, particularly given the working capital requirements of new stores and the time required to ramp up operations to maturity, the Company expects sustained growth while remaining free cash flow positive.

About High Tide
High Tide, Inc. is the leading community-grown, retail-forward cannabis enterprise engineered to unleash the full value of the world’s most powerful plant. High Tide (HITI) is uniquely-built around the cannabis consumer, with wholly-diversified and fully-integrated operations across all components of cannabis, including Bricks & Mortar Retail: Canna Cabana™ is the largest non-franchised cannabis retail chain in Canada, with 163 current locations spanning British Columbia, Alberta, Saskatchewan, Manitoba  and Ontario and growing. In 2021, Canna Cabana became the first cannabis discount club retailer in North America.