High Tide Reports Second Quarter 2024

Published: June 17, 2024

High Tide Reports Second Quarter 2024

High Tide Inc., the high-impact, retail-forward enterprise built to deliver real-world value across every component of cannabis, today released its financial results for the second fiscal quarter of 2024 ended April 30, 2024 the highlights of which are included in this news release. The full set of condensed interim consolidated financial statements for the three and six months ended April 30, 2024, and the 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.

Second Fiscal Quarter 2024 – Financial Highlights:

  • Revenue increased to $124.3 million in the second fiscal quarter of 2024 compared to $118.1 million during the same period in 2023, representing an increase of 5% year-over-year and (3)% sequentially, given this quarter had two fewer days and is also a seasonally slower quarter. 12-month trailing revenue exceeded $500 million for the first time in the Company’s history

  • Gross profit increased to $35.3 million in the second fiscal quarter of 2024 compared to $31.6 million during the same period in 2023, representing an increase of 12% year-over-year and (2)% sequentially, given this quarter had two fewer days

  • Gross profit margin in the three months ended April 30, 2024, was 28.4%, representing its highest level in the past nine quarters. This compares to 26.7% during the same period in 2023 and 28.1% sequentially

  • Adjusted EBITDA increased to $10.0 million in the second fiscal quarter of 2024 compared to $6.6 million during the same period in 2023, representing an increase of 52% year-over-year and (4)% sequentially, given this quarter had two fewer days

  • Adjusted EBITDA margin increased to 8.1% in the second fiscal quarter of 2024, compared to 5.6% during the same period in 2023 and was consistent sequentially

  • Salaries, wages, and benefits represented 12.4% of revenue in the second fiscal quarter of 2024, which was largely consistent year-over-year and sequentially

  • Given the strong cost controls the Company has been implementing, general and administrative expenses represented 4.5% of revenue in the second fiscal quarter of 2024, which improved from 5.2% year-over-year and was consistent sequentially

  • The Company generated positive net income of $0.2 million in the second fiscal quarter of 2024, which included a non-cash impact from depreciation of $7.5 million. Net income improved from $(1.6) million in the same period last year and compared to break-even sequentially

  • Earnings per fully diluted share were ($0.00) in the second fiscal quarter of 2024, compared to $(0.02) in the same period last year and break-even sequentially

  • Cabanalytics Business Data and Insights platform, advertising revenue, and other revenue, which includes management fees, interest income and rental income, was a record $9.0 million for the second fiscal quarter of 2024, compared to $6.7 million in the same period last year, and $7.8 million sequentially, representing increases of 35% and 15% respectively

  • For locations operational throughout the second fiscal quarter of 2024 and 2023, same-store sales increased by 4% year-over-year. Given this quarter had two fewer days, same-store sales were (2%) sequentially. Calculated daily, same-store sales ticked slightly higher than the previous quarter. The Company notes that it significantly outperformed total cannabis industry retail sales across the five provinces where it operates, which were (4.4%) sequentially, including the impact of new store growth7

  • The Company continued the rollout of ELITE, the first-of-its-kind cannabis paid loyalty program in Canada, with membership surpassing 44,000, representing an increase of 226% year-over-year and 38% since March 15, 2024, which is the fastest pace of onboarding since ELITE was launched in late 2022

  • Cash on hand as of April 30, 2024, totaled $34.5 million, an all-time record, compared to $22.5 million as of April 30, 2023, and $28.7 million as of January 31, 2024, representing an increase of 54% year-over-year and 20% sequentially

“I am thrilled to report that in an environment where many cannabis companies, including some of our retail competitors, have been forced to seek bankruptcy protection, our team has been able to deliver positive net income in Q2, while also generating record-breaking free cash flow. In fact, over the past four quarters, we have generated $22.7 million in free cash flow, fueling our strong organic growth. We accomplished this despite Q2 being a seasonally slower quarter with two fewer days, as we tightly managed our G&A while also rapidly growing our store count and increasing our Canadian retail market share to 10.9%.

We remain the highest revenue-generating cannabis company reporting in Canadian dollars with Adjusted EBITDA up 52%, bricks-and-mortar revenue up 11% and consolidated revenue up 5% year-over-year, despite industry sales being down 4% during the same period. All of this has allowed us to end the quarter with a record cash position of $34.5 million. As previously communicated, we set an aggressive target to open 20 to 30 stores by the end of this calendar year. We are already the second largest cannabis retailer globally by store count, and our team is accelerating strategic and accretive M&A, focusing on opportunities of various sizes to further add meaningful size and scale to our store network,” said Raj Grover, Founder and Chief Executive Officer of High Tide.

“On top of achieving net profitability and record free cash flow, our Cabana Club continues to expand and remains the largest bricks-and-mortar loyalty program in Canada with 1.43 million members. I am thrilled to see ELITE memberships again grow at the fastest rate since inception, increasing 226% versus last year and 38% sequentially, demonstrating the popularity of our innovative discount club model.

It is also worth noting that investors seem to be catching onto High Tide’s superior operational performance, something that is reflected in our 12-month stock trajectory and the fact that High Tide is amongst the best-performing Canadian cannabis stocks over this time frame. Our Canadian scale and experience position us well to participate in the German commercial cannabis pilot projects once they are launched. All of this, combined with continuing regulatory reform in the U.S. and Europe, leads me to believe that our ambition to turn High Tide into a global cannabis powerhouse is within reach,” added Mr. Grover.

Second Quarter 2024 – Operational Highlights (Feb 1- Apr 30):

  • The Company opened 5 new Canna Cabana locations in Ontario

  • For the second time in three years, High Tide was recognized as a top 10 ranked company in the diversified industries sector by the TSX Venture 50

  • The Company announced that it has entered into a definitive agreement pursuant to which it has acquired all IP, including trademarks and other assets of the Queen of Bud cannabis and lifestyle brand

  • The Company is pleased to announce that it has closed on the remaining interest of NuLeaf Naturals, LLC (“NuLeaf”), not held by High Tide. As described in the Company’s news release dated November 29, 2021, NuLeaf’s members were granted an option to put to High Tide the remaining shares in NuLeaf not held by High Tide (the “Put Option”) at an enterprise value equal to the trailing twelve months of EBITDA multiplied by 7.1. Notice of the intention to exercise the Put Option was delivered by NuLeaf’s members on June 2, 2023, and the transaction was completed on April 5, 2024. High Tide had previously assigned its ownership interest in NuLeaf to it’s subsidiary, High Tide USA, Inc., so the remaining 20% interest was also acquired by High Tide USA, Inc. The aggregate purchase price for the remaining 20% interest in NuLeaf was One Million Five Hundred Seventy-Five Thousand U.S. Dollars ($1,575,000 USD) (the “Purchase Price”). High Tide agreed to pay the Purchase Price to the members in cash in fifteen (15) equal monthly installments of One Hundred and Five Thousand U.S. Dollars ($105,000 USD), beginning on April 7, 2024.

  • The Company also announced that on April 20, 2024 ‘4/20’, it generated just under $2 million in total gross revenues across all retail platforms, representing a 35% increase from the previous Saturday. The Company’s Canadian bricks-and-mortar stores reported a 30% increase, while sales across its e-commerce platforms (Grasscity.com, Smokecartel.com, Dailyhighclub.com, Dankstop.com, Nuleafnaturals.com, FABCBD.com, BlessedCBD.co.uk, and BlessedCBD.de) reported an increase of 119% over the previous Saturday

  • Various Executives of the Company participated in the International Cannabis Business Conference in Berlin, Germany and the Benzinga Capital Conference in Hollywood, Florida

Subsequent Events (May 1 – present):

  • The Company opened an additional 4 Canna Cabana locations in Ontario since April 30, 2024

  • The Company grew its World Vision sponsorship support to 344 children internationally after committing to sponsoring two additional children for every new store that opens in Canada

  • On May 1, 2024, the Company announced the appointment of Mayank Mahajan to the role of Chief Financial Officer

  • As of June 13, 2024, memberships in the Cabana Club loyalty program increased to over 1.43 million, up from 1,040,000 members as of June 14, 2023, and 1.32 million as of March 15, 2024, representing increases of 38% and 8%, respectively

  • As of June 13, 2024, ELITE memberships have grown to over 44,000 members, up from 32,000 as of March 15, 2024, representing increases of 226% year-over-year and 38% sequentially
  • Fastendr retail kiosks have been installed in 130 Canna Cabana locations, up from 120 in the previous quarter, with more installations underway

  • The Company has entered into a binding subscription agreement with arm’s length institutional credit providers for $15 million in debt financing. Pursuant to the terms of the subscription agreements, the funds will be drawn in two tranches: (i) $10 million at closing, expected on or before June 30, 2024 and (ii) $5 million in November 2024

  • The Company sold 1,055,900 common shares to one institutional investor through the ATM program for gross proceeds in the amount of $3.2 million