High Tide Q3 Revenue Grows 98% YoY, What About Profit?

High Tide Inc. HITI HITI 2LYA revenue increased to CA$95.4 million ($72.4 million) in the third quarter of 2022 compared to CA$48.1 million in the same quarter last year, representing an increase of 98%. Sequentially, revenue increased by 18% compared to the second quarter of 2022

Q3 2022 Financial Highlights

• Gross profit increased by 54% to CA$25.8 million, compared to CA$16.7 million in the same quarter last year.

• Gross profit margin, was 27% compared to 35% in the same quarter last year. The shift in the gross margin was due to a change in retail pricing strategy to a discount club model. Sequentially, the gross profit margin was relatively on par with the previous quarter, which closed at 28%

• Adjusted EBITDA was CA$4.2 million compared to CA$1.5 million for the same quarter last year, representing an increase of 176%. Sequentially, adjusted EBITDA increased by 77% compared to CA$2.4 million during the previous quarter

• Net loss was CA$2.7 million compared to $1.8 million in the same quarter last year.

• Geographically, in the third quarter of 2022, CA$80.7 million of revenue was earned in Canada, CA$12.7 million in the United States and CA$1.9 million internationally. Compared to the third quarter of 2021, revenue increased by 110% in Canada, 33% in the United States, and 1,486% internationally

• Cash on hand as of July 31, 2022, totaled CA$18.3 million compared to CA$14.0 million as of October 31, 2021

Raj Grover, president and CEO of High Tide, stated: “Our team continues to deliver strong execution, and this shows in our third quarter results, which feature quarterly revenue of CA$95 million, representing 98% annual growth, as well as a 176% annual increase in adjusted EBITDA, making this the tenth consecutive quarter of positive adjusted EBITDA for High Tide. These impressive numbers come despite hyper-competitive cannabis retail markets across Canada and a global softening of e-commerce sales as pandemic-related restrictions are continuing to be lifted. High Tide now sits within striking distance of having the highest revenue of any cannabis company reporting in Canadian dollars.

“Our same-store sales have continued their upward trajectory, increasing by 46% year over year and 18% sequentially. This growth continues to be propelled by our innovative discount club model, which is specifically tailored to our company's unique position in the market through our diversified ecosystem. I am also very happy to report that our Cabana Club loyalty program, which is the largest of its kind in Canada, now sits at over 750,000 members, which represents more than 12% of the cannabis users across the country, excluding Quebec per Statistics Canada data. This membership number was our initial goal when we launched our discount club model last October, and we have now met our target in under a year. We look forward to rolling out our Cabana Elite program in the near term. This program will let members access additional benefits for a small recurring fee, while the existing Cabana Club program will remain free of charge," continued Grover.

Subsequent Events

• The company's Cabana Club loyalty program continued its rapid growth, sitting at over 750,000 members as of today, representing over 90% of daily transactions. The company anticipates launching a paid version of the Cabana Club, Cabana Elite membership program, by the end of the calendar year, which should monetize this base even further.

• Rollout of Fastendr continued, with 28 Canna Cabana locations equipped with the technology as of today

• On August 18, 2022, the company executed a binding commitment letter with connectFirst for CA$19 million in non-dilutive credit facilities

• The company acquired nine operating retail cannabis stores from Choom. As of today, the company operates a total of 140 retail cannabis stores across Canada

Outlook

The company's launch of its discount club model near the end of the fourth fiscal quarter of 2021 has driven remarkable same-store sales increases. These gains have been magnified by organic store openings and M&A activity leading to a sustained upward trend in its market share across the country. The company currently has three stores in the province of British Columbia, and a clear path to reach eight, the maximum allowable today by any one entity, in the near term, via both organic openings as well as accretive M&A.

The company first launched its white label offerings in June 2022 in the province of Saskatchewan, under the name Cabana Cannabis Co., and expects to launch in Ontario beginning next week. Over the long-term, the company expects these offerings to reach 25% of total sales, which should provide a meaningful boost to profitability.

The company has many benefits from its diversified ecosystem, one of which is the ability to bring its existing international CBD brands (NuLeaf Naturals, FABCBD and Blessed CBD) to Canada and sell them in its nationally-leading store network. The company anticipates entering into new markets and distribution platforms for its ancillary cannabis business lines in fiscal 2023.

Photo: Courtesy of CNW Group/High Tide Inc.

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