High Tide Inc.

At this time, I would like to welcome everyone to the High Tide Inc. Fourth Quarter Fiscal Year 2020 Financial and Operational Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Instructions will be provided at that time for you to queue up for questions. I will now turn the call over to your host, Christelle Deveaux, Director of Corporate Governance. Ms. Deveaux, please go ahead.

Thank you very much, Mary. Good morning, everyone, and welcome to High Tidings Quarterly Earnings Call. Joining me on the call today are Mr. Raj Grover, President and CEO, and Rahim Kanji, CFO. Earlier today, the company released its financial and operational results for the fiscal fourth quarter and year ended October 31, 2020. These results are available on the company's website and on CDAR. Before we begin, I'd like to remind everyone that certain statements made on today's call may contain forward-looking information within the meaning of applicable securities laws. Such statements may include estimates, projections, goals, forecasts, or assumptions which are based on current expectations and are not representative of historical facts or information. We want to be clear that such forward-looking statements represent the company's beliefs about future events, plans, or objectives, which are inherently uncertain and are subject to numerous risks and uncertainties that may cause the actual results or performance to differ materially from such statements. Additional information about both the material factors and assumptions forming the basis of our forward-looking statements and risks in which could cause actual results or performance to differ materially, and the material factors or assumptions that were applied to make certain conclusions, forecasts, or projections in forward-looking statements on the call is contained both in readily available document, available bond requests, and in our regulatory filings available on CDAR under the company's profile. HITI does not undertake any duty to publicly announce the results of any revisions to any forward-looking statements in this call or to update or supplement any information provided in today's call. In addition, on this call, we will refer to supplemental non-GAAP accounting measures, including adjusted EBITDA, which do not have any standardized meaning as prescribed by IFRS. We believe this non-IFRS financial measure assists management and investors in understanding and analyzing our business trends and performance. Please refer to our earnings press release for a calculation of these measures and reconciliations for most directly comparable measures calculated and presented in accordance with IFRS. These non-IFRS measures should not be considered superior to as a substitute for or as an alternate to and should be considered in conjunction with the IFRS financial measures presented on the financial statements listed on CDAR. It is now my pleasure to introduce Mr. Raj Grover, President and CEO of Hightide. Thank you. Mr. Grover, you may begin.

Thank you, Crystal, and good morning, everyone. Welcome to Hightide Inc.' 's financial results conference call for the fourth quarter ended October 31, 2020. I'll start this call by providing an overview of our results and other key developments in the fourth quarter. Rahim will discuss the financials in depth, and after that would be pleased to answer any questions you may have. In a way, this call marks the end of an era as it represents the last quarter before the closing of our acquisition of Meta Growth Corp. While I'm extremely proud of our results for the quarter, the reality is our company has been truly transformed on every level since then. We're a larger, stronger, healthier company than we were just a handful of months ago, which makes me so excited for the future. I'll get to that in a minute. We had already provided some disclosure regarding our top line to the market, declaring our expectations that it would be ahead of highest analyst estimate. Today, we are reporting record revenue of $24.9 million for the fourth quarter, which is an increase of 118% over the same quarter last year. Gross profit increased to $8.7 million, up 112% over the same quarter last year. Gross profit for the year was $30.8 million versus $11.3 million in the prior year. Adjusted EBITDA for Q4 2020 was $3.6 million compared to a negative $6 million in the same quarter last fiscal year. This was the strongest quarter ever generated by a Canadian cannabis retailer. and was also above the highest analyst expectations. We announced the acquisition of Meta in late August, and what a difference six months make. This is a vastly different company from where it was just six months ago. I'd like to touch on the advances we've made across several aspects of the company. First off, the entire scope of our operations has been magnified. Prior to announcing the acquisition of Meta, we had 34 open stores. While that made us a leader at that time, we now have 72 branded stores across the country. We're in a different league today. Our proven profitability has also become evident. Six months ago, our last reported trailing revenue was $54 million and EBITDA was negative $8 million. Today, we just reported revenue of $83 million for fiscal 2020 and adjusted EBITDA of positive $8 million. Investors are seeing clear evidence of profitable growth already, and again, this is before we doubled in size. Not only has our presence in Canadian bricks and mortar retail multiplied, but so have our U.S. operations. At the end of August, based on the last reported quarter, which was the fiscal second quarter of 2020, ended April, Hightide's U.S. operations were on an $11 million run rate. Today, if you were to take the U.S. revenue Reported for a fourth fiscal quarter and add smoke cartel it translates to a run rate of about 25 million dollars Expanding in the US is a key component of our strategy going forward We have been beefing up our management team to make sure we have the right pieces in place to succeed and I would like to highlight three key members who recently joined our team Omar Khan joined high tide as senior vice president of corporate and public affairs in January Omar is among Canada's most prominent cannabis public affairs strategist and has extensive experience in networks across Canada, the United States, and Europe. Also, earlier this year, we were pleased to announce the appointment of Andrea Elliott to our board of directors as an independent director. Andrea has over 20 years of executive retail experience and is currently executive vice president at Moose Knuckles, a successful global Canadian luxury outerwear brand. We're already greatly benefiting from our expertise in retail. In November last year, we also announced that Vahan Ajaymian joined Hightide as Vice President Capital Markets. Vahan was one of the pioneers in equity research of the cannabis sector and has been a thought leader in the space. Speaking of our capital markets profile, that's also increased by leaps and bounds. Six months ago, our shares were listed on the CSC. While the CSC were great partners during our early days, We uplisted to the TSX Venture Exchange concurrent with the closing of the Meta transaction in November. In December, we were the first Canadian retailer, cannabis retailer, anywhere to announce that we submitted an initial application to list on the NASDAQ. We have started receiving and addressing comments from NASDAQ and our application is proceeding well. Perhaps more important than where investors can buy shares is the ease at which they can buy them. Our liquidity has exploded. offering a more efficient market for investors. During the last 10 trading days in August, we were averaging a little over 1 million shares a day traded across our primary Canadian, US, and German exchanges. By the end of February, we were averaging 19 million shares a day across these exchanges. The average value of our shares traded has increased since then from less than a quarter of a million dollars a day to over $12.5 million. This increased liquidity is providing confidence for both institutional and retail investors and is helping us attract capital as well as helping with potential M&A targets.

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Another area of stark improvement is our balance sheet. It's basically been flipped upside down. Six months ago, our latest reported balance sheet for the second fiscal quarter, we had $7 million of cash on hand. Today, largely due to our recently completed oversubscribed $23 million bought deal financing, we currently have approximately $38 million on hand. On the debt side, in January, we announced that three of our major lenders had each agreed to amendments which extended the maturity date of their debt by more than a year and simultaneously lowered the interest rate. Our lenders are great partners, which have recognized that this simply isn't the same company they originally lent to in terms of risk profile, and they each agreed to get paid later and with a lower interest rate for $40 million worth of total facilities. This includes having successfully negotiated a $10.8 million interest-free debenture during 2025 with a strategic partner. Since the end of the fiscal year, a total of $29 million of convertible debentures have converted into common shares. Several investors have reached out to congratulate us on how well our shares have performed recently. While we've had an improving macro backdrop, I think it's important to realize that this just didn't happen. This didn't just happen. It boils down to our talented and dedicated team putting their heads down and making the right moves to improve the fundamentals of our business. Simply put, it's execution. And regardless of what the macro picture brings, I expect our team to continue leading the way. While we have made great strides in the last few months, in a sense, we're only just getting started. Our balance sheet has never been stronger, which positions us well for the next leg of growth. So where do we go from here? A key area of focus is Ontario. While COVID restrictions on construction have slowed their progress, we are encouraged by the AGCO's recent decision to increase the pace at which new stores can be licensed from 20 to 30 a week. Accordingly, we feel good about our prospects of being at the cap of 30 stores by September 30, 2021, when the cap is lifted to 75. As construction slowed down in much of Ontario, we accelerated the pace of build-outs in Alberta, where we have pockets of areas which are still underserved and we can open profitable stores. So look for a flurry of new store openings in Alberta this month. Also, we are encouraged by the AGLC's announcement that it plans to recommend regulatory and legislative changes that would be favorable to licensed cannabis retailers in the province. One item I would like to expand on, as the market may not fully appreciate, is our announced acquisition of Smoke Cartel. I'm very excited for several reasons. First, it adds revenue that is both profitable and strategic today. As per our press release announcing the acquisition, Smoke Cartel expects to generate 7.4 million US dollars in revenue in calendar 2020 with a 16% EBITDA margin. The lion's share of this revenue is coming from the US. Second, it cements our leadership in the online accessory landscape, as we will own both the largest and the second largest e-commerce accessory platforms in the world. Accessories are a core part of our DNA at Hightight. I've been focusing on this profitable business for over a decade. Third, it adds complimentary dropshipping technology. We already have Grass City, the world's premier online store for consumption accessories. Grass City generally fulfills its orders worldwide from inventory in our warehouses in Las Vegas, Calgary, and Amsterdam. While Smoke Cartel's proprietary dropshipping technology allows brands to plug into its network to fulfill orders, leaving the company with a lean inventory-like model. Fourth, it adds key personnel. Upon the close of the transaction, Sean Geng, the founder and CTO of Smoke Cartel, will be joining Hightide as our Chief Technology Officer. We look forward to working with Sean and having him deploy his dropshipping technology to Grass City, CBD City, and even Kanakabana, helping improve their operations. So you can see the multiple reasons why we are looking forward to the transaction closing, which is expected this month. The core of our business comes down to the customer and our ability to make a connection with them, earn their trust, and get their repeat business. Once again, our team has done a phenomenal job reaching them especially given COVID-related restrictions and opportunities, such as launching our own delivery in Ontario. I'm pleased to report that over 50% of our cannabis bricks and mortar revenue during the fiscal fourth quarter came from members of our loyalty plan, Cabana Club, and that this percentage has been ticking even higher since then. It is a testament to the stickiness of our customer base, which is exactly what you want as a retailer. Fiscal 2021 is already off to a great start. As mentioned in our press release last night, we expect to report revenue between $37 and $38 million for the quarter ended January 31st, which is already a step function up from Q4 level. With that, I will now turn the call over to Rahim Kanji, our CFO, to discuss our financial results.

Thank you, Raj, and good morning, everyone. In the fourth fiscal quarter ended October 31st, 2020, the company recorded consolidated revenue of $24.9 million, representing an increase of 118% year-over-year and 3% sequentially. Revenues comprised mainly of sales through our bricks and mortar cannabis retail locations, through our e-commerce platform, Grass City, and wholesale divisions, and recurring subscription revenue from our Kabanalytics data analytics platform. The revenue also included royalties earned from franchisee and branded locations. Revenue from our retail segment was $22.6 million in the fourth fiscal quarter of 2020. This was up $1.2 million sequentially. Revenue from our wholesale segment was $2.2 million in the fourth quarter of 2020. Even though we currently face production and logistical challenges, particularly regarding product coming from overseas, I note that wholesale revenue is only down $0.4 million versus the fiscal third quarter. In fact, our biggest challenge is not having enough product on hand to sell. The demand is very strong for our products. You can see on our website, famousbrands.com, most of our products are currently sold out. As the supply chain gets better, we expect this would result in another leg up in revenue in our wholesale divisions. Our consolidated gross profit was $8.7 million in the fiscal fourth quarter of 2020, or 35% of revenue, versus 36% generated in the fourth fiscal quarter of 2019. This year's quarter was impacted by two one-time items. First, we closed all remaining Smoker's Corner locations and exited that business, which resulted in a one-time inventory write-off of a quarter of a million dollars. We trued up our sales tax provision related to our U.S. sales for Grass City. Adjusting for these two non-recurring items, our quarterly gross margin would have been 38%. Going down to the bottom line, the company generated $3.6 million in adjusted EBITDA, which was our strongest quarter ever. Our EBITDA margin percentage for the quarter was 14.6%. While we are very proud of that margin, we do note that the percentage may take modestly lower in future quarters as we keep increasing the top line, particularly related to hiring more personnel to manage this growth. Let me quickly touch on two major accounting transactions during the year. On January 27, 2020, we acquired 50% interest in the Saturninus Partners, which operates a licensed retail cannabis store in Sudbury, Ontario. As a result of the company controlling the economic benefits of the partnership, our quarters include 100% of the financial results of the partnership with a non-controlling interest on our consolidated statement of loss and other comprehensive loss. During the fiscal year 2020, the company adopted IFRS 16 accounting standards that capitalizes fixed lease payments on the balance sheet and results in depreciation over the lease term versus being included in the operating expenses historically. All of our quarterly results were updated as a result of finalizing implementation of this new accounting standard. As at the end of fiscal year, the company had $7 million in cash compared to $806,000 as at the end of last fiscal year ending October 31st, 2019. The increase in cash was primarily driven by the company generating $8.9 million in cash from operations. As mentioned by Raj, Our cash balance today is approximately $38 million with much of the increase arising from the $23 million oversubscribed bought deal financing which closed last month. Our balance sheet remains very healthy and our debt levels are now very manageable. After accounting for conversions, our total debt at the end of February that is due in calendar 2021 and is not currently in the money is $3.6 million. Again, for context, we generated that much adjusted EBITDA in the fiscal fourth quarter alone. With that, I will now turn the call over to the operator to open the lines for the Q&A.

Thank you. Ladies and gentlemen, if you would like to ask a question, you will need to press star 1 on your telephone. To withdraw your questions, just press the pound key. We will limit one question and one follow-up question per participant. Again, to ask a question, press star one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Andrew Semple with Ecolon Capital Markets. The line is open.

Hello and good morning. Congrats on the financial results. Thank you, Andrew. Great. First question, Hightide now has had four months with META growth under the umbrella. I just wanted to ask how that integration process is going there, what steps you see as remaining to get those operations fully aligned with Hightide's business plans going forward?

So Andrew, we are very pleased with the way the integration of META is going. You know, adding Meta solidified as a leader in the Canadian cannabis retail market and also got us access to the Manitoba market where we had no exposure. Now, it may take some time to fully integrate and transfer everything over to the Canna Cabana banner. And, you know, also upgrading all the Meta and New Deep stores to our differentiated one-stop shop concept. But this is all a work in progress. We're working on it and we expect to complete the integration by call at the end of this fiscal year. so october 31st 2021 we should be looking good on that um but the scale that we've achieved due to the meta acquisition uh will also help us you know with our upcoming white label initiatives our cabanalytics platform subscriptions and increase in the reach of our cabana club loyalty program because we have access to this many new stores now and as i mentioned our expectations for the for the fiscal first quarter of 2021 is for our top line to be between You know, $37 to $38 million, a huge step up from the $25 million we just reported. So, meta is a key part of that.

That's a great color. Thank you. And just to follow up here, in your outlook, you mentioned several pending discussions surrounding retail stores and federally permissible businesses in the U.S. You know, understanding that you can probably not comment on the specifics of those potential discussions. But I am curious as to what you're seeing in terms of valuations more generally across those two spaces. And if you could also touch on the size of your M&A pipelines in both Canada and the U.S., that would be appreciated.

Yeah, absolutely, Andrew. So, you know, Hightide has always had this diverse, broad ecosystem and a vertically integrated business portfolio. Honestly, since shortly after inception 12 years ago, We started Smoker's Corner, and then shortly after that, we started RGR. And as you know, we've been quite active on the M&A front with the transformational acquisition of MetaFirst and then the announced strategic acquisition of SmokeHotel. Now, that said, we're no means done with M&A. The improvements to our balance sheet and application to list on the NASDAQ are likely to help keep the momentum going forwards. And then, and unlike other, you know, one thing I want to point out here is like, unlike other bricks and mortar retailers whose target universe may be confined to just buying other retailers, given our existing ecosystem and strategy, our scope is much wider. We are looking at other Canadian retailers, but we're also looking at other e-commerce businesses that also include accessory companies and CBD companies. So you know our continued execution is also paying off as several companies have noted our success over the past few months and have reached out to us regarding potential deals. So now the onus is on us to be very thoughtful on how we approach future M&A and make sure that anything we do adds to what we have both strategically and financially.

Great, appreciate that and I'll get back to you.

Our next question is from David Kitiko with ATB Capital Markets. Your line is open.

Hi, good morning. Congrats, everybody, on the quarter. I had a couple of questions here. First, I want to go back to your acquisition strategy a little bit. And I'm wondering, in previous quarters, Raj, I think you mentioned revenue coming from the accessory side of the business. It's just north of 20%. I'm wondering what your steady state run rate is. is for when you look at percentage contributions from your accessory side of the business, whether that's Canada and U.S. international versus brick and mortar. Thanks.

Yeah, so, you know, as per Q3, we were at around actually 38%, David, if you look at the accessories versus cannabis spread. And we've continued on that very similar momentum. The spreads are very similar. When I say 38% for accessories, we're talking about e-commerce and wholesale revenue. So we're hovering around that range of between 35% and 38% on accessories. And then if you look at U.S., Canada, and international spread, of course, by the sheer number of opening more cannabis retail locations, our revenue is currently much higher in Canada, but we continue to tick along in the United States. So our US revenue last reported quarter was 23%, we're anywhere between 18 to 20% this quarter. And on a dollar amount basis with the inclusion of Smoke Cartel, we see this going to even perform our revenue as soon as we acquire Smoke Cartel, we see this starting at $25 million. and going upwards from that. And we very much have our eyes on the US market. So I'm confident throughout 2021 and beyond, our US revenue will continue to inch higher. Obviously, we'll be adding more revenue in Canada as well because we're building a lot of retail stores. So from a percentage basis, Canada may be higher in the short term, but longer term, I think US revenue will far exceed Canadian revenue. And we are already making, with the moves that we are making, You know, like I said, we're already at a pro forma revenue of $25 million.

Okay, thanks for that color, Raj. I want to just switch gears a bit here. We put out some research last week showing, as per Health Canada, inventory levels are increasing across the board for 2.0 products. And this was for up to October and November 2020, realizing that your quarter ends here October 2020. So I'm wondering if you could give any color what you're seeing at the retail level from 2.0 products specifically, and are there any specific product categories amongst the 2.0 products that you're seeing not selling as quickly as, say, others? Thanks.

Yeah, good question, David. So on the 2.0 side, things have been ramping up in Canada, which I'm very pleased with, because 2.0 gives us an additional margin enhancement opportunity that we don't necessarily have as big as in the dry flower category. So one particular category that I want to highlight is the vape category. The vapes have been inching up practically every month. We started at around 12%, then we were at 15%. Now we're close to 17% on vapes. And also the other very pleasing aspect of this is the price points have been coming down. So I've never seen since inception, since vapes got launched, we are pretty much at a 40% or more price drop on vapes, which is really helping fuel the sales of vapes. If I could point out to one category that I think is a bit underrepresented at the moment in Canada, that would be, you know, edibles. As you know, edibles are a new and growing category. However, they only represent a little over 5% of our current sales. So it's a decent start to them as it frequently brings non-smokers into the market. And we position these products in particular to act as impulse or add-on purchases when customers are already at the counter. So, you know, while it might take some time to get more traction and getting more SKUs will help, we are happy with the way these new formats have been selling so far. But your other question that you asked me was, you know, the intake on how is it affecting due to Health Canada regulations. There is a bit of effect here for sure. So, you know, the 10 milligram limit on edibles and drinks is currently an issue. And there's a pending federal review of the Cannabis Act. And we will be working through national industry associations to put forward a unified perspective on this issue to continue taking this issue up with Health Canada. And eventually, I think that will help bring up the sales at the retail level.

Okay, thanks for that, Kalar. Very helpful. I'll hop back into the queue.

Our next question is from John Chu. The does have them. John is open.

Hi, good morning. Maybe talk about your plans for having your own branded products for sale in your stores. Certainly that's a pretty good revenue source, margin source, but also with the branding of your stores and everything else. So maybe just give us an update on what your plans are for that and potential timing and even what type of products you might be looking to introduce.

Hi, John. John, so, you know, having our own white label brand is something that we've been considering for some time now. I know that some others have already launched theirs some time ago. But, you know, we have very close relationships with several licensed producers that have offered to be suppliers of our own brands. But we have deliberately been waiting for optimal time for two reasons. And I've known this forever, but the reason I'm waiting for is a very practical one. So the number one reason is the wholesale price of flour has kept on coming down. We weren't interested in trying to catch a falling knife regarding our input cost and putting a pin in the price months ago while prices are still falling. And we're now much closer to the bottom than a free fall but we've been very aware of this fact and that's why we've taken it slow on the white label initiative and that's actually worked very well in our favor. This is why we are able to report profitability ahead of some of our competitors. And then, you know, the number two reason is we've gone, now we've gone from 30-something stores to 72 today. Accordingly, our buying power and thus our negotiating power has also increased. So, you know, our ability to force our own brand to work through our own network of stores has really increased. So we are preparing to start our white label program. However, we are still going to take a methodical and measured approach that will include waiting for further details from the OCS and because I'm hearing in regards to their flow through and skew rationalization programs that may impact house brands. So it's still a wait and see approach on that front, but we are getting clarity on that very shortly here.

Okay, great. And then just secondly, just with Ontario increasing the store count, just remind me again, I know you've got a 30 location target by the end of September, but have you secured your locations yet to get to 30 or, and do you have a sense of kind of, are you looking more suburban or urban and kind of a general idea on how you're approaching that?

Yeah, absolutely. So, you know, we've had several locations in the queue. I believe 26 or 27 are in the queue now. And we're glad to see the planned acceleration of licensing after pandemic restrictions continue to cause a freeze in construction in much of Ontario. I think last we heard was The update was March 8th when construction can begin in much of Ontario. So we're in freeze there. But we do have 26 open and in-queue locations already. So I'm absolutely not worried about hitting our cap of 30 stores in the province until September 30th, 2021, which it's not like some of our other competitors can get there and go beyond that cap. I think that cap opens up for everybody after September 30th. We believe our existing network and stores in the queue will position us well to reach that level by the end of September when the cap will be lifted to 75. But the one most important thing here, John, that I want to point out is we remain highly focused on the quality of our locations, not only quantity. We've learned from our experience in this much more hyper-competitive market in Alberta that it's all about securing the best locations. This approach is an integral part of our Ontario growth strategy because We all get 75. You might as well get the best 75.

Okay, that's helpful. Thank you.

Our next question is from Nikki D with the scoop. Your line is open.

Hi, good morning all. Congrats, guys, on a great quarter there. My question from my highly engaged subscribers here on the scoop is it comes up to like the NASDAQ. You guys are talking NASDAQ. And they're really excited about the meta growth acquisition. They love the smoke cartel, everything. But in order to go on the NASDAQ, the question keeps coming up about a reverse split. Has there been any talk about that? Are you guys, is there anything going on there that maybe investors should know about?

Yeah, no, good question there. So we've already started receiving and addressing comments from the NASDAQ and our application is proceeding well. And we are very excited at the prospect of being listed on the NASDAQ and believe that can help attract even more capital and add fire to our M&A initiatives. But that said, regardless of the timeline of the listing, we plan to continue the momentum from 2020 and keep on executing on our business driving forward. And we've not really announced a shared consolidation yet, to answer the second part of the question, but our board has already received the authorization for a potential rollback when appropriate. So if we need it in the future, we are still going back and forth with comments, but if we do need it in the future, then yes, that rollback has already been approved by the board.

Okay, thank you.

Our next question is from KJ Derrick with High Tide. Your line is open.

Yes, thank you so much for taking my call. My question to you, how do you plan to use your celebrity partner such as Snoop and Paramount Pictures to forward by reaching the younger generation of us?

You know, the celebrity element that is attached to our business portfolio and famous brands is a very exciting one for us. But, you know, we have to be reasonable with our approach on how loud we get with the celebrity licenses that we have. Although I'm very proud of the fact that we can command shelf space anywhere in the world because of these recognized brands, you know, we're also mindful of how we promote marijuana-related or cannabis-related products with celebrity endorsements. So we are not planning to promote or push it above and beyond where we're at today, but I can definitely tell you from a business perspective, it definitely helps us secure shelf space in every retail setting. You call it smoke shops, vape shops, dispensaries, cannabis retail outlets, anywhere we have the opportunity to sell these products. So we're excited about our licensed products, but we need to be mindful on how we promote them.

Thank you. That's all I got.

Our next question is from Joshua Vance with PI Financial. The line is open.

Hi, thank you for taking my question. I was wondering if you could provide some more high-level color on how you view grass-sitting small cartel fitting into your overall corporate strategy, specifically when you are allowed to enter the U.S., How do you view these assets planning to your U.S. strategy? Thank you.

Great question, Joshua. This is one of my favorite topics, actually. You know, so between Grass City and Smoke Cartel and CBD City, our e-commerce platforms, we're getting upwards of 33 million site visits annually. That was our number for 2020. And I think this is a massive opportunity in itself. Like 75% to 80%, if I recall correctly, are American customers. Having access to this level of American customers is a massive benefit heading into U.S. federal legalization whenever that happens. Like I pointed out earlier in one of the questions that Sean Geng is going to be joining us, as our chief technology officer. Our e-commerce progress is improving and getting stronger and stronger every day. I'm particularly very passionate about e-commerce. We are a retail-focused company, so having these amazing assets like Grass City and Smoke Cartel that are mature, it takes a lot of time for search engine optimization to kick in. Grass City was established in 2000, so it's a 21-year-old business. Smoke Cartel was established in 2013, so it's a seven, eight-year-old business. Just considering how much goodwill these businesses have generated already and the customer data that we have, for example, we have over half a million customers in just Grass City's database alone. Every time we send an email just on the Grass City platform, over 300,000 readers are you know, open up those emails. So it's a very educated guess that I can tell you that once federal legalization takes place and things start opening up, we've got some of the most priced assets in e-commerce that may be, you know, today generating around $18 to $20 million combined. But if we look at the future, I think the opportunity is tremendous. And as the business scales worldwide, you know, as the new markets open up, In Latin America, in Europe, in Asia, having these sophisticated ecosystems of e-commerce, I think will take us, these businesses will take us much further than where we are today. So this is a core part of our strategy going forward for sure.

Okay, thank you for that. And just one last question from me. How do you see same-store sales growth trending in the coming quarters? Maybe you could touch on that a little bit.

Yes, the same store sales growth in Canada is sort of all over the place right now. So, you know, you look at Alberta in 2019, probably 2019, our fiscal year, so October, we had, or 2019, we had close to 250 or 230 stores. Today we have 570 stores in Alberta, right? So obviously there's big competitive pressure coming in, at least in the Alberta market, But the good news is having a concept that we have, we've differentiated ourselves from our competition with our one stop shop concept that provides an unparalleled selection of accessories at unbeatable prices. So we've been able to maintain our revenue in the Alberta market with a slight decrease from last year. And if this continues, we are going to remain to be in profit mode. However, I would like to caution that Alberta market is hyper-competitive. There are pockets of opportunities that exist. Thankfully, we are Alberta-based. It's home turf for us, so it's easier for us to identify these pockets. But the Alberta market is getting mature. And then if you look at Ontario, you know, not very long ago, we were talking about how there were only 65 stores and then there were 150 stores. Well, there are over 400 stores in Alberta now. And there is another 1,400 in the queue. So even though there may be a nice short-term or medium-term upside, which we don't currently see because of COVID, these COVID lockdowns have not helped. The construction closures have not helped, although these are temporary issues. You know, so once these go away, we feel... a nice tailwind in Ontario for our numbers in Ontario for the next couple of quarters. But then again, eventually it's going to all start leveling out and start heading towards where we're at in Alberta. But that would be at least four to six quarters down the road in Ontario. So I hope that answers your question.

Yeah, it does. Thank you.

We have a follow-up question. From Andrew Semple with Ecolon Capital Markets, your line is open.

Hello there and thanks for taking my follow-up. I did want to just touch on a couple of financial items on the call. First up on CapEx, it was a little bit on the light side in Q4 and I know there's perhaps some lockdown activities that restricted construction in Q1. Should we expect, you know, fairly light CapEx in Q1 and then kind of picking up after that with your improved balance sheet and ability to deploy cash more quickly? And should that help accelerate store openings in the latter half of 2021?

Sure. I think, Rahim, do you want to take this question?

Yeah, sure. Hi, Andrew. So, yeah, the CapEx activity was slightly low in Q4 and going into Q1. Q1 was primarily a result of the lockdown we realized in Ontario, freezing all the construction activities. So that sort of slowed down some of our CapEx activities. But we anticipate that that CapEx activity to continue and grow as soon as those lockdowns are done. I believe Raj mentioned March 8th, I believe it is. So we should see our activity pick up. And as we had disclosed in our prospectus that we plan to build 15 stores with the use of proceeds from that bond deal. So we will start our project plan as soon as the lockdowns are open and continue to build those stores out. So you'll see more of activity from us in the Q2, Q3, Q4 periods of our 2021 fiscal quarters.

Great. And if I may ask, just on kind of a net basis, you know, how Did the lockdowns impact your Q1 2021 results? I'm not sure if you can comment or quantify that. And if you could give us some additional colour, how we should think of the growth trajectory coming out of Q1. Should we see an acceleration as lockdown measures are lifted?

Yeah, so just like every other business, we've realized, seen these slight declines in our location, specifically in the Ontario market as a result of lockdown. However, we have set up our infrastructure to ensure that we're operating based on the guidelines provided. So we have our delivery system open, we have our click and collect ready to go. But it has resulted in a slight decline in our Q1 revenue in Ontario, specifically around 9% to 10% in Ontario. But we're quite confident that as soon as these lockdowns are up, we should see the volumes come back and return of our loyal customers back to our locations.

Great. Thanks for that, Keller, and thanks for taking my questions today. Congrats on the results.

Thank you.

Thanks, Andrew.

We have a follow-up question from David Kitiko with ATV Capital Markets. Your line is open.

Hi, just one more question for me. Rahim, you mentioned in your prepared remarks that a lot of your product is flying off the shelves and you can't keep up with demand. So I'm just wondering, given the times we're in with COVID and coming out of COVID, do you have any future systems in place through an inventory management system to better keep up with supply versus demand just to really maximize profits for you. Thanks.

Yeah, no, thanks. So, yeah, we're constantly monitoring the volumes and the sales activity and we have a really good idea in terms of the products that are hot right now and flying off the shelf. And we're continuously working with our manufacturers and distributions and overseas to ensure that we are forecasting ahead of time in ensuring that these orders are shipped in time for when the inventory is depleted or near depletion. So, we should have that process pretty good going forward.

Thank you.

There are no further questions at this time. Now, I'd like to turn the session back over to Hightife CEO Raj Grover for final comments.

Thank you, operator. In conclusion, I'd like to thank all those on the line for their time and their interest in Hightide and give a special thank you to all of our shareholders for their unwavering support through 2020. We will meet again within a month to discuss our first quarter 2021 results ending January 2021. With that, I will ask operator to close the line. Have a great day, everyone.

That concludes today's conference call. Thank you everyone for joining. You may now disconnect