High Tide Inc.

Good evening. My name is Hannah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hightide Inc. Fourth Quarter Fiscal Year 2021 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. Crystal DeVoe with Hightide. Please proceed.

Thank you, Hannah. Good evening, everyone, and welcome to Hightide Inc's quarterly earnings call. Joining me on the call today are Mr. Raj Grover, President and CEO, and Raheem Kanji, CFO. Earlier today, the company released the highlights from its financial and operational results for the fiscal fourth quarter and year ended October 31st, 2021. Before we begin, I'd like to remind everyone that certain statements made on today's call may contain forward-looking information within the meanings 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 and 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 and 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 this call is contained both in a readily available document available upon request and in our regulatory filings available on CDAR and EDGAR under the company's profile. Hightide 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 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 alternative 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 now begin.

Thank you, Crystal, and good evening, everyone. Welcome to Hightiding's Unaudited Financial Results Conference call for the fourth quarter ended October 31st, 2021. 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, we'd be pleased to answer any questions you may have. Let's look at the headline numbers. Revenue for the quarter was $53.9 million. This was up 117% year over year and was up 12% sequentially to a new record. While we are very proud with our Q4 revenue number, the growth didn't stop there. With four days still to go in our fiscal Q1, I'm excited to share that we expect to generate over $70 million in sales in Q1, up 30% sequentially over Q4. $70 million in sales would represent the third highest quarterly level of revenue ever reported by a Canadian cannabis company and would put us on a run rate of over $280 million. For the fiscal year ended October 31st, we reported $181.1 million in sales, which was up 118% versus fiscal 2020. Gross margin for the year was $64 million or 35% of revenue compared to $30.8 million and 37% of revenue in fiscal 2020. Gross margin of 33% in Q4 ticked below the 35% generated in Q3. This was largely due to the launch of the discount club model for our retail stores. However, in dollar terms, gross margin increased to a record $17.6 million in Q4, up 5% sequentially. Adjusted EBITDA for Q4 2021 was $1.6 million. The preparation of the launch of the discount club model, as well as the impact it had during the 12 days in the quarter where it had gone live, resulted in EBITDA being only slightly higher than the $1.5 million generated in Q3. It has been four months since our last quarterly results conference call, and we have been incredibly busy. We acquired two CBD companies, Blessed one of the top CBD brands in the UK, and New Leaf Naturals, a market leader in the production and distribution of premium cannabinoid wellness products based in Denver, Colorado. We also announced the anticipated acquisition of Budroom Inc., a cannabis retail store in Ottawa, along with its fast-center technology, which allows shoppers to use customized kiosks and smart locker technology for operational efficiency, including lower overhead and labor costs, and provide a differentiated and enhanced customer experience. We look forward to closing the Budroom transaction next week and rolling out the fast gender technology nationwide. But the most impactful initiative since our last quarterly call came on October 20th when after doing a number of successful pilots as an intro while at MJBizCon in Las Vegas, we announced the launch of our innovative discount club model, which includes four key components. First, Unbeatable prices. We highlighted how the illicit market is still represented over 40% of the country's cannabis sector, and that data from multiple sources, as well as our own data, showed that over 70% of Canadian cannabis consumers are extremely price sensitive. Our discount club model offers everyday low prices and price matching versus advertised prices. Therefore, we are unbeatable in this area. Second, consumption accessories. Unlike cannabis, where retailers are generally paying the same price for the same assortment, Hightight designs, manufactures, and retails over 75% of the 5,000 SKUs of consumption accessories we sell. Our vertical integration in the consumption accessories category has given us a key strategic advantage, which is totally unique among North American cannabis retailers. We can offer our unique and proprietary accessories at rock-bottom prices and and still earn meaningfully higher gross margins than selling cannabis. The number of accessories we sell weekly has quadrupled since April. The one-stop shop concept is working. Customers come to our stores for our accessories and come back regularly to buy cannabis. Given both lingering supply chain issues and our desire to best cater to our retail customers, we have essentially phased out wholesale in Canada so that customers can find our wide selection of exclusive accessories at Cannacabana. Third, incorporating a loyalty plan. For every skew of cannabis and accessories, our stores show a market price, what these goods typically go in for at the market, and a member price, which is significantly lower. But in order to get the member price, you need to be a member of our Cabana Club loyalty program. Since introducing this concept three months ago, membership in the program has exploded from 245,000 to over 379,000 members today. That's 55% growth, which is well over 1,000 new signups a day. Our members used to represent over 50% of our daily transactions in our stores. They now represent over 90% of our daily transactions. This is a tremendous achievement realized quite quickly and, in our opinion, best demonstrates how our innovative discount club model is catching on. We have clearly created a large block of very loyal customers, which is exactly what you want as a retailer. We expect that our loyalty plan membership will continue to increase, and we see a path to eventually getting to 750,000 members across Canada. We also believe that there is a significant monetization opportunity when you have a block of members that size, and we have already identified pathways for monetization when the time is right. Fourth is our own brands. As previously disclosed, we are working with Heritage Cannabis Holdings and Loosh to produce a Cabana Cannabis Co. branded shatter and gummies respectively. We are now working with various provincial boards to get these products approved and expect them to hit our store shelves within 60 days. We also now own three top tier CBD brands in Fab, Blessed, and New Leaf. And we are working with licensed producers to bring these brands to Canada so that they are made available for sale in our stores. Not only will offering our own white label and own CBD brands help with our margins, it will also help with our discount club model, as these products will only be available at preferential prices in our stores, similarly to how many successful major retailers have their own house brands. As you can see, that while price is a major factor in our discount club, it's about much more than just that. We took a broader, more holistic approach to leverage our strengths and points of differentiation, and I'm very pleased to say that it's working tremendously well. You'll recall that when we announced the launch of this concept, we cautioned that based on the success of the three trials that we underwent last year, it would likely take several months until we feel the full impact of the discount club model. Given the time that has passed so far, we are very excited about how things are tracking. We had already started seeing an uptick in same store sales as they were up 7% in Q4 versus Q3 2021. But things really started accelerating since we launched the discount club model. Let's look at the month of November, the first full month of the discount club model and the last month for which StatsCan data is available and compare it to our same store sales. Nationally, according to StatsCan, cannabis sales across the country went down 3% in November. including new store openings. In contrast, while the market was down on a same-store basis, our stores posted a 5% gain in November versus October, outperforming the market by 8%. In Ontario, the largest market and where the land grab is most important, we did even better. We posted same-store sales growth of 10% in November versus October, while the entire province generated only a 2% increase in total, including adding new stores. Then, as expected, things accelerated even further in December. Our national same-store sales were significantly higher than the 8% of data service published. Across the country, our same-store sales were up 22% in December versus November, while Ontario was up a tremendous 27%. In fact, every single one of our 100 stores, over our 100 stores, posted a gain in same-store sales in December versus November, an incredible accomplishment and more proof that as expected, the word of the discount club model is getting out and customers are increasingly coming to our stores. We've also seen our new stores ramp up much faster than before we introduced the discount club model. Specifically, we are now seeing new stores get to maturity in just over three months while it would take almost five months previously. So there is no doubt that we're off to a great start on the discount club model. It is unique, it is differentiated, and it leverages our points of strength to help us dominate an otherwise difficult market which should lead to the creation of significant value for our shareholders. While there is still a ways to go to feel the full benefits of the model, we are very encouraged on how things are tracking so far. The rest of the business also continues to perform quite well. With the recent acquisitions of Blessed and New Leaf, our global CBD business is on a run rate of $48 million and this whole line of business did not exist a year ago for us. It's only been two months since the New Leaf acquisition closed and we are already working on some immediate term synergies such as co-packing oils for fab and creating multi-cannabinoid soft gels. Blessed also continues to perform very well. Our strategy is differentiated as while our CBD and accessories e-commerce businesses allow us to acquire potential future THC customers today, These businesses are also contributing positively to our revenue in EBITDA right now. Data sales are an underappreciated part of our business. With so much going on, I think people don't realize the contribution it makes to our bottom line. Data sales in Q4 were $4.2 million, up from $3.8 million in Q3 2021. This is an exceptionally high margin line of business for us, and multiple industry stakeholders remain very interested in obtaining our data due to our internationally diversified ecosystem. Based on the demand we are seeing, we expect our data sales to continue to climb in Q1 and beyond. In conclusion, while it might be trying times in the cannabis capital markets, we are once again continuing to execute on our business. Our discount club model is tangibly delivering. Our CBD and accessory businesses continue to perform and add to our consolidated EBITDA, and we are forecasting being at over $280 million revenue run rate at the end of fiscal Q1. Things are looking up for high tide thanks to the tireless work of our team. Every day I get more and more confident about how things are progressing. With that, I will now turn the call over to Rahim Kanji, our CFO, to discuss our financial results.