High Tide Inc.

Excuse me, everyone. Please remain holding. The conference will begin shortly. Again, please remain holding. The conference will begin momentarily. Thank you. Thank you. Thank you. Good afternoon, my name is Tamia and I will be a conference operator for today. At this time, I would like to welcome everyone to High Tide Inc's second quarter of 2022 unaudited 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 the question and answer session. I will now turn the call over to your host.

Thank you, operator. Good evening, everyone, and welcome to High Tidings Quarterly Earnings Call. Please note that all earnings discussed on this call are presented on an unaudited basis. Joining me on the call today are Mr. Raj Grover, President and Chief Executive Officer, and Mr. Rahim Kanji, Chief Financial Officer. Earlier today, the company released unaudited highlights from its financial and operational results. for the second quarter ended April 30th, 2022. Before we begin, please let me remind you that during the course of this conference call, High Tides Management may make statements including with respect to management's expectations or estimates of future performance. All such statements, other than statements of historical facts, constitute forward-looking information on forward-looking statements within the meaning of the applicable securities laws and are based on assumptions, expectations, estimates, and projections as of the date hereof. Specific forward-looking statements include, without limitation, all disclosures regarding future results of operations, economic conditions, and anticipated courses of action. For more information on the company's risks and uncertainties related to forward-looking statements, please refer to the company's press release dated June 14, 2022, released earlier today, and our latest annual information form and our latest management discussion and analysis, each filed with the securities regulatory authorities at CDAR.com or on EDGAR at www.sec.gov or on the company's website at www.hightideinc.com, and which are hereby incorporated by reference Although these forward-looking statements reflect management's current beliefs and reasonable assumptions based on the current available information to management as of the date hereof, we cannot be certain on the actual results that they will be consistent with the forward-looking statements in the future. There can be no assurance that actual outcomes will not differ materially from results. Accordingly, we caution you not to place undue reliance upon such forward-looking results. For any reconciliation of non-GAAP measures measured and discussed, please consult our latest management discussion and analysis filed on CDAR and EDGAR. It is now my pleasure to introduce Mr. Raj Grover, President and Chief Executive Officer of Hightide. Thank you, Mr. Grover. You may now begin.

Thank you, Crystal, and good evening, everyone. Welcome to Hightight Inc's financial results conference call for the second quarter ended April 30th, 2022. I'll start this call by providing an overview of our results and other key developments in the second quarter. Rahim will discuss the financials in depth. And after that, we would be pleased to answer any questions you may have. Total revenue for the second quarter was $81 million. This was up 98% year over year and was up 12% sequentially. While it continues to be a very competitive market for cannabis, all our sequential revenue gains were in Canada, driven by significantly higher same-store sales, as well as adding more stores to our network. $81 million in growing puts Hightide at an annual revenue run rate of almost $325 million. We continue to post the second highest revenue level among all Canadian cannabis companies that report in Canadian dollars, only behind Canopy Growth, a company with a $1.7 billion market cap versus ours at $170 million. Gross profit for the quarter was $22.7 million. As a percentage of revenue, gross profit declined from 32% in Q1 2022 to 28% this quarter. This was not a surprise given, as mentioned before, our Canadian business, which generates lower margins, increased its share of the mix to now represent 78% of total revenue. What is important is that the gross margin percentage we earned by selling cannabis in our stores was stable sequentially in Q2 versus Q1. Adjusted EBITDA for Q2 2022 was $2.4 million, representing our ninth straight quarter of positive adjusted EBITDA, which is unmatched in the Canadian retail cannabis sector. While we are pleased with our EBITDA of $2.4 million this quarter, we highlight that as the only pure play cannabis retailer trading on NASDAQ, direct ongoing costs incurred associated with our NASDAQ listing amounted to over $750,000 this quarter. Our store count went from 109 to 120 stores during this quarter. We are grooming and feeding these newer stores to catch up to the maturity levels we need them to reach to become EBITDA positive, and we expect this to continue given the pace at which we are acquiring and building new stores. As we open up more stores, which we expect to continue to do, the percentage of bricks and mortar revenue should increase versus other business lines. We are at 126 stores today, well on our way to our target of 150 by the end of the calendar year. On our last quarterly conference call, I provided some data showing how well our innovative discount club model has been received. Today, I'm pleased to highlight that this growth accelerated significantly during Q2. According to multiple data services, total cannabis retail sales across Canada were 6% higher in the month of April when our Q2 ended, when compared to the month of January when our Q1 ended. This includes the impact of opening new stores. In contrast, our same-store sales alone were 20% higher in April versus January. Accounting for the one fewer day in April, our same store sales were on a daily sales run rate ending Q2 that was 24% higher than we ended Q1. We have seen consistent growth and outperformance versus our peer group since we launched the discount club model on October 20th, 2021. Our same store sales alone, not including the new ones we added, were up a tremendous 43% comparing the month of April to the month of October. Whereas the entire Canadian market, including the addition of new stores, was only up 3% during this period. Accounting for the one fewer day in April, same-store daily sales were up 48% in April versus October. You can see that consumers are clearly attracted to our first-of-its-kind discount club offering. We are growing our market share every single month, and I can advise that May was no exception to this trend. While offering unbeatable prices is one key factor in our discount club, it is a lot more than just that in terms of leveraging our unique points of differentiation for consumers. We have three other pillars than just price. First is our accessories. This is where we started the company a dozen years ago. We have thousands of cutting-edge proprietary accessory SKUs, which we design, manufacture, distribute, and retail. None of our retailer peers have this line of business, so no one can touch us in this area. Second is our Cabana Club loyalty program. You have to be a member to get the members-only prices in our stores. We have seen Cabana Club membership skyrocket from 245,000 on October 20th to over 550,000 today. We reach out to our members regularly via emails and text messages to showcase our brands and products, having been the first cannabis retailer to launch market versus member pricing, and this differentiated model has contributed to increasing repeat business and loyalty. We have always been innovative in our marketing strategies, as recently highlighted by our $42,000 car giveaway on 420, which we have decided to now make an annual event. The final key differentiating pillar of our discount club model, which I'm particularly very excited about, is our Cabana Cannabis Co. house branded product line, which first hit our store shelves yesterday in Saskatchewan. We plan to continuously be adding more white label SKUs in Saskatchewan, and we look forward to providing positive updates regarding Manitoba and Ontario during our fiscal third quarter. We see meaningful margin-enhancing opportunities arising from these proprietary offerings, and our longer-term goal is to have them eventually represent 20 to 30% of our sales. This is yet another example of us executing on our communicated business plan. Smaller retail operators have taken note of these structural advantages that we have, which they don't, and they are seeing firsthand in the market how we have been successfully leveraging these trends to increase our market share month after month. This has motivated many to approach us to see if we would acquire their stores. Given the volume of potential targets we see, it allows us to be extremely selective and strategic. Many of them are strong businesses, as evidenced by the recent acquisitions we announced, and there are many more in the pipeline which we are working towards acquiring at highly accretive multiples for our shareholders. So our bricks and mortar Canadian business continues chugging along and is hitting new highs, even in this very competitive market. However, there was some softness in our international business, which largely consists of online sales of CBD and accessories, resulting in our revenue run rate outside of Canada, now representing $70 million annually. There were a few factors at play this quarter, which each made a small contribution. Specifically, Q2 is a seasonally slower quarter in retail as it compares to the holiday season. COVID had driven extraordinary gains in e-commerce over the past two years. With pandemic restrictions having now largely been eliminated, consumers are renormalizing their buying habits towards in-store purchases, including our own, with a temporary cooling off on sales for e-commerce players, despite a very positive long-term growth trajectory. And inflationary trends have at the margin impacted consumers globally. Overall, our international business continues to perform well and its prospect remains very bright. The beauty of our diversified model is that temporary softness in one area can be offset by strength in other areas. Our Canadian business represents 78% of sales and the international businesses continue to provide meaningful cash flow to help support it. So in conclusion, Q2 was another great quarter for Hightide. We continue to meaningfully grow our top line and we have ambitions to be the number one revenue generating Canadian cannabis company across the value chain. We are gaining market share every month due to the continued success of our innovative discount club model. We are putting up more stores, both organically and via highly and immediately accretive acquisitions, and all while generating healthy, positive, adjusted EBITDA for the ninth straight quarter, again unmatched in the Canadian retail cannabis industry. This is in part due to our aggressive approach to market share growth by leveraging our full and unique ecosystem and expanding our loyalty offerings, which we plan to monetize in the future. We have now clearly established ourselves as a leader in the Canadian cannabis landscape. I could not be more proud of our team for what we have achieved and continue to achieve, taking our company to new heights with every passing quarter. With that, I will now turn the call over to Rahim Kanji, our Chief Financial Officer, to discuss the financial results.