High Tide Inc.

Good morning. My name is Sylvie and I will be a conference operator today. At this time, all participant lines are in the listen only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you. You may begin your conference.

Thank you, Sylvie. Good morning, everyone, and welcome to High Tide Inc's 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. Mayank Mahajan, Chief Financial Officer. On January 29th, 2025, the company released audited financial and operational results for the fiscal year that ended October 31st, 2024. 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 or 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 January 29, 2025, or our latest annual information form and our latest management discussion and analysis, each filed with securities regulatory authorities at cdrplus.ca. or on EDGAR at www.sec.gov forward slash EDGAR, or on the company's website at www.hightightinc.com, and which are hereby incorporated by reference herein. Although these forward-looking statements reflect management's current beliefs and reasonable assumptions based on the currently available information to management as of the date hereof, we cannot be certain that the actual results will be consistent with the forward-looking statements in the future. There can be no assurance that the actual outcomes will not differ materially from these results. Accordingly, we caution you not to place undue reliance upon such forward-looking results. For any reconciliation of non-IFRS measures measured and discussed, please consult our latest management discussion and our analysis filed on CDAR Plus 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 begin.

Thank you, Carter, and good morning, everyone. Welcome to Hightide Inc's financial results conference call for the fiscal year that ended October 31, 2024. I'll begin with some high-level comments about the quarter and our strategy before Mayank and I dive deeper into the numbers. We filed a press release on financials yesterday, and I'm proud to report another record-breaking quarter for Hightide. Revenue for the year reached an all-time high of $522.3 million, up 7% compared to fiscal 2023. We also ended the year with a quarterly revenue record generating $138.3 million in Q4, up 9% year over year. This was the fastest growth rate we achieved all year and represents an annualized run rate exceeding $550 million. I'm incredibly proud of the growth we are generating at Hightide, especially considering that nearly all of it was achieved organically and financed primarily through internal cash flow. In 2024, we added 29 new stores, of which only one was acquired. This was more than double the number of stores we added in 2023 and at the high end of the target range of 20 to 30 stores that we communicated to investors at the beginning of the year. These stores were built using cash flow from our existing locations. I'm pleased to report that new store development is continuing at a similar pace in 2025 with plans to add another 20 to 30 locations this calendar year. I remain excited about the continued top-line growth we anticipate for 2025. With our strong Q4 results, we have now delivered positive free cash flow for six consecutive quarters, generating $22 million in fiscal 2024, an increase of 217% over fiscal 2023. This significant improvement in free cash flow was achieved even as we opened 29 new stores during the year. It's important to remember that new stores require upfront investments, not only in CapEx, but also in working capital and employee hiring and training before opening. These new stores act as a short-term drag on consolidated results until they ramp up. Despite this, Q4 free cash flow was $5.9 million, up 4% year over year. For 2025, we expect to remain free cash flow positive while continuing to grow our business. Long-term investors know that we see the Cabana Club as a crown jewel and a major contributor to our significant outperformance versus peers. I'm proud to report that membership numbers have reached new highs in Canada, with 1.72 million members, an impressive 11% sequential increase, and 34% growth rate year over year. Of these, 73,000 are elite members, our paid membership tier, which is also up 28% sequentially. This trajectory gives me confidence that we'll reach our long-term target of 2 million members sooner than expected, especially considering we had fewer than 1 million members less than two years ago. Late last year, we made the bold decision to take our Cabana Club global across all our e-commerce businesses, and early results are in line with expectations. We've already signed up 3.6 million members across the US and EU, bringing our global total to 5.32 million Cabana Club members. We've also started onboarding international elite members with signups now exceeding 3,000. We believe taking the Cabana Club global represents a tremendous opportunity for the future while unifying and simplifying all areas of our diversified ecosystem today. With the momentum toward legalization in more countries, we're uniquely positioned to extend the Cabana Club's reach as these opportunities arise. Early adoption has been encouraging, and we are confident in our initial predictions that proactive margin reductions on consumption accessories and CBD will lead to revenue breakeven within six months of launch and adjusted EBITDA breakeven within 12 months. Furthermore, we've begun leveraging the Cabana Club infrastructure to disrupt adjacent industries such as international snacks, or in cannabis terms, munchies. On the topic of leveraging our existing infrastructure internationally, Our recently announced definitive agreement to acquire a majority stake in PureCan, a profitable German medical cannabis importer and wholesaler, is an excellent example. After extensive efforts, we identified PureCan as the ideal entry point into the fast-growing German medical cannabis market. This acquisition aligns with our objectives, entering the market profitably, adding unique value, and doing so cost-effectively without significant strain on our resources. PureCAN is already profitable, with impressive adjusted EBITDA margins of 29%, providing a platform to strengthen our core business and deepen relationships with Canadian licensed producers. This transaction is highly accretive. We are acquiring PureCAN at a multiple of three times annualized adjusted EBITDA, significantly below our own trading multiple. Additionally, upon closing, our fully diluted share count will increase by less than 1%, and the cash outlay of 1.2 million euro is well within our means. Given our conservative balance sheet management, with gross debt to trailing adjusted EBITDA of less than one, the additional €1.2 million in debt is easily manageable. I'm excited to close this acquisition in the coming days and demonstrate the growth potential by leveraging our connections and resources with PureCan's existing network and infrastructure. PureCan already has the necessary licenses, certifications, and facilities, meaning no significant capex is required. Furthermore, PureCAN will come with no debt upon closing. The only additional investment will be for working capital addressing timing delays between payments to Canadian licensed producers and revenue collection from pharmacies and wholesalers in Germany. This transaction is structured to ensure long-term success for all stakeholders. Over the next 18 months, both teams will focus on scaling the business. Beyond that, a five-year call and put option structure will incentivize PureCAN shareholders to drive adjusted EBITDA growth while we retain the right to acquire the remaining stake at an attractive multiple. Returning to Canada, Q4 was another strong quarter for our core cannabis retail operations. Same-store sales rose 3% sequentially, and since launching our discount club model three years ago, we've achieved a cumulative 130% increase in same-store sales. This contrasts with a 5% decline in revenue for the average operator during the same period. Our market share in the five provinces where we operate averaged 11% during fiscal Q4 based on revised data from Statistics Canada. This was consistent sequentially and up from 10% in Q4 last year. Notably, this market share was achieved with just 5% of the store count in these provinces, highlighting the exceptional performance of our Kanakabana brand. Our long-term goal is to achieve a 15% market share across all our operating markets. I'll now go over key highlights from the financials before passing it over to Mayank for a deeper dive. Revenue for Q4 was $138.3 million, an all-time record, up 5% sequentially and 9% year-over-year. Our bricks and mortar segment led the way, growing 12% year-over-year and outperforming our expectations. In October, our average store achieved an annual revenue run rate of $2.6 million, which is more than double the average peer revenue of $1.2 million in the provinces where we operate. In Ontario, our largest market and the focus of our future expansion, our outperformance was even more pronounced. Excluding newer stores that have been open for six months or less, which are still ramping up, the average Kanakabana store was on an annual revenue run rate of $3.5 million in October. In contrast, the average of our peers in Ontario was just $1.1 million. Our same-store sales increased 0.4% year-over-year in Q4. While this is below the levels we have historically achieved, it reflects the broader market slowdown. In fact, total industry sales, including the impact of new stores across the five provinces where we operate, declined 1% year-over-year during our fiscal Q4. In contrast, sequentially, our same-store sales grew by 3% during the quarter. In addition to merchandise sales, our Kabanalytics data and advertising platforms continue to expand. With our growing footprint, increased sales volumes, and operational outperformance, interest in our retail ecosystem is growing. In Q4, the Kabanalytics business data and insights platform advertising revenue and other revenue, including management fees, interest income, and rental income, totaled $10.9 million, up 48% year-over-year and 21% sequentially. Consolidated gross margins were 26% in Q4 2024, consistent with Q4 2023, but slightly below the 27% we reported in Q3. We've maintained our gross margins in stores, avoiding price increases that might encourage weaker players to remain in the market or renew leases. Given the unstable nature of the cannabis retail market in Canada, with another major retail player having recently filed for CCAA protection, we feel our prudent gross margin management and a keen focus on free cash flow generation continues to yield meaningful benefits for shareholders. Looking forward, we anticipate lower gross margins in our e-commerce segment as part of our strategy to drive volumes through unbeatable prices as we roll out the Cabana Club globally. E-commerce accounted for only 5.6% of our consolidated revenue in Q4, and we expect our global Cabana Club launch to deliver meaningful benefits in the long term, mirroring the traction and volume increases we observed when implementing this model in our Canadian bricks and mortar business. Turning to expenses, salaries and wages represented 12.4% of revenue in Q4, up from 11.6% in Q4 last year. This increase reflects the rapid pace of store growth over the past 12 months as we hired teams four to six weeks before the opening of new locations. Good people are hard to find, secure, and trained, and we invest in ensuring they can provide tabana-level service from day one. While new stores take time to ramp up, it's encouraging to see salaries and wages as a percentage of revenue decline sequentially from 12.7% in Q3. General and administrative expenses continue to trend downward, representing 4.2% of revenue in Q4. While this was up from 3.7% in Q3, it compares favorably to 5.3% in Q4 last year. For the full fiscal year, general and administrative expenses declined from 5.5% in 2023 to 4.2% in 2024, demonstrating a commitment to cost efficiency. Adjusted EBITDA was $8.2 million for the quarter, down 1% year-over-year and 14% sequentially. This decline reflects the higher pace of new store openings, which, as noted earlier, create a temporary drag on results as they ramp up. Excluding the impact of non-cash impairment charges, which totaled $5 million in Q4, our income from operations was $2.1 million, marking a significant increase from $61,000 in Q4 2023. In conclusion, Q4 was another strong quarter for Hightide, and I'm excited about the opportunities fiscal 2025 holds. Over the past few years, we've established ourselves as a leader in Canadian cannabis revenue. As we begin 2025, we are taking steps to position ourselves as a leader in the global cannabis market. This includes our international expansion of the Cabana Club and our announced acquisition of a majority stake in PureCan. Additionally, we remain vigilant about the opportunities that may arise with the new administration in the U.S. As I've always said, high tide's best days are ahead. Today, I'm proud to report that while our core Canadian bricks and mortar business continues to thrive, we're also making strategic moves to enter and grow within the German cannabis market, including its fast-growing medical segment. With that, I'll turn it over to Mayank for his comments and a deeper dive into the numbers.