High Tide (HITI) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - High Tide reported record revenue of CAD 164 million for Q4 2025, representing a 19% year-over-year increase and a 10% sequential increase [7][26] - The annual revenue run rate exceeded CAD 650 million, with record Adjusted EBITDA of CAD 12.4 million, up 51% year-over-year [7][28] - Consolidated gross margins were 26% in Q4, consistent with the previous year, while Adjusted EBITDA margins reached a new record of 9.4% [27][28] Business Line Data and Key Metrics Changes - The brick-and-mortar segment led revenue growth, achieving a 15% year-over-year increase, driven by same-store sales growth of 5.5% [7][26] - Cabanalytics, the business data and insight platform, generated CAD 13.1 million in Q4, up 20% year-over-year [26] - The adjusted EBITDA for the brick-and-mortar segment was CAD 14.1 million, highlighting strong cost controls and operational efficiency [28] Market Data and Key Metrics Changes - Canna Cabana's market share in the five provinces increased to 12%, up from 11% a year ago, while total industry sales in these provinces grew by only 4% [11][12] - The average Canna Cabana store generated an annual revenue run rate of CAD 2.6 million, significantly higher than the peer average of CAD 1.2 million [11] - The company has expanded its store count by 27% in Ontario, accounting for all growth in the province, while the rest of the industry remained flat [15] Company Strategy and Development Direction - High Tide aims to add another 20-30 new stores in 2026, continuing its focus on organic growth [8] - The company is exploring M&A opportunities, with discussions ongoing regarding potential acquisitions [8][56] - High Tide's strategy includes leveraging relationships with licensed producers to enhance procurement and operational efficiency, particularly in the German market through the acquisition of Remaxion [19][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, particularly in the German medical cannabis market, despite short-term challenges related to inventory [22][40] - The company anticipates that the U.S. regulatory environment may shift positively, creating opportunities for strategic partnerships and market entry [75] - Management highlighted the resilience of the business model, noting that competitors are exiting the market, which could provide further growth opportunities [56] Other Important Information - High Tide generated CAD 12 million of Free Cash Flow for the fiscal year, meeting its goal of remaining positive [32] - The company has a strong balance sheet with total debt of CAD 65.5 million and CAD 47.9 million in cash and cash equivalents [32] - The Cabana Club loyalty program has grown to 2.5 million members, up 45% year-over-year, contributing to customer retention and sales growth [9][47] Q&A Session Summary Question: Impact of inventory issues in Germany on Q1 results - Management acknowledged that inventory issues in Portugal would impact Q1 results but expressed confidence in future growth once these challenges are resolved [36][40] Question: Brick-and-mortar business margins and growth - Management confirmed that brick-and-mortar margins have increased for four consecutive quarters, driven by strong sales and operational efficiencies [41][46] Question: M&A environment and competitor exits - Management noted that smaller competitors are exiting the market, creating opportunities for potential acquisitions, and expressed optimism about future M&A activity [56][57] Question: Budtender training and engagement - Management emphasized the importance of budtender training and engagement to enhance customer experience and brand loyalty [64] Question: January performance and Remaxion's outlook - Management reported improved performance in January compared to previous months and expressed optimism about future gross margins for Remaxion [67][68]