High Tide Inc. (HITI:CA) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed mixed insights: stable financials with strong EBITDA in Canada, but challenges like supply chain issues in Europe and reduced free cash flow. Positive growth strategies and membership expansion are offset by uncertainties in U.S. regulatory impacts and vague guidance on German market prospects. The Q&A session highlighted management's cautious approach to M&A and market expansion, which may temper investor enthusiasm. Overall, the balance of positive and negative factors suggests a neutral stock price movement.
Key Financial Performance
Revenue for Q4 $164 million, up 19% year-over-year and 10% sequentially. Driven by strong same-store sales of 5.5% and the addition of more stores.
Annual revenue run rate Exceeding $650 million. Reflects overall growth and expansion.
Adjusted EBITDA for Q4 $12.4 million, up 51% year-over-year and 17% sequentially. Driven by strong cost controls and increased gross margins.
Adjusted EBITDA margin for Q4 9.4%, a record high. Reflects improved operational efficiency and cost management.
Same-store sales growth 5.5%, contributing to 15% growth in the bricks-and-mortar segment year-over-year. Indicates strong customer retention and sales performance.
Free cash flow for fiscal year $12 million, meeting the stated objective of remaining positive. Indicates strong financial health and ability to finance growth internally.
Cabana Club loyalty program members 2.5 million in Canada, up 45% year-over-year. Reflects strong customer engagement and loyalty.
Canadian ELITE member count 151,000, up 107% year-over-year. Indicates rapid growth in premium customer segment.
Canna Cabana market share in Q4 12% in the 5 provinces where they operate, up from 11% a year ago. Reflects increasing dominance in the market.
Canna Cabana sales growth 16% year-over-year, compared to 4% growth in total industry sales in the 5 provinces. Highlights strong brand value and customer preference.
Revenue contribution from Remexian Almost $10 million in less than 2 months post-acquisition. Indicates successful integration and growth potential.
Consolidated gross margins for Q4 26%, consistent with the previous year. Indicates stable profitability despite market challenges.
Salary and wages as a percentage of revenue 11.5% in Q4, down from 12.4% a year ago. Reflects improved operational efficiency.
General and administrative expenses as a percentage of revenue 4.3% in Q4, consistent with the previous year. Indicates stable cost management.
Free cash flow for Q4 $1.3 million, down from $5.9 million in Q4 last year. Impacted by a working capital investment of $2.3 million.
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Operating Highlights
Revenue from Remexian: Contributed almost $10 million in less than 2 months after acquisition.
CBD Products: Potential Medicare pilot program in the U.S. could provide up to $500 coverage for CBD products annually, benefiting Nuleaf Naturals and FAB CBD brands.
Market Share: Canna Cabana achieved a 12% market share in the 5 provinces it operates, up from 11% a year ago.
German Medical Cannabis Market: Entered through acquisition of 51% of Remexian, a leading importer and distributor.
UK Medical Cannabis Market: Plans to enter the market in the second half of the fiscal year.
Store Expansion: Added 27 stores in 2025, reaching 218 stores nationwide, with plans to add 20-30 more in 2026.
Free Cash Flow: Generated $12 million in free cash flow for fiscal 2025, funding organic growth.
Operational Efficiency: Achieved record adjusted EBITDA margin of 9.4% and reduced salary expenses to 11.5% of revenue.
E-commerce Strategy: Exploring joint ventures or sales for U.S. e-commerce business, but delaying decisions due to potential regulatory changes.
Remexian Acquisition: Acquired 51% of Remexian with a call option for the remaining 49%, leveraging relationships to reduce costs and improve margins.
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Risk or Challenges
Increased competition in newer stores: Newer stores are taking longer to mature due to increased competition, which could impact the return on investment and profitability of these locations.
Supply chain delays in Germany: Delays in product releases from Portugal for the German medical cannabis market have impacted revenue and gross margins for Remexian, with the issue expected to persist for a few more months.
Potential regulatory changes in Germany: The German government may enact a new law governing medical cannabis, which could impact operations and profitability in the German market.
E-commerce segment struggles: The e-commerce business has experienced challenges, leading to a $23.6 million impairment of goodwill and other intangible assets.
Dependence on legacy biomass in Germany: Remexian's reliance on older biomass in Portugal has created supply chain vulnerabilities, though efforts are being made to diversify processing partners.
U.S. regulatory uncertainty: While there is optimism about potential regulatory changes in the U.S., the uncertainty surrounding these changes could delay or complicate strategic plans for the U.S. market.
Non-cash financial charges: The company faced significant non-cash charges, including a $23.5 million loss on the change in fair value of derivative liability, which could impact financial perceptions.
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Guidance & Outlook
Store Expansion: The company plans to add 20 to 30 new stores in calendar 2026, with a robust pipeline of 15 Tier 1 locations under development, particularly in Ontario. The long-term goal is to exceed 350 locations.
German Market Expansion: The company expects Remexian to be a large contributor to financial performance in the second half of the fiscal year, with improved supply chain dynamics and higher gross margins. Additionally, the company plans to diversify processing partners to mitigate supply chain risks.
European Market Growth: The company anticipates entering the United Kingdom's medical cannabis market in the second half of the fiscal year, leveraging its European operations.
U.S. Market Opportunities: The company is exploring opportunities in the U.S. market following regulatory developments, including potential Medicare coverage for CBD products, which could benefit its existing U.S. CBD brands, Nuleaf Naturals and FAB CBD.
Revenue and EBITDA Growth: The company expects continued growth in revenue and adjusted EBITDA, driven by store expansion, operational efficiencies, and contributions from Remexian.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What impact did the Portugal inventory issue have on Q4 results and what is the outlook for Q1?
A:The Portugal inventory issue negatively impacted Q4 results but the company still achieved record adjusted EBITDA. The issue will continue to have some impact on Q1 and may trickle into Q2. However, the company expects significant improvement starting from Q3 onwards.
Q:How is the company addressing the supply chain issues in Europe?
A:The company has diversified its supply chain by opening routes through Malta, Czechia, and Germany, in addition to Portugal. The first shipments from these new routes are expected by the end of February or early March. This diversification is expected to mitigate dependency on Portugal and improve operations.
Q:What drove the record EBITDA in the Canadian bricks-and-mortar business?
A:The record EBITDA was driven by factors such as ELITE sales, same-store sales growth, the white label portfolio, and the strength of the brand. Same-store sales grew by 5.5%, and bricks-and-mortar revenue increased by 15% year-over-year. The company also achieved a new record of 9.4% adjusted EBITDA margin for this segment.
Q:What is the company's growth strategy for its Canadian bricks-and-mortar business?
A:The company plans to expand to a minimum of 350 stores, up from the current target of 300 stores. The growth is supported by the Cabana Club membership program, which has grown by 45% year-over-year to 2.5 million members, and the ELITE membership program, which grew by 107% year-over-year to 151,000 members.
Q:How is the company managing competition and store ramp-up times in Canada?
A:The company acknowledges that stores are taking longer to mature due to increased competition. However, it remains confident in its model, which focuses on strategic locations and strong brand loyalty. The company is also seeing competitors with weaker locations exiting the market, which it views as an opportunity.
Q:What is the company's approach to M&A in Canada and the U.S.?
A:In Canada, the company is actively pursuing M&A opportunities and is in discussions with groups owning 40-50 stores. In the U.S., the company is cautious and evaluating options, including licensing agreements and mergers, while monitoring regulatory developments such as rescheduling.
Q:What is the company's strategy for the German market?
A:The company has opened a Canna Cabana store in Germany to establish a presence, although it is currently focused on selling accessories. The main focus in Germany remains on the medical cannabis distribution business through Remexian. The company is also preparing for potential retail opportunities in the future.
Q:What is the company's outlook for the Remexian business?
A:The company is optimistic about the long-term prospects of Remexian, despite short-term challenges related to inventory in Portugal. It expects gross margins for medical cannabis distribution to improve to the mid-20% range in the second half of the fiscal year. The company is also exploring opportunities in the U.K. and other European markets.
Q:How does the company train and engage its budtenders?
A:The company provides robust training for its budtenders, including hiring them a month in advance, exposing them to multiple stores, and requiring them to pass training modules on the Cabana learning portal. This ensures a high level of customer service and engagement.
Q:What is the company's perspective on U.S. regulatory changes and their impact on the industry?
A:The company is optimistic about potential rescheduling in the U.S. and is seeing interest from U.S. operators for partnerships. However, it is proceeding cautiously and focusing on selecting the most optimal move for shareholders. The company does not expect significant competition from non-cannabis players entering the market.
Q:What are the key metrics and growth drivers for the Cabana Club and ELITE membership programs?
A:The Cabana Club has grown by 45% year-over-year to 2.5 million members, while the ELITE membership program has grown by 107% year-over-year to 151,000 members. These programs drive customer loyalty, higher purchase frequency, and larger basket sizes, contributing significantly to the company's success.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the potential financial impact of U.S. regulatory changes, such as rescheduling or tax and banking reforms. They also used vague language when discussing the likelihood of securing pilot project retail licenses in Germany, stating that the chances are 'very slim' without elaborating further.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Affairs Officer
BC
Chief Communications
Communications Public
High Tide
Mr Raj
Ontario store
Portugal
President Executive
Public Affairs
Raj President
Remexian result
Tide Inc
United
ability
acquisition
agreement
amount
awareness
biomass
cannabis industry
consumer
contrast sale
distributor
example
intention
legacy
positioning
possibility
potential
processing partner
prospect
quality
record run
retailer
shipment
situation
speed
store count
strength
system
HITI Transcript
High Tide Inc. (HITI:CA) Q4 2025 Earnings Call Transcript
Unknown1-30
The earnings call revealed mixed insights: stable financials with strong EBITDA in Canada, but challenges like supply chain issues in Europe and reduced free cash flow. Positive growth strategies and membership expansion are offset by uncertainties in U.S. regulatory impacts and vague guidance on German market prospects. The Q&A session highlighted management's cautious approach to M&A and market expansion, which may temper investor enthusiasm. Overall, the balance of positive and negative factors suggests a neutral stock price movement.
High Tide Inc. (HITI:CA) Q3 2025 Earnings Call Transcript
Positive9-16
The earnings call highlights strong financial performance with record revenue and significant free cash flow growth. Membership growth and strategic expansion plans are promising. Despite some concerns about e-commerce and supply chain issues, management's optimism about U.S. market entry and margin improvements are positive. The Q&A reveals confidence in market share gains and strategic investments. Overall, strong financial metrics and growth plans outweigh the uncertainties, suggesting a positive stock price movement.
High Tide Inc. (HITI) Q2 2025 Earnings Conference Call Transcript
Unknown6-17
The earnings call presents mixed signals. Financial performance shows growth, with increased revenue and positive cash flow, but declining gross margins and adjusted EBITDA are concerns. The Q&A highlights potential regulatory and economic challenges, and e-commerce weakness. Despite positive developments like the German market entry and strong cash position, uncertainties in guidance and market conditions temper enthusiasm. The analysis suggests a neutral stock price movement over the next two weeks, as positive and negative factors balance each other out.
High Tide Inc. (NASDAQ:HITI) Q1 2025 Earnings Call Transcript
Unknown3-22
The earnings call presents mixed signals: positive revenue growth and market expansion plans are countered by declining EBITDA, negative free cash flow, and margin pressures. The lack of specific shareholder return plans and regulatory uncertainties in Germany add to the cautious outlook. While the potential entry into the German market and strong brick-and-mortar performance are positives, competitive pressures and economic factors weigh heavily, resulting in a neutral sentiment.
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