High Tide, Inc. ((TSE:HITI)) has held its Q1 earnings call. Read on for the main highlights of the call.
High Tide, Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. The company celebrated record revenues and substantial growth in same-store sales and Cabana Club membership. However, challenges such as a decline in adjusted EBITDA, negative free cash flow, and uncertainties in the German market expansion tempered the overall positive outlook.
Record Revenue and Growth
High Tide reported a record revenue of $142.5 million for the first quarter of 2025, marking an 11% increase year-over-year and a 3% rise sequentially. The company now boasts an annual revenue run rate of approximately $570 million, underscoring its robust financial performance.
Same Store Sales Increase
The company experienced a 5% year-over-year increase in same-store sales, the fastest pace in four quarters. Since October 2021, same-store sales have surged by 142%, contrasting with a 4% decline observed by the average operator.
Cabana Club Membership Growth
High Tide’s Cabana Club membership in Canada grew by 33% over the past year, surpassing 1.76 million members. The company has revised its long-term membership target from 2 million to 2.5 million, reflecting its confidence in continued growth.
Bricks-and-Mortar Revenue Growth
The company’s bricks-and-mortar revenue increased by 17% year-over-year, the fastest growth in five quarters. High Tide holds an 11% market share in the provinces where it operates, highlighting its strong presence in the retail sector.
White Label Strategy Success
High Tide’s White Label strategy is gaining traction, with the new Queen of Bud brand generating over $0.5 million in sales, indicating promising potential for future growth.
Adjusted EBITDA Decline
Adjusted EBITDA fell to $7.1 million for the quarter, down 32% year-over-year and 14% sequentially. This decline is attributed to the increased pace of store growth and the global expansion of the Cabana Club model.
Free Cash Flow Turned Negative
The company reported a negative free cash flow of $1.9 million in Q1, primarily due to high working capital investments. Despite this, High Tide expects to achieve positive free cash flow for the fiscal year.
Challenges in German Market Entry
High Tide faces uncertainties in entering the German market, particularly regarding telemedicine regulations, prompting a reevaluation of its partnership with Purecan.
E-commerce Segment Revenue Decline
The e-commerce segment saw a revenue decline, impacted by the launch of the global Cabana Club model, which affected short-term margins.
Forward-Looking Guidance
High Tide provided optimistic forward-looking guidance, projecting an annual revenue run rate of $570 million and a 5% year-over-year increase in same-store sales for Q1 2025. The company plans to expand its store count to 300 locations and grow its Cabana Club membership to 2.5 million. Despite a dip in adjusted EBITDA, High Tide remains committed to long-term growth and expects to be free cash flow positive for the fiscal year.
In conclusion, High Tide’s earnings call showcased a blend of achievements and challenges. While record revenues and membership growth paint a promising picture, the decline in adjusted EBITDA and free cash flow, along with market entry uncertainties, present hurdles. Nevertheless, the company’s forward-looking guidance reflects confidence in its strategic initiatives and resilience in the cannabis industry.