High Tide (HITI) Q2 2024 earnings summary

Executive summary

• Achieved record free cash flow of CAD 9.4 million in Q2 2024 and CAD 22.7 million over the past four quarters, with a trailing free cash flow yield over 8% of enterprise value.

• Positive net income of CAD 0.2 million, improving from a loss of CAD 1.6 million year-over-year and break-even sequentially, despite sector-wide insolvencies.

• 17th consecutive quarter of positive adjusted EBITDA, reaching CAD 10 million, up 52% year-over-year.

• Revenue reached CAD 124.3 million, up 5% year-over-year, with brick-and-mortar segment up 11% and maintaining market leadership in Canada.

• Cabana Club loyalty program surpassed 1.43 million members, with paid Elite members up 226% year-over-year and 38% sequentially.

Financial highlights

• Gross margin reached 28.4%, the highest in nine quarters, up from 26.7% in Q2 2023.

• Adjusted EBITDA margin was 8.1%, up from 5.6% in Q2 2023 and consistent with Q1 2024.

• Free cash flow for the past 12 months totaled CAD 22.7 million, yielding over 8% on enterprise value.

• Cash reserves ended at a record CAD 34.5 million, up 54% year-over-year and 20% sequentially.

• Same store sales increased 4% year-over-year in Q2.

Outlook and guidance

• Targeting 20-30 new store openings in 2024, with 10 opened year-to-date, and potential to exceed this through M&A.

• Long-term goal to reach 300 stores in Canada, with significant expansion planned in Ontario and other provinces.

• Monitoring German and U.S. markets for future international expansion, with plans to enter Germany as regulations evolve.

• Expects continued growth in loyalty memberships and high-margin product launches, especially in Alberta.

• Market share in Q2 rose to 10.9% from 9.9% year-over-year, with a long-term goal of 15% in operating provinces.