High Tide Q2 2024 Earnings and Debt Financing

The TDR Three Takeaways regarding High Tide Q2 2024 Earnings and Debt Financing:

  1. High Tide’s revenue reached $124.3 million in Q2 2024.
  2. High Tide achieved a record free cash flow of $9.4 million.
  3. High Tide secured $15 million in debt financing to fuel further expansion.

High Tide Inc. (NASDAQ: HITI, TSXV: HITI) has announced its financial results for the second quarter of 2024, with strong free cash flow, positive net income, and a strategic debt financing agreement. In Q2 2024, High Tide reported revenue of $124.3 million, a 5% increase year-over-year despite the quarter having two fewer days. The company’s gross profit rose to $35.3 million, marking a 12% year-over-year increase, with the gross profit margin hitting 28.4%, the highest in the past nine quarters.

High Tide achieved a positive net income of $0.2 million, a significant improvement from a net loss of $1.6 million in the same quarter last year. Adjusted EBITDA for the quarter stood at $10.0 million, reflecting a 52% increase year-over-year. This marks the 17th consecutive quarter of positive adjusted EBITDA for the company.

Free cash flow was a standout figure for High Tide, reaching $9.4 million for Q2 2024 and $22.7 million over the past four quarters. This yields a trailing free cash flow yield of over 8% relative to the company’s enterprise value. This strong cash flow generation underscores the company’s financial health and operational efficiency.

“I am very excited to announce that we have signed definitive agreements for an aggregate of $15 million in debt financing, plus a $10 million accordion feature. We have discussed publicly how we believe we are underleveraged, with our gross debt representing less than one times our 12-month trailing Adjusted EBITDA, and could stand to benefit from obtaining more debt to continue fueling our rapid store expansion across Canada,” said Raj Grover, Founder and Chief Executive Officer of High Tide.

The agreement for $15 million in subordinated debt financing will provide financial flexibility and support the company’s expansion plans. With a $10 million initial tranche and a $5 million tranche available in November 2024, this financing is structured to optimize interest payments, incurring a standby fee of 1% per annum on the undrawn amount. The debentures, issued for $900 per $1,000 principal amount, will mature in 60 months and bear a fixed interest rate of 12% per annum on drawn amounts.  

Grover highlighted the balance sheet and cash flow management plan, stating, “I am thrilled to report that in an environment where many cannabis companies, including some of our retail competitors, have been forced to seek bankruptcy protection, our team has been able to deliver positive net income in Q2, while also generating record-breaking free cash flow. In fact, over the past four quarters, we have generated $22.7 million in free cash flow, fueling our strong organic growth. High Tide accomplished this despite Q2 being a seasonally slower quarter with two fewer days, as we tightly managed our G&A while also rapidly growing our store count and increasing our Canadian retail market share to 10.9%.”

Grover provided the following comments regarding the revenue performance and strategic plan. “We remain the highest revenue-generating cannabis company reporting in Canadian dollars with Adjusted EBITDA up 52%, bricks-and-mortar revenue up 11%, and consolidated revenue up 5% year-over-year, despite industry sales being down 4% during the same period. This has allowed us to end the quarter with a record cash position of $34.5 million. As previously communicated, we set an aggressive target to open 20 to 30 stores by the end of this calendar year. We are already the second largest cannabis retailer globally by store count, and our team is accelerating strategic and accretive M&A, focusing on opportunities of various sizes to further add meaningful size and scale to our store network.” 

High Tide has always focused on collecting customer data via loyalty programs. Grover commented on the growth: “On top of achieving net profitability and record free cash flow, our Cabana Club continues to expand and remains the largest brick-and-mortar loyalty program in Canada with 1.43 million members. I am thrilled to see ELITE memberships again grow at the fastest rate since inception, increasing 226% versus last year and 38% sequentially, demonstrating the popularity of our innovative discount club model.”

High Tide continues as the largest non-franchised cannabis retailer in Canada and the second largest globally by store count, with 172 operating locations. The company’s market share rose to 10.9% across the five provinces where it operates, despite representing only 4.8% of the total cannabis retail store count in these regions.

Looking ahead, High Tide remains committed to expanding its retail footprint with plans to add 20-30 new Canna Cabana locations by the end of 2024. The recent regulatory changes in Alberta allowing private-label products present additional growth opportunities. The company is poised to launch innovative high-margin cannabis and accessory offerings under Cabana Cannabis Co and Queen of Bud banners.

High Tide’s financial performance, strategic debt management, and expansion plans should allow it to continue to have strong potential revenue growth in the quarters ahead.  Want to be updated on Cannabis, AI, Small Cap, and Crypto? Subscribe to our Daily Baked in Newsletter!

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