Good morning. My name is Marie, and I will be your conference operator today. At this time, I would like to welcome everyone to the High Tide Inc. Fourth Quarter Fiscal Year 2020 Financial and Operational Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would now like to turn the call over to your host, Krystal Dafoe, Director of Corporate Governance. Ms. Dafoe, Please go ahead.

Thank you, very much, Marie. Good morning, everyone, and welcome to High Tide Inc.’s quarterly earnings call. Joining me on the call today are Mr. Raj Grover, President and CEO; and Rahim Kanji, CFO. Earlier today, the company released its financial and operational results for the fiscal fourth quarter, and year ended October 31, 2020. These results are available on the company's website and on SEDAR. Before we begin, I'd like to remind everyone that certain statements made on today's call may contain forward-looking information within the meaning of applicable securities laws. Such statements may include estimates, projections, goals, forecasts or assumptions, which are based on current expectations and not representative of historical facts or information. We want to be clear that such forward-looking statements represent the company's beliefs about future events, plans or objectives, which are inherently uncertain and are subject to numerous risks and uncertainties that may cause the actual results or performance to differ materially from such statements. Additional information about both the material factors and assumptions forming the basis of our forward-looking statements and risks, and which could cause actual results or performance to differ materially, and the material factors or assumptions that were applied to make certain conclusions, forecasts or projections in forward-looking statements on this call is contained both in readily available document available upon requests and in our regulatory filings available on SEDAR under the company's profile. High Tide does not undertake any duty to publicly announce the results of any revisions to any forward-looking statements in this call, or to update or supplement any information provided in today's call. In addition, on this call, we will refer to supplemental non-GAAP accounting measures including adjusted EBITDA, which do not have any standardized meeting as prescribed by IFRS. We believe this non-IFRS financial measure assists management and investors in understanding and analyzing our business trends and performance. Please refer to our earnings press release for a calculation of these measures and reconciliation or most directly comparable measures calculated and presented in accordance with IFRS. These non-IFRS measures should not be considered superior to, as a substitute for, or as an alternate to, and should be considered in conjunction with the IFRS financial measures presented on the financial statements listed on SEDAR. It is now my pleasure to introduce Mr. Raj Grover, President and CEO of High Tide. Thank you. Mr. Grover, you may now begin.

Thank you, Krystal, and good morning, everyone. Welcome to High Tide Inc.’s financial results conference call for the fourth quarter ended October 31, 2020. I’ll start this call by providing an overview of our results and other key developments in the fourth quarter. Rahim will discuss the financials in depth, and after that, we’ll be pleased to answer any questions you may have. In a way, this call marks the end of an era as it represent the last quarter before the closing of our acquisition of META Growth Corp. While I am extremely proud of our results for the quarter, the reality is, our company has been truly transformed on every level since then. We are a larger, stronger, healthier company than we were just a handful of months ago, which makes me so excited for the future. I will get to that in a minute. We have already provided some disclosure regarding our top-line to the market declaring our [Audio Gap] in the fourth quarter which had an increase of a 118% over the same quarter last year. Gross profit increased to $8.7 million, up 112% over the same quarter last year. Gross profit for the year was $30.8 million versus $11.3 million in the prior year. Adjusted EBITDA for Q4 2020 was $3.6 million, compared to a negative $6 million in the same quarter last fiscal year. This was the strongest quarter ever generated by a Canadian cannabis retailer and was also above the highest analyst expectations. We announced the acquisition of META in late August and what a difference six months makes. This is vastly – this is a vastly different company from where it was just six months ago. I’d like to tough on the advances we’ve made across several aspects of the company. First…

Thank you, Raj, and good morning, everyone. In the fourth fiscal quarter ended October 2020, the company recorded consolidated revenue of $24.9 million, representing an increase of 118% year-over-year and 3% sequentially. Revenues comprised mainly of sales through our bricks and mortar cannabis retail locations through our e-commerce platform Grasscity and wholesale divisions and recurring subscription revenue from our Cabanalytics data analytics platform. The revenue also included royalties earned from franchisee and branded locations. Revenue from our Retail segment was $22.6 million in the fourth fiscal quarter of 2020. This was up $1.2 million sequentially. Revenue from our Wholesale segment was $2.2 million in the fourth quarter of 2020. Even though we currently face production and logistical challenges, particularly regarding products coming from overseas, I know that wholesale revenue was only down $0.4 million versus the fiscal third quarter. In fact, our biggest challenge is not having enough products on hand to sell. The demand is very strong for our products. You can see on our website famousbrands.com, most of our products are currently sold out. As the supply chain gets better, we expect this would result in an another leg up in revenue in our Wholesale division. Our consolidated gross profit was $8.7 million in the fiscal fourth quarter of 2020, or 35% of revenue versus 36% generated in the fourth fiscal quarter of 2019. This year’s quarter was impacted by two one-time items. First, we closed all remaining Smoker’s Corner locations and exited that business which resulted in a one-time inventory write-off of $250,000. Second, we trued up our sales tax provision related to our U.S. sales for Grasscity. Adjusting for these two non-recurring items, our quarterly gross margin would have been 38%. Going down to the bottom-line, the company generated $3.6 million in adjusted EBITDA, which was…

[Operator Instructions] Our first question comes from Andrew Semple with Echelon Capital Markets. Your line is open.

Hello and good morning. Congrats on the financial results.

Thank you, Andrew.

Great. First question, High Tide now has had four months with META growth under the umbrella and I just wanted to ask how that integration process is going there. What steps you see as remaining to get those operations fully aligned with High Tide’s business plans going forward.

So, Andrew, we are very pleased with the way the integration of META is going. Adding META solidified as a leader in the Canadian cannabis retail market and also got us access to the Manitoba market where we had no exposure. Now, it may take some time to fully integrate and transfer everything over to the Canna Cabana banner and also, upgrading all the META and New Leaf stores to our differentiated one stop shop concept. But this is all are work in progress. We are working on it and we expect to complete the integration by, call it, the end of this fiscal year. So October, 31, 2021, we should be looking good on that. But the scale that we’ve achieved due to the META acquisition will also help us with our upcoming White Label initiatives, our Cabanalytics platform subscriptions, an increase in the reach of our Cabana Club loyalty program, because they have access to this many new stores now. And as I mentioned, our expectations for the fiscal first quarter of 2021, is for our top-line to be between $37 million to $38 million, a huge step-up from the $25 million we just reported. So, META is a key part of that.

That’s great color. Thank you. And just a follow-up here. In your outlook, you mentioned several pending discussions surrounding retail stores and federally permissible businesses in the U.S. and understanding that you can probably not comment on the specifics to those potential discussions. But I am curious as to what you are seeing in terms of valuations more generally across those two spaces? And if you could also touch on the size of your M&A pipelines in both Canada and the U.S. That’d be appreciated.

Yes. Absolutely, Andrew. High Tide has always at this diverse broad ecosystem and a vertically integrated business portfolio. Honestly, since shortly after inception twelve years ago, we decided Smoker’s Corner and then shortly after that we started LGR. And as you know, we’ve been quite active on the M&A front with the transformation of acquisition of META first and then, the announced strategic acquisition of Smoke Cartel. Now that said, we are no means done with M&A. The improvements to our balance sheet and application to list on the NASDAQ are likely to help keep the momentum going forward. And then, and unlike other – one thing I want to point out here is like, unlike other bricks and mortar retailers whose target universe maybe confined to just buying other retailers given our existing ecosystem and strategy, our scope is much wider. We are looking at other Canadian retailers, but we are also looking at other ecommerce businesses that also include accessory companies and CBD companies. So, our continued execution is also being of that several companies have noted our success over the past few months and have reached out to us regarding potential deals. So now the onus is on us to be very thoughtful on how we approach future M&A and make sure that anything we do adds to what we have both strategically and financially.

Great. Appreciate that and I’ll get back in queue.

Our next question is from David Kideckel with ATB Capital Markets. Your line is open.

Hi, good morning. Congrats everybody on the quarter. I had a couple questions here. First, I want to go back to your acquisition strategy a little bit and I am wondering in previous quarters, Raj, I think we – you mentioned revenue coming from the accessories side of the business is just north of 20%. I am wondering what your steady state runrate is for when you look at percentage contributions from your accessories side of the business, whether that’s Canada and U.S. international versus brick and mortar? Thanks.

Yes. So, the – as per our Q3, we were at around actually 38%, David. If you look at the accessories versus cannabis spread, and we’ve continued on that very similar momentum, that spreads are very similar. When I say, 38% for accessories, we are talking about ecommerce and wholesale revenue. So we are hovering around that range of between 35% and 38% on accessories. And then, if you look at the U.S. Canada and international spreads, of course, by the sheer number of opening more cannabis retail locations, our revenue is currently much higher in Canada. But we continue to tick along in the United States. So our U.S. revenue, last reported quarter was 23% where anywhere between 18% to 20% this quarter and on a dollar amount basis with the inclusion of Smoke Cartel, we see this go into even pro forma revenue as soon as we acquire Smoke Cartel. We see this starting at $25 million and going upwards from that. And we very much have our eyes on the U.S. market. So I am confident throughout 2021 and beyond, our U.S. revenue will continue to inch higher. Obviously, we will be adding more revenue in Canada, as well, because we are building a lot of retail stores. So, from a percentage basis, Canada maybe higher in the short-term, but longer term, I think U.S. revenue will far exceed Canadian revenue. And we are already making with the moves that we are making, like I said, we are already at a pro forma revenue of $25 million.

Okay. Thanks for that color, Raj. Want to just switch gears a bit here. We put out some research last week showing as per Health Canada, inventory levels are increasing across the board for 2.0 products. So, and this was for up to October and November 2020 realizing your quarter ends here October 2020. So, I am wondering if you could give any color, what you are seeing at the retail level from 2.0 products specifically, and are there any specific product categories amongst the 2.0 products that you are seeing not selling as quickly as, say others? Thanks.

Yes. Good question, David. So, on the 2.0 side, things have been ramping up in Canada, which I am very pleased with, because 2.0 gives us an additional margin enhancement opportunity that we don’t necessarily have as big as in the dry flower category. So, one particular category that I want to highlight is the vape category. The vapes have been inching up practically every month we started at around 12% and we were 15%. Now we are close to 17% on vapes. And also the other very pleasing aspect of this is the price points have been coming down. So, I’ve never seen, since inception, since vapes got launched, we are pretty much at a 40% or more price drop in vapes, which is really helping field the sales of vapes. If I could point out to one category that I think is a bit underrepresented at the moment in Canada, that would be edibles. Edibles are a new and growing category. However, they only represent a little over 5% of our current sales. So, it’s decent start to them as it frequently brings non-smokers into the market and reposition these products in particular to act as impulse or add-on purchases, when customers are already at the counter. So, while it might take some time to get more traction, and getting more SKUs will help, we are happy with the way these new formats have been selling so far. But, your question that you asked me was, the intake on how is it affecting due to Health Canada regulations. There is a bit of a fact here for sure. So, the 10 milligram limit on edibles and drinks is currently – and there is a pending thorough review of the cannabis act and we will be working through national industry associations to put forward a unified perspective on this issue to continue taking this issue up at Health Canada and eventually, I think that will help bring up the sales at the retail level.

Okay. Thanks for that color. Very helpful. I’ll hop back into the queue.

Our next question is from John Chu with Desjardins. Your line is open.

Hi, good morning. Maybe talk about your plans for having your own branded products for sale in your stores showing that’s a pretty good revenue stores, margin stores but also helps with the branding of your stores and everything else. So, maybe just give us an update on what your plans are for that and potentially timing and even what type of products you might be working to introduce?

Hi, John. John, so, having our own white label brand is something that we’ve been considering for some time now. I know that some others have already launched theirs some time ago. But we have very close relationships with several licensed producers that have offered to be suppliers of our own brands. But we have deliberately in waiting for optimal time for two reasons and I’ve known this forever. But the reason I am waiting for is a very practical one. So, the number one reason is, the wholesale price of flower has kept on coming down. We won’t be interested in trying to catch a falling knife regarding our input cost and putting a pin the price months ago, while prices are still falling. And we are now much closer to the bottom than a free fall, but we’ve been very aware of this fact and that’s why we’ve taken it slow on the white label initiative and that’s actually worked very well in our favor. This is why we are able to report profitability ahead of some of our competitors. And then, you know the number two reason is, we’ve gone – now we’ve gone from 30 something stores to 72 today. Accordingly, our buying power and that our negotiating power has also increased. So, our ability to force our own brand to work to our own network of stores has really increased. So we are preparing to start our white label program. However, we are still going to take a methodical and measured approach that will include waiting for further details from the OCX, because I am hearing in regards to their flow through and SKU rationalization programs, that may impact house brands. So, it’s still a wait and see approach on that front. But we are getting clarity on that very shortly here.

Okay. Great. And then, just secondly, just with Ontario increasing the store count. Just remind me again, I know you’ve got a 30 location target by the end of September. But have you secured your locations yet? You could get to 30 or – and do you have a sense of kind of, are you looking more suburban or urban and kind of a general idea on how you are approaching that?

Yes. Absolutely. So, we’ve had several locations in the queue. I believe 26 or 27 are in the queue now and we are glad to see the planned acceleration of licensing up the pandemic restrictions continue to cause a freeze in construction in much of Ontario. I think last we heard was – the update was March 8, when construction can begin in much of Ontario. So we are on freeze there. But we do have 26 open and in queue locations already. So, I am absolutely not worried about hitting our cap of 30 stores in the province until September 30, 2021, which- it’s not like our some of our other competitors can get there and go beyond that cap. I think that cap opens up for everybody after September 30. So, we believe our existing network and stores in the queue will position us well to reach that level by the end of September, when the cap will be lifted to 75. But the one most important thing here, John that I want to point out is, we remain highly focused on the quality of our locations, not only quantity. We’ve learned from our experience in this much more hyper competitive market in Alberta that is all about securing the best locations. This approach is an integral part of our Ontario growth strategy, because we all get 75. We might as well get the best 75.

Okay. That’s helpful. Thank you.

Our next question is from [Indiscernible] with The Scoop. Your line is open.

Hi, good morning all. Congrats guys on a great quarter there. My question is from my highly engaged subscribers here on the Scoop is, it comes up to like the NASDAQ, you guys are talking NASDAQ and there is really excited about the META growth acquisition, I love the Smoke Cartel, everything. But I know to go on to NASDAQ, the question keeps coming up about a reverse split. Has there been any talk about that as you guys – is there anything going on there that maybe investors should know about?

Yes. Good question, there. So, we’ve already started receiving and addressing comments from the NASDAQ and our application is proceeding well. And we are very excited at the prospect of being listed on the NASDAQ and believe that can help attract even more capital and add fire to our M&A initiatives. But that said, regardless of the timeline of the listing, we plan to continue the momentum from 2020 and keep on executing on our business driving forward. And we’ve not really announced a share consolidation yet to answer the second part of question, but our Board has already received the authorization for a potential rollback when appropriate. So, if we need it in the future, we are still going back and forth that comment, but if we do need it in the future, then yes, that that roll back has already been approved by the Board.

Okay. Thank you.

Our next question is from KJ Derrick [Ph] with High Tide. Your line is open.

Yes. Thanks very much for taking on. My question to you, planning to use your celebrity partners such as Snoop, Paramount Pictures to forward reaching the younger generation a lot.

The celebrity elements that is attached to our business portfolio in Famous Brands is a very exciting one for us. But we have to be reasonable with our approach on how loud we get with the celebrity licenses that we had. Although I am very proud of the fact that we can commend shelf space anywhere in the world, because of these recognized brands, we are also mindful of how we promote marijuana-related or cannabis-related products with celebrity endorsements. So, we are not planning to promote or push it above and beyond where we are at today. But I can definitely tell you from a business perspective, it definitely helps us secure shelf space in every retail setting, you call it smoke shops, vape shops, dispensaries, cannabis retail outlets, anywhere we have the opportunity to sell these products. So, we are excited about our licensed products. But we need to be mindful on how we promote them.

Thank you. That’s all I got.

Our next question is from Joshua Vann with PI Financial. Your line is open.

Hi. Thank you for taking my question. I was wondering if you could provide some more high level color on how you view Grasscity and Smoke Cartel fitting into your overall corporate strategy. Specifically, when you are allowed to enter the U.S., how do you view these assets planning to your U.S. strategy? Thank you.

Great question, Joshua. This is one of my favorite topics actually. So, between Grasscity and Smoke Cartel, we are – and CBDcity, our ecommerce platforms were getting upwards of 33 million site visits annually. That was our number for 2020. And I think this is a massive opportunity in itself like 75% to 80%, if I recall correctly are American customers. So, having access to this level of American customers is a massive benefit heading into U.S. Federal legalization. Whenever that happens, like I pointed out earlier in one of the questions that Sean Geng is going to be joining us as our Chief Technology Officer. Our ecommerce promise is improving and getting stronger and stronger every day. I am particularly very passionate about ecommerce. We are a retail-focused company. So having these amazing assets like, Grasscity and Smoke Cartel that are mature. It takes a lot of time for search engine optimization to kick in. Grasscity was established in 2000. So it’s a 21-year old business. Smoke Cartel was established in 2013, so it’s a seven, eight year old business. And you know, just considering that how much goodwill these businesses have generated already and the customer data that we have, for example, we have over 0.5 million customers in just Grasscity’s database alone. Every time we send an email just on the Grasscity platform, over 300,000 readers open up those emails. So, it’s a very educated guest that I can tell you that once Federal legalization takes place and things start opening up, we’ve got some of the most priced assets in ecommerce that maybe today generating around $18 million to $20 million combined. But if we look at the future, I think the opportunity is tremendous and as the business scales worldwide, as the new markets open up in Latin America, in Europe, in Asia, having these sophisticated ecosystems of ecommerce, I’ll think will take us – these businesses will take us much further than where we are today. So, this is a core part of our strategy going forward for sure.

Okay. Thank you for that. And just one last question from me. How do you see same-store sales growth trending in the coming quarters, maybe if you could touch on that a little bit.

Yes, the same-store sales growth in Canada is sort of all over the place right now. So, you look at Alberta in 2019, call it 2019 our fiscal year. So, October, we had our 2019, we had close to 250 or 230 stores. Today we had 570 stores in Alberta, right. So, obviously, there is big competitive pressure coming in, at least in the Alberta market. But the good news is, having a concept that we have, we’ve differentiated ourselves from our competition with our one stop shop concept that provides a unparalleled selection of accessories at unbeatable prices. So, we’ve been able to maintain our revenue in the Alberta market with a slight decrease from last year. And if this continues, we are going to remain to be in traffic mode. However, I would like to caution that, Alberta market is hyper competitive. There are pockets of opportunities that exist. Thankfully, we are Alberta-based. It’s home turf for us. So, it’s easier for us to indentify these pockets. But the Canadian – with the Alberta market is getting mature. And then, if you look at Ontario, not very long ago we were talking about how there were only 65 stores and then there were 150 stores. Well, there are over 400 stores in Alberta now. And there is another 1400 in the queue. So, even though, there may be a nice short-term or medium-term upside, which we don’t currently see because of COVID, these COVID lockdowns have not helped, the constructions closures have not helped, although these are temporary issues. So, once these go away, we feel a nice tailwind in Ontario for our numbers in Ontario for the next couple of quarters. But then, again, eventually, it’s going to all start leveling and start becoming – start heading towards where we are at in Alberta. But that would be at least four to six quarters down the road in Ontario. So I hope that answers your question.

Yes. It does. Thank you.

We have a follow-up question from Andrew Semple with Echelon Capital Markets. Your line is open.

Hello, there and thanks for taking my follow-up. I did want to just touch on a couple financial items on the call. First up, on CapEx. There was a little bit on the white side in Q4 and I know there is perhaps some lockdown activities that restricted construction in Q1. Should we expect fairly light CapEx in Q1 and then, kind of picking up after that with your improved balance sheet and the ability to deploy cash more quickly? And should that help accelerate our store openings in the latter half of 2021?

Sure. I think, Rahim can, do you want to take that question?

Yes. Sure. Hi, Andrew. So, yes, the CapEx activity was slightly low in Q4 and going into Q1. Q1was primarily a result of the lockdown we realized in Ontario freezing all the construction activity. So that sort of slowed down some of our CapEx activities. But we anticipate that that CapEx activity to continue and grow as soon as those lockdowns are done. And I believe Raj mentioned, March 8th I believe, it is – so we should see our activity pick up. And as we have disclosed in our prospectus that we plan to build 15 stores with the use of proceeds from that bond deal. So, we will start our project plan as soon as the lockdowns are open and continue to build those stores out. So you will see more activity from us in the Q2, Q3, Q4 periods of 2021 fiscal quarters.

Great. And if I may ask, just on kind of a net basis, how did the lockdowns impact your Q1 2021 results? I am not sure if you can comment or quantify that and if you could give us some additional color how we should think of the growth trajectory coming out of Q1. Should we see an acceleration as these lockdown measures are lifted?

Yes. So, just like every other business, we realized a slight declines in our location, specifically in the Ontario market as a result of lockdown. However, we have set up our infrastructure to ensure that we are operating based on the guidelines provided. So we have our delivery system open. We have our click and collect ready to go, but it has resulted in a slight decline in our Q1 revenue in Ontario specifically around 9% to 10% in Ontario. But we are quite confident that as soon as these lockdowns are up, we should see the volumes come back and return of our loyal customers back to our locations.

Great. Thanks for that color and thanks for taking my questions today. Congrats on the results.

Thank you.

Thanks, Andrew.

We have a follow-up question from David Kideckel with ATB Capital Markets. Your line is open.

Hi. Just one more question from me. Rahim, and you mentioned in your prepared remarks that lot of your products is flying off the shelves and you can’t keep up with demand. So I am just wondering, given the times we in the COVID and coming out of COVID, do you have any future systems in place to an inventory management system to better keep up with supply versus demand just to really maximize profits for you? Thanks.

Yes. No, thanks. So, yes, we’ve constantly monitoring the volumes and the sales activity and we have a really good idea in terms of the products that are hot right now and flying off the shelves and we are continuously working with our manufacturers and distributions in overseas to ensure that we are forecasting ahead of time and ensuring these orders are shipped in time for when the inventory is depleted or near depletion. So, we should have that process pretty good going forward.

Thank you.

There are no further questions at this time. Now, I’d like to turn the discussion back over to High Tide’s CEO, Raj Grover for final comments.

Thank you, operator. In conclusion, I’d like to thank all those on the line for their time and their interest in High Tide and give a special thank you to all of our shareholders for their unwavering support through 2020. We will meet again within a month to discuss our first quarter 2021 results ending January 20, 2021. With that, I will ask the operator to close the line. Have a great day, everyone.

That concludes today's conference call. Thank you everyone for joining. You may now disconnect.