Good morning. My name is Nadia, and I'll be your conference operator today. At this time I would like to welcome everyone to the High Tide Inc.'s Q3 2024 Unaudited Financial and Operational Results Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Instructions will be provided at that time for you to queue up for the question-and-answer session. I will now turn the call over to your host, Krystal Dafoe. Please go ahead.

Well, thank you, operator, and good morning, everyone and welcome to High Tide Inc's quarterly earnings call. Please note that all earnings discussed on this call are presented on an unaudited basis. Joining me on the call today are Mr. Raj Grover, President and Chief Executive Officer; and Mr. Mayank Mahajan, Chief Financial Officer. Yesterday, on September 16, 2024, the company released unaudited highlights from its financial and operational results for the third fiscal quarter that ended October -- April 30th, 2024. Before we begin, please let me remind you that during the course of this conference call, High Tide’s management may make statements, including with respect to management's expectations or estimates of future performance. All such statements other than statements of historical facts constitute forward-looking information or forward-looking statements within the meaning of the applicable Securities Laws and are based on assumptions, expectations, and estimates and projections as the dates hereof. Specific forward-looking statements include, without limitation all disclosures regarding future results of operations, economic conditions, and anticipated courses of action. For more information on the company's risks and uncertainties related to forward-looking statements, please refer to the company's press release dated September 16, 2024, our latest annual information form and our latest management discussion and analysis, each filed with securities regulatory authorities at sedarplus.ca or on EDGAR at www.sec.gov. or on the company's website at www.hightideinc.com, which are hereby incorporated by reference herein. Although these forward-looking statements reflect management's current beliefs and reasonable assumptions based on the currently available information to management as of the date hereof, we cannot be certain that the actual results will be consistent with the forward-looking statements in the future. There can be no assurance that actual outcomes will not differ materially from these results. Accordingly, we caution you not to place undue reliance upon such forward-looking results. For any reconciliation of non-GAAP measures, measured and discussed, please consult our latest management discussion and analysis filed on SEDAR Plus and EDGAR. It is now my pleasure to introduce Mr. Raj Grover, President and Chief Executive Officer 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 third fiscal quarter that ended July 31, 2024. I'll begin with some big picture comments regarding the quarter and our strategy before Mayank and I dig deeper into the numbers. We filed our press release and financials last night, and once again, I'm proud to report another record breaking quarter for High Tide. Growth resumed, with revenue up 6% sequentially to an all time record of $131.7 million. You'll recall how we purposefully slowed growth in 2023. We saw the competitive dynamics and the market conditions and focused our efforts to be among the first cannabis companies to be free cash flow positive, thinking that those who weren't clearly on that path bore a meaningful risk of fading away and that's exactly what's been happening. We have been free cash flow positive for five straight quarters now, while during this time a whole series of public and private cannabis retailers have gone under. After proving our ability to consistently generate free cash flow, we said we would resume growth and here we are with the highest ever level of quarterly revenue. While that is great to see, I know that we now have 183 stores across the country, which included us opening eleven new cabanas during the quarter. Using internal cash flow, we have now surpassed the lower end of our communicated range to add 20 to 30 new stores this calendar year, and given the momentum we are seeing, we feel that we can now reach the higher end of this range. Investors will remember that a while ago we were aspiring to reach a 10% market share, one of the biggest achievements this quarter. And thanks to our team's efforts…

Thank you Raj and hello everyone. Q3 was my first quarter as part of the High Tide team, and what a fantastic quarter it was. We set records on most key metrics including revenue, EBITDA, store count and cash balance. Let's take a deeper dive into the numbers. As Raj mentioned, revenue for the quarter was an all time record at $131.7 million, up 6% year-over-year and sequentially. Our bricks-and-motor segment, which drives the vast majority of our business at over 90% of revenue, performed even better, up 10% year-over-year and 7% sequentially. On a consolidated basis, our gross margins of 27% were just below the 28% generated in Q3 last year and Q2this year, in line with our ongoing strategy to capture market share. As Raj highlighted, we have been able to simultaneously demonstrate revenue growth and cost cuts, which is truly remarkable. Over the past 12 months, our quarterly revenue has grown by $7.3 million, while our total expenses actually fell by $2.8 million. The main drivers for this were lower G&A expenses, primarily driven by taking cost out of the e-commerce segment, lower depreciation and amortization, primarily relating to intangible assets, particularly the license valued from the meta acquisition back in 2020 as they are now fully amortized, and lower share-based compensation. Adjusted EBITDA margin was 7.3% in Q3. This was an improvement versus 6.3% in Q3 2023, excluding the one time impact of the removal of the SRF in Manitoba. However, it was below the 8.1% achieved in each of the prior two quarters. This was due to the unprecedented rate of expansion. We added 11 stores in Q3 alone versus 13 stores during all of calendar 2023. We are confident that the addition of these stores will, over time, yield meaningful returns for shareholders. Free…

Thank you. [Operator Instructions] Our first question goes to Scott Fortune of ROTH Capital Partners. Scott, please go ahead.

Thanks for the opportunity. Good morning and congrats as there are only a handful of cannabis companies reporting positive EBITDA and net income. Congrats on that. Just wanted to follow-up on stores providing, your tracking to hit the top end of your 24 store guidance here of 20 to 30. Do you see any changes or strategy regarding opening new stores into 2025 or still driven primarily organically versus more M&A opportunities out there? And then can you touch base on the new store economics as they become fully optimized? As you mentioned, after two, three quarters regarding kind of average sales and margins compared to your existing profitable stores, kind of, obviously you're still seeing strong economics in the Ontario store ramps. Just a little bit color on your store kind of outlook as we move into '25 here?

Good morning, Scott. Thank you so much for your question. So on the topic of 20 to 30, I think you asked me, how is organic store growing for the year? It has been going very, very well. We've already put up 21 stores at the end of Q3, and since then, we continue to do our -- we are in construction mode, so we're very confident that we will reach the upper end of our guidance that we had provided. Between 20 and 30, we'll be close to like 27, 28 stores, I think, and nothing will change going into next year. Scott, we found our secret mantra of growing organically. When we're building stores organically, I'd like to remind investors that we're spending just $260,000 to build out these locations and then loading them up with $100,000 or so in inventory and working capital. And then we just go back to ramping up these stores, and you can get better, higher quality growth in amazing locations that you can cherry pick than what we are doing currently. So we're going to keep this approach exactly the same going into 2025, especially given we have five consecutive quarters or positive free cash flow. We've always said the quantum can significantly vary, but our intention is to remain free cash flow positive. Going into 2025, you talked about store economics a little bit. I had provided in my previous calls, I had noted that we may be able to raise margins towards the back half of this year. I don't see that happening. We're holding the line on margin. We may even go slight reduction in margin given the illicit market resurgence that we are seeing a little bit. And you're clearly seeing a lot of competitors go out of business. Tokyo Smoke just went bankrupt. I believe that over 100 locations, or they filed for CCWA proceedings. And we don't want to help the larger chains, the smaller chains and the independents that are just hanging by the thread. So, we're going to hold the line of gross margins because we already have amazing economics. As you pointed out, one quarter up or down on adjusted EBITDA is not going to change anything. When we're growing at the pace that we're growing and generating 12% market share, this clearly exceeded our expectations. We thought would be around, that 11, 11.2, and that is a victory. But getting to 12% is an absolute win. So everything that we've been doing is working out for us and we're going to stick to our plan going into 2025, Scott.

Perfect. Thank you for that detail. And then the follow-up -- one follow up. You recently launched Queen of Bud and kind of the branded white label products you're offering in your five provinces, you've added BC has come on board now, which is great. But can you provide a little more timing of the delivery and expectations of the white label sales for the rest of '24 and kind of more your expectation of the ramp into '25? And then, you recently announced that JV, with positive intent events and more pop-up opportunities kind of events, does that allow you to push your white label products there, or how can you look at that strategically from that JV standpoint?

Yes, absolutely, Scott. So, look, we're very, very excited about our long-term strategy. I always use the word long-term for white label because you can't be blindfolded. And just because you have a significant amount of stores, you don't look at what's happening in the market. So, I've said these things 100 billion times that LP still have a lot of weed [ph]. Now those weed levels are definitely coming down. We're seeing stability in wholesale prices, and long-term, white label will account for 20% to 25% of everything that we sell in our stores will be our own brands. So currently, we're sitting at just 2.53% in cannabis. On the accessory side, we have a lot more. On the cannabis, that's the smaller part of the equation. But on the cannabis front, we're sitting at, let's say, 2.53%. We're going to take this number up to 20% to 25% in the long term. And, you know, a brand like Queen of Bud, which has existed in Canada for over four or five years now, and it does and has produced millions of dollars in sales prior, it's not going to be so hard for us to build it, when we can poll position it in our stores, given that it's our own brand. So we're very, very excited about the trajectory of the Queen of Bud brand of Cabana Cannabis Co., and new brands that we will eventually introduce. Going on your question on what was launched and what is getting launched in 2024 and 2025, we just on Friday, we actually launched the Queen of Bud very, very beautiful and elegant candles in our stores. I'm very happy to report to you that we've sold 200 units in the first two days, 222 to be precise. I got…

Thanks for the color, and I'll jump back on the queue. Congrats again.

Our next question goes to Matt Bottomley of Canaccord Genuity. Matt, please go ahead.

Hey, everyone. Thanks for the question. Raj, just wanted to follow-up with some of your commentary when it goes back to -- there being sort of a wash of cannabis out there, and I know that's certainly the case when it comes to sort of the biomass of it. But I'm just wondering, as a purchaser, if you look at more of the CPG segments, the vape pens, the edibles, the beverages. Are you ordering from the provinces in any different patterns when it comes to consumers actually having brand awareness with some of these products? I know there's still hundreds, if not more LP's out there. But I'm just wondering if the things that look a little more CPG friendly are starting to change at all in the current environment with respect to where demand's coming from?

Good morning, Matt. Thank you so much for your question. So, look, you nailed it. There's hundreds and hundreds of LP's out there, Matt. And we've had the same situation for years and years now, but we know that a lot of LP's are going out of business and new ones are not coming back into the game at the same pace. My estimates were that the Johnnie Walkers and the grey gooses of the world that are built in alcohol will be built in cannabis. But I can tell you it's being proving extremely difficult, although good businesses are good businesses. Amazing LP's are amazing LP's, there's some that are doing a tremendous job that we know. We get customers asking for their brands, right? There are a ton of brands that customers ask by name now, which is great. But what I also see, Matt, at the same time that for some reason, three to six to nine months in, the product starts to fiddle away or fade away. But the one thing I've noticed, what the producers are doing better is that they're keeping the brand. So even at the SKU levels, their interest is starting to fade away, because there's just so much innovation in cannabis The producers are doing a better job in terms of brand positioning and of course, the ecosystem that we have in Canna Cabana where we move so much cannabis, we are also helping generate brand visibility. Just like we're helping take down the illicit market, we're also helping generate brand visibility for a lot of these producers. So, yes, the brands are picking up, perhaps not at the pace that the producers would be expecting, where people come and ask through names. Now, let me put another spin on this. We bought the Queen of Bud having 183 locations. By the way, we bought the Queen of Bud brand for just a million dollars and having 183 locations and doing close to $500 million in brick-and-mortar revenue, with only 5% of the countries or the provinces where we operate the brick-and-mortar store count, we couldn't be more happier to position our own brand front and center to the millions of customers that we have or to the hundreds of thousands of customers that come visit our stores. So we're in a good position. But to go back to your answer, certain producers are definitely doing a better job and brands are starting to pick up.

Got it. Appreciate it. And just one more question for me. I know it's a very small percentage of your business, but the e-commerce platform sales continues to decline as a percentage of your overall revenues. And I think that there's some strategy to that. I'm just wondering, similar to your comments that you gave with respect to maybe some brand rollout in '24 and '25, when it comes to white label more in that segment of the business with e-commerce, where do you sort of see that over the next 12 or 24 months? And is it something that you think will reaccelerate down the line or sort of stay where it is from what we've seen in more recent quarters of contribution?

Yes. So to just answer the question quickly, on e-commerce platform, the sales have definitely declined. But the good news is it's only 6%, 7% as a percentage of total of our total revenue Matt. Now we have a very exciting idea that we're working on for our e-commerce platform, which ties into our Cabana Club becoming a global cannabis community. I will shed more light on this in the coming weeks. I promise it won't be months and months, max, maybe a couple of months. We're working on something significant, which will be very, very helpful, which also ties into what you're talking about white label. So the approach that we're going to take, white label is going to become front and center in terms of what we're about to do in e-commerce. But we're absolutely will be selling branded products as well with more focus on white label products. But let me not say more. Sometimes I give too much information that I should be giving. And let me keep you guys all excited until we actually release what we're about to do with our e-commerce platforms.

Okay. Got it. Thanks, Raj.

Thank you. The next question goes to Mike Regan of Excelsior. Mike. Please go ahead.

Thanks, everyone, for the good quarter. In terms of what you said before about Tokyo Smoke going bankrupt. Are those 100 stores actually still operate or are they closing? And sort of what are you seeing just on the competitive landscape of stores closing as their five-year leases come up, five years into adult use at this point?

Good morning, Mike. Thank you so much for your question. So I believe they have 101 stores. Don't quote me on it, but that's my very good educated guess. They have announced that they are closing 29 stores, or they have already closed 29 stores. I can tell you that we are looking many of these closed locations. But again, let me remind everyone listening on this call that these companies are not going bankrupt because they've done a great job on site selection criteria and the size of these units and the rental rates that they're paying. I look at a lot of these stores with our real estate team, and I'm shocked sometimes to see a three, four, 5000 square feet store in Canada pop up. Who's going to take that at $100 a square foot, even if it's in the best location ever? The landlords are not going to take a haircut because it's a fully built store and they're trying to get pass on this store to some other business, some other operator. That's not going to be us, Mike. We are disciplined. We like quality locations, we like square footages that we can live with and we like rental rates that can stand the test of time, which is an opportunity for the landlord and the tenant and not one directional. A lot of these leases were signed when legalization took place in 2018 or even prior in some cases, and those groups are licking their wounds. It's not a good place to be in. Fire & Flower, Kiaro, Trees, Tokyo Smoke, 420, I can keep going ShinyBud, there's endless companies that have gone bankrupt. And again, the reasons for them going bankrupt is just how they've looked at their real estate portfolio and how they've managed their operating expenses. So as much as we are in these portfolios, the opportunities are thin because we don't want to get a three, 4000 square feet store paying $80, $90 a square foot. It defeats the purpose of just making an announcement that we took over ten Tokyo Smoke stores. But I'm not taking over that pain and bringing it over to High Tide. So, we're looking at everything, Mike, but it's not a slam dunk by any means.

Makes sense. You definitely don't want to take on their unprofitable leases and two large stores, especially if you can open one across the street at 1500 square feet or what have you. And I guess the second question is, quickly, you mentioned seeing a resurgence of the illicit market. Can you provide a little more detail on what you're seeing and what's driving that? And is that causing any pricing pressure overall in the market in general or what you meant by that?

Yes, absolutely, Mike. So this quarter has revealed a lot to us. So right at the end of Q2, what we started noticing that there's been an influx of illicit brick-and-mortar stores popping up all over Canada. And we've seen a huge concentration, especially in the city of Regina. Now we're seeing that in Ottawa and we're also seeing it in Toronto. By early counts that I have, we are now hearing that there's 200 illicit stores that have popped up since the beginning of this year. Many of them are located just on the outskirts of the city in indigenous reserves, but many of them are right in the city, Bench Street in Ottawa and King Street in Toronto. And not only did we have legal competitors to deal with, which we are absolutely dealing with and accelerating and making our mark. Now we got to go back and deal with the illicit market on this brick-and-mortar, illicit stores popping up. But look, the Ontario government dedicated $31 million to illicit market enforcement. And we are -- our GR team is continuously on the effort to communicate these issues to the various governments and the provinces where we operate, that were ones paying income taxes, sales taxes, providing jobs. It's the opposite with the illicit market. We are selling clean cannabis versus the other way around 96% of illicit market substances are infested with pesticides that are not allowed. And all of this is a bit annoying. But it's part of the game. I did not expect illicit market resurgence at this point. And this is why we have to hold -- not only hold the line on the illicit market, I'll give you an example. We have to drastically drop our margins in the city of Regina by…

Hopefully, they put some of that $31 million to work and listen to you and support the licensed industry actually paying taxes. Great. Thanks a lot.

Thank you. The next question goes to Andrew Semple of Ventum Financial. Andrew, please go ahead.

Hi, there. Good morning Raj and team and congrats on the fiscal Q3 results. Just as we get kind of near the end of the fiscal year here in 2024 and beginning to look in ahead and sharpen our estimates for 2025. Raj, just wondering if you have maybe any early thoughts on what High Tide would target for a store count and new stores opening next year, and how that mix might be between organic and acquisitions in terms of store growth?

Good morning, Andrew. Thank you so much for your question. So let me take this first question first, like what would 2025 store count look like. So Andrew, like I said, we're already at 21 stores opened this year in August, and we balance the art of generating free cash flow really well while growing so aggressively and rapidly and we are still free cash flow positive. So think of 2025 mirroring 2024 plus some additional M&A. We've been very, very disciplined on M&A. As you know, I bought one location in cash, and we paid just 1.5 times EBITDA, now those are the type of deals I'd like to do. When we're trading at 5 times EBITDA, you can't justify paying 4, 5 times EBITDA to a different operator. And some operators still have high hopes. And some of us are learning very fast that you join the big High Tide family, consolidate, which is the right thing to do at this point or face the risk of completely fading away. So 2025 will probably do the same thing, Andrew, to answer your question, 20 to 30 new stores, add it. Let's see where we are this year. I would like to end this year as close to 30 stores. We like to under promise and over deliver, and then we'll put our new milestone out in December when we provide a corporate update. And on top of that, we hope to do additional M&A. in '25, which has been very, very lean in 2024 because we've been waiting for the right opportunity. But we're winning on net income. We're winning on free cash flow. We're absolutely crushing in our market share, which is my favorite bullet this quarter was 12% market share. How happy can you be if you already have 12% of the market in Canada? So we don't need to do any out of the ordinary to derail our momentum. So think of 20 to 30 new stores in 2025 plus M&A.

Great. That's helpful. And understand the those are early comments and you expect to firm them up later this year. My second question just on store count, even as you've opened more stores and noticeable lease payments this quarter were actually down quarter-over-quarter, even as you added 11 stores. So, maybe just a couple of comments there. Are you seeing more attractive lease rates, first of all, as you're kind of gravitating towards smaller format locations? And secondly, as we're kind of five years since the past of adult-use sales, are you able to get some of your lease renewals done at more favorable rates than perhaps you initially signed at?

Yes, absolutely, Andrew. All of the above is true. Everything you said is exactly what is happening. So as five years are coming up, the cannabis rents like I was talking about the Tokyo Smokes and the Fire & Flower, of the world that they had signed on to that is no longer a thing in cannabis. Now it may be a thing for some landlords, but the industry has smartened up and we're not shelling out these kind of rents. We never were. High Tide never was. But we are in a much better position now paying maybe a 5% premium on rent on cannabis, mostly not getting a fixturing periods, getting our free rent periods, negotiating lower rents. We've learned the out of managing our stores in a 1,500 square foot footprint. All of these things are better lease negotiations, all of these things are leading to lower lease payments. And again, all of these things, when you're building a business you have to keep your eyes on absolutely everything. The real estate criteria, everything has to check. We have an anchored real estate strategy that just keeps on giving us. And we get the red carpet welcome from the larger landlords in this country, which I've mentioned several quarters in a row now. So while we have all of these opportunities, we just need to remain disciplined on how we are doing these negotiations. And the square footages that we are targeting, and this is exactly what I was telling, Mike, yes, there's 29 stores to look at from Tokyo Smoke or they were 92 to look at from Fire & Flower, but when we look under the hood, things were not so interesting from my perspective in terms of square footage and the rents that are signed on. We still are getting some of these locations, but we're only getting the best where we can renegotiate prices with the landlords. And like I said, because these stores are built, the landlords like to get full value. They're getting a build store, and they're passing the store back. So sometimes, it's the art of the deal and what you have to juggle to save your $300,000 or $260,000 for construction cost and maybe pay a 10% premium on rent or a 15% premium on rent or a slight square footage increase because you're still going to be in the green and be ahead, if you had to build your stores and ramp up the store organically, which has also gone up now, in many cases, over 12 months, it's taking for stores to ramp up. So some of these built-out stores and having existing customer bases are very, very good for us, and we're doing that, but we're remaining very disciplined and we're looking at all of these leases.

That's very helpful. Appreciate you taking my questions and I'll get back in queue.

Thank you.

Thank you. The next question goes to Doug Cooper of Beacon Securities. Doug, please go ahead.

Hi, good morning, guys. Terrific work on the quarter. I just want to dive down to a little bit the net income, I think you nailed it, Raj, I think is an important milestone for the company. Now, part of the driving of the positive net income, it looks to me like amortization went down almost, I guess, $2 million sequentially and interest expense was down $1.5 million sequentially. Can you just sort of talk about what's dragging those two down so much sequentially?

Absolutely, Doug. Good morning and thank you for your question. So look, we were not the net beneficiaries of our net income when we had high depreciation and amortization working against us. But this is all part of doing business. If we wouldn't have acquired Meta in 2020 and doubled our footprint and got ahead of Fire & Flower and become the number one in the country, none of this was possible. But then we had five years of dealing with this depreciation and amortization of the assets that we had purchased. And now we are leveling out five years are in. And now we are the net beneficiaries of this situation. Same thing with interest income as well when we -- sorry, interest payments. When we started the Connect First payments, I believe the loan was $19 million. That's down to like $13.5 million. We've already paid off the debenture, convertible debentures that we've had. Now we've got some more to replace the OCN debt that's coming up in December, and that's just going to wash each other out at a slightly higher rate of interest in this market, people can't even get this kind of funding. And we were able to achieve a $15 million debt facility with a $10 million accordion. So we'll take it. But like I said, going back to your original question, Doug, it's just the nature of doing business. Sometimes it works against you like we bought all these assets, and they're depreciating, totally normal course of doing business, but it affects net income, despite breaking even on net income in the quarter before. And despite producing net income, I would still remind investors focus on our market share, focus on our revenue growth, focus on our EBITDA, focus on our G&A, focus on our free cash flow. When you're looking at these metrics, we are clearly accelerating. Net income can be down or can be up one quarter when you are as a growth stage company. But how do you replace 12% market share. I bet you, any one of my competitors would bend over backwards to be at this position. We're already here. So our focus is not net income. It's very, very nice to see that the way we run our show, which is a very, very tight ship, we're able to generate net income even in this environment.

And just the last one for me. Data sales, so one from $7.3 million in Q1 jumped up to almost $9 million in Q2 and down 400,000 or 300,000 odd versus Q2 8.6%. And if you just talk a little bit about that? What do you expect for that this quarter or next year?

Yes, sure, Doug. So our data sales are purely a result of our store growth, right? Because if you don't have the store, we don't have any data to sell from that store. And I'm very conservative giving out these projections because a lot of our customers that are producers have been unfortunately going out of business. And we've had to write off some of these balances, but that's fine because overall, our ecosystem is so strong. We are still seeing new customers come and join us and the only customers that ever leave us are the ones unfortunately, that are going bankrupt. Currently, Doug, we are sitting at the highest number of customers we've ever had, because our ecosystem is so powerful, that data we generate is so meaningful and so revolutionary. The producers need to meet this data to guide their manufacturing priorities and be in our stores, and they're happily joining our data program. And I just want to remind investors, there's a few items in other revenue line. You can refer back to the press release, which are included in it such as rental income, subleased revenue. We acquired a bunch of dark leases for Meta. We've got rid of that. We've subleased a lot of stores. We're dividing stores and subleasing them. And we have advertising revenue now coming from the Altogether magazine, that's going really, really well in the accessories in the CBD industry. And I think I heard you say that we went down to $9 million this quarter. I think we are up by a $500 or 200,000.

I got $8.9 million last quarter, $8.6 million this quarter.

I think that may be a mistake on how you're looking at it. It's 9 point-something million. Mayank, can you please look at that number and tell me. I believe it's 9.1, 9.2 in data sales versus the $9 million that we did. Its 9,046 [ph] this quarter, Mayank is just pulling that up, Doug, but you should be able to get that, but this was a 1% sequential growth for us.

I'll double check that.

Yes, no problem.

That's great.

So I have that number, Doug, if you want that number, I have that number, it's 8,977 versus 9,046, giving us a 1% sequential increase.

Okay. Thanks.

Thank you. The next question goes to Frederico Gomes of ATB Capital Markets. Frederico, please go ahead.

Hi. This is Brenna [ph] for Federico. Thanks for taking our questions and congrats on the quarter. On the retail front, I'd just love to get some commentary on consumer trends across your regional footprint. Specifically, the extent of product trade downs that you're seeing now versus, say, three to six months ago? And how the traction of the Cabana Club has played into that?

Hi, Brenna. Good morning. Thank you for your question. So consumer trends on products, so dry flower remains to be the absolute dominant category still. In that very dominant category, you have pre-rolls that I believe are 29% of all dry flower sales. And in that pre-roll category, you have infused pre-rolls that are still taking off and continue to take off. A new category that has emerged and is doing extremely well, it's also the all-in-one vape disposable vape category. Vape is also rising quite a bit. And in our stores, we sell the best read for the best price, but we definitely have a lot of value-focused consumers coming to our stores and focusing on ounce bags, which is 28 grams. Also the 14-gram formats, which are very, very popular. Edibles still remain at the -- maybe about -- it's come up a little bit, which is nice, but not up to our standards and liking. Edibles are sitting at around 5.5% in our stores. Long term, when this course correct to the 10-milligram THC issue that we've been dealing with, the limits that help Canada's enforce per package. When that goes away, we think it can go up to 10% to 12% of our sales, which may be additive in nature, because a lot of the consumers that are taking edibles are not necessarily looking for smokable formats. So this may be additive to sales. At the moment, edibles are only 5.5%, 6% of our total sales. Dry flower, like I said, is the most dominant category at around 60% pre-rolls and then infused pre-rolls in the pre-roll category would be the biggest.

Okay. Perfect. And then secondly, how is the company viewing international opportunities right now? Could we get an update on Germany? And then more locally on opportunities, is there any update on BC potentially raising the store cap?

BC, so let me talk about international opportunities first. We are absolutely monitoring the progress in Germany. Like, you know, or you may know, legislation passed in April that gave the Agriculture and Food Agency authority to set up regulatory regime for commercial cannabis pilot projects. And the proposed federal budget that just came out in Germany includes funding to support this. So, once this passes, we anticipate seeing draft regulations this fall and winter. We are monitoring the situation in Germany very, very closely, and we intend to open up stores as early as mid 2025 or maybe even sooner than that. We intend to be one of the first companies, international companies, to apply for licensing in Germany, and we are very, very tuned in, in what's happening in that market. United States long term remains the biggest opportunity for high tide, but we have so much opportunity here alone. Brenna, as you know, we're sitting at 183 stores. We can go to 300 stores in Canada alone. We have a very, very good plan to get there. We feel that we can achieve this in the next couple of years. So that's a lot of growth. We're sitting at $525 million in annualized revenue as per this reported quarter, and we believe we can go to roughly $800, $900 million in Canada alone. Then there will be the German opportunity, which is looking very, very good at this point, but we can't say anything until it's real. Then the American opportunity, we know eventually, vape will be federally legal in America, or the exchanges like Nasdaq will warm up to the idea. Schedule three is, you know, both Harris and Trump are in favor of the safe Banking act. They're both in favor of rescheduling. So cannabis has some good momentum in the United States as well. Now, that's on an international level. Coming back to your point on BC, in BC, currently, we are only allowed to have eight stores per entity. This can change. And I believe this will change, and this can go up to 16 stores in the short term and then even go up higher from that. As you know, or you may know, BC has some of the highest illicit rates in the country, in opposite of Alberta, where we have some of the lowest illicit rates in the country, where there's no cap to cannabis legal cannabis stores. So we do believe that BC will eventually go in that direction. Maybe not an all out cap removed, but I think 16 locations are likely in BC in the next six to 12 months.

Perfect. Thank you for that commentary. I'll jump back in the queue.

Thank you. [Operator Instructions] Thank you. It appears we have no further questions. I'd like to turn the session back over to High Tide's Chief Executive officer, Raj Grover for final comments.

Thank you, operator, and thank you to everyone for your interest and continued support for High Tide. We're very proud of what we achieved this quarter and remain excited about the road ahead. With that, I will ask the operator to close the line. Have a great day, everyone.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.