Good morning. My name is Sylvie, and I will be your conference operator today. At this time, all participant lines are in a listen only mode. After the speakers remarks there will be a question-and-answer session [Operator Instructions]. You may begin your conference.

Thank you, Sylvie. 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. On January 29, 2025, the company released audited financial and operational results for the fiscal year that ended October 31, 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, estimates and projections as of the date 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 January 29, 2025 or our latest annual information form and our latest management discussion and analysis each filed with securities regulatory authorities at sedar.ca or on EDGAR at www.sec.gov/edgar or on the company's Web site at www.hightideinc.com and which are hereby incorporated by reference herein. Although these forward-looking statements reflect management's current beliefs and the 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 the 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-IFRS measures measured and discussed, please consult our latest management discussion and our analysis filed on SEDAR+ 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 begin.

Thank you, Carter, and good morning, everyone. Welcome to High Tide, Inc.'s financial results conference call for the fiscal year that ended October 31, 2024. I'll begin with some high level comments about the quarter and our strategy before Mayank and I dive deeper into the numbers. We filed a press release and financials yesterday and I'm proud to report another record breaking quarter for High Tide. Revenue for the year reached an all time high of $522.3 million, up 7% compared to fiscal 2023. We also ended the year with a quarterly revenue record, generating $138.3 million in Q4, up 9% year-over-year. This was the fastest growth rate we achieved all year and represents an annualized run rate exceeding $550 million. I'm incredibly proud of the growth we are generating at High Tide, especially considering that nearly all of it was achieved organically and financed primarily through internal cash flow. In 2024, we added 29 new stores, of which only one was acquired. This was more than double the number of stores we added in 2023 and at the high end of the target range of 20 to 30 stores that we communicated to investors at the beginning of the year. These stores were built using cash flow from our existing locations. I'm pleased to report that new store development is continuing at a similar pace in 2025 with plans to add another 20 to 30 locations this calendar year. I remain excited about the continued top line growth we anticipate for 2025. With our strong Q4 results, we have now delivered positive free cash flow for six consecutive quarters, generating $22 million in fiscal 2024, an increase of 217% over fiscal 2023. This significant improvement in free cash flow was achieved even as we opened 29 new stores…

Thank you, Raj. And hello, everyone. This was my first year end as part of the High Tide team, and what a fantastic year it was. We set records on revenue, adjusted EBITDA, store count and cash balances. Let's take a deeper dive into the numbers. As Raj mentioned, revenue for the fiscal year was an all time record at $522.3 million, up 7% versus fiscal 2023. Our bricks-and-mortar segment, which drives the vast majority of our business performed even better, up 12%. We also ended the year at a record level at $138.3 million in Q4, up 9% year-over-year, representing the fastest pace of growth during the fiscal year. On a consolidated basis, our gross margins were 27% for the fiscal year and equal to 2023's level. In Q4, consolidated gross margins were 26% equal to Q4 2023's level and 1% below 27% in Q3. Looking ahead, we expect lower gross margins in our e-commerce business as a result of taking our disruptive Cabana Club global, which we anticipate will be offset by our newly acquired medical cannabis unit Purecan once the transaction closes. I am very proud of the performance in our core bricks-and-mortar Canadian cannabis business, which is a tough market, we were able to post same store sales gains year-over-year in Q4 despite the fact that total industry sales, including the impact of new stores have declined year-over-year in each of the past eight months, which once again illustrates the superior brand strength Canna Cabana has in the market. We have always had millions of customers globally in our e-commerce segment. We recently completed the heavy lift of taking our disruptive Cabana Club global, further entrenching them into our increasingly global ecosystem with the aim of generating a stronger loyalty and higher sales. Keeping with the…

[Operator Instructions] First, we will hear from Matt Bottomley at Canaccord Genuity.

I just wanted to start on some of the market dynamics that you guys have seen. So obviously, the leadership on the market share front is very strong. But maybe just more directionally and some of this might be rounding or maybe if stats can revising numbers, but it looked like you had a percentage point or two more in Alberta and Ontario last quarter versus this quarter? Just looking at the two press releases at that time. I'm just curious if those dynamics have changed at all and if there was any headwinds in those two markets relative to what you've seen in the past?

So first of all, let me confirm with you that we've not seen any change in dynamics -- retail dynamics in Alberta or Ontario in particular than what we've been talking about. Example, illicit market resurgence, the regular competitive pressures we face in this business but nothing's changed. The only reason the 12% was revised down to 11% is the revised data from Statistics Canada. So we can only go with the data that we have at the time and we're publishing these quarters. But to give you some comfort and give some comfort to our listeners, we are actually up from 10% last year to 11% this quarter year-over-year and 12% -- down to 11% was simply a revision from Statistics Canada. And these things always happen, they publish new numbers time to time and we take the most recent numbers and then we publish those in our results.

So maybe just moving on, it's first time early chat on sort of the Germany deal since it was announced. So just curious on your level of potential investment into that market, not getting too granular because I know there's a lot of unknowns but just what's happening, particularly in Germany on a regulatory front. This comes up on some of the other LPs earnings calls as well and there's been takes, I guess, with respect to expectations there. But clearly, it's a lot more relevant now than it was several years ago. So just wondering what calendar 2025 might bring in terms of your level of investment and what you're hoping to see in terms of growth levers?

So there's no significant CapEx required for the German investment, the majority stake that we've taken into Purecan. We were very methodical about how we went about it. We never want to put any strain on our existing financial resources. And I am extremely excited about this acquisition because we've truly made this -- we're going to make this into one plus one equals to 11, not even three because I believe High Tide is the most perfectly positioned company to take advantage of the medical cannabis market in Germany or to get a significant amount of market share in the medical cannabis market in Germany. So again, no significant CapEx requirements because we already have the warehouse and logistics infrastructure setup. This business is already profitable with 29% EBITDA margins. The only major expense that we are going to incur upfront is going to be working capital requirements. So I can tell you, Matt, very confidently and very positively that I've had overwhelming response in my conversations with licensed producers. I think I've had over 20 now in the last week, it's three to four a day that we are talking to. And I can tell you almost all of them, I can't tell you even one that is not excited about getting started on this business venture with us. We are getting offered to distribute Canadian brands exclusively as well as nonexclusively on top of all of the momentum that is going into Germany. So working capital requirements are going to be there. Our intention is to move thousands of kilos of cannabis eventually and it's just the timing of payments between Canadian license producers and then our revenue collection from pharmacies and wholesalers in Germany. Working capital will be a good one, it will have an impact on our free cash flow but it's not going to be overnight but that is the only investment we need going into this business. We don't need to build new facilities or anything like that.

Next question will be from Frederico Gomes at ATB Capital Markets.

I guess the first question, Raj, I know that you mentioned the pricing in the market and how maybe you're not ready to take price in the market yet as the market consolidates. But is that something that we could see happening later in 2025? I mean what needs to happen here for you to be more comfortable on the pricing side of things here in Canada?

So look, Canadian market is a very unique one. It's the most competitive landscape in cannabis in the universe, I'd like to think. So pricing pressures have been there. But as you know, more recently, True North, which was a major player in Ontario with 48 stores just entered into creditor protection. And I think you and I and everybody else we talk about this every quarter and we remind our investors that we're going to hold the line of gross margins because it's frustrating many of our competitors. And they don't have the same strong business model that we do and we know they're hanging by the thread and many of them are leading the race and unfortunately entering into creditor protection. But at this time when we have record revenues we are up 5% sequentially, 9% year-over-year, these are big numbers. We have really good amounts of free cash flow, $22 million trailing free cash flow, $5.9 million in Q4 alone. I don't think we need to do anything out of the ordinary to stop this momentum and give a helping hand to our competitors that are leaving the race. So that is the only reason we're holding the line on gross margins. It is a tough market. As you can see, our same store sales, although leading the industry by a country mile, we are up 130% over the last three years when the average operator in the country has declined 5%, they're still only up 0.4% year-over-year. So it's not like we can increase margin by 2%, 3% overnight and then still expect our same-store sales to go up. So it's a fine balance spread. But what's happening is more and more competitors are leaving the race, big chains are struggling, middle size chains are struggling, independents are struggling. So as more competitors get out of the race, there's not going to be a lot of competitors remaining to be waging a price war with us. And at that point, we have a tremendous opportunity to increase gross margins in our core Canadian cannabis business.

Second question on your international e-commerce platform. Now that you launched the Cabana Club internationally, I'm just curious how do you see the hemp derived THC market in the US? I know that many other companies have invested in that market recently. It seems like it's grown rapidly. So have you -- do you have any plans in regards to that market?

So we have a few SKUs selling hemp derived CBD -- hemp derived THC states where legal, which are again covered by the 2018 federal farm bill, both New Leaf and Fab have these SKUs but it's producing an immaterial amount of revenue, because it's not been our focus, Fred, simply because it's just so much enforcement and changes in terms of what's legal, what's not legal today between the different states. So we're taking this slow because it changes by the day sometimes and we're investing a lot into this to make sure that we are above board on these products. Our revenue is tiny today but we will definitely see how it develops. Like we've got immediate opportunities in our core business segments as well as Purecan that we just acquired the majority stake in Germany, and this core business opportunities that we can produce much higher revenues at higher gross margins relatively quickly. So hemp-derived THC market is not at the forefront of what we're looking at but it's absolutely something that we're keeping an eye on, and time and resources are limited. So as soon as we have some more resources, we are going to dedicate it to this place but the revenue remains tiny today but we'll see how it develops.

Next question will be from Bill Kirk of ROTH Capital.

On Germany, how will you decide what brands or what products to offer into the country? You said you have a lot of calls, a lot of conversations. But how are you going to weigh maybe price point considerations versus quality or reliability when determining what is best?

So again, while we're doing our homework on what's moving fast and what's not in the German market, what we are discovering that absolutely everything that's making its way into Germany is getting consumed. I've been talking about this on a few recent interviews that I've done on this German opportunity. The German market has grown -- since April 2024 alone, the German medical market is up 250%. In Q3 of 2024, I think Germany moved 20 tons of cannabis, right? This is up from eight tons of cannabis the year prior. So you could see the growth and momentum there. And we have the opportunity to bring some of the best brands in Canada from the largest LPs, medium sized LPs, craft LPs, micro growers. We've got the branded approach there. We've got our own white label products such as Queen of Bud SKUs that we will be introducing in Germany. And then we are also going to be introducing running SKUs on the availability of the SKUs that are present in the market. The goal here is to build the biggest medical cannabis menu in Germany and become the preeminent distributor in the landscape, which does not exist today. There's a lot of small players, very tiny players but there's nobody of size and scale. And we feel with our procurement expertise of having derived over $1.5 billion in cannabis sales from our ecosystem and doing over $500 million of brick-and-mortar cannabis sales here in Canada we feel that we are fully positioned in terms of taking that market by storm. I'm having excellent conversations with our LP partners here in Canada and everyone is excited to get on board. It's going to take us a month or two to get going but I can tell you this is an exponential opportunity for us. And it includes the largest Canadian brands, it includes our own white label products and it also includes medium grade cannabis, high grade cannabis and in some cases, even lower good cannabis.

I can clearly hear the enthusiasm there. What is the appetite for other countries? When you look around the world, do you see anything else out there like Germany or should we expect more of this type of stuff?

Yes, absolutely, Bill. We're going to -- Germany is going to be our doorstep or our gateway into other countries in Europe and then eventually Australia. Australia is importing -- now that eyes and ears are on the medical side as well, what we're learning is exciting things are happening everywhere. So Australia is importing as much cannabis as almost what Germany is importing right now. UK is really coming up and I believe it up to like 15 tons. Czech Republic has just announced that they're not going to restrict their doctors, specialized doctors only to prescribe medical cannabis and they're going to open it up to all MDs, which I think will exponentially increase that market size as well. It will still be only a ton or so. We're already at 80 tons in Germany. So that's the biggest opportunity. Poland is also growing medically. So Germany is the first step, Bill, but you can be rest assured that we are definitely looking at other markets as well. But walk before we run, let's get our feet wet and then I think we'll have a very good opportunity in these other markets as well.

[Operator Instructions] Next is Andrew Semple at Ventum Financial.

First question would just be on the 2025 outlook for opening 20 to 30 new stores. Raj, if you wouldn't mind maybe clarifying how you're thinking of that as a mix of organic versus M&A, would M&A be incremental to that target or is that embedded within that 20 to 30 store target?

Andrew, thank you so much for your question. So yes, the target is exactly the same. It took us every day of the year to get to those 29 locations that we built organically. Organic store build-outs are not easy, Andrew, from procuring the perfect location to getting building permits and development permits and contracting these stores out and getting them up and running in time and then ramping them up to maturity. All of this takes a long time but organic growth is the best type of growth we can provide to our shareholders. Typically, a store cost us $260,000 to build plus about $100,000 and $150,000 of working capital requirements per store versus even when we're acquiring stores at extremely attractive multiples, first of all, there's just not too many good ones out there. Our average store is doing $2.6 million versus our competitor average is only $1.1 million or $1.2 million. We're more than double that average. So when we go look at these stores, you look at a block of stores, three of them are redundant to where our stores are or like they're 500 meters away, you can act on those portfolios. And then you look at the one-offs and it's a reasonable store, maybe doing $1.5 million, $2 million, which is not the best opportunity for us. And sometimes those sellers are looking for 5, 6 times EBITDA, which makes absolutely no sense this market. So we're disciplined. We've proven this model work with some M&A and a lot of organic growth. M&A is always -- we are always looking for deals, Andrew, but they're not easy to come by at the moment, especially with the mature levels, we're hitting at 191 stores currently across the country. So we will build 20 to 30 stores organically that's our organic target. Anything we do with M&A is going to be on top of it.

And then maybe just switching gears to the shape of the Canadian market and what we've been seeing this year. 2024 was clearly a year of slower growth nationwide, pricing pressures, competitive pressures, illicit market pressures as you've all highlighted, Raj. Though in recent months, we're starting to see growth pick up. The statistics Canada data for November was quite strong. So just maybe want to check and see if you've seen any recovery in cannabis demand towards the end of the year subsequent to quarter end and what your thoughts are for 2025 in terms of overall market growth here in Canada?

So Andrew, we've definitely seen some growth. But when we were reporting Q3, I'm sure you remember year-over-year cannabis sales were down 8% or 10%, which was a massive drop and then it started recovering again and the numbers got revised. And I can tell you at the end of the year, we ended up with the bang. Brick-and-mortar revenue is up 12% and we ended the year with a bang, and that was all because the sales picked up. And our model is very, very strong, which again outperformed the market. Sequentially, our same store sales, Andrew, we were up 3% which is a number I'm very happy with when you know the overall sales were down 1% at that time or that Q4 period. So sales have picked up but at the same time we are definitely feeling the pressures from the illicit market. And I'm sure you heard recently that Toronto is not going to be sending their bylaw officers into cannabis stores but we are -- and this is going to again pose a major hurdle and encourage people to open illicit stores but we are encouraged with Toronto police reiterating their commitment to enforcement. As I mentioned this before that Ontario has recently announced funding of $31 million over the three years, which will begin soon. So some of these things balance and offset each other but I cannot tell you that it's an exciting growth trajectory and it's easy growth. It's not easy. There were just too many players that opened up shop one by one surely enough, they're leaving the race. As you know, True North just happened, 48 stores. I have now filed for creditor protection. A lot of independents, Andrew, meeting the same fate. So it's a tough battle. And just a few quarters ago we were talking about Fire & Flower gone and Kiaro gone and Trees, Tokyo Smoke, ShinyBud, like the list goes on. So it's not an easy market out there. But our Q4 was strong. Our brick-and-mortar business, which is our core business, thankfully, was very strong. We're not in a position to raise margins right now but we're positioning ourselves to continue to remain as a leader in the Canadian cannabis market.

Thank you. And at this time, sir, it appears we have no further questions. Please proceed.

Thank you, operator. And thank you to everyone for your interest and continued support for High Tide. We're very proud of what we've 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, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.