Good morning. My name is Angeline, and I will be your conference operator today. At this time, I would like to welcome everyone to the High Tide Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Thank you. Mr. Brownlee, you may begin your conference.

Thank you, Angeline. 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 June 16, 2025, the company released unaudited financial and operational results for the fiscal quarter that ended April 30, 2025. 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 June 16, 2025, our latest annual information form and our latest management discussion and analysis each filed with securities regulatory authorities at sedarplus.ca or an EDGAR at www.sec.gov/ edgar, or on the company's website at www.hightideinc.com and which are hereby incorporated by reference herein. [indiscernible] 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 to not 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 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 second fiscal quarter that ended April 30, 2025. I'll begin with some high-level comments about the quarter and our strategy before Mayank dives deeper into the numbers. Another quarterly conference call, and I'm pleased to report yet another set of impressive industry-leading milestones for High Tide. Since 2018, we've been growing Canna Cabana steadily month in, month out regardless of where we happen to be in the cannabis or capital market cycle. We kept our laser-like focus on expansion but doing so smartly and efficiently. While so many of our competitors fell by the wayside, last month, we announced the opening of our 200th Canna Cabana in Sherwood Park, Alberta, a tremendous milestone. Canna Cabana is clearly the leader in Canada, not only by the sheer number of stores operated under any one banner, but also by the top line and cash flows that our brand is able to generate. While having a much smaller war chest than some of our better capitalized peers, we've been disciplined and relentless in building not only the largest cannabis retail brand in Canada, but the second largest in the world, which is something I'm incredibly proud of. Indeed, our approach has been thriving while the rest of the industry has largely been struggling or slowing down. For example, with the opening of our Sherwood Park location, we now have 87 stores in our home province of Alberta. Our provincial store count is up 10% versus a year ago, while the rest of the industry combined has contracted 6% during this time. In Ontario, where we still see the most growth ahead, we have 82 stores today. Over the past 12 months, we have increased the…

Thank you, Raj, and hello, everyone. Q1 was another great quarter for High Tide, in meeting our objectives and executing on our future growth strategy. Let's take a deeper dive into the numbers. Revenue for Q2 was an all-time high of $137.8 million, up 11% year-over-year, while it was down 3% sequentially this was entirely due to there being 3% fewer days this quarter, as our average revenue per day was the same as Q1, which is usually seasonally stronger. Our bricks-and-mortar segment led the way, up 16% year-over-year, driven by our strong same-store sales and the addition of more stores. In addition to merchandise sales, our Cabanalytics platforms continue to set new highs. Cabanalytics Business Data and Insights platform, advertising revenue and other revenue, including management fees, interest income and rental income totaled $11.3 million in Q2, up 26% year-over-year and up marginally sequentially. Consolidated gross margins was 26% in Q2 versus 28% in Q2 last year, and 25% sequentially. We were able to post sequential gains in our core bricks-and-mortar segment for the second straight quarter. As Raj mentioned, we expect to be able to raise margins in this segment once more in Q3. Q2 was also the first full quarter since we launched the Cabana Club loyalty program across all our e-commerce businesses. Our primary feature of this initiative is unbeatable prices. Turning to expenses. Salaries and wages represented 12.7% of revenue in Q2 versus 12.4% a year ago, and 12.3% sequentially as our store count continues to grow. Recall that we have to hire teams 4 to 6 weeks before opening for training to ensure Cabana level service on day 1. General and administrative expenses represented 4.2% of revenue in Q2. This was an improvement versus 4.5% a year ago and 4.6% sequentially. Adjusted EBITDA was…

[Operator Instructions] Your first question comes from Bill Kirk with ROTH Capital Partners.

Raj, how has the success of your White Label SKUs, how has it impacted the dynamic with the third-party LPs in your stores? Does it give you more negotiating power when dealing with those suppliers? Or does it create any sort of maybe competitive stress in the relationships?

Bill, thank you for your question. That's a different type of question, but I see where you're coming from. Just to let you know, Bill, our total sales of Queen of Bud amounted to $1.355 million. Out of that, close to $0.5 million of sales were in accessories. And then if you look at Cabana Cannabis Co., all in all, in total, we have about $5.3 million. And if you look at that at an annual level, we're talking about just 1% of our total sales. And pretty much 30%, 40% of that is accessories. So this is -- it's practically peanuts at this point in terms of competing with the producers that we're also buying from. We're buying their unique brands and products, which makes up 99% of our portfolio. So we're not concerned at this point. We are friendly with the industry. We don't want to compete with our customers as well, and we don't plan to become licensed producers anytime soon. Or that is not on our horizon. And the producers that are backing us up for White Label, they are best-in-class in the country. They're very, very good at their craft, and that is why we are doing business with them. And we have a fantastic relationship with them. And it works for both sides. They can move their biomass, and we're able to do some White Label offerings. We were able to bring some White Label offerings to please our customers and get some enhanced margins. But like I said, the business is very, very small to worry about it right now. We can take it to 10% in our store network, and I think that would still be digested very well.

Okay. And then from a regulatory perspective, the new Prime Minister said there'd be a budget in the fall. What, if any, changes for the cannabis industry could be included? And what would you want included?

So look, we're staying very close with all levels of governments in Canada. So here in Canada, we continue to work closely with regulators and our provincial partners to advocate the changes and to support legal retailers that we very badly need. As you know, there's still an illicit market problem here in Canada. Some of the recent progress I can tell you about that we made is Manitoba's decision to limit cannabis licenses for gas station and convenience stores to smaller communities. We were very established in the province of Manitoba. We were there from day 1. So we thought it was very unfair for convenience stores and gas stations to be getting licenses, which is now stopped. It also does not protect youth that comes to these stores and shops around with their family. So that is now gone and out of the way. Ontario also removed the outdated restrictions on street visibility per stores recently following British Columbia, Manitoba and Alberta. And we are especially engaged, Bill, with Alberta and Ontario, our 2 largest markets, where both governments are exploring additional changes that could help license retailers compete more effectively with the illicit market.

The next question comes from Frederico Gomes with ATB Capital Markets.

Congrats on the great quarter. First question, Raj, on the sequential gross margin improvement that you saw in bricks-and-mortar. Could you talk about the drivers behind that? And what's going to be driving the improvement in the next quarter and maybe the following quarters as well?

Yes, absolutely. Fred, thank you so much for your question. So this is not only sequential gross margin improvement. It was 2 quarters in a row now. So we're up 150 basis points in total in the last 2 quarters. And we still think there's room. I think you'll see another uptick in Q3 when we report that in September, I believe. So things are going really well on that side. I was -- last quarter, you heard me complaining about the illicit market remaining strong in markets such as Ottawa and Toronto. And that has not changed, but it's also not got worse. But what we are seeing in other pockets of the country where we don't have this illicit market issue or at least illicit market storefronts and delivery issues, we're now seeing competitor store closures happen at a heightened pace. This is something that I talked to you about and other analysts as well. And we had actually talked about exactly this that second half of this year, fiscal 2025, we should be able to raise margins and that is clearly starting to happen. So we're right on target with our predictions. To be clear again, it's not happening in Toronto and Ottawa, but it's not getting worse either. So that's a good thing. But in other smaller markets where competitors are quickly closing shops, we're now able to raise our margins. And this is going to continue going forward, I think.

Perfect. And then a second question on your e-commerce platform. So a big drag on adjusted EBITDA from e-commerce. So I guess, you mentioned that you're looking at that segment and everything is on the table. So just is there -- what's the point where you think it just might not be worth it to pursue the strategy anymore, you don't start seeing results from that discount strategy, what could you shift to here in terms of making that segment profitable or even exiting CBD e-commerce and [indiscernible] entirely?

Yes. So Fred, let me start by saying that e-commerce is a negligible division at this point with only 3% of our consolidated revenue. But we continue to see strategic value in this segment as it helps us to get more customers in the U.S. and Europe for the inevitable legalization. We know eventually, federal legalization will take place, and we're able to onboard customers today with these platforms. So there's a lot of strategic value there. And we've also aligned it with our global Cabana Club programming. So we continue to push ahead on our unbeatable prices Cabana Club discount strategy, but it has been a challenge for sure. Fortunately, like I said, it's a very small part of our business. We're making sure that people -- right now we're in the process of still advertising heavily and making sure that people know that it's the best value on the Internet. Gross margins should remain around 30% or so as they have been in the past 2 quarters. But look, ultimately, we will be completely flexible to do whatever is required to maximize shareholder value, whether that means getting a more leaner structure in our e-commerce divisions, putting them on hold and raising back pricing to just hold them for federal legalization or selling them entirely. Everything is on the table. We're not married to the e-commerce segment, we know what is our core business. That has never changed. That plan has never changed. You can clearly see our core businesses on fire, bricks- and-mortar grew by 16% year-over-year, 6.2% was same-store sales growth, 9% was new store growth. So we've got our secret mantra. And as soon as we turn off e-commerce or if it recovers, which can very well happen as well, you can see a lot more EBITDA will flow back into the business, which will be a bonus from here.

The next question comes from Matt Bottomley with Canaccord Genuity.

Raj, I just wanted to touch briefly on Germany. So I guess, first, just some of your prepared remarks regarding some relationships already with the LPs. Was this an exclusive commentary with respect to them already being involved with this person you're negotiating with? Or whatever color you can provide there? And then secondly, just going back to some of the concerns around the potential changes in telemedicine subsequent to Germany's election, what's happened since the last time, you guys reported or the last time we chatted with respect to whether it's that issue or just the market dynamics overall relative to where they were when you first announced an intent to enter that market?

Matt, thank you so much for your question. So firstly, we had started doing license producer outreach when we had initially announced that we were potentially going to do the transaction with Purecan. We had reached out to multiple LPs. And the response that we had received was overwhelming, Matt. We have 40-plus licensed producers that have already confirmed that they would love to do business through us in Europe, so reroute their offerings through us. Many of them actually voluntarily said that they would love to give us exclusivity in Europe for their products because they already do so much business here with us in Canada. And this is not partner-dependent in Germany. I can literally pick any partner that I want to in Germany and nothing changes on the Canadian front. Our relationships in Canada are tied to High Tide's march ahead here in Canada and how much procurement we do in this country and the relationships we built in the long term, it's got nothing to do with a particular German partner that we pick. Although we are going to pick an exciting German partner, which we will disclose in due course, since that is not announced yet. On your other question about German political update, there's a lot to talk about there. So I can give you a little bit of color there. So Germany also recently swore in a new coalition government led by the Christian Democrats as you know, and supported by the Social Democrats. Now the two parties don't currently see eye-to-eye on cannabis. So the Christian Democrats campaigned on rolling back some of the previous government's reforms. While the Social Democrats have pushed back against those efforts. So I think as a compromise, what we are hearing is that they've agreed to a joint review of the adult use cannabis law in Germany with initial findings expected this fall and then a full report will come out next spring. At least that is what we are hearing. And the newly appointed Health Minister also from the Christian Democrats has signaled interest in tightening rules around e- prescribing, especially from doctors outside of Germany offering prescriptions via online questionnaire, which we think is very fair and should happen. So that is going to get tightened. But that said, the industry view is that it remains very unlikely that the government will reclassify cannabis as a narcotic.

Perfect. Appreciate that. And then just one more for me. Just going back to one of the first questions on the Q&A here with respect to your own in-house brands. So I think you had mentioned at the end of your remarks that a 10% allocation ultimately probably wouldn't ruffle any feathers. So I'm just curious, is that something we should anticipate a decent ramp over the near-ish to medium term, just because I would assume that would be margin accretive. So if 10% might be the number. Just wondering what would be the roadblocks to getting there, whether they're your own decisions or just market dynamics?

Look, Matt, I was asked the question a lot. So I put 10% out there, but I can tell you that if I was 20% of our total offerings with the volumes that we have and the plans that we have to go to 300 stores, and beyond, I don't think any one of our partners or licensed producers are sweating on what we are talking about. I think they're totally cool with that. Like I said, I don't compete with my customers. I'm not a grower myself. We don't intend to be that. And we intend to give that business back to the growers here in Canada. So there's absolutely no issue on that end, and we might actually go to 20%, 25% in the long term. But I was just saying, even if we quickly got to 10%, you're not going to hear any volumes from any other LPs saying that you're now stepping on our toes. I think that absolutely not the case. We've also been very crafty and very careful in terms of what we bring to the market, Matt. So if you carefully look at or you carefully examine the Queen of Bud SKUs, we've got some very creative SKUs like rose petal blunts and chamomile blunts and things that are not existing in the Canadian market today. Queen of Bud is an extremely unique brand, and we're able to get upwards of 6% additional margin up to 8% additional margin. on some of the Queen of Bud SKUs. So we're very, very excited to launch more. In fact, more is already in the works. By the end of this summer, we're going to have a lot more SKUs in the market, and it's going to continue rolling out from that point.

The next question comes from Andrew Semple with Ventum Financial.

Congrats on the solid Q2 results and also on reaching the 200 store milestone. I'm just going to pick up with something you just mentioned, Raj, potentially exceeding 300 retail stores in Canada. I saw that the company tweaked its outlook in the press release previously. High Tide was aiming to reach 300 stores. I guess that seems to show that you're increasingly confident in getting to the 300 store mark. What are you seeing, I guess, more recently that's supporting that increased confidence? And I also want to check whether there's been any change in expectation whether the majority of stores would be organically developed versus acquired as you're looking to potentially exceed the 300-store milestone.

Perfect. Andrew, and thank you so much. As you know, we've disclosed the 300-store goal quite a long time ago to the market. As I get closer and closer to that goal, I mean, we're still at 200, but we have big dreams. We put the 300 number out there. I think we will breach the 300 number. But I'd like to get to goals before we raise those targets, but that's how much opportunity I'm seeing in Canada right now. As I've been talking to you and Fred and Matt and everybody else that we're going to see heightened competitor store closures. That is starting to happen, Andrew. Very suddenly, we see our store sales are picking up very rapidly. That has not happened in the last few years, and that's also giving us a tremendous opportunity to raise gross margins in many pockets of the country now. So we think this will continue. I've always the maintained 5 years leasing point is a major point for the industry where operators have to decide that do they want to continue bearing the pain or they want to hang up the boots and move on to something else. And that is starting to happen now. On top of that, we've established ourselves as the premier, the largest cannabis retail brand in the country, and we are getting red carpet treatment from some of the largest landlords in the country where we get locations ahead of anybody else. And we don't even see anyone competing with us on the table some time because those locations come to us first. So because we're able to get such high-quality Tier 1 locations all the time, I already have another dozen or so under construction. The 9 that we built this year, YTD, year-to-date…

Great. I appreciate that additional color, that was very helpful. And then just my follow-up here would be on maybe some of the market dynamics. We've been hearing from a number of the Canadian LPs that domestic cannabis prices have begun to stabilize or even increase for the first time in years at the wholesale level. Are you seeing any higher prices for branded cannabis SKUs at retail yet? Or is that not materialized on store shelves quite yet? And then what would the impact be to your business if we were to see a substantial increase in cannabis prices across the country, not that we're -- not that I'm necessarily expecting that, but just want to hear your thoughts on whether that's positive, negative or agnostic for your business.

Yes, absolutely, Andrew. So look, the situation has improved considerably from a year ago. It took us 6 years to get to this point, and I've been talking about White Label to you and others that it's been so difficult. By the time we order, by the time the product lands, we're already on the back foot because the original SKU has declined in pricing. But it's definitely been improving considerably at least from 1 year or 2 ago. It's a lot more balanced and export has helped. A lot of Canadian LPs are exporting to Europe and elsewhere around the world, Canada remains the largest exporter of cannabis to the world. This is why we are so excited to get into Germany. We have purchasing power here. We have procurement expertise here and prices are now stable, which is very, very good for our licensed producer friends as well. And then we are likely to see a slightly higher move going forward because Canada is now starting to run out of inventory and very balanced inventories currently, which wasn't the case for the last 6 years. So this is a great setup for ramping up our White Label offerings as well. It was a huge pain point for me, Andrew, where we would order under Cabana Cannabis Co. We knew we were ordering the best products only because we have all the data in the world. But guess what, by the time the product lands, there's a lot that goes into a product calls that you've got to register with the provinces, the packaging that goes into it. The time line for raw materials that need to be secured, all of that stuff and minimum case quantities that need to be ordered. And then by the time the product lands, the original SKU declines in prices. That is not happening. Queen of Bud is exploding. So is Cabana Cannabis Co., and we are going to introduce a lot more White Label products because we are confident that going forward, Canada is going to have a lot more balanced equation on the supply-demand dynamics, which should really help with price increases going forward and which should really help extracting some margins from our White Label product portfolio.

There are no further questions at this time. Let me turn the call over to Mr. Raj Gruber, Founder and Chief Executive Officer, for closing remarks. Please go ahead, sir.

Thank you, Angeline, 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'll ask the operator to close the line. Have a great day, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.