High Tide Inc. Stock

Thank you. Welcome to your conference call. Please continue to stand by. Your conference will begin in approximately five minutes. Good morning, my name is Ina and I will be your conference operator today. At this time, I would like to welcome everyone to High Tide Inc.'s 3rd Fiscal Quarter 2026 Unaudited Financial and Operational Results Conference Call. [Operator Instructions] I now turn the call over to your host. Please proceed.

Thank you, Operator. Good morning, everyone, and welcome to High Tide's Quarterly Earnings Call. Joining me on the call today are Mr. Raj Grover, President and Chief Executive Officer, and Mr. Mayank Mahajan, Chief Financial Officer. On September 14, 2026, the company released financial and operational results for the fiscal quarter that ended July 31, 2026. 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 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 September 14, 2026, our latest annual information form, and our latest management discussions and analysis each filed with securities regulatory authorities at www.sedarplus.ca or on EDGAR at www.sec.gov/edgar or on the company's website at www.hightideinc.com and which are hereby incorporated by reference herein. Although these forward-looking statements reflect management's current beliefs and reasonable 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-IFRS 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 begin.

Thank you, Carter, and good morning, everyone. Welcome to High Tide Inc. Financial Results Conference Call for the third fiscal quarter that ended July 31, 2026, which I'm extremely proud to say was the best quarter in our company's history. In fact, our financial performance was so strong, we felt it necessary to release guidance one business day after the quarter ended, with even the low end of our initial forecast exceeding even the most aggressive analyst estimates. Yesterday we released our full results, which were closer to the high end of the guidance ranges we provided and included many other new positive highlights. Investors can see from these results that not only are we growing our top line, but this growth is now clearly showing up in our bottom line. Specifically, compared to Q2, our gross profit grew 2.5 times faster than our operating expenses. As a result, 60% of the increase in gross margin flowed down to operating income, which was up 43% sequentially and 133% year-over-year. The operating income we generated in Q3 of $8.7 million was more than we generated during the first two quarters of the fiscal year combined. Talk about positive momentum. This growth continued all the way to the bottom of the income statement. We generated record net income of $12.7 million this quarter. Even excluding the fair value change in derivative liability, which helped us this quarter, adjusted net income was $2.2 million, up 186% sequentially and 157% year-over-year. More and more is showing up in the bottom line, which is what we want to see and what we have been promising our investors. This progress didn't just happen because we pulled the switch in Q3. It is the result of what we've been doing for years. It is the result of the hard work we have been putting in quarter after quarter and year after year. I'll point to three things specifically. First, owning the customer. With 2.73 million loyal members of Canna Cabana Club across the country, we are up over 11 times from when we launched the Discount Club model in October 2021. Second, growing revenue from $8 million of sales per our first annual report in 2018 to an annual run rate of approximately $800 million today. And third, finding ways to increase the profitability of our sales and having very tight cost controls as evidenced by us setting an all-time low this quarter in both trailing GNA as a percentage of revenue and trailing salaries and wages as a percentage of revenue. We are a product of our environment regarding the competitive dynamics within the Canadian cannabis market. All we can do is try to be proactive and make bold yet calculated moves to try to stay ahead of the curve. Others can struggle to play copycat and try to catch up from behind, but our amazing team is always plotting our next big move and exploiting our competitive advantages in new ways.

Particularly after our Q3 results, I believe that investors can see where the ship is heading. Similarly, we can't always control what the capital markets are doing. All we can do is run our operations tightly and make sure we are disciplined in terms of capital deployment to maximize value for our shareholders. And again, I think the data shows that we are succeeding. Even adjusting for the portion of Remexian that we don't currently own, our revenue grew 2.5 times faster than our share count over the past year, and adjusted EBITDA grew 3.9 times faster. While I don't think we are getting much credit for the improvement in per share metrics in the marketplace, I believe it's just a matter of time, especially if our net income continues to ramp as I expect it will. Trading at an EV to EBITDA multiple of 5.4 times the EBITDA we just reported annualized, we see the current setup as more of an opportunity than a risk. We've always been prudent in managing our affairs and operations to insulate us from being reliant on our share price for survival. That is why we are still here while so many of our peers have disappeared over the years. We have demonstrated for a few years now that we can increase our store count and grow our business organically, including investing in working capital, all from our internally generated free cash flow and not rely on external equity injections. This was apparent again this quarter. Driven by $7 million of free cash flow in Q3, which was our second highest level in nine quarters, our cash balance increased by $10.6 million during the quarter. Similarly, we have managed our balance sheet extremely carefully. We have no meaningful debt maturities for three years, and we still have $25 million available to be drawn on our revolver with Bank of Montreal.

So the way we see it, we have no issues regarding fueling our operations or addressing debt that would have to require raising equity near these levels. We have built something truly special and totally unique at High Tide, a global leader in cannabis. In Canada, we have the preeminent model and brand with 232 stores and revenue on an annual run rate of approximately $650 million. In Germany, our volumes are still ramping and we continue to set new records, a year into our transaction. Two engines of growth, both running with power, making High Tide the undisputed leader in the two largest federally regulated cannabis markets on earth. While we are continuing to eye other markets and evaluate partners, we are prioritizing discipline in our approach. We won't feel compelled to make a deal just to say we did or to meet a date on a calendar. There are multiple conversations currently ongoing with players of different sizes, but we won't pull the trigger until we are sure that it's the right opportunity at the right time and right price for our shareholders. Having already demonstrated how our procurement prowess can directly drive market leadership in a short amount of time in Germany, we are seeing prudent operators recognize the value and wisdom in wanting to partner with High Tide rather than compete with us. With 118 stores we are still planning to add in Canada and Germany scaling so impressively, we have a lot of future growth lined up based on what we already have in hand, so we don't feel the itch to rush into the next transaction too quickly. While we are evaluating opportunities and are engaged in negotiations and market due diligence every day, the strength of our current business positions us well. We aren't desperate to make a risky move and just hope it works. As highlighted in our press release, Q3 was a milestone quarter with almost every key consolidated metric hitting a new all-time high. Specifically, revenue of $199 million was an all-time high and up 33% year-over-year, representing the fastest growth rate in 13 quarters. Each of our bricks and mortar and medical cannabis distribution segments posted new records. Gross profit was a record $52.7 million, up 32% year-over-year. Each of our bricks and mortar and medical cannabis distribution segments posted new records. Adjusted EBITDA of $16.2 million was an all-time high and up 52% year-over-year. Each of our bricks and mortar and medical cannabis distribution segments posted new records, while our consolidated adjusted EBITDA margin of 8.2% marked the highest level in 12 quarters. Income from operations was a record $8.7 million and up 133% year-over-year. Each of our bricks and mortar and medical cannabis distribution segments posted new records. Cash flow from operations before changes in non-cash working capital was a record $11.9 million and up 44% year-over-year. I'll now give an overview of our two segments, following which Mayank Mahajan will dive deeper into the financials. In Canada, Canna Cabana continues to lead the way, fueled by the continued expansion of our loyalty program, the Canna Cabana Club. We are now at 2.73 million Canna Cabana Club members across Canada, up 27% year-over-year. We continue to move forward towards our long-term goal of 3 million members in Canada. Elite also continued to post gains up 62% over the past year and now exceeding 186,000 members that pay us $35 a year to shop in our stores. They say imitation is the highest form of flattery, and we are definitely seeing that in the Canadian cannabis landscape. Competitors are seemingly panicking and increasingly starting to copy pieces of our model, which has created tighter conditions in many areas. We are the originators of the discount club model that continues to take market share and we have scale. Accordingly, we believe we will come out of this period even stronger. But with the disruptions in the market, smaller operators are likely to suffer and possibly be wiped out. At the same time, even without illicit operators, the number of stores in key markets such as Ontario and Alberta have increased by 5% over the past 12 months, reversing the trends of flattening or retrenching that we were seeing a year or so ago. Meanwhile, consumers are being tighter with their wallets given macroeconomic uncertainty and creeping inflation. Putting all this together, it isn't easy times out there, which we have seen translate to negative same-store sales among our public and private peers. While we see a few more months of touch and go conditions ahead, we were pleased to see our same store sales be consistent with the prior year for the full quarter and that June and July each posted gains. The key is we are not losing any customers. On a same store basis, our transaction count was up 1.1%, which is being offset by slightly thinner baskets, as well as some price compression at the wholesale level. Customers are continuing to see us as their go-to destination for cannabis. Again, we are a product of our environment, and all we can do is aim to outperform the market, and our longer-term trend of outperformance is clear. Chaining our monthly same-store sales increases since October 2021, Canna Cabana was up 171% to June 2026. In contrast, as the increase in total sales in the five provinces where we operate has not kept pace with the increase in the number of stores, the average operator has experienced a 1% sales decline during this period. Excluding British Columbia, where we have been at the regulatory cap of 8 stores for years, our market share within the other 4 provinces where we operate was 14% during May and June, which was up versus 13% a year ago. Looking ahead, we see a 15% market share as a milestone, not a ceiling. Excluding stores open less than six months, which are still ramping up, our annualized revenue per square foot in Q3 was $1,721, once again above many leading blue chip retailers. In June, the average Canna Cabana store was on an annual revenue run rate of $2.6 million of product sales, which was 1.8 times our peer average at $1.4 million. In Ontario, the largest province, and our focus for future growth, our outperformance was even more pronounced. Excluding stores open less than six months, which are still ramping up, our average Ontario store was on a $2.8 million annual run rate, which was 2.4 times our peers at $1.2 million. For the 12 months ended June 2026, total industry sales in the five provinces where we operate were up 3% year over year. In contrast, total Canna Cabana sales were up 10% during this period. With 14 already completed, we believe we can achieve our goal of adding 20 Canna Cabanas during this calendar year and reiterate our long-term target to reach 350 locations across the country. This growth, combined with Remexian's current trajectory, makes us more confident than ever that we will breach the $1 billion revenue mark in the not-too-distant future. Speaking of Remexian, let's turn to Germany, where we demonstrated significant strength and growth in Q3. Remexian sold 10.2 tonnes of medical cannabis in this quarter, up 35% sequentially and 165% higher than the pace Remexian was on when the transaction closed a year ago. Remexian's financial metrics also posted impressive growth driven by the increased volumes. Revenue of $38.2 million was up 21% sequentially, but with cost controls and operating leverage, adjusted EBITDA grew almost twice as fast, up 38% sequentially to $4.4 million, representing a record 12% adjusted EBITDA margin. Looking at the broader German market, we see incredible appetite for medical cannabis and Canadian medical cannabis products in particular. According to data from Statistics Canada, the value of medical cannabis exported from Canada to Germany reached a record level of $49.4 million in July. Looking at the 3-month average, we are now at a $517 million annual run rate, up 62% versus a year ago. For us, this shows that we have even more room to continue ramping volumes up to a higher absolute tonnage level, given our superb team on the ground in Germany and unparalleled ability to procure cannabis at best-in-class terms, given our scale and free agent status. However, with the market growing so quickly, it may be challenging to ramp our market share as fast as we had previously thought. On that front, I note that BeeFarm significantly restated industry imports for the March quarter, which translated to Remexian having a market share of 10.5%. While Remexian has experienced impressive growth since March, it will be interesting to see where the industry was for the three months ended June and where our market share shakes out. In conclusion, Q3 was once again the best quarter in our company's history with new all-time records set across the board. With $25 million of dry powder available for growth from our revolver with Bank of Montreal, we had the resources to keep growing without relying on external equity. I am so grateful to each and every one of our team members globally. They are working hand-in-hand, hustling and executing every day, and I'm so proud of all the efforts, energy, and dedication that they bring to High Tide quarter after quarter. Without our superb team, we would have not come this far, and I'm confident that they will take us to even newer heights in the years ahead. With that, I will now turn the call over to the operator to open the line for the question and answer session. Thank you.

Thank you, Raj. And hello, everyone. In Q3, High Tide set multiple new financial records again, across, eventually, all key metrics. Let's take a deeper dive into the numbers. Revenue for Q3 was once again a new all-time high at $198.8 million, up 33% year over year, the fastest pace of growth in 13 quarters, up 11% sequentially. This was the fifth consecutive quarter marking a new all-time high in revenue. While our medical cannabis distribution segment posted a 21% sequential increase, our brick and mortar segment also grew a very impressive 9% sequentially. Consolidated gross margins were 27% in Q3, which was consistent with the prior year and sequentially. Our two gross margins which were fairly similar. Our bricks and mortar segment held steady at 27% while our medical cannabis distribution segment generated 26%. Once again, we had the line on expenses in Q3, showing the power of operating leverage by allowing the extra revenue to flow down to the bottom line. Salaries and wages represented 11.4% of revenue in Q3, marking meaningful improvements versus 12.2% a year ago, and 11.9% sequential. In fact, this was the lowest level in 12 quarters. It was the exact same thing regarding GNA expenses this quarter. GNA represented just 3.9% of revenue, marking the lowest level in eight quarters. This metric was 4.4% a year ago and 4% sequentially. Adjusted EBITDA was $16.2 million for the quarter. This was up a very impressive 52% year over year and 17% sequentially. While the addition of Remexian obviously helped, I note that our core brokerage segment also grew adjusted EBITDA 11% year over year. At 8.2%, our consolidated adjusted EBITDA margin was at a 12-quarter high. We are demonstrating a rare ability to increase profitability while growing the company at such speed. High Tide generated $7 million of free cash flow in Q3. While this was the highest level in four quarters, I believe it is even more impressive when you look at the components. Specifically, our cash flow from operations before changes in non-cash working capital. I believe that is the best single indicator of the ability of our operations to regularly generate cash. And at $11.9 million in Q3, it has never been higher. We invested $1.8 million in working capital in the quarter, which represented only 9% of the sequential increase in revenue. So again, while we may have to continue investing in working capital going forward, we see it as a small price to pay for the growth we are experiencing. And we are well positioned to be able to finance it ourselves. Over the past 12 months, we generated $12.8 million of free cash flow. Net income was a record, $12.7 million in Q3. Even excluding the benefit of non-cash derivative changes, we generated adjusted net income of $2.2 million, up 186% sequentially and 157% year-over-year. We believe this will continue to be positive going forward. We continue to have a strong balance sheet. As of today, at the High Tide level, total debt stands at $60 million and have not yet drawn on our $25 million Bank of Montreal debt facility, which provides a great resource to fuel more growth ahead. In closing, Q3 was a breakout quarter for High Tide. With records across the board, every month that goes by, we continue to cement our leadership in the two largest federally regulated cannabis markets on earth and increasingly translate that into profits for our shareholders. Thanks to our amazing team, without whom none of this would be possible. With that, I will now turn the call over to the operator to open the line for the question and answer session. Thank you.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] One moment please for your first question. Thank you. And your first question comes from the line of Neal Gilmer from Haywood Securities. Please go ahead.

Yes, thanks very much. Congrats on a good quarter here. Raj, I wonder if we can start and chat on Germany a little bit. Obviously, it was a great quarter for the Q3 numbers. If we go back to last year, Q4 was when you closed the transaction, but it was also impacted by the import quota in Germany. I'm wondering what your thoughts are as far as potential impacts that we may have going forward last year that it sort of carried forward once they increased the quota then it had to clear through some inventory at some lower margin rates so just wondering what you're sort of seeing as we get into sort of a similar time frame where we had those impacts last year.

Good morning, Neil. Thank you so much for your question. So yes, look, the German market is absolutely on fire, and the demand for Canadian cannabis is tremendous there. So Canadian medical cannabis exports to Germany, Neil, are now approaching almost a $600 million run rate, and July was up 100% year over year. So, you know, our results are obviously clearly showing that Remexian is participating in that growth. And I'm really looking forward to seeing what our June quarter market share looks like when that industry data comes out. So, again, very, very bullish on Germany. We actually believe that Remexian will now reach a higher steady state volume level than we were originally expecting on tonnage. And that is what the financial opportunity for us is, right? With the overall market expanding so quickly, I think we can gain share. It may take a little bit longer given how much the market has grown, but I think we can gain further share in the German market. On your question, on the import quotas, that happens practically every single year. It happened last year as well. Everyone faced the music for about 4 to 6 weeks, and then we got the approvals for additional quota. It's expected, it's actually anticipated to go down the same way this year, but we're not concerned. Things are looking really strong. We're very much in line with what we did in Q2, Q3. And I wasn't quite honestly expecting that we'll be here so quickly, 11 months or 12 months after the transaction closes. So no, things are looking great. Import quota can become a short-term issue, but it's definitely not a long-term issue.

Yes, no, no, the market looks like it's doing quite well over there. On the gross margin over on the medical cannabis distribution, sort of consistent between Q2 and Q3, is this sort of like the normalized level that you sort of expected aside from any disruptions going forward? Yes.

Yes, look, the gross margins has also surprised me on how quickly we've been able to ramp up. Like I've been saying it from the very beginning, Neil, that we have something very special in our hand here in Canada, right? Being the largest of the governments being the largest federally legal buyer here in Canada. You know, we're procuring biomass at unbelievably attractive price points and despite the price compression that's taking on in Germany and has been happening for quite some time, it's not touching us. We're actually raising our gross margin profiles. So Q2, as you know, was 27%, which jumped from 12% to 13% the quarter before in Q1. Now we're at 20%. I think we can maintain this margin trajectory or be very much in the high or mid-20s going forward. So I am not concerned about where gross margin will land in the future. I'm actually very, very happy where it's sitting right now.

Yep, great. Last one for me. In your prepared remarks, I sort of took away the impression that expanding into the UK or other international markets maybe pricing is becoming a bit of an issue. You talked about making sure you're doing the right thing for shareholders, which obviously is the best thing. But what are you sort of seeing there in that landscape as far as potential, you know, acquisitions or entry into some of the other international markets?

Yes, absolutely. Look, UK is a very exciting one. So UK is a smaller market than Germany, but it's growing significantly faster. And I've been meeting operators of absolutely all sizes across the supply chain to build a thorough understanding of the market. We've been doing it for almost six months now. And we're evaluating different ways in, in, in, you know, what gives us confidence that we'll be able to identify the best opportunity for our shareholders. But you know, Neil, you can clearly see how much growth we have ahead in Canada. We can still build about 118 stores in Canada alone. That gets us to our 350 store mark. So we have absolutely no pressure to do a deal. With so much runway in Canada and Germany, we don't want to rush into the UK or any other market at any cost. We'll take our time, but I can tell you can also happen at any time. So stay tuned. But we're being patient because we're busy. We've got a ton of growth ahead of us.

That's great. Appreciate your color there, Raj. I'll pass the line.

Thank you. And your next question comes from the line of Bill Kirk from Roth Capital Partners. Please go ahead.

Good afternoon, everybody. My first question is a little bit more hypothetical. I guess with Curaleaf looking to buy Aurora with a goal to maybe use Aurora's supply to help meet their international demand, how do you think a potential tie-up between those two would impact the German marketplace and or impact your vision of using Canadian supply?

Good morning, Bill. Thank you so much for your question. So look, it's a little sensitive. And for that reason, I don't want to take any sides at all, given the obvious sensitivities here, right? But that said, should that transaction proceed, I would view it as effectively one competitor leaving the marketplace, right? Aurora is no joke, they're a serious competitor in the medical field. And I think if they leave, it'd be very good for Remexian. Again, as we don't have any grow facilities, we are much better positioned, I believe, than anybody else as free agents to work with all LPs regarding exporting as we don't compete with them at all. So, you know, things are looking pretty good from that element. And if Aurora gets out of the race, I am not the one complaining.

Got it. And then if I can switch to Canada. June and July were a return to positive same-store sales. And it seems like there is a little bit more stress or at least potential stress on consumers right now. So, maybe what are you seeing in terms of consumer habits recently? And how does August look for same-store sales in Canada?

Yes, absolutely. Look, the Canadian market is definitely going through some ups and downs right now. You can see the news every single day just like I can. What's happening with the trade war, it's not getting easier, it's getting tougher. We've got absolute data to examine that none of our customers are leaving us. This is why we put the transaction numbers along with the same store sales numbers. We were actually up 1.1% on the transactions build. And that is continued in August, and that is actually continued quarter to date. But the landscape is very much where it was in Q2, Q3, right? It's not changed much. What we're seeing is we're getting more and more transactions coming in, which means our customers not leaving us, which is the best news. If we can keep our customers, as soon as they have more money in their pockets, I know they're going to spend more, but they're definitely building thinner baskets, Bill. Right? So they are going for ounce bags instead of going for three and a half grams. They're buying slightly less per visit, but this is purely resembling the inflationary pressures we're feeling and the job stress that's very real in the Canadian market. Once again, I'd like to emphasize, Bill, that our transactions are actually up in August and our transactions are actually up quarter to date, which means we're taking more and more share of this legal cannabis market in Canada.

Thank you, Raj. That's perfect. I'll pass it along.

Thank you. And your next question comes from the line of Frederico Gomes from ATB Capital Markets. Please go ahead.

Yes, thanks. Good morning. Congrats on the great quarter here. Going back to Germany, I think Raj, very strong growth there in terms of volumes. Are there any capacity constraints in terms of your ability to to keep growing at that same pace and distribute product in Germany?

Good morning, Fred. Thank you so much for your question. Look, I think we have lots and lots of room. We're not exhausted yet. You know, Remexian is absolutely firing on all cylinders. As you can see, every single quarter since the acquisition, the tonnage has moved up exponentially. We've gone up from even, you know, 7.6 tonnes in Q2 to 10.2 tonnes in Q3. Again, far exceeding our expectations, but it's not stopping. We're in a really good place right now, middle of Q4, and nothing has changed in that regard. In terms of the healthy profile that we're seeing there. I can tell you that I'm waiting very excitedly for the numbers to come out in June, for the June quarter, to see where our market share stands, because we believe we're taking so much market share in Germany and we're doing some great business there. It's absolutely continuing. I think we continue our march towards that 15% to 20% market share in the long term in Germany, which is exponential for any operator.

Thank you. And then second question, just going back to Canada, you mentioned some of the, I guess, some of the headwinds impacting the market and same-store sales growth was flat this quarter. You mentioned that you saw an increase in the number of stores in Alberta and Ontario year over year. Do you think that that's going to continue? We're going to keep seeing a number of stores growing in those two markets? Or do you think that the market could go back to, I guess, a conventional market traction in terms of number of stores given the current headlines.

Yes, I think the latter. I think the market could go back to contraction again. Like again, you can't control the new participants that are going to come into the race that are probably not so attuned to the public markets and cannabis and everything else that's going on. So that happens from time to time. We continue to grow. Some other chains are also growing. So that continues to increase store count. But I think, you know, even the way I'm looking at the market, if this trend continues, I'm more in the market for acquisitions than organic growth, although organic growth has been the beacon at High Tide. That's how we're leading the country. That's the best type of growth we can provide to our shareholders, you know, returning the best type of value. But I think in the quarters ahead, you could start seeing some declines again. I was a little bit surprised, actually, to see that the overall store count has gone up 5% in the last 12 months.

Thank you very much.

Thank you. And your next question comes from the line of Luke Hannan from Canaccord Genuity. Please go ahead.

Thanks, good afternoon everyone. I wanted to start with Remexian and specifically since you guys have acquired it, that you can be pretty active in factoring the receivables that look like it's, it's attributable to Remexian. So I just wanted to check and see, I guess, first of all, what's the rationale for this. And then secondly, this is something that previous owners did and, do you expect to continue at the same pace going forward? Thanks.

Hi, Luke. Thanks for your question. So, yes, I absolutely see our factoring relationships continue in Germany. First of all, you know, we're getting a bit of this special treatment factoring. When we hear the word factoring in North America, you know, we start thinking 17% to 20% interest rates. That's absolutely not the case in Germany. We're getting factoring done for sub-9%, and it's working out really, really well. The receiving parties, which are the pharmacies in Germany, are really credit worthy and there's absolutely no issue at all. So we believe that we can actually continue to increase that factoring span or continuing to to dabble into it because we're actually very uniquely positioned in that regard and that's because of the former relationships of Remexian and its sister company prior to us getting this transaction done. And we are absolutely taking advantage of it. And we are not seeing it slow down. And we're not having any issues at all regarding creditworthiness of the operators that are buying cannabis from us.

Got it, thanks. And then for my follow-up here if we switch over to the Canadian business, it's pretty impressive that despite everything that's going on in the Canadian market, you guys still are able to deliver operating leverage. If we look at the individual line items, obviously this quarter, salaries, wages and benefits was where you found the most leverage. I'm curious to know, I guess this is a two-part question. First is, do we expect that to continue going forward where most of the operating leverage that you're going to be generating is on salaries, wages and benefits? And then secondly, what exactly is it that's driving that? I'm trying to think of each incremental store that you add it's mostly just going to be the in-store labor component of that and then it's that's going to be supported by we'll say the other sports staff for district managers that sort of thing is that the reason why you're able to get leverages or something else that you guys are doing there thanks.

There's a lot there, Luke. And I won't share all of my secret sauce, but I will tell you this, that this was the lowest trailing GNA and lowest trailing salaries and wages line we've reported, ever reported. So this is music to my ears, and this is not the work that we've just done in Q3 or Q2. This is an accumulation of our strategy right since the beginning. We run a very tight show at High Tide. We count every dollar at High Tide, whether that's, you know, GNA spend or salaries and wages line. But, again, you know, we built a massive scale here in Canada. We have 232 stores now. And you're absolutely right, we don't need that many more district managers and we don't that many more regional managers. And it's mainly the labor that's running the stores. But, you know, we're also finding a lot more other efficiencies, which we've always been on top of. And when you combine all of these initiatives, you know, you could see, again, you know, trailing GNA, lowest ever, trailing salaries and wages, lowest ever. And I won't say, that it continues to eternity, but I think we'll keep our show pretty tight as we've always done.

Lou. Got it. Thanks so much.

Thank you. And your next question comes from the line of Derek Lessard from TD Cowen. Please go ahead.

Yes, good afternoon, Raj, and again, echo the congrats on the quarter. I just wanted to hit on your free cash flow. Obviously very strong, despite the working capital usage for Remexian. So, I guess I just wanted to get a sense of how should we be thinking about, your normalized consolidated cash conversion and then with given your your new, credit capacity, and your stronger earnings space, how are you ranking the use of that incremental cash amongst your various initiatives, whether it be organic store openings or acquisitions, debt reduction, et cetera? Thank you.

Yes, so I'll take the second part of the question first, and then I'll pass it over to Mayank Mahajan on the first part. Look, we've got a lot of uses for cash. Mainly, Derek, you know that we build all of our stores organically with our own internally generated cash flows, trailing cash flows over $12 million. This quarter alone, we reported $7 million. Even if we build 30 stores a year, that's eating up around, if we build 30 stores a year, that's eating up around $9 million to $10 million in cash flow. Remexian is absolutely exploding, so we also need to fund that growth. So that is where mainly our cash components are going right now, and I'm very happy with that allocation. Regarding the first part of your question,

I'll pass it over to Mayank. Thanks, Raj. And Derek, on your first question, how we are seeing the outlook of the cash flow, free cash flow, as Raj mentioned before, cash flow can change significantly up and down, considering the business we are in. And we are very opportunistic, as you know, and we are very disciplined at the same time, too. So we will keep running our business our show tight, we will keep delivering the great numbers. And as the opportunity grow, we will capture that opportunity.

Okay, that's that's helpful. And just maybe one last one on Remexian. Obviously still expecting or you still see a path of margin expansion, just maybe remind us and particularly, I guess, as the Canadian sourcing increases and the platform scales, can you just maybe remind us about what you're thinking about in terms of the longer-term margin opportunity, and what proportion of the volume is now sourced from Canada?

Yes, absolutely, Derek. So there's still plenty of room there. We are nowhere near finished leveraging our Canadian LP relationships to bring high quality cannabis to Germany on best in class terms. I've been saying this since we purchased Remexian and even before that. With medical volumes rising rapidly in Germany, we're consistently onboarding new producers to meet that demand. And gross margins were 27% in Q2, 26% this quarter, so fairly consistent. And even though price compression is inevitable, our unique procurement capabilities that we have here in Canada, you know, are going to provide and partially offset that. So I think we'll settle in the mid to high 20s over the long term, Derek, and I couldn't be more happier with that because for a distribution business if we are talking about mid to high 20s, we're looking pretty good with the way our tonnage continues to go up.

Absolutely. Thanks, guys.

Thank you. And your next question comes from the line of Patrick McCann from The Borough Capital. Please go ahead.

Hey, thanks for taking my questions, gentlemen, and congrats on the quarter. I was wondering about things. Store sales and the positive growth there, June and July, if you could talk about what was driving the inflection. Could you talk about what's kind of behind those numbers in terms of, you know, traffic, customer traffic, basket, assortment, elite penetration, what's behind that positive uptick?

Good morning and thanks for your question, Matt. It's all of the above. It's absolutely all of the above, but most importantly, it's our dominant discount club model that we launched in October of 2021. Today, our brand is the talk of the town. Our brand numbers are so strong, they're twice as much stronger than our next competitor. One of the competitors in public markets, our main competitor, reported a very large negative same store sales number. That is absolutely not the case with us. Again, we're not just fighting the battle on price. We are fighting, we have a loyalty moat. We have multiple moats that are part of our business now. We have 2.7 million members of the Canna Cabana Club. We have 186,000 Elite members that pay us $35 a year to shop in our stores. So, you know, once they become paid members, they become even more loyal. So our loyalty loop is extremely strong. That's what I put first. We don't sacrifice on location quality, Matt. Always ahead on locations. We talk about location, location, location all the time. I keep saying whether it's food or clothing or cannabis, that equation does not change, so let's not get it wrong. I think when you put all of this together with increasing amount of other elements like white label initiatives that we're bringing in, we're able to maintain a much decent same store sales trajectory than anybody else in the country.

Excellent. And then just as a follow-up to that, did you talk about when customers convert to Elite customers? You know, what data you're seeing in terms of, you know, measurable differences in their behavior, in their shopping behavior, in terms of, you know, increasing their spend, the frequency, you know, anything that you can share in terms of how the customer dynamics change when someone goes from the free to the paid Elite status on your membership.

Well, yes, absolutely. So look, because they're more loyal, they made a commitment to the program and they're part of our ecosystem. They definitely we see them definitely building higher baskets and they also shop more often with us. So if you combine those two elements, you've got more sales and more juice coming out of them.

Excellent. That's all I had. Thanks so much.

Thank you. That ends our question and answer session. I will now turn the call back to the management for any closing remarks.

Thank you, Operator, and thank you to everyone for your interest and continued support for High Tide. We are so proud of this record-breaking quarter, and we remain very excited for High Tide's global prospects ahead. With that, I will ask the Operator to close the line. Have a great day, everyone.

This concludes today's conference. Thank you for participating. You may all disconnect.

This live transcript is auto-generated without human intervention or review.

Thank you.

Ladies and gentlemen, please continue to stand by. Your conference will begin shortly. Once again, ladies and gentlemen, please continue to stand by. Your conference will begin shortly. Thank you very much. Good morning. My name is Jenny and I will be your conference operator today. This time I would like to welcome everyone to Hightight Inc's second fiscal quarter 2026 audited financial and operational results conference call. All lines have been placed on mute. 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 questions. I will now turn the call over to your host.

Thank you, Operator. Good morning, everyone, and welcome to Hightide Inc.'s quarterly earnings call. Joining me on the call today are Mr. Raj Grover, President and Chief Executive Officer, and Mr. Mike Mahajan, Chief Financial Officer. On June 15, 2026, the company released financial and operational results for the fiscal quarter that ended April 30, 2026. Before we begin, please let me remind you that during the course of this conference call, HITI'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 security 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 15, 2026, our latest annual information form, and our latest management discussion and analysis, each filed with the securities regulatory authorities at cdrplus.ca or on EDGAR at www.sac.gov forward slash EDGAR or on the company's website at www.hightiding.com and 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-IFRS measures measured and discussed, please consult our latest management discussion and analysis filed on CR Plus and EDGAR. It is now my pleasure to introduce Mr. Raj Grover, President and Chief Executive Officer of Hightide.

Thank you, Mr. Grover. You may begin.

Thank you, Carter, and good morning, everyone. Welcome to Hightide Inc's Financial Results Conference Call for the second fiscal quarter that ended April 30, 2026. I'll begin with some high-level comments about the quarter and our strategy before Mayank dives deeper into the financials. The Hightide team built on top of the strength we demonstrated in Q1, and took the company to new heights in Q2. As it is typically the slowest quarter from a seasonal perspective, and given three fewer days, Q2 is usually our weakest quarter. I'm extremely proud to report that not only was this our best Q2 ever, but looking at the financial highlights, it was the best overall quarter we have ever reported to our shareholders. There was strength across the board as we set new all-time records in revenue, gross profit, income from operations, and adjusted EBITDA.

These all-time highs were supported by both our core bricks and mortar Canadian cannabis business as well as Romexion, which generated record levels of tonnage, revenue, gross margin, and adjusted EBITDA in Q2. Let's drill into the highlights. Our consolidated revenue for the quarter was $179.3 million, putting us on an annualized pace well ahead of $700 million. Revenue was up 30% year over year, growing at its fastest pace in 11 quarters. Our bricks and mortar segments saw cannabis, hemp-derived products and other revenue posts an 8% gain year over year. At $48.4 million, our consolidated gross profits set an all-time record. This grew even faster than revenue, up 36% year-over-year, representing the fastest pace of growth in 12 quarters. Sequentially, gross profit was up 9% despite this quarter having three fewer days to make sales.

At 27%, our consolidated gross profit margin set an 8-quarter high and was up over 200 basis points sequentially. Our Bricks and Motors segment posted a sequential gain, but the real standout was our medical cannabis distribution segment, which generated a gross profit margin of 27%, which was more than double the 12% it generated in Q1. Since we first disclosed our plans to enter the German medical cannabis market, we had identified our unparalleled ability to be able to procure cannabis at best-in-class terms, and now I am thrilled to see this showing up in our financial results. Income from operations was a record $6.1 million in Q2, up a truly impressive 554% year-over-year and 157% sequentially, highlighting the degree of operating leverage in the business and the extent to which we run a tight ship. The EBITDA of $13.9 million was an all-time high. This was up 73% year-over-year, marking its fastest pace of growth in nine quarters and up 21% sequentially. Our adjusted EBITDA margin of 8% set an eight-quarter high.

Again, while Q2 is typically the seasonally slowest quarter of the year and with three fewer days, I am proud that we were still able to hit key milestones of positive net income and free cash flow this quarter. Adjusted for non-cash fair value charges of derivative liabilities and excluding non-controlling interest, we generated net income of $0.01 per fully diluted share, which was a huge reversal from a loss of $0.04 in the prior year and a loss of $0.02 sequentially. Excluding the non-cash impact from derivative liabilities, which largely arise from the outperformance of Remexian's results, we believe we are at the point where we can sustainably generate positive net income going forward. Free cash flow was $1.5 million in Q2. While this was lower than what we had generated in Q1 this year and Q2 last year, the devil is in the details. cash flow from operating activities prior to changes in non-cash working capital was $8.8 million, which was a seven-quarter high. However, setting the multiple all-time records, I just reviewed required investments and working capital to grow the business. Specifically, we invested $4.3 million in working capital, which was the largest quarterly investment we've made during the past six years.

As we always say, we believe it's most appropriate to look at a longer period of free cash flow to smooth out such variability from working capital changes. Over the past 12 months, we have now generated $13.4 million in free cash flow. All of this execution doesn't just happen by accident or because a rising tide is lifting all boats across the industry. That's clearly not the case when you compare our performance versus our peers. We work hard and exceed our own expectations ahead of our own internal timelines. Having been legally selling to cannabis consumers for approaching 20 years now, we understand all aspects of our ever-changing business very well. We don't follow the herd. We don't sit on our hands as markets evolve.

We've made bold moves, but thoughtful and calculated ones, not rash decisions. And these have been paying off. Whether it's our differentiated discount club model or our entry into the German medical cannabis market, our innovative moves have carved out a successful winning strategy, and others are struggling to play catch-up later. The Ramexian transaction closed on September 2, 2025, and we have used our unparalleled ability to procure cannabis from Canada to boost the company's results, just like we said we would. Revenue for the two months it contributed to Q4 results was just under $10 million, averaging $5 million a month. In Q1, Ramexian's revenue was $25 million, averaging over $8 million a month. This quarter, Remexian generated $31.6 million, averaging over $10.5 million a month.

In terms of volumes, Ramexian sold 7.6 tons of medical cannabis during the three months ended March 2026, which was up 85% from the three months ended September 2025, and we have more than doubled our market share in the two quarters since the transaction to 14.1% from 6.5%. believe we are heading towards 20% market share in Germany in the long term. Scaling the top line and boosting market share was an important element of our German strategy, and I'm thrilled with how well and how quickly it is playing out. The other key component of our strategy was how we could get better terms given our relationships with license producers, not just volume for volume's sake. Again, success here was already demonstrated this quarter. Gross margins at Rumexian were 27% in Q2, more than double the 12% generated in Q1. With strong cost controls and relatively fixed overhead, almost two-thirds of the sequential increase in gross margin dollars flowed down to adjusted EBITDA in this segment, which posted a significant reversal from negative $265,000 in Q1 to positive $3.2 million in Q2. Looking ahead, I'd like to point out that given its nature, specifically being somewhat reliant on the specific timing of when bulk shipments may arrive around quarter ends, the German medical cannabis business may see more volatility than our bricks and mortar business, which is supported by 228 stores open to customers every day.

Additionally, we are monitoring for any potential changes to the German medical cannabis framework. However, the macro backdrop keeps improving, with Canadian cannabis gaining share now at 53% of all imports into Germany, and the last three months, average of Canadian medical cannabis exports to Germany reaching over $400 million annually, a record level and up 85% year-over-year. Given these macro dynamics and our belief that we are still just getting going on leveraging our strong relationships, we feel that the Q2 results are much more representative regarding the go-forward picture for Ramexian than the Q1 results. So Germany has been a smashing success for us in just two quarters, and we are seeing other Canadian companies following our footsteps, making transactions in Germany, or coding industry players. While we think we are still ramping up in Germany, we are already plotting our next move in other jurisdictions. All I can say is that discussions are encouraging. We are already number one in Canada and Germany in terms of market share, and given the potential partners we are eyeing, we see a path to becoming number one in other jurisdictions as well.

We are at the point where industry participants are seeing what we've done in Germany in such a short timeframe and are reaching out to us as their potential partner of choice. Accordingly, we have had a lot of inbound interest from multiple partners in various jurisdictions, including the UK. The Cabana Club is the most differentiated concept globally. As other markets inevitably go adult use, we believe our model will be dominant in those markets as well. With that, let's discuss the results from our Bricks and Motors segment, which now also includes our e-commerce business. The segment posted a 7% increase in revenue year-over-year, and daily sales were consistent sequentially. Driven by higher margin initiatives such as elite memberships and white label sales, gross profit margin of 28% in this segment was the highest level in two years. adjusted EBITDA was up 33% year-over-year.

Our innovative discount club model, the Cabana Club, continues to expand. We are now at 2.65 million Cabana Club members across Canada, up 39% year-over-year, adding 750,000 new members over the past 12 months. we continue to move forward towards a long-term goal of 3 million members in Canada. Elite is growing even faster, up 84% year-over-year, and has exceeded 178,000 members. Our retail KPIs remain very impressive. While our same-store sales underwhelmed this quarter, public filings and the intelligence we've gathered cause us to believe that we have nevertheless outperformed our publicly traded and privately held peers. While there are competitive pressures both from illicit operators and legal competitors, as well as our core customers' wallets being impacted by overall macroeconomic conditions, we are nevertheless taking measures to improve this metric in the coming quarters. Our long-term trend of outperformance is clear.

Chaining our monthly same-store sales increases since launching our innovative discount club model in October 2021, Canna Cabana was up 161 percent to March 2026. In contrast, as the increase in total sales in the five provinces, where we operate has not kept pace with the increase in the number of stores, the average operator has experienced a 7% sales decline during this period. Our market share within the five provinces where we operate was 12% during February and March, which was consistent with a year ago. Excluding British Columbia, where we have been at a regulatory cap of eight stores for two and a half years, I know that our market share was up 14% across the four provinces during February and March, which was up versus 13% a year ago. Excluding stores open less than six months, which are still ramping up, our annualized revenue per square foot in Q2 was $1,620, once again, above many leading blue chip retailers. In March, the average Kanakabana store was on an annual revenue run rate of $2.4 million of product sales, which was double our peer average at $1.2 million. Ontario, the largest province, and focused for future growth, our outperformance was even more pronounced.

Excluding stores open less than six months, which are still ramping up, our average Ontario store was on $2.7 million annual run rate, which was two and a half times our peers at $1.1 million. For the 12 months ended March 2026, total industry sales in the five provinces where we operate were up 3% year over year. In contrast, total Tana Cabana sales were up 13% during this period. Regarding the outlook, we reiterate our target to add 20 to 30 stores in Canada during this calendar year, and we are already at 10. I'm very happy to have announced an agreement to acquire four Northern Helm stores yesterday. Northern Helm stores are strong performers, generating $8.5 million of annualized revenue and $1.7 million of annualized adjusted EBITDA for the three months ended March 2026. This transaction is consistent with our stated objective of supplementing organic growth with acquiring strong performing stores which are not close to cabanas at a fair and accretive multiple and aiming to get even more juice out of their results with our model.

With the transaction expected to close soon, I welcome the Northern Helm team to the Kanakabana family. With this one announced, we continue to look for supplemental M&A opportunities which can add shareholder value. We maintain our target to exceed 350 stores across the country, with new locations being additive to the total addressable market of consumers, we can sign up to our loyalty programs. Turning to our U.S. e-commerce business, which is a very minor component of our bricks and mortar segment, I am pleased to report this business has stabilized as we reported last quarter and has improved its adjusted EBITDA generation. Specifically, are EBITDA earned in the U.S. improved by $2.4 million versus the prior year? There are interested parties at the table on the accessory side regarding a potential transaction while we see how the U.S. CBD market unfolds given the anticipated upcoming CBD pilot projects through Medicare, given our well-established and leading New Leaf Naturals brand. As always, we will look to what surfaces the most value for our shareholders.

At the same time, given the rescheduling momentum we have seen in the US, we continue to evaluate opportunities to take our KanaKabana brand there across a range of scenarios and without giving up our major US exchange listing. All options are on the table. However, we are being extremely thoughtful in how we approach this massive market. Longer term investors may recall that we had multiple option style agreements in many US states that were diligence negotiated and papered back in 2021. Ultimately, we decided not to pull the trigger on them, given the limitations of the structure, and particularly considering how well our stores were performing in Canada. we ended up passing on those deals and allocating all of our capital on winning the Canadian market, which we did. We are taking the same approach now. While we are very interested in entering the market, you can only shoot that bullet once, so it has to be the right markets with the right partner under the right regulatory environment and terms that make sense for our shareholders.

Fortunately, while we wait for the right conditions to enter the U.S. with a big splash, there is no shortage of obvious, immediate-term growth ahead for us. adding over 100 stores in Canada, continuing to ramp up in Germany, and entering other markets. In conclusion, Q2 was the best quarter in our company's history, and we see a bright path ahead for more growth. Our long-term track record of outperformance and strong results quarter in, quarter out has not gone unnoticed. I am thrilled to announce that we have secured credit approval with Bank of Montreal for $40 million of facilities. This is no small feat for a cannabis retailer. It represents the culmination of years of hard work, persistence, and continued operational execution by our team. We expect the facility to close in the coming weeks to start formally working with our new long-term credit provider to help fuel the growth we anticipate ahead.

Having Bank of Montreal in our corner gives us more firepower, boosts confidence in our business, and makes us a more institutional-grade company. That said, I'd like to briefly address the valuation of our shares. I see a clear disconnect between the increasing attractiveness of Hightide as an investment in the debt markets, as evidenced by our announced $40 million commitment with the Bank of Montreal, which was the result of a process where multiple Tier 1 banks were at the table, and where our shares are currently trading trading in the equity markets. As of Friday's close, our shares are trading at an EBITDA last quarter annualized adjusted EBITDA multiple of just 5.7 times, a level I believe does not appropriately reflect the business we have already built and what lies ahead. In our view, our adjusted EBITDA is growing faster than the market has been able to digest, with Q2's level 73% higher than a year ago. two quarters into fiscal 2026, we have already generated two thirds of the adjusted EBIT that we did in all of fiscal 2025. Our capital markets team has been meeting with institutional investors across the continent, highlighting the opportunity our shares represent. And I believe our job gets even easier with these Q2 numbers.

While we cannot control the market, I'm confident that our efforts will pay off. In the meantime, our management team and board continues to put our money where our mouth is, and support the company is evidenced by another round of insider buying last month. I believe the fact that the team that is closest to the operations and sees what we are building has been buying more shares is a very strong signal in our conviction and one I truly appreciate. With that, I'll turn it over to Mayank for his comments and a deeper dive into the numbers.

Thank you, Raj. Hello, everyone. Q2 was another great quarter for Hightide. We kept executing in Canada, posted large gains internationally, and set new records on almost all financial metrics. Let's take a deeper dive into the numbers. Revenue for Q2 was once again a new all-time high at $179.3 million, up 30% year-over-year, the fastest pace of growth in 11 quarters, and up 1% sequentially. This was the fourth consecutive quarter making a new all-time high in revenue. Consolidated gross margins were 27% in Q2 and the highest level in eight quarters. Our two operating segments posted gross margins which were fairly similar, while each was setting new highs.

Our IES gross margins in two years at 28%. Meanwhile, our relatively new medical cannabis distribution segment generated a big leap to 27%, more than double Q1's level of 12%. to expenses, salaries and wages represented 11.9% of revenue in Q2, marking a meaningful improvement versus 12.7% a year ago, and just ahead of 11.8% sequentially. Once again, we demonstrated improving cost controls at high tide in Q2. General and administrative expenses represented just 4% of revenue, marking the lowest level in 7 quarters. This metric was 4.2% a year ago and 4.1% sequentially. Adjusted EBITDA was $13.9 million for that quarter. This was up an outstanding 73% year-over-year, marking its fastest pace of growth in nine quarters.

Our consolidated adjusted EBITDA margin also set an eight-quarter high at 8%. At 10%, the addition of Remaxion was additive to our consolidated adjusted EBITDA margin. HiSight generated $1.5 million of free cash flow in Q2. Again, while this was lower than some recent quarters, when you look at the component of this figure, you see a different picture. As Raj mentioned, there was a very meaningful investment in working capital to produce the growth we saw quarter cash flow from operating activities before investing in working capital was 8.8 million dollars highlighting the ability of our business to generate cash this was the highest level in seven quarters and almost as much as the entire first half of fiscal 25 Over the past 12 months, we generated $13.4 million of free cash flow. We are very pleased to see that we reported positive net income this quarter and we believe this is sustainable on an adjusted basis, excluding non-cash derivative liability changes. We continue to have a strong balance sheet.

As of today, at the high tide level, total debt stands at $63.6 million. We had $36.5 million in cash and restricted cash at the end of the quarter. I'm looking forward to closing the facility with bank of Montreal imminently. We will have a $25 million revolving facility, with almost 19 million of room available to draw down after paying Connect First. The beauty of a revolver is that we only pay interest on the amount we draw, but the remainder is there on demand. Similarly, we will have a $15 million committed delayed draw time loan, which can be used to repay our second position lender. on ongoing interest payment and expand our relationship with Bank of Montreal. In closing, Q2 was a breakout quarter for Hightide.

We have a retail platform which continues to dominate in Canada, and we have proven our unique ability to leverage that strength to quickly establishing a leadership position overseas. I look forward to what the future brings for us as we grow profitably even further. Thank you. Thanks to our amazing team, without whom none of this would be possible. With that, I will now turn the call over to the operator to open the line for the question and answer session. Thank you.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-down phone. If you wish to cancel your request, please press the star followed by the two. If you Using a speakerphone, please lift the handset before pressing any case. Once again, that is star 1. Should you wish to ask a question. Your first question is from Bill Turk from Roth Capital Partners.

Your line is open.

Good morning, everybody. So my question to start is how has Rumexian's tonnage performed in May? And the bigger part of the question here is going to be with May and half of June now, our numbers would suggest you're completely through that older sourced or back-blogged inventory, and if that's the case, how does sourcing change? and cost of product change, and what does it mean for international margins off these two Q levels?.

Good morning, Bill. Thank you so much for your question. So, REMAXION has obviously outperformed all of our expectations in Q2. You may recall, Bill, that February was about about 20% gross margins, but then we really took off from there. And we have full visibility on May. And May is somewhat between Q2, somewhat between March and April and February. So it's not as strong as, let's say, April, but it's not as weak as February in terms of gross margin. And like I said, you know, I said this in my prepared remarks that performance at Rumexia is going to be lumpier. because it just depends on the timing of the international shipments when they actually arrive in Germany.

The current situation, Bill, is we can sell, our distribution capabilities in Germany are second to none. Our procurement capabilities are definitely second to none here in Canada, as you can see. We've dropped Romexian's cost price by 30 to 40%. But just given the timing of the situation in Germany with import permits, import permits are still taking eight weeks to get into Germany. This is down from 13 weeks. So as soon as this situation gets better, we'll be able to sell even more cannabis. But like I said in my prepared remarks, you know, Our current quota should be looked at more in line with Q2 than Q1.

But if you really want my precise remarks on that, I predict maybe it's going to be somewhere in between. So still very, very good numbers. And margins will remain healthy. Now, the one thing I want to mention about the, I think the second part of the question was the dated inventory that we had stuck in Portugal. We had made a brave move, Bill. You remember we had 15 to 17 tons stuck at that time, but we knew a whole country cannot shut down to cannabis forever and businesses cannot collapse. And we took that into our stride and we went ahead with this acquisition. and it's already paid off. You can see the results today, but we are still left with four to five tons still remaining in Portugal.

The most dated inventory, we got it first, so this is less dated, but it's obviously still getting aged. But we're not concerned. We had a blend of that aged material in February, the same thing with March and April, the same thing in May. This is why the tonnage has gone down in Portugal. from that original 17 tons to somewhere close to 4 or 5 tons, I don't think it materially affects us or affects us at all in terms of really bringing the margins down. I'm pretty comfortable telling you that margins can remain around 25%.

And then for a second question, it looks like Ontario has asked a competitor of yours to relinquish control of its retail operations in the province. How would that change the competitive environment and would you be interested in any of those locations if they were to become available?.

Yes absolutely Bill. So we've obviously seen the media reports over the weekend but I I think it's too early to speculate how it ultimately all pans out. We've been talking about this for a while that if the whole industry is playing chess and somebody else is playing checkers, how is that fair? The questions have been answered today. It's for everyone to see what the regulator has said. Look, ValueBuzz is a strong competitor. It's a quality store network. Some of those assets, if they were able to become available, we would definitely take a very close look at that opportunity, but we'll apply the same discipline lengths that we always have to all acquisitions. something that we are watching very closely though. Thank you Raj. I'll jump back in the queue.

Thank you. Your next question is from Derek Lessard from TD. Your line is now open.

Yes, good morning, Raj, and congrats to you and the team on a really incredible quarter. I just basically, if I'm nitpicking here, I'd say probably, you know, I'd point to maybe the modest same-store sales weakness. But maybe just help us quantify how much of the same-store sales pressure is making. is coming from trade down, so formats or volume, versus underlying demand softness.

Yes, absolutely. Hi, Derek, and thank you so much for your question. So, look, what we're seeing so far is Q3 is relatively stable compared to Q2. And most importantly, Derek, there's two dynamics at play in terms of our modest same-store sales decline, which is 1.2%. Remember that over the last five years since the launch of the discount club model, we've absolutely beaten the industry over and gone to 161% jump versus the average operator has declined 7%. this is the first time we've gone in the red, although very minorly, but there's a few things at play here. First thing that you mentioned about formats is very, very true. Remember, our core customer, which is, I've said this many times, we built our stores to cater to the core customer of cannabis, which is the blue-collar worker. And, you know, that segment has been facing some pressure from the slowing housing market and the broader trade-related uncertainty between Canada and the U.S.

You can look at the auto sector, lumber sector, steel, manufacturing. all are hurting, right? And this is our core customer. So customers are trading down from eights to ounce bags, right? And when they have ounce bags, they have less frequent visits because they already have an ounce. Now they don't have the variety of strains. They are contended with one strain, but that's where some of the sales are being traded for sure. We are seeing that for sure. The second reason I can give you, which is an interesting one, is as we continue expanding our store network, some of our newer stores are helping us capture a larger share of markets where we already operate. But in a few cases, that can also create some sales transfer from older stores into newer stores that aren't yet included in same-store sales base.

So that is also happening. I have many markets I can give that example for, and now we're being a bit more watchful on that side as well. So, you know, while that can create some pressure reported on same-store sales, we're actually continuing to gain overall market share and grow our total sales in those regions. So, you know, it's not all bad. It's definitely the formats. It's definitely the less frequent visits because our core customers definitely impacted. I will tell you this. We've gathered a lot of intelligence on the private side. of things. As you know, we just acquired four stores from Northern Helm. We had their numbers. We had multiple other parties that have shared their numbers with us.

And basically, what we see is that the trend is across the board, and we are outperforming everything that I have seen, including one of our publicly traded competitors that have reported and we're outperforming them as well.

Right, Raj. And to be clear, yes, again, I was nitpicking, so you're right. It's not all bad. And then maybe just a follow-up to that. Just on the bricks and mortar margin, just curious on how you're thinking about the sustainability there, just maybe given some of the.

that slightly softer consumer backdrop at this moment? Yes, absolutely. So, Derek, I think our bricks and mortar margins hit 28%, which is an eight quarter high, made me very, very happy. We've been raising our margins gradually and slowly and still, you know, beating sales records. It's not affected our sales. But given the environment that we live in, we have to get a little bit more cautious on gross margin. on the brick and mortar side. We're also starting to notice that a ton of competitors in the industry are copying parts of our models, some trying to copy us in our entirety, believe it or not, including our color schemes, which is hilarious to watch. Some of the very established competitors as well. I hope you're still on the line, Derek.

I just heard some background noise. Yes, I'm here. Okay, perfect. Perfect. So, but despite all of that, you know, where our sales are going well, Tanaka Manor brand is very, very strong. We have opportunities to raise margins to white label and elite initiatives, which others don't, but our store level margins are being copied. We have a lot of competitive pressure, pressure both from legal operators and from illicit operators. For many, it's a survival strategy at this point, given we're winning so much. But we think that there will be slight pressure on brick-and-mortar gross margins, not too much, but we will adjust it accordingly.

Remember, we're playing this game for the long term. We're going to get to 350 stores. I believe our brick-and-mortar margins in the long term will get to 30%, so we'll be much higher than where we are today. But in the short term, we may have to reduce our margins a little bit to compete.

Yes, remember, Raj, that imitation is the sincerest form of flattery that mediocrity can pay to greatness. Well said, Derek. Thank you. Appreciate it. Thank you.

Your next question is from Ben Stonkes from Haywood. Your line is now open.

Hey, morning, guys. This is Ben on for Neil. Congrats on the great quarter. I know last quarter you mentioned the goal of entering through an M&A transaction within the next 12 months and that you're engaging with some of the larger players over there. as to whether there's been any progress on that front and how those conversations have been developing.

Yes, good morning, Ben. Thank you so much for your question. So absolutely, the UK remains a very important target market for us, and we are actively engaged in discussions with a range of parties. industry. So we're talking to many larger operators, many smaller size specialized businesses. I'm talking to everyone to understand the lay of the land in the UK and I can tell you it's a very very interesting market for us. potentially even more interesting than Germany, because in UK you can own the entire chain, including that last mile patient relationship, which we are unable to do in Germany. So, you know, our, as we previously communicated, our objective remains to complete a transaction within the next few quarters. That said, Ben, we're being very disciplined and selective. We're focused on finding the right partner, the right strategic fit, and a transaction structure that creates meaningful long-term value for shareholders.

So we're not going to rush into anything, but conversations are going well.

That's good to hear and I appreciate the color there. Just a follow up for me is on free cash flow. So it came in around 1.5 million in the quarter. As you touched on in your prepared remarks, most of that was working capital build from new stores and the Ramexian inventory. I just want to see how you're thinking about working capital needs from here. and what a normalized free cash flow conversion looks like once you're through this, say, investment phase.

Yes, absolutely. So, you know, the devil is in the details, Ben, always. Yes, free cash flow was lower sequentially and year over year. But we made, you know, an additional $4.3 million investment into working capital during this quarter, which is the highest level in years, right? If you take that out, we would have a about six million dollars in free cash flow this quarter but we're growing the ramexian business we're investing into into inventory and in our newly operated stores that take a long time to generate cash just like all other retail businesses so you know cash flow from operations before working capital reached eight point eight million dollars this quarter Ben which was the highest highest level in seven quarters. So very, very happy with that trajectory. Now, Ramexian is outperforming all of our internal expectations as well. So we may need to put in more cash as the business grows, but I think we can still remain free cash flow positive as we build our business, although it's going to be lumpy from quarter to quarter.

Yes, that's great. Thanks for that. Congrats again on the quarter, and I'll hop back in the queue.

Thank you. Your next question is from Lieutenant from Canaccord. Your line is now open.

Thanks. Good morning and congratulations on the quarter. I want to follow up, Raj, and see if you can just provide a little bit more information on Northern Helm. You provided the revenue and the EBITDA metrics for that business, but can you just give us a sense, I mean, how long was this transaction in the works? How long was it in the pipeline for? And then also, just Historically, I don't know, maybe a two or three year look back on what the financial performance has been, maybe how long those stores have been in market, just more details on Northern Hill.

Yes, sure. So, look, we just completed the transaction loop. We are, Northern Hunt stores have generated $8.5 million in revenue. So they're doing very, very good at the revenue level. EBITDA contribution was 1.7 million, and we paid 4.5 times. Still highly accretive to our results, and we're always watching out for our shareholders on that side. The acquisition was more of an inbound into us, although we have been reaching out to many operators and seeing if they have interest in selling only in the markets where we don't have a presence yet. You notice that with the Northern Helm acquisition, we entered three new markets in Ontario. which is not going to cause any redundancy issues with our existing portfolio.

You can imagine when you have 224 stores across the country and we're still opening up stores in similar markets that can have that effect, although we get to take a larger chunk of that market. The Northern Helm acquisition was especially good because of that, because it's differentiated markets. It wasn't inbounded to us. The operators saw how we've been executing. They wanted our shares. They wanted to take some cash, some shares. So it worked out perfectly because they want to get positioned with the largest retailer in the country. And we are starting to see more and more momentum on that side. Although, you know, seller expectations out there can still be drastically different with people, you know, some expecting that they can still get eight to 10 times.

But we're not trading more than six times. I don't understand how that is possible. possible and why other buyers would pay such multiples. We don't do that. We're very, very disciplined. And I think you'll see more of similar types of these acquisitions from us in the coming quarters.

That's great, Keller. Thanks for that. And then maybe I'll ask a question just more broadly on M&A. And forgive me if you touched on this, I may have missed it, but you have a lot on your plate when it comes to an M&A perspective. You have options in Europe, it sounds like now, and not just the UK, but Europe a little bit more broadly. And then also in Canada, the market's a little bit. stronger. You've talked about exploring optionality in the US. Is there a certain, can you rank order, I guess, your preference as part of all this?.

Yes, the preference is always home turf. Luke, I've always said, you know, never lose track of the home turf. We must win domestically to become successful internationally. Right? There's no such thing that you jump the gun and you start buying things all over the place and then we can't control them. The reason we bought Ramexian was we put two and two together and we're like, we're so strong domestically, we have the strongest strongest licensed producer relationships here. No one does have the same level in Germany. We can truly make the one plus one equal to three in that regard, and we've done that.

We're looking for exactly that type of M&A. It has to be a creative to our results. It has to be a great strategic fit in terms of what we're doing. Given our astounding success in Germany, We're definitely very interested in entering the UK market. I think you'll see even more momentum from us in Germany. We are now eyeing 20% market share in that country, which we feel is within reach in the long term. And UK lets us own that last mile patient relationships on top of the wholesale distribution network that we'll set up.

So UK is a very interesting market for us. Domestic, I'm unable to continue, but I can tell you I'm also speaking to counterparties of various sizes in the US. We're also looking at medical opportunities where we don't have to sacrifice our NASDAQ listing, and we can own medically operated stores in medically legal states, but that's not a priority for me. Right? Like US is a fantastic market. It's the market where I, you know, I dreamed to play in one day, but we're not in any kind of hurry. We keep on winning in Canada. The goal is to get to 350 stores.

We're only at 228. The goal is to win in Europe. We are the number one player in Canada, the number one player in Germany. We absolutely want to be the number one in all of the European markets where we enter. So we're not going to sacrifice our entry into the US just for the sake of it. We'll take our time. Priority sequence will be continue doing M&A in Canada, continue doing M&A in larger European markets, mainly UK, Poland, and Europe. And let's see how other markets develop there. So we've got a ton on our plate when it comes to M&A.

Great. Maybe actually just following up on that last piece. So in the outlook in the press release for this quarter, um, And the final sentence is about you intending to expand into additional European markets. If we go back one quarter ago, that outlook was more specific to the UK. So what, I guess, has changed from last quarter to this quarter from looking at M&A in Europe?.

Great, great question, Luke. So I'll tell you this. The market that interests me the most at this point is UK, 100%. We're very keenly looking at the UK market. But we've had a couple of inbounds, you know, with my travels to Europe on ICBC and Cannabis Europa. We had a couple of inbounds from two interesting markets that came to us where operators want to partner up with us. Again, I have to be very disciplined. We get these kinds of offers all the time, but our execution is being noticed, what we're doing in Germany, and everybody wants to get a piece of our supply relationships here in Canada.

And there are two interesting markets that have popped up that want to partner up with us, operators want to partner up with us, but we have to be disciplined in our approach. So we're still evaluating those markets, but I believe my interest still keenly lies in the UK.

UK at the moment. Got it. Thanks. Last one for me and then I'll pass the line. Just circling back to the Canadian seamstress sales performance, can you break out, I guess, whether or not there was a lot of change throughout the quarter? In other words, did it weaken or strengthen at all as you moved from the earlier part of the quarter to the latter, and then secondly, I wanted to follow up with the commentary mentioned Q3 is stable is that relative to Q2 so still down roughly a point and change or are you saying it's relatively flat year-on-year.

It's exactly how Q2 was about the point and change that we're seeing in Q3. And the entire quarter was kind of like that. Look, as you know, not just the headlines, just look around and you'll see, like I mentioned, auto sector, lumber, steel, manufacturing, these are all our core customers. The blue collar worker, that's 70% of our business, right? As these things co-exist, we will get stronger. People are not leaving us. They're just buying different formats in this, you know, in this high inflationary environment. oil prices are still very, very high, and it's going to take some time for them to come down. And it's going to take some time for our government to course-correct with everything that's happening between Canada and U.S. I think this is very, very temporary.

Our core case, what Kanaka Banna means to our customers, we keep on winning. Our brand is performing 50% better than the next closest competitor. So we're winning on all fronts. This is a matter of time. Business never goes in straight line, only up, it goes up and it goes down. In our case, slightly down and you can see we're record-breaking numbers that we produced. We've been beating analyst consensus throughout across the board.

So we've got holding power. I can't say the same thing about our competitors, our privately held competitors and publicly traded competitors. don't have Remaxian. They don't have the volumes that we have with our suppliers. They don't have the discount club. They don't have the largest cannabis loyalty program globally. So we've got so many advantages here. I am not worried at all.

Got it. Thanks. I'll pass the line. Thank you. Once again, that is star one, should you wish to ask a question. And your next question is from Brandon Pennington.

Your line is now open. Hey, all. This is Brennawn for Fred. Thanks for taking our questions, and congrats on the quarter. Starting off with the potential expansion of Ontario's retail cap, so like how likely do you think this is to happen based on the conversations that you're having and the things that you're hearing and how positive could it be for the long-term growth prospects? And a couple of add-on considerations with that would be, so like we know that high-tide targets, 350 stores longer term. So if this were to materialize, how could this affect your longer-term targets? And then also just curious about VC and if you see the cap potentially standing there as well.

Sure. Good morning, Brennan. Thank you so much for your question. So, yes, we are hearing that the government may consider to raise the cap from 150 stores in Ontario to 300 stores. Obviously, that would, again, mean an exponential opportunity for high tide. Our stores do 2.7 million as an average. average unit revenue in Ontario versus 1.1 million, which is peer revenue there. So, you know, that would be a dream come true. I know that there's a lot of noise from competitors, in fact, rightfully so. The independent competitors are feeling that the change will have a lot more power, and they're lobbying very hard against it.

I kind of understand that narrative. But we'll see how everything evolves there. If that happens, we are absolutely going to increase our long-term cap to over 500 stores, because Ontario alone will give us another 150 stores. So Canadian opportunity, you know, we've said in the long term, Canada will generate over a billion dollars in revenue for us. I think that number could get to 1.3, 1.4 billion if this happens, maybe even higher. So it's all blue sky scenario from here, but if it does not happen, we're still looking very, very good. We can generate over a billion dollars in revenue in Canada.

On the BC store cap front, we came pretty close two years ago from the cap increasing from 8 to 16. It didn't happen. Again, the independents were against it. They were fearful that the change would come in, but look at the result of what that's done to that province. BC has some of the highest illicit rates in the country after Quebec, or very similar to Quebec, you know, over 45, 50%. In comparison, Alberta is sitting at under 20%, right? It's a very forward-looking province. So, I think at some point, BC will increase the store cap. There are conversations that are taking place. slow to do it, which is increase it in time over 12 months to 16 stores and then maybe raise it higher again.

But they definitely have to do something about it because the illicit market is thriving in British Columbia and that should not be the case seven years after or eight years after legalization.

Okay, understood. As someone who's actually born and bred in the West Coast, that's an illicit number does not surprise me. So then just looping back to Ramexi and just kind of looking at the margins, so around 27%, which is definitely above what you expected, and you mentioned roughly 25% from the segment expected going forward. We are hearing about pricing question in Germany. So just wanting to dive a little bit deeper into this. So just how should we be thinking about these dynamics and is the move to value products in Germany benefiting Ramexian because of the segments that you're playing in and over time do you think that mid-20s is still sustainable?.

Yes, absolutely. Look, when we acquired the business, we said that long-term we intend to do mid-20s gross margins in Ramexian. Well, that day has already arrived, and I couldn't be more excited. We're definitely 90 days ahead of our own expectations. I like to under-promise, over-deliver, and it's happened in this case again. You know, Brian, given the relationships we have with the Canadian licensed producers, the biggest differentiator has been, not only have we strengthened and diversified our supply chain, and also receiving directly into Germany so we can receive more tonnage and receive it quickly, which is, again, very different from what was happening there prior, we've also been able to reduce cost in terms of procurement from Canada by 30% to 40%. So while the actual market is, there's a lot of price compression taking place in Germany, you're absolutely right, it's not affecting Rumexia and it's affecting all of our other competitors. that don't have the same strengthened relationships and supply chain. So we feel we'll continue to benefit from this.

I cannot tell you how many inbound opportunities I'm getting from producers that want to work with us directly. We've just launched seven exclusive brands in Mary Jane, which we'll share with the market in more detail, I believe tomorrow. Canadian brands. We have exclusively agreements with all these top-tier brands, and more and more are signing up every single day. So I believe that the market price compression becoming more and more real and taking place, Ramexian is nicely shielded because of these very strong relationships that we have in Canada.

Okay, perfect. That's a great color. I'll jump back in the queue. Thank you. Thank you. There are no further questions at this time. Please proceed with the closing remarks.

Thank you, operator, and thank you to everyone for your interest and continued support for Hightide. 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, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may now disconnect your lines.

[Call has ended.]

Good morning. My name is Ina, and I will be your conference operator today. At this time, I would like to welcome everyone to the High Tide First Fiscal Quarter 2026 Unaudited Financial and Operational Results Conference Call.

[Operator Instructions]

Mr. Brownlee, you may begin your conference.

Thank you, operator. 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 Chief Executive Officer; and Mr. Mayank Mahajan, Chief Financial Officer.

On March 17, 2026, the company released financial and operational results for the fiscal quarter that ended January 31, 2026. 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 March 17, 2026, 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/edgar or on the company's website at www.hightideinc.com and 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-IFRS measures 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 first fiscal quarter that ended January 31, 2026. I'll begin with some high-level comments about the quarter and our strategy before Mayank dives deeper into the financials. Fiscal 2026 is off to a great start, and I'm excited for what still lies ahead. Revenue for the quarter was $178.3 million, up 25% year-over-year, growing at its fastest pace in 10 quarters and up 9% sequentially. One quarter into the year, and we are at a revenue run rate exceeding $700 million. Also at $11.5 million, adjusted EBITDA was up 62% year-over-year, marking the fastest pace of growth in 2 years. Our domestic core bricks-and-mortar segment continues to outperform its peers with rising margins, which have now increased sequentially for 5 straight quarters and hitting 28%.

At the same time, our newer international business is now picking up steam and reaching new highs since we acquired a majority interest in it. Let's recap how Germany is going. The Remexian transaction closed on September 2, 2025. Revenue for the 2 months it contributed to Q4 results was just under $10 million, averaging $5 million a month. In Q1, Remexian's revenue was $25 million, averaging over $8 million a month. In February alone, Remexian sold 2.6 tonnes of medical cannabis and generated $12 million of revenue, which was a record since we acquired a majority stake in the company. Additionally, preliminary gross margins improved to 20% in February, while we caution that any 1 month's performance may not be consistently repeatable, it nevertheless gives us a strong degree of confidence that looking ahead, Remexian should be able to deliver results far ahead of the metrics used during the valuation period for the transaction.

What gives me extra comfort is that February strength was even before we start seeing the results of our strategy fully coming together. As mentioned on our last conference call, we have already begun sourcing tonnes of biomass from Canada at best-in-class terms, which are significantly better than what Remexian was procuring on its own or through brokers. Given import permit delays, this biomass probably won't start reaching Germany for about a month. And after that is when we anticipate a sustained improvement in profitability at Remexian. So I'm glad to say that it's all coming together.

Of course, growing the Remexian business, especially with meaningful inventory still stalled in Portugal and deposits for new biomass from Canada, which will go direct, requires working capital investments. Despite a modest drag in Q1 from Remexian, I'm very proud to report that High Tide generated free cash flow on a consolidated basis. Q1 free cash flow was $2.9 million, marking a huge reversal from negative $1.9 million in Q1 last year and more than double the $1.3 million generated in Q4. We like to look at free cash flow generation over a longer term to get a better sense of the trend.

To that point, despite constantly opening new stores, which act as a drag initially, including 7 in Q1 alone, we have now generated $16.8 million of free cash flow on a trailing basis, which is the highest level in the past 5 quarters. The engine of this free cash flow has been our core Canadian bricks-and-mortar business, Canna Cabana, which backed by our innovative discount club model continues to expand. We are now at 2.58 million Cabana Club members across Canada, up 47% year-over-year, marking the fastest growth rate in 10 quarters. ELITE is growing even faster, up 100% year-over-year and reaching 162,000 members. These numbers give us confidence that we will reach our long-term goals of 3 million members in Canada with over 1 million being ELITE. Our loyalty-based discount club is the largest in all of cannabis and truly the envy of the industry. It features everyday discounts for members as well as unique promotions such as our $100,000 420 giveaway, which was launched 2 weeks ago.

Our store's financial performance continued to be very strong. Bricks-and-mortar revenue was $150 million in Q1, a $600 million annual run rate. Backed by higher-margin initiatives gaining steam, the segment generated its fifth straight quarter of sequential gains in gross margin, reaching 28% in Q1, which was the highest level in over 3 years. The segment's adjusted EBITDA margin maintained its high at 9% in the quarter. Our retail KPIs remain very impressive. Despite the extremely harsh weather, particularly in Ontario in January, we were able to still post positive same-store sales increases during the quarter on a year-over-year basis.

Chaining our monthly same-store sales increases since launching our innovative discount club model in October of 2021, Canna Cabana was up 149% to December 2025. In contrast, the increase in total sales in the 5 provinces where we operate has mirrored the increase in the number of stores, implying that the average operator has had flat sales during this period. Our market share within the 5 provinces where we operate was 12% during November and December, which was up from 11% a year ago and 10% 2 years ago. Excluding stores opened for less than 6 months, which are still ramping up, our annualized revenue per square foot in Q1 was $1,728, once again above many leading blue-chip retailers. In December, the average Canna Cabana store was on an annual revenue run rate of $2.5 million, which was 1.9x our peer average at $1.3 million. In Ontario, the largest province and focused for future growth, our outperformance was even more pronounced.

Excluding stores opened less than 6 months, which are still ramping up, our average Ontario store was on a $2.9 million annual run rate, which was 2.6x our peers at $1.1 million. For the 12 months ended December 2025, total industry sales in the 5 provinces where we operate were up 3% year-over-year. In contrast, total Canna Cabana sales were up 14% during this period. We've added 27 stores in the past 12 months, almost all organically. The key factors of our selection criteria is location and lease terms as these are key pillars of sustained superior financial performance, and these decisions are set for years once they are made.

We are happy with how our new stores are performing, but the ramp is naturally slower due to increased competition and a broader slowdown in industry growth rates. Despite the drag from new stores, it is very heartening to see the increases in gross profit and EBITDA in this segment. We are confident that these newer stores will gain traction and add to our financial profile in the quarters ahead.

Regarding the outlook, we reiterate our target to add 20 to 30 stores in Canada during this calendar year. consistent with what we have achieved over the past 2 years. We expect this to be done mostly organically. We continue to look for supplemental M&A opportunities, which can add shareholder value. We remain -- we maintain our target to exceed 350 stores across the country with new locations being additive to the total addressable market of consumers we can sign up to our loyalty programs. As we scale up, the contribution from our higher-margin white label products will become more meaningful. Over the long term, we plan to reach approximately 20% of our sales coming from our white label products versus 1.6% currently. As always, these will continue to be made only by quality licensed producers and largely represent differentiated products like our strong performing Queen of Bud brand.

Turning to our U.S. CBD e-commerce business. We are pleased to report that we are one of the founders of National Compassionate Care Council, an industry group aiming to shape U.S. federal cannabis policy following rescheduling efforts. It focuses on integrating cannabinoid therapies into mainstream medicine through research, education and patient-focused advocacy. We believe this could be a meaningful opportunity for Nuleaf and FAB CBD, especially given that the U.S. is poised to launch CBD pilot projects through Medicare. While we are bullish on this opportunity, we don't feel that the market has ascribed any value to it, and we note that Frederico Gomes at ATB Comark published a report on the potential that this change could have on our business.

While we are waiting for the regulations to be unveiled, there are already early signs that our e-commerce segment as a whole has stabilized and is even ticking higher. Generating its first sequential increase in 2 years in Q1 with gains in both the CBD and accessories businesses, the segment's drag on consolidated adjusted EBITDA was also the smallest in 4 quarters. So there are reasons for optimism both in terms of the current trajectory of our e-commerce businesses and the potential to turbocharge our CBD businesses in particular. That said, we have several options regarding future steps, including ongoing conversations to explore potential transactions.

As always, we will look to what surfaces the most value for our shareholders. At the same time, we continue to evaluate opportunities to take our Canna Cabana brand into the U.S. through licensing agreements. While we are in conversations with operators of different sizes, this will take time, and we're being thoughtful regarding possible structure and partner.

Coming back to Remexian, we entered into this transaction for the long term. We are only just getting started on the synergies and while still present today, the issue of getting product out of Portugal will only alleviate from here going forward, which should boost margins versus what we reported in the past 2 quarters. Again, we note that a similarly sized German importer and distributor recently entered into an acquisition by a public company at a valuation significantly higher than our transaction with Remexian. And a reminder that as the pricing for the put and call options with Remexian's minority shareholders are set at 3.6x to 4x, depending on the timing of the exercise, the future accretion for the remainder of the company is already locked in for High Tide shareholders.

Remexian continues to gain prominence within the German medical cannabis market. Despite the volume of biomass in Portugal still waiting to be released, Remexian was able to significantly increase its market share of German imports from 6.5% for the 3 months ended September 2025 to 10.3% for the 3 months ended December 2025. As alluded to previously, total shipments since then have accelerated with the average monthly shipments for January and February up 25% versus the 3 months ended December. And this is before we start to see the benefits of the tonnage procured in Canada starting to arrive and enhance the segment's financial results.

While there could be some headwinds in Germany, particularly regarding a new law governing the details surrounding medical cannabis access, we are encouraged by the ongoing debate in the German parliament and are hopeful that the ultimate changes are likely to be more benign than what had been feared last year. Meanwhile, Remexian continues to gain momentum. We are already a leader in Germany, and as our strategy is starting to yield results there, we are looking to expand our ecosystem into other international markets. In particular, we are already meeting with key players in the U.K. with the aim of entering into a transaction in that country within the next 12 months.

Another highlight of our quarterly results I would like to touch on was our strong cost controls. In particular, general and administration expenses represented just 4.1% of revenue, marking a 6-quarter low. In conclusion, we are on the right track with many milestones achieved and many more ahead. We have now generated $42.6 million in adjusted EBITDA over the past 12 months, making us as profitable as we've ever been with expectations that all 3 of our segments will post gains in the quarters ahead.

High Tide's future looks bright, and it's worldwide. Thank you to our global team for making it all happen and for where we will go in the quarters ahead. On that front, I'm pleased to highlight that earlier this month, Kathleen Skerrett and Menashe Kastenbaum joined our Board of Directors. We also created 2 new advisory positions with David Wallach and Filip Ernest to provide strategic guidance to management on matters, including real estate, business development, artificial intelligence, e-commerce technology and community and stakeholder engagement. Welcome to our High Tide family. I look forward to working with you all and achieving even greater heights ahead.

With that, I'll turn it over to Mayank for his comments and a deeper dive into the numbers.

Thank you, Raj, and hello, everyone. Q1 was another great quarter for High Tide. We expanded the network in Canada, saw large improvements internationally, realized record revenue, all while generating increasing level of free cash flow.

Let's take a deeper dive into the numbers. Revenue for Q1 was once again a new and all-time high at $178.3 million, up 25% year-over-year, the fastest pace of growth in 10 quarters and up 9% sequentially. Consolidated gross margins were 25% in Q1, consistent with Q4 last year and just below 26% sequentially. While our medical cannabis distribution generated a lower gross margin this quarter than its usual historical performance given supply chain delays in Portugal, as Raj mentioned, we anticipate improving gross margins in this segment looking ahead as fresh biomass from Canada purchased at best-in-class terms starts arriving in Germany. Most importantly, we were able to post sequential gains in our core brick-and-mortar segment for the fifth straight quarter to 28%, the highest level in over 3 years.

Turning to expenses. Salaries and wages represented 11.8% of revenue in Q1, marking a meaningful improvement versus 12.3% a year ago and compared to 11.5% sequentially, which was a tough comparative as it marked our lowest level in 9 quarters. General and administrative expenses represented 4.1% of revenue in Q1. This quarter was a continuation of this downward trend comparing to 4.6% a year ago and 4.3% sequentially. It is great to see the demonstrated impact of operating leverage as we scale up our revenue.

Adjusted EBITDA was $11.5 million for the quarter. This was an outstanding 62% year-over-year. The star of the show here once again was our core brick-and-mortar segment, which posted a 58% increase year-over-year, representing the fastest growth rate in 7 quarters. The segment's adjusted EBITDA margins were 9% in Q1, which was consistent with Q4's high and materially above the 6% generated in Q1 last year. High Tide generated $2.9 million of free cash flow in Q1, marking a very pleasant reversal from the $1.9 million investment in Q1 last year and more than double the $1.3 million generated in Q4. Over the past 12 months, we generated $16.8 million of free cash flow, representing the highest level in 5 quarters. We continue to have a strong balance sheet. As of today, at the High Tide level, total debt stands at $64.5 million. We had $46.4 million in cash and restricted cash at the end of the quarter, and we are well positioned with no near-term maturities.

In closing, Q1 was another great quarter for High Tide. We have a retail platform in Canada that is second to none with millions of loyal customers that are backbone of the company. In particular, our 162,000 ELITE members are growing 100% year-over-year and generate even higher sales than base members. Our newly consolidated international business is showing great momentum, which has carried into our second fiscal quarter with February sales at $12 million. And as Raj mentioned, this is even before we start seeing the tangible impact of our procurement expertise. This gives us the confidence to now look at other jurisdictions where we can take our ecosystem and carve out yet another leadership position. Thanks to our amazing team without whom none of this would be possible.

With that, I will now turn the call over to the operator to open the line for the question-and-answer session. Thank you.

[Operator Instructions]

And your first question comes from the line of Luke Hannan from Canaccord Genuity.

First, I wanted to start with the same-store sales performance that you had in Canada during the quarter. You mentioned you did still deliver growth year-on-year despite the impact of the winter storms. But can you just delineate for us what exactly was the impact of the winter storms, either from a -- on a same-store sales basis or whatever other basis you're comfortable sharing? And then also just give us an indication of where that metric is trending quarter-to-date as well.

Thank you for your question. So yes, same-store sales were definitely impacted mostly in the last 10 days of Germany -- sorry, the last 10 days of January. And it also extended a little bit into February. But that was a once-in-a-lifetime event in Ontario. Things were closed. I believe you're from Ontario, so you would know, Luke, how serious that was. But barring that, the reality is that things are definitely slowing down a little bit in Canada. And when the market is doing that, all you can do is outperform the market. As an illustration, Luke, let's look at the 3 months ended December 2025. The last month, we have Statistics Canada data available. And let's exclude BC, given I'm sure you remember the strike impact there. It was a once-in-a-lifetime kind of event there as well.

So total industry sales, including the impact of opening new stores, were down across those 4 provinces for the 3 months ended December. This was the first time since legalization that total sales over a 3-month period were negative year-over-year. And it wasn't just due to marginal players. We actually saw a public company report negative same-store sales year-over-year during those 3 months as well. So like I said, we can only outperform the industry. In contrast, our same-store sales were up 2% during those months. And then again, our same-store sales in January were up as well, but only by a little.

So the macro consumer outlook is obviously a big driver, and all we can do is continue to outperform. And given the strength of our model, our Tier 1 real estate selection, our team's superior execution, we believe that we will continue to outperform the market. Like I said, we posted positive same-store sales increases in January as well. But the silver lining here, Luke, is as the growth slows in addition to outperforming the market in general, this is going to put even more pressure on those marginal players that we've been talking about, which are going to be becoming even more incentivized to exit the market. And when they close, those sales have to go somewhere, and we believe they will disproportionately go to us.

Very helpful. And then for my follow-up here, and then I'll pass the line. You talked about wanting to get into the U.K. market in the next 12 months. Can you just give us an idea of what exactly you're looking for, maybe how you intend to fund a deal there? Expect to structurally similar to structure it similar to Remexian? And then on that note as well, what are you seeing as far as the multiples and the kind of assets that are available?

Yes. Sure, Luke. So look, given that we're already a leader in Germany and starting -- and our strategy is starting to yield results there, we're looking to expand our ecosystem, obviously, into other international markets. This is something that I've been talking about that Germany is just a start. It's a step into other European markets as well. And U.K. is a very exciting market, Luke. It's been growing at 100% year-over-year. That's what it did last year. That's what it's projected to do this year between 60% to 100%. So that's very, very exciting for us. So what we're doing right now is we are meeting all key players in the U.K. I've probably spoken to 5 groups already and another 5 or 7 are on my list to speak with. This is ongoing. We are in no rush to enter that market. So it's not like we're cash trapped and we need to do something tomorrow in the U.K. market.

But we are very well -- we're definitely prospecting the key players there because it's going to become a very important market for High Tide. It's definitely one of those markets where Canadian cannabis is making huge waves. It's close to that same 50% benchmark that we've been talking about in Germany. So down the road, we have an aim of entering into a transaction in that country within the next 12 months.

And your next question comes from the line of Neal Gilmer from Haywood Securities.

Yes, I'm in Ontario, too. It's been a brutal one here, but I won't get into that. I wanted to talk about Germany. You commented on the February sales of $12 million and a gross margin of 20%. I guess a 2-part question here. Number one, if I take the $12 million and times it by 3, obviously, I get $36 million, which seems like significant growth over '25. I don't want to get over my skis or sort of what sort of message you want to sort of send to investors? Was there anything unique about February? Or should we be sort of thinking of that sort of run rate going forward?

And number two, the 20% gross margin that you disclosed, are you comfortable providing a range of where you think the gross margin could be once you get these Canadian sales into the German market?

Thank you so much for your question. So I'm definitely excited about what's happening at Remexian. So like I said in my prepared remarks, Neal, Q4 average revenue per month was $5 million through Remexian sales. Q1 average revenue was $8 million, and February revenue alone was $12 million, the highest since we acquired a majority stake. So look, we're very encouraged with how the overall business is trending. But that said, we continue to have meaningful biomass waiting to be released in Portugal, right? We still have 7, 8 tonnes in Portugal that are coming through. We started with 17, and we're down to about 7 or 8.

And as mentioned, February was the best month by tonnage since we acquired Remexian in September. Now some of this was more biomass being released from Portugal, but it was also supplemented by opportunistic buying by the Remexian team in countries outside of Portugal. The Portugal issue will still weigh in on Remexian results for Q2 and no 1 month should be taken as the benchmark going forward, right? Again, I have March's numbers. They're slightly softer than February, but that's, again, because of import permit delays and things like that. Although I am very bullish about Remexian's performance going forward.

The second part of your question, I believe, was on the gross margins. We definitely were excited to see that we are already at 20% gross margins in February. Like I said, it's probably not repeatable every month, at least for the next couple of months. But I'm very, very confident that it could become the norm going forward in Q3 and beyond. But we're looking at a range of 20% to 25%. I don't even think it stops at 20%. I think we hit mid-20s gross margins, probably capped at around 25% because like I said, the Canadian biomass that we procured at best-in-class prices and best-in-class terms have not even landed in Germany. It was supposed to be in Germany in the second week of March. That's not happened because of the import permit delays into Germany. So now that's trending towards March, but we've already hit 20% without this biomass. So when that comes in, it gives me good heart that we could see between 20% to 25% gross margins going forward.

Okay. I guess maybe the second follow-up question, and then I'll pass the line is back in Canada here. I take it from your prepared remarks, you talked about the 20 to 30 that you plan to open this year, mostly being organic. It just sounds like it's a pretty dry M&A landscape. Is my correct assumption that, that organic growth that you plan to do is mostly going to be focused on the Ontario market? Or can you talk about whether there's any other markets where you think that will drive that increase in retail stores?

Yes, absolutely, Neal. So look, the organic store goal, 20 to 30 is a tried and tested benchmark for us, which we've been doing for the last couple of years. Now it's definitely getting harder, Neal, to get good organic locations where we don't run into redundancy with our own portfolio or where it's not ultra -- already an ultra-crowded market, but same-store sales pressures on everybody. So that's a balancing act. Maybe we were towards the lower end of the organic growth trajectory this year, but we definitely feel that we would still be able to hit that milestone.

To your question about whether that growth is focused on Ontario, it absolutely is focused on Ontario because we can probably still add 54 stores to get to our 150. So there's a lot of growth ahead of us in Ontario. But we continue to grow in other markets as well. In our home province of Alberta, we're in the 90s here, mid-90s here for store count. I believe we can get to close to 130 stores in Alberta as well. Saskatchewan is open playing territory as well, where we have 13 stores, but we believe we can get to 20-plus stores in Saskatchewan. So the growth will not be limited to Ontario alone, although the focus is definitely on the Ontario market.

And your next question comes from the line of Frederico Gomes from ATB Comark.

First question on your bricks-and-mortar gross margins. You've been doing pretty well there, fifth consecutive quarter of expansion. But given the market slowdown on the sales side that we're seeing that you mentioned as the market matures, are you expecting to continue to report sequential margin expansion in that segment? Or could that sales slowdown impact that?

Fred, thank you for your question. So look, I'm very happy to see that we've had 28% gross margins. in our brick-and-mortar segment, which is 5 consecutive quarterly increases that we've seen at that segment. And I couldn't be more happier. But you're right, can we continue this forever? Probably not, probably not. But the one thing we said from the very beginning is that our white label initiatives and ELITE sales, which continue to pick up steam, as you know, white label has now jumped from 1.3% to 1.6% with a long-term goal of getting to 20%. That will happen over the next 5 years, but that will boost gross margins. Each white label SKU contributes to another 6% to 7% additional gross margins on our side. But we're very thoughtful about it. We want to introduce differentiated cannabis products that are made by quality licensed producers. So we're going to take it slow and steady.

And then the other major initiative that's contributing towards gross margins that will continue to do so is our ELITE sales. As you know, ELITE is growing at 100% year-over-year faster than our own expectations here. If it does that another year, we'll be close to 350,000, 320,000 ELITE members. This is very, very exciting, but that also means that it helps with our gross margins because it's consolidated, it adds another -- it's a 70% gross margin segment for us. which is very, very healthy. But at the same level, to offset that, we still have illicit market pressures. The competitive pressure is still quite strong. And sometimes we have to adjust our margin downwards in many of our locations to remain competitive and then gain steam again when other operators cannot hold and cannot compete with us, right?

So overall, think of if I can do another quarter or 2 of 28%, I'm very happy. I don't think it trends downwards, maybe slightly, but I don't think so, but we've got ELITE and white label sales to back it up to keep going -- to keep chugging it ahead slightly at least in the coming quarters.

I appreciate that. And then a second question, just on your e-commerce platforms. You mentioned early signs of recovery and obviously, revenue increased sequentially for the first time in 3 years. So what changes have you implemented recently in that business to drive that recovery? And since the quarter ended, has the trend continued with continued improvement?

Sounds good, Fred. So on the e-commerce front, we have implemented quite a few changes. As you know, we appointed Sri as our VP of Technology about 5 months ago now, and she's been doing a stellar job since she's come on board. We had identified that given our 3-tier pricing strategy, we had some issues with our tech stack, which we've now changed in 5 of our platforms. We've relaunched Smoke Cartel, Dankstop, Daily High Club, Grasscity was just relaunched about a week ago and Nuleaf Naturals has also been relaunched, and we're seeing very encouraging signs. We're seeing conversion up 30% to 50%. We're seeing orders up 30%. We're up 5% quarter-over-quarter in both our business segments, which is accessories and CBD businesses showing increases. And this is prior to the potential favorable regulatory changes for the CBD industry that I was talking about initially in my prepared remarks.

So this is all resulting on the segment's consolidated drag on EBITDA also coming down, which has been the smallest in 4 quarters. And you're absolutely right, we're already seeing that momentum carrying forward into Q2 as well.

And your next question comes from the line of Bill Kirk from ROTH Capital Partners.

My first question, Canada is set to lower medical reimbursement amounts. Would you expect the recreational market and your stores to benefit from that change to the medical program?

Bill, thank you for your question. So the medical industry -- cannabis industry in Canada has been shrinking. The patient numbers have considerably gone down. And I don't think that the medical cannabis clientele is competing with the recreational cannabis industry. So I don't think that it's going to matter much. There are cannabis stores on practically every city block or every 2, 3 city blocks in the country. So the convenience factor is already there when it comes to recreational cannabis sales, and we're extremely competitive at the recreational level now even with the illicit market, although illicit market continues to make mayhem on the edible side of things, but we're very competitive, but this change on the medical side is not going to have an impact on the recreational side. I think so.

Okay. And then going back to Germany, there was a comment in the press release about more than 1 out of 7 German pharmacies are now offering cannabis. Do you have an expectation for how widely available product can become in that market as it matures?

Sure, Bill. So look, it's already exceeding our expectations in terms of how the German market is growing. It's at 227 tonnes annualized. BfArM released their Q4 data and they revised Q3 upwards. So they did 57 tonnes in Q4, which was actually the same level of imports that BfArM had previously published for Q3. And the Q4 number is up 75% year-over-year, right? So that's huge growth right there. And from a big picture perspective, the market has gone from 33 tonnes when it started in 2024 to 227 tonnes right now. So there's a lot of growth that's already happened. We're only 10% of the market right now. We think we're going to continue to increase. It's nice to see more and more pharmacies starting to offer medical cannabis products. The patient growth has also gone up from 200,000 patients to now exceeding 1 million patients in Germany. So we're very happy with where things are at. And even if growth was to slow down a little bit, I think this is a massive market already.

And your next question comes from the line of Derek Lessard from TD Cowen.

Congrats on a great quarter. I just wanted to know like given your insights into -- with your POS and your loyalty program, do you have any, I guess, at least first thoughts as to why the market may have slowed or consumption?

Derek, thank you for your question. So the market slowing a little bit could be a result of the dollars that are available in consumers' pockets. We know that there's inflationary pressures here in Canada, we know a potential recession could be looming with what's happening worldwide and just the angst in consumers' minds. And also, we do go through these phases where illicit picks up a little bit and takes a little bit of a bite of the legal market. And that we continue to see in different pockets of the country. So that is probably also making a difference. But given that we are at the forefront of the industry and a legal -- have been a leader for a very long time, I think Canna Cabana will be a disproportionate recipient when these sales come back and when this momentum comes back in the Canadian market. So I am not concerned about it.

Okay. I'd agree with that. And I guess one of your competitors did point to higher selling prices and more of a promotional period a year ago. I was just curious, too, I guess, around the potential impact of a slowdown. Do you think -- do you see any room or concern for any type of irrational competitive behavior from some of your competitors or the ones who are just kind of still trying to stay in business?

Yes, it's definitely possible, right, Derek, this is business. Business never goes up in a straight line. No competitor is the same, and there's different competitors coming and going. So we definitely feel competitive pressures. And this quarter, in particular, Q2 is the slowest quarter of the year in which we are in. And Q1 that we just finished, as we mentioned, the industry growth sales slowed overall. And some competitors try to change their strategy just to see if they can come out of it and still survive. That's not happened to date. We're going to stick to our strategy. We're not raising prices on consumers. We have been gently raising prices. As you can see over the last 5 consecutive quarters, we've had gross margin increases at the brick-and-mortar level.

But we're not going gung-ho on this and raising prices on consumers. We want to make sure it's steady and stable, and we're able to enjoy margin increases through our white label program and through ELITE versus raising store level margin increases.

And your next question comes from the line of Tom Kerr from Zacks.

Most of my questions have already been answered and asked. Just I want to follow up on new store growth in Canada. And you might have mentioned this, but with the industry slowdown, does it still make sense to do the 20, 30 stores? Or would you wait for a turnaround in the entire industry? Just how do we look at that?

Tom, thank you for your question. So look, we give a range of 20 to 30 stores. Like I mentioned in my prepared remarks, it is getting a little difficult to find organic locations where it's not redundant to our portfolio, our existing stores already. And it's also getting difficult in the sense to find organic locations where you have a superior power center, which is not surrounded by a lot of competition.

So we're being very careful in terms of where we plot these stores. Now we may be at the lower end of that target and do about 20 stores this year, but that would still be a very healthy organic same-store sales increase. We are more focused on M&A this year. So we should be able to get some M&A done this year at the brick-and-mortar level, which will not be a net increase into the market, but we'd be taking over existing stores.

Okay. Got it. One more quick one. And just on the transition or the push to get members to the ELITE subscription status. Is that marketing? Is it sales? Is it advertising? Is it more benefits? How are you going to push that?

Look, it's a little bit of everything, right? We're focused on our marketing, our sales, the advertising around it. But our consumers, our customers, our club members are genuinely seeing the value in ELITE, right? Like I said, when times are tough, as you can see right now, people are not rushing to the till to become an ELITE member or they shouldn't be rushing to a till to become an ELITE member to spend $35 a year, but they're doing that because they see the value in everyday discounts. They see that exclusive product selection is very, very good, and they're excited about it. So ELITE gets a lot of benefits, and they're seeing -- I'm very happy to see that they're seeing value in these tough times or these slow times. And I don't think that ELITE momentum is slowing down anytime soon. We were growing at 100% year-over-year last year. We're still growing at 100% year-over-year right now. And if this keeps happening, we'll be at 320,000 members in no time.

There are no further questions at this time. I will now hand the call back to Raj Grover for any closing remarks.

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

This concludes today's call. Thank you for participating. You may all disconnect.

Good morning. My name is Constantine, and I'll be your conference operator today.

At this time, I would like to welcome everyone to High Tide Inc.'s Fourth Fiscal Quarter 2025 Audited Financial and Operational Results Conference Call.

[Operator Instructions]

I will now turn the call over to your host.

Thank you, operator. Good morning, everyone. My name is Omar Khan, I'm the Chief Communications and Public Affairs Officer for High Tide Inc. Welcome High Tide's quarterly earnings call.

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, 2026, the company released financial and operational results for the fiscal year and quarter that ended October 31, 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 risk and uncertainties related to forward-looking statements, please refer to the company's press release, dated January 29, 2026, our latest Annual Information Form and our latest management's discussion and analysis, each filed with securities regulatory authorities at sedarplus.ca or on EDGAR at www.sec.gov/edgar or on the company's website, www.hightideinc.com, and which are hereby incorporated for 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 to place -- 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 analysis filed on SEDAR+ and EDGAR.

It is now my pleasure to introduce Mr. Raj Grover, President and Chief Executive Officer of High Tide Inc.

Thank you. Mr. Grover, you may begin.

Thank you, Omar, and good morning, everyone. Welcome to High Tide Inc's. financial results conference call for the fourth fiscal quarter that ended October 31, 2025. I'll begin with some high-level comments about the quarter and our strategy before Mayank dives deeper into the financials.

Looking at the numbers, what a way to cap off fiscal 2025. Last night, we reported stellar Q4 results featuring record revenue of $164 million and annual revenue run rate exceeding $650 million and record adjusted EBITDA of $12.4 million.

Once again, our core Bricks-and-mortar segment led the way. Same-store sales growth of 5.5% helped drive 15% growth in the segment year-over-year and increased gross margins led to a record adjusted EBITDA margin of 9.4%. our bricks-and-mortar adjusted EBITDA annual run rate now exceeds $56 million.

Regarding footprint expansion, we added another 27 stores during calendar 2025, all organically. Once again, we met the higher end of the target we established at the start of the year to add 20 to 30 locations. Our goal for calendar 2026 is to add another 20 to 30 new stores. Clearly, we are not afraid of organic growth. While newer stores are taking longer to mature due to increased competition, given the strength of our brand and our commitment to only high-quality locations, we believe organic growth provides excellent ROI for our shareholders.

Our new store pipeline remains robust with 15 Tier 1 locations currently under development, particularly in Ontario, but we are also in talks with operators of various sizes regarding M&A possibilities.

The other thing I would like to highlight is how for our second straight year, our impressive organic growth of store build-outs was financed entirely by internally generated free cash flow which totaled $12 million for the fiscal year, meeting our stated objective of remaining positive.

Our retail KPIs remain truly impressive. Excluding stores opened less than 6 months, which are still ramping up, our annualized revenue per square foot in Q4 was $1,775 once again above many leading blue-chip retailers. Much of this strength can be attributed to the strength of our Cabana Club loyalty program, which keeps expanding. We are now at 2.5 million members in Canada, up 45% year-over-year, growing at the fastest rate in 4 quarters. Recall that since our last conference call, we raised our long-term target to reach 3 million Cabana Club members nationwide.

Our Canadian ELITE member count now sits at 151,000, up 107% year-over-year. Once again, our pace of onboarding new members was the fastest since we launched the ELITE tier in November 2022.

October 2025 was the end of our fiscal year, and it also marked the 4-year anniversary of the launch of our innovative discount club model, and the results have been nothing short of phenomenal. We outperformed our peers month in and month out, and this delta has been compounding during this time. Chaining our monthly same-store sales increases, we are up 151% during this 4-year period.

In contrast, total sales in the 5 provinces where we operate are up only 23%. And with the increase in the number of stores, the average operator is down 14%. In October, the average Canna Cabana store was on an annual revenue run rate of $2.6 million, which was 2.2x our peer average at $1.2 million. In Ontario, the largest province and focus for future growth, our outperformance was even more pronounced. Excluding stores opened less than 6 months, which are still ramping up, our average Ontario store was on a $3 million annual run rate, which was 2.6x our peers at $1.1 million. This outperformance has led to increasing market share. For the fourth fiscal quarter of 2025, Canna Cabana had a 12% market share in the 5 provinces where we operate, up from 11% a year ago.

The world has changed so much since we held a 5% market share 4 years ago. And while our share has risen, our overall growth continues to outperform the market. For the 12 months ended October 31, 2025, total industry sales in the 5 provinces where we operate were up 4% year-over-year. In contrast, total Canna Cabana sales were up 16% during this period. This underscores the strong degree to which customers see the value of our offering, and this outperformance is also being noticed by licensed producers, large and small.

Media Company, Rebel & Thorn recently prepared a report highlighting retailer insights for the Canadian cannabis industry, which really showcases Canna Cabana's strong positioning within it. The report found that Canna Cabana leads the pack in consumer awareness with 29% awareness across the country, #1 nationally and in almost every province where we operate.

Similar to our financial and operational metrics, awareness among consumers of our brand has been climbing steadily for the past several years, while our main competitors, many of whom have went through CCAA proceedings and closed stores have largely stagnated or decline on this metric.

In terms of shopping frequency, the report found that 16% of all consumers nationally cited Canna cabana as the store where they shop most often. Not only was this the highest level among our peers, we scored twice as high as the next closest brand. I'm even prouder at our outperformance when digging deeper into the data. When isolating only daily users of cannabis, our bread and butter customer, 49% of them named Canna Cabana as the location they shop most often at.

Again, this was by far the highest among our peers and about twice the level of our next closest competitor. This is a customer group that moves the market, and they choose Canna Cabana by a wide margin. Thanks to the strength of our model, the real estate we have carefully selected and secured and the operational excellence of our team, we are competing with brands, in many cases, much better capitalized than us, and we are winning.

The macro picture of the industry also continues to improve in terms of our positioning and relative ability to service customers. The retail shakeout we have expected for some time is finally happening with struggling competitors fading away rather than renew leases.

For example, over the past 12 months, we've increased our Alberta store count by 10%, while at the same time, excluding us, the rest of the province has seen a 5% contraction in the number of stores. In Ontario, where our stores outperformed peers by 2.6x in terms of revenue, we have boosted our store count by 27% over the past 12 months, accounting for effectively all of the growth in the province as the rest of the industry combined has remained flat. We have 218 stores opened across the country today, more than any other cannabis retail brand, and we reiterate our goal of exceeding 350 locations. So there is no doubt that it is full steam ahead in our base Canadian bricks-and-motor business.

Now I'd like to address our other operations. Q4 marks the first quarter with some contribution from Remexian following the acquisition of a majority stake in the company in September. We remain very excited regarding this transaction. You'll recall that we spent a considerable amount of time declaring our intention to enter the fast-growing German medical cannabis market, meeting many players evaluating the suitability of each, performing due diligence on what is a fluid situation in many respects, negotiating a deal that makes sense for our shareholders, and securing the required financial outlay. In typical High Tide fashion, we got it done.

We acquired 51% of Remexian one of the largest, and in our opinion, the best medical cannabis importer and distributor in Germany, and we have a call option to acquire the remaining 49%. In less than 2 months, Remexian contributed almost $10 million of revenue to our results, an impressive feat considering the temporary dynamics. In particular, during our due diligence period in the summer, Remexian began experiencing delays in product releases from Portugal, where many German distributors first sent biomass to be processed.

As a result, revenue and gross margins were below the run rate Remexian had previously generated. We expect this to continue for a few more months until the remaining biomass in Portugal, some of which is up to 10 months old churns through the system. We definitely believe we are nearing the tail end of this legacy situation.

While we view this as a short-term blip, we made note of this issue in our negotiations as well as the possibility that the German government may enact a new law governing medical cannabis. As a result, we incorporated various protections for High Tide shareholders, not the least of which is the acquisition multiple of just 3.6x, very accretive for our shareholders, and truly remarkable for a company exhibiting as much growth as Remexian.

Our new partners truly appreciate it that if High Tide owns 51% of the company, with all the benefits we can bring to the business, notably our relationships and experience in procurement, we can help meaningfully increase the value of the remaining 49% in the future. We also made sure we set the valuation multiple on the future EBITDA from now at 3.6x or 4x depending on the timing and option is triggered. As a result, we have already baked in the future accretion for our shareholders regarding when the second half of Remexian may be acquired.

I'm very pleased with how the integration of Remexian has been going post-closing and for our growth prospects moving together going forward. Much of the rationale for the transaction was that given our track record, having sold $2.1 billion of cannabis to date, we have a unique ability to leverage top-tier relationships with licensed producers of various sizes to procure the best quality cannabis on best-in-class terms. I can say that operationally, this is already bearing fruit.

We recently hosted the Remexian team to tour many licensed producer sites and we have already signed agreements to acquire quality biomass from leading producers at prices meaningfully below what Remexian was able to procure on their own. The strategy is working, and we should become evident -- it should become evident in our future results as the legacy biomass clears and this new lower-cost product begins to cycle through the system.

Regarding the situation in Portugal, one of the first things we started doing even before the transaction closed was to diversify our list of potential processing partners so that we are no longer as vulnerable regarding our supply chain. The encouraging news is that biomass has begun trickling out at a faster pace in recent months. In particular, we were encouraged by shipments in December, which resulted in our second best month in terms of tonnage sold. While we still have a meaningful amount of product stuck in Portugal, given our expectation that the speed of future shipments will accelerate, the fact that we have diversified our potential processing partners and our ability to earn higher gross margins, given our relationships with licensed producers, we expect Remexian to be a large contributor to our financial profile in the quarters in the second half of the fiscal year.

Further, while we are working on getting Remexian running at full speed, we know that our European ambitions are not just limited to Germany. For example, the United Kingdom's medical cannabis market has been growing at an exponential pace, and we expect to make sales in that market in the second half of this year.

Let's turn to the United States. Like most of the cannabis industry, we were very excited by U.S. President Donald Trump's Executive Order on December 18, advancing the rescheduling of cannabis. We've received inbounds from multiple large U.S. operators offering to explore the full range of how we can work together. While we caution that it is still early in our process, we are encouraged with what we see so far and for the prospects of being a meaningful player in the U.S. much sooner than we would have predicted a few months ago.

One area regarding President Trump's announcements where we were among a handful of companies to potentially benefit was regarding the language surrounding CBD. We are anticipating the launch of a pilot program under Medicare, where seniors would be eligible to get coverage for -- purchase for up to $500 of CBD products a year. If enacted, this has the potential to be a game changer for our 2 existing U.S. CBD brands, Nuleaf Naturals and FAB CBD.

You'll recall that on our last quarterly update, we had disclosed our intention to explore a meaningful change in our U.S. e-commerce business such as a joint venture, outright sale, et cetera. We are in talks with various parties regarding possible transactions. However, given this encouraging development and potential it can offer, we are slow playing entering into any such agreements, until we get more information as to how things may actually play out in terms of new regulations and the ability to revitalize our e-commerce segment ourselves.

In conclusion, I'm very happy with our Q4 results and fiscal 2025 as a whole. We added 27 stores, while the rest of the landscape was shrinking, set revenue records to now exceed a $650 million run rate, set another adjusted EBITDA record and still generated meaningful free cash flow. None of this could have been done without our amazing team that works hard day in, day out to make this all happen.

I'd like to share a tidbit that many investors may not be familiar with, which I believe really illustrates the strength of our team and the can-do attitude we all have as High Tiders. In October, there was a government employee strike in British Columbia, which crippled the ability of cannabis stores to get product to serve customers across the province. The result was devastating for retail sales with total industry sales down 55% in BC versus September, even after benefiting from an extra day.

In contrast, our team was able to work the supply chain, leverage our long-standing relationships and find ways to keep product on the shelf. As a result, our BC stores were down only 5% sequentially in October. While the specific example of outperformance was an isolated incident, it helps showcase our superior team's ability to navigate crisis and outperform. And I'm sure our customers appreciated it, which should lead to increasing loyalty in the quarters ahead.

With that, I'll turn it over to Mayank for his comments and a deeper dive into the numbers.

Thank you, Raj, and hello, everyone. Q4 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 Q4 was an all-time high of $164 million, up 19% year-over-year and 10% sequentially. Our bricks-and-mortar segment led the way, up 15% year-over-year, driven by our strong same-store sales of 5.5% and the addition of more stores.

In addition to the 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 $13.1 million in Q4, up 20% year-over-year and up 9% sequentially.

Consolidated gross margins were 26% in Q4 consistent with Q4 last year and just below 27% sequentially. Most importantly, we were able to post sequential gains in our core brick-and-mortar segment for the fourth straight quarter.

Turning to expenses. Salary and wages represented 11.5% of revenue in Q4 versus 12.4% a year ago and 12.2% sequentially, marking our lowest level in 9 quarters. This was due to the leverage seen in store growth as incremental new stores don't require more head office overheads as well as the addition of Remexian. General and administrative expenses represented 4.3% of revenue in Q4, consistent with 4.2% a year ago and 4.4% sequentially.

Adjusted EBITDA was $12.4 million for the quarter. This was truly impressive, growing 51% year-over-year and up 17% sequentially. The star of the show here was, once again, our core bricks-and-mortar segment. Highlighting our strong cost controls, the 0.7% sequential increase in gross margin followed by all the way down to a 0.7% sequential increase in adjusted EBITDA margin. Our adjusted EBITDA margins hit a new record of 9.4% this quarter, and we posted a record adjusted EBITDA for this segment of $14.1 million.

There were 2 noncash items I would like to address, which impacted our Q4 results. The first was relating to our e-commerce business. As you know, this segment has experienced struggles in recent quarter. As a result, our annual impairment testing, we determined that an impairment of $23.6 million was required relating to goodwill and other intangible assets allocated to this segment. While we are not happy with this impairment, the silver lining is that all intangibles and goodwill relating to the e-commerce segment have been written off. Further, as Raj outlined, we are cautiously optimistic regarding the prospect for a rebound in the segment's performance in the future, particularly, on the CBD side, given the proposed regulatory changes in the United States.

Additionally, there was a $23.5 million loss on change in the fair value of derivative liability in the quarter. This was as a result of 2 items, both of which, while positive in nature, resulted in paper losses on our financials for IFRS purposes.

First, our share price rose 44% during the fourth fiscal quarter, which resulted in a charge relating to the value of the warrants we have outstanding.

Second, and significantly more meaningful in terms of the financial impact, we reforecasted the outlook ahead for Remexian, which we believe has improved since the closing of the acquisition, given the traction we are already seeing in potential synergies including leveraging High Tide's relationships and ability to source product at lower cost than Remexian could have independently. Given the improved projection for Remexian EBITDA, the corresponding put option liability their shareholders have for the remaining 49% was deemed to be but more, resulting in a non-cash fair value change of derivative liability charged on our P&L.

Adjusting for these non-cash charges, net income was positive $1.4 million or positive $0.02 per fully diluted share. While the above 2 items have to be reported for IFRS accounting purposes, in our view, the flaws of physical cash tell a more accurate picture of how the underlying business is performing. High Tide generated $1.3 million of free cash flow in Q4, while this was below the $5.9 million in Q4 last year and $7.7 million last quarter. This was mostly due to this quarter requiring a working capital investment of $2.3 million, while the other periods benefited by working capital being a source of cash of $3.5 million and $2.4 million, respectively.

We have cautioned that working capital can vary in any given quarter, and that investors need to focus on this metric on a longer period. To that end, when looking at the fiscal year, we generated $12 million of free cash flow, meeting our goal to be positive for the year and then some.

We continue to have a strong balance sheet. As of today, at the High Tide level total debt stands at $65.5 million. We had $47.9 million in cash and cash equivalent at the end of the quarter, and we are well positioned with no upcoming maturities for over 2 years.

In closing, Q4 was another great quarter for High Tide. We continue to excel and lead our peers in our core businesses. We are growing while they are shrinking and our customers are becoming more and more aware of us and choosing us as they go to banner. We are generating free cash flow, which is fueling the expansion of our store network, and I'm very excited for the contribution Remexian will bring in the quarters ahead. Thanks to our amazing team, without whom none of this would be possible.

With that, I will now turn the call over to the operator to open the line for the question-and-answer session. Thank you.

[Operator Instructions] Your first question comes from the line of Neal Gilmer from Haywood Securities.

Congrats on a good quarter. Raj, I guess I just wanted to dive a little bit deeper into your comments with respect to Germany and the inventory that you're trying to work through. It sounds like it sees another couple of months. So I guess we'll see a bit of an impact in Q1 when you report that. And through Q1, did you sort of have to continue to sell this at the margin that we saw for the first couple of months that you had Remexian under your control?

Thank you very much for your question. So look, the Portugal issue definitely impacted our Q4 results. And while things are getting better, it'll have some impact on Q1 as well. Despite that, we still had record adjusted EBITDA.

Compared to the normal cycle of business revenue and gross margins, we know that we're going to have to plan for this, and we have done that. We had close to 16, 17 tons sitting in Portugal, Neal, when we first acquired the business. We're down to about half of that or a little bit less than half of that. And things are picking up pace.

Like we said, December was the second highest month in tonnage after June. June was 2.9 tons. December was 2.6 tons. And we've had to sell this biomass which is like 3, 4 weeks away from expiry. That is how it's getting released from Portugal, where export permits are being issued. But Infarmed, the authority there is only releasing a biomass that is closer to expiry.

So once we're behind this particular issue of existing inventory in Portugal, I see green pastures ahead. I'm ultra excited about this business. This may continue. We're already procuring biomass here 30%, 40% less than what Remexian was doing. So the opportunity is endless, especially, when adjacent markets to Germany are opening up. So you're absolutely right. Q1, we're going to feel similar pressures. It will trickle into a couple more months into Q2.

But then I think we have super green pastures ahead from Q3 onwards. In fact, end of Q2 or even mid-Q2, things could get very interesting. We've already sourced about 5, 6 tons ourselves since we purchased Remexian. But none of that biomass actually makes it to Germany until March first week. And the reasoning behind this is that we have to qualify every single one of our LPs with the processors, and that process takes 2 to 3 months. And the supply chain when it's first initially set up, it does take 3 to 4 months to just set it up.

But what we've done, Neal, to avoid this issue, Remexian was very dependent on Portugal. They were working with various processes in Portugal. I believe 5. But all of them face the music when the slowdown happened because of a couple of bad actors. So what we've done is we've opened up our supply chain through Malta. The first shipment should hit end of February or beginning of March. We've opened up our supply routes to Czech Republic or Czechia. We've already received a couple of shipments from Czechia that we were able to reroute from Portugal. And now we've also opened up things in Germany directly, which will be opened up in March. So we've got 3 additional supply chain routes open. This just makes me more bullish on the business.

We paid 3.64x for this business, and Portugal was one big reason we were able to negotiate such a low multiple for this business. The growth that this business is demonstrating is exponential. And for us to get it at that multiple is highly, highly attractive and accretive for our shareholders. And this is extremely short-term blip. I remain very bullish on this business. So we're talking about end of Q1, beginning of Q2, things should start looking a lot better.

I appreciate that color. That's helpful. I guess the other question for me comes back to the bricks-and-mortar business here in Canada. Obviously, what helped you achieve that record EBITDA? Was that continued to expanding gross margins in that business to, I think it's about 27.5% from 26.7%, I think it was in Q3. How should we think about that? Like do you have more room for that? Is that -- I guess, it's partly driven by some of the white label sales, I assume carries a little bit higher margin, but just sort of wondering how we should be thinking about the fluctuations in that margin. Not like on a quarter-to-quarter basis, I understand that goes up and down, but just sort of on a year-to-year basis?

Yes, absolutely, Neal. Look, we've had 4 consecutive quarters of margin increases in our core bricks-and-mortar segment, which generates 92% of our revenue. 4 straight quarters of margin increases, and it's absolutely being driven by ELITE sales. It's being driven by same-store sales growth. It's being driven by our white label portfolio and just the strength of our brand overall in Canada.

I mean I was so impressed that we grew -- our same-store sales grew 5.5% again. And our bricks-and-mortar revenue is up 15% year-over-year. I mean, this is mature state in Canada, we're talking about. We're talking about 7, 7.5 years after legalization. And we can still grow our brick-and-mortar revenue in one of the most competitive cannabis markets in the world at 15% year-over-year, and that's 92% of our business. I will take this any day.

So we remain very bullish. The more time we are in the market, the more stores we plant. Our brand is so potent and so powerful that I can literally place it, provided we have the best location, which we never sacrifice on. I can literally place it in the middle of competition and the juice flow starts flowing back to us. So I don't think that changes at all. Neal, we hit 9.4% as brick-and-mortar adjusted EBITDA margin, which was a new record for us. And our brick and mortar is on an annual run rate of EBITDA of $56 million now.

So exponential opportunity still lies ahead because we can get to 350 stores, minimum. I think we will exceed that number. We continue to raise this bar. We said we're going to have 250 stores, and we raised it to 300 stores. Now we're 350 stores. I feel that we can just keep going because our business is so strong. And we can literally replicate this model in the rest of the cannabis world as well when the opportunity comes because we've rehearsed and we practice this model really well. And there's nothing like this that exists anywhere else, Neal.

One main thing that's driving all of this success is our Cabana Club. Cabana Club reached 2.5 million members in Canada, up 45% year-over-year and the fastest pace of growth in 4 quarters. Same with ELITE. ELITE membership reached 151,000 in Canada, up 107% year-over-year, and it's the fastest pace of onboarding since inception. So we keep talking about this every single quarter. And this is going to continue. I don't think we're going to be stopped in this regard. Our club is exploding to grow 45% year-over-year after 7 years of legalization is very, very heartening.

Your next question comes from the line of Frederico Gomes from ATB Capital Markets.

Congrats on the great quarter here. Raj, you made a comment about new stores. You continue to open them, but they take a little bit longer now to mature because of increased competition. At the same time, you're posting excellent same-store sales growth consistently. So can you just help us square those 2 comments in terms of the stores taking longer to mature at the same time, your existing store base continues to grow very healthily.

Fred, thank you so much for your question. So look, 7 years into legalization, of course, stores are taking longer to ramp up because things are competitive in Canada, right? We've got to first find an area where we don't operate currently. Then we got to find the best location in that area because you can almost count on it that there's going to be other competitors around it.

If you go back to 2021, we were ramping up twice as fast as we are ramping up right now. But one thing you can be rest assured that we are going to ramp up to our average run rates and the weaker operators with the weaker locations are all going to start phasing out. And we're starting to see this now, Fred. You and I have talked about it for years that when is the impact really going to be felt, it's being felt now.

Alberta is experiencing negative store growth outside of us, we grew 10% in a year, while the overall province experienced negative growth. We were all of the growth in Ontario, Canada's largest province where the rest of the industry remained flat. So even though all of this is happening, because our model is so strong, our same-store sales just keep on chugging along.

A lot of our customers refer us by word-of-mouth to their friends, their family because they're seeing tremendous value, and it's just not available anywhere else in Canada. And if anyone tried to replicate our model, which many have tried and failed, we're so far ahead now and we're so far dominating now, I don't think anyone will be able to catch up with us. I am genuinely surprised that same-store sales in Q3, 7%, 5.5% right now in Q4, if it was a bit more timid than this, I wouldn't mind it. But this is just excellent. So I think this will continue Fred. I don't see signs of it stopping right now.

Appreciate that. And then just to follow up on that in terms of do you see competitors exiting, struggling. How is the M&A environment looking like at this point? Do you see any chance of maybe executing on a large-scale transaction of stores in Canada anytime soon?

Yes, absolutely. So what's happening here is that the smaller players, Fred, the independents with the one-off stores or a couple of stores are definitely facing the music. And they're phasing out of the market and not renewing their leases. But remember, these were bad quality locations to begin with. These were street front stores, not strategic at all, in the middle of the action with 10 other operators. Those locations just don't work. So we have to just stay on the sidelines and let that all play out and let people get out.

On the other hand, I think this year would be very special for High Tide. I don't want to put the cart ahead with the horse, but we are speaking with blocks of 40, 50 and may be even larger. So we can, like, we're still coming to 20 to 30 stores organic growth, but I think you can count on some M&A this year. I think multiple groups have realized that High Tide is here to stay and Canna Cabana is here to stay and win. And they want to join the High Tide family. And not just we are approaching the outside world in a more aggressive way to just take the market, take the bull by horns and just wrap this up relatively quickly. We're getting a lot of inbound action too as well now, that just want to join the Canna Cabana High Tide family.

So I think we'll be able to share some exciting news during this year. We are working on a lot. So stay tuned on that.

Your next question comes from the line of Bill Kirk from ROTH Capital Partners.

So to try to market their brands, LPs talk about how they need to work with budtenders, your budtenders to help them. So can you remind us, Raj, what your budtender education and training programs look like? And how can you capitalize on the assets that they are, especially as the LPs want to get in front of them to try to help their brands. Hopefully, you guys got that. Did I get cut off?

I'm sorry, Bill, do you hear me now? You hear me?

I do, yes. I do, yes, I hear you, Raj.

Okay. Okay. Perfect. So Bill, I was just saying that it was great chatting with you at ICR, and here our conversation continues.

So Bill, what we do is we put a lot of emphasis into our budtender engagement. One of the most important things, although we are a discount retailer and people sometimes think about discount and they think that discount retail cannot give a quality experience. The Cabana level experience is opposite of that. We are all of it. We're beautiful stores. We're open refreshing layout, retail focused, and our budtenders are very engaged with our customers.

So we give them a robust level of training, not only in the physical stores where we hire them up to 1 month in advance, then when they actually start their position, we put them in multiple stores just to get them exposure of customers and learn about sales in real time, just to train them for 2 to 3 days in their new location, we do that.

And we have a Cabana learning portal online that they must all pass and continue to pass every quarter. So we put a lot of emphasis into training because we want to wow our customers, our loyal club members, not just by exciting products and the lowest prices guaranteed, but really provide them that Cabana level service for what they're really looking forward to and how we can make their day better. So all of that is already happening.

You're right, many LPs do try to approach our budtenders and try to position their products. But we are centralized in terms of how we do our product assortment. It's not based on what one store manager wants. People can get influenced by license producers. So we don't allow that to happen. We're very centralized in our ordering. And typically, this is not an issue that comes up in our organization at all.

Awesome. And I wanted to follow up on Remexian. You gave us those highlights of improvements in December, what are you seeing in January? So December was better. Have you seen more of that continuing in January?

Yes. So look, I have the numbers for January. We're slightly lower than December, but were much higher than September, October and November, right? So things have definitely turned. We know it's going in the right direction now. However, we do have some remaining biomass in Portugal, and this biomass is being sold in its single-digit gross margins. Imagine selling cannabis after 10 months and still being able to sell it over cost. That's how much an amazing distribution network Remexian has and what they've built. So we are very bullish.

If I could get them 4 tons of cannabis, guess what, they're selling 4 tons of cannabis. And we're very sure that we can get cannabis gross margin profile, medical cannabis distribution profile north of 23%, 24%. I think it'll be the high mid-20s in the second half of the year when we get all this fresh biomass. We've already purchased close to 5 tons here in Canada, and I am very excited about the prices that we are procuring them at.

Remexian has not seen such pricing, and this is just the beginning. Every producer wants to work with us. We actually also have some partners from U.K. We reached out to all of them and now we are in regular contact with them and what we're hearing is they can believe the prices that we are offering them and we're going to start selling into the U.K. as well.

It won't happen immediately. Again, there's supply chain qualifications that we need, which takes 2 to 3 months to set it all up, but we are very sure that we can do it even before the second half of this fiscal year, maybe even in Q2, make our first sale in the U.K. market. And once again, what we have in our hands in Canada is attractive for people in Poland, for groups in the U.K. or Germany, France and Spain are going to open up and we want to be the preeminent distributor in Europe. So getting past the noise of Q1, remember this multiple was already baked in. We paid just 3.6, 4x for this business. It was worth a lot more.

But we paid that because of this Portugal slowdown. So we got to get through it. And also the looming German law change. And we disclosed all of this to our investors prior to buying the business. You don't buy a business for 2, 3, 4, 6 months. You buy a business for the long term, and I cannot tell you how bullish I am on the prospects of Remexian long term.

Your next question comes from the line of Michael Kim from Zacks Small Capital Research.

So first, just assuming rescheduling ultimately goes through here in the U.S. Just curious if you could sort of flesh out how some of these potential strategic partnerships or licensing agreements, sort of how they might look like? And then related to that, would you expect the competitive backdrop to shifts as maybe more noncannabis pharmaceutical companies or consumer firms potentially look to invest or partner with U.S. players?

Michael, thank you so much for your question. So look, yes, we are seeing a lot of inbound interest from U.S. operators who are recognizing our leadership positioning here in Canada and exploring ways to partner up with us in the U.S., given the apparent regulatory shift. We think rescheduling news could be out next month. So we're getting pretty close to it.

And look, we're evaluating all options across the spectrum on how we can work together from licensing agreements to full-blown mergers. Although it's still early days, and we're proceeding with caution. Things are looking fantastic here in Canada and we're looking forward to getting our German operation running full speed.

So we've got a great thing going. As much as we want to be a meaningful player in the U.S., we don't want to rush. So we will take our time to evaluate potential structures and partners, while keeping an eye on how regulations develop. And make sure that we select the most optimal move at the right time for our shareholders, just like I believe we did in Germany.

The other factor regarding rescheduling, which I think has flown under the radar in terms of market appreciation is the potential degree to which the proposed changes to CBD can be a game changer for Nuleaf and FAB.

And then I think your second part of the question was, do I see outside players outside of cannabis entering due to rescheduling? I don't, at the moment, I don't. I think cannabis industry is going to be able to capitalize on this momentum. I don't think we face a very significant risk from outside operators, but hey, look, operators like ourselves, the Canadian operators could be getting interested into the U.S. market. Some German operators could be getting interested. So the market will expand, but I think it will remain amongst industry insiders.

Got it. That makes a lot of sense. And then maybe just a follow-up on sort of the M&A discussion. Just maybe curious to get your take on potential tax and banking reform here in the U.S., how that might shift the competitive environment? And then how that might impact valuations from a from a potential transaction multiple perspective?

Sure. So at the moment, we are focused on M&A in Canada and not in the U.S. And even given that rescheduling is at the doorstep, you can see the multiples at where U.S. MSOs are trading at. It's all quite miserable, to be honest, Michael. So M&A can -- it can't really pick up steam and multiples are that depressed for large U.S. operators. Thankfully, we're busy in Canada. We're still playing here. But like I said, multiple U.S. operators have reached out. Some of them very, very large and they're very interested in seeing what we can do together.

And when Canna Cabana turns on its M&A engine in the U.S., I think we'll be able to roll up and consolidate more players than the U.S. operators that are -- just have regular retail platforms because we offer something very different, and we offer something very attractive, and it's not gone unnoticed with even some of the very large players in the U.S. So given that the tax reform, we are going to experience, capital should definitely flow back a little bit more into the U.S. market. It's been very dismal.

We don't have any capital constraints here in Canada. We've been able to raise capital at attractive terms. But the U.S. players have been -- are have been having problems with that. So I don't think M&A activity will pick up very aggressively. But you never know. After rescheduling the industry should be on the right footing and move forward in the right light.

[Operator Instructions] Your next question comes from the line of Eric Zhu from Canaccord Genuity.

This is Eric on for Luke Hannan. I just have like a very quick -- I guess 2 questions. First one is on Germany. I noticed you've opened new Canna Cabana in Germany. And just wanted to ask about what's your strategy there, currently selling accessories I believe? And what's the early performance there, if there's any more new stores planned? That's the first one.

Eric, thank you so much for your question. So Germany, we just planted our flag with the first Canna Cabana store. We had some certain permitting issues, which are getting course corrected and the stores should be live again in 1 week or so or about 2 weeks.

But remember, that store is only selling accessories. The stores -- the sales are going to be very minimal in that regard. That was more symbolic. That was us more getting native with the market, and it was also secured because we've applied for these pilot projects where we could secure retail licenses. But the chances of those pilot projects going through are very slim. So I wouldn't want to get anybody's hopes up. So the numbers we expect to yield out of these stores are very minimal in nature.

Our real focus in Germany remains Remexian. But because the Canna Cabana brand is starting to get native in Germany, I think that will lead to an added advantage going forward, when we are able to start building retail stores in Germany, which will always remain the forefront of our strategy. Remember, we are cannabis retailers first. The medical cannabis distribution is very, very exciting. And I think we're going to be fantastic players with a significant market share in that business.

But the Canna Cabana concept is so unique that we just wanted to enter a market like Germany, plant our flag there and just wait for the right time and the right opportunity to come. So we're already positioned in that market.

Makes sense. It's definitely nice to have the optionality.

And my second question is related to the Cabana Club membership program and the ELITE program. Since they have been growing at historical speeds, has there been any changes to your marketing strategy or the unit economics on the 2 membership programs? And maybe if there's any metrics that you can share with us, penetration, average order value frequency, et cetera?

Yes. So look, Eric, I'm so pleased. I was just talking to Neal about this, that our Cabana Club is absolutely exploding. We had 2.5 million members in Canada, up 45% year-over-year. And this was not the pace that we were -- our team was expecting. If this grows at 20% a year, that's a wow number. We're talking about almost 50% growth year-over-year.

So I don't think that slows down. I did in my prepared remarks, I did talk about how potent our brand is, how daily users of cannabis are choosing us. 49% of them, how we are so dominant nationally. We're the most recognized brand. We have 29% recognition nationally, which is twice as much higher than our next closest competitor. So you can see the delta there.

And then our program is so unique to our ELITE membership, where the loyalty loop is getting even more stickier. We have 151,000 ELITE members in Canada now, which also continues to grow at the fastest pace of onboarding since inception. It's up 107% year-over-year. And ELITE member tends to come shop more often with us. Their baskets are much larger. Think about this, when you're an Amazon member and you're paying your Prime Membership fees, or you're paying for Costco membership fees, you're buying at Amazon and you're automatically going to Costco and purchasing your stuff. This is exactly what is starting to happen at Canna Cabana.

The loyalty in our ecosystem has become so strong. It's actually the driver of all of it. Of course, combined with our very, very good locations that we never sacrifice on. So I think this trend will continue. It's showing us no signs of slowing down. It's actually exceeding all our expectations.

Ladies and gentlemen, there are no further questions at this time. So I'd like to turn the call back over to Mr. Raj Grover for closing comments. Sir, please go ahead.

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

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

Good morning. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the High Tide Third Quarter 2025 Financial Results Conference Call. [Operator Instructions].

Mr. Brownlee, you may begin your conference.

Thank you, Jenny. 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 September 15, 2025, the company released unaudited financial and operational results for the fiscal quarter that ended July 31, 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 September 15, 2025, our latest Annual Information Form and our latest management's discussion and analysis, each filed with securities regulatory authorities at sedarplus.ca or an EDGAR at sec.gov/edgar or on the company's website at hightideinc.com, and 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-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 third fiscal quarter ended July 31, 2025. I'll begin with some high-level comments on the quarter and our strategy before Mayank takes you through the details.

I'm very proud to present what was truly the strongest quarter in High Tide's history. Driven by the continued strength of our bricks-and-mortar business, every major metric showed meaningful gains this quarter with many setting new all-time records. To highlight just a few, revenue reached a record high, putting us essentially at a $600 million annual run rate. Bricks-and-mortar revenue was a record, up 18% year-over-year, representing the fastest pace of growth since we started disclosing the segment 2 years ago.

Same-store sales growth accelerated to 7.4%, also our fastest pace in 2 years, extending our multiyear streak of outperformance versus peers. Since launching our innovative discount club model in October 2021, same-store sales at Canna Cabana have increased 137%, while the average operator has declined by 2%. Looking ahead into Q4, our same-store sales showed no signs of slowing down.

Canna Cabana's market share across our 5 operating provinces reached 12% during the first 2 months of the quarter, our highest level since the early days of legalization. Gross margin dollars climbed to a record $40.1 million, up 13% year-over-year. Gross margin percentage was 27%, supported by bricks-and-mortar gross margins, which rose sequentially for the third straight quarter, tying their all-time high.

Adjusted EBITDA was a record $10.6 million, up 11% year-over-year. Bricks-and-motor adjusted EBITDA was $12.7 million, an all-time high, up 42% year-over-year and the fastest pace of growth in 6 quarters. Bricks-and-mortar adjusted EBITDA margin of 8.7% was up 1.4 percentage points year-over-year, reaching its highest level in 2 years. Income from operations reached a record $3.7 million, up 22% year-over-year, while net income turned positive at $832,000, a sharp turnaround from a $2.8 million net loss in Q2.

Free cash flow of $7.7 million grew 148% year-over-year and reached the second highest level since we began disclosing this metric 11 quarters ago. We are now at 2.15 million Cabana Club members in Canada, up 39% year-over-year to a new record. Canadian ELITE membership stands at 115,000 today, up 102% year-over-year and represented the fastest pace of onboarding since we launched the program in late November 2022.

Now with 207 Canna Cabana locations in Canada, the largest cannabis retail brand in the country and still rapidly growing, there's no question that our bricks-and-mortar business is performing exceptionally. We are the envy of the industry running full steam ahead. And with our recently closed acquisition of a majority interest in Remexian, we have added a tremendous German opportunity to our operations and growth prospects. This transaction reflects a disciplined shareholder-first approach, intelligent, prudent and designed to generate superior returns.

Having tracked Germany's sizable and accelerating medical cannabis market for some time, we announced our intention to enter earlier this year. Since then, we've been approached by multiple potential partners eager to collaborate, but after carefully evaluating all opportunities, we chose Remexian for their scale, profitability, cultural alignment and willingness to transact at a fair multiple that keeps all sides aligned and incentivized for future growth.

Remexian is already a leader in Germany, importing cannabis from around the world and distributing to hundreds of pharmacies and wholesalers. For the 6 months ended March 2025, the company generated annualized revenue of EUR 70 million and adjusted EBITDA of EUR 15 million, numbers that immediately add meaningful heft to our already-stellar business.

Our stated German strategy is simple and our positioning is unmatched. High Tide has now sold more federally legal cannabis than any company on the planet, over $1.9 billion to date. Already being the largest customer of most licensed producers here in Canada, we plan to leverage these relationships and have them channel their German medical cannabis shipments to us and our network instead of smaller, lesser-known distributors in Germany.

What started out as a theory has already gained more traction than we anticipated. The response from licensed producers has been overwhelming with dozens already committing to ship through High Tide, many on an exclusive basis. While suppliers pressed us on timing, we stress that finding, negotiating and executing the right transaction takes time. That day is now here. Our operations team is already in Germany working on integration and growth plans, and I'll be traveling from our head office in Calgary tomorrow to join them.

With so many licensed producers already lined up to send their production through us, we felt we had sufficiently derisked our business model, giving us the confidence to enter a larger transaction with a much bigger partner than initially considered. Remexian is a significant player and market leader having sold 7 tons of cannabis in calendar Q2, representing 16% of all imports into Germany. This puts High Tide in a tremendous position in the 2 largest federally legal cannabis markets on earth, 12% market share in Canada and now 16% in Germany.

We always said we aim to be global leaders in cannabis, and here we are having executed on that plan without growing a single gram ourselves. Of course, while we welcome the Remexian team to the High Tide family, our goal is to grow our market share together in Germany. High Tide will leverage its existing relationships with licensed producers of all sizes to source large volumes of high-quality cannabis at best-in-class terms, while Remexian broadens its distribution capabilities to turn the supply into revenue.

Looking ahead, the opportunity is enormous. Only 1/3 of Remexian supply is currently source from Canada compared to 45% of total imports into Germany. Leveraging our LP relationships, we see a clear path to increasing Canadian sourcing to 50% to 60% while continuing to build on Remexian's strong global supply chain. At the same time, we are focused on curating the largest and most diverse menu of cannabis strains in Germany, further cementing our leadership in this market. Remexian also provides a platform for us to take our house of brands into other markets we are eyeing, such as the U.K., Poland, Czechia and Switzerland.

Licensed producers want to be on our menu in Germany and leverage us to enter these other markets once they present sufficiently large commercial opportunities. Remexian has already imported medical cannabis from 9 countries and is authorized to import from 19. While medical cannabis is profitable today, our ultimate goal is clear: to be leaders in Germany's eventual adult-use market whenever and however it unfolds. With Remexian's infrastructure and our early mover advantage, we're well positioned to seize that opportunity. But it's not enough to just identify a good partner and formulate a winning strategy.

We were thoughtful in structuring the transaction to generate value for our current shareholders while offering meaningful upside for the remaining minority partners. I'm particularly proud of how we put this deal together. We acquired our initial 51% stake at just over 3.6x annualized adjusted EBITDA, instantly accretive given our higher trading multiple. The remaining 49% can be acquired at a similar multiple in 2 years through our call option, locking in future accretion. Meanwhile, the Remexian team remains our boots on the ground and is heavily incentivized to grow the business alongside us.

We were also very deliberate in how we structured the payment terms. While the largest component of the consideration was in shares, Remexian shareholders own less than 6% of our fully diluted shares outstanding. Especially considering the revenue and adjusted EBITDA they are contributing, we believe this is very reasonable. Just like our existing shareholders, our new partners are already nicely up on the value of their equity, starting our long-term relationship on the right foot. The cash component paid to Remexian shareholders was approximately half of the net proceeds from the 5-year financing we closed with Cronos in July, leaving the other half available to help grow the business.

Finally, we view the debt from this transaction as very manageable. It is a 5-year term where we pay interest only at 7% annually. The plan is to pay down the principal from our share of dividends declared by Remexian, effectively allowing the acquisition to pay for itself over time. Including our share of Remexian's debt at closing, we calculate our gross debt to be just 1.5x, the latest adjusted EBITDA generated by High Tide over the last 4 quarters, plus our share of Remexian's annualized adjusted EBITDA for 6 months ended March.

We believe this is a very manageable level, still positioning us to take on more debt if and when needed. Speaking of our balance sheet, we were very pleased to have closed our $30 million junior subordinated loan with Cronos in July. Having one of the largest license producers recognize our leadership and execution on the retail side by investing directly in High Tide is a strong validation of our strategy. Our achievements have not gone unnoticed across Bay and Wall Street as well.

Just last week, 2 new equity research analysts launched coverage of High Tide, highlighting our leadership position and bright future. Our share price has also increased meaningfully since our last earnings call. While that is great to see, we still have many opportunities ahead of us for growth now that we are truly an international cannabis powerhouse. In conclusion, Q3 was the best quarter in High Tide's history. We set records on almost every key metric and generated nearly $8 million in free cash flow. Yet this is just the beginning as we ended the quarter with most growth rates at multi-quarter highs and starting this month, we began adding Remexian's results to our financials.

It took us nearly 7 years since legalization to climb to 12% market share in the Canadian provinces where we operate. In Germany, we are starting with 16%, and we are excited about where we can take things together. It has been a very busy and fruitful summer for the High Tide team. Since our last conference call in June, we closed a $30 million financing with a strategic partner, finalized and executed our entry into the German medical cannabis market with a leading player and delivered superb results in our core operations for Q3. I want to sincerely thank the entire High Tide team. You all contributed to making this a game-changing few months for the company and setting us up for new heights ahead.

With that, I'll turn it over to Mayank for his comments and a deeper dive into the numbers.

Thank you, Raj, and hello, everyone. As Raj mentioned, Q3 was the best quarter in High Tide's history. I am very pleased to go over the details of the numbers and add additional color. Revenue for Q3 was an all-time high of $149.7 million, up 14% year-over-year and 9% sequentially. Our bricks-and-mortar segment led the way up 18% year-over-year, driven by our impressive 7.4% increase in same-store sales as well as the addition of the new stores. We are now at 207 locations across the country.

Having opened 16 so far during calendar 2025, all organically and with about a dozen more under construction, we feel confident about being able to reach the higher end of the guidance we gave at the start of the year to add 20 to 30 new locations. In June, the average Canna Cabana store nationwide achieved an annual revenue run rate of $2.6 million. which is more than double the average annualized revenue of our peers in the province where we operate. In Ontario, our largest market and the focus of our future expansion, our outperformance was even more pronounced. Excluding newer stores that have been open for 6 months or less, which are still ramping up, the average Canna Cabana store was on a $3.1 million annual revenue run rate in June.

This was 2.6x the average of our peers in Ontario at just $1.2 million. Consolidated gross margins were 27% in Q3, which was consistent with Q3 last year and up from 26% sequentially. We were able to post sequential gains in our core brick-and-mortar segment for the third straight quarter, reaching 27%.

Turning to expenses. Salaries and wages represented 12.2% of revenue in Q3. This was an improvement versus 12.7% a year ago and in Q2, and reached the lowest level in 7 quarters as our stores continue to become more efficient. General and administrative expenses represented 4.4% of revenue in Q3. This was higher than 3.7% a year ago and 4.2% sequentially, primarily driven by implementation costs for [indiscernible] ERP and growth-related professional fees.

Adjusted EBITDA was a record $10.6 million for the quarter. This was up 11% year-over-year and 32% sequentially. Our core bricks-and-mortar segment continued to perform exceptionally, posting adjusted EBITDA of $12.7 million, representing an annual run rate over $50 million. We are seeing the power of operating leverage here as bricks-and-mortar adjusted EBITDA was 42% -- was up 42% year-over-year, much higher than even the impressive revenue growth it posted.

On the other hand, our e-commerce business continues to underwhelm. Last December, we changed the business model for this segment, aligning it with our innovative Cabana Club concept, which represents a primary reason for our bricks-and-mortar operational performance. While it has not been 12 months yet, the segment has underperformed our expectations to date. We are taking steps to address this. We recently appointed Sri Pavithra Priyalakshmi as our Vice President, Digital and e-Commerce and brought in qualified external consultants to help with our plan to drive more sales.

Further, we recently expanded our offering of hemp-derived cannabinoids in the U.S. where permissible. While we still have time and remain optimistic that it will improve, ultimately, we will not tolerate a meaningful EBITDA drag every quarter. We have several contingencies in place, including potential partnerships and outright sale or maintaining slam down versions of our e-commerce platform, primarily as strategic assets in anticipation of further U.S. federal reforms.

High Tide generated $7.7 million of free cash flow in Q3. This compared to $3.1 million in Q3 last year, $4.9 million during Q2 this year and represented its second highest quarter ever.

Regarding our balance sheet, as of today, our consolidated debt stands at $69 million, which is just 1.5x our attributable adjusted EBITDA, which includes High Tide's trailing EBITDA and the pro forma contribution from Remexian based on their financials for the 6 months ended March. We believe this is quite manageable. In closing, Q3 was another exceptional quarter for High Tide. Our core bricks-and-mortar business put up truly incredible numbers, once again meaningfully outperforming the competition. I look forward to what we will be able to achieve starting in Q4 with the addition of Remexian results.

With that, I will now turn the call over to the operator to open the line for the question-and-answer session. Thank you.

[Operator Instructions] And your first question is from Bill Kirk from ROTH Capital Partners.

So on same-store sales, up over 7% year-over-year, each quarter this year has been better than the prior quarter. So I guess the question is how much of the recent acceleration is the industry getting better versus your market share gains improving each quarter? And then as like a follow-up to that, where you're gaining market share -- in those places where you're gaining market share, are there competitor closures that you're benefiting from? Or is it purely taking business by executing the competitor stores?

Bill, thank you so much for your question. So look, we're definitely the best retail model. I sound like a broken drum because I've been saying it for a few years now. We feel we're the best retail model in the country, and it's not a surprise that our same-store sales just continue to roar. Remember, we -- if we look at a longer-term lens, our same-store sales are up 137% approximately in the last 4 years, while the average operator in the 5 provinces where we operate has declined by 2%.

So this is not a one-trick pony. It's not because someone is going out of business and we're picking up that business. This is definitely having the best retail model in the country, which we're very excited about, and it's starting to really, really showcase its momentum. I was very, very happy with 7.4% after 4 years of hitting maturity with the discount club model. But I can tell you that it's not showing any signs of stopping down or slowing down in Q4, the quarter that we are currently in.

Now there is definitely competitor closures taking place. That's been happening over the last couple of years, as we've mentioned, that after 5 years, lease renewals come up. And many of the operators are trying not to renew. But those operators going out of business is -- the revenues from those businesses are minimal in nature, Bill, because the reason they're going out of business is sometimes these are $200,000, $300,000 annual stores or $0.5 million annual stores, which are not sustainable in cannabis at all, just simply given the type of expenses you have to incur to run a cannabis store. So I think the competitor closures are playing a small role. The bigger part is that Canna Cabana continues to thrive and is starting to really showcase its momentum.

Wonderful. And Raj, I know I'm getting ahead of myself a little bit on this one. But when you're talking to Canadian LPs about being their conduit into Germany, I'm sure they also ask you about the U.S., the United States someday, what do you tell them when they ask about eventual access to the United States?

Look, Bill, they've seen our execution on what we're able to do in Canada, and they're jumping on board with us to come to Europe. I cannot tell you the enthusiasm I'm hearing from licensed producers saying that, Raj, we already have trust working with the High Tide team here in Canada, and we don't have to worry about payment terms. We know we're good for that with each other. And we know the types of volumes High Tide is moving here, $1.9 billion since Canadian cannabis legalization in the last 6 years, and they're very, very excited to come on board with us in Europe.

And the exact same thing will happen when these producers can also do business in the United States, setting up U.S. subsidiaries and wanting to do business with us there. So this is exactly the reason why, Bill, we're so excited about expanding these relationships because in this case, we're truly becoming from regional or domestic partners to global partners, and this partnership will continue working in the United States as well. If and when that happens, we know it's a matter of when, not if. We know that President Trump has already decided to -- that's at least industry consensus to reclassify cannabis to Schedule III and an announcement is pending soon, and we may have opportunities ahead of time looking at that market through a licensing play, which we've already begun to study this -- and we've already begun to study this option. So I think the producers are excited to work with us in Germany and in Europe, and that enthusiasm will remain in place when we go to the U.S.

Your next question is from Neal Gilmer from Haywood Securities.

Raj, maybe I wanted to talk about your philosophy with respect to capital allocation now that the Remexian transaction is done. Obviously, still a strong balance sheet. What sort of, I guess, is your perspective on what you might need to invest in Germany in order to continue to grow into that market? And I guess the second part of the question is, with your target to exceed 300 stores in Canada, is your philosophy more on just opening stores organically? Or are you looking at potential acquisitions to reach that threshold?

Sure. Neal, thank you so much for your question. So look, Remexian business has been growing exponentially, simply put. March -- 6 months annualized March, we're sitting at EUR 70 million, June was an even bigger record month and then July and August were quite slow actually because of a slowdown in Portugal, which is temporary in nature. It's an international processing issue as most distributors that bring their biomass from Canada and other countries get it processed in Portugal and then into Germany, the way the supply chain is set up.

So generally speaking, Neal, there's significant working capital requirements because we keep on making more and more sales. So initially, that investment is absolutely required. Remember, we raised $30 million with the subsidiary of Cronos at very attractive terms. We gave half of that cash to Remexian as a cash payment for the cash component. The other half we're going to use as working capital where needed. But Remexian is already very profitable and we are running the business with those profits. But the way the business is growing and with this a little bit of uncertainty in Portugal, we may need to support it with some additional cash. But long term, we see absolute tailwinds in that respect.

Your other question was about getting to my goal of 300 stores in Canada, whether that would be organic or through M&A. So look, we've really mastered that playbook, Neal, growing stores consistently, organically in super high-quality locations. I never want to give up on that idea. I'm a big fan of very good locations. And we're going to continue getting that and we're getting some really good locations offered to us from the larger Canadian landlords here that now believe in our execution as they can see it all unfold.

So we're going to continue opening that 20 to 30 new stores organically. It takes a lot to open those stores, 3 to 4 stores a month. That's what we are typically doing. I'm opening another 3 potentially this month again. We'll be at 210 stores soon. And in a couple of years, organically alone will be at 250, 260. So if you add any M&A to that, which can absolutely happen, and given our share price momentum, that could probably happen sooner rather than later, we could get to 300 stores sooner rather than later.

That's great. Do you have -- I know this is sort of a crystal ball question, but any visibility into when the Portugal issues may be resolved?

Yes. Good question, Neal. So look, we've been monitoring the situation very closely. Like I said, June was a very lumpy month. We made record highs on revenue that month. And August and -- July and August, the supply really slowed down from Portugal. I'm talking about slowed down by 60%, 70%. And now we're starting to -- just starting to see movement from Portugal again. So I think September, October may face the pressures from Portugal. But from November onwards, things should start looking a bit more normalized. We know that things are starting to work again, but over the last few months, it's been a little slow. So my best guess, my most educated guess would be that September and October would be relatively slower. But then from November onwards, things will be back at full steam ahead from Portugal.

Okay. Great. Maybe one last small one from me. On the gross profit line, when we layer in Remexian here, what sort of gross profit does it have or gross margin does it have relative to your existing business at the 27%?

Yes. So mid-20s. I think mid-20s, think 25%, 26%. Of course, we will fine-tune this, Neal, as we leverage our relationships here in Canada and try to procure biomass at best-in-class terms for High Tide and Remexian. So things will get slightly better on that end. But right now, we're just getting our feet wet. We're trying to understand the business from all perspectives. Remember, Remexian imports from 9 countries. We have a global supply chain to look at. We're looking at Canada as well. But just early conversations with licensed producers, we're getting licensed producers from all over the country offering their cannabis to us, and we think we can procure it at best-in-class terms. So even if Remexian is currently slightly lower on the gross margin profile, I think in the long term, we can absolutely balance it to our levels at 27% or take it even higher.

Your next question is from Frederico Gomes from ATB Capital Markets.

Congrats on the great quarter. First question, just on your e-commerce business. How confident are you that you can execute that turnaround? And if you could talk a little bit more about that entrance into hemp-derived cannabinoids, I mean, the decision behind that and how it can help, I guess, your overall e-commerce strategy?

Fred, thank you so much for your question. So first of all, let me highlight for all our listeners here that e-commerce is less than 3% of our consolidated revenues. We were very excited when we launched this e-commerce initiative. It has not worked out for us yet in terms of CBD sales, which are lower across the board, across all industry participants. We are working to fine-tune that approach with the recent hire of Sri as our VP of Digital and e-Commerce. We've also got external consultants global level to help us out with that approach because we know we have good products.

But to your point, the hemp-derived cannabinoid opportunity is very much new to High Tide. We were staying away from that opportunity, given it's a game of whack-a-mole, one state off, one state on. We're hearing Texas was going to discontinue it, but then it didn't pass in the House or Senate, one or the two, and then now the governor is looking at banning it again. So that was the reason why we were not looking at it very closely.

But given the decline in CBD sales and you don't need a bong of pipe or a vaporizer every day, but you do need your cannabis every day, accessories have slowed down, too. We're trying to tap into this new opportunity. Now we've only started aggressively looking into it about a month ago. So it will take a couple of months to get off the ground. And we had also told the market that our initial goal is 12 months from launch to assess where the business is. But look, we don't sit on losses. We've just generated a record-breaking quarter from all respects.

And this 3% of the business that's not performing, we're also working to turn that around. And it can very much turn around still. If it doesn't, we have divestitures in play. We have partnerships in play. And we also have slimmed down versions of e-commerce platforms that Mayank communicated in his prepared remarks that we may keep just for U.S. federal legalization because we know how potent these platforms can be when we actually sell cannabis products. But hemp-derived cannabinoids could be light at the end of the tunnel. We'll see how that goes early days. We just launched it about a month ago or about 3 weeks ago.

Appreciate that. Second question on the margins in your bricks-and-mortar segment. I guess, it was the third consecutive quarter that you saw expansion. Can you expand on what's driving that expansion, whether it's price or maybe white label initiatives? And would you expect to continue to see margins increasing in bricks-and-mortar for the foreseeable future?

Yes. Great question, Fred. Thank you. So Fred, first of all, we've had 3 consecutive quarters of brick-and-mortar margin increases. Obviously, like any sophisticated business, we cannot do this forever. And remember, we are opening a lot of stores, Fred. While all of this is happening, while we're breaking all of these records financially, we keep on opening new locations. We opened 16 stores this year alone. In the discount world, when you first open locations, your gross margins are typically low to attract clientele. So we're also managing those new openings while you're still seeing an increase in brick-and-mortar gross margin.

So stable times, I'm talking about long term when we're at 300, 400 stores in this country, this could be looking very different. When we don't have growth like that coming out of Canada, our gross margin profile could simply increase because we don't have the pressures of new store openings, and we could be close to 30% in the long term. In the medium term, because we keep on opening new stores, and we have to keep in line in terms of how our stores are growing and what type of competition exists in a particular area, we have to manage that very carefully. So we're going to sort of hold the lines on gross margins here. I don't think they're going to decline, but they're not going to go up rapidly either.

Again, we're making records already. We're gaining market share. Don't fix something that's not broken, that's my approach. But long term, I can tell you we'll be close to 30% gross margins in Canna Cabana. And I'm sorry, your second question was about white label -- sorry, your question was about what's dictating these gross margin increases. So it's a little bit of everything, Fred. It's white label sales. As you know, Queen of Bud is doing very, very good. We published those numbers last quarter. Queen of Bud and Cabana Cannabis Co. white label products, we were -- I believe we were $5.3 million last quarter, Q2. Now we're $6.3 million on white label. So white label is starting to go up. And typically, on white label, we're making about 7% additional margin, right?

So as we onboard new SKUs, you get that benefit from white label. And again, ELITE is breaking records every single quarter, which is a really nice enhancement to our margin profile. So ELITE is also contributing. And then, of course, just some price increases as well because the wholesale prices have stabilized, and it's actually showing us some ticks upwards, so we can also benefit from that margin on the higher stabilized floor.

Your next question is from Michael Kim from Zacks Small Capital Research.

First, just curious what you may be seeing in terms of newer store performance relative to prior cycles, particularly as it relates to the ramp-up of sales and/or payback periods. Just wondering if you're seeing newer stores get up to speed quicker just given your scale and brand as well as your focus on higher traffic locations?

Michael, thank you so much for your question. So look, to my surprise, we've been beating our brick-and-mortar expectations of new store growth. I think our brand has become so powerful, and it's here, there and everywhere in the country that people are now actually looking for Canna Cabana near me, not cannabis near me, which has always been sort of the approach when we were building this brand, that we need to build a moat that is so convincing that people are looking for Canna Cabana near me and not cannabis near me.

So all of our new stores in super high-quality locations that we never sacrifice on are actually ramping up quite nicely and ramping up faster than the pace that we thought would happen at this stage of the game. We're talking about 7 years after legalization. A lot of time has passed. It's a very mature landscape, but our stores are ramping up nicely. Now not the same ramp-up, of course, which was 3, 4 years ago, but also not the same ramp-up, which was 2 years ago.

We're experiencing a very nice ramp-up trajectory from our stores. It can always be better, but that would just mean that our forthcoming quarters could look even better. Given that more stores we open up, it contributes -- it feeds into the model, contributes into that brand trajectory and more and more customers and Cabana Club members come on board, and then you see that part of the ramp-up and part of sales happening in our stores.

Got it. That makes sense. And then I know you're focused on integration with Remexian, but just wanted to get maybe some incremental color on the opportunities across Europe, particularly as it relates to the potential for similar investments and/or partnerships over time?

Yes, for sure. So look, we've already started -- integration process has already started, and we've already begun to identify and start to execute on joint initiatives. It's looking very, very good, but obviously, it will take some time. There's lots of opportunities to look at and to act on. On the other EU markets, look, our ambitions are global. We don't shy away from saying that, but we need to walk before we can run, and we need to ensure that we can excel in our plans with Remexian. But that said, we continue to monitor other countries and plan to enter them once we see like compelling commercial opportunities pop up, and we're satisfied with the size of the market, we may enter other European markets as well.

[Operator Instructions] And your next question is from Andrew Semple from Ventum Capital Markets.

Congrats on the strong results, Raj and team. First question, just on the Remexian. It was interesting to hear that in your prepared remarks, you mentioned that some of the LPs you've signed up recently had been on an exclusivity basis. When you first entered the Remexian acquisition, were you expecting to see exclusivity agreements? Or was that a positive surprise? And then secondly, do exclusivity deals come with lower margins for the Remexian business? Or is that not the case?

Andrew, thanks for your question. So no, exclusivity is not a surprise. Remember, we've been talking about our house of brands approach that we want to build in Germany and then take it beyond in Europe. Going with that approach, we approach licensed producers that we would like to showcase your brands exclusively because we are doing the hard work, we're the first ones with this approach in the German market. And we already have size and scale here for them to believe what we're able to do in Germany. And on top of that, we got a market leader already in Remexian.

So they couldn't be more happier with that, and they're more than happy to give us their brands exclusively. Of course, we have a very solid relationship with the producers here in Canada. So it's not a marriage that anybody cannot get out of or we cannot sort things out. But we have had a very, very good response at exclusive levels from licensed producers. And second -- your second question was about do you make lower margins because it's exclusive? Absolutely not. All we're doing is working closely with each other and making sure that we have consistent supply of top-tier Canadian brands, but that doesn't mean that we're sacrificing at margins at all.

In fact, we're able to procure the biomass at best-in-class terms because it's not a one-off smaller German distributor calling these producers to get best-in-class terms. It's just not going to happen. When we have such major buying power here in Canada, and we couple that with the Canadian growth that we're anticipating, we're already being offered very, very good terms from the producers.

That's great. And my follow-up question would turn attention to the brick-and-mortar business. I just want to kind of ask about the performance of the stores across the country and kind of geographic areas. I understand historically, Ontario has been one of the better provinces for store performance there. Your average store there tends to outperform the rest of the country. When you're looking at same-store sales growth and the organic growth you're seeing across the portfolio, are some of the other provinces catching up to Ontario level? Or do those Ontario stores continue to hold a lead in terms of performance?

Great question, Andrew. Our same-store sales are growing in every province in this country. I'm very happy to say that. We did have a little bit of slowdown in Saskatchewan. You probably hear -- you probably remember me saying that we had a ton of illicit activity around Regina. That activity still exists, but it's been tapered down with the competitive approach of ourselves and the rest of the industry. We're not feeling that same pinch that we were feeling in Regina and Saskatoon. Things have actually got better for us there, which showed up in our same-store sales. So I would say things are on the up and up in every Canadian province at the moment, not just Ontario.

Congrats again.

There are no further questions at this time. I will now hand the call back over to Raj Grover for the closing remarks.

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

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.

High Tide operates those Canna Cabana stores, more than 200 of them across the country. It's now -- it's the biggest cannabis retailer in Canada. And High Tide is now entering the fast-growing German medical cannabis market share. Let's get more from Founder and CEO, Raj Grover.

Thanks very much indeed, Raj. Always great to see you. What are you buying in Germany? And why are you interested in medical cannabis there?

Yes, absolutely. Look, Andrew, first of all, great to be here and chatting with you. We just made a big move in Germany, the fastest-growing medical cannabis market in the world and also the biggest federally legal market in the world by acquiring a majority stake in Remexian Pharma. And Remexian is not a small player. It's doing about EUR 65 million or CAD 100 million in top line. Significant amount of EBITDA, and they have just sold 7 tons of flower in Q2 alone, which is roughly 16% of everything imported into the German market. And Germany is predominantly an import market. There's only 3 local growers. Two of them are Canadian actually, Aurora, Tilray and there's a local grower by the name of Demecan. Everything else is an import market. So we're buying a super sizable player in Germany. We couldn't be more happy about it. Remexian is also has their DNA [indiscernible], our DNA exactly with their lowest price guarantee. And with our match here in the Canna Cabana stores is exactly what we are doing.

So our mission in Germany is now very simple. We want to provide the highest quality Canadian cannabis to up to 1 million German patients which has come up from just 250,000 patients in Germany a year ago to now about 1 million patients. So this is why we're excited and we're buying this company. And the rationale of why we're getting into the medical cannabis business is very straightforward for us, Andrew. We put 2 and 2 together, and we realized we're the largest customer here for licensed producers in Canada as our procurement costs alone add up to $400 million and 50% of all imports that are making its way to Germany are Canadian. So we have great network and relationships to leverage these relationships and supply Germany in this time of big tariff talks, et cetera, bring the Canadian exporters in the forefront in Germany and leverage our relationships and network here.

The -- and can you just remind me, I think I ask you this every time. Do you grow any cannabis yourselves? Do you produce it at all? Or do you buy it from other people?

No, we're strictly a retailer and now going to be a distributor. So very much living within our personality. We don't feel like farmers yet. Growing is not in our DNA yet. So we're very much focused on retail and distribution.

Right. Yes, apparently, it is booming that German medical cannabis business. Talk to us, though, about the stores. You're at more than 200 of them now. And where -- what provinces are you in? Can you remind us, Raj?

Yes. Canna Cabana is the largest cannabis retailer in Canada with 205 locations as of 2 days ago. We're coming up with 2 more stores very shortly here. And we operate in 5 Canadian provinces, Ontario, Manitoba, Alberta, Saskatchewan and British Columbia.

I was looking here at a report from ATB, and it sounds like you're a bit like a dollar store. It's pretty cheap for you to open a store. It's something like $0.25 million. It sounds cheap with construction costs these days. And then you need to come up with about another $140,000 in working capital. But according to ATB, you get a payback period of about 10 months. So are your stores relatively cheap to open the fixtures and all that stuff?

Well, I have to say this, we're just good at what we do. When we started the business, I was spending about $400,000 in the build-out of the stores and then adding another $100 or so $1000 in working capital and inventory. We've dropped that down to CAD 260,000 for an average 1,500 square feet location and $100,000 in inventory and we're free cash flow positive over the last 8, 9 quarters. We've generated over $34 million in cumulative free cash flow. So I have some leftover money after opening 7 to 10 stores a quarter.

Just -- I know you can't go into detail here, but I guess you need pretty big safes and security. I guess the regulators mandate that.

Yes, we do have a proper vault system in all of our stores. Every province varies with the restrictions that you need to open up or set up these vaults. But we can very much handle that all within that $260,000 that I was talking about.

Let's have a look at the stock. Tell me this, when are you going to become maybe the first -- it's been bouncing lately. When are you going to become the first cannabis company to pay a dividend?

I said that on our interview recently, let me generate $10 million in free cash flow consistently every quarter, and you're going to hear about dividends from us and potentially even buybacks.

Right. And where are you at now on the cash flow every quarter?

So last quarter was $4.9 million in free cash flow generation. Over the last 8 quarters or so, we did $34 million cumulative free cash flow. And this quarter is again looking very healthy. We've put some guidance out. We're guiding for record revenues, significant amount of EBITDA increase, and you know what that equates to good free cash flow.

We've less than a minute left. Any interesting consumer trends lately? Are people demanding high potency pre-rolls, for example? Are they demanding discount product? We're tight for time, sorry.

High-THC at the lowest price are what cannabis consumers want, and that's what Canna Cabana offers, and that trend continues in the market today, where we've tapped into the best concept out there for cannabis.

It's the high-THC, that's the hot category.

That is the hottest category always.

Okay. I think some people are -- yes, go bigger, go home. Raj, thanks very much indeed. Always great talking to you. Raj Grover, Founder and CEO.