High Tide (HITI): Q4 2024 Earnings Review

This article was originally posted on X as a thread on February 2, 2025.

Last week, HITI released its Q4 2024 earnings report.

As a longtime shareholder, I’ve been closely following the company for years.

Here’s a breakdown of everything.

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Financial Results

Record revenue of $138.3M, exceeding consensus estimates of $135M.

Signs of revenue acceleration, with double-digit growth expected in 2025. The core business grew 12% YoY, but overall growth was slightly offset by underperformance in e-commerce.

Despite a $35.2M revenue increase, total expenses declined by $5.9M, demonstrating disciplined cost management.

FCF increased from $7M to $22M YoY (+217%), highlighting improved operational efficiency.

Adjusted EBITDA rose 25% YoY to $38.3M, with margin expansion from 6.3% to 7.3%.

Achieved Net Income profitability (excluding non-cash impairments) for the first time: $1.2M vs. a ($6.7M) loss YoY.

Same-store sales (SSS) increased 0.4% YoY and 3% QoQ, outperforming the broader cannabis retail market, which declined 1% YoY. I was expecting SSS to show slightly better growth, but it’s still a solid performance given the overall market conditions.

Gross margins remained stable YoY at 26% (down from 27% QoQ) – The company is avoiding price increases to allow weaker competitors to exit the market, setting up for future margin expansion.

“More and more competitors are leaving the race, big chains are struggling, middle size chains are struggling, independents are struggling. So as more competitors get out of the race, there's not going to be a lot of competitors remaining to be waging a price war with us. And at that point, we have a tremendous opportunity to increase gross margins in our core Canadian cannabis business.”

HITI ended the fiscal year with a record cash balance of $47.3M and no debt maturities until September 2027. Total debt stands at $27M, with only $12M maturing in 2027.

All in all, HITI delivered a strong quarter. As industry consolidation progresses, the company is well-positioned to enhance margins and drive sustained long-term growth. It’s important to note that the overall market has been struggling due to the resurgence of the illicit market, but management has been highly competent in navigating these short-term headwinds.

Footprint Expansion: Store Openings & Future Outlook

Accelerated and Self-Funded Store Growth:

• 29 new stores opened in 2024 (vs. 13 in 2023), more than doubling the prior year’s expansion and hitting the high end of guidance (20-30 stores). The company now owns 191 stores across five provinces.

• Growth was primarily organic, with only one store acquired — demonstrating disciplined expansion.

• Notably, all new stores were funded entirely through internal FCF, a rare achievement in the sector.

• Cost per store opening: ~$260K in build-out costs + $100K–$150K in working capital. 2025

Expansion Plans:

• Targeting another 20–30 new stores, all organically developed and funded by internal FCF.

• Management remains highly selective on M&A, despite ongoing inbound interest from struggling small chains and independent operators. Raj Grover has emphasized acquiring only highly strategic locations at deeply distressed valuations — evidenced by the last store acquisition in June 2024 at just 1.5x annualized Adj. EBITDA.

New store openings require upfront CapEx, working capital, and employee ramp-up, temporarily weighing on consolidated results. The 217% YoY FCF growth becomes even more impressive when we consider the ramp-up in store openings.

HITI continues to lead the sector with best-in-class revenue per store:

• $2.6M per store vs. $1.2M industry average.

• In Ontario, the company’s key growth market, the gap is even wider: $3.5M per store vs. $1.1M from peers.

• Annualized retail sales per square foot across the Canna Cabana store network reached $1,699 in the fourth fiscal quarter of 2024, up 2% QoQ. This exceeded best-in-class retailers such as Walmart, Target, and Canadian Tire.

Loyalty Membership: Cabana Club & ELITE Members

Canna Cabana Club members in Canada grew 34% YoY and 11% QoQ to 1.72M, reinforcing HITI’s position as the largest cannabis loyalty program in the country.

ELITE Members (paid tier) in Canada saw 160% YoY and 28% QoQ growth, reaching 73,000 members – now representing 4.2% of total members vs. 2.2% last year.

Global Expansion of Cabana Club:

• High Tide recently launched its Cabana Club internationally through its e-commerce brands, selling CBD products and consumption accessories in the U.S. and Europe.

• Early traction: Over 3,000 paid members joined within the first two months (bringing the total paid members up to 76,000).

• Management remains confident in its initial predictions that these proactive margin reductions in this segment will lead to revenue breakeven within six months of launch and adj. EBITDA breakeven within 12 months.

HITI’s loyalty program continues to scale, driving deeper customer engagement and incremental recurring revenue. Step by step, Canna Cabana is slowly becoming the Costco of cannabis.

Market Share: What Happened?

Some may find it surprising that High Tide reported an 11% market share in Q4, supposedly down from 12% in Q3. However, this is due to a revision by Statistics Canada, which adjusted total industry sales upward for Q3, thereby lowering HITI’s previously reported market share for that period. On a QoQ basis, market share remained flat.

On a YoY basis, market share increased from 10% in 2023 to an average of 11% in 2024, reflecting continued gains. To be honest, I was expecting at least a modest improvement this quarter, but it's still encouraging to see this figure gradually rise.

Looking ahead,High Tide remains focused on capturing additional market share, with 15% as a key target.

While the resurgence of the illicit market may act as a headwind for HITI, it also accelerates the exit of smaller competitors, ultimately benefiting the company in the long run by enabling faster market share capture.

Importantly, High Tide holds an 11% market share while accounting for only 5% of the total cannabis retail store count.

Purecan’s Acquisition and Why It Is a Game-Changer

High Tide has officially entered the German medical cannabis market by acquiring a majority stake in Purecan, a profitable German medical cannabis importer and wholesaler. This move is highly strategic given that most medical cannabis in Germany is imported from Canada, and as the largest cannabis retailer in Canada, HITI has established relationships with every major Licensed Producer (LP) — providing a significant competitive advantage.

• No major CapEx required – Purecan already holds all necessary licenses, certifications, and facilities, allowing for immediate market penetration.

• Expanding TAM – The German medical cannabis market is rapidly growing, and HITI aims to offer the most comprehensive product catalog and capture significant market share.

Prescriptions for medical cannabis in Germany surged ~1,000% between March 2024 and December 2024 (Bloomwell Group report).

Medical cannabis sales are expected to exceed €420M in 2024 and could reach €1B by 2028 (though actual growth could surpass these estimates, given recent performance).

• Expanding Margins – Purecan is already profitable and has 29% adj. EBITDA margins (way higher than HITI’s core business margins). The acquisition is expected to close in the coming days at 3x annualized adjusted EBITDA, with less than 1% dilution and a cash outlay of €1.2M.

• Scalability into recreational market – When legislation allows, HITI will have a strong foundation to expand into the German recreational cannabis market.

• According to Raj, Germany is positioned as a key gateway for future expansion across Europe and eventually Australia.

Relevant quotes from the Earnings Call:

“The goal here is to build the biggest medical cannabis menu in Germany and become the preeminent distributor in the landscape, something that does not exist today. There are a lot of small players, very tiny players, but there’s no one of significant size and scale. I’m having excellent conversations with our LP partners here in Canada, and everyone is excited to get on board. It’s going to take us a month or two to get going, but I can tell you this is an exponential opportunity for us. And it includes the largest Canadian brands, our own white-label products, and a range of cannabis — from medium-grade to high-grade, and in some cases, even lower-quality cannabis.”

“I can tell you, with confidence and positivity, that I’ve had an overwhelming response in my conversations with licensed producers. I think I’ve had over 20 now in the last week, averaging three to four a day. Honesly, I can’t think of a single one that isn’t excited to start this venture with us. We are being offered the opportunity to distribute Canadian brands, both exclusively and non-exclusively, on top of all the momentum that’s building in Germany.”

“I believe High Tide is the most perfectly positioned company to take advantage of the medical cannabis market in Germany and capture a significant share of it.”

“Germany will be our doorway or gateway into other countries in Europe and eventually Australia.”

In essence, this acquisition provides High Tide with a strong foothold in Germany, a market with huge growth potential. With immediate profitability, minimal capital requirements, and a clear path to leadership, this deal represents a transformational opportunity for High Tide to expand its TAM and experience significant operating leverage.

Additionally, the company remains vigilant about the opportunities that may arise with the new administration in the US.

I couldn’t be more excited about the upcoming quarters!

Bonus: The impact of Trump’s tariffs on High Tide

I’ve received several DMs asking about the potential impact of Trump’s 25% tariffs on imports from Canada and how they might affect High Tide. Here’s my take:

• Direct impact: There is little to no direct effect on HITI’s operations. The company’s core business supply chain is fully within Canada, with no imports or exports between the U.S. and Canada.

• Indirect impact: A potential recession in Canada, triggered by these tariffs, could affect High Tide in the short term. Additionally, since I hold HITI on the Nasdaq, a stronger USD relative to CAD could create some headwinds for the stock price.

This doesn't affect my long-term investment thesis, but I'll keep monitoring the situation due to its potential effects on the broader Canadian economy.

Final Thoughts

All in all, High Tide reported another very solid quarter, and my investment thesis remains firmly on track.

2024 marked the company's best year to date, but the best is yet to come. With a range of strategic initiatives currently underway, I believe HITI is positioned to unlock significant operating leverage in the coming years, potentially leading to a re-rating of the stock.

While the company continues to strengthen its core business, it’s also expanding its cannabis ecosystem through accretive growth strategies, which will drive further value creation and enhance shareholder returns.

I remain a confident shareholder, eager to see another year of strong execution and growth.

After the recent correction, you can now buy HITI at a 7% FCF yield.

That's it! Thanks for reading.

High Tide (HITI) is, and will remain, a core position in my portfolio. I get why many avoid this sector, but this company has a highly aligned leadership that's consistently creating shareholder value.