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High Tide Releases Audited 2022 Financial Results - Fourth Quarter

 
High Tide HITI Stock Forum
Last Post by brad clarke 2 months ago
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 Isail4fun
(@rtimothyobrienhotmail-com)
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Topic starter January 30, 2023 6:05 pm  

High Tide Releases Audited 2022 Financial Results Featuring Record Fourth Quarter Revenue of $108.2 Million and Record Adjusted EBITDA of $5.0 Million 
 

The Company has also signed an LOI with Berlin-based health and life science company Sanity Group to better take advantage of potential German adult-use cannabis legalizationThis news release constitutes a “designated news release” for the purposes of the Company’s prospectus supplement dated December 3, 2021, to its short form base shelf prospectus dated April 22, 2021.

  • Current annual revenue run rate exceeds $450 million, maintaining High Tide’s position as Canada’s top revenue-generating cannabis company1
  • The Company celebrated its 11th consecutive quarter of positive adjusted EBITDA[2]
  • The Company now counts approximately 4.5 million total customers globally across all platforms[3]
  • The Company’s bricks-and-mortar locations generated same store sales growth of 50% year-over-year and 9% sequentially in the fourth fiscal quarter of 2022
  • Largest non-franchised retailer in Canada with 151 locations and approximately 950,000 Cabana Club members, making it the largest bricks-and-mortar cannabis loyalty program in Canada
  • Paid ELITE membership upgrades already exceed 6,000 members since launching this first-of-its-kind initiative in Canada at the end of November 2022 

Calgary, AB, January 30, 2023 / CNW / − High Tide Inc. (“High Tide” or the “Company”) (NASDAQ: HITI) (TSXV: HITI) (FSE: 2LYA), a leading retail-focused cannabis company with bricks-and-mortar as well as global e-commerce assets, filed its year-end audited 2022 financial results on January 30, 2023, the highlights of which are included in this news release. The full set of audited consolidated financial statements for the fiscal years ended October 31, 2022, and 2021 (the “Financial Statements”) and accompanying management’s discussion and analysis can be accessed by visiting High Tide’s website at www.hightideinc.com, and its profile pages on SEDAR at www.sedar.com, and EDGAR at www.sec.gov. 2022 Fiscal Year – Financial Highlights 

  • Revenue increased by 97% to $356.9 million for the year ended October 31, 2022, and increased sequentially by 14% to $108.2 million in the fourth quarter of 2022
  • Gross profit increased by 58% to $101.0 million for the year ended October 31, 2022, and increased sequentially by 15% to $29.5 million in the fourth quarter of 2022
  • Gross profit margin was 28% for the year ended October 31, 2022, and was 27% in the fourth quarter of 2022, which was consistent with each of the prior two quarters
  • Salaries, wages and benefits represented 12% of revenue in the fourth fiscal quarter of 2022 which compared to 15% in the fourth fiscal quarter of 2021 and was consistent with the prior quarter. General and administration expenses represented 7% of revenue in the fourth fiscal quarter of 2022, which compared to 8% in the fourth fiscal quarter of 2021 and was consistent with the prior quarter
  • Adjusted EBITDA[4] was a record $14.6 million for the year ended October 31, 2022, up 17% versus the prior year, and was $5.0 million for the fourth quarter of 2022, up 18% sequentially, and up 206% versus the fourth quarter of 2021
  • Geographically, for the year ended October 31, 2022, $290.4 million of revenue was earned in Canada (an increase of 93%), $59.3 million in the United States (an increase of 100%), and $7.1 million internationally (an increase of 671%). In the fourth quarter of fiscal 2022, revenue was $93.9 million in Canada (an increase of 16% sequentially), $13.2 million in the United States (an increase of 4% sequentially), and $1.2 million internationally (a decrease of 37% sequentially). This decrease is related to a global slowdown in sales of CBD products
  • Cabanalytics data sales from the entire retail ecosystem, including bricks and mortar and e-commerce platforms, were $21.7 million for the fiscal year that ended October 31, 2022, compared to $12.2 million for the fiscal year ended October 31, 2021. Sequentially, Cabanalytics data sales increased to $6.4 million from $5.5 million in the third fiscal quarter
  • The Company’s bricks-and-mortar locations generated same-store sales growth of 50% year-over-year and 9% sequentially in the fourth fiscal quarter of 2022. Given the success of our innovative discount club model, as well as the optional membership upgrade to ELITE, the Company anticipates same-store sales to continue to be strong compared to the industry average in the first fiscal quarter of 2023
  • During the fourth fiscal quarter of 2022, the Company completed its annual impairment testing. As a result of this testing, driven primarily by a slowdown in the global CBD sector as seen amongst our major United States CBD competitors, the Company recorded impairment charges of $48.6 million, primarily relating to goodwill. The Company notes that these are non-cash charges, with no impact on its ability to raise debt capital from its senior lender, and that online CBD sales represented only 6% of consolidated revenue for the fourth fiscal quarter of 2022  
  • Cash on hand as of October 31, 2022, totalled $25.1 million, compared to $14.0 million as of October 31, 2021

“I am thrilled to share these results, which, once again, deliver record-breaking revenue and adjusted EBITDA which further solidifies High Tide’s position as the largest revenue-generating cannabis company in Canada with a current annual run rate of over $450 million. While these numbers demonstrate exponential revenue growth, it’s also important to note that we have maintained adjusted EBITDA level profitability for 11 consecutive quarters and that we were cash flow positive from operations during the last fiscal year. In our opinion, this is because we have the strongest retail concept in Canadian cannabis, something that is backed up by the fact that our Cabana Club loyalty program now has approximately 950,000 members across 151 Canadian stores. I am also excited to report that we have already upgraded over 6,000 members into ELITE. As we continue to introduce more ELITE offerings, we anticipate upgrades to continue throughout 2023, providing us with an additional high-margin recurring revenue stream to further boost our bottom line. On top of all this, our same-store sales increased by 50 percent year-over-year, something that is an anomaly amongst North American cannabis companies. Our bricks-and-mortar margins have slowly but steadily ticked higher over the last two quarters, and we expect this to continue, which will help amplify the impact of our anticipated same-store sales increases. Our growing customer loyalty and value-focused strategy have resulted in the rapid conversion of illicit market consumers and have helped to increase our market share by approximately 1% per quarter for the last four quarters. With these increases, Canna Cabana now serves roughly 13% of Canadian cannabis consumers outside of Quebec. We also continue to be a global player in the retail sale of consumption accessories through our world-leading e-commerce platforms and our Canadian bricks and mortar stores.” said Raj Grover, President and Chief Executive Officer of High Tide. “Considering the challenging macro environment and where our equity value stands today, we have meaningfully slowed down our M&A activity and are primarily looking at smaller, highly accretive bricks-and-mortar opportunities to focus on free cash flow generation from our existing business lines. I want to sincerely thank our customers, team members, and shareholders for another stellar year as the retail market leader in Canada, and I look forward to delivering more of the same in 2023, with continued market share gains and further improved cash flow generation. I also want to acknowledge our industry and government partners who worked tirelessly to ensure that we, as an industry, continue to make progress toward greater sustainability within the cannabis sector.” added Mr. Grover. Letter of Intent with Sanity GroupHigh Tide also announced that it has entered into a non-binding letter of intent (the “LOI”) with the Berlin-based health and life science company, Sanity Group (the “Sanity Transaction”). With big progress on legislation expected this spring, the LOI is designed to leverage synergies between both complementary companies and position each to take advantage of potential German adult use legalization within their respective supply chain verticals. With a well-established track record in Germany with respect to medical cannabis, finished pharmaceuticals, and cannabinoid-based consumer goods, High Tide believes that Sanity Group is the best-positioned potential partner in its home market of Germany.Sanity Group and High Tide intend to work together on go-to-market strategies, identification of quality M&A opportunities, sourcing of high-quality real estate, expansion within European markets, and regulatory compliance topics such as licensing and government outreach. Subject to relevant laws and regulations, High Tide, aims to support Sanity Group in building a retail consumer brand strategy using its decade-long experience serving cannabis consumers in Canada, the United States and Europe, as well as providing targeted assistance in product display and advertising opportunities (product and brand promotion) across High Tide’s assets in Germany and other European markets in due course.“We want to be well positioned to bring this success to the German market, should the government proceed with its publicly stated goal to legalize cannabis adult use. This is why we are proud to partner with a top player in the German medical cannabis space like Sanity Group, particularly since our business models are complementary in nature,” said Mr. Grover.“We are very excited and proud to lay the foundation for a strong and trustful partnership in case of recreational cannabis legalization in Germany with a top player like High Tide through this letter of intent. High Tide stands for great experience and expertise in building retail cannabis brand strategies like no other player. We strongly believe in the mutual value of this partnership, added Finn Hänsel,” Chief Executive Officer of Sanity Group.Fiscal Fourth Quarter 2022 – Operational Highlights

  • The Company closed on its acquisition of assets from Choom Holdings Inc. through the Companies’ Creditors Arrangement Act Proceedings, adding 9 operating retail cannabis stores to the Company’s bricks-and-mortar portfolio across British Columbia, Alberta and Ontario for $5.3 million
  • The Company entered into and closed a binding commitment letter with Connect First Credit Union Ltd. (“connectFirst”) for a $19 million credit facility with an initial 5-year term, at connectFirst’s floor interest rate
  • The Globe and Mail’s Report on Business magazine recognized the Company for a second year in a row as one of Canada’s top-growing companies for 2022, ranking 21st out of 430 Canadian companies, with an audited growth rate of 1,970% over three years
  • The Company entered into a definitive agreement to add two retail cannabis stores in British Columbia via the acquisition of 1171882 B.C. Ltd., operating as Jimmy’s Cannabis Shop BC
  • The Company announced that its Colorado-based subsidiary, NuLeaf Naturals, launched its groundbreaking Full Spectrum Multi Cannabinoid oil and plant-based softgels for sale in Manitoba through the Manitoba Liquor & Lotteries Corporation and in Ontario through the Ontario Cannabis Store
  • Membership in the Cabana Club loyalty program increased to over 827,000 members as of October 31,2022
  • The Company added 13 new stores: 3 in British Columbia, 9 in Alberta and 1 in Ontario

Subsequent Events

  • The Company was declared the highest revenue-generating cannabis company in Canada[5]
  • The Company reached its communicated goal of 150 bricks-and-mortar stores across the country
  • The Company launched ELITE, the first-of-its-kind cannabis paid membership loyalty program in Canada converting over 6,000 members to ELITE status and generating over $180,000 in high margin revenue
  • The Company opened 10 new stores: 3 in British Columbia, 1 in Manitoba and 6 in Ontario
  • The Company initially launched cannabis seed sales through its subsidiaries GrassCity and Smoke Cartel and has now commenced sales on its Daily High Club and Dankstop e-commerce platforms
  • The Company completed the roll out of its proprietary Fastendr technology across 120 Canna Cabana locations
  • The Company now sponsors 302 children internationally through World Vision, after having committed to sponsoring two additional children for every new store that opens in Canada
  • Canna Cabana membership numbers as of today stands at approximately 950,000 members

Selected financial information for the fourth quarter and year ended October 31, 2022:(Expressed in thousands of Canadian Dollars)  The following is a reconciliation of Adjusted EBITDA to Net Loss: (Expressed in thousands of Canadian Dollars)  6 Loss from operations, excluding non-cash impairment charges was $5.3 million for the three months ended October 31, 2022 which compared to a loss of $2.1 million for the three months ended October 31, 2021. Excluding these charges, the Company generated a loss from operations of $23.6 million for the year ended October 31, 2022 which compares to a loss from operations of $15.9 million for the year ended October 31, 2021. 7 Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA. These measures do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-IFRS measures provide investors with a supplemental measure of the Company’s operating performance and therefore highlight trends in Company’s core business that may not otherwise be apparent when relying solely on IFRS measures. Management uses non-IFRS measures in measuring the financial performance of the Company.

   
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 D. H. Taylor
(@dhtaylor)
Noble Member Admin
Joined: 3 years ago
Posts: 1202
January 31, 2023 9:12 am  

Gotta love this.  Unless you are the market.  The numbers were strong with a solid increase in revenue QoQ and organic growth in same-store sales.  Operating costs are heading in the wrong direction.  But, this will likely shift somewhat.  


   
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 brad clarke
(@bradclarke80gmail-com)
Estimable Member
Joined: 2 years ago
Posts: 65
January 31, 2023 8:16 pm  

DH thanks for your video today. One thing I am trying to fully understand is the impairment charge. Now I know you defined that..but I have some clarification questions specifically to High Tide.

With the big slow down in CBD e commerce sales...comes this impairment charge...in a nut shell(maybe I am wrong?)

Does this mean High Tide is done with or eliminating these parts of their business?

Or is this a charge we will see at times going forward if these parts of the business do not perform well? I am just trying to understand how "we tore the band aid off now lets move forward" actually works....I hope this is not a confusing question.

On another note, if this charge is a one time thing does thing mean Q1 2023 could already be looking better as far as the financial statement goes?

 

Just trying to dig into how all of this relates to one another.

Thank you.


   
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 D. H. Taylor
(@dhtaylor)
Noble Member Admin
Joined: 3 years ago
Posts: 1202
January 31, 2023 8:35 pm  

@bradclarke80gmail-com Hey Brad...

As best I would assume, mgt basically eliminated everything in that segment of their business.  I doubt we would see continuous losses from this.  It would make no sense to keep a business segment that is doing so much damage.  Oftentimes, when there is an impairment write down, it is one-and-done.  

I have always said CBD is a bad business to get in to.  Simply, there are no barriers to entry.  Anyone can create a brand and run with it.  That means competition would be so stiff it would be impossible to stand out. High Tide looks as if they just learned that lesson.  


   
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 brad clarke
(@bradclarke80gmail-com)
Estimable Member
Joined: 2 years ago
Posts: 65
February 1, 2023 4:26 am  

@dhtaylor Gotcha....Ok well band aid off and move on as you said. Thank you.


   
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