Hello, everybody. When this is premiering, it will be Saturday, 8:00 P.M. Eastern. At Saturday, 8:00 P.M. Eastern, you could be buying other low-quality cannabis retailers. You could be doing a lot of bad things. Today we are blessed with the presence of the High Tide CEO, the largest cannabis retailer in Canada, and hopefully Germany one day. We all have sunglasses, but Raj, where are yours?
Well, since you gave me such a beautiful, pleasant intro, ta-da.
Whoa.
I told your on X I was going to do that. I said, "I don't know if I should do the interview immediately, but when I do it, you'll find me in sunglasses." I never get a chance to put sunglasses on and do an interview, here I am, guys.
Raj, thank you very much for coming onto the show. Welcome. First question, obviously the elephant in the room, Germany. Recently, Remexian was announced yesterday. Do you want to talk about what the vibe is right now with the High Tide team and what the last few months have looked like for you? There was a lot of questions regarding Purecan a few months ago that was kind of put on hold. What's the last few months looked like for you personally?
Long, exciting, because I know I was going to get there. This is my third interview today, and I'm excited to talk about Remexian, but it's been almost last eight, nine months, Ryan. There's been a lot of ups and downs. We started with Purecan in October, November. We announced that deal, I believe, in January, and then we called it off due to due diligence. Here we are with five times the company or even more. We're buying a leader in Germany. It was well worth the wait, but I cannot tell you how complex this transaction was to close because Remexian is a private company and they have other pharmaceutical companies, sister companies in that group, and they were doing business together. This is very normal in the private world. You and I have been a private entrepreneur.
When you have five, six companies, there's intercompany stuff that happens that you then need to untangle prior to becoming a majority stakeholder into that company. For us, it was just detangling all of that, taking the time to go through the transaction. They've risen very, very fast. Doing detailed due diligence, that's what took us five months. It was not easy to get there, but nevertheless, we got there and look at my timing. We're talking about rescheduling, so I think we well-timed it. There's a lot of eyeballs. Actual eyeballs, without sunglasses.
Yeah, we can take them off now. It explains a lot.
Sure, I like it.
We got the thumbnail.
Yeah.
Do you have a question?
We're all shareholders here. Can you explain a little bit more about the business model that we just bought?
I can. I think you'd be the best amongst us or right after me to explain the business model, Blake, because you've been so kind highlighting our story and really keeping in touch with what High Tide is doing. For all your listeners on the show, High Tide is a retail-focused company. It's the largest retail brand in Canada through Canna Cabana. 203 stores in the country and growing. Very ambitious company. We want to go to 300 +. We think we will easily breach 300 stores in Canada and get closer to or breach the CAD 1 billion revenue mark in this country alone, which I know is a little bit ways away, we've got so many opportunity, and now we're seeing all the angles play out. That's very, very nice. We never rest.
When we know we've got a great thing going, we're now stable and we're steadily growing. We're now looking at other international opportunities. I can't wait to play in the U.S. one day, which I've said many, many times. Thankfully, the rescheduling news has surfaced again. President Trump is interested. In the meanwhile, we're keeping ourselves busy in the biggest federally legal market of the world, Germany. I think Remexian is the best start I could have hoped for. Extremely excited about where we're going there.
They currently have about 16% of market share there. What are your plans for growing that?
It's not apples to apples. We put 16% to the best match because most companies are private and they don't release their data. 43 tons were imported into Germany in Q2. That was up 15% from Q1. Germany is mostly an import market except for DEMECAN, Aurora, Tilray, just a couple of growers there. Other than that, it's just an import market. While they imported 43 tons, Remexian sold seven tons in that same time period in the 90 days, which tells us it's roughly 16% of the grams sold in that period, which is massive. Blake, we're 12% of the market share in this country at the moment in Canada. We're already the leader, we're starting in Germany at 16%, at least in terms of tonnage. Dollar value, because they're discount play just like us, perfect match to the personality, could be 11%, 12%.
That's a banging start, I would say.
I have a quick question on that. You've had all the success in Canada. How are you looking to leverage that success in Canada and then get even more success in Germany or bring up this asset even more? Do you see any clear synergies that you can point out to the audience between these two businesses?
Yeah, absolutely. Fantastic question, CM. Lots of synergies. The main synergy is that Remexian buys 33%, roughly about 1/3 of their imports come from Canada. Germany is at 50%, they're already 17% behind, we can fill up that gap easy. We sit in Canada and we procure almost CAD 400 million of biomass here from all of the LPs. We can up that share north of 50%. We want to take this to close to 60%. Remexian is very, very sophisticated. They've already imported from nine countries, including Canada, Portugal, Denmark, South Africa, Lesotho, Colombia, Malta, Czech Republic. I think I've covered them all. They have license to import from 19 countries. We can also be competitive. If Canada starts becoming less competitive, I already have that logistics and the supply chain set up through Remexian.
I think that one-third of the imports, we can practically double it in the long term, or at least get it upwards of 50%, which is still about a good 20% upside from where they are in Canada.
Just a quick follow-up on that. Are you looking to transport the Canadian brands that you've established, that everyone knows and loves in Canada over to Germany and starting to build those up there even more as in start building stores eventually, under the same brand? Are you going to have a separate brand there and just apply the same strategies and win market share there?
That's accurate. A little bit of both, but mostly on the brand side. No one is doing what we suggested we were going to do. Usually what everybody's doing, they'll call Organigram, they'll call an LP here, Village Farms, they'll take their strain, and then they'll say that strain belongs to them and the genetics can be sourced anywhere, and they're available everywhere. They'll call it the strain under their brand. They'll put their brand and then they'll have the strain there. We're not doing that. We're taking our Canadian brands, we're taking our Canadian business partners here and promoting their brands. My goal is to build the biggest menu, the biggest variety of Canadian brands that you can steadily get. I'm not competing with my business partners here because I'm not growing.
I may still have at least 15%-20% of my own white label brands, such as Queen of Bud, which is doing extremely good. 80% of that is going to be a branded house, or 50% of that is going to be a branded house from Canada, then 30% of that is going to be more commoditized or other brands from other countries. I said, Remexian Pharma GmbH has deep reach in Germany.
Speaking of Queen of Bud, how is Queen of Bud, how has that growth been lately and the expansion with that? How's that looking?
Good timing on that question. I was just looking at this, that just arrived on my desk. I don't know if you guys can see it clearly, but this is the new vape we're launching. It's a disposable all-in-one Queen of Bud vape. We're very excited about the launches that we're doing right now. Queen of Bud, if you guys remember, we paid just CAD 1 million for that brand. I think our sales have already exceeded close to CAD 3 million or exceeding CAD 3 million. I think we'll end this year with over CAD 5 million in Queen of Bud sales. I wasn't expecting the ramp up that quick, but it's going better than our expectations, and we're introducing cool things like that. You know why.
Beautiful.
I love that. You just had this very impactful M&A activity right now. Are you looking at the market? I just want to get sort of a field check for you. Do you think that that's a strong possibility to continue acquisitions like Queen of Bud going forward?
Like Queen of Bud? Yes. There's a possibility that we look at another brand now that we've tested what Queen of Bud could be like and what we could do with it, and we're getting great business out of it and great juice out of it. We think we could do this again. I want to be very calculated, right? Queen of Bud does not compete with other Canadian LPs. In fact, we give this business to other LPs to do our white label. We give them the designs, we tell them what we want to do. Queen of Bud is California-inspired. Queen of Bud is very differentiated in terms of you get cannabis rolled up in rose petals and chamomile blends. It's very different than what any other Canadian LP is doing. We still don't compete with them.
I want to kind of remain in that direction. I want to make sure we're very strong with our partners. There's some other companies out there where 30%, 40% of their shelf is their own brands. You start diluting the variety for customers. They're coming to our club members and arcades are super excited about how independent we are and how much independent variety they can get at a Canna Cabana store. We want to continue doing that, showcase the best brands that Canada has to offer at the lowest prices possible. As you know, our lowest price guarantee mantra, and then introduce products like Queen of Bud, which are very revolutionary but highly differentiated and can be contract manufactured here. The LPs are happy because they still make a spread or a cut on that, and then we get to sell our own brands.
Perfect. You mentioned competitors there. I would like to ask how your relationship with SNDL has changed over the last few months. Now that they own some High Tide shares, that's very bullish for their belief in your business model and everything. I'm curious, are they asking for slightly more shelf space or slightly better pricing or any actual advantages? Is he just passively buying shares and has your relationship not actually changed?
He's not asking me anything.
Okay.
I met Zach a couple of months ago, so it's been a couple of months. No, he's not asking me anything. They've done a 10% investment in Village Farms, and that didn't go anywhere, and then they sold that stake off. He likes my business. He gave me a lot of compliments on how we're doing things, and he said he's buying it for cash flow. Look, if they wanted to do something bigger, they would need to be engaging very happily with us and in a really good mutual way. That's just still not possible because of Ontario rules and British Columbia rules. There's ownership rules of vertical integration in Ontario. I wouldn't want to talk what they did with Nova, how did it all happen, because I don't believe in that structure personally.
When they vertically integrated with Nova, they already had 63% of Nova or something along those lines, and they had control of Nova board, which didn't exist once they took over. It's a totally different equation with High Tide, and it's not allowed from a regulatory perspective. If you want to invest in my company, you're most welcome, Zach. That's what I told him. Others should too. Everybody loves the High Tide story, so I'm sure he loves it too. It's a great compliment to see your competitors invest in you. I don't think they're going to go too far in terms of advancing those conversations unless we want to as well.
To pivot to a slightly different topic. I get two more questions repeatedly from other investors. The first one is when the door finally opens up for you to start building out brick and mortar in the U.S. I don't know when that'll happen, when it does happen, are we going to see a period of hyper-growth similar to what High Tide was doing in 2020 and 2021, where you were basically doubling revenue every year? Are we going to see full force, balls to the wall, max go, stores everywhere? Are we going to see a more responsible, cautious, sustainable rollout? I'm curious, when the doors open, are you trying to blanket stores, shotgun them everywhere? I know you're going to be super selective with store locations still. That won't go away. How aggressive are you planning on being?
Slow and steady wins the race. Once I get what the race is, once we're stable and we've learned what we need to do, then we can go much faster. I'm not in a rush. We patiently waited right now. We could have executed an optionality style agreement for a long time. We did not go there because I don't want to give my shares away or cash away and not get any monetary benefit in the meanwhile. I cannot consolidate my financials due to Nasdaq, but we're going to be extremely selective on locations. My mantra here in Canada is not just the best retail model in cannabis, which is a discount club model, first of its kind in the world. It's also the highest quality retail location that I can get. I never sacrifice on locations because you only get that once. The rest goes on forever.
The location stays. You get that wrong, well, you're already in the back foot. That I'm not going to do, Blake, but I'll tell you this, I've been ultra excited about entering in the U.S. market. We had our plans mapped out. Like I said, we've spoken to multiple groups. We are going to enter that market through M&A. We can enter into states that others are probably not excited about. We have our playbook, which I wouldn't want to share too much about, but I'm telling you, we are ready. It may not be 100 stores overnight, but it's going to be significant in nature, and we are going to go in terms of quality over quantity. That's always the case with High Tide. You don't see me reporting back orders. You don't see me closing down stores. It's a really nice thing to do.
Don't close down the stores. You put a lot of hard work and effort and shareholder money into it. We want to make sure these stores grow, AKA our same store sales growth, and that's what we want to do in the U.S. Given our model, Blake, we will compete. I want to be the top five multi-state operator in the United States, and if this thing happens quick or something along the lines of descheduling takes place, everything is possible. We've been surprised before. You'll see some momentum from High Tide there.
Fiscal, you had a question?
Yeah. It was partly on the vein of the Schedule III potential that they're talking about. Obviously, with the U.S., it's no rush is the philosophy. I am curious, descheduling or rescheduling, from my understanding, moving from one to three potentially opens the door for maybe medical first before retail. Do you have any thoughts on possibly going that route first if that becomes the path of least resistance before eventual potential recreational?
Our core business is the Canna Cabana stores. We've got into the medical opportunity in Germany because we sit in the fantastic part of that value chain where we want to leverage our CAD 400 million in procurement relationships in Canada into the biggest federal legal market in the world, Germany. Medical market in the United States is not something that we need to do. That's again, because we cannot export from Canada into the U.S. even if rescheduling happens. I can export from Canada into Germany, or I can import into Germany from Canada. That's why the medical opportunity made a lot of sense to do in Germany, get our feet wet, get laced with that market, and then go gung-ho on Canna Cabana stores in Germany.
In U.S., if the rescheduling opportunity allows us through a safe harbor language inclusion for the exchanges, if the exchanges get comfortable, we can open Canna Cabana retail stores. That's what we want to do. I'm not saying no to the medical market given our new acquisition on that side, but it was leverage to our existing infrastructure in Canada, which we cannot leverage in the U.S. I can open retail stores if that opportunity comes.
Wrapping up here, Blake, did you want to ask about dividends and buybacks potentially?
That's the second question that I get hounded with constantly. Everyone's like, "When buybacks? When dividends?" I want to ask you, I know it's no time soon, under what conditions would you eventually start buybacks? The similar question, dividends. Under what conditions would you feel comfortable paying a small dividend?
It's not that we haven't thought about it. I thought about can I issue a half a percent, 1%? What does that cost? What does that account to? Let's become a dividend-paying stock. When we look at what we need to do, we need to focus on our business and we need to grow. We have growth opportunities in front of us. I just raised CAD 30 million in debt with Cronos at 4%, and we have to use this money. I'm still raising money to grow. To talk about dividends and buybacks, it's a little bit far out. However, that's absolutely on our wish list, and we are going to do this, hopefully in the medium term, not even in the long term. When my cash flows start hitting CAD 10 million consistently, quarterly, everything is on the table.
Maybe we start small, but we're going to go there, Blake.
Okay.
How did you get that deal at 4%? With that being at 4%, they must have been eager to loan you money.
I have to be transparent and honest. There's an OID factor there as well, which was all in, it was 11% with the warrants and everything, but you can get 10%-11% money in cannabis. I can pay back this money without any prepayment penalty. They came on board to support us. They saw SNDL picking up shares. They were not happy about it. Again, SNDL has their own strategy, so I'll leave them to that. The way we read it, and Cronos read it, is vertical integration is not allowed. This shouldn't be happening. We're here to support Raj. I got an inbound from Cronos, and it's like, "Hey, you're growing international. Do you need any help?" I'm like, "I always need some money, so why don't we do that?" We got it on very favorable terms. It's a five-year term.
I can pay it back any time I want. They're a great group to work with. We're already business partners here. There's fun times ahead.
Yeah. Last question before we let you go. If you have one piece of advice for young people, what is it?
Take calculated risks. Take the opportunity. Don't be trigger-shy. Don't wait and watch forever, right? If you get that feeling, not your mind going all the time, but if you get that feeling, you get that download, take the opportunity. The biggest problem I see with young people is, being trigger-shy or thinking too much and waiting too much, and then the opportunity's gone. What's the worst that can happen? You didn't capitalize fully or went a little sideways, but you learned something from it. Take some risk, calculated risk.
Well said. Lastly, Raj, where can the people find you before we let you go?
I'm on LinkedIn and X, as you know, just like Blake. High Tide is also, so you can find us there.
That's the Nasdaq. HITI, that's the ticker. Raj, thank you very much for coming onto the show. We know you're a very busy man right now. We appreciate it. Thank you for coming on.
It's been a genuine pleasure.
Yes.
Thank you.
Thank you.
Thanks so much, boys. I'll leave you guys with this, okay?
Oh, yeah. See you, Raj. All right. Thank you to everybody for tuning in. We're going to do a separate recording that's going to premiere tomorrow, so make sure you smash the like button, subscribe, do dividend stocks, not drugs, and of course, cash flow is king. Oh, yeah.