Grover with High Tide being interviewed by Frederico Gomes.
Well, okay. Good afternoon, everyone. Thanks for being here. We have Raj Grover, CEO of High Tide. Raj, very excited to be asking you some questions today. I guess to start off, just the basics here for anyone that is maybe not familiar with the High Tide story, can you walk us through the pieces of the business, Canadian retail, international distribution, and the scale at which you are operating today?
Hi, everyone. Hi, Fred. High Tide is a publicly traded cannabis company. We trade on the Nasdaq, the TSXV, and the Frankfurt Stock Exchange. We are basically a specialty retailer and a key innovator in the cannabis industry. We have two main engines of growth driving our business forward. One is in Canada, which is our Canna Cabana brand. Canna Cabana is the largest cannabis retail chain in Canada, with 234 locations across five Canadian provinces, which is also backed by the world's largest cannabis loyalty program, with 2.73 million members of our Cabana Club. Our second engine of growth is Remexian Pharma GmbH in Germany, which is a leading importer and distributor of medical cannabis products in Germany. So we have a tremendous opportunity in front of us, both here right at home in Canada as well as in Germany.
I guess we're going to be passing the mic back and forth here. Okay. I've been covering you guys for quite some time, and you are one of the best operators in Canadian cannabis retail. Look at some of the metrics. Your average Canna Cabana store runs at roughly 1.8x the peer revenue, 2.4x here in Ontario. If you look at your sales per square foot, you beat many blue-chip retailers. What is the secret here? What is the recipe to get these kind of results, and what makes that model different from other retailers?
For our model to work, Fred, our customers have to keep winning. That is as simple as that. The number one thing is we offer unbeatable value to our club members, backed by our lowest price guarantee promise, so they keep coming back. Second thing I would mention is convenience. We never sacrifice on our location selection criteria. We're very, very particular in terms of where we want to plot our stores. It should be easy for our customers to access and find, and then do their business every day or every week with us. Convenience and very good locations is a big factor. I think the third major factor is our operating history. I've been in the cannabis industry, the legal cannabis industry, selling consumption accessories to the same consumer for 17 years.
We know what they like, we know what they prefer, we know how they shop, and we take care of them in those ways. It's a combination of all of those three factors why our model is more successful than anybody else.
Great. When we look at the market today, I think we've seen some deceleration in terms of same-store sales growth, just the overall market being flat, I would say, in some of your markets. But you're growing your market share. I believe you went from 13% - 14% in Q3. It looks like gaining share has become very important to keep growing. Can you talk about what are your market share aspirations? Where do you think you can get in the medium to long term? Where does that share come from? Who are you stealing share from, and what's happening with the broader market?
Stealing share from everybody. No, as you said, Fred, we have 14% of the market in the provinces where we operate, excluding British Columbia, where we are capped at 8 stores. Even that conversation is changing, which I will share with you and everybody else in a little bit. We have 14% of the market. Our target market share in our core provinces where we operate is 18%-20%. I did not want to say this, but you put me on the spot, so I will tell you, we are still targeting 18%-20% in the 4 provinces at least where we operate right now, and we are getting close to those numbers. 14% was historical. Maybe we have something more positive to share, depending on what numbers come out. Most of that growth is going to come from Ontario, which is established.
You know, Ontario has 150 store cap. We have 107 operating locations, so we can still add 43 stores in the province of Ontario. We have got really good at that organic rate, chugging along, but we are very disciplined in terms of how and where we plot our stores. We are also very strategic when it comes to M&A. We will not pay unreasonable multiples. This is a buyer's market. We just executed on one store at 2.1x as a multiple of EBITDA, and that is what we are really after. I think industry consolidation, our Cabana Club membership growing, us getting organic trajectory on the same pace, 20 to 30 locations a year, is how we are going to get to that target in our core markets.
Just to follow up there, Raj, when do you think you are going to get there?
Look, historically, if you look at my numbers, I have been doing 20 - 30 stores a year. Mostly more towards the higher end of that target, 28 -3 0 stores. This year is going to be towards the lower end of the target. Again, there are many factors that drive that. We did buy a few stores this year as well. We purchased Northern Helm, the four stores that we did, and then we purchased another store in Chestermere. I think if we continue growing at exactly our trajectory today, it is only 3 years. But one major M&A can absolutely happen between now and the next 3 years. I think 3 years would be a good, reasonable timeline to achieve such targets.
Okay. So I guess three years to maybe get to 20% share. That's pretty impressive.
18%-20%.
18% - 20%. Yeah. You are the leader now, so that's good. You mentioned the discount club model has been very successful. I remember when you launched in 2021, and your same-store sales very outperforming the market, very significant, so that's very good. I think you also mentioned recently in your call that you have some competitors trying to imitate that model. How do you see that reaction, and how do you remain differentiated?
Yeah, look, so what they say, Fred, I'll just give the slogan here that imitation is the highest form of flattery, right? We're absolutely being flattered right now by all competitors. The competitors that are surviving or that have survived to some degree are throwing absolutely everything on the wall to copy pieces of it. It's absolutely happening. You know what? I don't blame them for trying. They're playing catch-up. We're way ahead of them. We have 2.73 million members of our Cabana Club. We have 234 stores open in the country. You can't replicate this success overnight. Most of the companies don't even have a loyalty program, right? Try starting from zero. We did this eight years ago. They're absolutely playing catch-up, and my job and my team's job is to continue to innovate.
We cannot stop people from replicating our model, but can they replicate our execution? Look at our execution, what we have done over the last eight years. Look at our track record. We are focused on executing better than our competitors. We will continue to do that. We will continue to innovate, and I want to give them more reasons to catch up the next thing that we are doing because we are innovating so much. They are always going to play catch-up, in my opinion.
Let us talk about your store footprint and your store targets. You have 234 stores today. You have the long-term target of 350. How should investors think about that pace of growth to reach that target? When you look at British Columbia, for example, where you have been capped at eight stores per year, you said you are going to comment on it, is there any chance that that gets raised and your target increases?
Yes, absolutely. Historically, like I said, we have been growing at 20- 30 stores a year, more towards 30 stores than 20 stores. That is going to continue. You are going to see us do high-quality organic growth, very disciplined, plotting our stores exactly where we see opportunity, not rushing towards it. Organic growth will be the key driver that it has been for the last few years. That is the best type of growth we can give to our shareholders because my cash-on-cash returns are like 10 months, right?
On top of that, there will be strategic M&A, strategic and financially accretive M&A. Again, we do not rush into silly multiples. We do not pay somebody 10 x or 8x because that is the only way they will sell. Do not sell. When your numbers come down, you will be sold at distressed prices later. That is how we look at it.
I think your last point about British Columbia, now that is becoming an exciting opportunity. Over the last few years or many years, I think 2022 June is when we have reached our eight-store cap, and we have been capped at that number, right? Outside of British Columbia, our market share is 14% because that can continue growing. In British Columbia, it could not. As you know, recent election win was the Conservative Party with a majority, and Conservative Party is very driven to do some cannabis reform in B.C.
They are very well aware that B.C.'s illicit market is still north of 45%, which is not only annoying to the industry, but also annoying to the government. They are losing tax revenue. They are putting the population's health at risk with all of that pesticide-infested cannabis that is out there. We have been told that they are very motivated to increase the store cap.
When it happens, let's not get our hopes high too much too soon because cannabis is never a priority for any government, right? Luckily enough, the Conservative Party actually put it on their agenda, and we have been speaking to them internally prior to their election win. Omar has been leading the charge from our team on that, and I'm hearing that they are motivated to increase the cap to at least 24 stores. Again, time will tell. We have to be patient, they told us. Again, natural gas is their priority in British Columbia, understandably so. They want to double that by 2029 and triple that by 2032. There's a lot of attention on those type of resources, but cannabis is absolutely in play now in British Columbia.
Well, I guess from eight to 24 would be a huge change if it happens, so let's see. I think one of the most exciting aspects of the story of High Tide is the economics of the stores, of the unit economics that we see. Not only you have a long runway for growth in terms of opening new stores, but also every new store has very good economics, and you mentioned a payback of 10 months. Can you talk a little bit about that, the economics of every new store that you open, how it works, the ramp-up period, et cetera?
Yeah, absolutely. It takes us CAD 260,000 in hard CapEx to build a store, roughly 1,500 sq ft, average store size. Then another CAD 100,000 in working capital, which is mostly inventory that goes into the store. If you want to round it up, because stores are not always 1,500 sq ft, sometimes they're smaller, sometimes they're slightly larger. You can't pick and choose to that degree. If you want to round it up, it's about CAD 400,000. We get our money back within 10 months, 10 to 12 months historically. It's absolutely fantastic returns that we are getting on that, versus paying a multiple. This is why we've chosen most of our growth to come from organic growth, and we remain patient for when a highly accretive and strategic M&A opportunity comes through. That's the only time we'll act.
Otherwise, we'll keep giving our shareholders that organic growth that we've got very good at.
Great. So, 20 - 30 new stores organically every year, 10-month payback period. That is pretty attractive. The loyalty program that you have, you mentioned a little bit, I think it is the largest in Canada, 2.7 million members, and your ELITE, the paid tier, almost 200,000 members latest we heard. Can you talk about the difference between an ELITE member and a regular member? And when do you think those membership fees that you get from ELITE could become, I guess, more meaningful from a profitability standpoint?
Yeah. So like you mentioned, Fred, we have currently 2.73 million members in our Cabana Club, which is up another 27% year-over-year. We have 186,000 members that are paid members, ELITE members, which is up another 62% year-over-year, so there are no signs of stopping. That growth is still continuing to ramp up. But if you look at any example, I am particularly excited about our ELITE membership growth because when you have paid customers paying you CAD 35 a year, which at roughly 200,000 members equates to about CAD 7 million, this membership base is extremely sticky. Think about as an example that I like to give often is Amazon Prime or Costco. Once you have paid for that membership up front, you are naturally driven to shop at those platforms. That philosophy is no different with ELITE.
Once you pay us the CAD 35 up front, you naturally become our closer customer and club member. You are very sticky. They are building larger baskets. We have the data to prove it. They are frequenting us, they are visiting us more often. So there are such huge advantages of ELITE, which basically does not exist in the rest of the world. There is no cannabis retail concept that has a paid tier. Not only do we have a differentiated loyalty retail concept, we have even more stickier customers through ELITE, which continues to ramp up.
I bet you get a lot of data from those customers and the purchasing orders and the Canadian market, we know that retailers have that direct relationship with the consumers, so we know a lot. LPs are limited in that. So how valuable do you think is that building that data and their competitive advantage, how do you monetize that data? How does it provide you strategic differentiation?
Well, I think it's absolutely one of our most valuable asset. We have 234 stores telling us real-time customer data, what they're buying, how they're shopping, what are the latest trends, what are the hottest categories. When you look at licensed producers, their line of sight is practically ending when they ship their product to provincial wholesalers. That's it. They actually buy our aggregated data from us, which helps them guide their manufacturing priorities, their upcoming product launches, so it's less of a trial and error for them. So that data is extremely meaningful for licensed producers and also for us. Our second advantage comes in for our white label program. I have complete visibility, what's happening real time in each one of my locations. We get a read of top-selling products, number one, number two, number three.
We could just go SKU by SKU from the top. We have no such thing as trial and error. We can go after established products, established licensed producers that are making it, and then contract manufacture it through them. Not only does it help me directly monetize it through licensed producers, which we have many, we have over 45 licensed producers that buy our data, that subscribe to our data program. But it also helps us guide our white label priorities, which we've been very disciplined with, and I'm actually very excited about that growth ahead.
Okay. Maybe talk a little bit more about the white label. What is it in terms of percentage of sales today? What's your target? And in terms of a margin lift, what can it provide to you guys?
Yeah. Currently, our white label sales are 1.9% as per last reported quarter, but I'm very excited to report upcoming quarters because now they're significantly ramping up. We are seeing those results catch up. But they're 2% because my overall sales continue to grow as well. My overall sales are growing 33% year-over-year, and it's mostly third-party products. Just as a sheer result of that, white label sales are relatively low. In the long term, we have tremendous potential in the white label category. We purchased the Queen of Bud brand for just CAD 1 million about two years ago. I just checked before coming to the conference, my last 12 months sales are close to CAD 10 million. So that's how beautifully that is progressing.
In absolute dollar terms, we are way higher than where we were, but we continue to chug along, and I think there's meaningful increases coming up in our white label share in the coming up quarters.
Let's talk about Germany, your international medical cannabis distribution business. Very exciting. You bought that business. It did record volumes, I guess, last quarter. Very strong numbers. Your German market share has increased as well. How are you actually winning in that market? I know it's a growing market, but also some challenges there, and how soon do you think you can get to your target market share? Can you talk about where you are today and how soon you're going to get to that market share target?
Yeah, absolutely. First of all, I'm extremely proud of the High Tide team, and our German counterpart team in how they've executed in Germany on our strategic growth plan. As you mentioned, Remexian sold 10.2 tons, which was a massive quarterly record. Last quarterly record was 7.6 tons. Before that, we did about 5, 6 tons, so that's how quickly the business is growing. I couldn't be more happier. We were $32 million or so in Q2 as quarterly revenue. In Q3, that number up to $38 million. Look, I said that from the very beginning, even before buying Remexian, why we did that, and as we were buying Remexian, our strength, Fred, is our procurement expertise.
We are the largest cannabis retailer in Canada, buying these products from the same licensed producers that are not only selling this domestically to us, but also selling this product for export purposes internationally to Germany and other international markets. We are dealing with those same pool of people. Our German counterparts, our friends in Germany, they don't have the same connections that we do. We were very confident that High Tide sits in a very unique position, given where we are, without having to build any cultivation facilities. I can literally pick the cream of the crop and buy those products at best-in-class terms and best-in-class prices, and it's absolutely yielding amazing results. When we bought Remexian, they were under-indexing on Canadian sales, Canadian cannabis imports. I think the Canadian cannabis imports were about 33% at that time. We've upped that to close to 80%.
You are hearing it first because, again, I checked the numbers, it was 70%, now it is 80%. Same thing with market share. When we bought Remexian, when we closed the transaction on September 2, 2025, our immediate market share after that was 6.5%. We have just exited the last quarter, or as per Q1, we are at 10.5%. We are still waiting for June BfArM numbers to come out, which could be higher. Our long-term target in Germany is at least 15%. I think if business continues the way it is, plus the market continues to grow, as you know, Germany is still growing by 25%-30% a year, we could get there in relatively quick order, about two to three years.
Very exciting. I think last quarter you posted very good margins in that business, about 12% Adjusted EBITDA. So it is highly profitable to you, but it is a distribution business, so I think investors always ask how sustainable are those margins? Are you seeing any compression and how the competitive environment looks like?
Look, so there is a very big difference in our distribution business in Germany and our Canadian business here, right? The 234 stores, 234 rents to pay, 234 payrolls to handle, times the number of employees that work in that store, plus miscellaneous expenses. It is a totally different ballgame. I have 35 to now probably 40 employees in Remexian in Germany, and we are doing about CAD 160 million-CAD 170 million turnover business, with such a low amount of employee base. So I do not think the 12% that we just reported is going to be a one and done or an outlier.
I think it is absolutely repeatable, but it is not always repeatable quarter after quarter because quarter after quarter things can be lumpy, and I will explain you why. You can sometimes get cannabis from the time you order into Germany in three to four weeks, and that is very fast timeline, right?
But other times it can be six months. Import permit timelines, export permit timelines. Import permit expires and export permits are not ready. This is the life I am living right now, so I am learning a lot. So it is lumpy quarter after quarter. The business is very strong. The market is very strong. The timing of the quarter can change this equation, like how much I can import into the country at any given quarter and how much I can sell within that quarter. Sometimes a sale happens a week after that. But long-term, I can tell you I am highly confident, that we can do maybe even between 12%-15% Adjusted EBITDA margin going forward. Long term.
Great. What other countries are you looking at to expand internationally outside of Germany?
Yeah. We like to walk before we run. We've already practiced, perfected, and rehearsed Remexian. It's going very, very good. That's made me look at other international markets. U.K. is very interesting. I get to own most of the value chain until the very end if I want to. In Germany, obviously, I cannot buy pharmacies because I'm not a pharmacist. That is the regulation in the German market. U.K. is not the same. We're very keenly looking at the U.K. market right now. Poland is also on our radar, but my philosophy is one market at a time, become really good at it, prove a point that we can do this, then move to the next one. France and Spain are also talking about reforms for medical cannabis, and I think things are going to happen very quickly in those countries as well.
The order of business for me would be U.K., Poland, France, Spain, mostly other European countries.
Let's talk maybe a little bit about the U.S. Obviously, we're waiting for regulatory reform. It looks like federal rescheduling could be happening soon. How do you think about a potential entry into that market? What would be the strategy? How soon would you be able to move if that's allowed? Just general comments there.
Yeah. Look, generally, I am very, very excited for what the U.S. market has to offer. It is the most exciting, the largest cannabis market in the world. I cannot wait to play in the U.S., but I can actually wait for all the growth that awaits me in Canada, Germany, and other international markets. We are literally waiting for this massive catalyst, which we call the rescheduling event, which we are all waiting for. We know that senior exchanges are having a lot of conversations with the federal government to make sure they can allow plant-touching businesses to cannabis companies that are listed or new cannabis companies that want to get listed. We are literally waiting for the Nasdaq heads-up. Once that happens, the U.S. market is going to be a priority. But in the shortage of that, I want to remind investors, we are not losing growth.
We are growing very rapidly. We grew 33% last year in our sales. We have Canada, 50% more store growth ahead of us, 234 to roughly 350. We have Germany, where our aspirations are 15%-20% market share in that country. The U.K. is another market that is getting ready. We are not hurting for growth, but I am absolutely looking forward to the United States.
In the U.S., you also have some e-commerce platforms, accessory CBD. I think the CBD platform has faced some headwinds. What is the strategic value of these assets today?
Yeah. Let me put some things in perspective. CBD businesses and accessory business is less than 2% of our consolidated revenue. As you know, there is a CBD pilot opportunity currently going on where Medicare and Medicaid could provide up to $500 in hemp-derived CBD products coverage to eligible seniors in the United States. Guess what? We happen to have NuLeaf Naturals, which is one of the oldest CBD brands in the United States. We also have a cGMP-certified facility where we manufacture our CBD products, including working with other third-party vendors. That is the CBD business that we are looking forward to what happens. Right now, it is just in a data collection stage. Next year, the government determines whether Medicare and Medicaid-related programs are going to cover that CBD advantage or CBD advantage coverage. We are waiting to see what happens on that side.
In the absence of that, for the accessory platforms, we are looking at divesting that portfolio, but I'm not in a rush. We don't want to simply give it away because there's a lot of strategic value there. What I'm really trying to carve out of that portfolio is literally the optionality to sell THC products once federal legalization or rescheduling event happens, or even after rescheduling if an opportunity pops up. That is what we are working on right now.
Okay. Final question. What are you most excited about over the next few months? What are some catalysts that investors should be expecting soon for High Tide?
Yeah. Again, I think the most exciting opportunity for me is U.S., the rescheduling as the biggest catalyst for High Tide. I think it's going to be meaningfully taking High Tide to the next level if it actually goes through, if we're able to bring our well-rehearsed discount club model to the U.S. That is catalyst number one. I'm hoping that it goes through this year or beginning of next year. That is the industry rumor, but we've heard these things before, but that is the biggest catalyst. Second one is Canada. Like I said, I still have 50% of store growth ahead here. We want to grow our discount club to beyond 3 million members, potentially 3.5 million members. We want to grow our ELITE portfolio. We want to increase profitability in our current Canna Cabana portfolio in Canada.
There's a lot to do in Canada, a lot of catalysts in Canada. On top of that, we have Germany now, and there's significant growth in that market. That market is still growing about 25%-30% currently. Then I think the last but not least, the fourth major catalyst would be a new European jurisdiction that we enter into, which is also highly attractive and fits really well into our model.
Thank you very much, Raj.
Thank you very much. Thanks, guys.