In spite or because of the pandemic, legal Canadian cannabis sales more than doubled in 2020 and retail giant High Tide Inc. (TSXV: HITI) (OTCQB: HITIF) (FRA: 2LY) rode the wave through its most profitable year yet.
On Tuesday, the company posted its financial results for fiscal 2020 and the three months ended Oct. 31.
High Tide reported revenues of $24.9 million in the fourth quarter, increasing 7.3 per cent from $23.2 million in the previous quarter.
According to the company, annual revenues rose to $83.3 million, a 166 per cent increase from $31.3 million in fiscal 2019.
High Tide noted that the figures didn’t include any contribution from Meta Growth Corp., a competitor it acquired in an all-stock deal that closed at the end of the reporting period. And although that transaction gave High Tide 72 retail locations — the most in Canada — its rival Fire & Flower Holdings Corp. (TSX: FAF) has 71, according to its website.
High Tide reported a fourth-quarter gross profit margin of 35 per cent, and 37 per cent for the year.
While staying in the green, adjusted earnings before interest, taxes, depreciation and amortization dipped slightly to $3.6 million, a 9 per cent decrease from nearly $4 million in the previous quarter. Annual adjusted EBITDA was reported at $8 million.
Company stock fell over 10 per cent Tuesday to $0.83 on the TSX Venture Exchange.
High Tide expects Q1 2021 revenue of $37–38 million
“Despite the global slump in retail sales associated with the pandemic, and thanks to the tireless efforts of our team, we closed the year with approximately $8 million in adjusted EBITDA making 2020 the best year in High Tide’s history,” president and CEO Raj Grover said in the statement.
The executive praised his company’s tight operations and its diversified cross-boarder strategy. Grover says High Tide plans to drive shareholder value through organic growth and strategic acquisitions.
“For the fiscal first quarter of 2021 we expect to report revenue in the range of $37 million to $38 million,” he said.
In a midday call, Echelon Capital Markets analyst Andrew Semple asked how integration with the Meta Growth stores was going.
Grover said that while he’s pleased with the progress, transitioning all the stores will take until the end of October.
“But the scale that we’ve achieved due to the META acquisition will also help us with our upcoming white-label initiatives, our Cabanalytics platform subscriptions, an increase in the reach of our Cabana Club loyalty program, because [consumers] have access to this many new stores now,” he said.
ATB Capital Markets analyst David Kideckel noted research his firm has released showing inventory levels increasing across the board for cannabis 2.0 products, and wondered if some categories aren’t selling as well as others.
In response, Grover expressed the most excitement for the vapes category, which have higher margin potential and have been dropping in price. Vapes now make up close to 17 per cent of cannabis sales, he said.
On the other hand, the CEO noted that edibles are off to a slower start, representing only 5 per cent of sales. He pointed to the 10-milligram limit as a barrier the industry is trying to get Health Canada to change its mind on. A shift there would drive more sales, he says.
The company said it had $7.5 million in cash at the end of the quarter, which has since increased to around $38 million today following rounds of bought-deal financing.
High Tide — which operates Canada’s largest private cannabis retail chain of 72 stores, as well as weed accessory wholesale and e-commerce in the U.S. — said $20.6 million of its revenues came from Canada, $4.1 million from the states and $200,000 from international sales.
For the fiscal year, $68.4 million of reported revenue was earned in Canada, $14.3 million in the U.S. and $600,000 internationally. Broken down by segment, $75.0 million was generated by retail, $7.9 million by wholesale and $400,000 by corporate.
Also in the quarter, High Tide acquired online U.S. accessory store Smoke Cartel, and uplisted to the TSX Venture Exchange from the Canadian Securities Exchange.
Top image via High Tide