By Michael Kim
NASDAQ:HITI
READ THE FULL HITI RESEARCH REPORT
After the markets closed on 9/15/25, High Tide (NASDAQ:HITI) reported F3Q25 (Jul) earnings results. For the quarter, HITI reported net income of $0.6 million, or $0.01 per share, compared to our ($0.01) estimate. The high-quality beat reflected higher-than-anticipated revenue and operating income, as well as more favorable non-operating income (Exhibit 1). Focusing on the top line, HITI generated $108.3 million of revenue in F3Q25, or ahead of our $107.7 million forecast, and at the high end of management’s preannounced guidance range. Strong year-over-year and sequential quarter growth primarily reflected accelerating sales of cannabis and CBD products, with same-store sales growth of 7.4% for the quarter – the highest level in the past two years. After factoring in cost of sales of $79.3 million, gross profit totaled $29.0 million for F3Q25 – consistent with management’s $28 million to $29 million guidance range and representing a gross margin of 26.8%, up 110 bps on a sequential quarter basis.
In aggregate, HITI’s operating expenses totaled $26.3 million in F3Q25, up from $23.4 million in F3Q24, but below our $26.8 million forecast. Much of the favorable variance related to lower compensation and advertising and promotion expenses. Excluding non-cash transaction and acquisition costs and share-based compensation, Adjusted EBITDA came in at $7.7 million (7.1% margin) for F3Q25, up from $6.9 million in the year-ago quarter.
Turning to the balance sheet, cash and cash equivalents totaled C$63.8 million as of July 31, 2025, up from C$34.7 million as of April 30, 2025, with much of the step up related to the recent Cronos convertible debt offering. Looking ahead, management maintains ample liquidity (along with accelerating free cash flows) to fund ongoing new store openings and capitalize on accretive M&A opportunities should they arise.
Our updated model calls for EPS of ($0.03) for F2025, followed by $0.12 in F2026 (compared to our previous $0.09 forecast), reflecting full-year accretion from Remexian and ongoing organic growth. Our higher F2026 outlook primarily reflects more favorable revenue and margin outlooks, partially offset by higher share count assumptions given the inflection in net income.
Looking ahead, our model calls for a sharp step up in revenues following the recent closing of the Remexian investment, with strong growth in F2026 and beyond. More specifically, we forecast total revenues to rise from $376 million in F2024 to $428 million in F2025 and $600 million in F2026. Our optimism primarily reflects continued organic growth (rising same-store sales and ongoing market share gains), a broader retail store footprint, with the company’s store count likely approaching 300 over the next several years, and accelerating Remexian contributions (once processing issues in Portugal normalize).
Focusing on Adjusted EBITDA, which excludes transaction costs, other non-recurring items, and stock-based compensation expenses, we forecast a step up in related growth in F2026, fueled in part by rising margins. Beyond strong revenue growth, key drivers likely include steady gross margins, rising economies of scale, particularly as it relates to incremental headcount needs, ongoing expense management/resource optimization, and accelerating growth across higher-margin initiatives (white label and ELITE memberships).
Turning to valuation, we are taking up our DCF-derived price target by $1.00 to $7.00, reflecting our higher earnings outlook. Stepping back, the absolute/relative performance of most U.S.-based cannabis company stocks remains inextricably linked to the prevailing narrative around potential regulatory reform in the U.S. In contrast, we look for HITI’s strong/improving fundamental story to increasingly resonate with (generalist) investors, thereby driving a material upward revaluation for the stock regardless of the regulatory backdrop. Furthermore, should favorable regulatory reform materialize (particularly as it relates to federal rescheduling here in the U.S.), we would expect management to bring the company’s unique discount club model south of the border in relatively short order (likely via an acquisition/investment), assuming HITI shares remain eligible to list on the Nasdaq.
We highlight the following key takeaways from F3Q25 results:
1. Strong/improving store economics: At present, High Tide operates 207 provincially-authorized Canna Cabana stores across Alberta, Ontario, Saskatchewan, Manitoba, and British Columbia. As previously disclosed, F3Q25 same-store sales (SSS) were up 7.4% on a year-over-year basis, representing the highest growth rate over the last eight quarters. Longer term, SSS increased 137% between October 2021 and June 2025, while the competition was down 2% on average. Much of the outperformance can be tied to more potent store economics. Indeed, for the three months ended June 30, 2025, Canna Cabana stores generated more than double the revenue per store average for peers across the five provinces in which HITI operates on an annualized basis, while maintaining elevated gross/EBITDA margins reflecting minimal shrink rates and prudent inventory management. Put another way, Canna Cabana stores reported annualized retail sales per square of $1,735 during F3Q25, up 5%+ on a sequential quarter basis and well ahead of peers and other “blue-chip”/high-performing retailers, including Walmart (NYSE:WMT) and Target (NYSE:TGT) – boding well for an upward revaluation for HITI shares, we believe.
2. Cabana Club growth keeps chugging along: A key growth driver for HITI remains the company’s Cabana Club loyalty program (launched in 2021), under which members benefit from discounted prices on cannabis products and exclusive access to consumption accessories. As of 7/31/25, memberships in Canada exceeded 2.15 million, up nearly 40% over the last 12 months and 13% on a sequential quarter basis, with the company on track to sign up 2.5 million members over time. Moreover, the Cabana Club program recently went global and currently maintains nearly 6.15 million members worldwide. While the base program remains free to join, the company introduced ELITE in late 2022, with members paying an annual fee of C$35 (up from the initial C$30 level reflecting strong demand) for greater discounts on products and delivery services, as well as access to exclusive flash sales and limited editions. ELITE memberships in Canada crossed 115,000 as of the end of July, up more than 2x over the last year and 19% for F3Q25. From a financial perspective, ELITE members typically generate higher-dollar receipts with greater frequency, with related membership fees providing a growing source of recurring/high-margin revenues.
3. Evolving capital story: At a high level, High Tide’s strong balance sheet remains a key differentiating factor relative to most other U.S.-based cannabis operators that typically struggle to source capital to fund growth due to regulatory restrictions, with highly dilutive financings often the only course of action. The company’s debt profile remains generally favorable, with long-dated maturities including the recent Cronos convertible debt offering and the Remexian loan. Furthermore, the company maintains ample liquidity and steady free cash flow ($5.6 million in F3Q25 bringing the cumulative total to $27+ million over the last two years) to fund organic growth, with management guiding to the upper end of the prior 20-30 new store openings target for calendar 2025 and reiterating the company’s long-term goal of operating 300+ locations across Canada.
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