By Tom Kerr, CFA
NASDAQ: HITI
READ THE FULL HITI RESEARCH REPORT
2nd Quarter 2026 Financial Results (C$)
On June 15, 2026, High Tide (NASDAQ: HITI) reported 2nd fiscal quarter financial results for the period ending April 30, 2026. The results were strong with revenues and margins above our expectations.
Revenues increased 30% to $179.3 million for the quarter compared to $137.8 million during the same period last year. Revenue was up 1% sequentially during the quarter despite the 2nd quarter being seasonally slowest and having three fewer days. This was the fourth consecutive quarter, marking a new all-time high in revenue. 96.8% of the revenue was derived from cannabis or hemp-derived products, with the remaining 3.2% from consumption accessories.
Same-store sales declined (1.2%) in the retail operations as the cannabis industry in Canada continues to face a slowdown. Middle-class consumers have been feeling economic pressures due to tariffs, inflation, household debt, and other economic factors. Nonetheless, the company has been significantly outperforming industry averages and main competitors. We estimate same-store sales decline in the Canadian cannabis retail market is in the (3.0%-4.0%) range.
Gross margin for the quarter increased to 27.0%, compared with 26.0% in the same period last year and 25.0% in the 1st fiscal quarter of 2026. This was the company's highest consolidated gross margin in the past 8 quarters. In the medical cannabis distribution segment (Germany), gross margin reached 27.0% during the quarter, which was more than double from 12.0% in the first fiscal quarter.
Adjusted EBITDA was a record of $13.9 million (7.8% margin) in the 2nd quarter. This was up approximately 73% compared to the prior year period and up 21% sequentially despite there being 3 fewer days in the quarter.
During the 2nd fiscal quarter, earnings per diluted share were $0.01 when adjusted for changes in non-cash derivative liability, which was an improvement from ($0.04) a year ago and ($0.02) sequentially.
High Tide generated $1.5 million in free cash flow during the quarter, which was below the $4.9 million generated in the prior year period. This was primarily due to working capital investments to grow the business, which was tied to inventory purchases in the Germany business as well as new store openings in Canada. During the past 4 quarters, the company has generated $13.4 million in free cash flow.
Cash balances (including restricted cash) remained strong and totaled $36.5 million as of April 30, 2026. Total debt balances were $32.9 million, and there was also convertible debt totaling $30.0 million (C$4.20 conversion price, but only upon mutual agreement between both parties). Current assets were $131.4 million, and current liabilities were $89.9 million, providing positive working capital of $41.4 million.
CEO Raj Grover stated, "Our second quarter results highlight the strength of High Tide's diversified growth strategy and our ability to execute at a high level across multiple geographies. Through the continued integration of Remexian, we have expanded our supply chain capabilities, eliminated unnecessary intermediaries, and are procuring biomass at materially lower costs than Remexian could on its own, enabling us to achieve key operational and financial objectives approximately 90 days ahead of our internal expectations."
Valuation
We are maintaining our DCF derived price target of US$5.00 per share, which still represents meaningful upside from current price levels. While many cannabis stocks do tend to move together in response to major industry-wide catalysts (such as rescheduling), we believe there can be major divergence in specific companies based on specific fundamentals. High Tide is likely one of those positive outliers due to a potential recovery of Canadian same-store sales growth to normal levels, successful new store openings, continued margin improvement, and a successful expansion into European markets.
We also look at peer multiples to provide a secondary valuation methodology. Although it’s difficult to find exact comparisons due to a variety of business models, country location, and financial data, we believe a set of cannabis related stocks are trading at an EV/EBITDA ratio of approximately 9.0x. With HITI trading at only approximately 5.7x EBITDA, there appears to be material upside. HITI stock would have to reach approximately US$3.40 per share to match its peer valuation, many of which do not have the strong growth profile and competitive advantages that High Tide does.
Another competitor comparison is Charlotte’s Web (OTCQX: CWBHF), which has performed very well since the executive order from the White House on 12/18/25 that opened the door to a pilot program where seniors could get up to US$500 a year of CBD covered under Medicare. High Tide owns NuLeaf and FAB CBD products, which compete with Charlotte's Web, so the company is not getting credit for that potentially large opportunity.
In addition, Canadian-based Organigram Global recently acquired Germany-based Sanity Group, a competitor to Remexian. The Sanity Group acquisition is roughly the same size as High Tide’s purchase of Remexian in terms of revenue (Remexian is more profitable), but Organigram is paying substantially higher multiples than High Tide did (believed to be over 12x). This demonstrates High Tide’s European business is truly an undervalued and unrecognized asset.
Key Investment Points
High Tide is the largest cannabis retailer in Canada, operating 228 stores across Alberta, Ontario, Saskatchewan, British Columbia, and Manitoba. Beyond traditional brick-and-mortar cannabis stores in Canada (branded Canna Cabana), the company markets Cannabidiol (CBD) and consumption accessories online across Canada, the U.S., the United Kingdom, and Europe. More recently, HITI closed the acquisition of a 51% ownership stake in Remexian Pharma GmbH, a leading low-cost medical cannabis importer/wholesaler in Germany, one of the highest-growth markets in the world, with much of the demand satisfied through imported cannabis from Canada.
Our investment thesis revolves around:
- We expect a continued favorable regulatory landscape in Canada. The Cannabis Act and the Cannabis Regulations in 2018 allow for and govern the cultivation/production, processing, retail sale, and distribution of cannabis for both medical and recreational use across Canada. Following the legalization of recreational-use cannabis, Canada has grown into a C$5.5 billion market, with a majority of sales coming from the five provinces in which High Tide has operations.
While HITI’s brick-and-mortar cannabis sales remain confined to Canada at present, we expect management to increasingly turn its sights to the U.S. in light of a more favorable regulatory backdrop. As uncertainty around rescheduling probabilities, implications, and timelines fade, we look for cannabis stocks to benefit from enhanced liquidity, rising institutional shareholder ownership profiles, and powerful upward revaluations over time.
- We believe there are plenty of growth levers the company can engage in. We expect a powerful step up in HITI’s earnings power reflecting the recent majority equity investment in Remexian in Germany, in addition to a number of compelling growth catalysts, including:
a) strong/sustained Same-Store Sales (SSS) growth;
b) ongoing retail store expansion, with management reiterating the company’s goal of adding 20-30 new stores per year;
c) further step ups in the number of Cabana Club/ELITE loyalty program memberships;
d) market share continuing to roll up to diversified/scale-enabled players; and
e) increasingly leveraging white-labeling opportunities to further build out the house-branded product portfolio. Currently, this is less than 2.0% of total sales, but the company’s target is for these products to represent 20% of sales. Gross margins on this product portfolio are typically 5%-7% higher than the legacy product set.
- High Tide has emerged as a global player in the industry. HITI recently closed the acquisition of a 51% ownership stake in Remexian Pharma GmbH, a leading low-cost medical cannabis importer/wholesaler in Germany. Germany remains amongst the highest-growth markets in the world, particularly following the enactment of the Consumer Cannabis Act in April 2024, which legalized cannabis for medical use. A key rationale for the transaction was the powerful opportunity to increasingly leverage HITI’s procurement expertise and LP network/relationships in Canada to drive accelerating imports/sales in Germany. As such, we see substantial potential for related revenue and EBITDA growth, as HITI increasingly pushes Canadian-supplied cannabis (sourced at lower prices) through Remexian’s broad distribution network in Germany.
- We project a favorable inflection in net income in fiscal year 2027 (October 2027), with further growth expected in fiscal year 2028 and beyond as the business continues to scale. Key modeling inputs include accelerating revenue growth reflecting continued organic growth, a broader retail store footprint, and accelerating Remexian contributions, combined with rising margins on the back of building economies of scale, ongoing expense management/resource optimization, and accelerating growth across higher-margin initiatives.
- 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, and highly dilutive financings are often the only course of action. The company maintains ample liquidity and steady free cash flow to fund organic growth initiatives and capitalize on accelerating consolidation trends across the industry, should the right opportunities arise. High Tide’s debt profile remains generally favorable, with long-dated maturities (mostly 2028). The debt to EBITDA ratio is 1.7x based on net debt as of 4/30/26 and 2nd quarter annualized attributed EBITDA. This demonstrates the company has ample debt capacity to fund its growth plans if necessary.
- The Company’s objectives when managing capital resources are to:
(i) Explore profitable growth opportunities;
(ii) Deploy capital to provide an appropriate return on investment for shareholders;
(iii) Maintain financial flexibility to preserve the ability to meet financial obligations; and
(iv) Maintain a capital structure that provides financial flexibility to execute on strategic opportunities.
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