High Tide's Q3 2025: Contradictions Emerge on E-Commerce Strategy, Dividend Policy, Store Performance, and Remexian Acquisition

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 15, 2025

Financials Results

• Revenue: $149.7M, up 14% YOY and 9% sequentially
• Gross Margin: 27%, flat YOY; up 100 bps sequentially (vs 26% prior quarter)

Guidance:

• Q4 same-store sales show no signs of slowing.
• Market share at 12% across five provinces in the first two months of Q4.
• Expect to hit the high end of 2025 plan to add 20–30 new Canadian stores (organically), with ~a dozen under construction.
• Remexian financials to be consolidated starting in Q4; focus on lifting its gross margins via Canadian LP sourcing.
• Germany supply bottlenecks from Portugal likely to persist into Sept–Oct; normalization expected from November.
• Bricks-and-mortar gross margins to hold near current levels near term; long-term potential approaches ~30% as growth matures.

Business Commentary:

• Record Financial Performance:
• High Tide achieved a record revenue of $149.7 million in Q3, representing a 14% increase year-over-year and a 9% sequential increase.

• This was driven by the strong performance of the bricks-and-mortar segment, with revenue up 18% year-over-year, and the addition of new stores.

• Same-Store Sales Growth and Market Share:

• Same-store sales growth reached 7.4% in Q3, marking the fastest pace in two years and extending High Tide's multi-year streak of outperformance versus peers.

• This was attributed to the success of the innovative discount club model, which increased same-store sales by 137% since its launch in 2021, amid a declining average operator performance of 2% decline.

• Profitability and Margin Expansion:

• Adjusted EBITDA reached a record $10.6 million, up 11% year-over-year, with bricks-and-mortar adjusted EBITDA at an all-time high of $12.7 million, up 42% year-over-year.

• Margins expanded due to more efficient store operations, white label sales growth, and stable wholesale pricing.

• German Market Entry and Strategic Partnerships:

• High Tide's acquisition of a majority interest in Remexian, a leader in Germany's medical cannabis market, was aimed at leveraging its network to channel Canadian cannabis shipments.
• This strategy is expected to capitalize on High Tide's market leadership in Canada and its strong relationships with licensed producers.

Sentiment Analysis:

• Management called Q3 the best in company history. Revenue hit a record $149.7M (+14% YOY, +9% seq). Adjusted EBITDA reached a record $10.6M (+11% YOY, +32% seq). Gross margin held at 27% (flat YOY, +100 bps seq). Net income turned positive at $0.8M vs a $2.8M loss in Q2. Free cash flow was $7.7M, up 148% YOY. Bricks-and-mortar same-store sales rose 7.4% and segment EBITDA hit $12.7M with margin up 140 bps YOY.

Q&A:

• Question from William Joseph Kirk (ROTH Capital Partners): How much of the same-store sales acceleration is industry recovery versus your market share gains, and are competitor closures driving your gains?
  Response: Growth is primarily from High Tide’s superior retail model; competitor closures contribute only marginally. Momentum is continuing into Q4.

• Question from William Joseph Kirk (ROTH Capital Partners): What do you tell Canadian LPs about eventual U.S. access as you become their conduit into Germany?
  Response: We’ll leverage trusted LP relationships globally; anticipate U.S. entry when reform allows (potentially via licensing) and expect to replicate partnership success there.

• Question from Neil Gomer (Haywood Securities): Post-Remexian, how are you thinking about capital allocation for Germany and reaching 300 Canadian stores—organic versus M&A?
  Response: Remexian may need working capital near term; we’ll continue opening 20–30 organic stores annually and may add M&A to reach 300 sooner.

• Question from Neil Gomer (Haywood Securities): When might the Portugal-related supply issues resolve?
  Response: Supply slowed ~60–70% in Jul–Aug; expect pressure in Sept–Oct and normalization from November.

• Question from Neil Gomer (Haywood Securities): What gross margin does Remexian run versus your 27%?
  Response: Mid-20s (~25–26%); expect improvement as we leverage Canadian LP terms and optimize sourcing.

• Question from Frederico Yokota Choucair Gomes (ATB Capital Markets): Confidence in e-commerce turnaround and rationale for entering hemp-derived cannabinoids?
  Response: E-commerce is <3% of revenue; we’ve hired new leadership and consultants, and are testing hemp-derived cannabinoids. If underperformance persists, we’ll consider partnerships, divestiture, or a slimmed platform.

• Question from Frederico Yokota Choucair Gomes (ATB Capital Markets): What drove bricks-and-mortar margin expansion and can it continue?
  Response: White label, ELITE membership growth, and some pricing helped. Near term margins should hold; long term, as growth matures, margins could approach ~30%.

• Question from Michael Kim (Zacks Small Capital Research): How are newer stores ramping versus prior cycles?
  Response: Brand strength and top-tier locations are driving faster-than-expected ramps, with better trajectories than two years ago.

• Question from Michael Kim (Zacks Small Capital Research): Any plans for similar investments or partnerships across Europe?
  Response: Focus is on executing with Remexian first; we’re monitoring other European markets and will enter when commercial opportunities are compelling.

• Question from Andrew Semple (ATB Capital Markets): Were exclusivity agreements with LPs expected for Germany, and do they impact margins?
  Response: Exclusivity aligns with our house-of-brands strategy; no margin trade-off and enables better procurement terms given our scale.

• Question from Andrew Semple (ATB Capital Markets): Are other provinces closing the performance gap with Ontario?
  Response: Same-store sales are growing across all provinces; Saskatchewan is improving as illicit activity eases, and Ontario remains strong.