High Tide Inc. (HITI) delivered a record fiscal third quarter, with revenue reaching C$198.8 million and adjusted EBITDA climbing to C$16.2 million. The Canadian cannabis retailer also posted its strongest adjusted EBITDA margin in three years, at 8.2%. However, the company's cash generation did not keep pace with its top-line growth, leaving investors to weigh the quality of the expansion.
The results, released Monday after the market close, showed revenue up 33% year-over-year from C$149.7 million and 11% sequentially. Gross profit rose 32% to C$52.7 million, holding the gross margin steady at 27%. Adjusted EBITDA surged 53% from a year earlier, with the margin expanding by roughly 1.1 percentage points. The company credited improved operating leverage, citing lower general and administrative expenses—down to 3.9% of revenue from 4.4%—and reduced wage costs, which fell to 11.4% from 12.2%.
Shares of High Tide, which trade on the Nasdaq, closed at US$2.63, up 4% from Friday, and were near US$2.67 in after-hours trading. The modest post-close reaction was expected, as management had already guided in August to revenue in the range of C$195 million to C$200 million. The actual figure landed near the top of that range.
Cash Flow Concerns Persist
While the headline numbers impressed, the cash flow story was less compelling. Free cash flow came in at C$7.0 million for the quarter, a sharp improvement from C$1.5 million in the prior quarter but 9% below the C$7.7 million generated in the same period last year. That translates to a free-cash-flow margin of approximately 3.5%, down from 5.1% a year ago. High Tide attributed the decline to C$4.2 million in additional working-capital investment.
Cash and restricted cash stood at C$47.1 million at quarter-end, up from C$36.5 million three months earlier but down from C$63.8 million a year ago. The company subsequently closed C$40 million in senior secured credit facilities with Bank of Montreal, providing additional borrowing capacity. Still, the next several quarters will be critical to determine whether new store openings and acquisitions can translate into stronger cash generation rather than merely expanding the revenue base.
Net Income and Adjusted Figures
The reported net income of C$12.7 million requires context. Adjusted for changes in a derivative liability and a long-term contract asset, net income was C$2.2 million, compared with C$0.9 million a year earlier. The filed interim statements offer investors a clearer view of operating profitability separate from non-cash valuation swings.
Germany Drives Growth
Germany emerged as the primary growth engine. Remexian, High Tide's medical-cannabis distribution arm, generated C$38.2 million in revenue, up from C$31.6 million sequentially, on a record 10.2 tonnes of product distributed. Its gross margin was 26%. Remexian now accounts for roughly 19% of company revenue, giving German volume and margin significant influence on consolidated results.
In Canada, the retail segment showed stability. Canna Cabana's same-store sales were flat year-over-year for the full quarter, though June and July each turned positive, and same-store transaction counts rose 1.1%. Market share in provinces where High Tide operates (excluding British Columbia) increased to 14% from 13% a year earlier. Membership in the free Cabana Club reached 2.73 million, while the paid ELITE tier grew to over 186,000 members.
Expansion and Outlook
During the quarter, High Tide opened four new Canadian locations and acquired four Northern Helm stores. Three additional Canna Cabana locations opened after July 31, bringing the total network to 232. This expansion underscores the central challenge for the company: whether improving corporate expense ratios and German scale can outpace the working capital, acquisition spending, and financing demands of growth.
Management's conference call is scheduled for Tuesday at 11:30 a.m. EDT. Key checkpoints will include Remexian's next-quarter tonnage and margin, a full quarter of positive Canadian same-store sales, and free cash flow that grows in tandem with revenue. The tension between record adjusted EBITDA and a smaller share of sales converting to cash remains unresolved, and the latest quarter did not provide a definitive answer.