Welcome to Cultivated Live for Friday, June 28th. My name is Jay Rosenthal. I'm the co-founder of Cultivated Media and the host of this program, Cultivated Live. Since we launched, our goal at Cultivated has been to be cannabis industry first, providing you with the most important, insightful, useful, and timely information. We do that through our daily newsletter at Cultivated Daily. We do that through this daily live stream at Cultivated Live, and we would love if you followed us on LinkedIn, subscribe to us on YouTube, and most importantly, get our newsletter to your inbox every day. You can find that at cultivated.news. Because it is a coveted before a long weekend time slot, I'm here with my friend Raj Grover. He is the founder and CEO of High Tide. Raj, thanks for making time. Jay, it's good to see you, man. You've been busy from Business of Cannabis to Cultivated News, it's great to be here with you again. I feel like I'm a fraction as busy as you. That's what I would say. I think that's debatable. I think we're both entrepreneurs, and we're managing and doing what we got to do, but it's definitely great to see you again. Well, we are doing what we have to do, and this is a busy day and a busy weekend I would imagine, for the whole team at High Tide and Canna Cabana shops because it is a long weekend here in Canada. How much do you think about the big upticks in long weekends as you plan the operation? Is there a huge uptick around July 1st? Definitely huge upticks. We live for long weekends. I wish every week ended with a long weekend. Me too. That's not the case. Hey, life goes in full circles, and you got to wait your turn. The July 1st weekend, the Canada Day weekend, is an amazing weekend here in Canada, and I can tell you, this week is looking encouraging, so I'm happy with that. Yes, excited for what's coming our way. Me too, and as soon as we're done here, I'm going to go buy some weed for the weekend. I'll hit up my local- You know where you're buying it from. I don't have to repeat that, but we'll be saying the name of the best brand in Canada a few times on your show. You're a smart man, so you know what to do. I know where to find it, that's for sure. It's not just this weekend that has been busy for you and the team there. Recently, your quarterly reports came out. Give us a little bit about where the company is now, I guess where it's been, but also where it is right now and how the company's doing. Yeah, absolutely. Would love to give you some highlights from our ER. We've been having a good quarter, a great quarter all the time, nothing new here. Nevertheless, it remains exciting. One of the biggest highlights from this particular quarter that we just announced, the Q2 quarter, was our free cash flow generation, which was CAD 9.4 million for the quarter, up from CAD 3.6 million the previous quarter, and negative CAD 2 million the year before. This implies a cash flow margin of 7.6%, Jay. I couldn't be more happier with that, and a free cash flow yield of over 8% versus our company's enterprise value. We're looking really good in terms of our free cash flow profile. I think total over the last four quarters, we've now generated CAD 22.7 million, which also implies CAD 5.7 million average per quarter. I can put up 10 to 12 stores with this kind of free cash flow. We are doing exactly that. A couple other highlights from the quarter include our revenue, which was CAD 124.3 million for this quarter, which was up 5% year-over-year. Our trailing 12-month revenue has now exceeded CAD 500 million for the first time, while many of our competitors continue to go bankrupt. Quite the contrast there. Our market share gains are rapidly increasing. We're rapidly making gains. Last year, we were at 9.9% of the total retail market in the five provinces where we operate. We are now up to 10.9%, even on a quarter-over-quarter basis. We went up from 10.4% to 10.9%. That was great. Two of our biggest markets in Canada, which is Alberta and Ontario, our market share is now up to 20% and 10% respectively. ELITE was the other bright spot. I think you and I have spoken about our discount club model in detail, and you know about ELITE, which is our paid membership tier. ELITE has grown at its fastest pace since inception, again, for three quarters in a row. This was the third straight quarter of that record. We've gone from 32,000 members to 44,000 members that are paying us CAD 35 a year, this ELITE rate is up 226% year-over-year and 38% sequentially. This was also the third straight quarter of record ELITE sign-ups. Our Cabana Club in general, our big club, has also grown from about 1 million members a year ago to 1.43 million members, which is a 38% year-over-year growth. I can tell you a few more quickly. I could talk about the business forever. This was our 17th straight quarter of positive adjusted EBITDA. Our EBITDA margin is up from 5.6% a year ago to 8.1%. Couldn't be more happy with those numbers. We hit a nine-quarter high on our gross margin profile as well, which came at 28.4%. Our same store sales have been our bright spot. You know Jay, there's been a lot of turmoil across the nation, stores shutting down. We're doing a lot of lease takeovers. I announced one yesterday, I believe. There's more coming. Stay tuned. What happens tomorrow, you'll see some more action. I don't know if this interview is going to be published before or not, but there'll be more action coming up, in the same regard of lease takeovers. Our same store sales are up 111% over the last 10 quarters, versus the average operator in the country is down 10%. Our retail sales per square foot, we are now generating over CAD 1,500 sales per square foot through our retail network, versus CAD 400 as our peer average. Even retail giants like Target and Walmart are doing CAD 350 and CAD 500 respectively. Cash on hand, never been better at CAD 34 million. I've said enough. You touched on, well, you touched on a lot of things, of course, but I want to talk about the big picture trends and why you've been able to, I guess, buck them or at least head in a different direction. Is it team? Is it locations? Is it outlasting the competition? Is it pricing? Is it all of those things? Is it operationally? If you had to point to, I don't know, one, two, three, four of those things, what is the differentiator between what you're doing versus what you just referenced, like operators not doing great, or many operators not doing great here in Canada, and the ability to take over leases certainly is a sign of that. Where do you pinpoint the difference in the trajectories of the companies? Yeah, look, the biggest one I would say is differentiated strategic thinking, Jay. Right? We are not just following the herd. We've done things differently from the very beginning. Canna Cabana is a very different retail model. It's the first of its kind discount club model in North America. It's a membership-based concept, and we're clearly crushing it. Again, differentiated thinking would be number one. Operational prowess. Absolutely, one particular thing I could point out is we're very operationally focused. It doesn't matter if it's a dollar or if it's CAD 10 million. We're looking at it with laser focus. We want to make sure we run our business tight. I'm a cricket follower, and in cricket they always say, do the basic things right, and we've done a lot of basic things right. We focus on our operations and we continue to win. I want to say this, thank you for asking me this. I 100% feel that we have the best team in the business of cannabis. It takes a team to build a company, to build an international company. That is what we are becoming. I couldn't be more thankful for our amazing team members that have stood by me day after day after day, quarter after quarter. We are laser focused on continuing to win, Jay, we are not stopping here. All of these things combined, differentiated thinking, operational prowess, best teamwork, leads to dream work. Does it also, as time goes on, you have more data sets to draw from in store and outside of your store about how to even hone that even further, right? Like when you started, there was zero stores in Canada. They were just opening up. Now you have one, two, three, four, five years, store over store growth and all of those things. How much does that play into it, where everybody sort of started with the blank slate, but the data compounds upon data in store, pricing models, the loyalty programs. Is there a data team at High Tide that looks at all these things all the time, and does that also help because you have a bigger data set really than almost anyone? Yeah, fantastic question. Look, this is the age of big data. We couldn't be blessed more to have the best data from our retail network. We have 174 locations operating across the country. We very quickly built 30 to 40 stores. This is going back four or five years. We realized that 70% of the Canadian customer cared deeply about price. We started doing pilots, started prepping for the discount club model, went and acquired six e-commerce platforms with high ancillary cannabis margins and higher gross margins and higher EBITDA numbers. Started the price war battle here in Canada very, very successfully. We knew we had to have something powerful in our hand, which we did. Then successfully won the games here. We did this by reading our data correctly. Yes, we have an internal data group. We have data scientists in our team. I'm a big part of reviewing that data, and making decisions accordingly. If you have all of this data and you don't make good use of it, again, you are not operationally focused and reading your numbers correctly. We've done that, and that's definitely a big part of our winning recipe. Which brings us to the future, or we're talking today about the past quarter and quarters, but talk about the future, and if you don't want to get too specific about what the operation might look like in Canada, talk a little bit about where you see opportunities maybe outside of Canada. I know obviously we've heard news about what's happening in Germany and a little bit of news about the rest of what's happening in Europe, but also there's always news about what's happening in the U.S. How do you take in, digest that news, and then apply it to the High Tide model of where you may think about going next? Does that obviously it factors into your future plans, but how does that news come to you and what do you think about that? Look, we're very tuned in with what's happening in cannabis in general, in Canada, in the U.S., and also globally, right? We are very fortunate to be in a G7 country that has legalized cannabis, and of course, Canada could have done many, many things right. We've still got a CAD 5 billion plus market, and we can bring a lot of this learning to other countries like Germany, how companies can operate in legal framework, right? We are very tuned in what's happening in the German market. We have a perfected model, tried, tested, and perfected model, I'd like to say, that we've already rehearsed really well in Canada. We want to pick up this winning model, cut, copy, paste, rinse and repeat in the markets that we enter. Germany is a very exciting market for us. It's becoming real and real every day. We are hopeful that the regs for Pillar 2 in Germany will be announced by the end of this year. It was going to be next year, but they're expediting that process. At least that is what we are hearing. On the U.S. side, I think we're going to have a great second mover's advantage, Jay. The only reason we don't have dispensaries in the United States right now is because we are on the big exchange. We're on the Nasdaq Stock Market. Things will change eventually. Everything does. Federal legalization will become real one day. It could get descheduled. There's many other elements that can take place, such as some safe harbor language accompanying the Schedule III announcement, the Schedule III when it actually happens, and Nasdaq changing its tune. If that never happens, we're still doing great in Canada, and we have tons of growth ahead in Canada and then Germany and rest of Europe, and we'll get our fair share and chance in the U.S. I think coming as a second mover in the United States is going to be a bigger advantage. We don't have to sacrifice on the quality of locations. We won big in Canada because we focused on high-quality locations. If you look at our MSO friends, they're located in industrial zones. They have 4,000 or 5,000 square feet because California was only issuing X licenses in one municipality. All of that will change. It happened in Canada. It's going to happen in other jurisdictions. It'll happen in the United States, too. We'll get to cherry-pick the best locations. We'll get to come with a differentiated plan like we've executed in Canada, and if we can fight here and win at a 28% gross margin profile, which by the way is a nine-quarter high, what are we going to do when we play with margins with 50% and 60% that our peers are playing with? They can enjoy those high gross margins. I don't want to give it too much in terms of how we're going to enter the U.S., exactly when is that going to happen. The when will come when it'll come. We're not going to go against Nasdaq wishes or try a funky structure to make things happen where we cannot consolidate our financials. What's the point of that? I can't realize any of the numbers. We're going to wait our turn, but we've got a ton of good strategies to play in the U.S. I'm just so excited about that market. Right now, just focus, focus. Be the best in Canada. Long-term plan in Canada here is 15%. We think we'll reach that number. That is a good place, I think, to end it as we head into a Canada Day long weekend. I super appreciate you making time, spending time. As always, very generous with your time to share how the company's going, but also your perspective about what is happening, certainly here in Canada as we head into Canada Day long weekend, but also around the world. Thank you so much for your time today, and I'm going to read you out. Is that okay? Fantastic. Great. Thank you, Raj, for being here today. That is it for this week's Cultivated Live. Again, my name is Jay Rosenthal. We'll be back here, not on Monday because that's a holiday here in Canada, but on Tuesday, we'll be back with a regular scheduled program with United States of Cannabis on Tuesday, with my co-founder Jeremy Berke on Wednesday, with Krista from Vetrina on Thursday. Thanks, everybody. Have a good and safe weekend. If you're here in Canada, have a good and safe long weekend.