💸 The Tape

High Tide (NASDAQ: HITI) (TSXV: HITI) reported fiscal third-quarter results Monday afternoon, and the word "record" appears in the release so many times it starts to lose meaning. It shouldn't. Revenue, gross profit, adjusted EBITDA, operating income, net income and operating cash flow before working capital all hit all-time highs in the same quarter, and the company is now approaching an $800 million annualized revenue run rate — a number that would have sounded like a typo three years ago for a Calgary discount-club cannabis retailer.

The headline numbers

Revenue for the quarter ended July 31 came in at $198.8 million, up 33% year over year and 11% sequentially. That's the fastest annual growth rate in 13 quarters and the fastest sequential growth in 15, and the fifth straight quarter of new highs. Gross profit rose 32% to $52.7 million on a steady 27% margin.

The number Raj Grover wants you to notice is further down the page. Adjusted EBITDA jumped 53% to $16.2 million, an 8.2% margin and the highest in twelve quarters. Income from operations more than doubled to $8.7 million. Operating cash flow before working capital hit $11.9 million, and free cash flow was $7.0 million — up 373% from a soft second quarter, and that's after absorbing $4.2 million of additional working capital to feed the German business.

The cost lines back it up. G&A fell to 3.9% of revenue, the lowest in eight quarters. Salaries and wages dropped to 11.4%, the lowest in twelve. Grover's framing — "our bottom line is now growing substantially faster than our top line" — is the operating leverage story High Tide has been promising since it invented the discount-club model in 2021, and this is the quarter it showed up in the P&L. Revenue grew 2.5 times faster than the share count; adjusted EBITDA grew 3.9 times faster. For a sector that has spent years diluting its way to growth, that's the metric that matters.

Reported net income of $12.7 million is inflated by an $11.8 million non-cash gain on a derivative liability; strip that out and adjusted net income was $2.2 million against $0.9 million a year ago. Still positive, still improving, but the headline figure flatters.

Engine one: Canna Cabana keeps taking share

The Canadian retail machine is running at 232 stores, the largest chain in the country, with 14% market share in the provinces where it operates (excluding British Columbia's eight-store cap), up from 13% a year ago. The Cabana Club loyalty program passed 2.73 million members, up 27%, and the paid ELITE tier grew 62% to more than 186,000. Average store revenue is 1.8 times the peer group, and annualized sales per square foot of $1,721 would embarrass most non-cannabis retailers.

The context makes it sharper. Over the twelve months through June, total industry sales in High Tide's five provinces grew 3%. Canna Cabana grew 10%. Same-store sales for the full quarter were flat, but June and July both posted positive comps and transaction counts rose 1.1% on a same-store basis — in a Canadian market that has been shedding independents for three years. Since the discount club launched, Canna Cabana same-store sales are up 171% while the average operator is down 1%. That's not a retailer riding a market; it's a retailer eating one.

The quarter added new stores in Toronto, Welland, Ottawa and Calgary, closed the four-store Northern Helm acquisition in Ontario, and opened Lindsay, Orléans and Regina after quarter-end. The company reiterated its 350-store long-term target and 20-plus openings this calendar year, mostly organic.

Engine two: Remexian is scaling faster than anyone expected

The German medical cannabis distributor that High Tide took majority control of last year distributed a record 10.2 tonnes in the quarter, up 62% year over year and 35% sequentially, generating $38.2 million of revenue at a 26% gross margin. Market share has climbed from 6.5% to 10.5% in six months, and shipments are up 44% since the March quarter.

This is the part of the story worth watching. Germany is the largest medical cannabis market outside North America, it's still growing, and Remexian is licensed to import from 19 countries with the deepest Canadian supply relationships in the business. Every Canadian LP scrambling for EU-GMP export capacity is, in effect, feeding Remexian's volume. The company flagged that it's assessing other European jurisdictions but intends to be selective — sensible language from a business that has learned expansion discipline the hard way.

The balance sheet and the buy signal

Cash ended the quarter at $47.1 million, up from $36.5 million sequentially, and the company closed a $40 million senior secured facility with Bank of Montreal after quarter-end — the same week Cannara upsized with BMO and TD. Canadian cannabis retail is now bankable at conventional terms, which is a sentence that could not have been written in 2023.

Grover and a group of officers and directors also bought roughly 91,000 shares on the open market in May at $3.39. Small dollars, but insiders buying ahead of a record quarter is the kind of signal that ages well.

The U.S. question

The most interesting paragraph in the release isn't about Canada or Germany. High Tide says it has initiated outreach to Nasdaq and the TSX Venture Exchange to understand how broader U.S. rescheduling would change their listing policies — and, by extension, whether a Nasdaq-listed company could participate directly in U.S. adult-use cannabis. It's engaging with "multiple counterparties" in the U.S. already.

Read that alongside the timeline. The DEA's administrative law judge has closed the record on adult-use rescheduling. If the answer comes back Schedule III, the exchange-listing barrier that has kept every Canadian operator out of U.S. plant-touching assets could fall. High Tide, with a Nasdaq listing, a proven discount retail model, an $800 million run rate and a fresh bank facility, would be positioned to move first. It's telling investors as much without promising anything.

Bottom line

This was the cleanest quarter High Tide has printed. Growth accelerated, margins expanded, costs fell as a share of revenue, cash went up, and the two businesses driving it are both gaining share in their markets. The only real knock is that adjusted net income remains thin, and the company will need the leverage to keep compounding to justify the multiple it's asking for. But with Canna Cabana outgrowing the Canadian market three to one and Remexian doubling its German share in six months, it's hard to argue the trend isn't pointed the right way. The webcast is Tuesday at 11:30 ET; the U.S. question will be the first one asked.

📈 Dog Walkers

$ACB ( ▲ 1.87% ) Counters With Words… Send An Offer.

Aurora Cannabis (NASDAQ: ACB) responded within hours to Curaleaf's Alberta Securities Commission application, calling it "a desperate effort" to distract from a bid that undervalues the company. The release breaks a two-week silence, and it's the first time Aurora has engaged Curaleaf on substance rather than simply reciting the board's recommendation.

The defense of the at-the-market program rests on four points: it was announced in February, six months before the bid; it was designed to fund accretive acquisitions in Canada and the UK; it had been dormant for three years before that; and it has been inactive for several weeks. Miguel Martin says the recent UK acquisitions are a direct example of the proceeds at work, and that the program will be used only when the board decides it's in the company's interest.

That's a reasonable rebuttal to the "defensive tactic" charge. It does not answer the harder question — why the board sold shares at US$3.04 while insisting US$4.00 is inadequate — and the release doesn't try. Instead it pivots to Curaleaf's balance sheet: more than $1 billion of debt, including $500 million of senior secured notes at 11.5%, plus concentrated voting control and regulatory risk that Aurora holders would inherit through mostly-stock consideration.

The news is buried in the fourth bullet. Aurora disclosed that on September 2 it filed its own complaint with the ASC over what it calls unresolved regulatory deficiencies in Curaleaf's bid — and says Curaleaf has ignored them. No detail on what the deficiencies are, but a dueling regulatory docket changes the shape of the fight: both sides now need hearings before either gets a clean run at shareholders.

The board's advice is unchanged: reject, take no action, don't tender, withdraw if you already have. What's still missing is a number. Aurora has now explained its ATM, attacked Curaleaf's leverage, and lodged a regulatory complaint. It has yet to tell shareholders what it thinks the company is actually worth.

📺 Trade To Black

Will Rescheduling Change the Cost of Capital?

• FDA wants psychedelics to patients faster: Four agency staffers writing in the New England Journal of Medicine laid out a new framework and named psilocybin and DMT as compounds worth pursuing amid a worsening mental health crisis.

• Rescheduling clock check: NewLake Capital CEO Anthony Coniglio joins to break down where things stand a month after post-hearing briefs, and whether Judge Julius's recommendation lands this week or the wait drags on.

• Rates and cannabis capital: Coniglio shares how many more rate moves he expects and what an elevated-rate environment means for operator access to credit.

• Two separate conversations: Even with Schedule III, borrowing costs don't automatically fall — rescheduling fixes the tax problem, not the monetary one.