Canadian cannabis chain High Tide Inc. (Nasdaq: HITI) (TSXV: HITI) has obtained a $15 million loan to repay existing debts and support its expansion plans, the company announced Thursday morning.
The loan will be provided in two parts: $10 million now and $5 million in November 2024. High Tide also has the option to borrow an additional $10 million if needed.
The company said in a news release that it believes it can take on more debt to help fund the opening of new Canna Cabana stores across Canada. High Tide currently has a low debt-to-income ratio and is “underleveraged,” founder and CEO Raj Grover said in a statement.
“I believe we have found the sweet spot with this financing, which demonstrates how we prudently manage our balance sheet,” Grover said. “Given the turbulence in the cannabis retail landscape in Canada, with several of our peers having recently filed for creditor protection, this financing is yet another sign that the market believes in the strength of our business and the creditworthiness of our company.”
The firm’s strong position, with yearly earnings of $31 million and debt of less than $28 million, set the stage for future growth, management said on a March earnings call. The company also reported a record cash flow of $5.7 million in its most recent quarter.
High Tide’s newly-minted CFO Mayank Mahajan should have more to say on Thursday afternoon’s second-quarter earnings conference call.
Recent changes to Ontario’s cannabis laws, which now allow a single company to own up to 150 stores (up from 75), have created new opportunities for expansion, management said in March. High Tide currently operates 54 stores in the province and plans to open an additional 96 locations, with a focus on the Greater Toronto Area, including up to 10 stores in Mississauga.
The expansion plans go beyond Ontario, with a goal of opening 20 to 30 new stores across Canada by the end of 2024. The company plans to achieve that through a combination of building new stores and buying existing ones. Management emphasized its focus on selecting “high-quality locations” and acquiring stores that complement its existing network.
High Tide as of Jan. 30 operates a total of 163 cannabis retail stores across five Canadian provinces, with a strong presence in Alberta and Ontario. The company’s discount club model and well-known brand have more or less contributed to its success in Canada’s tight market.