Why Is High Tide Stock Gaining Tuesday?

High Tide Inc. (NASDAQ:HITI) stock is trading higher in Tuesday’s session after the cannabis retailer reported record second-quarter financial results and announced an acquisition and a new credit facility.

Record Revenue And Profitability

High Tide reported adjusted earnings of 1 cent per share, compared with a loss of 3 cents per share a year earlier. Revenue rose to $130.7 million from $96.9 million.

In Canadian dollars, revenue reached a record 179.3 million Canadian dollars, up 30% year over year and 1% from the prior quarter. The company said it posted its strongest revenue growth in 11 quarters and its fourth straight quarter of record revenue despite seasonal weakness and fewer operating days.

Gross profit increased 36% year over year to a record 48.4 million Canadian dollars, while gross margin expanded to 27% from 26% a year earlier and 25% in the prior quarter, its highest level in eight quarters. Adjusted EBITDA climbed 73% year over year to a record 13.9 million Canadian dollars, marking its fastest growth in nine quarters.

Free cash flow totaled 1.5 million Canadian dollars. Operating cash flow before working capital adjustments reached a seven-quarter high of 8.8 million Canadian dollars. Cash and cash equivalents, including restricted cash, stood at 36.5 million Canadian dollars at the end of the quarter.

High Tide Expands Retail Footprint

Separately, High Tide entered into a definitive agreement to acquire J. Supply Holdings, which operates as Northern Helm, expanding its cannabis retail footprint in Ontario.

Under the agreement, High Tide will acquire four of Northern Helm’s six Ontario stores for approximately 7.74 million Canadian dollars. The stores are located in Bowmanville, Kingston, Courtice and Oshawa.

New Credit Facility Approved

The company also received credit approval from Bank of Montreal for 40 million Canadian dollars in new senior secured facilities.

The financing includes a 25 million Canadian dollars revolving credit facility with a three-year maturity. The facility will refinance existing connectFirst debt, support working capital and fund acquisitions and investments. After refinancing, High Tide expects to have about 19 million Canadian dollars of additional borrowing capacity available.

The package also includes a 15 million Canadian dollars delayed-draw term loan to refinance existing second-lien debentures. The new facilities are expected to replace the current senior credit arrangement after customary closing conditions are met, which the company expects within about 30 days.

HITI Price Action: High Tide shares were up 13.11% at $2.56 at the time of publication on Tuesday, according to Benzinga Pro data.

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