Frederico Gomes

Frederico Gomes from ATB Capital Markets Inc. questioned High Tide's confidence in turning around its e-commerce business and sought more details on the decision and strategy behind entering the hemp-derived cannabinoid market to support e-commerce. He also asked about the drivers of the third consecutive quarter of margin expansion in the bricks-and-mortar segment, including the impact of white label initiatives, and whether this margin increase is expected to continue.

Answer

Raj Grover, President and CEO of High Tide, acknowledged that e-commerce, representing less than 3% of revenue, has underperformed expectations for CBD sales. He mentioned new leadership and external consultants are working on a turnaround, with contingencies like divestiture or partnerships if performance doesn't improve. The entry into hemp-derived cannabinoids, initiated about a month prior, is a new attempt to tap into a different market. For bricks-and-mortar margins, Grover explained the expansion is driven by white label sales (now $6.3 million, adding 7% margin), ELITE membership growth, and stabilized wholesale prices. He anticipates holding the line on current margins in the medium term due to new store openings, but sees potential for 30% long-term.

Frederico Gomes asked about High Tide's confidence in turning around its e-commerce business, the strategy behind entering hemp-derived cannabinoids, and the factors driving the third consecutive quarter of bricks-and-mortar margin expansion, including the impact of white label initiatives.

Answer

Raj Grover (President, CEO, High Tide) noted that e-commerce, representing less than 3% of revenue, is undergoing a turnaround with new leadership and external consultants, and hemp-derived cannabinoids are a new focus. He stated that if e-commerce doesn't improve, divestment or partnerships are options. For bricks-and-mortar margins, he attributed the expansion to increased white label sales (reaching $6.3 million), the ELITE membership program, and stabilized wholesale prices, expecting margins to hold steady in the medium term but potentially reach 30% long-term.

Frederico Gomes asked about High Tide's confidence in turning around its e-commerce business, the strategic rationale and expected impact of entering hemp-derived cannabinoids, and the factors driving the consistent expansion of brick-and-mortar gross margins, including future margin expectations.

Answer

Raj Grover, Founder, CEO & President of High Tide, acknowledged e-commerce challenges (representing less than 3% of consolidated revenue) but highlighted efforts with new leadership and external consultants, and the recent aggressive push into hemp-derived cannabinoids as a new opportunity. He explained that brick-and-mortar margin expansion was driven by increasing white label sales (Queen O’Bud, Cabana Cannabis Co.), the growing ELITE membership program, and stabilized wholesale prices. Mr. Grover noted that while rapid increases might moderate due to new store openings, long-term margins could approach 30%.

Frederico Yokota Gomes asked for a timeline regarding High Tide's entry into the German market, questioning if the company would move on from Purecan to another partner soon. He also inquired about the potential impact of tariffs on the company's accessories business, particularly for products sourced from China.

Answer

President and CEO Harkirat Grover stated that while he could not provide a definitive timeline, the company is actively pursuing the right partnership in Germany and expects a resolution within a 'couple more months,' not quarters. He confirmed discussions are ongoing with other groups beyond Purecan. On the topic of tariffs, Grover asserted the impact is 'very, very minimal,' as 99% of the business is domestically sourced and sold within Canada and the U.S., insulating it from U.S.-China tariff issues.

Frederico Yokota Gomes asked for a timeline on High Tide's entry into the German market, whether with Purecan or another partner. He also questioned the potential impact of tariffs, specifically from China, on the company's accessories business.

Answer

President and CEO Harkirat Grover stated that while he could not give an exact date, a partnership decision for the German market would be made in the coming months, not quarters, as they are in discussions with multiple parties to find the right fit. Regarding tariffs, Mr. Grover clarified that High Tide's business is minimally exposed, as 99% of sales are domestically sourced and sold within Canada and the U.S., insulating them from significant tariff impacts.

Frederico Yokota Gomes asked for a timeline on High Tide's entry into the German market, whether with Purecan or another partner, and questioned the potential impact of tariffs, particularly from China, on the company's accessories business.

Answer

President and CEO Harkirat Grover stated that while entry into the German market is a priority, finding the right partner is critical, and a decision is expected within a 'couple more months,' not quarters. He confirmed discussions are ongoing with other groups besides Purecan. On tariffs, Mr. Grover asserted the impact is minimal, as 99% of the business is domestically sourced and sold within Canada and the U.S., insulating them from U.S.-China trade issues.

Frederico Yokota Gomes asked for a timeline on High Tide's entry into the German market, whether with Purecan or another partner, and inquired about the potential impact of tariffs on accessories sourced from China.

Answer

President and CEO Harkirat Grover stated that while they are still in discussions with Purecan, they are also exploring other, potentially better, opportunities and expect to finalize a partnership within a couple of months. He emphasized the importance of finding the right partner to leverage High Tide's significant purchasing power. Regarding tariffs, Mr. Grover clarified that the impact is minimal as 99% of their business is domestic to Canada or the U.S. and does not involve cross-border tariffs, effectively insulating the company.

Frederico Yokota Gomes asked about the potential for price increases in the Canadian market in 2025 and the company's strategy regarding the U.S. hemp-derived THC market.

Answer

Executive Harkirat Grover explained that High Tide is maintaining its current pricing to pressure competitors, citing the recent creditor protection filing of a major rival. He indicated that as more competitors exit the market, the opportunity to increase gross margins will emerge. On hemp-derived THC, he stated that while the company has some offerings, revenue is immaterial, and it is not a current focus due to the complex legal landscape, with resources better allocated to the core Canadian and new German operations.

Frederico Gomes questioned the recent slowdown in industry sales growth and High Tide's key growth drivers. He also asked for an update on international expansion plans for Germany and the U.S. given regulatory shifts.

Answer

President and CEO Raj Grover identified significant growth potential in Ontario, with room for 87 more stores, and reiterated a 20-30 store organic growth target for the year, which could be exceeded with M&A. On international strategy, he confirmed Germany is a high priority pending Pillar 2 regulations. For the U.S., he stated the company is monitoring rescheduling but will avoid complex ownership structures and wait for a clear path for its NASDAQ-listed entity to operate directly.

Frederico Gomes of ATB Capital Markets inquired about Organigram's adjusted gross margin outlook, specifically the drivers for the significant expansion expected in Q4 to meet the 35% full-year target. He also asked about the company's current strategy for cultivation capacity, given recent operational improvements and strong international demand.

Answer

CFO Greg Guyatt confirmed the 35% gross margin forecast, attributing the Q4 ramp-up to seasonality, the realization of Motif acquisition synergies currently in inventory, and a favorable product mix from growing international sales. CEO Beena Goldenberg addressed capacity, explaining that while they've added 14,000 kg through optimizations, they are re-evaluating an $8M CapEx plan to determine the most effective way to expand further to meet international demand without sacrificing their domestic market leadership.

Frederico Yokota Gomes inquired about the drivers behind the negative operating cash flow in the quarter, particularly the changes in working capital. He also asked for the company's cash flow expectations for the remainder of the fiscal year, considering CapEx, margin expansion, and seasonality. Additionally, he questioned Organigram's strategy for differentiating in the crowded U.S. hemp-derived THC beverage market and the timeline for that segment to become margin-accretive.

Answer

CFO Greg Guyatt clarified that the negative cash flow was impacted by the $6 million Collective Projects acquisition and a deliberate investment in working capital, mainly inventory, to prepare for the seasonally strong Q3 and Q4. He affirmed the company expects to be cash flow positive for the full fiscal year. CEO Beena Goldenberg addressed the U.S. strategy, stating the immediate focus is on investing in marketing and sampling to drive trial and awareness for the Collective Projects brand. She noted that while the product is high-quality, short-term margins are being reinvested to build market share, with accretive growth being a longer-term goal.

Frederico Gomes questioned if the record yield per plant was driven by seed-based production and asked for a reminder of its expected margin impact. He also sought commentary on the Canadian pricing environment, noting the company's flat average selling price.

Answer

CEO Beena Goldenberg clarified that while seed-based harvests yielded an impressive 200 grams per plant, the overall record yield was driven by improvements in both clone-based and seed-based cultivation. She noted seed-based production improves margins through shorter cycle times and significant labor savings. On pricing, she stated that like-for-like flower pricing has stabilized and increased, but the company's overall average price was flat due to product mix, while also noting price compression in the edibles category.

Frederico Gomes of ATB Capital Markets asked if there is potential upside to the Canadian cannabis gross margin beyond the current 30-40% target range, given strong international performance. He also inquired about the primary growth drivers for the second half of the year, considering the company is currently supply-constrained.

Answer

CFO Stephen Ruffini and COO Ann Gillin Lefever acknowledged that upside to the gross margin range is possible due to favorable SKU/customer mix and improved cost absorption from higher volumes. However, Lefever noted they are remaining prudent with the 30-40% target, citing the history of price compression in Canada and settling prices in new international markets. For H2 growth, CEO Michael Degiglio stated they expect performance to be similar to H1 as they are constrained on supply, with the exception of continued ramp-up and SKU diversification at the Lely facility in the Netherlands.

Frederico Yokota Gomes asked about Village Farms' capital allocation strategy following the Vanguard transaction and its outlook on pricing trends in the non-branded Canadian cannabis market.

Answer

CEO Mike DeGiglio stated the company is focused on building its cash reserves for future U.S. market optionality, prioritizing organic growth, and considering further Canadian capacity expansion for 2026. COO Ann Gillin Lefever confirmed that non-branded wholesale pricing continues to strengthen year-over-year, driven by tighter supply and strong international demand.

Frederico Yokota Gomes from ATB Capital Markets requested clarification on the guidance for tripling international sales in 2025, asking how much would come from the Netherlands versus other medical markets. He also questioned the risk of a new oversupply cycle in the Canadian wholesale market.

Answer

CEO Mike DeGiglio clarified that the projected tripling of international sales is exclusively from the medicinal export business and does not include the Netherlands recreational market, which is a separate business segment. Regarding the Canadian market, Orville Bovenschen, President of Canadian Cannabis, stated that demand for their high-quality flower remains very high and steady, and they are not seeing trends that suggest an impending oversupply of quality product.

Frederico Gomes of ATB Capital Markets inquired about the specific supply challenges in Poland mentioned in the call and asked for an update on whether the situation has normalized.

Answer

CEO Luc Mongeau clarified that the issue stemmed from an internal flower allocation process that hindered success in the Polish market. He stated that these processes have now been properly implemented and that the company looks forward to returning to growth in Poland soon.

Requested more specific details about the cannabis market in Poland, including its size, growth rate, competitive landscape, and Canopy's market share.

Answer

Judy Hong described Poland as a key growth driver in Europe, noting the market is somewhat insulated from competition due to a government-controlled import permit system. Canopy has successfully secured these permits by providing consistent, high-quality products, and demand is currently exceeding supply.

Frederico Gomes requested more details on the Polish cannabis market, asking about its size, growth rate, competitive environment, and Canopy's market share, following comments about the company's 'outsized growth' there.

Answer

CFO Judy Hong explained that the Polish market is relatively insulated from competition because the government issues specific import permits, which Canopy has successfully secured. She noted that demand is currently exceeding supply, allowing Canopy to fulfill all its import registrations and establish a leadership position in that market.

Asked for clarification on the drivers of the impressive growth in the Canadian medical cannabis segment and its potential for future upside, given the overall market is relatively flat.

Answer

The growth is attributed to strong execution by the medical team, a marketplace model offering a broad assortment of both Canopy and third-party products, and providing best-in-class service. They are gaining market share in a stagnant market and believe they are well-positioned to continue this trend by offering high-quality products to patients.

Frederico Yokota Gomes from ATB Capital Markets asked for more clarity on the drivers behind the impressive, multi-quarter growth in the Canadian medical cannabis segment and its future upside, especially given the overall Canadian medical market is flat.

Answer

CEO David Klein attributed the sustained growth to strong, day-in-and-day-out execution by the medical team, which operates a marketplace model offering best-in-class service and hand-selected products. CFO Judy Hong added that while the broader market is stagnant, Canopy is successfully gaining market share by providing patients with a broad assortment of high-quality products, including those from third parties.

Frederico Gomes of ATB Capital Markets questioned the potential timing and impact of regulatory changes in Germany and asked if sales volumes in Poland have recovered to previous levels.

Answer

CEO Miguel Martin projected more clarity on German regulations by the end of the calendar year, noting that stricter rules often benefit experienced operators like Aurora. He stated the impact would be less severe than what was seen in Poland. Regarding Poland, Martin confirmed that demand has resumed and Aurora has grown its market share, successfully launching new high-potency products, effectively resolving the previous headwinds.

Frederico Yokota Gomes from ATB Capital Markets asked about the competitive landscape in international medical markets and the company's capital allocation priorities now that it is generating positive free cash flow.

Answer

CEO Miguel Martin explained that international markets are more consolidated than North America, with high barriers to entry like EU GMP certification favoring established companies like Aurora. Regarding capital allocation, he emphasized the strength of their balance sheet, which is free of cannabis-related debt. The strategy is to remain patient but be opportunistic with accretive M&A that enhances their core medical cannabis business, continuing the disciplined approach that has led to their current success.

Frederico Gomes of ATB Capital Markets asked about SNDL's international sales growth, its potential prioritization over domestic sales, the outlook for exports, the progress of the Rise Rewards loyalty program, and the company's strategy regarding cultivation expansion.

Answer

CEO Zach George clarified that while international growth is expected to be meaningful, it comes from a small base and does not detract from their focus on the Canadian market. He noted the loyalty program is in its early days with six-figure members and that the company is currently leveraging procurement for biomass needs rather than investing heavily in new cultivation, using its existing facility as a hedge.

Frederico Yokota Gomes from ATB Capital Markets inquired about SNDL's potential U.S. market entry strategy, its M&A outlook for Canadian cannabis retail, and the expected benefits from its new loyalty program.

Answer

Executive Zachary George explained that a U.S. entry would leverage existing SunStream credit investments, converting them to equity without a large cash outlay, and that lessons from Canada's challenging market provide a key competitive advantage. George also confirmed an active M&A pipeline for Canadian retail. Executive Alberto Paredero-Quiros added that the loyalty program is designed to enhance consumer communication and value, with potential expansion to the liquor segment.

Frederico Yokota Gomes of ATB Capital Markets asked about the outlook for the Liquor Retail segment's weak same-store sales, the operational performance and potential capital needs of U.S. investments, and the rationale behind the CSE listing application.

Answer

Executive Alberto Paredero-Quiros addressed the liquor segment, attributing weakness to a market slowdown and forecasting flat revenue for 2025 with long-term growth of 1-1.5%. Executive Zachary George discussed U.S. investments, noting that while SNDL cannot currently engage in plant-touching activities, U.S. opportunities are a high priority for capital deployment. Regarding the CSE listing, George stated it creates 'optionality' for international growth but did not confirm specific plans.

Frederico Yokota Gomes from ATB Capital Markets inquired about the strategic rationale for acquiring the remaining stake in Nova, the key drivers of the significant margin improvement in Cannabis Operations, and the company's capital allocation priorities, including share repurchases and valuation.

Answer

Executive Zachary George explained that fully owning Nova ensures SNDL shareholders capture the entire cash flow and earnings potential of the retail business. Regarding margins, Executive Alberto Paredero-Quiros cited a holistic productivity program, including the Olds facility closure and automation, as the primary driver. Zachary George added that eliminating high-cost biomass was critical and expressed confidence in reaching gross margins in the 30% range. On capital allocation, George reiterated priorities in Canadian retail growth and potential U.S. investments, stating that share buybacks are for taking advantage of discounted valuations for long-term holders, not for propping up the stock.

Frederico Gomes of ATB Capital Markets requested more details on the beverage and wellness expansion into Europe and Asia, including timing and strategy, and asked about the progress of the Canadian cultivation expansion.

Answer

CEO & Chairman Irwin Simon stated the international expansion is happening 'now,' driven organically and through potential M&A, with a focus on non-alcoholic beverages and high-protein hemp foods in the Middle East and India. Regarding cultivation, he noted the expansion is underway to meet demand, with the majority of the increased output destined for the Canadian market to support new product innovation, and a smaller portion for international export.

Frederico Gomes asked about the market impact of recent telemedicine restrictions in Poland, the potential for similar changes in Germany, and the current pricing environment in the German medical cannabis market amid rising competition.

Answer

Chief Strategy Officer Denise Faltischek acknowledged a temporary prescription drop in Poland but noted a Q4 recovery. She stated that Germany's medical cannabis framework is expected to remain stable and that while competition has led to price segmentation, high-quality products still command premium prices. Chairman and CEO Irwin Simon emphasized that Tilray's vertical integration with CC Pharma provides a significant competitive advantage in Germany.

Frederico Yokota Gomes of ATB Capital Markets asked why the cannabis beverage category remains a small part of the Canadian market, unlike the fast-growing U.S. Delta-9 beverage segment.

Answer

Chairman and CEO Irwin Simon attributed the limited market size primarily to distribution constraints, as these beverages can only be sold in licensed cannabis stores. He stated that despite this, Tilray holds a 45% market share in the category, and believes the market would be substantially larger if sales were permitted in mainstream channels.

Frederico Yokota Gomes from ATB Capital Markets inquired about the Ohio market, asking if valuations have shifted since the Ratio Cannabis acquisition was announced, and about the drivers of gross margin improvement in the challenging Michigan market.

Answer

Ziad Ghanem, an executive, confirmed that TerrAscend remains pleased with the performance of its Ohio acquisition and is actively seeking other accretive deals at the right price. Regarding Michigan, executive Keith Stauffer attributed the margin improvement to persistent efforts in optimizing the cost structure, while noting the market remains challenging and the company is not yet ready to expand its footprint there.

Frederico Yokota Gomes asked about the M&A environment, questioning if private company valuations are declining and how aggressively TerrAscend plans to add stores in Ohio. He also inquired about the potential impact of new store openings on the company's operations and market position in Maryland.

Answer

Executive Jason Wild confirmed that M&A price expectations have decreased, particularly for private targets in Ohio, allowing for more attractive multiples. Executive Ziad Ghanem addressed the Maryland market, stating the company is well-prepared for new store openings, which are primarily social equity or non-vertical operators. He explained that TerrAscend's expanding cultivation capacity will allow it to capitalize on the increased wholesale demand from these new retailers, similar to its successful strategy in New Jersey.

Frederico Yokota Gomes from ATB Capital Markets inquired about TerrAscend's #1 market share position in New Jersey, asking if it was due to market share gains or changes in reporting methodology, and also questioned the status of the outstanding tax refunds.

Answer

CFO Keith Stauffer clarified that a methodology improvement by market data firm BDSA revealed TerrAscend has held the #1 position for some time. President & COO Ziad Ghanem added that despite increased competition, their retail business has returned to growth, prompting an expansion of their Boonton facility. Regarding the tax refund, Stauffer confirmed that of the $30 million total owed, $8 million has been received, with $22 million still outstanding and none denied.

Frederico Yokota Gomes inquired about the margin impact of New Jersey's revenue mix shifting towards wholesale, the company's remaining production capacity, and the potential for market share gains and upside in Pennsylvania.

Answer

CFO Keith Stauffer explained that the margin impact from the New Jersey wholesale shift was anticipated and mitigated by improved yields, automation, and steady wholesale pricing. President Ziad Ghanem added that wholesale revenue is more efficient at an EBITDA level due to lower overhead. Regarding Pennsylvania, Ghanem noted the stable market allows their brand quality to drive wholesale growth, with significant upside expected from potential adult-use legalization. Executive Chairman Jason Wild emphasized that TerrAscend has substantial unused cultivation capacity in Pennsylvania to meet future recreational demand.

Frederico Gomes inquired about the hemp-derived market, asking if the trend of regulated cannabis companies entering the space will persist and whether Curaleaf would consider acquisitions to build capabilities.

Answer

Chairman and CEO Boris Jordan expressed a 'cautiously optimistic' view, citing legislative risk from the one-year Farm Bill extension. He believes the beverage category is likely safe but expects a rollback of synthetic products. Consequently, Curaleaf is not currently considering acquisitions and is instead focusing on organic growth with new product launches until there is more regulatory clarity.

Frederico Gomes asked for details on Curaleaf's international strategy, specifically focusing on the market opportunity and competitive landscape in Australia following the company's first shipments to the region.

Answer

Executive Chairman Boris Jordan described Australia as a large, expanding, but highly competitive market, contrasting it with New Zealand, which is smaller with higher margins. He explained that Curaleaf is currently using third-party distributors to introduce its brands and is evaluating whether to establish a direct, vertically-integrated presence in these markets, consistent with its European strategy.

An analyst on behalf of Frederico Gomes asked about the international business, seeking to identify the key levers Curaleaf can pull to reduce the segment's margin drag and improve profitability.

Answer

Executive Chairman Boris Jordan stated that the primary lever is achieving volume and scale, with the segment on track for over $100 million in revenue this year. CEO Matt Darin added that building a vertical supply chain is crucial, citing the recent acquisition of supplier Northern Green Canada as a key step to capture margin and control the supply of high-quality EU-GMP flower.

Frederico Gomes from ATB Capital Markets asked about the pricing and discount environment in Florida and the company's store expansion plans for the state into 2024. He also inquired about the current pricing environment in Pennsylvania.

Answer

President & CEO David Goubert acknowledged ongoing price compression in Florida but highlighted the upcoming exclusive launch of Kiva edibles in Q4 as a key initiative to improve margins, as AYR is currently under-indexed in that category. He noted a revised plan to open 2-3 more Florida stores in 2023 (for a total of ~64) and ~10 in 2024, slowing the pace to focus on ramping up new stores and on openings in other states. For Pennsylvania, CFO Brad Asher confirmed some pricing pressure but noted it was partially offset by increased transactions, while Goubert added that the state's profitability continues to improve despite top-line softness.

Frederico Gomes of ATB Capital Markets inquired about shifts in consumer trends regarding product tiers and how Cresco is adapting its 'good, better, best' strategy. He also asked for commentary on wholesale pricing trends in Michigan.

Answer

Chief Transformation Officer Greg Butler noted a consumer shift towards both value and premium tiers, with Cresco addressing this through its value brand High Supply and premium innovations like FloraCal. He stated that for Michigan, they do not anticipate any price improvement in the second half and are focused on expanding distribution of their quality brands into independent stores.

Frederico Gomez of ATB Capital Markets requested more detail on the non-cash flow generating assets being sold for $5-$10 million and asked about the state of price compression in the Pennsylvania market.

Answer

Chairman and CEO Jim Cacioppo clarified the $5-$10 million in potential proceeds includes a small mortgage and comes from selling a mix of assets like closed retail locations, excess grower processor real estate, and undeveloped land. Regarding Pennsylvania, he described price compression as being "on the edges" rather than systemic, noting that the industry is acting with discipline by holding back production capacity in anticipation of adult-use legalization.

Frederico Gomes of ATB Capital Markets asked for an update on Maryland's adult-use retail sales, including pricing, product availability, and sales trends. He also sought details on Q2 cash flow from operations, the influence of working capital and taxes, and the impact of 280E decoupling in Illinois and New Jersey.

Answer

CEO John Hartmann reported strong, growing sales in Maryland, running at 2.5 times previous medical levels with no product constraints. CFO Dan Neville explained that the $8 million in cash from operations was generated after paying $7 million in taxes. He noted that 280E decoupling in NJ and IL will provide a future annual cash flow benefit of $9-10 million but did not impact Q2.