High Tide Inc. (HITI) Q1 2022 Earnings Report, Transcript and Summary

Good evening. Thank you for attending today's High Tide, Inc. Q1, 2022, earnings call. My name is Hannah and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions]. I would now like to pass the conference over to our host, Krystal Dafoe with High Tide, Inc. Please go ahead.

Thank you, Operator. Good evening, everyone. And welcome to High Tide, Inc. quarterly earnings call. Please note that all earnings discussed on this call are presented on an unaudited basis. Joining me today on the call are Mr. Raj Grover, President and Chief Executive Officer, and Mr. Rahim Kanji Chief Financial Officer. Earlier today, the company released unaudited highlights from its financial and operational results for the first quarter ended January 31, 2022. Before we begin, I'd like to remind everyone that certain statements made on today's call and contained in the company's press release dated March 17, 2022, released earlier today, may contain forward-looking information within the meanings of applicable securities laws. Such statements may include estimates, projections, goals, forecasts, or assumptions which are based on current expectations and are not representative of historical facts or information. The use of any of the words could intend, expect, believe, well projected, estimate, estimated, and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information, and are based on the company's current beliefs or assumptions as to the outcome and timing of such future events. We want to be clear that such forward-looking statements represent the company's beliefs about future events, plans, or objectives, which are inherently uncertain and are subject to numerous risks and uncertainties that may cause the actual results or performance to differ materially from such statements. Please refer to the company's press release dated today, March 17, 2022, released earlier today, for a comprehensive list of statements. The assumptions and expected future events relied upon it in making such statements and certain known risks which may cause actual results, performance, or achievements to differ materially from those expressed or implied in such statements. Readers are cautioned that the list is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions, or expectations upon which they were placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in the press release and on this call are expressly qualified by the cautionary statement in the press release and reflect the company's expectations as of the date hereof and are subject to change thereafter. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, estimates or opinions, future events, or results or otherwise, or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law. Additional information about both the material factors and assumptions forming the basis of our forward-looking statements and risks, and which could cause actual results or performance to differ materially, and the material factors or assumptions that were applied to make such conclusions, forecasts, or projections in forward-looking statements on this call, are contained both in a readily available document, available upon request and in our regulatory filings available on SEDAR and EDGAR under the company's profile. In addition, today's call may contain future oriented financial information known as FOFI, within the meaning of Canadian Securities Legislation about prospective results of operations, financial position, or cash flows based on assumptions about future economic conditions, and courses of action, which FOFI is not presented in the format of a historical balance sheet, income statement or cash flow statement. The FOFI has been prepared by management to provide an outlook of the company's activities and results and has been prepared based on a number of assumptions, including the assumptions contained under the heading entitled Cautionary Note Regarding Forward-Looking Statements in the company's press release dated March 17th, 2022, released earlier today. And the assumptions with respect to the costs and expenditures to be incurred by the company, capital expenditures, and operating costs, taxation rates for the company, and general and administrative expenses. Management does not have or may not have had the relevant date. Firm commitments for all costs, expenditures, prices, or other financial assumptions, which may have been used to prepare the FOFI or assurances that such operating results will be achieved, and accordingly, the complete financial effects of all those costs, expenditures, prices, and operating results are not or may not have been available at the relevant days of the FOFI objectively determinable. Importantly, the FOFI contained in this call, or maybe based upon certain additional assumptions that management believes to be reasonable based on the information currently available to management, including, but not limited to assumptions about, one, the future pricing of the company's products. 2. The future market demand, and trends within the jurisdiction in which the company may from time-to-time conduct the company's business. 3. The company's ongoing inventory levels and operating cost estimates. 4. The company's net proceeds from the company's at the market offering. And, 5. The company's unaudited financial results for the three months ended January 31st, 2022. The FOFI or financial outlook contained in this call, do not purport to present the company's financial -- pardon me, to present the company's financial condition in accordance with IFRS as issued by the International Accounting Standards Board. And there can be no assurance that the assumptions made in preparing the FOFI will prove accurate. The actual results of operations of the company and resulting financial results will likely vary from the amount set forth in the analysis presented in any such documents. And such variations may be material, including due to the occurrence of unforeseen events occurring subsequent to the preparation of FOFI. The company and management believe that the FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments as at the applicable date. However, because this information is highly subjective and subject to numerous risks, including the risk discussed under the heading entitled Cautionary Note Regarding Forward-Looking Statements in the company's press release dated March 17, 2022, released earlier today, and under the heading Risk Factors and Risk Assessment in the company's public disclosure. FOFI or financial outlook within this call should not be relied on as necessarily indicative of future results. Readers are cautioned not to place undue reliance on the FOFI or financial outlook contained on this call, except as required by Canadian Securities Law, the company does not intend and does not assume any obligation to update such FOFI. High Tide does not undertake any duty to publicly announce the results of any revisions to any forward-looking statements and or FOFI in this call or to update or supplement any information provided in today's call. In addition, on this call, we will refer to supplemental non-GAAP accounting measures, including adjusted EBITDA, which do not have any standardized meaning as prescribed by IFRS. We believe this non-IFRS financial measure assists management and investors in understanding and analyzing our business trends and performance. Please refer to the company's press release dated March 17th, 2022, released earlier today for a calculation of these measures and reconciliations to the most directly comparable measures calculated and presented in accordance with IFRS. These non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to and should be considered in conjunction with the IFRS financial measures presented in the financial statements of the Company available now on SEDAR and EDGAR under the company's profile. It is now my pleasure to introduce Mr. Raj Grover, President and Chief Executive Officer of High Tide. Thank you Mr. Grover, you may begin.

Thank you, Krystal, and good evening, everyone. Welcome to High Tide Inc's financial results conference call for the first quarter ended January 31, 2022. I'll start this call by providing an overview of our results and other key developments in the first quarter. Rahim will discuss the financials in depth and after that, we'll be pleased to answer any questions you may have. You'll recall that during our last conference call on January 27th, we disclosed our expectation that revenue for the first quarter would exceed $70 million. Today, we reported that revenue was $72.2 million. This was up 88% year-over-year and was up 34% sequentially in what is a very competitive market for cannabis to a new record. $72.2 million represents the second highest quarterly revenue figure ever reported by a cannabis company, which reports in Canadian dollars and puts us on an annual run rate just shy of $290 million. So we are up there with the larger players in terms of the scale of our operation, if not our market cap. The growth in revenue is a clear testament to our accretive M&A strategy, our diversified cannabis ecosystem, and the innovative discount club model we launched on October 20th, 2021. Gross profit for the quarter was $23 million. Despite the margin hit, which was a result of the launch of the discount club model due to the strength of our ecosystem and the addition of NuLeaf, we were able to have our gross margin percentage remain strong at 32% in Q1 which was only down a touch from Q4's level of 33%. Adjusted EBITDA for Q1 2021 was $3 million. This was 80% higher than the $1.6 million reported in Q4 and frankly much stronger than we had predicted. Rahim will get into some of the moving pieces shortly. But big picture I see no reason why EBITDA won't keep growing from here. It has been four months since we launched our innovative discount club and it has surpassed our expectations. On a same-store sales basis, our stores generated 22% more revenue during the month of January as compared to October when we launched the discount club model, a tremendous speed, especially when considering that the Canadian market overall was down 3% comparing January to October. In Ontario, where the market size and land grab is most crucial, our stores are growing even faster with same-store sales 32% higher in January versus October. In addition to reinvigorating existing stores, newly operating stores are ramping up much faster and to higher levels of daily sales. As a reminder, while unbeatable prices are a key feature of our unique discount club, the model is built on more than just that. Besides simply offering lower prices, we design, manufacturer and import thousands of skews of consumption accessories. This business took over a decade and more than 60 trips to Southeast Asia to establish. It's not something a competitor can easily replicate. Our discount club is connected with our loyalty plan, Cabana Club. Membership in the Cabana Club has skyrocketed from 245,000 on October 20th to over 450000 today. Our members are responsible for over 94% of the day-to-day transactions in our stores, up from 50% before launching the discount club concept. We reach out to our members regularly via email and text messages to showcase our brands and products at everyday low prices, which is a hard thing to do in a compliant manner in cannabis, leading to repeat business. When we surpassed our 420,000 member, we launched the promotion to give back to our loyal customers by announcing that on April 20th or 4, 20, we will be giving away a car valued at $42,000 to a randomly selected member of our Cabana Club. To our knowledge, nothing like that has ever been offered in cannabis. And we have seen Club membership growth as customers see one more reason to join. Having such a large block of committed members who are brand loyal to Canna Cabana is what every retailer stripes for. And again, this loyalty plan is not something that our competitor can just replicate overnight. We continue to expect to eventually reach 750,000 members and we look to monetize this block down the road. Remember that we aren't even open in British Columbia yet, which has a population of over five million people and presents a tremendous opportunity for signing up new Cabana Club members. Finally, offering white label products and bringing FAB, Blessed, and NuLeaf to Canada represent another unique offering. Our first white label products are expected to drop in Saskatchewan and Manitoba next month. Meanwhile, we are working with regulators in Ontario and Alberta regarding white-label possibilities. Our ever increasing scale makes us a unique customer for DLP's we are partnering up with for white-labeled products and frankly it allows us to strike the best agreements. We are gaining market share with our discount club model every month. There is still a way to go to feel the full benefits of the model, but as of today's results highlight, there is no doubt that we are off to a great start posting exceptional growth while remaining EBITDA positive for the eighth straight quarter. Q1 was also the first quarter of following the acquisition of NuLeaf, our largest acquisition ever, and its results were included in just over two months of this quarter. We are very pleased with NuLeaf's performance and welcome the team into the High Tide family. NuLeaf is already collaborating with FAB and unlocking new term synergies relating to co-packing and shipping. Meanwhile, Blessed has launched its brand in Germany and is looking to enter more countries in Europe, as well as the United States later this year. So with a current annual run rate of approximately $85 million of revenue outside of Canada, all of which is very additive to EBITDA. The delay in U.S. federal legalization of THC is not slowing High Tide down at all. We have 3 million customers in our database. The vast majority of which are in the U.S. All these customers have purchased either consumption accessories or CBD from us, and we are in touch with them regularly. As soon as we can legally sell them THC, we aim to do so. We plan to leverage our existing customer base, our cannabis know-how and expertise, our sophisticated e-commerce assets and our market share to be a leader in the U.S. THC market, just like we have done in Canada, going from ancillary sales to THC as soon as we were allowed. This is the primary part of our U.S. strategy, although we may look to supplement this with an options type of agreement or two. As a company, High Tide has always been focused on pushing the envelope. Working hard and accomplishing things we didn't think we could achieve is part of our culture from top to bottom. That and being blessed with such an amazing team is how we always stay leaps ahead of the competition. I'd like to take a minute to address three innovations we launched since our last conference call, less than two months ago. First, we closed the acquisition of Fastendr. And it just five weeks we have already installed this exciting technology in all five of our Ottawa store locations. Reception to the new tech from staff and uptick from customers has been very encouraging. We plan to outfit 50 more stores with the kiosk by the end of April and hope to add all existing stores by the end of the calendar year. All newly built locations will be equipped with the fast end of technology from the start. Second, we launched a new delivery on demand service across much of the country where we operate. With our new offering, customers are guaranteed delivery within two hours of ordering, or within an hourly spot chosen by the customer. Similar to fast sender, this service makes customers purchasing experience much easier, and in this case, we are charging 999 per delivery, which should enhance our delivery margins. Then on March 8th the first day, private sector cannabis deliveries were allowed in the province, we launched delivery on demand in Alberta. We counted that only 10 retailers were licensed by the AGLC and ready-to-go on day 1 of delivery and we were the only public company on that list. Third, FAB launched its CBD subscribe and save program in the U.S. Under this program, customers can set up the delivery frequency for their favorite products and have them automatically shipped to their door while saving 20%. High Tide is all about synergies and taking the best aspects of each part to benefit the whole. Just like we have been implementing the drop shipping technologies in the market, we have solidified ourselves as the clear leader in bricks-and-mortar cannabis with 113 stores across the country, the global leader in accessories e-commerce, and a major player in the CBD market. Looking ahead, while we can control what the capital markets do or what happens in Washington based on the initiatives we are pursuing, we expect that our track record of impressive growth will continue going forward. Thank you to our team for their tireless efforts and work to make it all happen. With that, I will now turn the call over to Rahim Kanji, our Chief Financial Officer, to discuss our financial results.

Thank you, Raj. And good evening, everyone. Let's dig into these results. In the first fiscal quarter ended January 31, 2022, the company recorded consolidated revenue of $72.2 million, representing an increase of 88% year-over-year and 34% sequentially. Revenue earned in the U.S. was $17 million, up 74% versus Q4 2021, boosted by the acquisition of NuLeaf as well as organic growth. Including the portion of the quarter prior to when the NuLeaf transaction closed, our annual revenue run rate in the U.S. was $75 million. Retail revenue was $71 million in the first fiscal quarter of 2022, up 93% year-over-year and 35% sequentially due to contributions from acquisitions, stores rebuilt organically as well as same-store sales growth. Revenue from our consumption accessories wholesale segment was $1.2 million in the first fiscal quarter of 2022, representing a $200,000 decline versus Q4. This segment continued to suffer from major supply chain and logistical challenges, while at the same time, we shifted our focus to retail to make sure that our customers benefit from our proprietary accessories. Our consolidated gross profit was $23 million in the first fiscal quarter of 2022 versus $17.5 million in Q4 and $14.8 million in Q1, 2022. At 32% of revenue, consolidated gross margins remained healthy and were just below Q4, as NuLeaf helped offset the impact of the discount club model in our bricks-and-mortar stores. We expect that the next few quarters will continue to show consolidated gross margins north of 30%. However, the precise level will depend on the varying growth rates of the different parts of our business. The single most profitable significant revenue source we have is our data sales at over 90% gross margins. Data sales were $4.7 million in Q1 up from $4 million in Q4 and should continue to post steady growth going forward. Our Adjusted EBITDA was $3 million in Q4, representing the highest level in three quarters and well ahead of our expectations, given that we were bracing for the worst in terms of the impact of the discount club model. As mentioned, consolidated gross margin percentage remained steady on a much higher revenue base sequentially. However, payroll efficiencies also where we saw large gains. Salaries, wages, and benefits represented 13.7% of revenue this quarter versus 15.3% in Q4 and 15.2% for all of fiscal 2021. Our bar tenders are becoming more efficient thanks to the leadership and systems implemented by Aman Sood, our Chief Operating Officer. And this has flowed to the bottom line. While not giving formal guidance conceptually, we believe there is room to potentially improve this metric further as we rollout Fastendr technology across all our stores and COVID restrictions ease, allowing us to run our stores even more efficiently. We ended the quarter with over $10 million of cash on hand. Total principal value of our debt is $29.7 million to-date with only $5.6 million due in the upcoming 12 months. While the capital markets remain very challenged across the cannabis sector, we believe we are well positioned given the strength of our operations. The fact that most of our debt is long-term and us at-the-market facility which can allow us to raise capital on a low cost basis opportunity, typically, if so desired. As mentioned last quarter, we are not able to draw more than $4 million, we have already obtained on our non - dilutive debt line, and the entirety of this amount is required to be paid back by May 31st. We are working on a few different ways to address this, including replacing it with another larger, non - dilutive debt facility. Our cash flows from operations before working capital were very strong at $1.7 million in Q1, something that has encouraged potential lenders. We continue to feel the impact of COVID related issues pertaining specialty to staffing in our retail store. Despite this, we have continued to post strong operating results. Working together across countries and industry sub-segments, we were able to post a significant increase to our adjusted EBITDA in Q1. It's not an easy market out there but from what I can see given our positioning and the quality of our team, I expect continued growth from here. With that, I will now turn the call over to the operator to open the lines for the question-and-answer session.

[Operator Instructions]. The first question is from the line of Aaron Grey with Alliance Global. You may proceed.

Hi. Good evening. Congrats on the quarter and thanks for the question. First question for me on the retail side. Great, it sounds like the discount model is going well you guys still have that target there. But just specifically on that retail margin came down a bit not as much as we saw the prior quarter. As we look going forward with further roll out of the discount model you guys provided some color last earnings call, could you just maybe give an update in terms of where you feel that retail gross margin line will go going forward? Thank you.

Hey, Aaron, thanks for the question. Our retail margin, brick-and-mortar margin, in particular, definitely came down. In fact, it came down an aggressive seven points. But then, again, thanks to our diversified strategy and ecosystem, we were able to get our consolidated margins up to 32%, which I was personally very impressed with. So even though we have some of the most competitive retail margins at our brick-and-mortar stores in Canada, consolidated, we are looking great and I don't think that is going to change. I think we will maintain margins between 30% and 33% going forward. Again, thanks to NuLeaf, thanks to Blessed, FAB, some of these acquisitions that we did in 2021, they were very thoughtful and precisely for this reason.

Okay, great. Yeah. Thanks. And yeah, sequentially. Sorry, is what I was trying to versus the year-over-year, but yeah, good to see that kind of stabilized on how you looked to see that going forward. Second question for me before I pass it on. Right, so you guys talked about the Crossroads acquisition, three times EBITDA multiple. Just given what you've seen in terms of dynamics in the public markets, as well as the private, you think you guys are changing in terms of M&A landscape. I know you guys ' stock is down, but it seems like it might be tougher out there for those moms and pops. So how you guys see that M&A landscape, whether it be on the brick-and-mortar side in Canada, or something else within the U.S. and internationally. Thank you.

Sure. So Aaron, if you look at our history on how we've been purchasing companies, we are always looking forward to doing accretive deals and Crossroads was no different. We acquired it at a 3.5 times multiple of EBITDA, which in my mind is extremely attractive. And those multiples on the brick-and-mortar side in Canada, vary province to province, between 3.5 to six times, depending on what province we are looking for. And we're also very mindful of the fact that where our stock price is trading. Although these deals are extremely accretive and that's the number one point for me, we're still being very careful and we've actually slowed down our M&A a little bit to cherry pick absolutely the best deals at the right multiples. So we do have e-commerce opportunities in the pipeline. We have more opportunities on the brick-and-mortar front, especially at these attractive multiples, which we will be announcing shortly. But we are being very careful about really marching ahead on M&A when the stock is sitting at these levels, unless the deal is highly accretive, we are not going to do it. So again, our pipeline is robust, but we are cherry picking the deals that we really want to do at this time.

Raj, thanks so much for the for the comment. Congrats on the quarter and I'll go and join back in the queue.

Thank you, Mr. Grey. The next question is from the line of Andrew Semple with Echelon Capital Markets, you may proceed.

Good afternoon, and congrats on the quarter, very impressive traction on the retail segments there. So it's great to see the improvement on the revenue side, but in my view I guess perhaps the bigger positive surprise was actually on the gross margins, so I'd like to return to that. It'd be helpful I think if you could unpack some of the drivers within the consolidated gross margins, including whether the retail discount club model had a better gross margin than anticipated. How significant of a tailwind did NuLeaf provide, and whether there have been any improvements in the supply chain constraints on the accessories side that may have helped within the quarter.

Hi, Andrew, and thank you for your questions. Getting started on the retail gross margins, so we were anticipating to land somewhere between 12% and 15% on the brick-and-mortar front with the aggressive unbeatable price strategy that we have in our stores and we've done exactly that because we are the leaders in Canada. Most of the competitors that we have in the Canadian landscape are looking at us and pretty much setting their margins looking at what High Tide is doing. We have settled at a nice, healthy 16% on the higher end of the spectrum on the brick and mortar side. That's definitely helped out a little bit because initially I was assuming that we will remain close to 12%, 13% for at least a couple of quarters after the launch. But that to my surprise, has stabilized at 16%. So I'm very happy with that. And then on the particular point of NuLeaf, NuLeaf has been an absolute price jewel of an acquisition that we did. And we've maintained our gross margins in Blessed, we've maintained our gross margins on FAB and NuLeaf, which are an average of close to 70%, 75%. And we had good two months of NuLeaf sales incorporated into this quarter and almost a full quarter of Blessed and a full quarter of FAB. So from that perspective, our consolidated margins kept on gaining traction and we ended up at 32%. My projection prior to this, including speaking with yourself and other analysts, we were projecting close to 27%, 28%, but I think we benefited on both sides. The brick-and-mortar remains strong in terms of margin, as well as all of the acquired businesses performed very, very well and maintained their gross margin, and hence we are sitting here today. In terms of going forward, I do feel that our brick-and-mortar margins will remain stable between 15% and 16%, and we are constantly looking at accretive acquisitions which are going to contribute favorably towards gross margins for our entire ecosystem. So I think going forward, our gross margin situation is going to remain healthy.

Great, that's very helpful. Thank you, Raj. And I just want to ask on the M&A. On the yields of the Crosswinds (sic) [Crossroads] acquisition, I would appreciate an update on the integration plans for newly acquired retail stores ahead of what I presume to be an opportunistic year for tuck-in store acquisitions. Is the plan to convert these stores to the discount club model on day one after taking ownership, or is there a transition period, and could you also touch on your plans for branding, whether you have a plan to convert most acquired stores to the Canna Cabana brand immediately or will you be more selective in certain regional markets?

Sure. When we just recently did the acquisition of Bud Room, we actually closed that acquisition about a month ago. But -- and we need to do things right when it comes to positioning it as a Canna Cabana brand. So we need to replace our external signage at the very least and also do some improvements internally in each one of these brick-and-mortar locations that we acquired. So for example, when we acquired Bud Room, it did need a little bit more of cabinetry to accommodate our accessory strategy. We are very aggressive with our accessories, we have such a vast variety, so we want to make sure that we have wall-to-wall coverage of accessories in every store that we acquire or we organically build. So that is usually the only hold up before we turn the switch over to Canna Cabana. It's the external signage which in some cases, building permits -- sorry, signage permits can take a month or two to acquire. So as soon as we get the external signage change and we get the cabinetry change, we make that switch. Until then we keep on riding on the old previous gross margins. For example, Bud Room is still at its older gross margin profile. But I believe in the next two weeks when we get our signage installed and cabinetry all in, we will be able to go back to the Canna Cabana brand and the Canna Cabana pricing. And this will remain consistent with Crossroads and any other future acquisitions that we do.

Understood. Thanks for the additional color there. I'll get back in queue. Thank you.

Thank you, Mr. Semple. The next question is from the line of Scott Fortune with ROTH Capital. You may proceed.

Good afternoon, and congratulations on the quarter. Just looking at the discount model roll out here, the success you've had, it seemed to be replicating the pilot program. How and then what's happening with the lock down or consumers moving back into the stores, any updates on that and how we can expect a similar pace to the pilot program over the next two quarters for sales from that side of things?

Hi, Scott, and thank you for your question. I don't think there has been a significant impact of COVID improving and customers flocking back to our stores. But in general, due to the introduction of the discount club concept, which is a very unique concept as you know, Scott, it's the first of its kind in North America. We have our Baltimore coverage of consumption accessories, there's a lot more to see in our stores and purchase at some very attractive prices. So the word of mouth is definitely getting out and we are definitely marching ahead. As for expectations, we're actually slightly ahead in terms of our growth in our stores. And I feel that going forward, we will be able to come through on exactly what we messaged to the market in the next couple of quarters between the next six to nine months, we should hit maturity to the numbers that we had originally messaged to the market. But you can see our results today, our EBITDA has jumped 80% sequentially, despite the drop in brick-and-mortar retail margins, and we are gaining market share. So from any perspective, you look at the business today, it's way healthier, this is a way better strategy to go forward for a company like High Tide because there's not many other companies that have a unique ecosystem like ourselves. So to go back on the question, we are seeing strong results from the discount club concept, we are seeing membership grow at an exponential rate. I believe we've grown over 84% in our club members, which further provides us a monetization opportunity for our club members. So things are looking great in terms of our discount club, and I feel by the end of the year we should be very close to the originally message numbers on the discount club that we project will happen this year.

I appreciate the color. And then to one the under-appreciate digit segments is that data technology, that generated about $4.7 million this quarter on 17% quarter-over-quarter growth. Is that a function of more stores or you looking to expand the data offering? How should we look at the kind of data technology as we move forward here?

So I've been very impressed with the demand for our data across our ecosystem. So Scott as you know, High Tide has one of the most unique ecosystems in cannabis. We are involved in TXI, CBD and accessory sales, and all of these units are very attractive. The data that comes out of it is very attractive to multiple industry stakeholders, not just the licensed producers, but even other investment bankers that are interested in this data to get ahead and start calculating on how Canadian, American, and European companies are doing because we have business operations across the continents now. So from that perspective, because we have CBD companies now, we do a good $48 million - $50 million annualized CBD business. We do a good $40 million of annualized accessories business, and the remaining comes from THC. So our data sales are in very high demand and we feel that it'll be stable, maybe it won't grow as exponentially as we have been, but we definitely feel that our data sales will continue to grow. And as all of us know, data is -- the output is only the report that we present to our customers. Whether that's a licensed producer or investment banks or any other clients that we have, it's simply just a report, so it's a very, very high margin business in anywhere between 96% and 99%. So from that perspective, I couldn't be happier with the data sales that we are generating. And I believe the data sales will continue to grow, not so sharply, but definitely more steadily.

I appreciate the color. I'll jump back in the queue. Thanks.

Thank you, Mr. Fortune. The next question is from the line of Frederico Gomes with ATB Capital, you may proceed.

Hi. Good evening. Congratulations on the quarter. Thanks for taking my questions. First, I want to talk about the delivery. Can you talk about the economics on deliveries because you mentioned that your fee should be accredited to margins? Can you talk about that a little more? And what's the percentage of your sales that's coming from delivery right now just considering the provinces that allow for that? Thank you.

Good evening, Frederico, and thank you for your question. In our delivery model, the margins are very consistent to what we have or what we generate in our stores. As we recover the delivery feedback by the customer when they paid that $9.99 charge. Deliveries are not generating a great ROI for any of the Canadian retailers, due to the current regulations of our own delivery. So we see our delivery on-demand services more of a convenience and service to our loyal club members, so we can continue to provide them with the best cannabis retail experience. And we have not seen any major increase or decrease since the launch of delivery on demand. But again, our boarder was literally launched a couple of weeks ago or week and a half ago. And prior to that, I believe sometime in February we launched this in Ontario, so our delivery numbers should continue to rise throughout this year as our service becomes more well-known.

Thank you. And then on your expansion in Ontario, so right now Ontario has had that mark cap of 75 stores, when do you think that you guys will reach that cap, and are you looking at alternatives to continue expanding in the province for different arrangements once you reach those 75 stores if nothing changes in terms of regulations? Thank you.

Yes. So we are very focused to get to that 75 store number Frederico and if our track record -- you can look at our track record. We always come through when we say that we're going to open an x number of stores. So I'm quite confident that we look continued to build in Ontario throughout this year and we will get pretty close to that goal. Our goal is to reach a 150 locations by the end of calendar 2022 and I believe most of that store growth is going to come out of Ontario. If I was to just throw a number out there randomly and don't hold me to it, we are going to try our best. But I think we could probably add another 25 locations in Ontario alone by the end of this year, so we'll be close to 55, 60 locations. l also intend to have our age stores fully built already in British Columbia this year. BC has been a little bit of a challenging market in terms of acquiring building permits. We have three organic leases that are still sitting there and all three of them actually waiting for building permits and as much as we are out there doing very accretive M&A, we're also very disciplined and BC commands some of the highest multiples in the country when it comes to bricks-and-mortar retail. So it's not like we've not looked at opportunities and we can grow our stores there today, but I'm waiting for the right moment. Thanks to our diversified ecosystem, we can continue to grow in other markets and segments and come back to BC when the time is right. But I'm feeling very hopeful that this year we'll have all of our eight locations. And between Ontario and BC, we will add another 30-35 locations this year.

Thank you, Raj. Congrats on the quarter again. Go back to the queue. Thank you.

Thank you, Mr. Gomez. [Operator Instructions] There are no additional questions waiting at this time, so I will turn the call over to the management team for any closing remarks.

Thank you, Operator. And thank you to everyone for your interest and continued support for High Tide. With that, I will ask the Operator to close the line, have a great evening.

That concludes today's conference call. Thank you for your participation. You may now disconnect your line.