High Tide Inc. (NASDAQ:HITI) Q2 2022 Earnings Conference Call June 14, 2022 5:30 PM ET
Company Participants
Krystal Dafoe – Investor Relations
Raj Grover – President and Chief Executive Officer
Rahim Kanji – Chief Financial Officer
Conference Call Participants
Scott Fortune – ROTH Capital Partners
Frederico Gomes – ATB Capital
Pablo Zuanic – Cantor Fitzgerald
Andrew Semple – Echelon Capital Markets
Operator
Good afternoon. My name is Tania, and I will be your conference operator for today. At this time, I would like to welcome everyone to High Tide Inc.’s Second Quarter of 2022 Unaudited Financial and Operational Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Instructions will be provided at that time for you to queue up for the question-and-answer session.
I will now turn the call over to your host.
Krystal Dafoe
Thank you, operator. Good evening, everyone, and welcome to High Tide Inc.’s quarterly earnings call. Please note that all earnings discussed on this call are presented on an unaudited basis. Joining me on the call today 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 second quarter ended April 30, 2022. Before we begin, Please let me remind you that during the course of this conference call, High Tide’s management may make statements including, with respect to management’s expectations, or estimates of future performance. All such statements, other than statements of historical facts, constitute forward-looking information on forward-looking statements within the meaning of the applicable securities laws and are based on assumptions, expectations, estimates and projections as of the date hereof. Specific forward-looking statements include, without limitation, all disclosures regarding future results of operations, economic conditions and anticipated courses of action. For more information on the company’s risks and uncertainties related to forward-looking statements, please refer to the company’s press release dated June 14, 2022 released earlier today and our latest annual information form and our latest management discussion and analysis, each filed with the securities — regulatory authorities at sedar.com or on EDGAR at www.sec.gov. or on the company’s website at www.hightideinc.com. And which are hereby incorporated by reference herein.
Although these forward-looking statements reflects management’s current beliefs and reasonable assumptions based on the current available information to management as of the date hereof, we cannot be certain on the actual results that they will be consistent with the forward-looking statements in the future. There can be no assurance that actual outcomes will not differ materially from results. Accordingly, we caution you not to place undue reliance upon such forward-looking results. For any reconciliation of non-GAAP measures measured and discussed, please consult our latest management discussion and analysis filed on SEDAR and EDGAR.
It is now my pleasure to introduce Mr. Raj Grover, President and Chief Executive Officer of High Tide. Thank you, Mr. Grover. You may now begin.
Raj Grover
Thank you, Krystal, and good evening, everyone. Welcome to High Tide Inc’s financial results conference call for the second quarter ended April 30, 2022. I’ll start this call by providing an overview of our results and other key developments in the second quarter. Rahim will discuss the financials in-depth and after that we would be pleased to answer any questions you may have.
Total revenue for the second quarter was $81 million, this was up 98% year-over-year and was up 12% sequentially. While it continues to be a very competitive market for cannabis, all our sequential revenue gains were in Canada, driven by significantly higher same store sales, as well as adding more stores to our network. $81 million in growing puts High Tide at an annual revenue run rate of almost $325 million. We continue to post the second highest revenue level among all Canadian cannabis companies that report in Canadian dollars only behind Canopy Growth, a company with a $1.7 billion market cap versus ours at $170 million.
Gross profit for the quarter was $22.7 million. As a percentage of revenue, gross profit declined from 32% in Q1 2022 to 28% this quarter. This was not a surprise given as mentioned before our Canadian business which generates lower margins increased its share of the mix to now represent 78% of total revenue. What is important is that the gross margin percentage we earned by selling cannabis in our stores was stable sequentially in Q2 versus Q1.
Adjusted EBITDA for Q2 2022 was $2.4 million, representing our ninth straight quarter of positive adjusted EBITDA, which is unmatched in the Canadian retail cannabis sector. While we are pleased with our EBITDA of $2.4 million this quarter, we highlight that as the only pure play cannabis retailer trading on NASDAQ, direct ongoing cost incurred associated with our NASDAQ listing amounted to over $750,000 this quarter. Our store count went from 109 to 120 during this quarter. We are grooming and feeding these newer stores to catch up to the maturity levels we need them to reach to become EBITDA positive and we expect this to continue, given the pace at which we are acquiring and building new stores. As we open up more stores, which we expect to continue to do, the percentage of bricks and mortar revenue should increase versus other business lines. We are at 126 stores today, well on our way to our target of 150 by the end of the calendar year.
On our last quarterly conference call, I provided some data showing how well our innovative discount club model has been received. Today, I’m pleased to highlight that this growth accelerated significantly during Q2. According to multiple data services, total cannabis retail sales across Canada were 6% higher in the month of April when our Q2 ended, when compared to the month of January when our Q1 ended. This includes the impact of opening new stores. In contrast, our same store sales alone were 20% higher in April versus January. Accounting for the one fewer day in April, our same store sales were on a daily sales run rate ending Q2 that was 24% higher than we ended Q1.
We have seen consistent growth and outperformance versus our peer group since we launched the discount club model on October 20, 2021. Our same store sales alone, not including the new ones we added, were up a tremendous 43% comparing the month of April to the month of October, whereas the entire Canadian market, including the addition of new stores was only up 3% during this period. Accounting for the one fewer day in April, same store daily sales were up 48% in April versus October. You can see that consumers are clearly attracted to our first of its kind discount club offering. We are growing our market share every single month and I can advise that May was no exception to this trend.
While offering unbeatable prices is one key factor in our discount club, it is a lot more than just that, in terms of leveraging our unique points of differentiation for consumers. We have three other pillars than just price. First is our accessories. This is where we started the company a dozen years ago. We have thousands of cutting edge proprietary accessory SKUs which we design, manufacture, distribute and retail. None of our retailer peers have this line of business, so no one can touch us in this area.
Second is our Cabana Club loyalty program. You have to be a member to get the members only prices in our stores. We have seen Cabana Club membership skyrocket from 245,000 on October 20 to over 550,000 to date. We reach out to our members regularly via emails and text messages to showcase our brands and products, having been the first cannabis retailer to launch market versus member pricing and this differentiated model has contributed to increasing repeat business and loyalty. We have always been innovative in our marketing strategies as recently highlighted by our 42,000 car giveaway on [4/20] (ph), which we have decided to now make an annual event.
The final key differentiating pillar of our discount club model, which I’m particularly very excited about is our Kibana Cannabis Co. house branded product line, which first hit our store shelves yesterday in Saskatchewan. We plan to continuously be adding more white label SKUs in Saskatchewan and we look forward to providing positive updates regarding Manitoba and Ontario during our fiscal third quarter. We see meaningful margin enhancing opportunities arising from these proprietary offerings and our longer term goal is to have them eventually represent 20% to 30% of our sales. This is yet another example of us executing on our communicated business plan.
Smaller retail operators have taken note of the structural advantages that we have, which they don’t. And they are seeing first hand in the market how we have been successfully leveraging these trends to increase our market share month after month. This has motivated many to approach us to see if we would acquire their stores. Given the volume of potential targets we see it allows us to be extremely selective and strategic. Many of them are strong businesses as evidenced by the recent acquisitions we announced and there are many more in the pipeline, which we are working towards acquiring at highly accretive multiples for our shareholders.
So our bricks and mortar Canadian business continues chugging along and it’s hitting new highs, even in this very competitive market. However, there was some softness in our international business, which largely consist of online sales of CBD and accessories resulting in our revenue run rate outside of Canada now representing $70 million annually. There were a few factors that played this quarter, which each made a small contribution. Specifically, Q2 is a seasonally slower quarter in retail as it compares to the holiday season. COVID had driven extraordinary gains in e-commerce over the past two years, with pandemic restrictions having now largely been eliminated, consumers are renormalizing their buying habits towards in-store purchases, including our own with a temporary cooling off on sales for e-commerce players, despite a very positive long term growth trajectory. And inflationary trends have had the margin impacted consumers globally.
Overall, our international business continues to perform well and its prospect remains very bright. The beauty of our diversified model is that, temporary softness in one area can be offset by strength in other areas. Our Canadian business represents 78% of sales and the international businesses continue to provide meaningful cash flow to help support it.
So in conclusion, Q2 was another great quarter for High Tide. We continue to meaningfully grow our top line and we have ambitions to be the number one revenue generating Canadian cannabis company across the value chain. We are gaining market share every month due to the continued success of our innovative discount club model. We are putting up more stores both organically and via highly and immediately accretive acquisitions, and all while generating healthy positive adjusted EBITDA for the ninth straight quarter, again unmatched in the Canadian retail cannabis industry. This is in part due to our aggressive approach to market share growth by leveraging our full and unique ecosystem and expanding our loyalty offerings, which we plan to monetize in the future. We have now clearly established ourselves as a leader in the Canadian cannabis landscape. I could not be more proud of our team for what we have achieved and continue to achieve taking our company to new heights with every passing quarter.
With that, I will now turn the call over to Rehan Kanji, our Chief Financial Officer to discuss our financial results.
Rahim Kanji
Thank you, Raj, and good evening, everyone. Let’s dig into these results. In the second fiscal quarter ended April 30, 2022, the company recorded consolidated revenue of $81 million, representing an increase of 98% year-over-year and 12% sequentially. Our consolidated gross profit was $22.7 million in the second fiscal quarter of 2022, representing 28% of revenue versus 32% in Q1 2022. Our Canadian bricks and mortar business grew its share of revenue sequentially and as it carries a lower gross margin, which resulted in the consolidated level declining. While the ultimate consolidated gross margins in subsequent quarters will depend on the mix of revenue, which will be influenced by organic growth rates and future acquisitions, I can say that we have identified and are actively taking advantage of opportunities to increase our gross margin percentage in Canada.
Our adjusted EBITDA was $2.4 million in Q2. I know that our business is already becoming more efficient. While consolidated revenue rose by $8.8 million sequentially, salaries, wages and benefits were essentially unchanged. We continue to look for ways to have revenue growth outpaced compensation growth going forward. General and administration administrative expenses increased by $807,000 sequentially, this was due to the new store openings in the quarter, a contribution of full quarter of new lease operations, and increase in general corporate expenses. We ended the quarter with $15 million of cash on hand. Total principal value of our debt is approximately $30 million today.
We are continuing with the due diligence for the $30 million credit facility with Connect First Credit Union and have a goal to close it in July. As a reminder, the facility will consist of two $15 million components, a $15 million term portion upfront at a very attractive 5.19% fixed interest rate, part of which would pay off $5.5 million of existing debt and a 15 million M&A master line facility, which will help support the cash portion of future M&A allowing future transactions to be less dilutive.
Our cash flows continued to be strong in Q2, our cash flow from operations before working capital was $1.6 million in the quarter, essentially equal to the $1.7 million generated in Q1. That said, we continue to invest in working capital and CapEx to support more organic store growth, which is clearly generating more sales. As our bricks and mortar retail portfolio now sits at 126 stores and counting. More than any other corporate-owned network in the country. I want to reiterate what Raj said, our strategy is clearly working. We are gaining market share faster than we had expected and are now the clear leader in the Canadian cannabis retail market.
With that, I will now turn the call over to the operator to open the lines for the question-and-answer session.
Question-and-Answer Session
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Scott Fortune with ROTH Capital Partners. Please proceed.
Scott Fortune
Good afternoon, and congrats on the quarter. I want to focus a little bit more on the retail store, the four wall metrics here and kind of dig into the gross margin, and your High Tide focus increased profitability on the retail side there. Can you kind of tell us where kind of retail gross margins are at these levels now and the kind of expectation kind of going forward for the company as we’re reaching saturation in a lot of these data on this [indiscernible] side. Can you just step us through kind of the margin outlook on the retail side as you see next coming quarter or throughout 2022 here that would that be helpful?
Raj Grover
Yes, absolutely Scott. Hi, and thank you for your question. So Scott, retail, our consolidated gross margins are sitting at 28%. If you separate retail gross margins out and include our data revenue, we are close to 23%. If you take the data revenue out of that, we are close to 16%. The good news is Scott that, we have gone through that initial phase of really going after the market share and now we are clear leader emerging as everyone can see in our sales number and our absolutely exponential same store sales growth. So I am feeling very confident that this quarter and next, this current quarter that we are in, we actually have some opportunity to increase our margin slightly. So we may see a slight margin increase on that front, but at the very least, we are going to remain very stable on our brick and mortar margin front.
And in the case of inflation and people have limited dollars today, if we talk about our overall consolidated gross margin profile, we also feel that our international business gross, where it stands today, our gross margins remain stable. So I don’t see this deteriorating any further from where we are today consolidated, as I see some opportunity on a brick and mortar side now to slightly increase our margins at the retail level.
Scott Fortune
Got it. I appreciate the color on that. And then just a little focus on — provide a little more color or the economics around the delivery initiatives that you’ve put in place in kind of your network here. The margin expectations from that and strategically the opportunity delivery, what percentage of kind of provincial sales do you think can come from delivery outside the retail and the online sales now currently. Just little more color on how you look at the rollout on the delivery side of things?
Raj Grover
Yes, absolutely. So Scott, we’ve always been forward thinking with our offerings and we launched delivery on demand in February. And then I believe end of January or February and then we in Ontario, Manitoba and Saskatchewan, then we launched it in Alberta on March 8th. But what we are noticing for delivery, especially for us, Scott, is that, we are a very differentiated brick and mortar concept. We’ve got wall to wall coverage of accessories. We have maybe 700, 800 additional SKUs than our next competitor when it comes to accessories and other offerings. So what we are starting to notice is, customers really prefer coming to our stores. Our store traffic continues to go up month-over-month, quarter-over-quarter. And our delivery business is still sitting under 4% of our total business.
I don’t see that business line particularly growing exponentially, but I definitely see it holding stable here. And because we charge our customers a $9.99 fee for that delivery on demand initiative that we’ve launched, it has not hampered our gross margins. In fact, we are doing better on delivery gross margins than previously before announcing that delivery on demand initiative. So overall, delivery remains a very small part of our business. I think it will evolve to become slightly bigger part. But because our concept is so differentiated, we are sort of the [cost co] (ph) of cannabis where we have a lot of consumers come in and they love to browse through our stores. And we like that too, because it helps our average basket go up when they come shop in our stores.
So we are going to stay top on delivery. We are not going to lose market share on that. But we are more inclined to continue to develop our brick and mortar concept, because it’s very differentiated from any other retail offering that’s out there today.
Scott Fortune
I appreciate the color. Thank you.
Operator
Thank you. The next question comes from Frederico Gomes with ATB Capital Markets. Please proceed.
Frederico Gomes
Hi, good evening, Raj and Rahim. Congrats on the results and thanks for taking my questions. My first question is, you continue to outperform the industry in terms of same store sales growth quite substantially. And I’m curious how long do you think that sort of outperformance can go on? I imagine that sales per store may get to a point where it’s hard to continue increasing at such a fast pace. So when do you think that that will cool off and you will have to drive growth through store expansion only or through margin expansion as well?
Raj Grover
Good evening, Frederico, and thank you for your question. I was really hoping someone ask me this question, because I’m so excited to report our 23% sequential increase on same store sales growth. This is followed by another 23%, 24% that we put out in the quarter prior to this. And you’re exactly right, like how long can this continue. But I will keep getting the good news until I can. So I can tell you that May was no exception and we continue to see same store sales growth in May. We continue to see same store sales growth even in June.
Now at what rate and at what delta will be seen by the time we get closer to the end of quarter. But we are becoming more and more known in the Canadian retail landscape, Frederico, and that’s just equating into — while others are having stream difficulties are not facing fierce challenges, our same store sales continue to rise. I don’t see them stopping even for the next quarter. I don’t have a crystal ball to see what it would look like towards the end of the year or next year, but we are already very comfortable to where this level is at today and we see the opportunity to slowly start to increase our margins again if we have to. If this gets competitive again, we can remain here or even go slightly below and we will still be totally fine.
Same store sales growth is a key metric which confirms our concept is very well received by consumers. And I don’t see any difference going forward for the remainder of this quarter and potentially even the next quarter. And particularly exciting part for us Frederico was, April saw — the broader market in April saw only a 6% same store sales increase, while on a daily sales run rate basis, we saw a 24% increase. So we are growing almost 300% above and beyond where the overall market is growing. So I don’t see that trajectory slowing down drastically. I can still see light at the end of the tunnel that it’s — the sales are still growing. And like I said, because our concept is so differentiated and we are the only group in Canada that has that leverage with accessories, which we are further leveraging into our system. So I think we will see continued sales growth here.
And then when the time, Frederico, because we have such a diversified ecosystem we can go back to more CBD opportunities, we can go back to more accessories opportunities. While the capital markets are taking a breather or more than a breather, I should say, we’ve kept our interest on our business line that’s absolutely exploding. But when the time is right, we can always go and get more margins in our ancillary business lines, which we don’t even have today. As you can clearly see, we’ve slowed down on international M&A and very much purposely – purposefully because we have a reason to do so. We know what we have in our heads in terms of our brick and mortar concept, which is today the leading concept in Canada, but tomorrow I see that as a leading concept in United States and then globally, potentially in Germany as well. As we know, Germany is getting ready to legalize cannabis potentially ahead of United States. So we have a lot of opportunities and lot of ideas in front of us that if one line softens up like you said. Raj, what happens if the same store sales growth slows down? No problem. We can go to our diversified ecosystem and start tapping into those margins again. But I don’t see us going there right now, because our brick and mortars is not only stable, but it’s definitely on the rise.
Frederico Gomes
Thank you. Yes, that’s really helpful. My second question is, you mentioned your M&A strategy for e-commerce platforms. Just given the macro environment there in terms of session fears, inflation, and capital becomes scarcer. Are you seeing any type of multiple compression there? And how is your pipeline looking right now? Thank you.
Raj Grover
So, Frederico, biggest of our network and because of our deep roots in cannabis since 2009 when the company really started, we know all the players in North America and a lot of the players in Europe. And our pipeline at any given time is always robust in terms of the deals that we want to do. I’ve been pushing some of the deals that we’ve had in the pipeline and the other groups are patiently waiting, because they still want to do a deal with High Tide, but I just can’t justify where we are sitting at our stock price currently in the market to go be doing some bigger deals on the e-commerce side. If I saw that it was an opportunity that we could lose, I would have expedited those deals, but I don’t see that happening because there’s not many other groups that are out there that are even competing with us at this level on the e-commerce front. So we’ve got time on our hands on that front and you can be rest assured, Frederico.
If our valuations are going down, the private company multiples are also coming down. As you can see, we are very responsible, we are doing highly accretive deals for our shareholders, we are consolidating the Canadian market typically at a 3.5 time multiple of EBITDA, which we basically set the — we set that price in the market. So we can continue to do that. Canada is on the raise for us, has a lot of opportunities in the pipeline that we want to monetize and take advantage of. There’s multiple groups that are the [CR paper] (ph) extremely competitively extremely reasonable levels where our stock is trading right now, and they want to come join the High Tide family. So we’re going to continue looking at those opportunities and a couple of very selective e-commerce opportunities, which I just don’t want to pass on. But again, because our valuations have come down, their valuations are also getting adjusted.
Frederico Gomes
Thank you. That’s really helpful. I’ll hop back in the queue.
Operator
Thank you. The next question comes from Pablo Zuanic with Cantor Fitzgerald. Your line is open.
Matthew Baker
This is Matthew Baker on for Pablo. Thank you for taking our questions. If we take your latest quarter retail revenues of $80 million, of which we assume $59 million are Canadian retail sales and your Cabana Club memberships of 550,000 active members. That would suggest a monthly spend per client of about $35. Just wondering, does this sound correct, because does the number seems low or is this the wrong way to think about it? Thank you.
Raj Grover
Hi, Matthew. Thank you for your question. It’s a very technical question that I would have to probably revert to Rahim. But if you are asking me, I would say that seems really low. I think that number has to be north of $50 or even $60 per customer. But then again, don’t quote me on it, because I don’t have the data in front of me, but that number seems quite low. Rahim, do you have any –
Rahim Kanji
That’s a — Thanks, Raj. That’s a very good question and a very creative way to come up with that number. And like Raj said, it does seem low. And I would agree that it’s a north of $50 that we’re seeing on our average basket. So the other way to look at it is the utilization of that membership as well. So at 550,000 you can argue about 60% to 70% members that are very active in making transactions on a regular basis. So if you use a percentage of those membership to come up with the basket value, it probably gets to very close to what we’re generating right now. Does that helps?
Matthew Baker
Thank you for that answer. Just for a follow-up question. We’re wondering, do you have data that would indicate percentage of average monthly spend of your Cabana Club members between High Tide and elsewhere? Is it like 20% or closer to 90%. Just trying to gain a better understanding of how loyal the Cabana Club members are? And if you know, how much of their spend is at High Tide stores? Thank you.
Raj Grover
I wouldn’t know how much members are spending at our stores versus other stores, but I can definitely tell you one thing, Matthew. Before we launched the discount club model about 50% of our daily transactions were conducted by club members. That number has now gone north of 90%, we’re actually sitting at 94%. So that should give you a very good idea of loyalty amongst club members.
Matthew Baker
All right. Thanks for that answer. And if I could just have one more follow-up question. Just wondering how your — the US CBD business is doing with prices continuing to come down? And also, if possible, if you could remind us how much is sold online compared to the brick and mortar stores? Thanks.
Raj Grover
Our US CBD is all sold online, with the exception of NuLeaf doing about $2 million to $3 million in wholesale revenue. And US CBD amongst all CBD players, when inflation is soaring at the rate it is, people are more concerned about filling their gas tanks and getting food on the table than buying pipes, bombs and CBD products. So we’re seeing the same type of softness in international e-commerce on all sort of disposable income going down, nothing out of the ordinary one way or the other, it’s very much in line with what the global trends look like. So I am not concerned about at all regarding our US CBD sales or in fact for that matter even our international CBD sales.
I also feel that the long term trajectory for e-commerce, which is practically all of our CBD business is very, very strong. So we are going to continue looking at more CBD businesses and we’re going to continue looking at more online CBD businesses, because that make a lot of sense to us, because we already have platforms such as NuLeaf that can service the United States through its facility — it’s cGMP certified facility that we have in Denver, Colorado.
Matthew Baker
I appreciate all the color. Thank you.
Operator
Thank you. The next question comes from Andrew Semple with Echelon Capital Markets. Please proceed.
Andrew Semple
Good evening and congrats on the Q2 results. First question here is on the macro environment. And we are seeing inflationary — certainly a lot of inflationary pressure on the consumer. How are you seeing that impacting consumer purchasing habits at your stores and in your e-commerce channel? And being a discount orientated retailer, is the inflationary environment driving new consumers? Or do you feel like it’s driving new consumers towards your discount club model?
Raj Grover
Thanks for the question, Andrew. So our cannabis sales in Canada remain very strong and increasing as we play in the value segment, which is very appealing to consumers in North America, especially right now with everything that you pointed out around inflation. So from that perspective, we practically — we couldn’t have timed this better in terms of the timing of our discount club model. And you can clearly see that in our cannabis sales trajectory. It’s now a brick and mortar business, it has now become 78% of our overall business. This has gone up from, I believe, 72% or 73% to 78% now. So we are seeing some softness in our accessories and CBD online businesses as consumers have less disposable income to spend on consumption accessories and premium CBD products. But we are going to offset this, Andrew, by entering into new markets. We have some really good plans. I don’t want to put them out on this call, but you will see them come through, through some of the press releases that we have planned once these plans are mature in the not too distant future.
So what we are trying to do here is, we can’t help with inflation, we can’t help with the macro backdrop, I can’t control that. But what we can control is entering new markets, because our brands are extremely high quality and they’re very well recognized in the markets where we operate. So we are now going to open up new market opportunities to continue momentum where we are seeing some softness, but our core business, which is our value concept in Canada, again, I couldn’t have timed this better. It’s growing at a very rapid rate. It’s exceeding our expectations. We’re very, very happy as the business is growing. And like I said, May and June were no different. We are continuing to see same store sales growth, which is 78% of our business.
Andrew Semple
Great to hear and looking forward to seeing those developments. Second question here, let’s switch gears to the e-commerce and accessory side of the business. In prior calls, obviously, you had mentioned several times that supply chain issues were a factor there. Do those continue to be a factor? Or what’s the somewhat softening of demand that we’ve seen that has the supply chain caught up a bit and balanced out? And then while you’re on the topic of e-commerce, could you maybe also touch on the impact of the magnitude of the shifting regulatory landscape for Delta 8 and how that impacts High Tide’s e-commerce channels?
Raj Grover
Yes, great question, Andrew. So supply chain around the globe is a mess. We all know that and — that can be clearly seen in our depleting wholesale revenues, our wholesale has come down to close to $1 million from almost $2.5 million or even less now. It’s almost such a negligible amount that there’s no attention on that side of the business because when you order something from overseas it used to take 60 days. You could plan your turns in 60 to 90 days. It’s now taking seven to eight months and it’s exaggerated a little bit in China because of what is happening there, we are trying control having the zero COVID policy. And of course, all of our accessories are made overseas. So what we are doing, Andrew, in the meanwhile is, we’re prioritizing our entire business to service Canna Cabana, because that is the core of our business, that’s where we want to win the landscape, we want to make this into a global concept. So we have still managed to keep Canna Cabana fully loaded with accessories, but that has come at the expense of our wholesale business, and that has also come at the expense of certain online e-commerce platforms servicing consumers with consumption, accessory. Although to a much lower magnitude, it is not a big deal on the logistics side because, again, it’s retail for us and we prioritize retail over wholesale.
CBD has not been affected by supply chain, it’s all locally produced, so there’s no issues there with supply chain. On the question of Delta 8 and Delta 9, look, Andrew we are an opportunistic company, we made a conscious decision when we initially purchased a NuLeaf and FAB that maybe we didn’t — we were unclear about the regulation around Delta 8 and Delta 9. And now we’ve seen increasing number of NASDAQ listed companies and you can look them up. We’ve looked four of them up and they’re all selling it and we haven’t sold it for good seven to eight months. So we are basically bringing these sales back to life starting with Delta 8 and getting into Delta 9, we have made a conscious decision to not sell these products in 12 states that are identified that don’t allow them to. We are constantly on top of these regulations to make sure we understand them. We also have legal opinions from law firms in the United States that have stated that this is the legality around Delta 8 and Delta 9. So we’ve made a conscious decision to get into it. And I think this will help us offset some of the CBD softness that we are seeing temporary through Delta 8 and Delta 9 products.
Andrew Semple
Okay. Appreciate the clarity there. And thanks for taking my questions.
Operator
Thank you. There are no further questions in the queue. I would now like to turn the session back over to Higi Tide’s Chief Executive Officer, Raj Grover for final comments.
Raj Grover
Thank you, operator, and thank you to everyone for your interest and continued support for High Tide. We are very proud of what we achieved this quarter and remain excited about our growth trajectory. With that, I will ask the operator to close the line. Have a great evening, everyone.
Operator
This concludes the High Tide Inc.’s second quarter of 2022 unaudited financial and operational results conference call. Thank you for your participation. You may now disconnect your line.
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