Raj Grover: Yes, good morning, Johan, and thank you for your question. So, Johan, we have signed over 6,000 members already in Cabana ELITE with less than 2% of our inventory in actual ELITE products. So we mentioned in the press release and also on the script that we’re very excited about this uptake because we practically just launched this program. Again, it’s the first-of-its-kind initiative that I don’t see any other company doing or innovating like us. But we’re super excited about the ELITE future because we feel that we can get the ELITE product line to reflect 30% to 40% of our in-store offerings long term. So just look at the delta, we’re currently sitting at 2, we’re going to 30 to 40. So you can understand the uptake that we can have once we get to this long-term rollout of ELITE products.
In fact, a good 55 to 75 SKUs, I believe — we just worked out internally with our team — are becoming this week, and I think that is going to have an impact alone, not only considering what we’re looking at two to three years out, but we’re going to start seeing a little bit better intake of ELITE rollout as we start to introduce these SKUs. We are very happy with the intake so far because we’re going to continue to introduce new ELITE offerings every quarter. And this is a very high-margin recurring revenue stream for High Tide and should increase customer stickiness even further because if I’m paying for something as a customer, I want to come back to that store and shop more because I’m already a committed paying member. We already had very sticky members, as you know, — we were over — 90% of our daily transactions in stores are conducted by club members.
And now, when we’re turning these members into ELITE, we think this goes even further. The current economical return that we’re yielding on ELITE is over 70% gross margins. And this is selling ELITE at half price at $2.50 a month, like I mentioned, or $30 a year. But this is going to go up to $60 a year or $5 a month when the price goes up next year. So we think we can yield north of 80% gross margins to ELITE.
Unidentified Analyst: Right. Thank you so much. I appreciate the color. I’ll jump back into the queue.
Operator: Our first question today comes from Andrew Partheniou from Stifel. Your line is now open.
Andrew Partheniou: Thank you for taking my questions. Congrats on the cash generation this quarter. I wanted to just get a little bit of clarity on the language. In the press release, you discussed slowing down M&A activity. But in your outlook for new stores, it seems that you’re guiding for roughly the same number of acquisitions as last year. So if you could just clarify what you meant by slowing down M&A activity in the press release, that would be helpful.
Raj Grover: Yes, good morning, Andrew, and thank you very much for your question. I understand where the confusion is. So let me clarify a bit. So, Andrew, if you if you go back to 2021, we acquired six e-commerce platforms in the United States and internationally, one in the UK. And what we meant by slowing down an M&A activity, and I’ve said this multiple times, given the opportunity that — given our equity prices remaining so depressed, we don’t even want to pay 5 or 6 times EBITDA. And we are now focusing on more smaller, highly accretive brick-and-mortar M&A that we did last year. As you know, 87% of our revenue is derived from our brick-and-mortar operations, and we have no impairment in those operations. Impairment is not a norm for a High Tide.
