CALGARY, AB, Nov. 25, 2020 /CNW/ - Decibel Cannabis
Company Inc. (the "Company" or "Decibel") (TSXV: DB) (OTCQB:
DBCCF), a premium cannabis producer and retailer, is pleased to
announce its third quarter financial results for the three-month
and nine-month periods ending September 30,
2020.
"We are beginning to demonstrate the positive results of our
collective efforts to reposition Decibel for success, as we remain
focused on executing our strategic plan" said Benjamin Sze, CEO of Decibel. "We continue to
execute as a producer of premium cannabis, with strong demand for
our latest cultivars. The early success of our cannabis 2.0 product
categories validates Decibel's approach to product innovation while
maintaining our commitment to quality."
In the third quarter of 2020, the Company achieved net revenue
growth of 29% and, for the first time, positive adjusted EBITDA, by
delivering net revenue growth in all business verticals. The
Company executed on its strategic plan, delivering high end
cannabis products and consumer experiences through its Qwest Family
of Brands and Prairie Records retail business, realizing cost
reductions, and launching vape and concentrate products within the
third quarter.
Q3 2020 Financial and Operational Highlights
- Net Revenue Growth: Total net revenue grew by 29% over
the second quarter to $7.6 million,
driven by strong sales growth from retail and cultivation
operations, and only includes one month of derivative product sales
in September. Net revenue grew by 163% over the comparative 2019
period.
- First Period of Positive Adj. EBITDA: The third quarter
marks an inflection point in the business, as the Company achieved
$860 thousand of adjusted EBITDA, an
improvement of $886 thousand from the
prior quarter.
- Increased Qwest Sales:
272 kilograms sold in the third quarter, with an average wholesale
flower net price per gram of $8.68
for the period, a 9% increase over the second quarter of 2020. The
Company launched new trendsetting cultivars that deliver high THC
and strong terpene profiles at the start of the quarter, including
Kush Mints, Point Break, and Ex-Wife.
- First Month of Derivative Sales: In September, Decibel
achieved a key milestone with its extraction and manufacturing
facility, The Plant, shipping its first orders to Saskatchewan and Alberta. This initiative contributed
$785 thousand of net revenue for the
period. Initial product launches have been well received with
reorders being received shortly after initial sales.
- Strong Prairie Records Results: Increased revenue for
the period to $3.9 million,
reflecting sales growth of 2% over the second quarter of 2020.
Decibel opened two new Alberta
retail stores in July, one near the University
of Alberta campus in Edmonton and one beside the Palace Theatre in
downtown Calgary on Stephen
Ave.
- Cost Reduction Initiatives: Decibel completed the
majority of its corporate cost cutting initiatives in the third
quarter, and remains laser focused on managing costs and driving
profitable operations. Had Westleaf and We Grow been combined for
the entire 2019 year, a 32% reduction in SG&A year to date
would have been realized, despite commencing commercial operations
at the Plant and new retail store openings in Q3 2020.
- Substantial Completion of Construction of Thunderchild
Cultivation: Decibel substantially completed construction of
its large scale, indoor cultivation facility, Thunderchild
Cultivation, in July. The Company has submitted a complete site
evidence package to Health Canada for licensing of the Thunderchild
Cultivation facility.
Quarterly Highlights
|
|
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Three months
ended
|
Nine months
ended
|
|
September
30,
|
September
30,
|
September
30,
|
September
30,
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Net wholesale revenue
of flower
|
$2,361
|
$2,880
|
$6,578
|
$4,702
|
Kilograms of flower
sold
|
272
|
369
|
782
|
563
|
Average wholesale
flower gross pricing per gram
|
$10.18
|
$9.07
|
$10.15
|
$9.81
|
Average wholesale
flower net pricing per gram
|
$8.68
|
$7.80
|
$8.41
|
$8.35
|
Kilograms of cannabis
harvested
|
311
|
345
|
936
|
1,080
|
|
|
|
|
|
Net wholesale revenue
of extracts
|
$785
|
-
|
$785
|
-
|
Other wholesale
revenue
|
$500
|
-
|
$565
|
-
|
|
|
|
|
|
Number of retail
stores
|
6
|
nil
|
6
|
nil
|
Retail
revenue
|
$3,932
|
nil
|
$10,578
|
nil
|
|
|
|
|
|
Total
|
|
|
|
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Net
revenue
|
$7,578
|
$2,880
|
$18,505
|
$4,702
|
|
|
|
|
|
Gross profit before
fair value adjustments
|
$2,898
|
$1,126
|
$7,164
|
$1,804
|
Adjusted EBITDA
(a)
|
$860
|
$875
|
$425
|
$0
|
(a)
|
Adjusted EBITDA is a
non-GAAP performance measure. Refer to "Cautionary Statements –
Non-GAAP Measures" for further details.
|
Decibel's financial statements for the three-month period ending
September 30, 2020
("Financial Statements") and related Management's Discussion
& Analysis ("MD&A") for the reporting period are available
under the Company's profile at www.sedar.com. As of
September 30, 2020, Decibel was in
compliance with all of its financial covenants and expects to
remain in compliance for the remainder of its twelve-month forecast
period. The Company's ability to meet the conditions of these
ratio covenants over the next twelve months is subject to the
Company's ability to operationalize capital projects that are
either recently completed or are subject to Health Canada licensing
and operationalizing, and all other applicable regulatory approvals
in order to generate revenues.
Leave of Absence
Due to personal reasons, Benjamin
Sze, Chief Executive Officer, is taking a leave of absence
from his role as Chief Executive Officer of the Company as of the
close of business today for an indefinite period of time.
Cody Church, the Company's current
Chairman of the Board, has been appointed Interim Chief Executive
Officer, effective as of the close of business on November 25, 2020.
Results of Annual Meeting
Decibel is also pleased to announce that its shareholders
approved all matters submitted by the Company for consideration at
its annual and special meeting of shareholders held yesterday,
November 24, 2020 (the
"Meeting").
Due to the special circumstances arising from the global
COVID-19 pandemic, and following guidance of local health
authorities for social distancing, Decibel encouraged shareholders
to vote in advance of the Meeting using the instructions provided
in the Notice of Meeting and Management Informational Circular and
Proxy Statement. The Company also provided remote access to the
Meeting via an audio webinar, and will make a recording of the
Meeting available on its website in the coming days.
At the Meeting, Decibel's shareholders:
(i)
|
Fixed the number of
directors of the Corporation to be elected at the Meeting at six
directors;
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(ii)
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Elected each of Cody
Church, Paul Wilson, Michael Kelly, Ivan Casselman, Benjamin Sze
and Billy Yellowhead as directors of the Company;
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(iii)
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Appointed KPMG LLP,
Chartered Professional Accountants, as the Company's
auditors;
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(iv)
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Re-approved the
Company's stock option plan; and
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(v)
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Re-approved the
Company's restricted share unit award plan.
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About Decibel
Decibel is uncompromising in the process and craftsmanship
needed to deliver the highest quality cannabis products and retail
experiences. Decibel has three production houses operating or under
development along with its wholly owned retail business, Prairie
Records. The Qwest Estate in Creston,
BC is a licensed and operating 26,000 square foot
cultivation space which produces the widely championed, rare
cultivar-focused brands Qwest and Qwest Reserve, which are sold in
six provinces across Canada.
Thunderchild Cultivation, an 80,000 square foot indoor cultivation
facility in Battleford, SK is
scheduled to be completed and licensed in 2020. The Plant,
Decibel's extraction facility, in Calgary, AB has 15,000 square feet of Health
Canada licensed extraction and product development space. This
production house will fuel the growth of our brands Qwest, Qwest
Reserve, and Blendcraft, into new and innovative product formats
like concentrates, vapes, edibles and beyond.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Cautionary Statements
Forward Looking Information
This news release contains "forward-looking information" and
"forward-looking statements" (collectively, "forward-looking
statements") within the meaning of the applicable Canadian
securities legislation. All statements, other than statements of
historical fact, are forward-looking statements and are based on
expectations, estimates and projections as at the date of this news
release. Any statement that involves discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions, future events or performance (often but not always
using phrases such as "expects", or "does not expect", "is
expected", "anticipates" or "does not anticipate", "plans",
"budget", "scheduled", "forecasts", "estimates", "believes" or
"intends" or variations of such words and phrases or stating that
certain actions, events or results "may" or "could", "would",
"might" or "will" be taken to occur or be achieved) are not
statements of historical fact and may be forward-looking
statements.
In this news release, forward-looking statements relate to,
among other things, Decibel's expected compliance with its
financial covenants, the timing, construction and licensing of the
Thunderchild Cultivation facility and the Company's ability to grow
Qwest, Qwest Reserve and Blendcraft brands into new and innovative
product formats. Forward-looking statements are necessarily based
upon a number of estimates and assumptions that, while considered
reasonable, are subject to known and unknown risks, uncertainties,
and other factors which may cause the actual results and future
events to differ materially from those expressed or implied by such
forward-looking statements. Such factors include, but are not
limited to: risks relating to delays, regulatory changes and
impacts, capital requirements, construction impacts, displacement
requirements and unforeseen requirements resulting from the
COVID-19 pandemic, the ability to obtain or maintain licences to
retail cannabis products; review of the Company's production
facilities by Health Canada and receipt or maintenance of licences
(including any amendments thereto) from Health Canada in respect
thereof; future legislative and regulatory developments involving
cannabis; inability to access sufficient capital from internal and
external sources, and/or inability to access sufficient capital on
favourable terms; the labour market generally and the ability to
access, hire and retain employees; general business, economic,
competitive, political and social uncertainties; the satisfaction
of conditions precedent under the Company's credit facilities;
timing and completion of construction and expansion of the
Company's production facilities and retail locations; and the delay
or failure to receive board, regulatory or other approvals,
including any approvals of the TSX Venture Exchange, as applicable.
There can be no assurance that such statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on the forward-looking
statements and information contained in this news release. Except
as required by law, the Company assumes no obligation to update the
forward-looking statements of beliefs, opinions, projections, or
other factors, should they change, except as required by
law.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about the Company's prospective results of operations
including, without limitation, the expected results of its costs
cutting measures and, which are subject to the same assumptions,
risk factors, limitations, and qualifications as set forth
above. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at
the time of preparation, may prove to be imprecise and, as such,
undue reliance should not be placed on FOFI. The Company's actual
results, performance or achievement could differ materially from
those expressed in, or implied by, these FOFI, or if any of them do
so, what benefits the Company will derive therefrom. The Company
has included the FOFI in order to provide readers with a more
complete perspective on the Company's future operations and such
information may not be appropriate for other purposes.
These forward-looking statements and FOFI are made as of the
date of this press release and the Company disclaims any intent or
obligation to update any forward-looking statements and FOFI,
whether as a result of new information, future events or results or
otherwise, other than as required by applicable securities
laws.
Non-GAAP Measures
This news release contains the financial performance metric
of Adjusted EBITDA, a measure that is not recognized or defined
under IFRS (a "Non-GAAP Measure"). As a result, this data may not
be comparable to data presented by other cannabis companies. For an
explanation and reconciliation of Adjusted EBITDA to related
comparable financial information presented in the Financial
Statements prepared in accordance with IFRS, refer to the MD&A
for the three months ended September 30,
2020. The Company believes that Adjusted EBITDA is a useful
indicator of operating performance and is specifically used by
management to assess the financial and operational performance of
the Company.
The Company calculates Adjusted EBITDA as net loss and
comprehensive loss excluding unrealized gain on changes in fair
value of biological assets, change in fair value of biological
assets realized through inventory sold, depreciation and
amortization expense, share-based compensation, other income,
finance costs, foreign exchange loss, non-cash production costs,
severance payments, and other non-cash costs. Non-cash production
costs relate to amortization expense allocations included in
production costs. Non-GAAP Measures should be considered together
with other financial information prepared in accordance with IFRS
to enable investors to evaluate the Decibel's operating results,
underlying performance and prospects in a manner similar to
Decibel's management.
Accordingly, this Non-GAAP Measure is intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with IFRS.
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SOURCE Decibel Cannabis Company Inc.