CALGARY, AB, Aug. 16, 2021 /CNW/ - Decibel Cannabis Company
Inc. (the "Company" or "Decibel") (TSXV: DB) (OTCQB: DBCCF), a
premium cannabis producer, is pleased to announce its second
quarter financial results for the three month period ending
June 30, 2021.
The Company achieved net revenue of $12.4
million with strong gross margins of 41% and a record adj.
EBITDA of $2.1 million, its fourth
consecutive quarter of positive adj. EBITDA.
"Decibel's tremendous first half results are a testament to the
strength of our brands, ability to innovate and our exceptional
team", said Paul Wilson, CEO of
Decibel. "We continue to build a solid foundation by creating
meaningful brands, high quality products and executing against our
aggressive strategic plan."
Management Commentary
In the first half of 2021, provincial distributors decreased
their inventory levels, and, in some provinces, cannabis retail
in-store shopping was restricted. This caused Qwest products to be
out of stock for a cumulative 7 weeks. During this time, we
enhanced production and our cost structure across our assets to
expand gross margin and tailored an innovative product pipeline for
the second half of 2021.
In the month of June, following the relaxation of COVID related
restrictions and store re-openings, we experienced record level
sales. In July, we saw a surge in demand for Decibel products and
as a result, we have accelerated investment in our facilities to
debottleneck and streamline production to meet these new
levels.
With the resumption of Ontario's retail store roll-out, we have
invested heavily in our sales team to increase our presence in the
province. We expect that our sales team's strong performance in
western provinces (which kept retail stores open) will carry into
the Ontario cannabis market and
the team has seen early success with our recent product
rollouts.
We are confident in our strategy centered around creating
industry leading quality and choice to meet the needs of today's
cannabis consumer. With the strength in our multiple brands, we
remain focused on driving innovation and bolstering our product
offerings through our 2.0 pipeline and Thunderchild Cultivation
flower production ramp up.
Key Financial Highlights
- Net Revenue: Net revenue was $12.4 million in the second quarter, a 1%
decrease over the prior quarter, driven by strong product sales
across a number of categories but offset by stock-outs that totaled
7 weeks in the quarter, supply chain disruption given COVID and
delayed or reduced purchase orders as a result of in-store shopping
closures in Ontario. Net revenue
grew by 111% over the comparative 2020 quarter.
- Record Positive Adj. EBITDA: The Company achieved a
record $2.1 million of adjusted
EBITDA in the second quarter, its fourth consecutive quarter of
positive adjusted EBITDA, and an increase of 6% from the prior
quarter (improvement of $2.2MM from
prior year). For the trailing twelve months, the Company has
achieved $6.1MM in adjusted
EBITDA.
- Flower Sales: 449 kilograms sold in the second quarter,
with an average wholesale net price per gram of $7.96, an increase of 4% and a decrease of 11%,
respectively, over the prior quarter. The decline in price per gram
was a result of a greater volume allocation towards Qwest products
versus Qwest Reserve products which achieves a higher price
point.
- Derivative Sales: $5.7
million of net sales of vape and concentrate products in the
second quarter, a 2% increase from the prior quarter. Sales growth
was driven by increased demand for vape and concentrate products
launched within Q2, partially offset by the COVID shut down in
Ontario and product launch
timeline changes implemented in Alberta and Ontario.
- Retail Sales: $3.2 million
of retail sales, a 1% increase over the prior quarter, primarily
driven by seasonality and sales growth in the Alberta retail stores as COVID restrictions
relaxed, partially offset by new entrants into the Saskatchewan retail market. Retail sales
declined by 17% over the comparative 2020 quarter.
- Product Innovation Roll-Out
-
- Decibel continued its aggressive roll out of in demand products
launching 15 new product SKUs across Ontario, Saskatchewan, Alberta and BC in the quarter with strong
interest from customers in different jurisdictions and impressive
market share improvements.
- Focused on winning in Ontario,
Decibel was successful in both the April and June OCS product
calls, the Company achieved 15 new listings that have or will
launch in Q2 and early Q3 of this year.
- Launched two new cultivars, Stuffed French Toast under the
Qwest brand and Sunset Mac under the Qwest Reserve brand, in new
glass packaging.
- Launched into the live concentrate category with two live resin
vapes under the General Admission brand alongside two strains of
Gems & Juice and Live Sugar under the Pressed by Qwest
brand.
- Launched into large format pre-rolls with the General Admission
brand, its first dried flower product with 6, 7 and 12 x 0.5g
pre-rolls.
- Thunderchild Cultivation Operational Development: The
Company continues to invest in working capital as it ramps the
facility and has now fully planted and commissioned all 20 rooms
with a number of rare cultivars coinciding with Decibel's unique
product roadmap. Thus far, the facility has achieved and
outperformed expectations on yield per square foot. The Company
anticipates run rate production by mid-Q4 with a focus on
implementing a number of operational efficiencies that can be
achieved in post processing.
- Strengthened Balance Sheet: On May 13, 2021, the Company announced it had closed
an amendment to its authorized overdraft facility increasing it
from $1.5 million to $7.5 million with a committed interest rate of
Prime + 1.00% (currently 3.45%). The additional capital will
accelerate Decibel's sales growth through the Thunderchild
Cultivation facility and new vape and concentrate launches.
Quarterly Highlights
|
|
|
|
Three months
ended
June 30
|
Six months ended
June 30
|
|
2021
|
2020
|
2021
|
2020
|
Net wholesale revenue
of flower
|
$3,576
|
$2,054
|
$7,438
|
$4,281
|
Kilograms of flower
sold
|
449
|
258
|
881
|
511
|
Average wholesale
flower gross pricing per gram
|
$9.55
|
$10.03
|
$10.16
|
$10.25
|
Average wholesale
flower net pricing per gram
|
$7.96
|
$7.97
|
$8.44
|
$8.38
|
Kilograms of salable
cannabis harvested
|
439
|
230
|
980
|
463
|
|
|
|
|
|
Net wholesale revenue
of extracts
|
$5,676
|
-
|
$11,268
|
-
|
|
|
|
|
|
Number of retail
stores
|
6
|
4
|
6
|
4
|
Retail
revenue
|
$3,189
|
$3,837
|
$6,361
|
$6,646
|
|
|
|
|
|
Total
|
|
|
|
|
Net
revenue
|
$12,440
|
$5,891
|
$25,066
|
$10,927
|
Gross profit before
fair value adjustments
|
$5,095
|
$2,124
|
$10,073
|
$4,266
|
Gross
margin
|
41%
|
36%
|
40%
|
39%
|
Adjusted
EBITDA1
|
$2,149
|
($26)
|
$4,182
|
($436)
|
Cash flow from
operations
|
($3,007)
|
$1,328
|
($6,121)
|
($4,331)
|
Decibel's financial statements for the three-month period ending
June 30, 2021
("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 June 30, 2021, 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.
1
|
Adjusted EBITDA is a
non-GAAP performance measure. Refer to "Cautionary Statement
Regarding Certain Non-GAAP Performance Measures" for further
details.
|
About Decibel
Decibel is uncompromising in the process and craftsmanship
needed to deliver the highest quality cannabis products and retail
experiences. Decibel has three operating production houses 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, processing
and distribution space which produces the widely championed, rare
cultivar-focused brands Qwest and Qwest Reserve, which are sold in
six provinces across Canada. The
Thunderchild Cultivation Facility, is a licensed and operating
80,000 square foot indoor cultivation facility in Battleford, SK. The Plant, Decibel's
extraction, processing and manufacturing 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, Blendcraft, and General Admission, 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
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 and twelve months ended December 31, 2020. The Company believes that
Adjusted EBITDA is a useful indicator of operational 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 and
severance payments. 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.
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, the Company's ability to meet consumer demand,
that the additional capital will accelerate Decibel's sales growth
through the Thunderchild facility and new vape and concentrate
launch; the Company's ability to grow Qwest, Qwest Reserve and
Blendcraft brands into new and innovative product formats,
variations and its other business plans and expectations.
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 and maintain licences to
retail cannabis products; review of the Company's production
facilities by Health Canada and 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.
These forward-looking statements are made as of the date of
this press release and the Company disclaims any intent or
obligation to update any forward-looking statements, whether as a
result of new information, future events or results or otherwise,
other than as required by applicable securities laws.
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SOURCE Decibel Cannabis Company Inc.