CALGARY, AB, April 22, 2022 /CNW/ - Decibel Cannabis Company
Inc. (the "Company" or "Decibel") (TSXV: DB) (OTCQB: DBCCF), a
premium cannabis producer, is pleased to announce its year-end
audited financial results for the three and twelve month periods
ending December 31, 2021.
"Decibel continues to execute on its strategy to accelerate
revenue growth and deliver new, unique and innovative choices to
cannabis consumers. The success achieved through 2021 with record
market share demonstrates the strength we've created in our brands,
and our dedication towards our customers", said Paul Wilson, CEO of Decibel. "Our momentum has
accelerated into 2022, and we are gaining great traction across our
products and brands, particularly with our recent infused product
launches over late Q4 and first quarter of 2022."
Key Financial Highlights – Fiscal
Year 2021
- Net revenue of $52 million in
2021, an increase of 75% from 2020.
- Gross profit of $18 million in
2021, an increase of 53% from 2020.
- Positive adjusted EBITDA of $7.4
million in 2021, an increase of 386% from 2020.
Key Financial Highlights – Fourth
Quarter
- Net Revenue: Net revenue was $14
million in Q4, a 5% increase over the prior quarter, driven
by the launch of Decibel's new infused pre-roll lines and continued
growth in demand for flower, vape and concentrate products. This
was partially impacted by price compression in the flower segment
and slower retail sales from increased competition. Net revenue
grew by 23% over the comparative 2020 quarter.
- Gross Margin: Gross margin was 26% in Q4, compared to
31% in the prior quarter. The decrease in gross margin is
attributable to a combination of permanent and transitory
impacts.
-
- Permanent impacts include price compression in Qwest Family of
Brands' products by approximately 25% and a 4% reduction in retail
sales margins due to higher competition.
- Transitory impacts include a $345
thousand provision for aged inventory, $738 thousand in air freight charges due to
supply chain challenges, and $369
thousand of non-cash amortization, and $891 thousand of write downs.
- Adjusting for the impact of the transitory factors, normalized
gross margin would have been 43%.
- Positive Adj. EBITDA: The Company achieved $1.5 million of adjusted EBITDA in Q4, its sixth
consecutive quarter of positive adjusted EBITDA and an improvement
of 32% from the prior year.
- Flower Sales: 808 kilograms sold in Q4, with an average
wholesale net price per gram of $5.70, an increase 64% and a decrease of 25%,
respectively, over the prior quarter. The decline in price per gram
is due to increased competition in the premium segment to which the
Company reduced Qwest Family of Brands pricing by approximately 25%
to remain in line with other premium cannabis products.
Additionally, overall price per gram declined due to a higher
contribution from Qwest and General Admission products that have a
lower price per unit as the Company continued to broaden its
product offerings to its consumers.
- Derivative Sales: $6.9
million of net sales of vape, infused, and concentrate
products in Q4, a 5% increase from the prior quarter. Sales growth
was driven by increased demand for vape and concentrate products,
as well as the launch of a new infused pre-roll line in late
Q4.
- Retail Sales: $2.5 million
of retail sales, a 17% decline over the prior quarter, primarily
driven by new entrants into the Saskatchewan retail market, partially offset
by Alberta retail sales
growth.
- Harvests & Yields: Decibel harvested 1,059 kilograms
of dried flower material in Q4, representing substantial growth
over prior periods as Thunderchild achieved run rate harvests.
Yields from the Thunderchild Cultivation Facility fell below
management estimates, with a facility upgrade necessary to further
enhance product quality and contribute to higher yields, to better
meet growing demand for Decibel products. To reinforce the
Company's commitment to quality products, it accelerated the
implementation of the planned infrastructure optimization at its
Thunderchild Cultivation Facility, which are expected to be
completed by end of April.
- Working Capital: Cash used in operations was
$5.1 million in the fourth quarter.
The Company has made significant investments in working capital to
meet the growing demand for Decibel brands and products, helping
the Company achieve its aggressive sales growth and preparing for
strong launches of infused products in the first quarter of 2022.
Additionally, the Company identified certain supply chain risks
related to inventory procurement for packaging and vape carts from
overseas manufacturers. As a result, the Company invested in the
fourth quarter to air freight inventory and hold more inventory
than historical levels to mitigate against these risks.
- Debt Financing in Place to Repay Convertible Debentures:
On February 1, 2022, the Company
closed a debt financing with connectFirst Credit Union in respect
of $54 million of debt capital over a
5-year term. The Company has two facilities that remain
undrawn:
-
- $12 million additional term debt
earmarked for repayment of the Company's convertible debentures;
and
- $7.5 million accordion to support
future growth initiatives, with availability subject to a trailing
twelve month funded debt to EBITDA ratio of less than or equal to
4.00:1.00.
Q1 2022 Preliminary
Results
The Company anticipates for the three-month period ending
March 31, 2022:
- Net revenue between $16.5 and
$17.5 million, compared to
$12.6 million in Q1 2021
- Exiting Q1 2022 with a record 4.0% recreational national market
share
Year End and Quarterly Financial Highlights
|
|
|
|
Three months ended
December 31
|
Year ended
December 31
|
|
|
|
|
2021
|
2020
|
2021
|
2020
|
(thousands of
Canadian dollars)
|
|
|
|
|
Gross wholesale revenue
of flower
|
$5,500
|
$3,856
|
$18,720
|
$12,360
|
Net wholesale revenue
of flower
|
$4,605
|
$3,243
|
$15,804
|
$10,386
|
Kilograms of flower
sold
|
|
808
|
378
|
2,181
|
1,160
|
Average wholesale
flower gross pricing per gram
|
$6.80
|
$10.21
|
$8.58
|
$10.17
|
Average wholesale
flower net pricing per gram
|
$5.70
|
$8.58
|
$7.25
|
$8.47
|
Kilograms of salable
cannabis harvested
|
1,059
|
327
|
2,808
|
1,140
|
|
|
|
|
|
|
|
|
Gross wholesale revenue
of extracts
|
$11,722
|
$6,078
|
$37,270
|
$7,043
|
Net wholesale revenue
of extracts
|
$6,893
|
$4,528
|
$24,747
|
$5,312
|
|
|
|
|
|
|
|
|
Number of retail
stores
|
|
|
6
|
6
|
6
|
6
|
Retail
revenue
|
|
|
|
$2,520
|
$3,654
|
$11,902
|
$14,232
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Gross
revenue
|
|
|
|
$19,742
|
$13,588
|
$67,892
|
$33,635
|
Net revenue
|
|
|
|
$14,018
|
$11,425
|
$52,453
|
$29,930
|
Gross profit before
fair value adjustments
|
$3,689
|
$4,519
|
$17,863
|
$11,683
|
Gross margin
|
26%
|
40%
|
34%
|
39%
|
Adjusted EBITDA
1
|
|
|
$1,450
|
$1,102
|
$7,417
|
$1,527
|
Cash flow from
operations
|
|
($5,133)
|
$1,343
|
($17,160)
|
($4,238)
|
Link to Decibel's Investor Presentation
Decibel's audited financial statements for the year ending
December 31, 2021
("Financial Statements") and related Management's Discussion
& Analysis ("MD&A") for the three and twelve months ending
December 31, 2021, are available
under the Company's profile at www.sedar.com. As of December 31, 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 space which
produces the widely championed, rare cultivar-focused brands Qwest
and Qwest Reserve, which are sold in six provinces across
Canada. Thunderchild Cultivation,
is a licensed and operating 80,000 square foot indoor cultivation
facility in Battleford, SK. 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, 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, 2021. 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.