CALGARY,
AB, May 29, 2023 /CNW/ - Decibel Cannabis
Company Inc. (the "Company" or "Decibel") (TSXV: DB) (OTCQB:
DBCCF), a market leader in premium cannabis and extract
manufactured products, is pleased to announce its interim financial
results for the three month period ending March 31, 2023.
"We've started the year off with another strong quarter that
represents both significant year over year acceleration as well as
sequential growth." said Paul
Wilson, CEO of Decibel. "Our New, Unique and Innovative
products, assortments and formats continue to resonate with both
new and existing customers. This provides ample momentum as we
approach a number of material and additional catalysts this summer,
when we expect to build market share and brand position in
Canada, and in turn continue to
leverage our business internationally".
First Quarter Highlights
- Record National Market Share(1) of 6.7% in Q1
2023 which placed Decibel as the 3rd largest licensed
producer in Canada by market
share.
-
- As of April 2023, Decibel's
market share was 7.1% which placed Decibel as the 2nd
largest licensed producer in Canada by market share.
- Record Net Revenue was $27.1
million in the first quarter of 2023, with sequential growth
of 5% over the prior quarter, despite seasonal weakness, and year
over year growth of 63%. Net revenue improvement was driven by
continued growth in demand for derivative products, expanded
operational capacity, and expanded distribution.
- Gross Margin Before Fair Value Adjustments was 49%
in the first quarter of 2023, compared to 43% in the prior quarter
and 35% in the first quarter of 2022. The increase year over year
was the result of significant cost savings which began in the third
quarter of 2022 from initiatives including operational
efficiencies, automation equipment commissioned, and sourcing of
more cost-effective components related to the manufacturing of
cannabis products.
- Adjusted EBITDA(2) of $6.8 million in the first quarter of 2023, with a
sequential decline of 4% over the prior quarter and year over year
growth of 175%. This marks Decibel's eleventh quarter of
consecutive quarterly positive adjusted EBITDA.
- Record Adjusted Net Income(2) of $3.3
million in the first quarter of 2023, with sequential growth of 87%
over the prior quarter and a year over year improvement of
$5.0 million.
- Record Adjusted Earnings Per Share ("Adjusted
EPS")(3): of $0.01
Adjusted EPS in the first quarter, with a sequential improvement of
$0.01 over the prior quarter and a
year over year improvement of $0.01.
Notes:
|
1 HiFyre Retail Analytics, Licensed
Producer Sales over Time Nationally
|
2 Non-GAAP financial measure. Refer
to "Cautionary Statement Regarding Certain Non-GAAP
Measures" for further details.
|
3 Non-GAAP
ratio. Refer to "Cautionary Statement Regarding Certain Non-GAAP
Measures" for further details.
|
|
Summary Highlights
|
|
|
|
Three months
ended
|
|
|
|
|
March 31
|
|
|
|
2023
|
2022
|
(thousands of
Canadian dollars, except where noted)
|
|
|
|
Gross sales of flower
1, 2
|
|
|
$2,962
|
$5,479
|
Net sales of flower
1, 2
|
|
|
$2,355
|
$4,244
|
|
|
|
|
|
Gross sales of extracts
1, 2
|
|
|
$38,341
|
$16,301
|
Net sales of extracts
1, 2
|
|
|
$23,368
|
$10,347
|
|
|
|
|
|
Number of retail
stores
|
|
|
6
|
6
|
Retail sales
1,2
|
|
|
$1,418
|
$2,059
|
|
|
|
|
|
Total
|
|
|
|
|
Gross
revenue
|
|
|
$42,721
|
$23,839
|
Net revenue
|
|
|
$27,141
|
$16,650
|
Gross profit before
fair value adjustments
|
|
|
$13,366
|
$5,805
|
Gross margin before
fair value adjustments
|
|
|
49 %
|
35 %
|
Adjusted EBITDA
2
|
|
|
$6,765
|
$2,459
|
Net income and
comprehensive income (loss)
|
|
|
($569)
|
($4,372)
|
Adjusted net income
2
|
|
|
$3,349
|
($1,670)
|
Cash flow from
operations 3
|
|
|
$2,315
|
$2,985
|
|
|
|
|
|
Per Share
Metrics
|
|
|
|
|
Income (loss) per
share
|
|
|
-
|
($0.01)
|
Adjusted EPS
2
|
|
|
$0.01
|
-
|
Notes:
|
1 In the
table above, wholesale inventory transferred to the retail stores
and subsequently sold of $668 for the three months, has been
eliminated from retail sales and attributed to wholesale sales of
flower and extracts to provide a more accurate depiction of
business performance.
|
2 Non-GAAP
financial measure. Refer to "Cautionary Statement Regarding Certain
Non-GAAP Measures" for further details.
|
3 Refer to
"Cash Flows" for further details.
|
Link to Decibel's Investor Presentation
Decibel's interim financial statements for the three month
period ending March 31, 2023
("Financial Statements") and related Management's Discussion
& Analysis for three month periods ending March 31, 2023, are available under the Company's
profile at www.sedar.com.
As of March 31, 2023, Decibel was
in compliance with all of its financial covenants under its credit
facilities and expects to remain in compliance for the remainder of
its twelve-month forecast period.
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,
Saskatchewan. The Plant, Decibel's extraction facility, in
Calgary, Alberta, 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 press release contains certain financial performance
measures that are not recognized or defined under IFRS (termed
"Non-GAAP Measures"). As a result, this data may not be
comparable to data presented by other licensed producers and
cannabis companies. For an explanation of these measures to related
comparable financial information presented in the Financial
Statements prepared in accordance with IFRS, refer to the
discussion below. The Company believes that these Non-GAAP Measures
are useful indicators of operating performance and are specifically
used by management to assess the financial and operational
performance of the Company. Accordingly, these Non-GAAP Measures
are 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.
Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP financial measure that is
calculated 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. This non-GAAP financial measure 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.
|
|
|
|
Three months
ended
|
|
|
|
|
March 31
|
|
|
|
2023
|
2022
|
(thousands of
Canadian dollars)
|
|
|
|
|
Net income
(loss)
|
|
|
(569)
|
(4,372)
|
Unrealized loss on
changes in fair value of biological
assets (gain)
|
|
|
(3,954)
|
(3,250)
|
Change in fair value of
biological assets realized
through inventory sold
|
|
|
7,872
|
5,952
|
Depreciation and
amortization
|
|
|
1,216
|
796
|
Share-based
compensation
|
|
|
398
|
1,231
|
Other loss
(income)
|
|
|
(68)
|
(5)
|
Transaction
costs
|
|
|
-
|
11
|
Finance
costs
|
|
|
697
|
1,019
|
Foreign exchange loss
(gain)
|
|
|
111
|
(35)
|
Loss on disposal of
property, plant, and equipment
(gain)
|
|
|
-
|
-
|
Non-cash cost of goods
sold
|
|
|
1,062
|
653
|
Other
adjustments
|
|
|
-
|
459
|
Adjusted
EBITDA
|
|
|
6,765
|
2,459
|
|
|
|
|
|
Adjusted Net Income is a non-GAAP financial measure that is
calculated as net loss and comprehensive loss excluding unrealized
gain on changes in fair value of biological assets and change in
fair value of biological assets realized through inventory sold.
Adjusted EPS is a non-GAAP financial measure that is calculated as
net loss and comprehensive loss excluding unrealized gain on
changes in fair value of biological assets and change in fair value
of biological assets realized through inventory sold, divided by
the weighted average common shares outstanding. This non-GAAP
financial 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.
|
|
|
|
Three months
ended
|
|
|
|
|
March 31
|
|
|
|
2023
|
2022
|
(thousands of
Canadian dollars)
|
|
|
|
|
Net income and
comprehensive income (loss)
|
|
|
(569)
|
(4,372)
|
Unrealized gain on
changes in fair value of biological
assets
|
|
|
(3,954)
|
(3,250)
|
Change in fair value of
biological assets realized
through inventory sold
|
|
|
7,872
|
5,952
|
Adjusted net income
(loss)
|
|
|
3,349
|
(1,670)
|
Weighted average number
of shares outstanding
|
|
|
406,754
|
404,054
|
Adjusted
EPS
|
|
|
$0.01
|
-
|
|
|
|
|
|
Supplementary Financial Measures
Retail Sales is a supplementary financial measure that is
intended to provide a more accurate depiction of the revenue earned
by the Company's retail operations. Inventory transferred directly
from the Company's wholesale operations to the Company's retail
operations is removed from Retail Revenue as presented in the
Company's Financial Statements.
Gross Sales of Flower is a supplementary financial measure
intended to provide a more accurate depiction of gross revenue
earned by the Company's wholesale flower operations. Inventory
transferred directly from the Company's wholesale flower operations
to the Company's retail operations is added to Gross Wholesale
Revenue of Flower as found in the Company's Financial Statements to
arrive at Gross Sales of Flower.
Net Sales of Flower is a supplementary financial measure
intended to provide a more accurate depiction of net revenue earned
by the Company's wholesale flower operations. Excise taxes
associated with flower sales are subtracted from Gross Sales of
Flower to arrive at Net Sales of Flower.
Gross Sales of Extracts is a supplementary financial measure
intended to provide a more accurate depiction of gross revenue
earned by the Company's wholesale extracts operations. Inventory
transferred directly from the Company's wholesale extracts
operations to the Company's retail operations is added to Gross
Wholesale Revenue of Extracts as found in the Company's Financial
Statements to arrive at Gross Sales of Extracts.
Net Sales of Extracts is a supplementary financial measure
intended to provide a more accurate depiction of net revenue earned
by the Company's wholesale extracts operations. Excise taxes
associated with extracts sales are subtracted from Gross Sales of
Extracts to arrive at Net Sales of Extracts.
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: that the Company has strong momentum heading
into 2023; expectations that demand for Decibel's products will
grow; the Company's ability to meet consumer demand; Decibel's
expectations that it will build its position in Canada and turn leverage into international
opportunities; anticipated growth in Decibel's net revenue, growth
in demand for Decibel's products, and improvements made to
Decibel's operational capacity in the first quarter of 2023;
anticipated future volatility in gross margin related to price
competition; Decibel's targeted gross margin; Decibel's
expectations that it will remain in compliance with its financial
covenants for the remainder of its twelve-month forecast period;
and 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. 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.
Forward-looking statements and FOFI (as defined herein) 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, 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; timing and completion of construction and
expansion of the Company's production facilities and retail
locations; the risk that the Company may not be able to meet
consumer demand; the risk that the Company may not improve its
operational capacity when anticipated, or at all; the risk that
Decibel may not remain in compliance with its financial covenants
for the remainder of its twelve-month forecast period; and the
delay or failure to receive board, regulatory or other approvals,
including any approvals of the TSX Venture Exchange, as
applicable.
With respect to forward-looking statements and FOFI contained
in this press release, Decibel has made assumptions regarding, but
not limited to: growth of the brand and recognition in Canada will lead to growth internationally;
demand for Decibel's products; Decibel's ability to realize
operational efficiencies and effect certain cost saving measures
(including in the impact thereof); Decibel's ability to enter new
markets and industry verticals; Decibel's ability to attract,
develop and retain key personnel; Decibel's ability to raise
additional capital and to execute on its expansion plans; the
timelines for new product launches, Decibel's ability to continue
investing in infrastructure and implement scalable controls,
systems and processes to support its growth; the impact of
competition; the changes and trends in Decibel's industry or the
global economy; the Company's ability to generate sufficient cash
flow from operations and obtain financing, if needed, on acceptable
terms or at all; the general economic, financial market, regulatory
and political conditions in which the Company operates; the ability
of the Company to ship its products and maintain supply chain
stability; consumer interest in the Company's products; anticipated
and unanticipated costs; government regulation of the Company's
activities and products; the timely receipt of any required
regulatory approvals; the Company's ability to conduct operations
in a safe, efficient and effective manner; the Company's
construction plans and timeframe for completion of such plans; and
the changes in laws, rules, regulations, and global
standards.
Any financial outlook or future oriented financial
information (in each case "FOFI") contained in this news release
regarding prospective financial position, including, but not
limited to: anticipated future volatility in gross margin;
Decibel's targeted gross margin; and Decibel's expectations
that it will remain in compliance with its financial covenants for
the remainder of its twelve-month forecast period, is based on
reasonable assumptions about future events, including those
described above, based on an assessment by management of the
relevant information that is currently available. The actual
results will likely vary from the amounts set forth herein and such
variations may be material.
Readers are cautioned that the foregoing list of assumptions
and risk factors is not exhaustive. The forward-looking statements
and FOFI contained herein are expressly qualified in their entirety
by this cautionary statement. The forward-looking statements and
FOFI included in this news release are made as of the date hereof
and Decibel does not undertake any obligation to publicly update
such forward-looking statements and FOFI to reflect new
information, subsequent events or otherwise unless so required by
applicable securities laws.
Market, Independent Third Party and Industry
Data
Certain market, independent third party and industry data
contained in this news release is based upon information from
government or other independent industry publications and reports
or based on estimates derived from such publications and reports.
Government and industry publications and reports generally indicate
that they have obtained their information from sources believed to
be reliable, but Decibel has not conducted its own independent
verification of such information. This news release also includes
certain data derived from independent third parties. While Decibel
believes this data to be reliable, market and industry data is
subject to variations and cannot be verified with complete
certainty due to limits on the availability and reliability of raw
data, the voluntary nature of the data gathering process and other
limitations and uncertainties inherent in any statistical survey.
Decibel has not independently verified any of the data from
independent third party sources referred to in this news release or
ascertained the underlying assumptions relied upon by such
sources.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/decibel-announces-first-quarter-results-with-record-27-1-million-of-net-revenue-6-8-million-of-adjusted-ebitda-and-0-01-of-adjusted-eps-301836331.html
SOURCE Decibel Cannabis Company Inc.