Most profitable pure play public
cannabis company in Canada1,2
CALGARY,
AB, Aug. 17, 2023 /CNW/ - Decibel
Cannabis Company Inc. (the "Company" or "Decibel") (TSX-V: DB)
(OTCQB: DBCCF), a market leader in premium cannabis and extract
manufactured products, is pleased to announce its interim financial
results for the three and six month periods ending June 30, 2023.
"Our strong second quarter sequential net revenue growth,
driven by demand for our core products and international exports,
continues to exceed our publicly-stated targets." said Paul Wilson, CEO of Decibel. "We continue to
highlight the success in our new, unique and innovative product
strategy, demonstrated through clear consumer preference to our
infused pre-roll strategy. In 2023, our industry leading brand,
General Admission, has grown category share to 49%3 (+6%
YTD3) in light of significant category competition
through new competitive brands: +50 Brands3 (+56%
YTD3) & New SKU's: +156 SKU's3 (+62%
YTD3). Currently the infused pre-roll segment makes up
~34% of the Canadian pre-roll category3, in established
US markets it makes up ~60% (California & Arizona YTD Sales
'233). We continue to see tailwinds for our core
business that will further reinforce our Canadian market position
and international presence."
Second Quarter Highlights
- Record National Market
Share(4) of 7.5%
in Q2 2023 which placed Decibel as the 2nd largest
licensed producer in Canada by
market share.
-
- As of July 2023, Decibel's
market share was 7.6% which placed Decibel as the 2nd
largest licensed producer in Canada by market share.
- Record Net Revenue of $30.9 million in the second quarter of 2023, with
sequential growth of 14% over the prior quarter, and year over year
growth of 66%. Net revenue improvement was driven by net Canadian
recreational sales through growth in demand for vapes and infused
products, increased manufacturing capacity, international sales,
and the launch of the Company's new brand Vox and General Admission
Edibles near the end of the quarter.
- Gross Margin Before Fair Value Adjustments
was 42% in the second quarter of 2023, compared to 49%
in the prior quarter and 41% in the first quarter of 2022. The
second quarter was impacted by a $754
thousand write off of aged product and increased temporary
labour of $0.9 million to meet market
demand as the Company is in the process of expanding manufacturing
capacity.
- Record Adjusted
EBITDA(2) of $7.3
million in the second quarter of 2023, with sequential growth of 8%
over the prior quarter and year over year growth of
126%.
- Positive Free Cash
Flow(2) of $0.5
million in the second quarter of 2023, with sequential decline of
75% over the prior quarter and a year over year decline of 51%.
During the quarter, the Company reduced accounts payable by
$4.2 from the prior quarter, which
negatively impacted Free Cash Flow.
- Record Adjusted Net
Income(2) of $4.3
million in the second quarter of 2023, with sequential growth of
27% over the prior quarter and a year over year improvement of
$4.2 million.
- Adjusted Earnings Per Share
("Adjusted EPS")(5): of $0.01 Adjusted EPS in the second quarter,
consistent with the prior quarter and a year over year improvement
of $0.01.
Year to Date Highlights
- Net Revenue of $58.0
million, an increase of 65% over 2022.
- Adjusted EBITDA(2) of $14.1 million, an increase of 147% over
2022.
- Positive Free Cash Flow(2) of $2.3 million, a decrease of 14% over 2022 driven
by a $3.7 million reduction in
accounts payable.
- Adjusted EPS(4) of $0.02, an increase of $0.02 over 2022.
Notes:
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1
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Based on reported
"Adjusted EBITDA"2 for the interim period ended June 30,
2023, as set forth in publicly available filings on SEDAR+ of pure
play Canadian cannabis companies listed on the Toronto Stock
Exchange or the TSX Venture Exchange. See "Cautionary Statements
- Notes about Comparables".
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2
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Non-GAAP financial
measure. Refer to "Cautionary Statements - Non-GAAP
Measures" for further details.
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3
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Data provided by
Headset.
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4
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HiFyre Retail
Analytics, Licensed Producer Sales over Time Nationally.
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5
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Non-GAAP ratio. Refer
to "Cautionary Statements - Non-GAAP Measures" for further
details.
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Summary
Highlights1
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Three months
ended
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Six months
ended
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June 30
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June 30
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2023
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2022
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2023
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2022
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(thousands of Canadian
dollars, except where noted)
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Gross Canadian
recreational sales 1,2
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$46 715
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$24 105
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$87 275
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$45 885
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Net Canadian
recreational sales 1,2
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$28 148
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$16 409
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$53 128
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$31 000
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International sales
2
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$1 136
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-
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$1 766
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-
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Retail sales
1,2
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$1 610
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$2 147
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$3 141
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$4 206
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Number of retail
stores
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6
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6
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6
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6
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Total
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Gross
revenue
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$49 461
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$26 252
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$92 182
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$50 091
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Net revenue
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$30 894
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$18 556
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$58 035
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$35 206
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Gross profit before
fair value adjustments
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$13 062
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$7 689
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$26 428
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$13 494
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Gross margin before
fair value adjustments
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42 %
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41 %
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46 %
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38 %
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Adjusted EBITDA
3
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$7 302
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$3 230
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$14 066
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$5 689
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Net (loss) and
comprehensive (loss)
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($423)
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($2 112)
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($992)
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($6 484)
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Adjusted net income
3
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$4 263
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$89
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$7 611
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($1 581)
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Cash flow from
operations
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$922
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$1 777
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$3 237
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$4 761
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Free cash flow
3
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$458
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$939
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$2 287
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$2 664
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Per Share
Metrics
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Income (loss) per
share
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-
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($0,01)
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-
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($0,02)
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Adjusted EPS
4
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$0,01
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-
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$0,02
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-
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1
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In the table above,
wholesale inventory transferred to the retail stores and
subsequently sold of $721 thousand and $1.4 million for the three
and six month periods, has been eliminated from retail sales and
attributed to Gross Canadian recreational sales and Net Canadian
recreational sales to provide a more accurate depiction of business
performance.
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2
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Supplementary financial
measure. Refer to "Cautionary Statements - Non-GAAP Measures" for
further details.
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3
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Non-GAAP financial
measure. Refer to "Cautionary Statements - Non-GAAP Measures" for
further details.
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4
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Non-GAAP ratio. Refer
to "Cautionary Statements - Non-GAAP Measures" for further
details.
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Link to Decibel's Investor Presentation
Decibel's interim financial statements for the three and
six month periods ending June 30,
2023 ("Financial Statements") and related Management's
Discussion & Analysis for three and six month periods ending
June 30, 2023, are available under
the Company's profile at
www.sedar.com.
As of June 30, 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 a consumer-focused cannabis company focused on
delivering products that delight customers through a commitment to
robust innovation and product quality. Leading brands General
Admission, Qwest, and Vox are among its portfolio sold both across
Canada and beginning to extend
towards new countries to create a global footprint. Decibel
operates a processing and manufacturing facility in Calgary, Alberta, and two cultivation
facilities in Creston, British
Columbia, and Battleford,
Saskatchewan.
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.
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Adjusted
EBITDA
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Three months
ended
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Six months
ended
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June 30
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June 30
|
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2023
|
2022
|
2023
|
2022
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(thousands of Canadian
dollars)
|
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Net income
(loss)
|
(423)
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(2 112)
|
(992)
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(6 484)
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Unrealized loss on
changes in fair value of biological assets (gain)
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(471)
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(4 181)
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(4 425)
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(7 431)
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Change in fair value of
biological assets realized through inventory sold
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5 157
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6 382
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13 028
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12 334
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Depreciation and
amortization
|
468
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1 022
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1 684
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1 819
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Share-based
compensation
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173
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862
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571
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2 093
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Other
(income)
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(50)
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(46)
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(117)
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(53)
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Transaction
costs
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-
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(1)
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-
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10
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Finance
costs
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742
|
808
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1 439
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1 828
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Foreign exchange
loss
|
134
|
152
|
244
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117
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Non-cash cost of goods
sold
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1 572
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255
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2 634
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908
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Other
adjustments
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-
|
89
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-
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548
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Adjusted
EBITDA
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7 302
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3 230
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14 066
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5 689
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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 ratio 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. These
measures intended to provide a proxy for the Company's net income
and comprehensive income and is used to compare Decibel to its
competitors and derive expectations of future financial performance
of the Company and 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.2
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Adjusted EPS
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Three months
ended
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Six months
ended
|
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|
June 30
|
|
June 30
|
|
|
2023
|
2022
|
2023
|
2022
|
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(thousands of Canadian
dollars)
|
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|
|
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Net (loss) and
comprehensive (loss)
|
(423)
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(2 112)
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(992)
|
(6 484)
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Unrealized gain on
changes in fair value of biological assets
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(471)
|
(4 181)
|
(4 425)
|
(7 431)
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Change in fair value of
biological assets realized through inventory sold
|
5 157
|
6 382
|
13 028
|
12 334
|
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Adjusted net income
(loss)
|
4 263
|
89
|
7 611
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(1 581)
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Weighted average number
of shares outstanding
|
408 984 777
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404 054 387
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408 984 777
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404 053 519
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Adjusted EPS
|
$0,01
|
-
|
$0,02
|
-
|
|
|
|
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Free Cash Flow is a non-GAAP financial measure that is
calculated as cash flow from operations less cash used in investing
activities. 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.
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Free cash
flow
|
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|
|
|
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Three months
ended
|
|
Six months
ended
|
|
|
|
June 30
|
|
June 30
|
|
|
2023
|
2022
|
2023
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2022
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(thousands of Canadian
dollars)
|
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Cash provided by
operating activities (used in)
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922
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1 777
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3 237
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4 761
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Cash provided by
investing activities (used in)
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(464)
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(838)
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(950)
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(2 097)
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Free cash
flow
|
458
|
939
|
2 287
|
2 664
|
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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 Financial Statements.
International Sales is a supplementary financial
measure intended to provide a more accurate depiction of
international sales earned by the Company's wholesale
operations.
Gross Canadian Recreational Sales is a supplementary
financial measure intended to provide a more accurate depiction of
gross revenue earned by the Company's wholesale operations.
Inventory transferred directly from the Company's wholesale
operations to the Company's retail operations is added to Gross
Canadian Recreational Sales as found in the Financial Statements to
arrive at Gross Canadian Recreational Sales.
Net Canadian Recreational Sales is a supplementary
financial measure intended to provide a more accurate depiction of
net revenue earned by the Company's wholesale operations. Inventory
transferred directly from the Company's wholesale operations to the
Company's retail operations is added to Net Canadian Recreational
Sales as found in the Financial Statements to arrive at Net
Canadian Recreational Sales.
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 expectations for continued growth and
momentum in the second half of 2023, the Company's expectations for
additional catalysts late summer and early fall and the timing and
results of the same; the Company's expectation that it will remain
in compliance with all of its financial
covenants under its credit facilities for the remainder of its
twelve-month forecast period 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; 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 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 revenue growth 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.
Notes About Comparables
This news release outline's the Company's performance
relative to third-party issuer metrics (the "Comparables").
The Comparables were considered to be an appropriate basis for
comparison with Decibel as they are publicly provided by similar
pure play issuers. The information relating to the Comparables has
been obtained or derived from public sources, see "Market,
Independent Third Party and Industry Data". Comparables may be
affected by, among other things, the size of the business, capital
structure, principal market served, historical performance and
growth expectations, which can vary significantly among Decibel and
the issuers providing the Comparables. In addition certain
Comparables may be calculated differently by other issuers, see
"Non-GAAP Measures". Accordingly, an investment decision should not
be made in reliance on the Comparables.
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.
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SOURCE Decibel Cannabis Company Inc.