Decibel Announces Year End and Fourth Quarter Results with Record Fourth Quarter $25.8 Million Net Revenue and $7.1 Million Adjusted EBITDA
CALGARY, AB, April 24, 2023 /PRNewswire/ – 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 audited financial results for the three and twelve month periods ending December 31, 2022.
Our fourth quarter results capped off a year of strong financial performance with record results including market share, net revenue, adjusted EBITDA, and adjusted net income. This creates momentum heading into 2023 with demand continuing to grow and assets well positioned to deliver on this demand.
Paul Wilson, CEO of Decibel
We have a number of 2023 catalysts that support an outlook where Decibel continues to build its market share and brand position in Canada and in turn leverage into international opportunities.
Fiscal Year 2022 Financial Highlights
- Record Net Revenue of $79.3 million in 2022, an increase of 51% over 2021.
- Record Adjusted EBITDA(1) of $17.0 million in 2022, an increase of 129% over 2021.
- Record Adjusted Net Income(1) of $3.1 million in 2022, an increase of $11.7 million over 2021.
- Record Adjusted Earnings per Share(2) of $0.01, an increase of $0.03 over 2021.
- First branded product sale to Israel as Decibel begins to expand internationally.
Notes:
1Non-GAAP financial measure. Refer to “Cautionary Statement Regarding Certain Non-GAAP Measures” for further details.
2Non-GAAP ratio. Refer to “Cautionary Statement Regarding Certain Non-GAAP Measures” for further details.
Fourth Quarter Highlights
- Record National Market Share(1) of 6.0% in Q4 2022 and 6.6% in December 2022 which placed Decibel as the 4th and 3rd largest licensed producer in Canada by market share for the respective periods.
- Fastest growing large licensed producer in 2022
- As of March 2023, Decibel’s market share was 6.8% which placed Decibel as the 2nd largest licensed producer in Canada by market share.
- The Company’s preliminary results indicate sequential net revenue growth in the first quarter of 2023, driven by continued growth in demand and further improvements to operational capacity to meet demand.
- Record Net Revenue was $25.8 million in the fourth quarter of 2022, with strong sequential growth of 41% over the prior quarter and year over year growth of 84%. The net revenue growth was driven by increased demand for the Company’s derivative products and the Company’s first two sales of branded dried flower product in Israel. Net revenue growth year over year was driven by expanded distribution, new infused products and continued growth in demand for derivative products.
- Gross Margin Before Fair Value Adjustments was 43% in the fourth quarter of 2022, compared to 52% in the prior quarter and 26% in the fourth quarter of 2021. The fourth quarter was partially impacted by a provision and write off of cultivation and extraction inventory of approximately $3.2 million. The increase year over year was a result of significant cost savings realized 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. The Company anticipates that there may be future volatility in its gross margin related to price competition and continues to target the upper end of its previously stated target of 40 – 45% gross margin.
- Record Adjusted EBITDA(2) of $7.1 million in the fourth quarter of 2022, with strong sequential growth of 66% over the prior quarter and year over year growth of 387% over the fourth quarter of 2021. This marks Decibel’s tenth quarter of consecutive quarterly positive adjusted EBITDA.
- Adjusted Net Income(2) of $1.8 million in the fourth quarter of 2022, with a sequential decline of 40% over the prior quarter and a year over year improvement of $5.6 million over the fourth quarter of 2021. The fourth quarter was partially impacted by a write off of cultivation and extraction inventory of approximately $3.2 million. This marks Decibel’s third quarter of positive adjusted net income.
- Leverage: At the end of the fourth quarter of 2022, Decibel had a funded debt to trailing twelve month EBITDA of 2.57x and a funded debt to annualized EBITDA of 1.55x.
Notes:
1 HiFyre Retail Analytics, Licensed Producer Sales over Time Nationally, October 1, 2022 – March 31, 2023.
2 Non-GAAP financial measure. Refer to “Cautionary Statement Regarding Certain Non-GAAP Measures” for further details.
Operating Highlights
New Unique and Innovative Products
The Company launched a total of 13 new products in various provinces in the fourth quarter of 2022, including
- 5 General Admission SKU’s in vape and infused pre-rolls in distillate and live resin formats; and
- 8 Qwest SKU’s in dried flower, standard pre-rolls, and infused pre-rolls formats.
Summary Highlights
Link to Decibel’s Investor Presentation
Decibel’s audited financial statements for the year ending December 31, 2022 (“Financial Statements”) and related three and twelve month periods ending December 31, 2022 Management’s Discussion & Analysis (“MD&A”), are available under the Company’s profile at www.sedar.com. As of December 31, 2022, 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.
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.
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.
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 Earnings per Share 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.
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.
The Company’s expectations for its Q1 2023 results, including net revenue growth in the quarter, are based on, among other things, the Company’s anticipated financial results for the three month period ended March 31, 2023. The Company‘s anticipated financial results are unaudited and preliminary estimates that: (i) represent the most current information available to management as of the date of hereof; (ii) are subject to completion of interim review procedures that could result in significant changes to the estimated amounts; and (iii) do not present all information necessary for an understanding of the Company’s financial condition as of, and the Company’s results of operations for, such periods. The anticipated financial results are subject to the same limitations and risks as discussed under “Forward Looking Statements” above. Accordingly, the Company’s anticipated financial results for such periods may change upon the completion and approval of the financial statements for such periods and the changes could be material.
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.
