CALGARY,
AB, July 13, 2022 /CNW/ - Decibel Cannabis
Company Inc. (the "Company" or "Decibel") (TSX-V: DB) (OTCQB:
DBCCF), a premium cannabis producer, is pleased to provide a
preliminary outlook for net revenue and Adjusted
EBITDA1 for the second quarter, ending June 31, 2022.
"In the second quarter Decibel continued to match and exceed
revenue projections, and significantly exceed EBITDA projections.
Performance was driven by exceptional continued growth in demand
for our popular brands and new products. This, coupled with
prioritizing certain key capital initiatives, generated gross
margin and EBITDA significantly beyond our forecast," said
Paul Wilson, CEO of Decibel. "We
expect revenue in the quarter to be in the $18.5 - $19.5 range
and corresponding Adjusted EBITDA in the $3.0 - $3.5M range.
Margins and profitability expanded with our automation,
infrastructure and cost engineering improvements coming online
earlier than planned. These improvements have been in the pipeline
and impacted the end of Q2, with the full impact unfolding in the
third and fourth quarter. The impact of these projects appears to
be well beyond our projections for gross margin expansion."
Q2 2022 Outlook
- Demonstrated positive cash flow from operations in first two
quarters of 2022
- Anticipated Adjusted EBITDA of $3.0 to $3.5
million ($2.5 million Q1
2022)
-
- Resulting primarily from strong net revenue growth and margin
expansion outpacing SG&A.
- Eighth consecutive quarter of positive Adjusted EBITDA.
- Anticipated Net Revenue of $18.5
to $19.5 million
-
- Implies year over year growth of 49% to 57% compared to Q2
2021
- Driven by strong demand growth in all categories led by newly
launched infused products and vape cartridges. Additionally,
Decibel saw demand growth for its Qwest flower products.
- Canadian cannabis market continued to grow at a rate of 22% in
for the first half of 2022 compared to the first half of 2021.
- Decibel market share grew at a rate of 41% in the first half of
2022.
- Decibel posts another record market share month in June at
4.4%.
- Anticipating significant ongoing gross margin and profitability
increases
- Significant amount of cost engineering and automation
infrastructure investments realized in late Q2 and early Q3, with
potential for Decibel to exceed previously stated targeted gross
margin of 40 – 45%.
The Company will release its second quarter financial results
and related management discussion and analysis for the period ended
June 30, 2022, on August 18, 2022, before markets open.
1 Adjusted
EBITDA is not a standardized financial measure under IFRS and might
not be comparable to similar financial measures disclosed by other
issuers.
|
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 Company's
MD&A for the three and twelve months ended March 31, 2022. 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, anticipated gross margin, revenue for
Q2 in the $18.5 - $19.5 range and corresponding EBITDA in the
$3.0 - $3.5M range; cash flow from operations;
strong net revenue growth and margin expansion outpacing
SG&A; the expectation that the full impact of certain
improvements will be realized in the third and fourth quarter of
2022 and that such projects will be well beyond the Company's
projections for gross margin expansion; anticipated significant
gross margin and profitability increases; the anticipated release
date of the Company's second quarter financials; 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. 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, 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; the risk that the Company may
not remain in compliance with all of its financial covenants;
general business, economic, competitive, political and social
uncertainties; 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. Many of these risks and uncertainties and additional
risk factors are described in the Company's Annual Information Form
for the year ended December 31, 2020
and Management's Discussion and Analysis for the year ended
December 31, 2021, which are
available at www.sedar.com. 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.
[NTD: Decibel to confirm assumptions] With respect to
forward-looking statements and FOFI contained in this press
release, Decibel has made assumptions regarding, but not limited
to: 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
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 gross margin, revenue for Q2 in the
$18.5- $19.5 range and corresponding adjusted EBITDA in
the $3.0 - $3.5M range; the expectation that the full impact
of certain improvements will be realized in the third and fourth
quarter of 2022 and that such projects will be well beyond the
Company's projections for gross margin expansion; anticipated
significant gross margin and profitability increases, 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.
PRELIMINARY FINANCIAL
INFORMATION
The Company's expectations for its gross margin, cash flow from
operations, net revenue and adjusted EBITDA (see "Non-GAAP
Measures") are based on, among other things, the Company's
anticipated financial results for the three and six month period
ended June 30, 2022. 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.
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SOURCE Decibel Cannabis Company Inc.