CALGARY,
AB, April 24, 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 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", said
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:
|
1 Non-GAAP financial measure. Refer
to "Cautionary Statement Regarding Certain Non-GAAP
Measures" for further details.
|
2 Non-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
|
|
Three months
ended
|
|
Year ended
|
|
|
December 31
|
|
December 31
|
|
2022
|
2021
|
2022
|
2021
|
(thousands of
Canadian dollars, except where noted)
|
|
|
|
Gross sales of flower
1, 2
|
$4,659
|
$5,500
|
$17,385
|
$18,720
|
Net sales of flower
1, 2
|
$3,414
|
$4,605
|
$13,373
|
$15,804
|
|
|
|
|
|
Gross sales of extracts
1, 2
|
$33,374
|
$11,722
|
$92,695
|
$37,270
|
Net sales of extracts
1, 2
|
$20,065
|
$6,893
|
$57,079
|
$24,747
|
|
|
|
|
|
Number of retail
stores
|
6
|
6
|
6
|
6
|
Retail sales
1,2
|
$2,318
|
$2,520
|
$8,874
|
$11,902
|
|
|
|
|
|
Total
|
|
|
|
|
Gross
revenue
|
$40,351
|
$19,742
|
$118,954
|
$67,892
|
Net revenue
|
$25,797
|
$14,018
|
$79,326
|
$52,453
|
Gross profit before
fair value adjustments
|
$11,082
|
$3,689
|
$34,026
|
$17,863
|
Gross margin before
fair value adjustments
|
43 %
|
26 %
|
43 %
|
34 %
|
Adjusted EBITDA
2
|
$7,061
|
$1,450
|
$17,010
|
$7,417
|
Net income and
comprehensive income (loss)
|
($3,147)
|
$654
|
($4,462)
|
$1,743
|
Adjusted net income
2
|
$1,788
|
($3,809)
|
$3,134
|
($8,567)
|
Cash flow from
operations 3
|
($114)
|
($5,119)
|
$8,258
|
($17,160)
|
|
|
|
|
|
Per Share
Metrics
|
|
|
|
|
Income (loss) per
share
|
($0.01)
|
-
|
($0.01)
|
$0.01
|
Adjusted earnings per
share 2
|
-
|
($0.01)
|
$0.01
|
($0.02)
|
Notes:
|
1In the
table above, wholesale inventory transferred to the retail stores
and subsequently sold of $39 and $501 for the three and twelve
months, respectively, have been eliminated from retail sales and
attributed to wholesale sales of flower and extracts to provide a
more accurate depiction of business performance.
|
2Supplementary financial measure. Refer to
"Cautionary Statement Regarding Certain Non-GAAP Measures"
for further details.
|
3Refer to
"Cash Flows" in the MD&A (as defined herein) for further
details.
|
4Non-GAAP
financial measure. Refer to "Cautionary Statement Regarding
Certain Non-GAAP Measures" for further details.
|
5Non-GAAP
ratio. Refer to "Cautionary Statement Regarding Certain Non-GAAP
Measures" for further details.
|
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.
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
|
|
Year ended
|
|
|
December 31
|
|
December 31
|
|
2022
|
2021
|
2022
|
2021
|
(thousands of
Canadian dollars)
|
|
|
|
|
Net income
(loss)
|
(3,147)
|
654
|
(4,462)
|
1,743
|
Unrealized loss on
changes in fair value of biological
assets (gain)
|
(5,550)
|
(9,660)
|
(18,406)
|
(25,199)
|
Change in fair value of
biological assets realized
through inventory sold
|
10,485
|
5,197
|
26,002
|
14,889
|
Depreciation and
amortization
|
955
|
967
|
3,669
|
3,737
|
Share-based
compensation
|
459
|
806
|
1,814
|
2,426
|
Other loss
(income)
|
(35)
|
(32)
|
(150)
|
(66)
|
Transaction
costs
|
-
|
-
|
10
|
-
|
Finance
costs
|
694
|
1,046
|
3,158
|
4,090
|
Foreign exchange loss
(gain)
|
433
|
34
|
649
|
167
|
Loss on disposal of
property, plant, and equipment
(gain)
|
-
|
-
|
81
|
34
|
Non-cash cost of goods
sold 1
|
2,721
|
1,260
|
4,005
|
1,996
|
Other adjustments
2
|
46
|
807
|
640
|
1,152
|
Other non-cash costs
3
|
-
|
371
|
-
|
2,448
|
Adjusted EBITDA
4
|
7,061
|
1,450
|
17,010
|
7,417
|
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.
|
|
Three months
ended
|
|
Year ended
|
|
|
December 31
|
|
December 31
|
|
2022
|
2021
|
2022
|
2021
|
(thousands of
Canadian dollars)
|
|
|
|
|
Net income and
comprehensive income (loss)
|
(3,147)
|
654
|
(4,462)
|
1,743
|
Unrealized gain on
changes in fair value of biological
assets
|
(5,550)
|
(9,660)
|
(18,406)
|
(25,199)
|
Change in fair value of
biological assets realized
through inventory sold
|
10,485
|
5,197
|
26,002
|
14,889
|
Adjusted net income
(loss) 1
|
1,788
|
(3,809)
|
3,134
|
(8,567)
|
Weighted average number
of shares outstanding
|
404,154
|
403,909
|
404,154
|
365,778
|
Adjusted net income
(loss) per share 1
|
-
|
($0.01)
|
$0.01
|
($0.02)
|
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.
Preliminary Financial
Information
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.
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.