Decibel Announces Year End and Fourth Quarter Results
CALGARY, ALBERTA – April 29, 2024 –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 audited financial results for the three and twelve month periods ending December 31, 2023.
“The Company’s fourth quarter financial results delivered another year of growth across all metrics and I look forward to working with the team to continue to build on this success” said Benjamin Sze, Decibel’s new Chief Executive Officer.
Fiscal Year 2023 Financial Highlights
- Record Net Revenue of $116 million in 2023, an increase of 46% over 2022.
- Record Adjusted EBITDA(1) of $25.9 million in 202
23, an increase of 52% over 2022. - Record Adjusted Net Income(1) of $8.0 million in 202
23, an increase of $4.9 million over 2022.
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 Net Revenue was $27.7 million in the fourth quarter of 2023, with year over year growth of 8%. The net revenue growth was driven by increased demand for the Company’s derivative products.
- Gross Margin Before Fair Value Adjustments was45% in the fourth quarter of 2023, compared to 43% in the fourth quarter of 2022. The increase partially reflects operational investments that partially impacted the quarter, including expansion of the Company’s manufacturing capacity.
- Adjusted EBITDA(1) of$5.1 million in the fourth quarter of 2023, with a year over year decline of 27% over the fourth quarter of 2022. The decrease in Adjusted EBITDA was primarily driven by an increase in SG&A relating to increased sales and marketing spend and the launch of the Blinker proprietary vape system of $638 thousand.
- Adjusted Net Income(1) of negative$132 thousand in the fourth quarter of 2023, with a decline of $1.9 million over the fourth quarter of 2022. Adjusted Net Income was negatively impacted by $1.8 million of bad debt expense and $638 thousand for launch costs of Blinker, the Company’s proprietary new closed loop vape system.
- Leverage: At the end of the fourth quarter of 2023, Decibel had a funded debt to trailing twelve month EBITDA(2) of 1.58x.
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.
Operating Highlights
International Developments
Subsequent to year end, the Company achieved the following developments internationally:
- completed its craft cannabis first export to Australia in March 2024;
- received its first purchase order for vapes to export to Australia;
- signed a supply agreement with a new Israel counterparty contemplating an annual commitment of 1,000 kilograms of craft cannabis; and
- an Israeli customer defaulted on its payments required under the cannabis supply agreement with the Company, leading the Company to provision $1.6 million of such receivable. The Company took formal legal action to collect the receivable, and the Israeli company subsequently filed an insolvency motion. Decibel joined these proceedings and formally filed its claim with the trustee. The Company believes there is 300kg of inventory related to this provisioned receivable that is currently accessible, and that a portion of the receivable may be recoverable through a resale agreement of this inventory with the trustee and another Israeli company.
Summary Highlights
1 In the table above, wholesale inventory transferred to the retail stores and subsequently sold of $1.0 and $3.2 million 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.
2 Supplementary financial measure. Refer to “Cautionary Statement Regarding Certain Non-GAAP Measures” for further details.
3 Refer to “Cash Flows” in the MD&A (as defined herein) for further details.
4 Non-GAAP financial measure. Refer to “Cautionary Statement Regarding Certain Non-GAAP Measures” for further details.
5 Non-GAAP ratio. Refer to “Cautionary Statement Regarding Certain Non-GAAP Measures” for further details.
Decibel’s audited financial statements for the year ending December 31, 2023 (“Financial Statements”) and related three and twelve month periods ending December 31, 2023 Management’s Discussion & Analysis (“MD&A”), are available under the Company’s profile at www.sedarplus.com. As of December 31, 2023, 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 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.
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
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.
Non-GAAP Ratios
Adjusted earnings per share (adjusted net income (loss) divided by the number of outstanding shares) and funded debt to trailing twelve month adjustedEBITDA (total debt divided by trailing twelve month adjusted EBITDA) are non-GAAP ratios, do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. The Company believes that adjusted earnings per share is a useful metric to normalize net income for biological asset accounting impacts. The Company believes that funded debt to trailing twelve month adjusted EBITDA is a useful metric in assessing the company’s ability to repay total debt.
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.
IBF4
