CALGARY, AB, April 29, 2024 /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, 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 2022, an increase of 52% over 2022.
- Record Adjusted Net Income(1) of $8.0 million in 2022, 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 was 45% 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
Three months ended | Year ended | |||
2023 | 2022 | 2023 | 2022 | |
(thousands of Canadian dollars, except where noted) | ||||
Gross Canadian recreational sales 1,2 | $43,202 | $36,140 | $177,231 | $108,187 |
Net Canadian recreational sales 1,2 | $24,808 | $21,586 | $105,773 | $68,559 |
International sales 2 | $1,427 | $1,893 | $3,692 | $1,893 |
Retail sales 1,2 | $1,498 | $2,318 | $6,493 | $8,874 |
Number of retail stores | 6 | 6 | 6 | 6 |
Total | ||||
Gross revenue | $46,127 | $40,351 | $187,416 | $118,954 |
Net revenue | $27,733 | $25,797 | $115,958 | $79,326 |
Gross profit before fair value adjustments | $12,365 | $11,082 | $51,631 | $34,026 |
Gross margin before fair value adjustments | 45 % | 43 % | 45 % | 43 % |
Adjusted EBITDA 3 | $5,136 | $7,061 | $25,904 | $17,010 |
Loss and comprehensive loss | ($1,191) | ($3,147) | ($1,770) | ($4,462) |
Adjusted net income 3 | ($132) | $1,788 | $8,002 | $3,134 |
Cash flow from operations | $1,903 | ($114) | $7,077 | $8,258 |
Free cash flow 3 | $1,498 | ($499) | $4,942 | $4,494 |
Per Share Metrics | ||||
Income (loss) per share | - | - | - | ($0.01) |
Adjusted EPS 4 | - | - | $0.02 | $0.01 |
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.
Three months ended | Year ended | |||
2023 | 2022 | 2023 | 2022 | |
(thousands of Canadian dollars) | ||||
Net loss | (1,191) | (3,147) | (1,770) | (4,462) |
Unrealized gain on changes in fair value of biological | (3,442) | (5,550) | (12,549) | (18,406) |
Change in fair value of biological assets realized | 4,501 | 10,485 | 22,321 | 26,002 |
Depreciation and amortization | 592 | 955 | 3,110 | 3,669 |
Share-based compensation | 307 | 459 | 1,371 | 1,814 |
Other (income) | (51) | (35) | (221) | (140) |
Transaction costs | - | - | - | - |
Finance costs | 753 | 694 | 2,924 | 3,158 |
Foreign exchange loss | 196 | 433 | 479 | 649 |
Loss on disposal of property, plant, and equipment | - | - | - | 81 |
Non-cash cost of goods sold | 1,478 | 2,721 | 5,289 | 4,005 |
Other adjustments | 1,993 | 46 | 4,950 | 640 |
Adjusted EBITDA | 5,136 | 7,061 | 25,904 | 17,010 |
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
Three months ended | Year ended | |||
2023 | 2022 | 2023 | 2022 | |
(thousands of Canadian dollars) | ||||
Loss and comprehensive loss | (1,191) | (3,147) | (1,770) | (4,462) |
Unrealized gain on changes in fair value of biological | (3,442) | (5,550) | (12,549) | (18,406) |
Change in fair value of biological assets realized | 4,501 | 10,485 | 22,321 | 26,002 |
Adjusted net income (loss) 1 | (132) | 1,788 | 8,002 | 3,134 |
Weighted average number of shares outstanding | 426,924,936 | 404,154,231 | 408,132,762 | 404,028,200 |
Adjusted EPS | - | - | $0.02 | $0.01 |
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.
Three months ended | Year ended | |||
December 31 | 2023 | 2022 | 2023 | 2022 |
(thousands of Canadian dollars) | ||||
Cash provided by operating activities | 2,342 | (114) | 7,077 | 8,258 |
Cash used in investing activities | (844) | (385) | (2,135) | (3,764) |
Free cash flow | 1,498 | (499) | 4,942 | 4,494 |
Cash used in financing activities | (1,408) | (940) | (4,427) | (3,447) |
Increase in cash | 90 | (1,439) | 515 | 1,047 |
Cash, beginning of period | 3,391 | 4,405 | 2,966 | 1,919 |
Cash, end of period | 3,481 | 2,966 | 3,481 | 2,966 |
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 adjusted EBITDA (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.
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: expectations that demand for Decibel's products will grow; the ability for Decibel to delight customers through the Company's product offering; the ability of the Company to extend its product offering to new countries and create a global footprint; and 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 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 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.
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.
SOURCE Decibel Cannabis Company Inc.
