CALGARY,
AB, May 29, 2024 /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 unaudited interim
financial results for the three month period ending March 31, 2024.
"Despite the drop in revenue, we remain one of Canada's top brands by market share.
With a focused effort on our strategy, we expect an improved Q2 and
more importantly a continued path to sustainable growth and
profitability. I am currently undergoing a comprehensive
business review and I look forward to sharing the initiatives
undertaken before July 15th." said
Benjamin Sze, Decibel's Chief
Executive Officer.
First Quarter Highlights
- National Market Share(1) of 6.0%
in Q1 2024, which placed Decibel as the 4th largest licensed
producer in Canada by market
share.
- Net Revenue was $21.0
million in the first quarter of 2024, with year over year
decrease of 16%. Net revenue decrease driven by increased
competition in the infused pre-roll segment, vape consumers
switching towards large format 510 cartridges and disposables and
the halting of exports to Israel
as the Company transitioned to a new distribution partner.
Subsequent to quarter end, Decibel has launched large format 510
cartridges and disposables.
- Gross Margin Before Fair Value
Adjustments was 48% in the first quarter of 2024,
compared to 51% in the first quarter of 2023.
- Adjusted EBITDA(2) of $3.6 million
in the first quarter of 2024, with a year over year decline of 45%
over the first quarter of 2023. The decrease in Adjusted EBITDA
quarter over quarter was primarily driven by a decline in net
Canadian recreational sales and international sales and the
reclassification of retail financial contributions to discontinued
operations, partially offset by a decrease in SG&A.
- Positive Free Cash Flow(2) of $375 thousand in the first quarter of 2024, with
a sequential decrease of 79% over the first quarter of 2023.
- Adjusted Net Loss(2) of $3.5
million in the first quarter of 2024, with a decline of
$6.8 million over the first quarter
of 2023. Adjusted Net Income was negatively impacted by a
$3.3 million impairment on the
Prairie Record's assets held for sale during the first quarter of
2024 and subsequently sold on April 10,
2024.
- Adjusted Earning Per Share ("Adjusted
EPS")(3) of negative $0.01, with a year over year decrease of
$0.02.
Notes:
|
1 HiFyre
Retail Analytics, Licensed Producer Sales over Time
Nationally
|
2 Non-GAAP
financial measure. Refer to "Cautionary Statement Regarding
Certain Non-GAAP Measures" for further details.
|
3 Non-GAAP
ratio. Refer to "Cautionary Statement Regarding Certain Non-GAAP
Measures" for further details.
|
Summary Highlights
Quarterly
Highlights
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
2024
|
2023
|
(thousands of
Canadian dollars, except where noted)
|
|
|
Gross Canadian
recreational sales 1
|
$32,303
|
$39,893
|
Net Canadian
recreational sales 1
|
$20,598
|
$24,313
|
International sales
1
|
$355
|
$629
|
|
|
|
Number of retail stores
in discontinued operations
|
6
|
6
|
|
|
|
Total
|
|
|
Gross
revenue
|
$32,658
|
$40,522
|
Net revenue
|
$20,953
|
$24,942
|
Gross profit before
fair value adjustments
|
$10,028
|
$12,677
|
Gross margin before
fair value adjustments
|
48 %
|
51 %
|
Adjusted EBITDA
2
|
$3,589
|
$6,550
|
Net loss and
comprehensive loss
|
($3,333)
|
($569)
|
Adjusted net income
(loss) 2
|
($3,477)
|
$3,349
|
Cash flow from
operations
|
$905
|
$2,232
|
Free cash flow
2
|
$375
|
$1,746
|
|
|
|
Per Share
Metrics
|
|
|
Income (loss) per
share
|
-
|
-
|
Adjusted EPS
3
|
($0.01)
|
$0.01
|
1
Supplementary financial measure. Refer to "Cautionary Statement
Regarding Certain Non-GAAP Measures" for further
details.
|
2 Refer to
"Cash Flows" in the MD&A (as defined herein) for further
details.
|
3 Non-GAAP
financial measure. Refer to "Cautionary Statement Regarding
Certain Non-GAAP Measures" for further details.
|
Decibel's unaudited condensed consolidated interim financial
statements for the three month period ending March 31, 2024 (the "Financial
Statements") and related management's discussion & analysis
for the three month period ending March 31,
2024 ("MD&A") are available under the Company's
profile at www.sedarplus.ca.
As of March 31, 2024, 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 news release.
Cautionary Statements
Non-GAAP Measures
This news 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 income (loss) and comprehensive income (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.
EBITDA
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
2024
|
2023
|
(thousands of
Canadian dollars)
|
|
|
Net loss and
comprehensive loss
|
(3,333)
|
(569)
|
Unrealized gain on
changes in fair value of biological assets
|
(4,595)
|
(3,954)
|
Change in fair value of
biological assets realized through inventory sold
|
4,451
|
7,872
|
Depreciation and
amortization
|
1,243
|
1,037
|
Share-based
compensation
|
63
|
398
|
Other
(income)
|
12
|
(68)
|
Finance
costs
|
772
|
661
|
Foreign exchange
loss
|
90
|
111
|
Non-cash cost of goods
sold
|
732
|
1,062
|
Other
adjustments
|
4,154
|
-
|
Adjusted
EBITDA
|
3,589
|
6,550
|
Adjusted Net Income is a non-GAAP financial measure that is
calculated as net income (loss) and comprehensive income (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 income (loss) and comprehensive income (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 are intended to provide a
proxy for the Company's net income (loss) and comprehensive income
(loss) and are 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.
Net
Income
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
2024
|
2023
|
(thousands of
Canadian dollars)
|
|
|
Net loss and
comprehensive loss
|
(3,333)
|
(569)
|
Unrealized gain on
changes in fair value of biological assets
|
(4,595)
|
(3,954)
|
Change in fair value of
biological assets realized through inventory sold
|
4,451
|
7,872
|
Adjusted net income
(loss)
|
(3,477)
|
3,349
|
Weighted average number
of shares outstanding
|
423,958,978
|
406,754,039
|
Adjusted
EPS
|
($0.01)
|
$0.01
|
Free Cash Flow is a non-GAAP financial measure that is
calculated as cash flow from operations less cash provided by (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.
Cash
Position
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
2024
|
2023
|
(thousands of
Canadian dollars)
|
|
|
Cash provided by
operating activities
|
905
|
2,232
|
Cash used in investing
activities
|
(530)
|
(486)
|
Free cash
flow
|
375
|
1,746
|
Cash used in financing
activities
|
(1,220)
|
(840)
|
Increase/(decrease) in
cash
|
(845)
|
906
|
Cash, beginning of
period
|
3,481
|
2,966
|
Cash, end of
period
|
2,636
|
3,872
|
Non-GAAP Ratios
Adjusted earnings per share (adjusted net income (loss)
divided by the number of outstanding shares) is a non-GAAP ratio,
does not have a standardized meaning prescribed by GAAP and is
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.
Supplementary Financial Measures
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 Statements
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 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
news 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.
Readers are cautioned that the foregoing list of assumptions
and risk factors is not exhaustive. The forward-looking statements
contained herein are expressly qualified in their entirety by this
cautionary statement. The forward-looking statements 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 to reflect new information, subsequent
events or otherwise unless so required by applicable securities
laws.
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.