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Formerly Westleaf Inc.

Decibel Announces Q1 2020 Financial Results Reflecting First Full Quarter of Contributions from Merger

CALGARY, AB, June 19, 2020 /CNW/ – Decibel Cannabis Company Inc. (the "Company" or "Decibel") (TSXV: DB) (OTCQB: DBCCF) is pleased to announce its first quarter financial results for the three-month period ending March 31, 2020. Decibel’s financial statements for the three-month period ending March 31, 2020 ("Financial Statements") and related Management’s Discussion & Analysis ("MD&A") for the reporting period are available under the Company’s profile at www.sedar.com.

"During the first quarter of 2020, we made significant steps towards completing integration and cost saving initiatives, while continuing to progress our large-scale development projects. Although our targeted cost structure is not fully reflected in this quarter’s financial results, early impacts of our efforts are starting to be realized," said Benjamin Sze, CEO of Decibel. "We expect to continue to see cost reductions and growth as we operationalize our extraction & manufacturing facility and capture further production efficiencies at our Creston facility."

The first quarter of 2020 reflects the Company’s first period that recognizes full quarter results of the consolidated entity resulting from the plan of arrangement (the "Arrangement") that was completed by We Grow BC Ltd. on December 19, 2020, resulting in a reverse takeover of Westleaf Inc.

Investor Highlights 

  • Total net revenue for the first quarter of $5.0 million, a $4.5 million increase over the comparative period
  • Sold 224 kilograms of cannabis in the first quarter achieving an average wholesale flower gross price per gram of $11.85
  • Adjusted EBITDA loss for the first quarter of $0.4 million

Three months ended

March 31, 2020

March 31, 2019

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Adjusted EBITDA is a non-GAAP performance measure. Refer to "Cautionary Statements – Non-GAAP Measures" for further details.

Q1 2020 Financial Highlights and Subsequent Events

  • Total net revenue grew tenfold in the first quarter to $5.0 million over the first quarter of 2019, driven by execution on the strategic plan resulting from the Arrangement, continued strong demand for Qwest products, and increases in wholesale pricing.
  • Kilograms sold increased ~280% in the first quarter to 224 kilograms, achieving an average wholesale flower gross price per gram of $11.85 for the period, reflecting best-in-class pricing attributable to the Company’s strategic focus on rare genetics and premium quality cannabis.
  • During the first quarter of 2020, Decibel executed cost-reduction measures and realized on synergies resulting from the Arrangement, resulting in an estimated combined cost savings exceeding $5 million, net of severance costs, through the 2020 fiscal year compared to 2019.
  • Adjusted EBITDA loss for the first quarter of $0.4 million increased over the first quarter of 2019, primarily from selling, general and administration costs increasing from the Arrangement, partially offset by significant revenue growth and production efficiencies leading to an improved gross margin.
  • Subsequent to the first quarter of 2020, Decibel entered into an agreement to amend its credit agreement with ATB Financial on May 22, 2020. The Company believes the amended agreement is better aligned with the Company’s balance sheet and cash flow expectations and provides financial flexibility over the near term. For more information please refer to Decibel’s MD&A for the three months ended March 31, 2020, including to "Liquidity and Capital Resources".

While the pandemic continues to have a significant impact on the economy, the Decibel team has reacted quickly and successfully implemented a pandemic response plan, altering its operating procedures in its facilities and retail locations to address the current risks of COVID-19. We are pleased that the Decibel team has remained safe, productive, and is continuing to deliver high quality cannabis products and retail experiences. 

About Decibel

Decibel is uncompromising in the process and craftsmanship needed to deliver the highest quality cannabis products and retail experiences. Decibel has three production houses operating or under development 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, an 80,000 square foot indoor cultivation facility in Battleford, SK is scheduled to be completed and licensed in 2020. 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, and Blendcraft, 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

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, the Company’s expectations regarding costs reductions and growth as it operationalizes its extraction & manufacturing facility, the Company’s expectations regarding its ability to capture further production efficiencies at the Creston Facility, the timing, construction and licensing of the Thunderchild Cultivation facility, the Company’s ability to grow Qwest, Qwest Reserve and Blendcraft brands into new and innovative product formats, the Company’s expectations with respect to the amended credit agreement’s ability to provide financial flexibility and allow the Company to meet its near term objectives and the Company’s ability to execute on the foregoing. 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 the Company’s ability to file the Interim Filings, additional timing, delays, regulatory changes and impacts, capital requirements, construction impacts, displacement requirements and unforeseen requirements resulting from the COVID-19 pandemic, the ability to obtain or maintain licences to retail cannabis products; review of the Company’s production facilities by Health Canada and receipt or 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 satisfaction of conditions precedent under the Company’s credit facilities; 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 TSXV, as applicable. 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.

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 MD&A for the three months ended March 31, 2020. The Company believes that Adjusted EBITDA is a useful indicator of operating 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.

SOURCE Decibel Cannabis Company Inc.