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Formerly Westleaf Inc.

Decibel Announces Record First Quarter Results, With Sequential Strong Net Revenue Growth and Adjusted EBITDA of $2MM

CALGARY, AB, May 27, 2021 /CNW/ – Decibel Cannabis Company Inc. (the “Company” or “Decibel”) (TSXV: DB) (OTCQB: DBCCF), a premium cannabis producer, is pleased to announce its first quarter financial results for the three month period ending March 31, 2021.

Record Market Share Across BC, AB, SK, ON in Q1 20211,2:

  • #1 brand in premium flower sales with an 8.4% market share
  • #1 brand in concentrate sales with a 21.9% market share
  • #3 brand in vape sales with a 10.0% market share

“These exceptional first quarter results are a testament to the strength of our brands, industry-leading product quality and ability to develop and execute an innovative product portfolio that meets the needs of today’s cannabis consumer”, said Cody Church, Interim CEO of Decibel. “Despite significant industry headwinds in the quarter, we delivered on our commitment of sustainable and profitable growth, while substantially strengthening our balance sheet and available liquidity.”

Key Financial Highlights

  • Record Net Revenue: Net revenue grew to $12.6 million in the first quarter, an 11% increase over the prior quarter, driven by strong sales growth from vape and concentrate products and continued demand for Qwest flower. Net revenue grew by 151% over the comparative 2020 quarter.
  • Record Positive Adj. EBITDA: The Company achieved a record $2.0 million of adjusted EBITDA in the first quarter, its third consecutive quarter of positive adjusted EBITDA, and an increase of 84% from the prior quarter. Adjusted EBITDA improved by $2.5 million over the comparative 2020 quarter.
  • Flower Sales: 432 kilograms sold in the first quarter, with an average wholesale net price per gram of $8.94, an increase of 14% and 4%, respectively, over the prior quarter. Decibel continues to see strong demand for premium cannabis and its Qwest products, which command industry leading pricing with demand outstripping current supply.  
  • Derivative Sales: $5.6 million of net sales of vape and concentrate products in the first quarter, a 23% increase from the prior quarter. Sales growth was driven by increased demand for vape and concentrate products launched in the fourth quarter.
  • Retail Sales: $3.2 million of retail sales, a 15% decrease over the prior quarter, primarily driven by seasonality and new entrants into the Saskatchewan retail market. Retail sales grew by 13% over the comparative 2020 quarter. Decibel’s retail portfolio continues to bring strategic value, contributing to the success of recent product launches, product innovation and understanding consumer trends.
  • Thunderchild Operational Development:
    • Achieved a minor contribution of first revenue out of the facility in March 2021
    • Completed seventh harvest since commencement of operations
    • Eight grow rooms planted and at various stages (40% of total facility planted)
  • Launch of New Vape & Concentrate Products:
    • In April, Decibel continued to innovate in the vape category with the launch of its first 100% Live Resin Vape with its General Admission Kootenay Fruit live resin vape and a new flavour of distillate vape with its General Admission Rainbow Sherb distillate vape cartridge
    • In April, Decibel launched into the premium concentrate category with its first live, loose concentrate with its Apricot Kush live sugar, available in BC, Alberta and Saskatchewan now and in Ontario in July
    • Additional upcoming Q2 2021 launches including additional live resin vapes and live sugar along with gems & juice (diamonds & sauce)
  • Strengthened Balance Sheet: On May 13, 2021, the Company announced it had closed an amendment to its authorized overdraft facility increasing it from $1.5 million to $7.5 million with a committed interest rate of Prime + 1.00% (currently 3.45%). The additional capital will accelerate Decibel’s sales growth through the Thunderchild facility and new vape and concentrate launches

Quarterly Highlights

Link to Decibel’s Investor Presentation

Decibel’s financial statements for the three-month period ending March 31, 2021 (“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. As of March 31, 2021, 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.  

HiFyre Retail Analytics, Licensed Producer Sales over Time in BC, AB, SK, ON, January 1, 2021 – March 31, 2021
HiFyre Retail Analytics, Premium flower market defined as flower products sold more than 20% above average selling price per gram
3 Inter-company revenue of $658 pertaining to sales to the retail operations, has been eliminated on the Company’s Interim Consolidated Financial Statements. In the table above, the inter-company revenue elimination has been allocated between wholesale revenue and retail revenue to provide a more accurate depiction of business performance.
4 Adjusted EBITDA is a non-GAAP performance measure. Refer to “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” for further details.

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, processing and distribution space which produces the widely championed, rare cultivar-focused brands Qwest and Qwest Reserve, which are sold in six provinces across Canada. The Thunderchild Cultivation Facility, is a licensed and operating 80,000 square foot indoor cultivation facility in Battleford, SK. The Plant, Decibel’s extraction, processing and manufacturing 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

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 and twelve months ended December 31, 2020. The Company believes that Adjusted EBITDA is a useful indicator of operational 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.

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 ability to meet consumer demand, that the additional capital will accelerate Decibel’s sales growth through the Thunderchild facility and new vape and concentrate launch; 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. 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, displacement requirements and unforeseen requirements resulting from the COVID-19 pandemic, 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 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 TSX Venture Exchange, 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.

These forward-looking statements are made as of the date of this press release and the Company disclaims any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

SOURCE Decibel Cannabis Company Inc.

For further information: Stuart Boucher, stuart.boucher@decibelcc.com, 780-619-0310; www.decibelcc.com