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Formerly Westleaf Inc.

Decibel Announces Second Quarter Results with Strong Revenue and Fourth Consecutive Quarter of Record Adj. EBITDA


CALGARY, AB, Aug. 16, 2021 /CNW/ – Decibel Cannabis Company Inc. (the “Company” or “Decibel”) (TSXV: DB) (OTCQB: DBCCF), a premium cannabis producer, is pleased to announce its second quarter financial results for the three month period ending June 30, 2021.

The Company achieved net revenue of $12.4 million with strong gross margins of 41% and a record adj. EBITDA of $2.1 million, its fourth consecutive quarter of positive adj. EBITDA. 

“Decibel’s tremendous first half results are a testament to the strength of our brands, ability to innovate and our exceptional team”, said Paul Wilson, CEO of Decibel. “We continue to build a solid foundation by creating meaningful brands, high quality products and executing against our aggressive strategic plan.”

Management Commentary

In the first half of 2021, provincial distributors decreased their inventory levels, and, in some provinces, cannabis retail in-store shopping was restricted. This caused Qwest products to be out of stock for a cumulative 7 weeks. During this time, we enhanced production and our cost structure across our assets to expand gross margin and tailored an innovative product pipeline for the second half of 2021.

In the month of June, following the relaxation of COVID related restrictions and store re-openings, we experienced record level sales. In July, we saw a surge in demand for Decibel products and as a result, we have accelerated investment in our facilities to debottleneck and streamline production to meet these new levels. 

With the resumption of Ontario’s retail store roll-out, we have invested heavily in our sales team to increase our presence in the province. We expect that our sales team’s strong performance in western provinces (which kept retail stores open) will carry into the Ontario cannabis market and the team has seen early success with our recent product rollouts.

We are confident in our strategy centered around creating industry leading quality and choice to meet the needs of today’s cannabis consumer. With the strength in our multiple brands, we remain focused on driving innovation and bolstering our product offerings through our 2.0 pipeline and Thunderchild Cultivation flower production ramp up.

Key Financial Highlights

  • Net Revenue: Net revenue was $12.4 million in the second quarter, a 1% decrease over the prior quarter, driven by strong product sales across a number of categories but offset by stock-outs that totaled 7 weeks in the quarter, supply chain disruption given COVID and delayed or reduced purchase orders as a result of in-store shopping closures in Ontario. Net revenue grew by 111% over the comparative 2020 quarter.
  • Record Positive Adj. EBITDA: The Company achieved a record $2.1 million of adjusted EBITDA in the second quarter, its fourth consecutive quarter of positive adjusted EBITDA, and an increase of 6% from the prior quarter (improvement of $2.2MM from prior year). For the trailing twelve months, the Company has achieved $6.1MM in adjusted EBITDA.
  • Flower Sales: 449 kilograms sold in the second quarter, with an average wholesale net price per gram of $7.96, an increase of 4% and a decrease of 11%, respectively, over the prior quarter. The decline in price per gram was a result of a greater volume allocation towards Qwest products versus Qwest Reserve products which achieves a higher price point.
  • Derivative Sales: $5.7 million of net sales of vape and concentrate products in the second quarter, a 2% increase from the prior quarter. Sales growth was driven by increased demand for vape and concentrate products launched within Q2, partially offset by the COVID shut down in Ontario and product launch timeline changes implemented in Alberta and Ontario.
  • Retail Sales: $3.2 million of retail sales, a 1% increase over the prior quarter, primarily driven by seasonality and sales growth in the Alberta retail stores as COVID restrictions relaxed, partially offset by new entrants into the Saskatchewan retail market. Retail sales declined by 17% over the comparative 2020 quarter.
  • Product Innovation Roll-Out
    • Decibel continued its aggressive roll out of in demand products launching 15 new product SKUs across Ontario, Saskatchewan, Alberta and BC in the quarter with strong interest from customers in different jurisdictions and impressive market share improvements.
    • Focused on winning in Ontario, Decibel was successful in both the April and June OCS product calls, the Company achieved 15 new listings that have or will launch in Q2 and early Q3 of this year.
    • Launched two new cultivars, Stuffed French Toast under the Qwest brand and Sunset Mac under the Qwest Reserve brand, in new glass packaging.
    • Launched into the live concentrate category with two live resin vapes under the General Admission brand alongside two strains of Gems & Juice and Live Sugar under the Pressed by Qwest brand.
    • Launched into large format pre-rolls with the General Admission brand, its first dried flower product with 6, 7 and 12 x 0.5g pre-rolls.
  • Thunderchild Cultivation Operational Development: The Company continues to invest in working capital as it ramps the facility and has now fully planted and commissioned all 20 rooms with a number of rare cultivars coinciding with Decibel’s unique product roadmap. Thus far, the facility has achieved and outperformed expectations on yield per square foot. The Company anticipates run rate production by mid-Q4 with a focus on implementing a number of operational efficiencies that can be achieved in post processing.
  • 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 Cultivation facility and new vape and concentrate launches.

Quarterly Highlights

1. Adjusted EBITDA is a non-GAAP performance measure. Refer to “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” for further details.

Decibel’s financial statements for the three-month period ending June 30, 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 June 30, 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. 

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, Blendcraft, and General Admission, 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: Contact Stuart Boucher, stuart.boucher@decibelcc.com, 780-619-0310, www.decibelcc.com