Decibel Announces Business Update

Rhea-AI Summary

Decibel Cannabis Company has announced initiatives to improve operating efficiencies and reduce expenses, focusing on process optimization, portfolio rebalancing, labor adjustments, and new market exploration. The company plans to relaunch its QWEST brand to recapture market share in the dried flower category. Additionally, Decibel has begun shipping vape products to Australia and plans to expand into the UK by early Q3 2024. The company has optimized its product portfolio, paused capex initiatives, and reorganized cultivation processes to enhance efficiency and quality. These efforts are expected to reduce annual SG&A by $2 million and strengthen the balance sheet. KPMG LLP will exit as the auditor, with a new auditor to be appointed in July 2024.

Positive

• Expected annual SG&A reduction of $2 million.
• Beginning international shipments to Australia and the UK.
• Relaunching QWEST brand to regain market share in dried flower.
• Optimized product portfolio for better market competitiveness.
• Improved operational efficiencies through process optimization and reorganization.

Negative

• Stock value has declined, requiring focus on improving shareholder value.
• Change in auditor due to KPMG LLP exiting the Canadian cannabis industry.

CALGARY, AB, July 8, 2024 /PRNewswire/ - Decibel Cannabis Company Inc. (the "Company" or "Decibel") (TSXV: DB) (OTCQB: DBCCF), a market leader in premium cannabis and extract manufactured products would like to provide an update to its shareholders and stakeholders. 

Over the past month, the Company has executed a series of initiatives to improve operating efficiencies and focus on reducing expenses. These came in the form of process optimization, portfolio rebalancing, right-sizing labour and new market exploration. The purpose of this release is to provide some insight into these initiatives that form the basis of our new business strategy.

"Unfortunately, our stock has taken a hit over the last while. This is disappointing and shareholder value is something we will focus on. Our balance sheet needs to improve, and I believe we are taking the right steps to do so. Decibel has consistently outperformed its peers by market share, revenue generation and profitability despite what our valuation may suggest. We are implementing operational and strategic enhancements that we anticipate will form the basis of a stronger and more resilient company allowing us to grow and take back market share," said CEO Benjamin Sze. 

Domestic Flower Strategy

QWEST was the preeminent dried flower brand in 2018 when Decibel was formed. Over the past few years, our business focused on the highly scalable ready-to-consume product strategy ("RTC"). This has left an opportunity for the Company to re-align and refocus on our dried flower consumer, where we significantly under-index category market share. Over the next month, we are excited to relaunch QWEST, delivering a value proposition that does not exist in market today. 

"QWEST started off as a premium brand. As our product mix shifted to RTC, we failed to deliver on consumer expectations in the dried flower category, while the market evolved around us. The upcoming relaunch of QWEST is focused on delivery of exceptional value to the flower consumer. This platform, once established in Canada, will give us optionality both domestically and internationally and is expected to show market share gains," said CMO Warren Matzelle. 

International Markets

We are also excited to announce that we have begun shipping vapes to Australia and expect to ship our first flower and vape products to the UK in early Q3 2024. With these shipments we expect our brands to be just as successful internationally. 

Portfolio Optimization

The Company has completed a review of our product portfolio and lifecycle patterns. SKU portfolio have been optimized ensuring we remain true to the General Admission, VOX and Qwest brands. Our refreshed portfolio gives us meaningful participation in critical segments in vape, infused pre-roll, standard pre-roll and flower. Ensuring we have the right mix of products to meet the needs and wants of our consumers.

"Decibel has been very good at identifying market trends and ensuring we are competitive in the categories we participate in. I believe by optimizing on our product mix, we will better serve consumers and support our retailer partners," said CRO Adam Coates

Rightsizing Initiatives:

Capex initiatives were put on pause with dollars being allocated to revenue generating activities alongside process improvements and right sizing of the business. These initiatives are intended to realize an estimated annualized reduction in SG&A by approximately $2 million. In addition to the rightsizing, work has been done to improve working capital and significantly reducing AP.

"With all the implementation, we expect to materially strengthen our balance sheet, positioning the Company better to capitalize on opportunities in the future," said CFO Stuart Boucher.

Cultivation Reorganization

Dried flower processing has been reorganized across our facilities. These changes will allow us to increase efficiencies at each facility while ensuring we have quality checkpoints that are consistent across the organization. These changes are expected to allow a path to scale additional production while maintaining the great quality as required by consumer demand. 

"Changing the flow of how cannabis flower moves through our various facilities will allow each operation to focus on its core competency. This flexibility enables us to quickly scale up and down our supply to match the ever-changing demand profile irrespective of whether that demand comes through international sales or domestic wholesale," said COO Kris Newell.

Change in Auditor

The Company's former auditor KPMG LLP has exited the Canadian cannabis industry and therefore will not be standing for re-election at the Company's AGM. As a result the Company will be appointing a new auditor within the month of July 2024 and, following which, the Company intends to announce the date of our AGM. KPMG LLP will remain engaged to review the Q2 2024 financial statements to the extent requested by the Company. 

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.

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", "is expected", "anticipates" "plans", "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 estimated reduction in SG&A; the anticipated reduction in the Company's AP balance; the anticipated improvements to the Company's working capital position; the Company's expectations regarding the optimization of its portfolio, including the Company's ability to continue to attract consumers; the results of the Company's cultivation reorganization, including any anticipated increases in production efficiency, improvements in quality and reduced processing/packaging costs and the Company's ability to scale production; the effects of the Company's process initiatives, including the timeline for completion of these initiatives; the Company's intention to re-focus on dried flower consumers; the Company's expectations regarding the relaunching of QWEST; the timeline to ship flower and vape products to the UK; the effects of its product launch in Australia and the UK; the anticipated timing for the appointment of a new auditor and announcing the timing of the AGM.

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: the ability of the Company to implement its rightsizing initiatives, portfolio optimization, cultivation reorganization, process changes and domestic flower strategy; satisfaction of all international regulatory requirements, including applicable product testing; risks relating to delays; other regulatory changes and impacts; capital requirements; construction impacts; displacement requirements; global macro-economic events, conditions and factors; the ability to obtain and maintain licenses to retail cannabis products; review of the Company's production facilities by Health Canada and maintenance of licenses (including any amendments thereto) from Health Canada in respect thereof; future legislative and regulatory developments involving cannabis, international export rules and regulations; 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; and general business, economic, competitive, political and social uncertainties.

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.

These forward-looking statements are made as of the date of this news 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.

View original content to download multimedia:https://www.prnewswire.com/news-releases/decibel-announces-business-update-302190491.html

SOURCE Decibel Cannabis Company Inc.

FAQ

What initiatives has Decibel Cannabis Company announced in July 2024?

Decibel Cannabis Company announced initiatives to improve operating efficiencies and reduce expenses, including process optimization, portfolio rebalancing, labor adjustments, and new market exploration.

What is the focus of Decibel's QWEST brand relaunch?

The QWEST brand relaunch is focused on providing exceptional value in the dried flower category to recapture market share.

Which international markets is Decibel entering in 2024?

Decibel has begun shipping vape products to Australia and plans to expand into the UK by early Q3 2024.

What financial impact does Decibel expect from its new initiatives?

Decibel expects an annual SG&A reduction of approximately $2 million from its new initiatives.

Why is Decibel changing its auditor in July 2024?

Decibel is changing its auditor because KPMG LLP is exiting the Canadian cannabis industry and will not stand for re-election at the company's AGM.