Decibel Announces Record Year End Results, Strong Net Revenue Growth of 51% from Prior Quarter and 2nd Consecutive Period of Positive Adjusted EBITDA

Rhea-AI Summary

Decibel Cannabis Company reported impressive year-end financial results for 2020, showing a remarkable 380% increase in net revenue to $30 million. Gross profit surged 2,888% to $11.7 million, with adjusted EBITDA reaching $1.5 million, an improvement of $3.5 million from 2019. The fourth quarter alone generated $11.4 million in revenue, up 51% from the previous quarter, largely driven by strong sales of their Qwest products. The company also enhanced its financial stability with a $30 million debt refinancing, providing significant liquidity for future growth.

Positive

• Net revenue increased by 380%, reaching $30 million in 2020.
• Gross profit rose by 2,888% to $11.7 million.
• Adjusted EBITDA improved by $3.5 million to $1.5 million.
• Fourth quarter revenue reached $11.4 million, a 51% increase from Q3 2020.
• Successfully launched $4.5 million in vape and concentrate product sales in Q4.
• Achieved a 22% market share in concentrate and a 9% share in vape categories across multiple provinces.
• Completed $30 million debt refinancing, enhancing financial flexibility and liquidity.

Negative

• Retail sales decreased by 7% compared to the prior quarter.

CALGARY, AB, April 14, 2021 /PRNewswire/ - Decibel Cannabis Company Inc. (the "Company" or "Decibel") (TSXV: DB) (OTCQB: DBCCF) , a premium cannabis producer and retailer, is pleased to announce its year-end financial results for the three and twelve month periods ending December 31, 2020.

"The success achieved in 2020 reflects Decibel's commitment to sustainable profitability and product quality, all while executing on an aggressive growth plan" said Cody Church, Interim CEO of Decibel. "We continue to execute as a leading producer of premium cannabis, growing our production from 1,800 kg to over 9,000 kg in this year to meet the strong demand for our Qwest Family of Brands. We are gaining momentum with our cannabis 2.0 portfolio as it continues to gain market share, validating Decibel's approach to product innovation while maintaining our commitment to quality."

Key Financial Highlights – Fiscal Year 2020

• Net revenue of $30 million in 2020, an increase of 380% from 2019.
• Gross profit of $11.7 million in 2020, an increase of 2,888% from 2019.
• Positive adjusted EBITDA of $1.5 million in 2020, an improvement of $3.5 million from 2019.
• Fourth quarter contributed $1.1 of the $1.5 million in adjusted EBITDA achieved in the year.

Key Financial Highlights – Fourth Quarter

• Record Net Revenue: Net revenue grew to $11.4 million in the fourth quarter, a 51% increase, over the prior quarter, driven by strong sales growth from Qwest dried flower and newly launched vape and concentrate products. Net revenue grew by 645% over the comparative 2019 quarter.
• Record Positive Adj. EBITDA: The Company achieved a record $1.1 million of adjusted EBITDA in the fourth quarter, its second consecutive quarter of positive adjusted EBITDA, and an increase of 28% from the prior quarter. Adjusted EBITDA improved by $4 million over the comparative 2019 quarter.
• Record Qwest Sales: 378 kilograms sold in the fourth quarter, with an average wholesale net price per gram of $8.59, a volume increase of 39% and pricing in line 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. Kilograms sold and average wholesale net price per gram increased by 125% and 23%, respectively, over the comparative 2019 quarter.
• First Full Quarter of Derivative Sales: Achieved $4.5 million of net sales of newly launched vape and concentrate products in the fourth quarter. Decibel had 22 product SKUs in market across four provinces including British Columbia, Alberta, Saskatchewan, and delivered its first shipment to Ontario at the end of December.
• In January, Decibel achieved a 22% market share in concentrates and a 9% market share in vape categories across British Columbia, Alberta, Saskatchewan and Ontario^1,2
• Retail Sales: $3.7 million of retail sales, a 7% decrease over the prior quarter. Decibel's retail portfolio continues to bring strategic value, contributing to the success of product innovation and understanding consumer trends.
• Strengthened Balance Sheet: Decibel completed a $30 million debt refinancing comprised of $28.5 million of term debt and a $1.5 million authorized overdraft. The proceeds were used to fully repay Decibel's then outstanding $26.8 million of debt with its former lender and provide additional liquidity. The new credit facility resulted in several positive impacts:
• $3.2 million of additional liquidity available for working capital purposes.
• Extended debt maturity by 5 years and debt amortizes over a 10 year term.
• Repayment schedule aligned to operational timeline with $16 million having an interest only period ending in Q3 2021. Principal savings over this period provide Decibel flexibility and additional resources to support its growth strategy.
• Reduced blended interest rate by ~1.70%, to 4.75% for outstanding term debt and Prime + 1.00% for the authorized overdraft. This represents approximately $360 thousand in annual interest savings over the full year 2021.
• Simplified financial covenants to a monthly current ratio of not less than 1.25:1 and two annually tested covenants, a debt service coverage ratio of not less than 1.40:1.00, and a debt to equity ratio of not greater than 0.75:1.00 at the end of 2021 and 0.50:1.00 for all fiscal years ending thereafter.

Year-End and Quarterly Highlights

				Three months ended		Year ended
				December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Net wholesale revenue of flower				$3,243	$1,176	$9,821	$5,878
Kilograms of flower sold				378	168	1,160	731
Average wholesale flower gross pricing per gram				$10.21	$8.91	$10.17	$8.48
Average wholesale flower net pricing per gram				$8.59	$6.99	$8.47	$8.04
Kilograms of cannabis harvested				377	139	1,313	1,077
Net wholesale revenue of extracts				$4,528	-	$5,312	-
Other wholesale revenue				-	-	$565	-
Number of retail stores				6	4	6	4
Retail revenue				$3,654	$357	$14,232	$357
Total
Net revenue				$11,425	$1,533	$29,930	$6,235
Gross profit before fair value adjustments				$4,519	(1,413)	$11,683	$391
Gross margin				40%	(92%)	39%	6%
Adjusted EBITDA (a)				$1,102	(2,940)	$1,527	(2,026)
Cash flow from operations				$1,343	(378)	(4,238)	(1,444)

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

Subsequent Events

• On January 29, 2021, the Company's wholly-owned subsidiary, dB Thunderchild Cultivation LP, received a cultivation license from Health Canada for its cultivation, packaging and processing facility, located in Battleford, Saskatchewan (the "Thunderchild Cultivation Facility"). The licensing of the Thunderchild Cultivation Facility significantly increases Decibel's cultivation capacity by more than four times, to >9,000 kilograms of premium craft cannabis, allowing Decibel to meet the tremendous consumer demand it is experiencing for Qwest products.

Decibel's financial statements for the three and twelve month periods ending December 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. As of December 31, 2020, 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, 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, the Company's expectations with respect to its ability to comply with its financial covenants, 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.

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SOURCE Decibel Cannabis Company Inc.

FAQ

What were Decibel Cannabis Company's total revenues for 2020?

Decibel Cannabis Company reported total revenues of $30 million for the fiscal year 2020.

How much did Decibel's gross profit increase in 2020?

Decibel's gross profit increased by 2,888% to $11.7 million in 2020.

What was the adjusted EBITDA for Decibel Cannabis Company in 2020?

Decibel reported an adjusted EBITDA of $1.5 million in 2020, up $3.5 million from the previous year.

How did Decibel's fourth quarter revenues compare to the previous quarter?

In the fourth quarter, Decibel's revenues grew to $11.4 million, a 51% increase over the prior quarter.

What significant financial actions did Decibel take in 2020?

Decibel completed a $30 million debt refinancing, improving liquidity and financial stability.