Decibel Announces Year End and Fourth Quarter Results with Record Fourth Quarter $25.8 Million Net Revenue and $7.1 Million Adjusted EBITDA
Decibel Cannabis Company reported impressive financial results for the year ending December 31, 2022, showcasing strong growth and market presence. The company achieved record net revenue of $79.3 million, marking a 51% increase from the previous year. Adjusted EBITDA reached $17.0 million, a significant 129% growth year-over-year, while adjusted net income stood at $3.1 million, improving by $11.7 million. In Q4 2022 alone, net revenue hit $25.8 million, reflecting an 84% year-over-year increase. Decibel's market share rose to 6.8%, positioning it as the second-largest licensed producer in Canada as of March 2023. The company also made its first branded product sale to Israel as part of international expansion efforts. Despite these successes, the gross margin decreased to 43% in Q4 2022 from 52% in the prior quarter, influenced by inventory write-offs.
- Record Net Revenue of $79.3 million in 2022, a 51% increase.
- Adjusted EBITDA of $17.0 million, up 129% from 2021.
- Q4 2022 net revenue of $25.8 million, an 84% increase year-over-year.
- Market share reached 6.8%, making Decibel the 2nd largest licensed producer in Canada.
- Gross margin decreased to 43% in Q4 2022 from 52% in Q3 2022, impacted by a $3.2 million inventory write-off.
"Our fourth quarter results capped off a year of strong financial performance with record results including market share, net revenue, adjusted EBITDA, and adjusted net income. This creates momentum heading into 2023 with demand continuing to grow and assets well positioned to deliver on this demand", said
Fiscal Year 2022 Financial Highlights
- Record Net Revenue of
in 2022, an increase of$79.3 million 51% over 2021. - Record Adjusted EBITDA(1) of
in 2022, an increase of$17.0 million 129% over 2021. - Record Adjusted Net Income(1) of
in 2022, an increase of$3.1 million over 2021.$11.7 million - Record Adjusted Earnings per Share(2) of
, an increase of$0.01 over 2021.$0.03 - First branded product sale to
Israel as Decibel begins to expand internationally.
Notes: |
1 Non-GAAP financial measure. Refer to "Cautionary Statement Regarding Certain Non-GAAP Measures" for further details. |
2 Non-GAAP ratio. Refer to "Cautionary Statement Regarding Certain Non-GAAP Measures" for further details. |
Fourth Quarter Highlights
- Record National Market Share(1) of
6.0% in Q4 2022 and6.6% inDecember 2022 which placed Decibel as the 4th and 3rd largest licensed producer inCanada by market share for the respective periods. - Fastest growing large licensed producer in 2022
- As of
March 2023 , Decibel's market share was6.8% which placed Decibel as the 2nd largest licensed producer inCanada by market share. - The Company's preliminary results indicate sequential net revenue growth in the first quarter of 2023, driven by continued growth in demand and further improvements to operational capacity to meet demand.
- Record Net Revenue was
in the fourth quarter of 2022, with strong sequential growth of$25.8 million 41% over the prior quarter and year over year growth of84% . The net revenue growth was driven by increased demand for the Company's derivative products and the Company's first two sales of branded dried flower product inIsrael . Net revenue growth year over year was driven by expanded distribution, new infused products and continued growth in demand for derivative products. - Gross Margin Before Fair Value Adjustments was
43% in the fourth quarter of 2022, compared to52% in the prior quarter and26% in the fourth quarter of 2021. The fourth quarter was partially impacted by a provision and write off of cultivation and extraction inventory of approximately . The increase year over year was a result of significant cost savings realized in the third quarter of 2022 from initiatives including operational efficiencies, automation equipment commissioned, and sourcing of more cost-effective components related to the manufacturing of cannabis products. The Company anticipates that there may be future volatility in its gross margin related to price competition and continues to target the upper end of its previously stated target of 40 –$3.2 million 45% gross margin. - Record Adjusted EBITDA(2) of
$7.1 million in the fourth quarter of 2022, with strong sequential growth of66% over the prior quarter and year over year growth of387% over the fourth quarter of 2021. This marks Decibel's tenth quarter of consecutive quarterly positive adjusted EBITDA. - Adjusted Net Income(2) of
$1.8 million in the fourth quarter of 2022, with a sequential decline of40% over the prior quarter and a year over year improvement of over the fourth quarter of 2021. The fourth quarter was partially impacted by a write off of cultivation and extraction inventory of approximately$5.6 million . This marks Decibel's third quarter of positive adjusted net income.$3.2 million - Leverage: At the end of the fourth quarter of 2022, Decibel had a funded debt to trailing twelve month EBITDA of 2.57x and a funded debt to annualized EBITDA of 1.55x.
Notes: |
1 HiFyre Retail Analytics, Licensed Producer Sales over Time Nationally, |
2 Non-GAAP financial measure. Refer to "Cautionary Statement Regarding Certain Non-GAAP Measures" for further details. |
New Unique and Innovative Products
The Company launched a total of 13 new products in various provinces in the fourth quarter of 2022, including
- 5 General Admission SKU's in vape and infused pre-rolls in distillate and live resin formats; and
- 8 Qwest SKU's in dried flower, standard pre-rolls, and infused pre-rolls formats.
Three months ended | Year ended | |||
2022 | 2021 | 2022 | 2021 | |
(thousands of Canadian dollars, except where noted) | ||||
Gross sales of flower 1, 2 | ||||
Net sales of flower 1, 2 | ||||
Gross sales of extracts 1, 2 | ||||
Net sales of extracts 1, 2 | ||||
Number of retail stores | 6 | 6 | 6 | 6 |
Retail sales 1,2 | ||||
Total | ||||
Gross revenue | ||||
Net revenue | ||||
Gross profit before fair value adjustments | ||||
Gross margin before fair value adjustments | 43 % | 26 % | 43 % | 34 % |
Adjusted EBITDA 2 | ||||
Net income and comprehensive income (loss) | ( | ( | ||
Adjusted net income 2 | ( | ( | ||
Cash flow from operations 3 | ( | ( | ( | |
Per Share Metrics | ||||
Income (loss) per share | ( | - | ( | |
Adjusted earnings per share 2 | - | ( | ( |
Notes: |
1In the table above, wholesale inventory transferred to the retail stores and subsequently sold of |
2Supplementary financial measure. Refer to "Cautionary Statement Regarding Certain Non-GAAP Measures" for further details. |
3Refer to "Cash Flows" in the MD&A (as defined herein) for further details. |
4Non-GAAP financial measure. Refer to "Cautionary Statement Regarding Certain Non-GAAP Measures" for further details. |
5Non-GAAP ratio. Refer to "Cautionary Statement Regarding Certain Non-GAAP Measures" for further details. |
Link to Decibel's Investor Presentation
Decibel's audited financial statements for the year ending
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.
Neither
Non-GAAP Measures
This press release contains certain financial performance measures that are not recognized or defined under IFRS (termed "Non-GAAP Measures"). As a result, this data may not be comparable to data presented by other licensed producers and cannabis companies. For an explanation of these measures to related comparable financial information presented in the Financial Statements prepared in accordance with IFRS, refer to the discussion below. The Company believes that these Non-GAAP Measures are useful indicators of operating performance and are specifically used by management to assess the financial and operational performance of the Company. Accordingly, these Non-GAAP Measures are 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.
Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP financial measure that is calculated 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. This non-GAAP financial measure 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.
Three months ended | Year ended | |||
2022 | 2021 | 2022 | 2021 | |
(thousands of Canadian dollars) | ||||
Net income (loss) | (3,147) | 654 | (4,462) | 1,743 |
Unrealized loss on changes in fair value of biological | (5,550) | (9,660) | (18,406) | (25,199) |
Change in fair value of biological assets realized | 10,485 | 5,197 | 26,002 | 14,889 |
Depreciation and amortization | 955 | 967 | 3,669 | 3,737 |
Share-based compensation | 459 | 806 | 1,814 | 2,426 |
Other loss (income) | (35) | (32) | (150) | (66) |
Transaction costs | - | - | 10 | - |
Finance costs | 694 | 1,046 | 3,158 | 4,090 |
Foreign exchange loss (gain) | 433 | 34 | 649 | 167 |
Loss on disposal of property, plant, and equipment | - | - | 81 | 34 |
Non-cash cost of goods sold 1 | 2,721 | 1,260 | 4,005 | 1,996 |
Other adjustments 2 | 46 | 807 | 640 | 1,152 |
Other non-cash costs 3 | - | 371 | - | 2,448 |
Adjusted EBITDA 4 | 7,061 | 1,450 | 17,010 | 7,417 |
Adjusted Net Income is a non-GAAP financial measure that is calculated as net loss and comprehensive loss excluding unrealized gain on changes in fair value of biological assets and change in fair value of biological assets realized through inventory sold. Adjusted Earnings per Share is a non-GAAP financial measure that is calculated as net loss and comprehensive loss excluding unrealized gain on changes in fair value of biological assets and change in fair value of biological assets realized through inventory sold, divided by the weighted average common shares outstanding. This non-GAAP financial 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.
Three months ended | Year ended | |||
2022 | 2021 | 2022 | 2021 | |
(thousands of Canadian dollars) | ||||
Net income and comprehensive income (loss) | (3,147) | 654 | (4,462) | 1,743 |
Unrealized gain on changes in fair value of biological | (5,550) | (9,660) | (18,406) | (25,199) |
Change in fair value of biological assets realized | 10,485 | 5,197 | 26,002 | 14,889 |
Adjusted net income (loss) 1 | 1,788 | (3,809) | 3,134 | (8,567) |
Weighted average number of shares outstanding | 404,154 | 403,909 | 404,154 | 365,778 |
Adjusted net income (loss) per share 1 | - | ( | ( |
Retail Sales is a supplementary financial measure that is intended to provide a more accurate depiction of the revenue earned by the Company's retail operations. Inventory transferred directly from the Company's wholesale operations to the Company's retail operations is removed from Retail Revenue as presented in the Company's Financial Statements.
Gross Sales of Flower is a supplementary financial measure intended to provide a more accurate depiction of gross revenue earned by the Company's wholesale flower operations. Inventory transferred directly from the Company's wholesale flower operations to the Company's retail operations is added to Gross Wholesale Revenue of Flower as found in the Company's Financial Statements to arrive at Gross Sales of Flower.
Gross Sales of Extracts is a supplementary financial measure intended to provide a more accurate depiction of gross revenue earned by the Company's wholesale extracts operations. Inventory transferred directly from the Company's wholesale extracts operations to the Company's retail operations is added to Gross Wholesale Revenue of Extracts as found in the Company's Financial Statements to arrive at Gross Sales of Extracts.
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: that the Company has strong momentum heading into 2023; expectations that demand for Decibel's products will grow; the Company's ability to meet consumer demand; Decibel's expectations that it will build its position in
Forward-looking statements and FOFI (as defined herein) 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, the ability to obtain and maintain licences to retail cannabis products; review of the Company's production facilities by
With respect to forward-looking statements and FOFI contained in this press release, Decibel has made assumptions regarding, but not limited to: growth of the brand and recognition in
Any financial outlook or future oriented financial information (in each case "FOFI") contained in this news release regarding prospective financial position, including, but not limited to: anticipated future volatility in gross margin; Decibel's targeted gross margin; and Decibel's expectations that it will remain in compliance with its financial covenants for the remainder of its twelve-month forecast period, is based on reasonable assumptions about future events, including those described above, based on an assessment by management of the relevant information that is currently available. The actual results will likely vary from the amounts set forth herein and such variations may be material.
Readers are cautioned that the foregoing list of assumptions and risk factors is not exhaustive. The forward-looking statements and FOFI contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements and FOFI included in this news release are made as of the date hereof and Decibel does not undertake any obligation to publicly update such forward-looking statements and FOFI to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
The Company's expectations for its Q1 2023 results, including net revenue growth in the quarter, are based on, among other things, the Company's anticipated financial results for the three month period ended
Certain market, independent third party and industry data contained in this news release is based upon information from government or other independent industry publications and reports or based on estimates derived from such publications and reports. Government and industry publications and reports generally indicate that they have obtained their information from sources believed to be reliable, but Decibel has not conducted its own independent verification of such information. This news release also includes certain data derived from independent third parties. While Decibel believes this data to be reliable, market and industry data is subject to variations and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Decibel has not independently verified any of the data from independent third party sources referred to in this news release or ascertained the underlying assumptions relied upon by such sources.
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