CALGARY, AB, Feb. 6, 2023 /CNW/ – Decibel Cannabis Company Inc. (the “Company” or “Decibel”) (TSXV: DB) (OTCQB: DBCCF), a premium cannabis producer, is pleased to provide preliminary unaudited fourth quarter results and 2023 financial outlook.
- Q4 2022 record Net Revenue of $25.25 – $26.25 million (>38% growth from Q3 2022)
- Q4 2022 record Adjusted EBITDA of $6.25 – $7.25 million (>47% growth from Q3 2022)
- Q4 2022 achieved <3.0x Debt to trailing twelve-month Adjusted EBITDA
- Targeting 2023 Net Revenue year-over-year growth of >35%
Decibel has continued its market share gains, becoming the third largest LP in Canada by market share and the fastest growing large LP with 77% growth in 2022. We remained focused on developing consumer loyalty and category expansion supported through refinement of differentiation within our products. By creating demand, it led to an abundance of attractive investment opportunities by way of automation and supply chain optimization, leading to record level gross margin in the back half of the year. Through these steps, we’ve grown Decibel’s top and bottom line substantially, capping off the year with record level results. We are steadfast in our strategic plan that has driven our recent success, while remaining nimble to navigate a highly dynamic Canadian marketplace and ever-growing international landscape.
We plan to grow our position to become a market leader in Canada through organic growth centered around a pipeline of new, unique, and innovative products, and a strong revenue generation engine to grow distribution. Growing our footprint and recognition in Canada will in turn create a foundation to expand our brands internationally, bringing quality and choice to consumers abroad.
With demand in place, Decibel has invested aggressively to expand its margins and drive free cash flow, with a pipeline of high return on capital opportunities still in place. This year, we are increasing our focus on improving operating cash conversion with the streamlining of operations, a continued transition towards automation, and improving our balance sheet. We think this is critical given the current challenges present in the industry, and positions Decibel to further reinvest in its business and reinforce its ability to outcompete.
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 space which produces the widely championed, rare cultivar-focused brands Qwest and Qwest Reserve, which are sold in six provinces across Canada. Thunderchild Cultivation, is a licensed and operating 80,000 square foot indoor cultivation facility in Battleford, SK. The Plant, Decibel’s extraction 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.
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 plans to become a market leader in Canada and eventual growth internationally; the Company’s expectation of improving operating cash conversion; the Company’s expectation that growing its footprint and recognition in Canada will create a foundation to expand internationally; Decibel’s expectation as to the results of its investments; the Company’s 2023 financial outlook, including targeting and achieving 35% net revenue growth year-over-year through a new, unique, and innovative product pipeline, expanded distribution, and international expansion; strengthening the balance sheet while maintaining certain levels of debt to adjusted EBITDA; 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. 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.
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, supply chain disruptions, the occurrence of plant pestilence, 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. Many of these risks and uncertainties and additional risk factors are described in the Company’s Annual Information Form for the year ended December 31, 2020 and Management’s Discussion and Analysis for the year ended December 31, 2021, which are available at www.sedar.com.
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 Canada will lead to growth internationally; demand for Decibel’s products; streamlining of operations and a transition towards automation will improve Decibel’s balance sheet; Decibel’s ability to enter new markets and industry verticals; Decibel’s ability to attract, develop and retain key personnel; Decibel’s ability to raise additional capital and to execute on its expansion plans; the timelines for new product launches, Decibel’s ability to continue investing in infrastructure and implement scalable controls, systems and processes to support its growth; the impact of competition; the changes and trends in Decibel’s industry or the global economy; the Company’s ability to generate sufficient cash flow from operations and obtain financing, if needed, on acceptable terms or at all; the general economic, financial market, regulatory and political conditions in which the Company operates; the ability of the Company to ship its products and maintain supply chain stability; consumer interest in the Company’s products; anticipated and unanticipated costs; government regulation of the Company’s activities and products; the timely receipt of any required regulatory approvals; the Company’s ability to conduct operations in a safe, efficient and effective manner; the Company’s construction plans and timeframe for completion of such plans; and the changes in laws, rules, regulations, and global standards.
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: targeted net revenue growth of greater than 35% in 2023, 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.
PRELIMINARY FINANCIAL INFORMATION
The Company’s expectations for its H2 and Q4 gross margin, cash flow from operations, net revenue and adjusted EBITDA (see “Non-GAAP Measures”) are based on, among other things, the Company’s anticipated financial results for the three and twelve month period ended December 31, 2022. The Company’s anticipated financial results are unaudited and preliminary estimates that: (i) represent the most current information available to management as of the date of hereof; (ii) are subject to completion of interim review procedures that could result in significant changes to the estimated amounts; and (iii) do not present all information necessary for an understanding of the Company’s financial condition as of, and the Company’s results of operations for, such periods. The anticipated financial results are subject to the same limitations and risks as discussed under “Forward Looking Statements” above. Accordingly, the Company’s anticipated financial results for such periods may change upon the completion and approval of the financial statements for such periods and the changes could be material.
Cautionary Statement Regarding Certain Non-GAAP Measures
This news 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 licenced producers and cannabis companies. For an explanation of these measures to related comparable financial information presented in the Consolidated 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.
Adjusted EBITDA: Adjusted EBITDA is a non-GAAP financial measure that is intended to provide a proxy for the Company’s operating cash flow and is widely used by industry analysts to compare Decibel to its competitors and derive expectations of future financial performance of the Company. Adjusted EBITDA increases comparability between comparative companies by eliminating variability resulting from differences in capital structures, management decisions related to resource allocation, and the impact of fair value adjustments on biological assets, inventory, and financial instruments, which may be volatile on a period to period basis. For a complete breakdown of the historical composition of adjusted EBITDA please refer to the Corporation’s most recent MD&A on SEDAR.
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SOURCE Decibel Cannabis Company Inc.