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DECIBEL 2nd qrt net revenue

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TheQueen
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CALGARY, AB, Aug. 18, 2022 /CNW/ - Decibel Cannabis Company Inc. (the "Company" or "Decibel") (TSX-V: DB) (OTCQB: DBCCF), a premium cannabis producer, is pleased to announce its second quarter financial results for the three and six month periods ending June 30, 2022.

"Our second quarter results continue to demonstrate that Decibel is on the path we projected in our 2022 operational outlook", said Paul Wilson, Chief Executive Officer of Decibel. "Our New Unique and Innovative product development and revenue generating initiatives have once again produced quarter-over-quarter record performance. This progress has been compounded by our productivity initiatives and record gross profit, now resulting in positive cash flow, putting us on track for another projected milestone."

"With more highlights scheduled for the back half of 2022, Decibel is delivering exactly what we've planned and forecasted to the market, ourselves, and our shareholders."

Financial Highlights

   -- Record Net Revenue: $18.6 million of total net revenue in Q2, with strong 
      sequential growth of 11% over Q1 2022 and 49% over Q2 2021. Net revenue 
      growth was driven by expanded distribution particularly in the Ontario 
      market, the continued launch of new General Admission and Qwest infused 
      products in various provinces and continued growth in demand for 
      derivative products. During the second quarter, net revenue would have 
      been $18.9 million, however $320 of discounts were provided related to 
      discontinued products. 
 
   -- Record Gross Margin Before Fair Value Adjustments: Significant sequential 
      improvement to 41% in Q2, compared to 35% in Q1 2022 and 41% in Q2 2021. 
      The increase was driven by initiatives realized midway through the second 
      quarter, including operational efficiencies, automation equipment 
      commissioned, and sourcing of more cost-effective components related to 
      the manufacturing of cannabis products. The cost engineering initiatives 
      and capital investments impacted the later part of the second quarter, 
      with additional equipment landed early August expected to drive continued 
      sequential margin expansion. The Company achieved its previously stated 
      target of 40 -- 45% gross margin ahead of the second half of 2022. 
 
   -- Record Adjusted EBITDA: Record $3.2 million of adjusted EBITDA in Q2, 
      with strong growth of 31% over Q1 2022 and 49% over Q2 2021. This marks 
      Decibel's eighth quarter of consecutive quarterly positive adjusted 
      EBITDA. 
 
   -- Derivative Sales: $13.0 million of net sales in Q2, with strong 
      sequential growth of 25% over Q1 2022 and 128% over Q2 2021. The increase 
      in sale of wholesale extracts is primarily attributable to expanded 
      distribution, the launch of a new infused product line, and continued 
      growth in demand for vapes and concentrates. This demand growth trend is 
      continuing into Q3 2022 with record level demand and distribution for 
      Decibel derivative products. 
 
   -- Flower Sales: $3.4 million of net sales in Q2, a sequential decline of 
      19% over Q1 2022 and 10% over Q2 2021. During the period, sale of flower 
      products was driven by reduced volumes during planned infrastructure 
      optimization at the Thunderchild Facility. 
 
   -- Record National Market Share3: Achieved 4.5% market share in July 2022, 
      growth of 70% year over year. 
 
   -- Cash Flow from Operations: $1.8 million of cash flow from operations in 
      Q2, a sequential decrease of $1.2 million over Q1 2022 and an improvement 
      of $4.8 million over Q2 2021. This marks Decibel's second consecutive 
      quarter of positive cash flow from operations. 
 
   -- Repayment Convertible Debentures: On May 11, 2022, the Company repaid its 
      9.5% convertible debentures with the draw-down of a fixed 4.75% $12 
      million term loan. This extends the maturity date of $12 million of debt 
      by 4 years, avoids approximately 6% of potential shareholder dilution, 
      and results in $0.6 million of annual interest expense savings. 

Operating Highlights

New Unique and Innovative

The Company launched or expanded distribution of the following products in the quarter:

   -- Total of 26 products launched in various provinces over the course of Q2 
      2022 
 
   -- 6 General Admission flower and pre-roll products 
 
   -- 6 General Admission vape flavours in distillate and live resin formats 
 
   -- 9 General Admission and Qwest infused pre-rolls 
 
   -- 5 Qwest flower and pre-roll products 

Capital Projects

The Company made the following progress on its operational initiatives:

   -- The Plant: Received its Health Canada license May 2, 2022 for Phase 1 of 
      its processing hub expansion. In August 2022, the majority of the 
      automation and other critical equipment was received, which is expected 
      to drive further margin enhancement on Decibel products in the second 
      half of 2022. 
 
   -- Thunderchild: Completed its staged infrastructure optimization to better 
      meet growing demand for Decibel products and enhance product quality and 
      yields. Production volumes are expected to resume full run-rate 
      production by the first half of 2023. 

Summary Highlights

 
                                 Three months ended           Six months ended 
                                            June 30                    June 30 
                        2022     2021                2022     2021 
(thousands of Canadian 
dollars, except where 
noted) 
Gross sales of flower 
 (1, 2)                  $4,471              $4,289   $9,950            $8,951 
Net sales of flower 
 (1, 2)                  $3,447              $3,577   $7,692            $7,437 
 
Gross sales of 
 extracts (1, 2)        $19,634              $8,742  $35,935           $15,846 
Net sales of extracts 
 (1, 2)                 $12,962              $5,674  $23,308           $11,268 
 
Number of retail 
 stores                       6                   6        6                 6 
Retail sales (1, 2)      $2,147              $3,189   $4,206            $6,361 
 
Total 
Gross revenue           $26,252             $16,220  $50,091           $31,158 
Net revenue             $18,556             $12,440  $35,206           $25,066 
Gross profit before 
 fair value 
 adjustments             $7,689              $5,095  $13,494           $10,073 
Gross margin before 
 fair value 
 adjustments               41 %                41 %     38 %              40 % 
Adjusted EBITDA (2)      $3,230              $2,149   $5,689            $4,182 
Cash flow from 
 operations (3)          $1,777            ($3,007)   $4,761          ($6,121) 
 
 
(1)  In the table above, wholesale inventory transferred to the retail stores 
     and subsequently sold of $188 and $414 for the three and six months, 
     respectively, have been eliminated from retail sales and attributed to 
     wholesale sales of flower and extracts to provide a more accurate 
     depiction of business performance. 
(2)  Non-GAAP financial measure. Refer to "Cautionary Statement Regarding 
     Certain Non-GAAP Measures" for further details. 
 

Link to Decibel's Investor Presentation

Decibel's financial statements for the three and six month periods ending June 30, 2022 ("Financial Statements") and related Management's Discussion & Analysis ("MD&A"), are available under the Company's profile at http://www.sedar.com. As of June 30, 2022, 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.


   
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