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Decibel Announces Fourth Quarter Results with Strong Net Revenue Growth and Sixth Period of Consecutive Positive Adjusted EBITDA

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Isail4fun
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Decibel Announces Fourth Quarter Results with Strong Net Revenue Growth and Sixth Period of Consecutive Positive Adjusted EBITDA

NEWS PROVIDED BY Decibel Cannabis Company Inc. 

Apr 22, 2022, 08:00 ET

"Decibel continues to execute on its strategy to accelerate revenue growth and deliver new, unique and innovative choices to cannabis consumers. The success achieved through 2021 with record market share demonstrates the strength we've created in our brands, and our dedication towards our customers", said Paul Wilson, CEO of Decibel. "Our momentum has accelerated into 2022, and we are gaining great traction across our products and brands, particularly with our recent infused product launches over late Q4 and first quarter of 2022."

Key Financial Highlights – Fiscal Year 2021
  • Net revenue of $52 million in 2021, an increase of 75% from 2020.

  • Gross profit of $18 million in 2021, an increase of 53% from 2020.

  • Positive adjusted EBITDA of $7.4 million in 2021, an increase of 386% from 2020.
Key Financial Highlights – Fourth Quarter
  • Net Revenue: Net revenue was $14 million in Q4, a 5% increase over the prior quarter, driven by the launch of Decibel's new infused pre-roll lines and continued growth in demand for flower, vape and concentrate products. This was partially impacted by price compression in the flower segment and slower retail sales from increased competition. Net revenue grew by 23% over the comparative 2020 quarter.

  • Gross Margin: Gross margin was 26% in Q4, compared to 31% in the prior quarter. The decrease in gross margin is attributable to a combination of permanent and transitory impacts.

    • Permanent impacts include price compression in Qwest Family of Brands' products by approximately 25% and a 4% reduction in retail sales margins due to higher competition.

    • Transitory impacts include a $345 thousand provision for aged inventory, $738 thousand in air freight charges due to supply chain challenges, and $369 thousand of non-cash amortization, and $891 thousand of write downs.

    • Adjusting for the impact of the transitory factors, normalized gross margin would have been 43%.

  • Positive Adj. EBITDA: The Company achieved $1.5 million of adjusted EBITDA in Q4, its sixth consecutive quarter of positive adjusted EBITDA and an improvement of 32% from the prior year.

  • Flower Sales: 808 kilograms sold in Q4, with an average wholesale net price per gram of $5.70, an increase 64% and a decrease of 25%, respectively, over the prior quarter. The decline in price per gram is due to increased competition in the premium segment to which the Company reduced Qwest Family of Brands pricing by approximately 25% to remain in line with other premium cannabis products. Additionally, overall price per gram declined due to a higher contribution from Qwest and General Admission products that have a lower price per unit as the Company continued to broaden its product offerings to its consumers.

  • Derivative Sales: $6.9 million of net sales of vape, infused, and concentrate products in Q4, a 5% increase from the prior quarter. Sales growth was driven by increased demand for vape and concentrate products, as well as the launch of a new infused pre-roll line in late Q4.

  • Retail Sales: $2.5 million of retail sales, a 17% decline over the prior quarter, primarily driven by new entrants into the Saskatchewan retail market, partially offset by Alberta retail sales growth.

  • Harvests & Yields: Decibel harvested 1,059 kilograms of dried flower material in Q4, representing substantial growth over prior periods as Thunderchild achieved run rate harvests. Yields from the Thunderchild Cultivation Facility fell below management estimates, with a facility upgrade necessary to further enhance product quality and contribute to higher yields, to better meet growing demand for Decibel products. To reinforce the Company's commitment to quality products, it accelerated the implementation of the planned infrastructure optimization at its Thunderchild Cultivation Facility, which are expected to be completed by end of April.

  • Working Capital: Cash used in operations was $5.1 million in the fourth quarter. The Company has made significant investments in working capital to meet the growing demand for Decibel brands and products, helping the Company achieve its aggressive sales growth and preparing for strong launches of infused products in the first quarter of 2022. Additionally, the Company identified certain supply chain risks related to inventory procurement for packaging and vape carts from overseas manufacturers. As a result, the Company invested in the fourth quarter to air freight inventory and hold more inventory than historical levels to mitigate against these risks.

  • Debt Financing in Place to Repay Convertible Debentures: On February 1, 2022, the Company closed a debt financing with connectFirst Credit Union in respect of $54 million of debt capital over a 5-year term. The Company has two facilities that remain undrawn:

    • $12 million additional term debt earmarked for repayment of the Company's convertible debentures; and

    • $7.5 million accordion to support future growth initiatives, with availability subject to a trailing twelve month funded debt to EBITDA ratio of less than or equal to 4.00:1.00.
Q1 2022 Preliminary Results

The Company anticipates for the three-month period ending March 31, 2022:

  • Net revenue between $16.5 and $17.5 million, compared to $12.6 million in Q1 2021

  • Exiting Q1 2022 with a record 4.0% recreational national market share

Year End and Quarterly Financial Highlights

       

Three months ended
December 31

Year ended
December 31

       

2021

2020

2021

2020

(thousands of Canadian dollars)

       

Gross wholesale revenue of flower

$5,500

$3,856

$18,720

$12,360

Net wholesale revenue of flower 

$4,605

$3,243

$15,804

$10,386

Kilograms of flower sold

 

808

378

2,181

1,160

Average wholesale flower gross pricing per gram 

$6.80

$10.21

$8.58

$10.17

Average wholesale flower net pricing per gram

$5.70

$8.58

$7.25

$8.47

Kilograms of salable cannabis harvested

1,059

327

2,808

1,140

               

Gross wholesale revenue of extracts

$11,722

$6,078

$37,270

$7,043

Net wholesale revenue of extracts

$6,893

$4,528

$24,747

$5,312

               

Number of retail stores

   

6

6

6

6

Retail revenue

     

$2,520

$3,654

$11,902

$14,232

               

Total

             

Gross revenue

     

$19,742

$13,588

$67,892

$33,635

Net revenue

     

$14,018

$11,425

$52,453

$29,930

Gross profit before fair value adjustments

$3,689

$4,519

$17,863

$11,683

Gross margin

26%

40%

34%

39%

Adjusted EBITDA 1

   

$1,450

$1,102

$7,417

$1,527

Cash flow from operations 

 

($5,133)

$1,343

($17,160)

($4,238)

Link to Decibel's Investor Presentation

Decibel's audited financial statements for the year ending December 31, 2021 ("Financial Statements") and related Management's Discussion & Analysis ("MD&A") for the three and twelve months ending December 31, 2021, are available under the Company's profile at www.sedar.com. As of December 31, 2021, 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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D. H. Taylor
(@dhtaylor)
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Joined: 2 years ago
Posts: 1053
 

This is some solid news.  These guys are going to start printing some consistent numbers.  It will be nice once these stocks have the ability to up-list to Nasdaq.  


   
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