Decibel Announces Q1 2020 Financial Results Reflecting First Full Quarter of Contributions from Merger

Published: June 22, 2020

Decibel Announces Q1 2020 Financial Results Reflecting First Full Quarter of Contributions from Merger

Decibel Cannabis Company Inc. announced its first quarter financial results for the three-month period ending March 31, 2020. Decibel’s financial statements for the three-month period ending March 31, 2020 and related Management’s Discussion & Analysis (“MD&A”) for the reporting period are available under the Company’s profile at www.sedar.com.

“During the first quarter of 2020, we made significant steps towards completing integration and cost saving initiatives, while continuing to progress our large-scale development projects. Although our targeted cost structure is not fully reflected in this quarter’s financial results, early impacts of our efforts are starting to be realized,” said Benjamin Sze, CEO of Decibel. “We expect to continue to see cost reductions and growth as we operationalize our extraction & manufacturing facility and capture further production efficiencies at our Creston facility.”

The first quarter of 2020 reflects the Company’s first period that recognizes full quarter results of the consolidated entity resulting from the plan of arrangement (the “Arrangement”) that was completed by We Grow BC Ltd. on December 19, 2020, resulting in a reverse takeover of Westleaf Inc.

Investor Highlights 

  • Total net revenue for the first quarter of $5.0 million, a $4.5 million increase over the comparative period
  • Sold 224 kilograms of cannabis in the first quarter achieving an average wholesale flower gross price per gram of $11.85
  • Adjusted EBITDA loss for the first quarter of $0.4 million

Three months ended

March 31, 2020

March 31, 2019

Net wholesale revenue

2,227

506

Kilograms sold

224

59

Average wholesale flower gross pricing per gram

$11.85

$10.03

Net wholesale flower gross pricing per gram

$9.95

$8.63

Kilograms of cannabis harvested

314

188

Number of retail stores

4

nil

Retail revenue

2,809

nil

Total

Net revenue

5,036

506

Gross profit (loss) before fair value adjustments

2,142

136

Adjusted EBITDA (a)

(418)

(132)

(a)

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

Q1 2020 Financial Highlights and Subsequent Events

  • Total net revenue grew tenfold in the first quarter to $5.0 million over the first quarter of 2019, driven by execution on the strategic plan resulting from the Arrangement, continued strong demand for Qwest products, and increases in wholesale pricing.
  • Kilograms sold increased ~280% in the first quarter to 224 kilograms, achieving an average wholesale flower gross price per gram of $11.85 for the period, reflecting best-in-class pricing attributable to the Company’s strategic focus on rare genetics and premium quality cannabis.
  • During the first quarter of 2020, Decibel executed cost-reduction measures and realized on synergies resulting from the Arrangement, resulting in an estimated combined cost savings exceeding $5 million, net of severance costs, through the 2020 fiscal year compared to 2019.
  • Adjusted EBITDA loss for the first quarter of $0.4 million increased over the first quarter of 2019, primarily from selling, general and administration costs increasing from the Arrangement, partially offset by significant revenue growth and production efficiencies leading to an improved gross margin.
  • Subsequent to the first quarter of 2020, Decibel entered into an agreement to amend its credit agreement with ATB Financial on May 22, 2020. The Company believes the amended agreement is better aligned with the Company’s balance sheet and cash flow expectations and provides financial flexibility over the near term. For more information please refer to Decibel’s MD&A for the three months ended March 31, 2020, including to “Liquidity and Capital Resources“.

While the pandemic continues to have a significant impact on the economy, the Decibel team has reacted quickly and successfully implemented a pandemic response plan, altering its operating procedures in its facilities and retail locations to address the current risks of COVID-19. We are pleased that the Decibel team has remained safe, productive, and is continuing to deliver high quality cannabis products and retail experiences.

Decibel is uncompromising in the process and craftsmanship needed to deliver the highest quality cannabis products and retail experiences. Decibel has three production houses operating or under development 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, an 80,000 square foot indoor cultivation facility in Battleford, SK is scheduled to be completed and licensed in 2020. 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, and Blendcraft, into new and innovative product formats like concentrates, vapes, edibles and beyond.