Decibel Releases Second Quarter Results Highlighting Positive Developments with Launch of Cannabis 2.0 Products

Published: August 31, 2020

Decibel Releases Second Quarter Results Highlighting Positive Developments with Launch of Cannabis 2.0 Products

Decibel Cannabis Company Inc., a premium cannabis producer and retailer, is pleased to announce its second quarter financial results for the three-month and six month periods ending June 30, 2020. In the second quarter of 2020, the Company achieved positive cash flow for the first time by delivering net revenue growth in both its high end product brand Qwest and Prairie Records retail businesses, realizing cost reductions and continuing to execute on its business strategy.

Q2 2020 Financial and Operational Highlights 

  • Net Revenue Growth: Total net revenue grew by 17% in the second quarter to $5.9 million, over the first quarter of 2020, driven by continued execution on the Company’s strategic plan with strong same store sales growth from retail operations and continued demand for Qwest products.
  • Adjusted EBITDA Improvement: Through strong revenue growth and a focus to realize cost reductions in the quarter, achieved Adjusted EBITDA loss of $26 thousand, an improvement of $384 thousand over the first quarter of 2020.
  • Increased Qwest Sales258 Kilograms sold in the second quarter, with an average wholesale flower gross price per gram of $10.03 for the period. During the quarter, the Company executed tactical pricing initiatives on older strains in Alberta and Saskatchewan, which helped drive distribution, volume and velocity in retail stores and increased consumer trial of the premium Qwest family of brands products.
  • Strong Prairie Records Results: Increased revenue for the period to $3.8 million, including same stores sales growth of 37% over the first quarter of 2020. Showing continued strong retail execution by reducing days of inventory to a targeted 30 days and disposing of non-core leases.
  • First Sales of Vape Pens and Concentrates: Subsequent to quarter end, Decibel achieved a key milestone with its extraction and manufacturing facility, The Plant, shipping its first orders to Saskatchewan and receiving initial purchase orders for its first 10 SKUs of vapes and concentrates. Decibel received its sales amendment for cannabis derivative products 46 days ago, on July 13, 2020.
  • New Cultivar Launches: Late June, launched trendsetting cultivars that deliver high THC and strong terpene profiles, including one of the highest recorded THC percentages for Decibel’s Kush Mints cultivar. The new cultivars continue to demonstrate Qwest’s premium pricing having achieved an average blended gross price of $11.23 per gram.
    • Qwest Reserve – Kush Mints – 31.7% THC;
    • Qwest Reserve – MAC1 at 28% THC;
    • Qwest Reserve – Point Break at 25% THC; and
    • Qwest – Pineapple Cake at 24% THC.
  • Two New Store Openings: Opened two new Alberta retail stores in July, one near the University of Alberta campus in Edmonton and one beside the Palace Theatre in downtown Calgary on Stephen Ave.
  • Substantial Completion of Construction: Subsequent to quarter end, Decibel substantially completed construction of its large scale, indoor cultivation facility, Thunderchild Cultivation, and has begun bringing genetics into the facility.

“The first half of 2020 presented some great challenges for Decibel, integrating the two companies, managing through the pandemic and tremendous volatility in the capital markets, all while staying focused and executing our strategic plan” said Benjamin Sze, CEO of Decibel. “We continue to make significant strides in becoming a premier producer of premium cannabis and cannabis 2.0 products.”

Appointment of Senior Advisor
Decibel is pleased to announce that it has appointed Dr. Ivan Casselman (Ph.D., FLS), a cannabis science advisor and plant medicine researcher, as a senior advisor to Decibel. He has worked in the BC cannabis industry for over a decade. His experience as an analytical chemist and plant medicine researcher gives him a unique insight into product development and business development strategy in the cannabis sector.

“I am so excited to be invited to advise Decibel and to help chart the future course of the company. For decades, BC has been known for the production of high-quality cannabis. Decibel is a company rooted in that BC tradition” said Dr. Ivan Casselman. “As the medical and legal cannabis market continues to develop and grow in Canada, Decibel has an amazing opportunity to bring that tradition to the rest of Canada and one day, the world.”

Quarterly Highlights

Three months ended

Six months ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Net wholesale revenue

$2,054

$1,316

$4,281

$1,822

Kilograms sold

258

134

511

194

Average wholesale flower gross pricing per gram

$10.03

$11.86

$10.25

$11.23

Average wholesale flower net pricing per gram

$7.97

$9.82

$8.38

$9.39

Kilograms of cannabis harvested

311

437

625

625

Number of retail stores

4

nil

4

nil

Retail revenue

$3,837

nil

$6,646

nil

Total

Net revenue

$5,891

$1,316

$10,927

$1,822

Gross profit before fair value adjustments

$2,124

$542

$4,266

$678

Adjusted EBITDA (a)

($26)

$385

($436)

$253

(a)

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

Credit Facility Amendment

On May 22, 2020, Decibel entered into an agreement to amend its credit agreement with ATB Financial. 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.

Decibel’s financial statements for the three-month period ending June 30, 2020 (“Financial Statements”) and related Management’s Discussion & Analysis (“MD&A”) for the reporting period are available under the Company’s profile at www.sedar.com. As of June 30, 2020, 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.

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,