Debra Borchardt
Decibel Cannabis Company Inc. (TSXV: DB) (OTCQB: DBCCF) released its interim financial results for the third quarter ended Sept. 30. Total revenue was $49 million, well above last year’s revenue of $28 million for the same time period.
Decibel also reported that the quarter had a net income of $523,000, which was a sequential decline of 88% over the prior quarter and a year-over-year decline of 82%.
The company noted that the net income was negatively impacted by a litigation expense of $3 million – comprised of $2.6 million in direct litigation expense and $400,000 in professional fees – related to arbitration with UCG Canada LP, which has now concluded.
“With continued success in our ready to consume product strategy, our recent launches including General Admission Blinker, General Admission edibles, and our new brand Vox Popz crushable pre-rolls are expected to further cement our ready to consume position and meaningful growth in the coming year.” CEO Paul Wilson said. “Alongside these top line growth initiatives, we are pleased to have concluded the expansion of our manufacturing capacity, which will expand gross margin and support our new wave of product launches.”
Decibel added that the third quarter was also impacted by a $368,000 write-off of aged products and increased temporary labor of $566,000 to meet market demand.
Free cash flow was $1.2 million in the quarter, a decrease of $1.2 million over the comparative periods. The company said the decrease was largely a result of accounts receivable increases that were partially offset by a reduction in capital investments and an increase to accounts payable.
Revenue Growth
The company’s net revenue growth was driven by:
- Continued growth in demand for derivative products
- Expansion of manufacturing capacity
- The launch of the company’s new brand Vox and General Admission Edibles
- Branded sales to Israel
Decibel said that international sales were negatively impacted by delays in third-party lab results which have since been resolved with third-quarter volumes being sold in the fourth quarter of this year.
On a positive note, net Canadian recreational sales for the quarter were $27.8 million, an increase of 74% over the comparative periods.
“The rise of Decibel is remarkable,” analyst Pablo Zuanic recently wrote. “It had less than 5% segment share in 1Q22, and it now leads the segment with 16% share; it was at 10% as recently as 4Q22. Pre-rolls accounted for 65% of company sales in 2Q23 (Hifyre), and for over 95% of its absolute (year-over-year) rec sales growth in 2Q23, as per Hifyre.”
