Decibel Cannabis Company Inc. (TSX: DB) (OTCQB: DBCCF) reported notable gains for its second quarter sending June 30, consolidating its position as Canada’s second-largest licensed cannabis producer by market share.
The firm saw its national market share peak at 7.5% in the second quarter of this year. At the same time, it reported net revenue of C$30.9 million, a sequential rise of 14% from the previous period and an impressive year-over-year surge of 66%.
The uplift was attributed to a combination of factors including heightened demand for vapes and infused items, a boost in manufacturing capability, and robust international sales. The company also launched two new brands, Vox and General Admission Edibles.
“In 2023, our industry leading brand, General Admission, has grown category share to 49% in light of significant category competition through new competitive brands,” CEO Paul Wilson said in a statement.
He also mentioned the importance of the infused pre-roll segment, which currently holds about 34% of the Canadian pre-roll market. To put this in perspective, he noted that such products account for around 60% of the market in established U.S states, such as California and Arizona.
However, despite its revenue success, gross margin dipped to 42% sequentially, from 49% in the first quarter of the year. The slight contraction was due to a C$754,000 write-off on product, coupled with a C$900,000 rise in temporary labor costs. The latter was a measure to satiate market demand, due to Decibel’s expansion of manufacturing capacity.
From an earnings standpoint, Decibel saw record adjusted EBITDA of C$7.3 million, a rise of 126% since the same period last year. The company also recorded adjusted net income of C$4.3 million for the second quarter, underlining a year-over-year rise of C$4.2 million.
The firm closed the quarter with a positive free cash flow of C$500,000, marking a sequential downturn of 75% and a year-over-year dip of 51%. One of the influencing factors was a C$4.2 million reduction in accounts payable from the previous quarter.