Adam JacksonCanadian player Decibel Cannabis Company Inc. (TSX: DB) (OTCQB: DBCCF) has reported strong financial results for the fourth quarter of 2022 and the full fiscal year ending Dec. 31, 2022.
Decibel achieved a company-high national market share of 6% in the fourth quarter of 2022, placing it as the fourth-largest licensed producer in Canada by market share during the period.
However, the company experienced a net loss of C$3.15 million during the period, versus a net income of C$654,000 in the same period in 2021.
The company also saw significant net revenue growth, with C$25.8 million in the fourth quarter of 2022, up 41% from the previous quarter and 84% year-over-year. The growth was driven by increased demand for derivative products and the company’s first two sales of branded dried flower products in Israel.
“Our fourth quarter results capped off a year of strong financial performance with record results including market share, net revenue, adjusted EBITDA, and adjusted net income,” CEO Paul Wilson said in a Monday statement.
In the fourth quarter, Decibel had an adjusted net income of C$1.8 million, which was a 40% decline from the prior quarter but an improvement of C$5.6 million over the fourth quarter of 2021.
The decline was partially due to a write-off of inventory of approximately C$3.2 million. This was the third consecutive quarter that Decibel had a positive adjusted net income.
Decibel has also launched 13 new products in various provinces in Q4 2022, including General Admission SKU’s in vape and infused pre-rolls in distillate and live resin formats and Qwest SKU’s in dried flower, standard pre-rolls, and infused pre-rolls formats.
Full-Year Results
The premium flower and extract maker’s revenue for the year was $79.3 million, representing an increase of 51% from the previous year. For the full year, the net loss was C$4.46 million, compared to a net income of C$1.7 million in 2021.
“This creates momentum heading into 2023 with demand continuing to grow and assets well positioned to deliver on this demand,” added Wilson.
The company’s annual adjusted EBITDA and net income showed significant growth, with the former hitting a record of C$17 million and the latter reaching C$3.1 million. The positive results can be attributed to operational efficiencies, automation equipment commissioned, and sourcing of more cost-effective components related to the manufacturing of cannabis products.
Market Share
The company’s market share continued to grow into March 2023, reaching 6.8% and placing it as the second-largest licensed producer in Canada by market share.
Still, company filings reveal material uncertainties over the company’s cash flow versus its obligations.
Decibel generated cash flows of C$8.3 million from operations and has net current assets of C$15.9 million as of December 31, 2022. Its future depends on its ability to maintain profitable operations, generate sufficient funds from operations, obtain new financing, and comply with covenants relating to its lending agreements.
The company had a funded debt to trailing twelve-month EBITDA of 2.57x and a funded debt to annualized EBITDA of 1.55x.
“We have a number of 2023 catalysts that support an outlook where Decibel continues to build its market share and brand position in Canada and in turn leverage into international opportunities,” Wilson said.
