Mr. Paul Wilson reports

DECIBEL ANNOUNCES RECORD SECOND QUARTER RESULTS WITH $30.9 MILLION OF NET REVENUE, $7.3 MILLION OF ADJUSTED EBITDA, AND POSITIVE FREE CASH FLOW

Decibel Cannabis Company Inc. has released its interim financial results for the three-month and six-month periods ended June 30, 2023.

"Our strong second quarter sequential net revenue growth, driven by demand for our core products and international exports, continues to exceed our publicly-stated targets," said Paul Wilson, chief executive officer of Decibel. "We continue to highlight the success in our new, unique and innovative product strategy, demonstrated through clear consumer preference to our infused preroll strategy. In 2023, our industry-leading brand, General Admission, has grown category share to 49 per cent (plus 6 per cent year to date) in light of significant category competition through new competitive brands -- plus 50 brands (plus 56 per cent year to date) -- and new SKUs (stock-keeping units) -- plus 156 SKUs (plus 62 per cent year to date). Currently, the infused preroll segment makes up approximately 34 per cent of the Canadian preroll category; in established U.S. markets, it makes up approximately 60 per cent (California and Arizona year-to-date sales 2023). We continue to see tailwinds for our core business that will further reinforce our Canadian market position and international presence."

Second quarter highlights:

• Record national market share of 7.5 per cent in Q2 2023, which placed Decibel as the second-largest licensed producer in Canada by market share:
  • As of July, 2023, Decibel's market share was 7.6 per cent, which placed Decibel as the second-largest licensed producer in Canada by market share;
• Record net revenue of $30.9-million in the second quarter of 2023, with sequential growth of 14 per cent over the prior quarter and year-over-year growth of 66 per cent; net revenue improvement was driven by net Canadian recreational sales through growth in demand for vapes and infused products, increased manufacturing capacity, international sales, and the launch of the company's new brand Vox and General Admission edibles near the end of the quarter;
• Gross margin before fair-value adjustments was 42 per cent in the second quarter of 2023, compared with 49 per cent in the prior quarter and 41 per cent in the first quarter of 2022; the second quarter was impacted by a $754,000 write-off of aged product and increased temporary labour of $900,000 to meet market demand as the company is in the process of expanding manufacturing capacity;
• Record adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $7.3-million in the second quarter of 2023, with sequential growth of 8 per cent over the prior quarter and year-over-year growth of 126 per cent.
• Positive free cash flow of $500,000 in the second quarter of 2023, with sequential decline of 75 per cent over the prior quarter and a year-over-year decline of 51 per cent; during the quarter, the company reduced accounts payable by $4.2-million from the prior quarter, which negatively impacted free cash flow;
• Record adjusted net income of $4.3-million in the second quarter of 2023, with sequential growth of 27 per cent over the prior quarter and a year-over-year improvement of $4.2-million;
• Adjusted earnings per share EPS of one cent in the second quarter, consistent with the prior quarter and a year-over-year improvement of one cent.

Year-to-date highlights:

• Net revenue of $58-million, an increase of 65 per cent over 2022;
• Adjusted EBITDA of $14.1-million, an increase of 147 per cent over 2022;
• Positive free cash flow of $2.3-million, a decrease of 14 per cent over 2022, driven by a $3.7-million reduction in accounts payable;
• Adjusted EPS of two cents, an increase of two cents over 2022.

Decibel's interim financial statements for the three-month and six-month periods ending June 30, 2023, and related management discussion and analysis for three-month and six-month periods ended June 30, 2023, are available under the company's profile on SEDAR.

As of June 30, 2023, Decibel was in compliance with all of its financial covenants under its credit facilities and expects to remain in compliance for the remainder of its 12-month forecast period.

About Decibel Cannabis Company Inc.

Decibel is a consumer-focused cannabis company focused on delivering products that delight customers through a commitment to robust innovation and product quality. Leading brands General Admission, Qwest and Vox are among its portfolio sold both across Canada and beginning to extend toward new countries to create a global footprint. Decibel operates a processing and manufacturing facility in Calgary, Alta., and two cultivation facilities in Creston, B.C., and Battleford, Sask.

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