Mr. Benjamin Sze reports

DECIBEL ANNOUNCES YEAR END AND FOURTH QUARTER RESULTS

Decibel Cannabis Company Inc. has released its audited financial results for the three- and 12-month periods ending Dec. 31, 2023.

"The company's fourth quarter financial results delivered another year of growth across all metrics and I look forward to working with the team to continue to build on this success," said Benjamin Sze, Decibel's new chief executive officer.

Fiscal year 2023 financial highlights:

• Record net revenue of $116-million in 2023, an increase of 46 per cent over 2022;
• Record adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $25.9-million in 2022, an increase of 52 per cent over 2022;
• Record adjusted net income of $8-million in 2022, an increase of $4.9-million over 2022.

Fourth quarter highlights:

• Record net revenue was $27.7-million in the fourth quarter of 2023, with year-over-year growth of 8 per cent. The net revenue growth was driven by increased demand for the company's derivative products.
• Gross margin before fair value adjustments was 45 per cent in the fourth quarter of 2023, compared with 43 per cent in the fourth quarter of 2022. The increase partially reflects operational investments that partially impacted the quarter, including expansion of the company's manufacturing capacity.
• Adjusted EBITDA of $5.1-million in the fourth quarter of 2023, with a year-over-year decline of 27 per cent over the fourth quarter of 2022. The decrease in adjusted EBITDA was primarily driven by an increase in SG&A (selling, general and administrative) relating to increased sales and marketing spend, and the launch of the Blinker proprietary vape system of $638,000.
• Adjusted net income of negative $132,000 in the fourth quarter of 2023, with a decline of $1.9-million over the fourth quarter of 2022. Adjusted net income was negatively impacted by $1.8-million of bad debt expense and $638,000 for launch costs of Blinker, the company's proprietary new closed loop vape system.
• Leverage: At the end of the fourth quarter of 2023, Decibel had a financed debt to trailing 12-month EBITDA of 1.58 times.

Operating highlights

International developments

Subsequent to year-end, the company achieved the following developments internationally:

• Completed its craft cannabis first export to Australia in March, 2024;
• Received its first purchase order for vapes to export to Australia;
• Signed a supply agreement with a new Israel counterparty contemplating an annual commitment of 1,000 kilograms of craft cannabis;
• An Israeli customer defaulted on its payments required under the cannabis supply agreement with the company, leading the company to provision $1.6-million of such receivable. The company took formal legal action to collect the receivable, and the Israeli company subsequently filed an insolvency motion. Decibel joined these proceedings and formally filed its claim with the trustee. The company believes there is 300 kg of inventory related to this provisioned receivable that is currently accessible, and that a portion of the receivable may be recoverable through a resale agreement of this inventory with the trustee and another Israeli company.

Decibel's audited financial statements for the year ending Dec. 31, 2023, and related three- and 12-month periods ending Dec. 31, 2023, management's discussion and analysis (MD&A), are available under the company's profile at SEDAR+. As of Dec. 31, 2023, Decibel was in compliance with all of its financial covenants 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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