Decibel revenue fell on Canadian competition as it looks toward exports

Canadian cannabis producer Decibel Cannabis Co. (TSXV: DB) (OTCQB: DBCCF) reported a 12% year-over-year decline in its third-quarter revenue as the company battled increased competition in Canada and paused exports to Israel, though the company says a recent acquisition will help expand its international reach.

Revenue fell to C$24.1 million for the period ending Sept. 30, from C$27.5 million a year earlier. The company cited heightened competition in pre-rolled products and consumers switching to larger vape cartridge formats.

Despite lower sales, Decibel improved its gross margin to 53% from 44% last year through cost-cutting efforts. Adjusted EBITDA declined to C$5.1 million from C$6.5 million.

“Decibel has been very deliberate about reducing our current liabilities, by approximately C$5 million this quarter,” CEO Benjamin Sze said in a statement. “This marks the last quarter where our primary focus is on Canadian domestic recreational sales.”

The pivot away from Canadian retail comes after Decibel’s C$6.3 million purchase of AgMedica Bioscience in late October. That deal more than doubles Decibel’s production capacity for international exports to 12 metric tons annually, according to filings.

Sze called the acquisition facility “the cornerstone of our international strategy.” The company expects AgMedica to generate C$30 million in revenue and C$4 million in EBITDA next year.

The international push follows Decibel’s exit from Canadian retail earlier this year when it sold its Prairie Records stores to Fire & Flower for C$2.1 million plus a note worth C$844,000. Decibel took a C$3.3 million impairment charge on the sale.

Canadian recreational cannabis sales for the company fell 12% to C$23.8 million in the third quarter. International revenue dropped to C$309,000 from C$500,000 after Decibel temporarily stopped shipping to Israel while switching distribution partners.

Earlier this month, Decibel raised C$2 million through a private placement, with executives and directors buying about 56% of the shares offered.

The company ended September with C$3 million in cash and remained compliant with its loan agreements.

Management plans to expand distribution beyond Canada while defending domestic market share through its relaunched Qwest flower brand and new vape products.