YCBD - Earnings call transcript Q1 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to cbdMD’s December 31, 2021 First Quarter Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its first quarter results, which followed the filing of its quarterly report on Form 10-Q. Today's conference call is being recorded and will be available online, along with our earnings press release covering our financial results and non-GAAP presentation and reconciliation at cbdmd.com in accordance with cbdMD's retention policies. All participants on this call will be in a listen-only mode. The call will be followed by a question-and-answer session. would Kennedy, to Officer the Operating I over the and time, Officer. Ronan to company's this now turn like conference Chief At Chief Financial go please Ronan, ahead.

Ronan Kennedy

cbdMD's thank and call for Catherine. quarter update. you you, XXXX first And joining Thank the December XX, earnings all

well of call as Scientific Affairs. we and Marty today, Swift, Sibyl the our Chairman Regulatory Dr. On Co-CEO, our and have Sumichrast; as Vice President

provide update an Swift Following the overview our quarterly the Marty Safe for Dr. an Harbor financial business, will summary climate will regulatory will provide I provide on statement, current then results. and of of CBD a the

for on SEC, February federal made Sumichrast. intend not turn Chairman over I'd as Thursday, we'll open Harbor may provisions on this purposes cbdMD's website those be And would date, and conference call our the XXXX, the that, reflect only securities about all in may of or by to We'd XX-K today of these that various Any that except of other viewed differ after Private and XXXX. uncertainties for forward-looking to or Co-CEO, occur questions. today's to on XX, statements under report year remarks Act forward-looking that for with any required the Reform Securities cautions like today's statements that, from filings which including the statements our to future subject cbdMD date, Marty risks expectations, Form Following call prospects company's of like the law. statements ended at actual With results to the cbdMD the everyone company's these SEC's www.sec.gov. events to of annual update and XXXX. www.cbdmd.com that can to be indicated, on up Safe September remind plans the circumstances Litigation cause and risks are forward-looking call website as materially forward-looking our XX, at does described constitute speak

Marty Sumichrast

cbdMD. would three-year agreement. passage under merger the afternoon, startup us We're goal the Ronan. the knowing be of how net first merger contractual million received, our lofty of appreciate sales company three-year of much, unknown acquisition competing considering more anniversary and our owner CBD Farm anniversary quarter, sales year very the achieved ago, accomplishment thousands the It's for $XXX.X forth brand industry joining brands. with of earnout pandemic We've target have We million an brand, flagship were Development, everyone. our exceeded also made COVID we against the total And you proud CBD in which set of almost third Based you our dealing two Cure the impressive with the decriminalized Last we completed sales the complications for our Thank agreement years. a Three with CBD global was entering this it now well good $XXX.X of earnout. our U.S. under for of while our of while of not Bill, the of celebrated And other we the our years brand three-year today.

market overall with reposition These affected U.S. remain bullish that at we but our caused we include chain during several conditions years, disruptions first As look disruptions next the three accomplish, to have channel distribution, CBD product market. costs we and company softness out by we the must combined set can on for quarters. an what up business for the adjust in last new supply issues, our delays

structure to timely unacceptably and negative manner, that adjust failed operating accordingly precipitated, result. challenges these led high and to a While our we cost in

now cutting overhead are XXXX, early in target with annualized did savings. $XX million a we As our faced and circumstances, overall we when similar cost with

securing the with BXB marketing power over we this XX% We we can't established sales by significant of recognition both We the by delivering a of priorities our brands. non-CBD brand’s We to prosperity, online intend footprint end cbdmd.com sales to saving and accomplish net to expect channels. focus wholesale. amount we websites, and have to on on our also our on We product retail to believe plan this customer and cut know of innovation our through focusing we driving partnerships, expanding leverage our this our co-branding sales, brand changing must by instituted new quarter. grow our efforts to way generates our to sales. traffic have expand best-in-class

conversion Our conversion the in rates significant based standards. top with customer website for five industry on residing rates enjoys cbdmd.com

Joe podcast. new team, is partnerships, marketing Le Board, three brought Coapman generating corporate expansion initiatives, months Marketing on year. exclusive legacy November CBD marketing as Rogan athletic mission revamped Experience, our this traffic our we to Joe digital to and Our include with spend sponsorships, short sales with of of through lead department brand as effort, which just Matt sites. exclusive and proven marketing, cut leader successful drive well Spotify Stugotz Batard customer the co-branding new with focus To and activations Dan in direct sponsorship in BXB category the redefined a in last his our Officer sponsorship podcast, as underperforming and our on Rogan Matt, through sales. and Chief Show advertising Recent the partnership

seeing results. that we Next to partnerships improved month, six can announce over can customers additional sites. we drive new our I expect weeks, that report sales past to are the

While and brands product The making our our we customers, important. improve to brick wholesale mortar the and driving offering wholesale streamlined of sales equally is is our adjusted competitive. our to even growth pricing, online more division and vital, sales our

partnership management. reaching under world, such management also leading which Golf, XXX verticals, golf in Troon We company our as course distribution new the over golf are exclusive with courses the has

convenience operators and store pricing and retailers larger with a to enhancements. strategy sales inroads making also are redefined We product

and international regulation registration, more We compliance as are clear. become expanding into markets

Central over selling We and America currently and major products we are the such are international Japan. our markets registering to UK, as in several markets, XX

new award-winning launched newly the as We and innovative of a awards. product continue to such multi-year as continue products, our functional year recipient, gummies a create

We our obtain group from protecting to such enhancing health internationally. company that this Paw major market which CBD during certifications sports the announced brand only opens that animals to week of highly the the partnerships We National and first continue in the companion to Certified committed the non-profit for that we strengthens NSF and leagues or as Supplement certification designation respected our a door to appeal, the the CBD NASC are Sport throughout USA official country. Animal Council, and of

clarity the Finally, over the unencumbered. please Science for to Swift, and Dr. factor with to Vice turn will FDA biggest at to force and our our Programs, the Dr. FDA's I'll was Office our Sibyl the now single Strategy Supplement that the most to update. clarity ahead. is and Swift, significant, the we are Dietary at Associate of Affairs Regulatory important Director products an With now President now respect products. ability go market sell actively Swift Receiving cbdMD. with call our to regulatory Research formally engaged Dr. and provide from FDA and

Sibyl Swift

broad five my And able is statutory of of the Programs Office to not according I requirements, it's subtherapeutic supplement office within call responsible safety submissions. work but conditions spent requisite only talk cannabinoid the CBD spectrum in use. XXX.X, safe ODSP, over a to the dietary meet Supplement that patent everyone of to MD, amount we is FDA I suggest, years according Marty. with pending have at to be data, for that dietary serving reviewing the regarding to sizes blend demonstrate to in-depth Dietary and today on proprietary supplement knowledge to pleasure or our the you, starting the Thank prior our is which for

in with novel to coming with to the quality is months. be and of FDA safety the there We in analysis as met we agencies dark. It analytical to and globally a we was is a believe week, safety in million And Last UK the expect support to a validated not our approval it in food our process. The know our it. the products EU review company. notification. discuss the ingredient of submitted Our data and required submission dossier safety good expressed is FDA dietary shot data over testing of new results dollars we successfully says invested want the to during dossier and meeting in The pre-submission The recognized FDA for a interest this the data they science and wanted receiving a testing they science. foods. indicated the the

they will on unless expressly health it a earning Natural for the the to to own. by to its However, the statements provided exclusion current to they CBD their our position filing, FDA would issues. we from Citizens with not submitting notification individuals be with FDA coming the to Association, Therefore, be we a in FDA that to no meeting and community days, the the would criteria. drug will exclusion with a met authority, Products process the conjunction last made which FDA be see policy. notification defaulted the organizations we clear We standard Petition The the change that in is confirmed call statutory make act a use indication for removed request

by or back issue that that with hemp which on extract position the as not cannabidiol that the FDA their data safety spectrum for graft our request will fallen process. dossier groups has will submissions reviewed that cannabidiol on the The part a for as Petition NDI pathway Other our ingredient CBD. broad approached containing of lens exclusion products, those an this FDA be with Citizens Our core without and repeatedly reviewing is remove a safety is have extensive the review ingredient submissions. same bigger notifications create for FDA

We conditions for review product the to upon our based our use. data of are asking FDA our

stringent, Education and intent asking drugs. are those and company both products safely the are labeling introduced who to to into and manufacturing, are Health the Supplement of the natural follow used of product sale intervention and Dietary unnecessarily drafted DSHEA, Act, natural FDA dietary a foods was day or every counteract as which We the federal supplements We

ingest of CBD. We are not drug suggesting that level customers should a dose

CBD things that basis and understand in the doing a and we a accordance regulations safety our is which why not exactly on without find one-to-one review subject subjected data and of are why than approved a than other lower is to doses significantly In and standard CBD difficult dietary in CBD being to different supplements fact, are dietary level our supplements, challenges, we to moves is FDA for the the hemp to authorities broad the We these standard. asking being their context them for drug drugs. slowly products a instead in understand Therefore, marketplace with it its for entire products.

supplements, our marketplace different consumer product, We to hemp that our to a are than all policy deserve dietary conduct confused. the improperly to than public studies healthcare the Consumers other further help maintain supplement it by maintain open ability review the arbitrary on then it we is all food default any to the to it life products, are they or and We robust applied willing stop to for to access food to removing products safe, domain, life. times the of rule to in put deny exclusion they or for is especially but our no rather behind out recognizing science would being from like statement any to FDA healthy health. these other expect product, will and in a their support using efficacy the exclusion FDA cannabinoids trying that walks Americans believe capricious of of drive and far as hiding past product time supplement access about

access substandard the sales ours Uncertainty be as marketing we such pride industry. platforms. CBD adhere manufacturers this. the great of the flood the believe applicable marketing and leading sale supplement leading products, and care. to standards brands, mainstream FDA should as retailers, rules such being ours, all well due and to such standards market the in blame is of which While to Other Act, products apply has this all to products as ours as on all to prohibited go manufactured these Food, Cosmetic substandard for Drug, as highest to brands with channels, to existing wholesalers dietary expense smaller CBD MD, and and brands to directly are as ourselves rigorous the platforms. for products At CBD leaders allowed and properly retail We adhere safe and

it about but field data. act, are FDA sitting data, disingenuous After status to them rather we than with been could been enough deserves. is the deference this regulatory not the filing belief The in without framework. a and to arbitrarily support have applied long the is demand conclude, more eventual drug needs NPA, by and statements and We done concept our the make exclusion. To CBD original to being past. level an able begin the created citizen's has of process on playing of not backing petition a they waiting the that the decide tactic bringing we sidelines This to quo in continue for to industry

safe to looked able to the the However, now I'll to our over time, field. our highest products quality our science and Financial and a at it's to we be shareholder build We that back and on and dealt providing CBD Kennedy, level turn consumers, feel Ronan to regulation products platforms value. products it and to with Chief are everyday in Thank be invest Ronan? playing all ensure committed and for market the industry useful remain wellness across you. to finally Officer. And Operating drive and Chief health our

Ronan Kennedy

GAAP for first sales XXXX the quarter Thank net from prior and year's a were XX% everyone. decrease first fiscal million, welcome of $X.X you, Sibyl total. Total quarter

E-commerce the business direct-to-consumer total million Our fiscal first XXXX, quarterly a quarterly year-over-year in e-commerce first represented quarter. the of net of decrease. generates sales for XX% sales our of XX% $X.X quarter

XXXX. million Our quarter $X.X net XX% to the sales fiscal million comparative as for down compared the first first wholesale business of in generated $X.X for quarter,

to XXXX. gross decreased fiscal the inventory profit an XX.X% to charge. GAAP margin first XXX,XXX is XX.X% the partly first quarter This in from in of due quarter Our non-cash

As slower we and moving rationalize product several expiring lines.

adjusted gross in as the totaled compared our our declines, Excluding is product from lower leverage and in prior manufacturing on year. changes This to profit XX% as revenue this well non-GAAP based XX.X% year-over-year charge mix. as operating decline the

in operating Year-over-year Our up increase amortization stock million, depreciation from first the non-cash year. million compensation in expenses totaled by well $XX.X of increased $XXX,XXX of expenses $XX.X operating $XXX,XXX in comprised non-cash quarter as expense. for fiscal $XXX,XXX as XXXX prior and the increase

$X.X prior Our commission of leading operating expense expenses a increase marketing, increased million year-over-year total the XX% quarter. to and sponsorship fiscal or $XXX,XXX from

Goodwill the million $X.X increases by able of as $XX.X million our loss the prior million compared charges intangibles is the to profit. operating first operations period. Excluding end as over $XXX,XXX non-cash were sponsorship of year-over-year. a The Overall, at reduce marketing $X.X and decline commission drop year gross quarter loss expenses, due from fiscal to as remaining GAAP in primarily the non-cash and quarter in expenses a to and well impairment totaled from $XX.X we XXXX, of our for million

contingent the non-GAAP in and loss XXXX operating operating adjusted Our AdBack the million in The non-GAAP a non-cash XXXX, stock adjustment of Cure include to XXXX, of our on statement of adjusted of in $X.X million Based for in XXXX $XXX,XXX X consolidated fiscal our quarter million acquisition non-GAAP fiscal non-GAAP loss we depreciation XXXX operating at of million of first as first Development. by prior in operating $XXX,XXX the including attributed despite and resulting first to $XX.X $X.X to expenses period fiscal quarter related drop gross for gain September a the decline to as December expense, in of quarter profit, related expenses. to compared Other operating XXXX. quarter over in to an income increase $XXX,XXX revenue reduced the primarily the Goodwill well from quarter, December of and increase trade adjusted impairment income operating an the fiscal year as expense name revenue. Sequentially, charge non-GAAP corresponding the first $X.X operating inventory quarter loss XXXX non-cash expenses liability is loss million for non-cash of the our our

in of under balance from time and the During earnout valuation XXX,XXX consolidated earnout shares booked XXX,XXX for market the the the liability XXX,XXX liability non-cash the of total decrease or of during results out capital period decrease the of remaining from resulting were the $X.X $X.XX end primarily on in – contingent quarter period of shares to $X.XX in price the the of contingent terms a additional issuance, reclassified million valuation to share. of XXX,XXX The in December we corresponding revalued at sheet. the third gain to paid the we The acquisition. At quarter. a are the liability change our stock common contingent issued the per

operations, cash. from – loss $X the acquisitions and $X.X of equivalents million changes coming and During XXXX, and approximately XXXX, of in non-GAAP paid working million, approximately September non-GAAP adjusted dividend approximately balance and compared main cash capital. used XXX,XXX $XX.X the we of We million in cash $XX.X on The $XX.X XX, first working cash from of utilized $X.X of cash with of XX, capital equipment capital our million quarter of included component XXXX. working million had operating fiscal million million and of our equivalents $XX.X of approximately as to cash property December

Our current from December assets decreased XX% of $XX.X as to approximately million. September XXXX XXst,

on which the of company XXXX As total has is is $X.X equipment The million XXX,XXX million were million abilities approximately December $X.X accounts accrued XX, approximately manufacturing expenses. facility. of and payable, $X.X current for financing company's our notes

we cut their our current alluded to did of can't Marty the base. steps must prosperity, the As take Several structure rightsize cost we to generate our but initiatives anticipated return. necessary marketing away to earlier, our revenue not

turn We've we attain to We XX% reduced opportunities we days. These over changes MD We've rationalized believe and/or is November, to taken of the return modern taking brand So, million P-and-L underperforming selling are With swift CBD as head eliminate I'd back measure run approximately are can SKUs we've way brand over the committed total, and strategically count of will a top have revenue investments not shareholders. performance. to next the changing to have renew as since consumers we choice rate cost have that Marty. believe growth. over call that our the be identified and cost action. additional CBD several by marketing now our steps choice in like for impact savings annual gummies. and we operating categories, are our significant on to for In such identified several XX and XX to positive non-performing to expanded we XX the

Marty Sumichrast

Thank that With you, I'd open Q&A. line to Ronan. like Catherine, up the for

Operator

[Operator You question Pfeffer coming a have Mike with from Instructions] Oppenheimer.

Your line is live.

Mike Pfeffer

Hi, part this hopeful cost announced with question for cost the is filing, long expenses how into the be will to this in about the you're second then guys citizens With outcome? you the reduction of regard of question measures could talk fit regard will is this the to take accomplishing you And Dr. Swift. Thanks. and this? petition how to of implementing does legal that terms in process

Sibyl Swift

for XXX we but quickly about petition. data petition It typically go to act this process case. XXX not quicker, The from could a to do takes days citizen the the filing in the Absolutely. expect agency

and would CBD supplement in CBD the the that or alternative be discussion, lawful the excluded from issued the that a after food stated that determines under drugs that a comment commissioner of I of outcome the is act. dietary definition my is finding notice regulation and in As is not hopeful

have NPA the petition the As expect do the any to full the of citizen's required any support responses. incur association and member or will and board for we trade a costs a member not of

Mike Pfeffer

you Thank

Operator

for conference questions conclude Thank much that no our participation. your you for in does With the so further queue call today.

cbdMD (YCBD) 11 Feb 222022 Q1 Earnings call transcript