Earnings call transcript Q4 2022

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Operator

Good afternoon. Welcome to cbdMD Inc.'s December 31, 2022 First Quarter of Fiscal 2023 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 at cbdmd.com in accordance with cbdMD's retention policies. All participants on this call will be in listen-only mode. followed Question-And-Answer be will call by Session. a This

now turn the the this ahead. VP time, over to would I go Brad, Whitford, At conference like to Finance. Please, of company's Brad

Brad Whitford

thank you, Quarter First XXXX you Thank Fiscal and all joining XX, of Update. cbdMD, and Call for Earnings XXXX, December Brenda,

about materially Chief annual and SEC, indicated, the also the which XXXX, from remind Operating statements described Chief Officer. at Act are constitute subject reviewed in like to to December On that we on quarter McDermott, cautions filings for report Safe President; on and have the purposes risks call with those the these website plans and all at www.cbdmd.com XXXX. our risks of the Harbor and uncertainties Financial differ may our that including company's future that XX-Q various forward-looking our www.sec.gov. or other SEC's statements provisions remarks everyone XX, cause on forward-looking ended cbdMD Kevin website Reform of prospects for Private today, Ronan Form and the the company's be expectations, Kennedy, our to actual of Litigation Securities can We'd results under

that of on any speak laws. occur these XX, today's after date, forward-looking federal XXXX, be securities Any to this Monday, would conference required forward-looking update as only may statements statements events February intend today's not and made call as circumstances or to by of date, cbdMD except reflect does

call like Kevin. I'd to that, turn the over With to

Kevin MacDermott

to especially Thank afternoon, you, Brad. everybody, good shareholders. Hi, our

reestablish The completing year reset growth. foundation spoke us for we for This we was that best culminated get critical healthy year about feel what with months for few was a and us predominantly business Just a the how to positions reset a for process. us ago, calendar cbdMD. XXXX

we relationships propel the we on that initiatives We sponsorships along structure, from to hard We made with made the had sure and and rightsizing in strides growth. talent making drive a past of outside to delivered promise. great have that decisions unwind never lot our cost and organizational

That us. behind is

We focus approach all-out an our segue have on purposeful. is now to revenue,

the along path expenses holding We to our profitability. top-line the while flat, accelerating grow relatively to expect

stress the was but about manage right for I want to company not base, flexible cost growth. profitable a with sustainable and to structure this creating that shrinking cost revenue a about and smaller preparation

overhead in right, No primary right quarters. but our doesn't longer to the and price by products order [Indiscernible] the operation sole profitability right having are has few message anyone, we our the point, making supported getting burdened excite the sure past and structure at focus over the right Paving cost our by way is our spend. unproductive been getting focus

million ago, represent A $X the of transformational of to our are revenue hold, a year first in approximately Those for was be initiatives approximately cost the quarter place. ratio. benefit and second XXXX quarter lower components we in our $XX it the SG&A will anticipate now and much million will taking with

into translate to not, our will much been have trends that we own revenue us top for gains met a but and on line income top certainly our growth, pending bottom-line. see, expectations can operating line disappointing, improved continues you As Have matter, improve.

in Ronan that made addressed terms thoughtfully But acceptable spend speak we've on overall has an sure marketing we financials. our will our have forward, to return. see, you our going as overall marketing of and SG&A

of at December the begin our our and end marketing January. stated we push I call, that entering year the into would On

Shannon brands Here fresh retailers. to products brings CMO, perspective announced is we've new what positioning a We in and to in done our that wellness Charles, and regard. consumers us Shannon

team. bottom our engaged a well our efforts. position, a addition welcome packaging our digital to relationships to and a experience as well marketing brands as as RIQ, messaging, go-forward our digital will to be boost expand leader as record with nice to in proven for marketing direct strategy, in marketing line, around field a turn We've track support helping and and Our the as direct-to-consumer

an in marketing gains steps That's Media. access our of into subscriber eyeballs entered base that engagement print haven't to have advertising which will a demographics we to proposition. We AXXX our augment and set significant and a the capabilities, only past. with digital we not reached but share These us and

proposition, are our interest wasn't range creating a message that that broader in who introduced there larger the we extensions, a to and category cost consumers are and before our confident brand size sharing as will exposing existing the as the segments for this, planned future, CBD XXXX. in resulting With later into of immediate our those be in well line value of product

believe of These the in at launched media key other September the efforts XXXX, we revenue and steps, products retargeting part we affordably an consumers' products to and We diversification direction. high-strength make along are daily wellness end needle regimen. to positive believe move with increase social our in a better them those of will the priced

products that the know market. are We the in the quality among best of our

reasons in executing a market grow. The expect expected revenue, to we We multibillion-dollar have disappointed though are be to and is is generate as we many to on CBD but now place with we improvements results. put and the optimistic, that on, mentioned, market are

to part sharing next gain share, progress expect to look our the We of on I with well forward you call. as that more being growth. as

that regulations FDA to the diary since regulating that I them. have not their behalf to the regulate turn agency in place started needs a statement final FDA FDA the recently, stating responsibilities. before in note, direct Principal specifically Despite action Ronan, tools Woodcock does the Janet the comprehensive congressional in properly it Deputy delaying set FDA supplements XXXX, Director, on to On a CBD the over of issued of is

safe to into our for have existing customers. with As we framework leaders in the the industry, and agency as the disappointed efficacious put our complying we regulatory disregard efforts products our are to that continues prove

Look, and ethical provider demonstrated products. responsible of CBD we have

have of their our we our safety have invested studies We efficacy. trials and demonstrating proving previous on shared the with into science products our toxicity calls heavily extensive clinical

to CBD industry in the As trade and leader, address issue needs. health we our and customers their market best broader are this to the look forward continue to groups to other products working with that access safe help responsible industry address wellness and ensuring that brands have to

over Ronan. like that, to With it I'd to turn Ronan?

Ronan Kennedy

first XXXX the a prior you, quarter sales Total for Kevin. quarter decrease comparative or $X.X the from fiscal XX% total. were Thank million of net year

year-over-year was $X.X quarter first business decrease. e-commerce of in of a the quarterly generated XX% million quarterly sales Our XXXX. fiscal This

impacted represented We a quarter product for forces prior pantry the quarter. year sales pullback of by total net prior loading spend quarter our XX% XXXX consumers. comparative E-commerce in new the sales during marketing were high-strength the first on our XX% macroeconomic believe in versus and to offering launch, of

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

were to bringing new offering as as impacted we on before through Revenues retailers SKU transitioned sell products. look legacy new to inventory

in quarter. XX% XXXX. a of products percentage few that of sales at the the we to fiscal came had comparative XX% the This of during stock out a quarter gross as for first The year compares In period. for topical profit were net addition, prior

the in when factoring sales profit mix. gross maintain mid-XXs to expect range the in margins We

years. accelerating Our XXXX and million up $X.X quarter. from year made quarter down which expense onetime operating in a mostly the stock prior in associated $XXX,XXX in includes prior quarter with totaled The $XXX,XXX fiscal the of first expense million, expenses comparative is for current termination approximately $XX.X sponsorship non-cash grants

onetime expense, that costs due was operating the non-cash the $XXX,XXX in across focus expense with partially as continues January This on management areas reductions of all we board is offset mainly from expense profitability. intangibles as amortizing intangible down stock Excluding began to across came our decrease -- to XXXX.

the operations from fiscal loss quarter million approximately of a to of year compared first prior for in the resulted this loss $XX $X as a in XXXX period. million Overall,

million we year million year totaled in of prior by over our a non-GAAP the our million, goodwill loss $X operations Excluding from impairment, on basis. the meaning the reduced loss prior non-GAAP quarter $X $XX.X

Sequentially, September impairment to in primarily from loss million is quarter. million attributable This the $XX.X goodwill XXXX $XX.X operating the improved quarter. during September the

first the Our fiscal employee of agreement, final expense fiscal of XXX quarter resulting expense of a terminate to depreciation the non-GAAP in fiscal expenses sponsorship for XXXX, and stock to of with first non-GAAP non-cash as $X.X $X.X expense, million quarter amortization XXXX loss a quarter the operating include a the XXXX. $XXX,XXX adjusted operating operating million and in the loss first to non-GAAP adjustments adjusted compared $XXX,XXX for associated

cost decrease management's over period structure year focus profitability. non-GAAP is our and loss adjusted prior The operating the primarily to attributed in on

large XXXX operating for September run operating quarter. we and on adjusted reduction GAAP rate, increased loss anticipating our non-GAAP are losses and second million our $X.X in January's adjusted by non-GAAP the from a both quarter. results quarter Based the Sequentially,

We on the Therapeutics and up invested as of costs of $XXX,XXX front-loaded. first year. cbdMD’s during R&D quarter in are fiscal prior wrapping the to clinical compared their our XXXX, studies $XXX,XXX Most were

our results in continue product the efficacy education differentiated We a from clinical category. and studies to the us unique position believe both provide for

at currently first balance the on acquisition expenses our non-cash $XX,XXX Cure earn-out $XXX,XXX. quarter Based include is Development. contingent of consolidated of of liability liability gain The to statement for income income, XXXX the XXXX our Other December related a sheet contingent on

November through in We fourth XXXX. period runs that are the now marketing

and fourth during include first operating difference. we dividends The our the making – approximately non-GAAP up adjusted million, $X.X $X.X cash. main $X paid utilized the million the During of capital components of XXXX, fiscal million adjustments of quarter of working some loss

working approximately$X.X We XXXX, equivalents cash of as September million working had of of million approximately XX, compared XXXX. cash and capital of approximately approximately on and equivalents XX, cash $X million and of to million and cash capital $XX.X $X.X December

assets the a for is primary decreased the sponsorship. The million, September million. was as driver usage cash XX attributed of XX% and athlete to termination of the an For prepaid assets of of sponsorship reduction to of mostly current current approximately operations from $XX.X $X.X December the by decrease

approximately expenses. payable company's December managing as remain We of the cash very and our million accounts liabilities of $X.X $X.X million, focused position $X.X current As accrued and XX, million on total were liquidity. which

address our burn. to We continue to cost our structure improve

our to end compared employees at as total of headcount of XX February, approximately As is year. XX early our fiscal the

lower to of lease. alternatives to the half warehouse continue cost approximately sublet have seek headquarter We our of and our

optimistic XXXX. are competitive ability cautiously about quarterly to sales We in our grow optimistic position product about our and calendar

to current will impact have a to small revenue a SG&A, our With big the bottom-line. increase

resulting shareholders sheet We to on are avenues proxy our Adara’s mindful $X Friday. Adara being our vote to to shareholders. back closed a balance the February transaction, this our existing approved and XX, on million improve in pursuing multiple while liquidate return

way its entered to expands Last provides our into week, relationships we liquidity. us them with the access structured impacting transaction that without AXXX a and marketing marketing with valuable strategic

are focused XXXX. other partnerships the or improve for to position our our pursue customers accelerate We profitability all delivering new strategic could on continuing business, stakeholders. remain and attracting We additional and avenues throughout that liquidity

like And with now up that, to to the I'd call questions. open

Operator

Please question shareholder. [Operator a from Instructions] go Justice, The ahead. comes first Todd

Unidentified Analyst

Hello. Good afternoon.

Kevin MacDermott

Todd. Hi,

Unidentified Analyst

you? are Kevin. how for Hey, first question So just, is

So, to bring to and on us new of hiring background with you she the marketing Shannon, the the can table? give going some our what efforts CMO, is

Kevin MacDermott

of and out haven't to comes our of up just consumer done organization, that's we of initiatives the think supplement efforts of going add an She branding with wellness set has bit a the and and a little Shannon product past be host in into I been I of is the wellness getting opening whole to our direct-to-consumer, curated broader demographics. portfolio. to a what Sure. space. job that great marketing involved And food around think

Rogan now the Joe that's So the that to you Shannon bring of consumers, fringe athlete at we'll added and and in I to opening really pretty the up that think growth will wider confident demographic, pretty that, we're we've but continue past. has been to and been with support good successful set going if

Unidentified Analyst

has been at positions successful this Where past where held at? she she's what level? in see the her experience, I'm to failing

Kevin MacDermott

she to Naturade, too of into don't going want qualifications. And a relative to obscurity great a quite did we pretty and are most recently, But growth I us into get is job Shannon's Well, subsequent taking acquisition. from a that a out help brand at bit. confident heavily high that

Unidentified Analyst

Yes, okay.

my the to we so, do cash question company? is, available on And where stand run other

Ronan Kennedy

pretty large million the We got million we've the and $X.X had just the activity end back end cash quarter, the and on into of At some with December we January. through happened $X hand. made of strides that

second forward. So quarter we of are much, going anticipating much a sort for improved the quarter

Unidentified Analyst

back money was there, for great been if But a kept because last money, it capital got made of that we I There obviously, have unfortunately, big back, that other would Adara, But thing got other in Yes. is cash. – our coming, we that think could in $X land million had windfalls it. we right? no no but we minds company, the have that's

the months it's – with only we the be of cash. at can with sales on run we to I this four I our mean, I today, cash math, the company going starting burn, cash have So So burn figure cash do at say best and how hand, well point, a right? got our to six I that mean, we and I can

Ronan Kennedy

say continue sort Look, we we although are any make specific not as we can projections making on progress. that, to of

Unidentified Analyst

are my can are going projections. cuts we're to close what salvage My don't you being kind enough of the I projections. making do? making deep the is to not aren't to seeing mean, I do Well, I can the need position we question I I cash we're – see math. in. anywhere get

Ronan Kennedy

sure guess, forward. have the cuts the have to on and we've liquidity feel on our have like going I making enough position we our we that very in needed capital are focused made operate been top-line business and to focused

Unidentified Analyst

off runway point? based assessment, this your of how capital we at much we have how much so And have, do

Ronan Kennedy

of days cash to the the were spot Look, of our incremental we and our on the and better position I sort rate. our we both than was plus and end capital back what at a operating go in today much had are guess I'll XX run balance we ago, believe that quarter

Unidentified Analyst

Okay.

Kevin MacDermott

That's see. outlook, but we'll guess optimistic I a see. tempered we'll

Unidentified Analyst

Thank you.

Operator

concludes question-and-answer call. today's and This session conference today's

lines. disconnect Thank your have may participating, pleasant You you and day. for a

cbdMD (YCBD) 13 Feb 222022 Q4 Earnings call transcript