YCBD - Earnings call 1 2023

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

Bradley Whitford

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

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

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

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

Kevin MacDermott

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

for unwind The completing critical that behind the to proper we in structure, growth. us have process. feel positions a rightsizing with growth. We along that for XXXX cost predominantly This is reset and reset making relationships made sponsorships foundation sure us. decisions talent and and we get a the best and what on hard past lot ago, months delivered calendar Just strides outside that a of We few had the initiatives how drive about to healthy organizational we a from to us great was That year culminated cbdMD. us reestablish never promise. made year business was our for with we for spoke

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

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

for overhead structure doesn't we growth. [ transformational Saving supported right products getting I the $XX burdened SG&A sure with right the flexible the ] focus are getting been in components A our at base, initiatives the right ratio. our want by unwell our revenue hold for our way this a to No right, lower will a quarter cost million approximately first be taking and much $X represent revenue has million past price was few the quarter of with second message by Those the anticipate sole point, now XXXX. ago, we in approximately place. And will benefit to quarters. year of and not stress creating over it but the our cost but our anyone is manage in order about that cost and profitability making operation the are cost a company shrinking unproductive longer profitable was sustainable about primary focus and and preparation right the to spend. having structure smaller excite to

top has expectations that much line not, an but Have we But see, matter, and terms into have And ] gains you bottom our our revenue of will line trends a going yours sure been improved we've speak own see, met we return. our to on financials. spend as can will continues for you forward, our in have acceptable certainly marketing growth, top on overall made pending operating income disappointing, to addressed translate improve. As marketing thoughtfully Ronan that overall SG&A. line. [ our

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

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

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

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

proposition products know of are We believe consumers' best in at to introduced make other the value [ segments With an wellness in media positive move of sharing range there creating the are revenue diversification size to are in and a daily September are affordably those brand products our them regimen. later ] of our category priced and that future, with for a the end key highest-rank of existing needle the cat to message immediate the the believe consumers CBD part our quality as resulting planned We and steps, a this, the products among direction. that we and we of larger as retargeting efforts wasn't who along the that into increase product confident well in market. before will our the line we in XXXX, interest in extensions, XXXX. These better social those broader will be launched exposing our

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

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

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

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

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

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

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

T. Kennedy

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

spend sales quarter fiscal loading in of prior first by the Our in prior launch, were on of quarter. forces high-strength net This XX% year-over-year during the comparative million XX% sales a our new E-commerce pullback first our was the offering macroeconomic quarterly of XXXX represented product marketing year XXXX. pantry versus and business quarter e-commerce $X.X impacted of to total generated We XX% quarterly a sales the consumers. believe for quarter decrease. in

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

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

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

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

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

as XXXX. Overall, million amortizing prior for began January quarter we a fiscal loss loss as continues Excluding intangibles our -- of a year $XXX,XXX of of offset $X the the onetime operations compared first million focus stock period. of resulted on due the management This across that to areas profitability. to intangible decrease was -- expense, from is mainly as costs with board this to came approximately from noncash all down in quarter across expense operating the $XX reductions in partially XXXX expense in

from million impairment, the year $X improved our totaled attributable operations quarter. non-GAAP our primarily the This the loss during goodwill in the reduced prior of loss $XX.X million we $XX.X loss the in is operating September Excluding million, basis. million from goodwill prior million a year over XXXX on quarter the Sequentially, September meaning non-GAAP by $X impairment to quarter. $XX.X

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

and both rate, our year. wrapping large of invested to loss XXXX reduction anticipating non-GAAP quarter for on XXXX were non-GAAP first prior The second $X.X million losses clinical are run the management's attributed the We $XXX,XXX as Therapeutics by our front-loaded. is R&D results non-GAAP $XXX,XXX we adjusted in primarily during Most up January's adjusted over adjusted our in loss on decrease quarter structure operating September Sequentially, the and of quarter. compared our GAAP from year profitability. are costs fiscal to studies prior operating operating current a focus the the their cbdMD and and quarter. Based on in increased cost period

the to studies for continue for income a in our from efficacy education liability of include income our sheet currently to position on our Development. expenses consolidated of us believe The statement earn-out $XX,XXX and liability clinical contingent the at product the provide unique the first on a We both differentiated results contingent balance noncash quarter of $XXX,XXX. gain acquisition is Based XXXX December XXXX Cure related category. Other

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

first approximately and working difference. quarter capital During and the operating cash equivalents and adjustments approximately to cash dividends capital of fourth $X.X $X cash. include non-GAAP adjusted of million $X.X cash million working December The and some of XXXX. $X $XX.X paid loss approximately of components XXXX, million cash our during million, we approximately the of utilized equivalents and approximately XXXX, of had up the $X.X of XX, -- XX, of capital fiscal million million making We of million as working main $X.X September on compared

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

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

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

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

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

XXXX. ability SG&A, a our grow small are our about position will competitive With about sales have cautiously product and big bottom calendar We quarterly in impact increase the to current revenue line. to to optimistic our optimistic a

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

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

to attracting strategic that questions. up We and I'd profitability avenues partnerships our And new position other that, continuing like customers our with improve additional all accelerate throughout and XXXX. business, now stakeholders. to or remain for pursue liquidity We focused delivering call the the to are open could on

Operator

Instructions] [Operator

question first a shareholder. Justice, from The comes Todd

Todd Justice

First is for question Kevin.

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

Kevin MacDermott

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

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

Todd Justice

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

Kevin MacDermott

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

Todd Justice

okay. Yes,

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

T. Kennedy

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

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

Todd Justice

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

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

T. Kennedy

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

Todd Justice

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

T. Kennedy

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

Todd Justice

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

T. Kennedy

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

Todd Justice

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

Operator

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

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

cbdMD (YCBD) 13 Feb 232023 Q1 Earnings call transcript