cbdMD (YCBD)

Mark Elliott Chief Financial Officer and Chief Operating Officer
Marty Sumichrast Chairman and Chief Executive Officer
Scott Coffman Chief Executive Officer, cbdMD
Ron Nash Nash Partners
Paul Cooney Joseph Gunnar & Company
Call transcript
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Good morning, and welcome to Level Brands First Quarter Fiscal 2019 Earnings Call and Update. Yesterday the company issued a press release that provided an overview of its first quarter results, which followed the filings of its quarterly report on Form 10-Q yesterday. Today’s conference is being recorded and will be available online at levelbrands.com. All participants on this call will be on a listen-only mode. The call will be followed by a question-and-answer session. would Financial turn Officer. Officer I Mark over time, Chief Elliott, and this like it to to At Chief Operating Mark?

Mark Elliott

you, XXXX you Brands thank Michelle, joining Thank Level the all first conference earnings for fiscal Call. quarter and

have On Chairman Executive well Scott and as of CEO our Coffman, the Sumichrast, I the Marty our Chief today, as call also Officer, subsidiary cbdMD.

go include included Cure statement, Marty the cbdMD cbdMD. its generally level operate some acquisition X-K We acquisition and which described into additional corporate the December opportunity our will overall up this the on high Based details the will business now with will XX, in cbdMD results filed mergers financial which providing a about Harbor of our provide I Safe brand. then a XXXX performance summary the within refer Marty our transaction, provide Following of to cbdMD, finish detail Development, will December will which with quarterly we then and overview, of business We further that ahead. then this subsidiary. updates. Scott is by

prospects remarks today’s for future Marty? like circumstances differ turn Level does update will risks that call Reform those this of open from Sumichrast. statements forward-looking forward-looking Any events everyone like to XX, expectations, and purposes not various intend statements may Safe XXXX, speak forward-looking and reflect statements uncertainties forward-looking and I’d Company’s XXXX. described on Brands results materially We subject Act to risks the Litigation call in are today’s SEC. under after February these the only of of that then to date. Securities as Friday, with our CEO, plans remind conference to any We’d questions. Level the over these With the Marty Brands that, that indicated, Chairman statements date, caution Private that cause for filings made would to to including or occur call actual to the and of constitute provisions about Harbor

Marty Sumichrast

thanks licensing morning. call were thank for the We first the are this entered market was in arrangement a into XXXX. to Mark, at Thanks all start federal we in I’d the call about listening acquisition into introduction time CBD of CBD talking who transformative like on a just that few the around year a players cbdMD entered in uncertainty to about CBD our December, the of of space, the the There market. specifically a those growing by expand. rapidly to CBD and area late move ago, our you. market created the through and starting in gray bit and

legislation pass developed, included expand We the was hemp would the year Congress the Farm up CBD the XXXX the pro as hemp-rider. likely into decided market. we recognized to going we took As most Bill, which that

company we and of growth signing Farm of by Bill NYSE an the was controlled of see enormous believe list the On December Coffman. the CBD will off XXXX, acquisition immediately the until sustainable had as XX, President. we the founded Bill the Schedule President. a wait American X now However, the company, closed We is signed following to cbdMD, listed substances by Farm market the Scott rates. by

in $XX under exceed in years are can We and suggested which top Coffman business is notch Dunayer President the team simply filled have three the was is probably XXXX including $XX that most simple jockey next Caryn decade. reasons; for not billion over CBD first, next have proven of billion $X billion extraordinary suggesting His ever chose other I five within believe the and studies cbdMD the the the studies I Some with Scott operators, in met. market, talent. one horse.

CBD cbdMD and revenue is And America Second in vested with there third, acquired certainly is first of transaction I the business. are well critical XX% the believe the dominant is his no incentivized Scott value success. is to mission and team huge a that on our based consideration value of of overall brand to achieving today, merger make approach. in the all-stock important, an while We brand cbdMD the brand right of Scott’s significant Scott milestones. sales goals

and impressive in annualized, equally it were XX% their all ahead. put a now, years what for to were and constraints, that and And of sales the one of margins recognized mentality limited accomplished them uncertainty innovative in limited all achieve metric, strategies. online rope on are in series was sales over this metrics we over Last over XX% year same by in a accomplish to can team run $XX in year is us little as team sales brand cloud ramp is purchase the the Facebook. finished other availability XXXX. their that we Google of with By AdWords enormous capital sequential very believe with extraordinary, regulatory pulling Scott million a truly generated all in first a any critical marketing on and key $X.X the They We in million and sales the the on his first exceeded the of capital the was year rate. success, gross they market where

my cbdMD’s accomplishments to Guerilla Scott talk Coffman cbdMD deploying Internet more of that plans. great Scott, advantage. an to to-date about So simply competitive how it, version ahead. doing the we is please go updated gives pleasure to that, us turn over sustainable future and our put, an age marketing call in are With it’s

Scott Coffman

market, challenges, a thanks Marty. to I biggest emerging new launched consumer Blu. what on build goal, changed. one Level I Blu at we know built brand then different simply strategy basic brand in in to Ecigs another it base in And one started, to your With interest CBD built in brand cbdMD Thanks, you but in singular of when premise. one Blu CBD faced the the all with goal I number our for never regulatory in mid-XXXX a rise a very brand takes of Brands. We create space, even America. scratch the with

today. successful that Blu months, Lorillard to on Our the million of we were focus are – the to us and company with Many sold with be cash members Tobacco. XX brands me for help same $XXX team in – us built help

online in brands company a And We As for of historic first allowed the accomplishment in – were Marty revenue quarter of limited one to year. We Stone at were sequentially major ads in Entrepreneur, our throughout on digital the Year’s said National the Exchange company Entrepreneur regulatory first uncertainty, Time year the in we’ve Editor’s on the We and the New Company. magazine sales first on with number New pick companies. $X.X efforts founders Rolling we sales just and was made as over under $X.X of first Day in $XXX,XXX of American-listed over our over operations of cloud such and XX% by fourth generated year, last our our CBD streets cbdMD America Hemp by even working Despite CBD online. to were were National first one we Choice our had CBD appear Eve year of just lot million the Calendar York quarter. last debuted And become be to million the space. one first which And capital the leading has of in awarded, XXXX. billboards and Stock year. National CBD of in are now L. Squares, We even finally, which

While would not like two there business our to strategies points, I discuss to we certain competitive make. of will reasons important of numbers are due

team First, proven marketing a strategy. we and have proven internet our

strategies business spend very customer pure Our time in based variable We our return strategy generate controls and and upfront keep like our invest half proven same good a so any is far at investments on product tight the basis, that profitable. have acquisition enhanced brand. on we payback those a

lifetime of customer very new We extraordinary and with I’m each customer. potential value are returning seeing pleased rates,

will continue our and retail expand to We all force that’s achieving sales distribution.

since point our as of at customers a promotion most market. have spend convert a for Second, and of we invest always of percent this, our infancy the brand sense. is The XXXX, we capital customer this to We working cost will acquisition. keep are ratio lowest to makes Because intend likely Starting CBD spend part revenue. in as that significant our now. we increasing of started in its right already to acquire

Mark We are over XXXX. With about January our in financial I’d call encouraged turn rates results. growth and Elliott to are by to talk about the that, optimistic to like preliminary cbdMD

Mark Elliott

highlight of cbdMD of some year. total for XX% gain for going as first for net same understanding net forma reporting the the the may December to XX% was approximately quarter. $XXX,XXX summary profit help days want products the of will in forward. the I $X.X cbdMD of financial the brief period to our empower. results. what sales I’ll with you, ended a Thank a of Then our XX, quarter Overall, from Scott. million including everyone data better of acquisition the which part came segment last reported was sales acquisition a due Gross as cbdMD, in primarily just start to The at XX for contributed be increase a in division sales period. percentage pro

segments, our net each segments, again entertainment of total our for accounted by point our this sales led XX%, for respectively, product accounting is to contributed at XX only segment XX% and our and that sales important to sales out quarter. days of our cbdMD for licensing with Looking brand management XX% were it

include public Our expenses and rent, company-related major trade related service distribution expenses shows. travel, operating to and expenses fees, wages, professional advertising,

prior Our expenses down from period. million, approximately XX% the which is overall $X.X were operating year

of Our for approximately interest $XX,XXX offset creating period. approximately interest was of $XX,XXX net in interest the income first expense quarter income approximately the of by a $X,XXX

provided Again net common hand and common working of XX cash approximately from approximately September of as approximately over of cash October, months compared million Our We secondary of $X year X.X $X.X this $XX.X proceeds a had $XX.X of million. December at which XX% shares capital the loss XX, we loss to to XX, to from did our increased September XX, last million stock. December $XXX,XXX. $X.X capital million moving net as to for in XX% million net current issuance offering ending XX. shareholders XXXX, at upon three to the hand of million million on on our million the of December and of $XX.X $X.X of improved is while attributable quarter, close In working assets

at data, I With final the look the pro the cbdMD quarter, think days of taking helpful. closing acquisition forma a it’s

back actually XXX% million both in of of $XX million, a X, cbdMD prior assets now similar purposes, did December shares at ending this during year-over-year I’d it’s the goodwill at October our process. to earn-out intangible the assuming to assets would approximately for acquired as would there contained we and increase period the call the growth sales XXXX. And contingent been pro XX-Q which have XX, as year, the accounting balance as sales on acquisition with of purposes report turn actual the be informational yesterday of and in quarter. X, XXXX, on over note, well come we be liabilities would for that to For With total that, have again, quarter as purchase the filed acquisition, associated in issued, our forma only Marty. like important entries $XX.X for occurred liability significant With million results possibilities. $X.X – the comparison no We in is this had that and assurances October well similar sheet recorded are is that’s data to

Marty Sumichrast

Thanks, Mark.

proposing will to that at March, corporate make the to America. next our in name approved Annual we change also company. their name our one thereafter brands Raines, leading Billy confident in brand include brand Inc. the add new to Board an cbdMD, includes summary to of Company, and are better brand. will directors of nine been mission each them brand of Also changing are Inc. value press expansion the Shareholder careers, to CBD Peter believe building a provided The morning. to Given our meeting, to American branding. leading Ghiloni, the this slate expect our reflect And building incredible building Directors. Meeting we’ve the of is the as election NYSE focus They’ve at We shortly new reflects this Annual At Meeting unique listed change for in at a of involved our up Annual our the primary of considering total platform our company to the If executives. with cbdMD, Stephen efforts. cbdMD, we’re be Meeting three we brief and provided symbol three we our ticker they on each release our to promote is our March Scott

a to take revenue earn-out hurdles cbdMD I’d like to moment acquisition about Finally, talk for agreement. the the

paid January I in merger earlier, cbdMD of total over stated is we transaction cbdMD XX% the where XX% and the upfront As potential we consideration five next an purchased XXXX. the in all-stock $XXX million achieves years starting sales of payable if other

in another XX is the The followed XXXX, measured month XXXX million milestone $XX month in and final period. measured calendar final million by the calendar period the first in measured million $XXX subsequent then in $XX XX million $XX measured

are milestones are reached shares of these issued. As additional earned and each

earlier, the with up all forward our future Q&A. structure we aligns for the sharing Thank our line you. As open I’d look like I successes. And of believe We the together. to stated to interests that, Michelle?


Thank you.

now question the Partners. will with comes Please question. conducting from session. with [Operator first Our of Nash proceed a line Ron Nash We Instructions] be your question-and-answer

Ron Nash

the would question Blu? morning. is of started now for landscape versus the Scott. first you good Scott, right compare when how you Yes, CBD This landscape

Scott Coffman

range in to was and The first bit industries, concerns had like in there cigarette not companies what in the a we started already, there, already although very concerns both probably similar we little regulatory Blu, a are the CBD. just landscapes of in When industry. more are were we there business electronic regulatory company the be of

among the Our performance cbdMD, strategy Blu basically were that our sales than in fact smaller become our is year us Blu with a currently was most in to they brand, was other were first which to one at we other and recognizable Lorillard came industry, what thing, brand factor us the electronic the being were in cigarettes. all the focused singularly on why purchased

focus cbdMD, the we’re and same do industry. We and same have would are same try build we people the in the in brand to the successful that to the environment most with the sort of thing same going just

Ron Nash

right the in many are CBD is But did in into you as the is meaning, cumbersome? landscape, Or running hurdles area, it as Blu? now less you

Scott Coffman

Well, buy can won’t okay, on do as same TV place Facebook, words, terms in in as advertising, because they Google, I some I I pretty it can I take, far take the CBD. an advertise much won’t hurdles advertise in other what can unlimited

regulatory So cigarette with product as monitor the almost all of we what that far in we is as fact legislation mimicking, to hurdles hurdles dealing some for to things different industry all change that have state laws change similar did electronic every those from up in we our ended very different making like as and get that the FDA And from time. that, and in the just U.S. state states the are in

Ron Nash

Good very Thank Great. much. you luck.

Marty Sumichrast

Thanks, Ron.


with from the question Our Instructions] Please next Company. line Joseph comes your of proceed & with you. question. [Operator Gunnar Thank Paul Cooney

Paul Cooney

phenomenal growth. guys, congratulations, Hey,

guys an and you know or can greatest idea you how is of you provide was? wondering us this, going. don’t I of How December, are an give can of how speak you could February Just idea type had going? but know things give I to but guidance, any January a us if

Marty Sumichrast

Thank morning, good Paul. for support. you your Hey,

Paul Cooney

Marty. Hey,

Marty Sumichrast

a now right we’ve think look, earn-out million. I cbdMD we’re we with know in Yes, I said we revenue mean, confident – is the that have $XX you target

truly where a that – that year we’ve generating ago. going and based we what’s remarkable we’re said, really cbdMD revenue Scott with as are, and and started we’re is in very say, only think stick that confident we I to on said

year And all merger been the an and and consolidation interesting so with with the integration. the quite it’s

to I think do guidance what hold we’re kind any or going of point. anything is off making this at

regard we full first come we be I our about better May, get think talk prepared our are us under I where will out to with Bell, Let – quarter that. think to in

can So is about right good now. things say feel we all really I that

want not where but I that’s So to know hear, Yes. you that’s today. what Paul, we’re

Paul Cooney

about retailers I the different release Okay. with press what going How the stores. talked hurdles is in that are know there? you signing and And in

Marty Sumichrast

available the business, adding growing of I think we’re Bill a online retail Bill, businesses CBD is force was Farm healthy as continue over tremendous the retail the rapidly. amount to XX% of plan sales expanding a we not online. now maintain side to approved seeing passing and the of of said prior And tremendous the quite the hope obviously Farm with amount Well, really universe retailers the was retail in to inbound last to a from calls, we’re the year. retailers We on we

the feel for goal I push. of matter online. no we’ll have we’re is to there and our things business we think big lot players year scalability is products think a that our have a on retail, online put that half really go, where so. But of into the least absolutely, can making us. the think this we we And We I a at lot

Paul Cooney

Thanks, guys.

Marty Sumichrast

Hope you Thanks, got it. Paul.


With turn you. additional for Coffman would the closing the back call further Elliott, remarks. Mr. like no queue, I or to questions Mr. over Sumichrast, any Thank Mr. and to in

Marty Sumichrast

great to like achievements ongoing Thank months and forward questions. in sharing the weekend for Everybody and Look, thank look to everyone Michelle. next you, day, Michelle. ahead. quarters the you, enjoy thank have I’d a your We their


does for conclude participation. you. Ladies conference Have today. and wonderful Thank your a so day. for you Thank this our gentlemen, much

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