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cbdMD (YCBD)

Participants
Mark Elliott Chief Financial Officer and Chief Operating Officer
Marty Sumichrast Chairman and Chief Executive Officer of Level Brands
Scott Coffman Founder and Chief Executive Officer of cbdMD
Scott Rothbaum Joseph Gunnar & Company
David Bannister The Market Analysis Group
Steve Emerson Emerson Investment Group
Call transcript
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Operator

Good morning. Welcome to the cbdMD Second Quarter Fiscal 2019 Earnings Call and Update. This morning, the company issued a press release that provided an overview of its second quarter results, which followed the filings of its quarterly report on Form 10-Q last evening. Today’s conference is being recorded and will be available via replay. All participants on this call will be in listen-only mode. followed question-and-answer be will call by session. a The now turn Chief the this Officer time, over to would I Officer. Elliott, At conference like to Chief Operating and Financial Mark please Mark proceed.

Mark Elliott

XXXX all Thank Latonya, the quarter and you earnings you, for Call. conference thank cbdMD joining second fiscal

Sumichrast, CEO the call also of CBD which operates Marty our brand. the as Scott Chairman and have subsidiary On well our Coffman, cbdMD today, CEO, I as Founder and Industry,

not update like circumstances Marty of call any I’d Marty? does to forward-looking to Any the results differ We’d our filings its this these from expectations, to of that remarks Litigation accomplishments intend statements Marty into ahead. XXXX. will that the indicated, and a of provide risks only With Private quarter. and financial occur like date, would that the and the provide to that the or those then in Scott risks Reform for conference forward-looking and overall summary SEC. open then over as Following plans Safe Harbor the these Then cbdMD of quarterly after we reflect overview, to the turn CEO, statements results statements statements Safe May statement, events will including remind XX, further speak described made an with materially about call details Harbor performance opportunity various our today’s significant Sumichrast. questions. cause up the are Company’s will for future go Securities XXXX, to to and today’s constitute Act of for the Chairman that, forward-looking date. forward-looking will Thursday, prospects about I cbdMD, may under purposes subject cautions provisions and actual uncertainties on everyone of cbdMD call

Marty Sumichrast

on Mark, morning. the thanks thank listening is everyone to call and you introduction this who for the

know, Prior could out December first on projections we purchased you trajectory. Since we place. do we’ve modeled on currently of earn for that the were XXst $XXX revenue the based year, to we that what cbdMD. As on many sales years. growth been date, for acquisition, in incredible last an the we five five the million have Those in year basis business the

first quarter million Just cbdMD, $XX $XX in to March we memory, is million What of is with refresh reported the for sales which XXXX. were today everyone’s of in years earn sales the XXXX those XXst and outs can quarter, first approximately full in $X.X share net that in what our ahead and we of on million revenue sales, this had quarter, for are the quarter seeing on our which full us that puts ahead year out pace is currently a the we estimates. that of we a in March XX% we original are earn budgeted trending two projection based

assure While initial of we can growth that very and this path results will we the trajectory the rate with these are continue, business. current pleased obviously of

from XX% competitors by of quarter. cbdMD December the some the reported virtually revenue sequential sales our growth, while stagnant So, to grew March

thing, a on growth dealing is daily the basis. good our which is expected above it challenges team a While operational brings of with a host also

in headcount significantly Some grown XX just are increased people as of follows: these we approximately first to the examples our XXX from where months. we’ve five

XXXX. million current office distribution And have something additional manufacturing meet cash. over XX,XXX taking these on provided to space we million feet. until additional of expanding our in $X.X we of and working our process cash we in in growth. are now, expand this also demand, And an to March, approximately having in center the and we and address an the end and of square At to didn’t to address and just had are yesterday, which think $XX.X would $XX.X offering we exciting available completed secondary fuel the we We all capital capital of order us adequate are have we late needs million just dynamic and

call like would the and more floor to Scott future. the I plans about to over Now turn Coffman talk Scott, the our to-date to the yours. is for accomplishments

Scott Coffman

create a Thanks, brand I goal, singular biggest industry, and Marty. brands. thanks in grow have goal. on brand why in revolves to focused make to all get for that cbdMD. impact America. before the a cbdMD decision-making with We our your in In we And create consumer a emerging of brand in around on immensely ourselves a That interest you to building. order good new launched mid-XXXX successfully decision, is all

of is great brand. plenty building were that, and the revenue not as same we it’s the While

Let accomplished you of explains me three brand give building that have that we good process. examples thought our already

pure This The cbdMD. to first change U.S. play a national listed was companies first our a the made at Level name Exchange. is only since Brands it from CBD of brainer from was no

We brand have our recognition credibility our enhanced retailers. customers, results with suppliers, immediate and and seen in distributors

his and Time Bubba Champion The use and choose to would with sponsored product Masters second had us partnership our Bubba XX we Watson. before before Tour was he have Like PGA as being Champion sponsors. X other test athletes one our

be the of Sports summer cbdMD - major best the hat Championship significant And get today big with sports the and prime of we great brand as as will placements. three first at cbdMD CBD will leagues. proud to will brand PGA other sports golf We excited as front amount off time luck sponsor CBD CBS Championship. professional and value best wish are with paid watch partnership be the to the We in our the on his the makes at TV of positioning next back him well course. of our PGA so leagues over logo the with on partner broadcasting be a CBD We players him games the tee first to Adidas in jersey, boards, are base three company to now all

Cube recovery. even on CBD founders lot We a to Time the his one Year’s and XXXX. Editors a even our brand to CBD and of by on ads awarded the were grateful be National were New of first Choice which has number incredible vision Entrepreneur CBD to ELLE. National now is magazine at to for were billboards Day company cbdMD first he partners debuted were the are the National in We their Company. had And Hemp to Eve major their that and allow CBD Stone show CBD We the of first as team. Calendar to such our companies. digital history. We’ve by athletes We allowed Squares, We in whole Entrepreneur, company appear use with Rolling help Ice body

We have proven a strategy. and proven internet marketing team

payback time We a on business invest investments controls building customer our to enhance any strategy in Our brand. the based by far and expected basis, on we proven and at produce those strategies our spend and the acquisition return returns good have good is like keep generate same upfront product pure our variable that so tight and brands.

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

over and Our remains online. XX% currently sales our tracking are ecommerce robust of platform

expand our force targeting sales to continue distribution. retail We

count store December. from increased our since have XXXX retail XXX to We doors over doors

likely market and the investing of point the customers retail demand brand for acquisition. the strong is front. to most its we are Because see right the at promotion acquire infancy we Since mortar and aggressively cost in now. brick on this, to lowest continue CBD We of customer are

achieve Next second results. to quarter With increasing Mark year Elliott we are XXXX. encouraged that, results turn the the by over the will are financial our necessary our looking in call Overall, to revenue. about percent are convert as to optimistic rate intend like our to of I’d talk spend a we growth about for. to as keep this spend Currently, we we

Mark Elliott

Overall, Thank cbdMD last in results. quarter. period over you, profit in over a was Scott. And under for was segment of for million the financials start XX.X% in Gross sequentially going million GAAP-based for net quarter sales of purposes. XX, was net total year up $X.X had the over just reporting cbdMD sales which XXXX. quarter. just XX of cbdMD division reports quarter March the the our as accounted this second our million sales for March part in same first of XX, the am sales In just ending net quarter for $X sales for ended March summary of grown quarter. segment I during the sales percentage to year, the under million, And a XX% $X.X March XX% the XXXX product have $X.X as $XXX,XXX total online. XX the Gross year. ending came its the with of for products brief from to throughout XX%

and We XX% percentage were the net as Our going XX% of cost cost between sales segment sales of of in – XX% sales a product forward. expect

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

overall This were $X.X prior after our over of period year and million the multi-million in representing ramp the operating attribute quarter. CBD Our really the was second the up approximately expenses dollar increase a operations cbdMD to merger.

merger To account and contingent financials, If a for issue on contractual consideration earn large we liability sheet. shares. you will booked our have balance see for our we at provision look obligation the this out you to a these,

of is other XX valued or large million $XX.X non-cash and to at That decrease liability it for on December booked of in to attributable March contingent at hand related end. value period fiscal a of of again, hand $X.X to XX, only approximately a created million contingent We year liability. significant the working had a period of This XX of cash ended non-cash to XXXX. shareholders to income this the expense of and on this created non-cash increased increase quarter cash million March and So March quarter. it is increase XX XX XX the September and XXXX primarily price to for working impact at million respectively. expense capital to $XX.X from the this, compared December capital in came million our will was be common $XX.X million significantly XX, and loss $X.X on net million, is our as expense the This at $XX.X the due statement. March liability our This our from slice each the share non-cash through $XX.X expense reporting

changes for XX% of March the XX, million, Both increased our these $X.X XX% the approximately current business. liabilities of cbdMD ramp to to million. also XXXX, to September increased of while our $XX.X current and related XX, up are assets As

Marty. to we at With issuance $XX.X of $X price of share. call now previously to million X.X completed just I’d a per net the which the shares secondary expenses was of turn and like the Marty offering back indicated, this provided As upon another million that,

Marty Sumichrast

you the Mark, up now, that us. has anybody Great. and let’s for thank for open questions line

Operator

Instructions] Please Our Rothbaum question comes your & line Company. Gunnar Scott, proceed [Operator with live. first question. Scott from with Joseph is your

Scott Rothbaum

guys. morning on an Congrats quarter. awesome Good

Marty Sumichrast

you. Thank

Scott Rothbaum

I your big ecommerce. see A sales. the that maintaining question background know Do presence of for is Scott, a you XX% online presence? you over had And company your in obviously,

Scott Coffman

because my an Yes, traffic. to built so, very online, large we a infrastructure of this online background team is create have

is problem So, level up. is, more heavy a great. are we’ll opened stores The now at XX-XX retail have retail that drawing is

than goal Our online XX% hopefully, more maintain to always a retail. to above XX%, is XX% to no

are back our purchase door. and have even to month just they are start that, people to your take have beginning they product view and convenience as for and to We in retail it two every go also because if more going you’d more have more the to the delivered online, in product, months, to first purchasing to the believe

new back are online. also and we users marketing-first a retail lot we us are a to coming online of believe which to with convert users company, So keeps going that online

I So, growth forward. are be with more of we to able quickly, retail maintain keep our like begin of to a going XX-XX to I’d that so going the XX-XX think

Scott Rothbaum

Thanks for clarifying. Okay.

Operator

David question question. Please with next Bannister with Our from The comes proceed your Market Group. Analysis

David Bannister

a curious the and quarter. have I company also supply. about bit shareholder Great potential guys. writing subscribers. your I I my was a for little been of just about lack for Hey am

of a thoughts concerns that. analyst et an supply of wondered and too enough as shareholder oil, what be distribute forward your my and able to just be, your going continue One would are around and cetera to you products have

Marty Sumichrast

large million that of opportunist now been our and keep lab a that you think our plan $XX how somewhere in which we in building has XX,XXX would that our, are sales moving We already if a square that of big stores construction foot expanding, orders. that accommodate at new one box remain we right

believe would We point have half new lab up So of to right features our we where we point brought to the we are need addressing capacity those now. we get the supply this control the at that online.

David Bannister

lines? great. further you have Have that exploding as sounds are market, the it you of thought in any about product Well, expansion in Or your things guys CBD seen area?

Marty Sumichrast

a this are feel supplement no now don’t company who you able first world, that in a out that to do just In allow an has two that Yes, you out there eight there the under with that – we knowing week, are you comfortable patches that release, XX-day come you of will couple brand going the patch that’s vitamin to product of any it of the also the mean, cost. new that’s I time will take because way every industry that right to so, are to true doing come coming want things as we are that By are first hour as companies if the will where patch take out type been the people see more product easy next people want an with. doing day out the to do seeing product. we a weeks,

be We pet new offering the having product on market. XX-fold brands into largest Xst pet treat, June the expanded by a our the and by called a probably across that in are pet launching cbdMD pet supplements almost to the powered where brand of CBD going very are Pal we also on separate brand brand increase one will market

David Bannister

amazing. Yes, an or dogs on window, went anxiety have my and it months three dramatically seen of interesting week own I and note, Pet as Oil changed with four go eyes in months CBD was for from personally about super just before side high my it and a eyes we to

Marty Sumichrast

of builds we their things and and is market up and is your products. And older the very where to companies the CBD for we there want just great and doing dogs they is, people exploding of variety few what in a long, pet thing think dog that agree, that one seeing very are about about things is it safe dogs is give and there few it feel those

probably will the second line that at be We will least largest June products by pet X of add there. out

David Bannister

so Excellent. Thanks much guys.

Marty Sumichrast

question. the for you Thank

Operator

question. Investment proceed Group. comes with Steve Emerson question from with next Our Emerson Please your

Steve Emerson

Congratulations and what an amazing job.

Marty Sumichrast

Thanks, Steve.

Steve Emerson

wholesale, change are can lot was any a XXXX of any sales distributors doors your of is And doors, much there is change How and us? or retail? there particular you share with

Marty Sumichrast

now, right we still are XX% wholesale So, XX% business. online,

are taking we more seeing of because those Farm way what of big It’s the Now, box for us. are a doors opening off is, store. it Bill yet, scheduled

on seeing then thing there. of are to pick process For are that that we retailers doing, their It’s a dramatically, one going is going the the But a we combination of exchange a how lot that with us. are that of gives the are which also Watson. we of they fact on is number a slow is are carry the other product real companies them products that in exchange just company from retail seeing integrating stock also and the us sales up and comfort the from what stock Bubba separating new we are

they brand So, is figure they stores to are over to a one carry safest, we their of stores the companies. CBD. most where which leverage in are can are trying willing that’s out trusted lot and lots now, the Right getting of put

Steve Emerson

you. Thank

Mark Elliott

Thanks, Steve.

Operator

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

Marty Sumichrast

Great.

We the the I at quarters for position right with in achievements the thanks believe the of all, in look time we First amazing market. the at Thanks we our team and are everyone in and to right questions. got forward ahead. now right an everybody. sharing months ongoing

So, I’ll thank back much. very turn Latonya. you to it

Operator

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