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cbdMD (YCBD)

Participants
Mark Elliott CFO
Marty Sumichrast Chairman & co-CEO
Caryn Dunayer President
Scott Coffman Founder & CEO
Steve Emerson Emerson Investment Group
Paul Cooney Joseph Gunnar & Company
Michael Solomon Maxim
Scott Fortune Roth Capital Partners
Call transcript
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Operator

Operator

Good morning. Welcome to the cbdMD Third Quarter Fiscal 2019 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its third quarter results, which followed the filings of its quarterly report on Form 10-Q. Today’s conference is being recorded and will be available online at the cbdmd.com in accordance with cbdMD's retention policy. call in this mode. on participants will listen-only be All question-and-answer followed The be a session. call will by

At this Officer. would to time, I Mark conference turn Elliott, over the Chief Financial Mark, proceed. now please like to

Mark Elliott

Cynthia quarter XXXX third you, the call. fiscal and for earnings all Thank joining you cbdMD conference thank

On and and Caryn our Marty the Dunayer. also our Sumichrast, Chairman today, our we President, Co-CEO call have Co-CEO, Scott Coffman,

we provide summary an I the with the earnings overview, efforts our marketing Scott Following Marty wrap up then issued Safe Caryn then a statement, and will and business further our things results. today's will financial and will provide into details of that Harbor quarterly and announcement. sales go revenue brand provide strategies then of will and about and guidance

open Following call that questions. up will the we for

to plans expectations, of Private We’d XXXX. Act about that for and Harbor of prospects everyone Securities provisions like remarks purposes forward-looking under the statements Reform Safe various future remind Litigation constitute

cbdMD www.cbdmd.com are our cautions subject which reviewed SEC's that company's indicated, actual from the results materially filings the that at cause with the at including on uncertainties and those Company’s be differ these website SEC may described to or in to risks on can forward-looking risks website the statements www.sec.com.

made events reflect after does intend to to not that speak Any only of August cbdMD and forward-looking date. as circumstances on statements today’s call statements this conference would Wednesday, update forward-looking XXXX, of today’s XX, date, or these occur any

Marty the With that, Marty? to Sumichrast. like call Chairman over CEO, turn to I’d and

Marty Sumichrast

call on everybody to who's this and in thank Mark, much you afternoon. very the thanks listening

ago, brand. minute grew operator review some period cure and that history in felt accomplishments on rebranded few sales short initial for so be based In expectations infrastructure and the integrated the revenue and me and update months the was the owner on the company take into from Before provide the I next our December the we XX of results is that get quarters, a last of exchange, the Charlotte company It seven much the XXXX something our to five American development, growth cbdMD put and purchased can will based Scott only recent a need we've which a both minutes. future company perspective. quarter, our just the that so beyond talking and time guidance operations, expectations about the be NYSE far in let

brands of focused that is successful most singularly cbdMD the is the into mission and in mission U.S. one Our grow to cbdMD

our was a the total review XX% let's most On $X.XX recent Now results. GAAP up million were for quarter quarter. March which our our net from basis June sales

cbdMD's financials brand we audited XX correlates million run in for year. provision earn the XX million the sales rate for ahead well While comparative approximately million from the sales annual provided the quarter in of on net we're which we approximately of from into X.X we don't acquisition agreements. the annual have prior which include sales X saw means million, based June financials, the With a year acquisition over actual from sales revenue of of over XXX% the of December the quarter, net our jump generating target third out XXXX

seeing we as gross, we're this increased sales feel While above expenses well experiencing also we're expected growth.

by last sponsorships, the marketing, several approximately customer significantly through totaled share and Circus. quarter quarter growing significant driven during MMA, net our in initiatives. XX% advertising brand We continue These including sales Nitro our the acquisition three, and to Bellator Bubba big market investments invest Watson of

by XX% the decline expect with as net investments percent a to approximately out sales to of to as we XXXX. our these continued Looking flatten sales, end goal net of calendar to ahead into the overall fiscal sales an year grow, our of

market While believe reach we competitive to we're in our establishing a continue the these our advertising many solid target CBD, advantage struggle with to related we value deals. as of constraints high through sponsorship peers markets

growth equity equity options currently have and fund we to capital raised the in In cushion. and debt the additional or do partners, us, order comes, we May, in million to have including possibilities. XX.X time we'll in cash We when that strategic raise funds trajectory, a to confident we're expect future nice many that available

quarters coming Our goals revenue operational in for certain follows. milestones hitting and are the as

ended surpass second of in million monthly to XXXX in is sales our X quarter March quarter net expect we the XXXX. First, XX, which the fiscal year

surpass to XX, in XX expect sales XXXX. year, XXXX fiscal of quarter which ended we XXXX. expect finally, the to be early And is the quarter quarter we of flow cash monthly in XX, first quarter ended second our March the net million positive operationally Second, is year XXXX which our fiscal December

party things I to Before seeking completed the next our be sometime to days. to third provide XX brief over turn regulatory certification we're expect and me XX Mark, GMP, a update. audit Currently, within let

FDA. testing their We recognized GRAS And that categorized our MDI the currently exploring are to we as intended can generally with have use. initiated be and products or regards conclusion safe options seek an independent with required both as applications to GRAS the for

Mark, talk of our I'd please Officer things operations quarter. Elliott, like ahead. over from turn to the about June Chief Financial more go results to the Mark

Mark Elliott

net start quarter. with Overall, I'm the third June results. to Marty. ended is was Marty million. XX over total a just earlier, quarter as you, brief Thank This from March our sequentially summary sales of based up XX% for X XXst mentioned going GAAP the

as product quarter the accounted and were for Sales total allowances saw with in consistent what Our March our profit discounts. total we of gross percentage of segment, quarter. came at quarter. of million, net the This with sales. a XX.X% by sales the Gross led for XX% which approximately million we're is for X.X net X.X sales in

forward. sales as cost a percentage constant segment going a the we product Our XX% of between in sales maintain XX% expect of and sales net and XX% were to

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

This third out a non-cash to It increase a license number related ramped XX.X important quarter. brand Our expense year management this expenses included compensation X.X in to is to million as operations. charge expense our was business, prior million dollar that impairment we million point options. million related represents overall well in operating our stock and non-cash up as of were X multimillion the XX.X and which another approximately is stock awards as this

cash is we balance previously cash on the collection building of a our and inventory, June add capital of operations spend approximately sheet. share up of in million The this as million company being September during approximately X.X utilized significant X.X was XX. from And the our XX provided, on increased of term cash accounts an spend million. million near X.X to on on received current which marketable with a million is quarter, our sale equivalents proceeds assets we had in receivable June $X XX.X X.X in have the additional as XX.X was million as September XX% million expect at We XX of inventory. to to on and that list we hand on of services X to as XX, end isolated from million, securities this for XX. This XX.X well XX.X Also the capital million of and June working cash compared quarter cash million approximately and working the

liability amount in As contingent total the were non-cash increase a periods of is stock recorded of million payable X.X for the the loss June expenses, of has third the charge net has was million, December We and XXXX charged a This quarter. third tier our X.X based the which in of for debt. XX, of XXXX, million significantly non-cash result large accrued increased during development. quarter. the to debt company's the liabilities price XX.X market other was company of common accounts the acquisition approximately our other current no Its related

equity increased June. at at XX the Cure shares, by annual than of April this of related Development. which equity a shareholder of were million a purchase issuance approved surplus Based and shareholder in swing of XX driven to of meeting end was positive Our was million our XX to deficit XXXX primarily of of This our the million as March to XX.X from more shareholders

the XX.X a million of contingent This XX.X to was liability at as compared June The The million recorded XX. non-cash out value is XX. expense the increase earn statement, March is shares on again, under XX.X of income an million at our charge.

major issued the with issue In million increase March for the the dated addition, ended of or loss million per share shares the driver the value April. the related X.X which income XX.X our This had were our statement million in June XXXX of that XX.X represented the This in expense change to in and for April, $X.XX from a to for June attributable we XXth. quarter XX, non-cash combined million XX.X accounted was increase XX X.X came net of merger the shareholders common quarter million share. on to just an

of With and go that about our please efforts Dunayer, the to like call President and to Caryn cbdMD I over marketing Caryn now sales talk would ahead. brand to strategies.

Caryn Dunayer

cbdMD. Thanks, Mark. Again, thank call the your on interest for everyone in you to

we best arsenal it two I the CBD early I we the being U.S. completely launched R&D day, listing brand. the generating beyond in in afforded the joined public States. process, and one still the this took only marketing, big is years of NYSE and to first American the on to and a that of Being United brand after listed sales little to but has and our likes drive the dive play the ago, agree. Seven This thought look results a say any in and pure expectations. company. sales exchange Scott our only tools ago, credibility the months I over we've relevant of been back helped into company not Marty cbdMD provide the I XXXX. resources, Before branding initial our brief step public began

Viacom most respected we them has using start Cube's to demonstrated to to to Group was multi-year building that to speed metric in us a and consumer brand pack comes sales head the continuously BigX we Brightfield efforts every in category them when which watch, Basketball comes firm Ice the that cbdMD the month lead followers our overall booming We've in This been have market evident measure and the of and saying League Despite competitors the had in with the named and and to use groundbreaking industry's From when beauty, fact catching up also space. partnership Top look two professional a factored virtually overtaken MMA to incredible. have with emulate on are Bellator to On CBD dominant last it out domestic absolutely and brand, exclusive not cbdMD's categories, leading we've market talented trend our only several to the the aligning recognition. brand but and part CBD XX brand athletes. creativity named brands flat cbdMD intelligence when Skincare and it Topicals in ability Olympic strategy forward. our move clearly should a

Managing profile We gain results. is high Brightfield's disrupt than Director in and the really know rapidly smart shake massive CBD a matters, leveraging one to receive accolades. savvy at to PR the such Gomez, has there thing base. day, leveraged sponsorships end companies, the both honored and to of Bethany consumer previous added, the We're better anyone with industry humbled massive a marketing up effectively cbdMD leaders.

XX% for retail the split that mortar XX% With get sales sales. quarter June to let's Overall and ecommerce from were down specifics. brick from the and

the On from which quarter, rapid customers, we added is was accounts. experience side the we customer business, new continue approximately XX% metric the the In an growth, XX,XXX ecommerce of new March quarter. impressive June up to ecommerce our

up with least. pretty of the our at the in On placements and now side the experiencing in over locations, We've We've XXX ongoing the retailers, currently quarter business be mortar say from success stores the and who exciting of year. the amount numerous shaping just up carry XXXX retail to also next to tremendous conversations brick national brands. of the growing we're beginning had is secured

strategy a was online to sales, direct through brand our go our commerce to initial saturate consumer Although build leveraging platform. space and market the to

and expansion. During in retail We've past international we've most respected headway and retailers a significant heavy space. travel quarter put emphasis with in the the both the on strategically made partnering market, distributors the retail distribution

nations. European with Additionally, EU key the we've latest other partnership announced European providing Ireland our in Ultra recently distribution UK, Sports and

of We expect to secure solid key year. end distribution markets international next additional the and by

CBD. launched include entries, you from have skews. Paw's Before pet CBD's line XXX.XX. Scott in independent are officially for comprehensive XX dogs, We the goal over I our ventures [ph] concentrations store products online the in is retail various and the have turn announce we cats, call Paws call consists on www.cbdmd.com. for flavors CBD to currently can and XX.XX deployments and sold horses of ranging price via finally unique to pet that channels, brand early pet all of product with available flagship Paws a today. currently lovers CBD points box and line of XXXX pet at retail and big The offering

CBD's Paws brand As is the increase R&D approximately year. to ongoing XX skews end product expected continues, to the offering of by this

for CBD end XXXX the XXXX. of calendar clinics by over grooming retail an Paws be salons is and goal to Our stores, veterinary

Coffman. With Scott, ahead. to to that, call please over I'd go like turn Scott the

Scott Coffman

you, Thank Caryn.

the fiscal remainder you see, in and can a As for growth position beyond. XXXX of we're great

achieving consumer to becoming the space. in our of brand world great start one have We products number goal CBD the a

we And we decided next happen. the revenue that have I that With make to with guidance our five believe provide can for team, quarters.

to net million expect of September. between we achieve XX to annual sales at million which fiscal XXXX, Specifically, year ends for XX

so XXXX, it the XXXX puts five in achieve will XX to million ahead into year the earn we forward look With gains to the million final by the sharing the in future Development, and on net extremely reached and we The accomplished that ahead. of the bottom full fiscal sales volatility aggregate income trajectory of shares resulting liability us results. line of million. we out revenue schedule. earnout eliminating issuance for in are XX in guideline us quarters expect net XXXX annual of Achieving future be calendar of initial December you we've mind we is Agreement Purchase pursuant XX.XX non-cash now Based far, the of eliminating Looking to this Cure with allows an XXX net the this our successes pleased our estimate years what end the million with two can to related result

like that With Q&A. to up open to line I'd the

Operator

Instructions]. [Operator

comes question Steve Emerson your from Please question. of first Our state Emerson Investment Group.

Steve Emerson

you how proposals value? Is to sponsorships? going of customer a which there do for to or a sales decide Scott, and activate? payback You're in internet ratio terms estimated

Scott Coffman

likes, Yes, give we be seen that bigger at things. at sponsorships. coupon Bellator of going someone meltwater how us the our our the value both overall other eyeballs affiliate like look to knew revisions types who think software is company or bring our or will we use much they back to through influencers while those to look We us things shares what are both worth. codes, to We do how many get, BigX, in

a we're study both our said return have are the a brand. So is We partners two also we're as we to but analytics we going to advertising because where want building do we we who value creating at before, to look but nothing and what from people from return strategic be. basically good get monetary

deal the want be ones of out Bellator, seem with be Watson, name to to doing Bubba the time. with it companies that brand strategic to build that this other don't So it the at we partners those that are be there associated our we

Steve Emerson

What's your a specific there internet X share are on you metric, to payback you buy? us? looking X care with metrics Is to for an any

Scott Coffman

the along really of only pure most stuff, Sure, is sponsorships, track coupon buy codes. so way on lines, and see influencers as those you our we

the likes influencers, it. in spend at of as far of to shares, influences and or an what they as get how look and sales, over the our most that So people we we more the the back above [indiscernible] influencer in them be on we make all

purchase the if to do internet, two So really, I'm one can just internet. the on I branding a yes, then of on just the more a ads they're I'm buying Well, if sponsorships, play. doing these

didn't get back tracking campaign successful I I this to if So plus is guess, one one advertising a for. publicity,

Steve Emerson

you your make one so to period what is over Okay, how decision? one payback

Scott Coffman

to and whatever can't that that see then one quantify. just a promotion we and the are on or all we're influencer get period a looking payback things by will BigX people the is TV what on being being month and it would over like a at measure month TV influencers one be really we Yes, really running, one ad eyeballs we basis that of

Operator

your comes Gunnar. Cooney Our state from next question Paul Please question. Joseph of

Paul Cooney

growth, it the is XX XX around soft now guys first in on when Congratulations obviously land gives here in that rate deal, sales over you in for right XXXX. can be $XX you I and What gave way in back given for question terrific What it are that you're seems achieve have these a this to and August. like your you big XXXX announced right guys the a grab gives huge. on are around The you looks have and and grabbing guys? going guidance XXXX guys as what's of some of the with million on million past December, and numbers you guidance land. to you just shortly thereafter, you run confidence that you now you're now actually And going confidence we million guys is lot

Caryn Dunayer

a is people a guidance, of So to we gave be we bit. previous good it initially the and surpassed the that think out we that the I When have. chunk products by going quite

we've I of of think best that of think place our projections the skyrocket we're buys been we're had and repeat It's massive to we clearly, kind product we able the getting now best. done that the hire that a terms in team we've have to really I that in growing. initial and evident

of the enjoy. everyone product share and as seems having hiring job done securing as the that with doing think true to really a possible marketing, and I market that good the premium right right very much So we've people

Scott Coffman

point saying add this important open we're couple recognized another point we've have think fact move of that our by to getting able and that move seen be this is out and quickly. to brand And they to us had to a brand the building been quickly, do this. they this had expected would meetings would they because hadn't the opening doors in these we a to market able the where One name, I we retail seen at that they in really they were things be already our building did that when that there. this it's

is credibility, which ratio, a in question Another seeing which has ourselves our we're on allows lifted lot done to that really a and higher what is of the much what internet led fast growth it's given concept so doing of we've that also the increase to we're return customers the doing. we've us and we're build

third be our do until already really which market, we this factor, weren't do we which out of we our type into have had been has will that able all amount The the factored pet really wasn't didn't original line we we the forward because in that going projections think have. products we to we is factor into

XX have in would phase. able product we pet we sure to at factored be not that growth, this weren't to have really products because pet, rapid we close Now we that our into develop

Operator

question. Solomon state of question next Maxim. from comes your Our Michael Please

Michael Solomon

you're of with? We're it about momentum locations, is these mentioned, obviously. like in is there You a XXXX some can involved chance that different talk you that looks retailers gaining retail

Caryn Dunayer

of as which conversations box retail Farm with, mentioned. opened for So we're know, expanding and began as market, having retail the large into the I lot and chains passed, distribution, up, ongoing previously Bill a conversations big soon travel you the national us, really

and a mortar ones after the and for and go individual just going able the just Some than here larger after distribution and to to there. now have multi-chain really brick you opportunities at skyrocketed be pieces grow rate and with much multi-organizational starting calling us, on twos going of know, the

pieces but even. So retail excited to specific the the in we're CBD passed, space as start larger in rollout masses really the some as is everyone stuff to think term skyrocketed to wasn't and in Farm having soon to the just travel see some December market in which terms finalizing POS certain of share next to really I on the available some retail of ability our prior that distribution space and an kind collateral you'll of really in those with of get things Bill XXXX public international distribution level place, the it the for in

Michael Solomon

or names can no at you share forward that point, is can look this something to? Thanks, we

Scott Coffman

to deal. it Well we've the until right name got want we now; show really we don't close the

Caryn Dunayer

Yes, they're, finalized there that the phases. but in and we're rollout deals are they're certain are complete,

in out come finalizing you'll and see term. some, the we're So POS some in of process very the near press

Operator

state Fortune Our Roth next your Capital Partners. question of Please question. comes from Scott

Scott Fortune

you stores. those looking from A big of as follow And the of and then on for boxes? the on of biggest your the can up big with your of And [ph], what you Can get that where inventory in you for real your couple retail the quick or for discussions can Are concerns that inventory the levels? production discussions far year a you? are next a kind they're step box that you kind needs out FDMs supply some with years are harvest the note, as supplier? can of next

Scott Coffman

the people box, that as a first would market. we're know of a couple far and as topical big that is negotiating the big of yes, with a big more stores into lot so you of step box think their Yes, CBD box, as

which We producer are has [indiscernible] a to big been the us producing our also companies with own of one also in XXXX, topicals help orders. have since and topical box

capacity big the scale boxes on a to supply large forward. have moving we So

keep us -- what and be, now. of stockpiling chain broad they of spectrum what supply wanting other is The in for we're good they're also do we isolates would supply have a to very part

to area as deal, hand we produce in the we mentioned say to. It's large on they to yes that scale now. increasing fortunate a our type want right where Marty the us to position of which have, ability signed and really just our start to would scale have topical, any as put So supply wanting are us in boxes a been is of with big to to for

Scott Fortune

much that, your north, Okay, doing farmers in you expanding information from or great. an standpoint? put or cultivators And harvest? basis out did then guys your area? you And that you're beyond how And with annual southeast color on on the are

Caryn Dunayer

I term. now going scaled in next we a Right up but out the coming we've was in just haven't from consistent previous will be to a in that conversations the good that we're very situation supply. say had

we're have at a definitely we So stockpiling bit in reserve quite this. and

Marty Sumichrast

Marty, not Is producing, do that. Scott, this is we're we're not growing. We don't

So I understand you question don't the asking. were

Scott Fortune

Right.

So built sure accounts, supply want and a have large then enough I'm and fulfilment come distribution for that or with handle kind on and to they that sense from endpoint. just you making that to needs infrastructure get out board, as of

Marty Sumichrast

I place in I we now. are right that Yes, mean, getting think

ready a place that. problem will have that and can we with we have it's us mentioned, nice and as help are know, be with You to Scott feel arrangement in somebody

tied that's down. So

Scott Fortune

of due you Scott, all oil, last only obviously, mentioned, on and the waiting other topical. the the from the are your know of FDA. that's a boxes the sense FDMs are lot products the that's clarity beyond tinctures FDA. We the focused and to big topical, question, Okay, to add What

clarity, color from guys? side So the any waiting from for FDA of you this FDA things

Scott Coffman

don’t, them moving know people forward be big but from the that focus where the things, opposed said, they into box get kind as the topicals of is we're that different right so haven't matter to companies not have topical, said with market stage heard I this just they to the to if as that there. proceeding we're We great. If you like, what far on other market topicals we first easiest FDA step because haven't think then just anything matter clarity, right, way FDA. the going the other the they're are went the see no on had move conversations will no the from Okay, for now. If And we products, and market, in

Operator

your Please from question Our state next [indiscernible]. comes question.

Unidentified Analyst

bit love great a same out XX see And if and wanted and months? your or to numbers the But pet how you there? great you Caryn the a have Guys, is us the is more on line. projections. to quarter I she do ecommerce grow give next color over of little Do what competition could expect to mix that lot the do retail

Caryn Dunayer

and our now pet probably industry think I skews Right that have we amount division. of the for lead the we

even So the from concentrations typically most or span butter space, and also flavor, in we species. They other have competitors Typically, have multiple of flavors. the don't various they'll natural. peanut everything across one maybe

products have dogs, for horses. we So cats for and for

that's So the unique industry. in very

additional In a bit that that only also last guidance it an in the hoping less of there's and with We've scaled saturated of offerings. key it right product that space relaunch players the we've been we locations of pet terms on to up XXXX is we're sales, we've is significantly Right better market, pretty significantly you this think, a CBD and year dominant a little the in a just of I the overall about is by know than kind the general, gave, that there. than retail anyone and couple end year over next be side. line taken selling, pet a now The rebranding anticipated. now in half, market existing

you So with scaling on of to having a it know, good, secure know, the kind market kind of in and from up pet side place the you begin there.

the very that the pet we're division for numbers alone. excited next see think in come quarter to the over I

Unidentified Analyst

expecting the next the and sustain capacity are months? achieved Do growth you've XX to already manufacturing you've in the

Caryn Dunayer

internally with know, manufacturers contract then you that Absolutely, work and and we Absolutely. with aligned with. ourselves

Unidentified Analyst

flavor? skew? But what's What's best best the the

Caryn Dunayer

going at cat are seller lower dog horse dogs and makes the it's from taste peanut the split of the terms buy the best concentrations. the They tinctures. cat personally the apple. because an side like the some They're But I between point sense. flavors like the products, intro of of in that be CBD with Well, for to now, it Most likely products natural kind the most phenomenal. right then it's price butter lower so

Operator

further questions at gentlemen, teleconference. this this your no you be There appear conclude Ladies for We participation. thank does today's to and time.

time lines disconnect and may great your You have day. this a at