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cbdMD (YCBD)

Participants
Ronan Kennedy CFO
Marty Sumichrast Chairman and Co-CEO
Ken Cohn Chief Marketing Officer
Paul Cooney Joseph Gunnar
Michael Galantino Chapin Davis
Barry Mendel Mendel Money Management
Call transcript
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Operator

Good afternoon. Welcome to the cbdMD Incorporated Fourth Quarter and Fiscal Year Ended September 30, 2020 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its fourth quarter and fiscal year-end results, which followed the filing of its annual report on its Form 10-K. Today’s conference call is being recorded and will be available online at cbdMD.com in accordance with cbdMD’s retention policies. All participants on this call will be in a listen-only mode. by session. followed be call a question-and-answer The At the Ronan call I would Kennedy, now turn like to over company’s Financial this Chief time, the Officer. to your host ahead. go Ronan, please

Ronan Kennedy

for Thank joining fiscal you, September earnings XXXX and XX, thank Katherine, you year-end the fourth quarter and cbdMD and update. call all

also our our Ken Officer, Chief and call Marty Co-CEO, the On have Sumichrast, today, Marketing Cohn. we Chairman as as well

provide business, a Ken and of Following the and provide overview fiscal then of statement, I’ll and Safe quarterly will our results. summary an the Marty financial Harbor year-end

these we’ll call federal reflect Litigation laws. Following XX-K over of prospects the statements purposes the We’d and remarks or the except to Act XX, occur are cautions on cbdMD forward-looking Reform reviewed actual update that constitute like and www.sec.gov. this with of to risks filings maybe to today's all events and everyone which cbdMD.com differ can may XXXX, up including cbdMD about Marty as our and Sumichrast. Chairman that, to speak that only annual I'd website from various company's Any call conference Securities September cbdMD's for does intend to date, SEC's statements subject the With any securities the report these described results Safe December other company's today's uncertainties website open for the cause of questions. of be Co-CEO, XXXX. or Tuesday, forward-looking Harbor statements those by SEC, the to call date that on year not the at on and Form made after to circumstances of that, forward-looking as that turn required indicated, ended like would provisions our for materially future XX, under XXXX, plans expectations, in Private remind forward-looking the statements risks on

Marty Sumichrast

who world, in recognizable Paw everyone have investors CBD believe one brands. cbdMD valuable international afternoon. continues attract welcome is companies We joining now customers us And most the cbdMD become the you. the and to from and is and attention alike. to world's and CBD thank Ronan, of successful of this two cbdMD CBD most

media social online our sales to brand's dominance has Our which continues our business, fueled growth. drive

In fact, based one November as Analytics visited at of CBD top Google upon websites the most a world. the cbdMD.com report, XXXX in the ranks

also plan into As we will look not our ahead customer product and demographics. diversify reach will our new XXXX, into to our only categories believe we expand but sales, expand drive

as growing to we attract Bubba and class Barstool As Sports, and Bellator world Lifetime status our partnerships, continue Watson, world the brands stage. on we MMA, recognition did with Fitness

how brand cbdMD the our growth competency, core example XXXX, remarkable the cbdMD on announce us CBD XXX% in and Joe as is quarterly on over continue industry in and focused public throughout well. we direct-to-consumer our which by brands We've of Here this sales engine. our our these has quarters. the pandemic, show Spotify help fiscal our eight over Since become of help Experience the deliver on grown Rogan proud goals taking have class partner done also to we Today, has brands partners. Despite million the remaining financial December I'm that in COVID-XX We XXXX. to dominate believe attract achievements which monthly is downloads. CBD another that world podcast, exclusive exclusively XXX plays

in than two this cash in CBD To doubled operated brands listed more strongest company debt. fact, built industry, U.S. We with $XX balance we sheets put than of the years measure. now stands recently in achieving the today. goal a to and operating and from for of we no first-half set during at positive dramatically a have $X.X adjusted have of fiscal our one approximately the this operations non-GAAP million a with million income which maintained XXXX, context, XXXX. in calendar less cash year, our $XX two XXXX, second-half in we liquidity, of bank year approximately in today the adjusted in non-GAAP from reduced the Furthermore, over virtually million loss fiscal we Earlier financial

milestone will confident We are XXXX. that presently fiscal we this reach in early

We quarterly goal upon global opportunities to to expected believe $XX.X by million a is sales and advantage XX%, respectively are including Group, positioned by achieving year, Brightfield market, net plus be in according and amount billion and arise of the the leading unique XXth, ability XXXX. this However, to CBD significant the grow fiscal a may to billion resulting of record XXXX. market net over gain marketing later of our which we opportunity, net of may industry XX%, which share a to analytics quarter-over-quarter several as during addressable to $XX September take are total analytics meaningful the $X both growth of firm year. based believe into annual $XX.X year-over-year extended firms, demonstrating is gain sales of that million we reporting market growth sales We

continue not fiscal we have financial While expect do guidance, robust any XXXX. to sales to we into committed growth

Cohn, Marketing take branding we've maintaining climate introduce and future. not for pending CBD on guidance we talk marketing about go to states Ken, any attention manufacturing Finally, strategies. under will our change GMP our for pleasure the regulations, ahead. focused is cannabinoids COVID-XX who related as hemp the with we with regulatory and expect the the Therefore, do continued regulatory lead regulatory help highest on please derived FDA compliance respect standards Officer, remain to administrations, in It to products. in presidential the Chief and CBD, near my state Ken now

Ken Cohn

our distinction. that for and of the Thanks, both within offered and XXXX solidify cbdMD to the is CBD category, XXXX continue drive Marty, and and brands opportunities believe has of a year welcome, I CBD everyone. cbdMD Paw separation landscape to

our investors we in of with We trust to their a and metrics consider marketing retention focused insights key these as while website brand, important spend or our we traffic do convert initiatives, the our non-GAAP and these value, review our measures We time, internally As continue the and driven indicators customers? effectiveness and performance questions believe questions, rate faced a educate, drive just in to capitalize utilize and making each at to traffic, our performance. surging are same We on quarter. and returning How and order on KPIs, to of inform such name the data recent important analyzing most this these coming of advertising average number consumers accelerate into lean few. garnered heavily financial e-commerce challenges we our decisions on quarter. new continue

once per effectiveness compared at approximately order to purchased in XX% throughout being Our with email rate representing customer fiscal more order XX more more the to order marketing. our median In via and our website regarding the as organic $XX Data to increased past continued this XXXX, aid fourth spent prior every the increase items existing quarter And during the website three continue the quarters. average traffic customers days the quarter, largest of of new previous value, over increase per quarter in reaching a direct-to-consumer the customers retention our money quarter, amplifying traffic. us year. now once in traffic frequently, who least bought purchased returning of

to relevant less growing we sent content our information. entire we emails and focused While database, on segmented

XX-seconds click we the promising advertising very nationally multiple growth networks day TV our such, This we and view in a well. cable launched with conquer continued followed As first past cbdMD's campaign. version experienced have open was through quarter, across commercial by broadcast XX-second as metrics, rates. cbdMD's national

sales to in which CBD our full campaign is this You metrics September move excellent XXXX. on approximately advertising million bolstering can view advertising showed homepage look as expand fiscal of brand's for strengthen net launching since Paw our the confidence And direction. XXXX, in the Average media orders the we to commercial to of $X.X in cbdMD.com. continue in TV a continue first positive XXXX. year

CBD's direct-to-consumer over pawcbd.com, the seeing sales the direct-to-consumer are XX% of growth for XXXX net the for account of significant sales during year. into We translate fiscal brand's as cbdMD.com Paw power

focus in roll to XXXX. fiscal to programs We retention on education, planning reward CBD Paw are customer continue and out cross-selling, and subscription and

As we of our success, the is CBD Paw cbdMD's CBD the make seek to market. dominant expansion mimic brand goal pet to in the

ranked cbdMD of top awards accolades of than cbdMD was for as innovative dog product Paw the cbdMD also a awards and pet dog topicals skincare very the by conducted the categories, for for consumer overall Brightfield XX industry business won users. our we brands products. brand CBD and highest and brand a unaided and satisfaction, the proud pet Brightfield has best award booming also also of Group well X,XXX XXXX, and more CBD Group beauty. were in consumer Brightfield award ranked innovation XXXX's highest any calming terms of also of in received in domestic two Group awareness top many for top the magazine as We including high-quality, of named The in recognition XX CBD reliable. aid. several calming survey as

with Paw Tripadvisor. XXXX, first category fiscal CBD launched During a partnership also

as Our numerous seen has achievements business well. BXB brick-and-mortar

site our First, GNC the both shelves live is as in GNC as well GNC e-commerce franchise partnership on locations. on XX

is five Lifetime XXX Mart regional our Second, distribution Save expand as demand, customer continue XX to distribution locations. locations. expanded from their partners distribution our strong Lifetime to our of success expansion example their another of retail story. from of several their XXX such of products, increased who After to

launch also our us channel, to financial for to locations recent now into coming over HQ review we we an have Ronan updates turn January more to forward Shop and and distribution with our Third, c-store weeks. month, with With CFO, excited expected X,XXX lucrative the launched new expansion look most our solidified I'll we call announce fourth, secured to that, And up XXXX. are the in results. have Kennedy, distribution to that providing this the in

Ronan Kennedy

start or and fourth year-over-year $XX.X to for XX% sequential GAAP quarter hit going another increase I'm brief summary with net Ken. million, high GAAP the you, gain. total based Thank our a of quarterly On sales a of basis, all-time results. XX% a

fiscal was the year ended fiscal were This a XX, the over $XX.X For results. sales million. net XXXX increase September XX% audited

increase. also the fiscal in $X.X quarter million hit XXXX, a quarterly of sales high Our record year-over-year fourth direct-to-consumer a XX% of

over increase million For XXX% fiscal $XX.X represented XXXX. fiscal and XXXX sales direct-to-consumer totaled

direct fiscal well XX% sales Our a to to sales marketing XX% on in off of developing our year. in investments during emphasis relationship the customers net our resulting prior with compared the total our year, XXXX and growing direct-to-consumer paid in

$X.X Our sales see business million rebound a in XXXX. of during a for Despite of during generated challenges XX% growth. presented XX% sequential wholesale in still million representing the We fourth this by sales, the fiscal net fiscal did quarterly generated COVID-XX a net represents wholesale XXXX, $XX.X increase. business the a year-over-year which total quarter

goal to Our always gross XX% a to has been maintain margin XX%. between profit

XX.X% Our period. of GAAP profit came comparative quarter at compared gross XXXX, prior sales fiscal as percent net fourth of the for to year XX% a for the in

For profit was fiscal to fiscal profit adjustment gross XX%. million. due mostly XXXX, generated old our GAAP quarter to adjusted a gross fourth $X.X and non-cash is for materials million fourth The of XX.X% inventory. quarter gross $X.X accounting compared of a adjustment net XXXX. of inventory raw was writing realized for non-GAAP non-core value We off XX% the non-cash adjustments margin The margin after

in the advantage We we of in XXXX, $XX.X earlier gross we increasing leverage. our maintain scientific believe TV million investments, our into support net $XX.X efforts preferred margins product calendar between as this sheet balance strategic forward equivalents in in our proceeds to stock expand Going we XXXX, to cash we to fiscal execute spend, and believe allows XX% position our invest make strong regulatory us strong with portfolio. enviable to hand. XXXX approximate our our take seek marketing than and have industry, from completed to more capital us position strategy. year ample in utilize December an cash Coupled continue going our and profit further with XX%, including and on our to on this revenue, and direct-to-consumer offering increasing We ended cash very efforts, of in operating expect and a to maintain and million puts incremental

the which in X.X% September for reduction $X.X this increase in XX, resulted $XX.X an quarter, XXXX Our operations a loss for Overall million September XX, operating loss were from of XXXX GAAP from expenses a the of September prior over XXXX quarter. approximately million period. year the quarter was XX.X%

We loss of our fourth GAAP the from time fiscal of operations from fourth during third fiscal cash expenses, million, $XX.X expenses increase and spent resulting XXXX, focusing considerable measures or in XXXX, us were $XX.X spent expense For additional of balance well Along quarters fiscal non-recurring XXth, and XX.X% quarter. cost on with $X.X believe during on our XXXX, we time and million a approximately September reducing we XXXX. the and the discretionary focused our fiscal million, the in control in inventory balance the with company sheet. very our made operating XXXX. sheet, operating quarter loss expenses accruals a fourth along The for XXXX during incurred position in mentioned, previously number non-cash fiscal

quarter for non-GAAP the operating adjusted quarter Our expense fourth affiliate allocate year XXth, discretionary expenses fourth for compared comparative in all to mainly increase of non-recurring XXXX, non-GAAP non-cash related by non-GAAP over non-GAAP $XXX,XXX $XXX,XXX IP operating expense adjusted a quarter, in loss XXXX the period. the to operating from the management's expenses fiscal resulted together receivables, the discretionary million, the $X.X loss $XX.X accrual, accrued included million fiscal loss items. adjusted attributed to million $XXX,XXX prior full operations quarter $XXX,XXX and year toward for $XXX,XXX to fourth increase write-down a XXXX similar XXXX. of The was expense $X of the marketing related one-time expenses decision operating for loss stock and and The a totaled bonus with quarter and severance, in adjusted to of June

created occurred or non-GAAP in operating non-cash first-half income revalued Other liability liability quarter, over consolidated end of this of income $XX.X the expenses of XXXX other of related year's million during adjusted we to As an had approximately to XXXX, million, acquisition of the December the of loss fourth non-cash statement value the contingent Cure previously year. is mentioned, the each on our fiscal $XXX,XXX include XX% approximately a corresponding in The charge contingent a increase which Development. fiscal Based $XX at XXXX expense. quarter and

The had fiscal was the period-to-period. million. market gain the total result of $XX.X For changes our of from contingent year, in change We the price stock in the common from the liability of contingent valuation non-cash primarily liability was working of XXXX. XXth, cash million of cash capital and $XX to cash of approximately million equivalents compared cash approximately as on $X.X and and approximately $XX.X working a of of XXXX, XXth, and million capital $XX September million September equivalents the

of to in $XX.X which as operations. expenses expenses, increased merchant in and XX% accounts sponsorship year-end from assets driver primary the marketable and assets A current in prior XXth, Our partially from cash reserve XXXX million. securities was and of increase by September current the other discontinued decreases increase prepaid offset prepaid assets was receivable, the

XXXX in equipment in approximately million to many accounts was September adjusted expense. ways and second-half As manufacturing $X.X We consider our liabilities Paycheck current of notes $X.X our which company gains the Program. for loan revenue XXth, $X.X a million, company's is well as million improvement. earnings the of approximately be and payable and strong is total accrued of has from financing facility, beyond $X.XX as The SBA million Protection a success $XXX,XXX

and GMP made past lab Our significant facilities, too. new We moved foot the for XXX meet XXX% NSF space our an parameters to year operations environmental space to XX,XXX standards. X,XXX completed this square We introduced both over fulfillment from NSF team square and registration audit our and a foot we and registered FDA to warehouse portfolio. audit expanded We by facility. upgraded obtaining SKUs strides

completed been and of this through payroll, levels COVID-XX controlling these All navigating have year. maintaining while while budget accomplishments and

that, Marty. year. success accomplish in of to the With and turn what now proud excited see over can to like our they back call team's coming the to I'd are We

Marty Sumichrast

the Thanks, for that, like Ronan. I'd to With open call up Q&A. Katherine?

Operator

first and now from the open Your is Paul floor questions. Ladies gentlemen, is for Certainly. Instructions] coming [Operator question Cooney.

line is live. Your

Paul Cooney

company Marty, Hey, hey, call, and team, the the Love us a else in surprises far kinds in as we the your conference on as come brand. product and us are what the forward coming year. about congratulations brand? Just what great to your can Marty, you're talking quarter. in of expect growth Great the what outside up far to the of going like as as concerned? can are quarters, products the for see

Marty Sumichrast

appreciate that think Paul, you, shortly. really to Look, new always think excited thank we've And going I talking been support. you're and to rolling your first see Well, out about start some I lines innovative, the year. us to product we're

really CBD brand some you'll athletes, Bellator, our that And Lifetime, many going and good of be think really get The into side have Joe recognition think is We only I to very to helps I partner their with in bigger some value Barstool, so brands certainly great us and to Rogan, these really with matching it. up want as us expanding the with a other of large see of done space, on thing Bubba, really we brands. customer a list, job that the to I some mentioned, brands, and partnering us think not have that's but partner we come a side. also the sales help that and

Paul Cooney

are brand? more brand are about enhance to using concerned Now, or as about in talking that's you far talking somebody as their maybe like your Marty, getting coming and you sponsorships,

Marty Sumichrast

our with financial and front balance be the on our wherewithal. and the challenges that can us groups to to sheet space all meet for think both grow because high time our I in I'd existing the say to do such, us above. done running of It's we brand recognition, few are organization that get CBD and very and talking say the would companies also work the we brand Paul. regulatory year, both, side, next all are in the to a exciting we've the achieve really that

I who get very when they're get concerned us they they these pay that's deals them and I And working companies excited about and for think And and strong our start are next financial them. see off to see think year. comfortable. partner announced I with, they done us sheet, they big our performance we're and balance see to going and on think

Paul Cooney

Okay. Thanks.

Marty Sumichrast

Thanks, Paul.

Operator

question Michael coming next Galentino. is Your from

Your live. is line

Michael Galantino

how Hey, Marty, doing? you

Marty Sumichrast

you? how are Hey,

Michael Galantino

Do with is a be excited I introduced to one, quarter. have just with the relationship? You transaction And marketing you don't This Sports to a And Joe this through exclusivity year, you multi-level them do Barstool regarding we're thrilled know, kind we for and for the then congratulations firms relationship them there also be have competition time it comes working you have do Hey, I involved have be are have out on of guys, that? you. Thank whatever? and like the company. great CBD the question second constraints our got do see growth any direct when forward? you questions. going I two on you impressive. the Number Rogan incredibly to is, to you for have guys to

Marty Sumichrast

exclusive thank he his that certainly XXXX. being Yes, a had good We We've which brand, which our deal position is with with his Rogan strong excited very got Spotify you. relationship on Joe. for were enhances an Joe enhances just partner.

exclusive, of one Barstool. a think to continue exclusive. strong that very commitment everything is to Barstool that platform. CBD we're going the love brands And is probably through and Barstool they're we we're but are their So biggest doing, so one we not

necessarily marketing, not significantly they because And we much the the As are far focus we such channels think don't as I'm on see look, do. a our distribution sure are really different. I really that's MLM brand certainly don't guys as competition, multi-level distinction. as big And the that

So there. look, out it's a huge market

$XX who about billion, $X.X you about current, of three the it's XX to, billion, companies next said, to the say the XX% to in And billion it's I now, billion market on CBD $XX growing have years. talk five $XX top As depending only share.

on we piece so pie of there getting gaining that you've the this of other got XX% And huge out top into you have market are bigger. that

great course We So cbdMD there's at in both sit is for for and brand our of doing really Paw us. space branding amount us. of the at of the just an runway enormous CBD, top

So, Certainly but the MLM not sell we see crowd it. we necessarily competitor. don't a don't do we direct CBD product, way they certainly as the

Michael Galantino

in follow-up thought. I the growth Paw One you Thank XXXX in That's What you. question on of what division? that expect kind brand.

Marty Sumichrast

that's Well, started pleased our we will with in we $X.X COVID from I a million we of lot growth. XX, guidance, the you haven't was. scratch where environment basically that I of really first XX and and in but also given tell out mean, a it months that did were operation,

a tell of business, is there unlike the competition, there's cbdMD, other a of this, thing lot I'll where The lot CBD is just competition. pet you not

the one spend really knows a nowhere from to year. your And opportunity call pet, is the the on top the went if We anybody in pet pet. you we anything about in think So market. just big if you own on

see and but we So a got we out we year, in grow guidance, to a excited think think quickly great that it's expect the market. next we We're growth. opportunity very we brand haven't to great significant but given

Michael Galantino

you. Thank

Marty Sumichrast

Sure.

Operator

is from Mendel last Your [ph]. question Ben coming

is Your line live.

Barry Mendel

Barry to CBD Paw's market in like Number two, competitive have how CBD you're of things, your and you Mendel. the brands, going What looks program area? do landscape kind area? brands pricing can one? talk pet the the number in about marketing your you Couple

Marty Sumichrast

don't why on you talk Ken, CBD? about the Paw marketing

Ken Cohn

lot happened the And synonymous the display, learnings it influencers, certainly, it it whether Sure. take side. consumer side becomes whether we've trajectory CBD on category, Paw's when human it the business. tactics, seeing CBD e-mail, that very we've as the like we've the side, is whether similar comes whether be we're of on a on a seen successfully of and been to Paw be with be business, the social, be CBD has the gained on cbdMD to What it able it apply

the let outset. success on side to the of direction right MD going so since on us point to in we're the kind the So Paw, done because continue it's

the So you Marty, don't why question? second on jump

Marty Sumichrast

don't see compression right price pricing, as we there. And Yes, has out now held firm. look far much as pricing

Barry Mendel

Okay. Thanks.

Marty Sumichrast

Sure.

Operator

for that participation. in our questions conference Thank call does your conclude queue you further today. no for the With

You may now disconnect.