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cbdMD (YCBD)

Participants
Marty Sumichrast Chairman, Co-CEO
Ronan Kennedy Chief Financial Officer
Ken Cohn Chief Marketing Officer
Scott Fortune Roth Capital Partners
Call transcript
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Operator

Good afternoon. Welcome to the cbdMD Inc. December 31, 2020, First Quarter Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its first quarter fiscal 2021 results, which followed the filing of its quarterly report Form 10-Q. Today’s conference call is being recorded and will be available online at cbdmd.com in accordance with cbdMD’s retention policies. call in this listen-only on participants will a be mode. All a will be call question-and-answer followed The by session. company’s time, now over the turn this the Financial At I call to, would Ronan like to Chief Officer. Kennedy, ahead. go please Ronan,

Ronan Kennedy

you, XX, first update. December and the call XXXX XXXX, you for quarter all Thank joining Paul, cbdMD’s earnings fiscal and thank

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

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

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

Marty Sumichrast

up thank our I and the I world. one who’s net results last to CBD CBD us of most Ronan, earnings call record channel, quarter was that With believe afternoon. of believe add e-commerce cbdMD I joining of one the approximately in XX% we're back powerful statement. today's I On companies welcome said everyone from most you, sales e-commerce can well. we this brands our coming powerful believe as that now last industry's

continues cbdMD.com success Based to online report on the the growth. the from brands one top, CBD recent of Our websites has in most drive our business, which visited world. our e-commerce a sales SimilarWeb, fueled ranks at as

plan the engine, on reported net we a ahead focused sales skincare cbdMD our push gross show December fiscal and as for of core sales on At our which we which sequentially of was time direct-to-consumer continued growth quarter expand XX% of we same million XX, the year-over-year well sales, quarterly remain competency, $XX.X as results, We record year-over-year product our our pandemic, will brand, category XXXX, margins XX%. reach new ended XX%. increased launch believe also the quarterly is to a into beauty the and record the profit XX% into such and e-commerce customer quarterly Despite we which to basis. demographics. XXXX, COVID-XX as expand continue net our our Botanicals, help As our drive diversify to

by quarterly adjusted million CBD the and debt. strongest industry, We at have We XX% end last one in balance by operating year-over-year operating reduced XX%. sheets $XX.X of cash the loss no non-GAAP of quarter and in quarterly the loss virtually our

the former company our at this by oversee future continued commitment The of Dr. and GMP share, CBD our demonstrates making quality confident as Swift the regulatory products XX% regulatory our adjusted to for industry. products to cbdMD to to a in demonstrates expenses regulatory gain sequentially, while our highest we’ll and leadership the total With in Dr. science global quarterly instrumental in share Dr. consultant during the that commitment global non-GAAP position audits addressable and be industries at will efficiencies respect and Sibyl operating based announcement certifications. CBD that commitment regulatory year. same to our cbdMD’s operations. authorities addition decreased for We also and our significant regulatory market, This our strengthening total FDA the Swift while and of initiatives. Swift’s upcoming official safety We R&D the market our its time continue retained at show to fiscal of matters, remain customers our evident on prepare in and a find continues other same standards to We leader investments X% approach delivering regulatory to continue to by involvement recent in income that operating we’ve time the GMP was FDA to positive and compliance. achieving year-over-year

units Exchange Acquisition investor ADRA.U. Stock sponsor we're offering of the Adara newly company commenced initial formed Adara its announce SPAC symbol or Acquisition LLC, to an Corp, trading in NYSE $XXX primary yesterday. cbdMD under on pleased public million blank-check ticker American a Sponsor Today of Adara priced the Finally, that is the Corp.

to will marketing pleasure our Ken strategies. our who ahead. Marketing my talk introduce brands Officer, it's Now and about Cohn, go Ken, Chief

Ken Cohn

believe are CBD industry. the our the brands said themselves in leaders to and within Marty, now and recognition earnings category. was Paw our financial separate that XXXX and Thank brand I you, of both separation everyone. and CBD welcome continue in of cbdMD on year both believe I last I that performance call the the CBD

our traffic, converting and and point customers simultaneously driving strategic to ecommerce informed, new accelerating that towards surging while alike. capitalizing or retention initiatives, of indicators in We our of these performance order average utilize value, metrics and informing marketing decisions key are usage of and effectiveness on analyzing advertising measures We spend, continue our accumulation and our on and consumer financial heavily further to performance. our including lean returning the and data review KPIs, decisions, on us believe to educating, investors make brands, their traffic. trust rate the website We both important focused these internally and non-GAAP

existing increased existing on $XX and purchase particular focus customer least we [Audio month, December customers frequency others. with contributing our getting heavy rate value who consumer X once Average X% Coincidentally several Our purchased keeping increase the according particular, at larger customers, season. the decline advertising to continued retention to Number regarding including just quarter, month continue with during in traffic new due via holiday multiple and order with prior times, in over direct to at among our were in representing quarter to customers to the Cyber median category paidsocial traffic we web over to native for SimilarWeb. and over prior XX focused quarter the traffic, the factors, over XXXX a the website website as and of holiday CBD on traffic re-engaging Gap] days, during the

conversion have let's advertising In podcasts, terms continued since with proven quarter in and they drivers start on cbdMD our strong for terms sub-department traffic our of specific of return historically spend. cbdMD, best provided which on with highlights, to be advertising overall focus

quality, audiences. opportunities additional explore deep, to continue we strategic who deliver with high forward, podcasters profile Moving

effective Second, selling, of continue open with segmentation, to on rates remains and most us a up-selling our customer and tools education, the purchases focus proving increase, and continued one promotions, to cross cost associated conversion. engagement email email to that

results. We also ever first with very initial our launched SMS promising campaign

discussed as national our both cable across first during and entitled networks. viewed advertising Day Conquer television second second commercial XX nationally broadcast in multiple, the call, Third, I campaign cbdMD’s last formats was XX

very Our values order campaign average websites promising metrics, delivered very direct-to-consumer encouraging and strong including sales.

CBD XXXX our eye are TV we Advertising in first next soon. year metrics a in the to and an launching excellent brand's campaign direction. our such, Paw campaign As move results with expanding positive continue showed on

with updated pet are website eye CBD acquisition, look the pawcbd.com. translate large Paw power all an cbdMD.com market. deliver customers, for the CBD we focus pawcbd.com online direct-to-consumer growth dominance on on with increasing as into of leading seeing for significant customer experience the recently we industry in We new Concurrent to a an

for In brand, Bowl and on CBD national campaign Discovery first of weekend are have advertising our a occurred TV we proud accolades partnership launch the We additional products. to the awards Paw of Paw of with past excited CBD’s this we Puppy received terms many few well as Animal our the highlights and which Plus. remain for as Tripadvisor Planet during

cbdMD Botanicals, with with our pleased multi-billion Skin with being ranked cbdMD more overall one conscious a who launch some few the cbdMD past record will the years in consumers the consumer category than of the products. skin also by the featuring cost the branded and well Care/Beauty and best-selling multiple number and conducting Over domestic and Botanicals XX Topical Care categories. one while top of a XX in also products received won awareness, our one number terms care in of also beauty Products has proven survey Calming at entered naturally consumer be offers skin to named were innovative same CBD CBD satisfaction, luxury announce of that care and global the XXXX Brightfield users Aids. and several market skincare, derived Group, Pet luxury botanical for the Skin after Pet including in recently that beauty quality, of line was award Innovation We skin Award Business providing its We customers XXXX’s cbdMD market. CBD XXXX awards, and care reliable across Magazine track cbdMD unaided Global Calming best products. Dog Botanicals and believe recognition market, growing, officially Beauty industry for high Dog cbdMD Paw in time CBD number in

made domestically Our wholesale significant also channel has and internationally. distribution strides

now most featured Network. of with as Kennedy to this our Paw seeing trending Bulldog a results. where We Shopping well our order CBD basis that, has in CFO, over market the Also, our as Mexico, increase are live CBD call due channel Ronan I'll customer partnerships amounts financial significant from also international average a Caribbean the turn Gap] we as been We're the throughout review on expansion, month-to-month added our on pandemic. recent to to the strategic brand, increase With recovers added [Audio pet in distributors. two success the have and the to seeing

Ronan Kennedy

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

approximately represents sales XXXX, and total quarter now first year-over-year XX% e-commerce the hit XX% million in quarterly revenue. our fiscal quarterly $X.X high of increase of of XX% also gain. Our sequential a record a E-commerce

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

fiscal and and The of the over XXXX last by of was mortar believe last the the first the result year-over-year we primarily nationwide to prior a COVID-XX performance XX quarter experience impact is broader retailers quarter brick months.

percent comparative strength prior year at Our profits gross came XXXX, results. help GAAP sales positive our in of quarter for XX% e-commerce these first fiscal a period. of XX% drive The in our net the compared the of to and sales improvement operations as for

we our total gross a profit we and XX% similar revenue. as margins XX%, Going e-commerce maintain our revenues provided to of forward, between percent expect maintain

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

past $XXX,XXX $XXX,XXX time expenses and quarterly ramped $XXX,XXX Our quarter, quarter stock discretionary up this we spent $XXX,XXX XXXX non-recurring in for accrual, up on accrued and expenses and regulatory a was the of together cutting non-GAAP an related loss $XXX,XXX a adjusted We dollars quarter over from to to operating R&D over bonus regulatory resulting quarter $X included in resulted compared XXXX we of of severance attributed with in non-cash decrease depreciation expense our of fiscal first in ramped the one to of and XXXX. non-GAAP and fiscal profit our sequential and in the as increase quarter first and efforts The both revenues million first operating XX, in $XXX,XXX for gross in the loss non-GAAP sponsorship a improvements operating operating fiscal expenses increased cost loss gross and as marketing expenses adjusted margins. – $XXX,XXX. XXXX our adjusted December mainly

in cost acquisition quarter continue and consolidated expenses revalued of the of an Any non-cash is other The contingent primarily in period We includes stock our a in of the had common price the XXXX in several liability common liability contingent to to of fiscal during increase impacting non-cash operational structure. the and our income liability increase quarter December drive the created income. change of million, the net $X.XX to Other market in of increase of income to efficiency was - to price corresponding a a at statement charge the our during objectives shares. the which share. the in stock increases first lower from value liability pursue contingent related related our valuation The liability on the contingent liability contingent Base Development. contingent Cure each increase result end an $X earn-out we $X.X XXXX increase

In other and We security. September approximately working addition, from million equivalents December had expenses capital cash cash cash and $XXX,XXX the of XXXX. to gains of working equivalents $XX $XX.X of compared realized income capital $XX.X a $XX.X of million the XX, marketable of approximately sale investments, on approximately included approximately and XXXX million XX, as of million and and cash other

the XX, increase XX% assets was million. XXXX current from XXXX million of in preferred primary in a approximate of the current of from XX, December $XX.X A assets as driver increased Our net offering proceeds $XX.X in to December September approximately XXXX.

As Program. has facility, equipment December manufacturing of $X.X $X.XX on a current notes as million $X.X the which from XXXX as liabilities the our million, $XXX,XXX loan million accounts approximately payable company XX, approximately is The of total company's Protection were and $X.X accrued is million SBA of for finance well expense. Paycheck

executing million ended cash non-GAAP in our quarter the in coupled trend, adjusted $XX.X XXXX remain equivalents plan. our with we we mentioned, with As cash operating loss and confident and

launched our call plan Our increasing Marty. our balance further regulatory our our to marketing TV to portfolio. incremental remains over grow With that, investments, to expand sheet recently turn to U.K. spend, back I'd our efforts, scientific product make direct to business, strategic support utilize efforts strong the including like and now and

Marty Sumichrast

lines With Thank open you, I'd any to for that, Ronan. like the up question-and-answers, Q&A.

Operator

have line do your is question we your Scott announce your And and please Scott coming Instructions] [Operator from Certainly! question. live, affiliation a Fortune. pose

Scott Fortune

doors side forward, deploying a million you you and expanding then provide growth of a you Good afternoon, guys. a drive kind what the $XX whether its Thanks that of here for cash, taking the question. I know kind strong, seeing. of the for the want continue sense kind been to kind has little e-com things. impact to were Can slowing The but what in I your quarter-over-quarter growth you're going of get of quarter-over-quarter, or COVID color? to marketing growth like said, of you,

Marty Sumichrast

is Scott, Yes Marty. this

business. we know seeing, you continued direct-to-consumer the are on strength So

and where the know of the big business, game our you of with the that still mortar way has smaller back it's retailers, levels. a stable. strategy for its still pre-COVID side the are to would on of retailers out On it lot the dealing of kept part was most as business brick say relatively I and

next into calendar to folks the going talking to sense probably willingness so. second half we going is more the a, as XXXX. we quarter, then be You end we – are a know quarter, I towards of the of big this and there my get box are think early from be is there And

ourselves comes, that been space, there. we the We’ve going to the whole situation well certainly positioned branding really be as marijuana so time You and around that into positioning legislation with believe in when a leader helps know CBD. to move we're

As about breakeven. million, pretty XXX,XXX. adjusted $X now much you we've a look was know far September year burning know business near you ago utilizing as in were little our $X a X taken bit number I went that capital, to with XXX,XXX. we we're the We deeper million, quarters was – to a down ago think back Two million

I to sales. So to improve going continue that's think

our those dollars. continue As with sales margins, improve to can reinvest we

having So opportunistic spend capital to capital. extent. to We're some not utilize ways kind looking deficit use we are to of the that to at

to we money That's be more great going spending return are So on Ronan as for television. a really us. said been

other horizon. podcast, exciting return things we've that's great us, and Our the got been some a really on for

the which besides have public, – was going again seven continue eight know again, when taking to think out great the really we quarter March and you eight increases this now XXXX since to had of going know and of quarters we're you We’ve straight you we at quarter that's one cbdMD year going you So hit. know know. last a pandemic anticipate for and we've been

that about and tremendous traction and retailers of really is the brand from also excited we're online So getting also space. amount Paw a our

Scott Fortune

that. I Okay, appreciate

more that’s that on job you’ve You growing expanding CBD, great all from and from point, competition Pet are overall coming helped products MarthaStewart market innovations. of the and done a getting the stand

throughout kind or through cadence that me seems you Just or side. you how of are new going do That step though, forward. the a and Botanicals going luxury see growing like that XXXX new demographic the of Kind you of after. channel a that the know growth us

Marty Sumichrast

is know female of that demographic Yes, try the you really know the you age the one hit demographic, to over expand into that we female of demographic, to wanted the do and things XX.

things. So demographic. really toward we a marketing that started couple did We

see you'll goes launch of really and to go to that towards demographic. it the that cbdMD.com that line botanicals demographic, you female really after commercial now our and Day, go the If mentioned that – go you focused Conquer the our to Ken if was

as and online carry now push we tremendous retailers like Ken, interest it So to into line. add of to year, new and it, to from were to that of that sort started getting a of retailers anything selling we all this we Scott. for amount our you would exclusively

Ken Cohn

cbdMD and our I it's to is Other would for a thing that that once into than only you entry nailed of products are – them the great think family The it's exceptional an other way get extra it’s part I portfolio. family, point into an think I brand it. add try we them Marty, the

Scott Fortune

in for the jump Thanks I the it. Okay, color and I’ll appreciate queue.

Marty Sumichrast

Scott. Thanks

Operator

Thank you. today. our in so Thank for for that the call And with participation. you further much no queue, conclude conference does questions your