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cbdMD (YCBD)

Participants
Ronan Kennedy CFO, COO, Secretary & Treasurer
Marty Sumichrast Chairman & Co-CEO
Sibyl Swift VP, Scientific and Regulatory Affairs
Hunter Diamond Diamond Equity
Call transcript
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Operator

Good afternoon. Welcome to cbdMD Inc.’s September 30, 2021 Fourth Quarter and Fiscal Year 2021 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its fourth quarter fiscal 2021 results, which followed the filing of its quarterly report on Form 10-K. Today's conference call is being recorded and will be available online, along with our earnings press release covering our financial results and non-GAAP presentation at cbdmd.com in accordance with cbdMD's retention policies. All participants on this call will be in a listen-only mode. followed question-and-answer be will call by session. a The now turn the the this Officer. Chief time, over to would I Operating Chief Kennedy, At conference like to Officer and Financial company's Ronan please Ronan, ahead. go

Ronan Kennedy

XX, update. thank And year for cbdMD's and Kate. you, XXXX call you quarter and Thank fourth earnings joining all the September XXXX fiscal

of as Dr. Sibyl Swift, On the our have as we Regulatory Chairman and Vice well President Scientific call today, Co-CEO, and Affairs. Marty Sumichrast our

overview for harbor of will update safe Following well division. statement, I’ll a therapeutics Dr. on provide an And as cbdMD business, Marty Swift results. provide our the summary provide the will then current CBD an update the an of our financial finally regulatory from climate as quarterly

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

Marty Sumichrast

you afternoon, and everyone. joining for good your today, yesterday's you us appreciate Ronan. delay. understanding very Thank We technical much, And appreciate

be which of CBD the brands. industry It's year against unknown ago, cbdMD. XXXX, the with anniversary competing X this our years Cure will anniversary of of brand, our XX again, the week CBD of flagship in the decriminalized very over acquisition X-year top brands the the of Development, despite in first Next of X-year entering an the grew CBD brand U.S. thousands COVID passage Farm CBD business, in CBD of company Bill, our pandemic, the were grew Based in the the In our owner quickly we we other the our XXXX, by become XX%. second CBD year In startup the business, time to America. we also one

a of down leading into And with today third Now $X approximately year, leading market. it's brands. Group, firm, our industry the to CBD CBD to are finish According positioned X the $X billion is industry top our at the as broken we X industry Brightfield billion firmly analytics the groups. we a

representing top first market. U.S. market, CBD XX approximately and total cbdMD's the CBD U.S. X.X% group made of with up is the approximately XX% represent the The share of CBD they of brands, market

they drug, pharma Epidiolex. is FDA-approved is And epileptic one drug The alone and seizure-reduction the of represented player, second group the entire by XX% control Pharmaceuticals Jazz market. which main their group,

top division up grew, costs such high maintain in our is loss our represent the for this as a XX% up to U.S. X,XXX This in to of market. now like in marketing mature be made increased CBD cbdMD of fiscal as the anemic the year, to The at GAAP over Group, X.X%. product overall smaller players reduced an more Compare growth, resulted were year, nearly XXXX. sales U.S. than fiscal caused We year, distribution half cbdMD, X XX% third second costs the control group, the first to the flat challenging market to which market. resulted a by product grew combined of majority outpace disruptions in XXXX therapeutics the XXXX. profit fiscal been for expected which in which sales in and several the over which operating XX% according with by the firm a of brands, record where Slower our experienced XX% of year-over-year CBD Brightfield with our entire established which And chain our of the XXXX. from Despite purchasing, product from to sales increase well gross coupled vast to XXXX million. investment the setup year the new and fiscal the of in our with this half $XX.X rates gross able pricing, delays, were we industry in have net XXXX market, significantly was as XX% growth margin is U.S. channels energy of by drinks, industry X% supply anticipated industry its able industry. CBD most our

and will there enter promulgated fiscal announced optimistic are seeing sales We're what be and X in demand years? are products own year, new a even relatively companies the the who we continues then the that sales currently been our will now And The X industry will brands, larger available. XXXX. previously unable and that have new growing believe is be will on industry at TAM. established of we in CBD a until have and to XXXX will a which channels this allow believe we XX, vision, CBD brands, the Marketing And product market, us growth team and XXXX veterans, X,XXX calendar will we new which nearly strong closed consumer CBD new practice fill demand. our as regulation roles guardrails positioned market X rates select withdrawing in estimates next before compliant up which few be consolidation. enter now confusion. will and brands, allow as While significant next regulations and well guidance to industry. evolutionary brands represents XXXX. our innovation, effect higher share and the of Group XXXX return The December that is play? safe channels, meet years, end and powerful industry regulations. consumers. phase leading We're and and as into ending be industry our rate of access Proper regulatory industry. the to Brightfield witnessed question trusted, which cycle quarter distribution seasoned larger turn of in of return open, With by consumer by customers the distribution future industries. What smaller consolidation become we for the should our phase CBD are to double CBD in growth will as will cbdMD these of in safeguards authorities, needed will balance regulations, other to total CBD grow of of they dramatic have been watershed to the a addressable new in the beginning many we healthy and We CBD believe industry has new greater countless In an CBD the a very resources the This the best a XX% reach XXXX sheet or well the infrastructure, brands gain in the our our natural

are: total our to increase share innovative that continue industry one, highest with customers. products always our to of saying, these to new quality the outpace goals goals launch on to believe positive achieve X of we be And products. EBITDA. focus growth; three, can the overall We course, addressable it Our adjusted CBD achieved without mission the market; is to bring of goes our two, and

a and new generated example for regulation that recruited Johnson, especially to mass products. under been become Business that accounts. As expand consumer direction products FDM wholesale Monday, recipient cbdMD We lead President line more brick-and-mortar Development We the stores past clearer. Botanicals of Product Dave regularly as U.S. of new our recognized Senior markets new recover has number a executive into to plan are a our now outstanding increase to excitement this One the management. from and We channel. from Vice the it's channels the international starting sales BXB effort our veteran, multiyear drug is Year relaunched cbdMD to Awards, food, pandemic, registration, product national was in the of our of our of distribution our plan become of to and compliance and

We are major we Japan. selling registering in the markets. such over currently international several are Brazil to markets and XX Central products our UK, America, And as

bestselling regulators seeing of allow expand state our also ingestibles. the of are more We some to start categories sale as

Matt sponsorships, best-in-class. our sponsorships, plan cbdMD's innovative our Marketing built believe we direction our which And marketing recently under recognition realigning built will our is and in for management new Coapman rapid have Officer, incredible those he through The the with We believe XXXX. Chief of on brand more brand opportunities expansion we leverage marketing executive footprint. and our our as have the reinvigorating retail of we of efforts. strategy is We we the result hired back to which

and to have much iconic those as you'll plans others. We about our very soon. life with partnerships brands, Bellator new CrossFit be with coming already started more as activations hearing industry-leading And well

brands brands and co-branding market media position a with as in and brand to global efforts are social non-CBD reach. marketing continue We established to awareness sports expand organizations in our unique with opportunity sales lead secure and the

to M&A opportunities DirectCBDOnline, our online as such We potential of marketplace. continue purchase the explore accretive

requirement NASC brand's committed in for NASC animals a best category. the a such in We step segment animals. of Council, dedicated itself and Having official to to protecting mass gating supplement strengthen obtain States, distribution country. such and that our to believe United quality Supplement as a the identifying the health this as group pivotal and Animal non-for-profit is the animal safety from National Paw space certification CBD certification the enhancing has to of certifying the retailers continue products certification several appeal quality or CBD the NASC is only certifications retail we companion throughout access for in the

formerly now are Finally, Sibyl our necessary my we our pleasure call one with Managing it's to was committed Swift and an President Therapeutics our progress at that, Associate Dr. cbdMD important ahead. Research the Vice of of of the success. the go to the provide Office now And Dr. Affairs please Swift, providing Regulatory program Swift, the resources at Dr. FDA's cbdMD & ensure Directors at Supplements Therapeutics over division and turn regulatory Dietary and to Strategy Director the update. its Science for to cbdMD. at and will

Sibyl Swift

the with that such Thank the importantly, filing on able XXXX, the January you, clear barriers and, Marty. to talk with distribution. to former media results call from held submissions. the in being employer regulatory program banking, to pleasure CBD recruited initiate everyone goal a already inefficient mass today. industry no and Make as by with with me major science most a unresolved In it's robust interactions back of mandate accelerate FDA mistake, be regulations And is in areas the and cbdMD ultimate public my of

a that That this nothing to ongoing government that to solution, arbitrary solution, We public a effect, are to cannabinoids. a with FDA's seen health and from decisions CBD business. based federal to care do to act American partnerships reasonable with These access has agency. resistance even withholding negligent same like products our the have on responsible responsible regulatory basic have the the formulated other potential led quagmire are

is way products Our effective. safe of classic a getting a the belief is reasonable these solution. government case and in are This the of

Center spectrum to provide safety have broad initiated human can consumers. study with cannabinoids to products. profile year, for other preclinical leading is of our work is South blend. robust arthritic greater ingredients provide data, mood, a of commonly believe pain, tremendous inflammation additional our further drug we in also response these further proprietary sleep will State, inflammation, cbdMD to determine the the is lead have to with UMass blends of use data proprietary tackling also State benefit including The potential forward there study pain will universities, patentable this unique needs. exploring this new issue. planning dogs that are drug the formulations same indicative logs, not And support human cannabinoid in and specific which functional with our program. of blend efficacy encouraging reduce Carolina, the study used At explore to how that This we the Excellence. therapeutic have discovery for with intend Colorado regarded as patented, of Colorado ability to products our is and with Positive only support We continue of of our FDA humans. may University announced for University Mississippi a development. and partnerships the botanical NSAID to we South study a the believe identify Here with We'll industry the in is We cannabinoids provide discover results drug cannabinoids science to the of University with Carolina of an of on and to efficacy also if the designed be

ensures to will generate of of generation data current in next we we commitment identifying proprietary cannabinoids to compiled products, science aggressive Our while of safety to confidence formulations. blends, gives The be and we novel date take look and demonstrating cannabinoid leaders efficacy of as to the more the safety have the approach our regulatory body and us the advancing by to cannabinoid XXXX. a products the continue

indication provide that the analyzed on for a will have the partisan landscape and proposed We FDA been own. no their have FDA assessed Numerous CBD. act the see likelihood We bipartisan this bills pathway year. regulatory and will that

data of with the to Office However, to officials Safety result we in discuss yet dossier, with and FDA a the we the programs. going have actions. Dietary Food effective the require to quality safety Additive Office meeting of and public they in agency. Therefore, in and is agency pre-submission most our Last legislative the interactions path the believe advocacy requested Supplement the forward week,

are We is the topic. hold agency. plan we'll pathways. both And we on with the the evaluating meetings agency [Indiscernible] with the both several and NDI discussing be first of to this This

use of the We novel inform turn Operating feedback Kennedy, support the proprietary from Financial submissions type blends. with our safety regarding the on to our FDA will And now to meeting back spectrum Officer. we will anticipate blend. Ronan a over broad and of Thank cannabinoid first decision it regulatory submission We will submit which to Chief additional you. I Chief Ronan?

Ronan Kennedy

total XXXX or Thank fiscal total. you, quarter sales Sibyl. the net of On fiscal for quarter a million $X.X a GAAP from fourth were increase basis, XX% year's fourth prior

to year-end million fiscal increase totaled fiscal XX, sales X% our the XXXX. XXXX, million, audited $XX.X September For compared $XX.X net a for

quarter Our e-commerce of direct-to-consumer sales quarterly in $X.X XXXX. generated the fiscal of business million

E-commerce X% ended fourth to XX% e-commerce represented a fiscal or is the fiscal and $XX.X compared million sales for XX% the year generated ended quarterly million this quarter total increase. net year both the the While for an sales prior net year XXXX. our comparative year-over-year decrease XXXX, fiscal for $XX.X of

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

$X.X saw For million year as XX.X% and the sales. million, optimistic wholesale sales about respectively, September $XX.X and a XX, potential ended year this increase Paw for from during XXXX XXXX, generated trend. year million from increase net the strong fiscal are the $XX.X and a prior with XXXX, business our we generated

year-end adjustments. came fiscal for the for for packaging gross NRV quarterly in as as XXXX quarter Our some percent changes to regulatory compares as fiscal of for profit remained well accounting XX% year net a XX% the This sales, comparative other strong labeling write-offs prior GAAP period. onetime of after fourth at

a the September net gross For was fiscal profit of year and XX% ended XX, as and XXXX, XXXX respectively, sales. total XX%, percentage

We business. expect the margins factoring sales acquired the in mid-XXs to gross recent when maintain our profit range with mix in

due quarter is in prior of expenses spend. fourth in compensation, for marketing contributing and as prior were increase $XX.X noncash million increase from million factors XXXX a to reduction million, Operating the increased expenses and in advertising, $XX.X year. of over $XXX,XXX. the quarter, expenses the increase in operating to XX% mainly totaled Our stock sponsorship $XXX,XXX other the fiscal $XXX,XXX compared expense up $X.X from net Other fiscal which

$X comp, the in an regulatory, million loss this fiscal ended for the of in $X.X from XXXX. $XX.X September controllable declined June while net year a of Sequentially, $X.X to $X.X in the the profit Overall, in $X.X other as quarter resulted period. XXXX mostly million in million prior fourth increased marketing primarily million fiscal $X.X gross operations comparative achieving and while $XX.X year $X from mainly stock For GAAP is $X.X reductions, in payroll increase our fourth quarter operating compensation, income to to fiscal million and of This attributable compared costs. XX, for year-end drop spend, in in the $XXX,XXX is sponsorship and XXXX million loss to to million net approximately XXXX, R&D quarter operating cost due expenses. million marketing expenses the million from million from the the XXXX. achieving increase This in of $X.X reduction advertising, million

from fiscal the XXXX $XX.X ended operations and year totaled XX, For and million, September $XX.X our loss million XXXX, GAAP respectively.

compared The to the quarter primarily operating adjusted of of operating the noncash adjustments non-GAAP a to the million quarter. to adjusted the loss $XXX,XXX Sequentially, non-GAAP of of over fourth our from reduced for the a operating of million for the XXXX $XXX,XXX in of loss operating as stock and $X adjusted fiscal $X.X loss $X.X charge, September XXXX operating $XXX,XXX accrued loss onetime expense, expenses. expense, XXXX million Our fiscal to year the in depreciation increase period fiscal resulting in fourth increase June inventory included non-GAAP $XXX,XXX quarter attributable expenses non-GAAP XXXX comp operating noncash non-GAAP in prior is XXXX. quarter in fourth we the by quarter adjusted

adjusted our cbdMD XXXX. totaled $XXX,XXX For $XX.X related its fiscal of in our to We and loss increase operating fiscal contingent attributable mainly Therapeutics' noncash the fiscal our marketing acquisition the founding increase gain R&D our continue in Development. for consolidated will is on XXXX, $X.X statements since tax on include non-GAAP million. cbdMD invested quarter million in Based expenses liability expenses. addition income gain The deferred $XXX,XXX our XXXX we mission. to in related income to year invest over Other third of And December Therapeutics non-cash to of XXXX prior Cure

During paid-in acquisition. quarter, the the changes million valuation terms valuation corresponding $X.XX time At booked our quarter. earnout remaining to $X.X per to contingent contingent the and issuance, of September gain a the of the a the the additional XXX,XXX non-cash earnout of in are we The earn-out of The the sheet. XX, a balance August, contingent the primarily consolidated during XXX,XXX $XXX revalued capital end for decrease, liability shares common ending decrease we of on market in third liability shares we from period liability from of price XXXX, subsequently, in the of $X.XX share. resulting were stock the a issued to under result period the million classified at

of adjusted million We had million equivalents DirectCBDOnline. working our utilized cash of cash XXXX, cash $X to paid $XX.X -- approximately and components $X.X $X.X main cash September $XX.X and The million and XXXX, purchase approximately operating loss we operations, of compared adjusted working of $XX cash. the September non-GAAP the million $X of dividends our operating million, used for XX, from quarter in million equivalents and fourth During capital capital $XX.X XXXX. cash million on million of of as of XX, approximately include price of and

XXXX in A XXXX, million $XX.X stock current increase driver December September from assets $XX.X XX, and respectively. September our XXXX in offering $XX.X of XX% July of of the Series primary from prior A to at and year was proceeds assets current million Our preferred of the approximately million. approximately net increased

total $X.X approximately notes our and of $X.X approximately of equipment The accrued September expenses. liabilities company manufacturing the for were is has XX, of current $XXX,XXX As facility. payable accounts million which financing million XXXX, company's million, $X.X is and

invested revenue despite protect have difficult mid-third strong year synergies to precautionary expenses track operations taking our as of realign on from been Our launches half cash position quarter quarterly against and product we million several and get we're as core tied XXXX. business recent beginning our per well XXXX. fiscal The inventory personnel of and we've today's marketing And maximize -- remains to first quarter at our the to by were the of changes steps in available this chain measures operating issues working new several second Since fiscal of our XXXX, our to reduce a business. back of in spend end, made quarter drive to potential fiscal to acquisition have supply quarter dollars fiscal environment. From performance consolidated the from business.

As are previously in call which lead XXXX. as and product to we over initiatives during a set several months growth focused at remain mentioned, Amify of now Marty. new during fiscal our the optimistic back anticipate initiatives, registrations, to building coupled We the opportunities initiatives about such XXXX. we fiscal to invested launch our revenue foreign and, will With coming we turn in to with I'd inertia like number the that, Marty

Marty Sumichrast

open the up for line With Ronan. to Kate? you, I'd like that, Q&A. thank everyone, Well,

Operator

you. Instructions] and Thank the from gentlemen, Pfeiffer today coming for Mike is questions. now question at floor [Operator open Oppenheimer. first Ladies [ph] is Our

is live. line Your

may begin. You

Unidentified Analyst

my for question. thanks taking Hi,

revenue therapeutics Thanks the follow will of these drug the supplement are potential can the what efforts? on more Just side a a through on looking as And the much. we just that division And the deeper at in opportunities 'XX? provide to so play versus dig little on side? comments color is up, made, you dietary windfall role possible

Marty Sumichrast

Michael. I appreciate the thanks, Well, question.

to about the role overall Therapeutics the Sibyl to our be strategy. Sibyl, it Michael's helpful respond would think plays would you I that division to comments? talk is like business and in have what

Sibyl Swift

that Michael, Thank Absolutely. for you, Marty. you thank question.

at leverage as in supplements. dietary application a experience very with a real data towards design how to and unique leveraged such as supplement dietary looking well. our we therapeutics So design can as them, be And for we're opportunity therapeutic the studies a to way look best opportunity to them there's that

And working -- so experience that we've together we've interest received in significant how can other -- and significant as some we how supplement this through we're from work entities knowledge is last of data the and drug to some design supplements, will of those basic submissions lend continued formulations further for preliminary and studies can safety be applications. with but itself also that for support year,

Unidentified Analyst

strategies And the the Is so time revenues from this? don't in potential with therapeutics? I is that? can -- could company guess from benefit I if you know I on different that Marty -- Or something soon -- think that talk, But we the frame do how further 'XX? out? How these How possible, about therapeutics. that, should mean on about we

Marty Sumichrast

I therapeutics Well, is it the think that And business. to initially we're on able that do. currently core on not make drives what I ability with we're to trying product provide sales, products drives our to think development do claims

in, stages, as areas a partnership in would think but that believe that other we our It's and development. type can kind well we Beyond as only that, pipeline. but safety we that universities really we only development will of data with we're and as able in of benefit we're work going and the in products the to our party if in of third to out with these hopefully can utilize. we market we kind of any the not a partners initial see as drug really products to the the it the that what probably And far are studies, have business are not many that existing and be have, ability results of we these get there do

kind hone when that something would of XXXX, in base. of it's existing to of what that's our able current with Sibyl, sort we'll down, can like you to because the benefit think maybe asking I timing, products. product I Michael hopefully So our be is interact portfolio on that think

Sibyl Swift

benefits way lend we support to year some enrolling is to incrementally like the are safety those other areas for of kind to make Marty seeing claims that of The the in year. in that the to beginning that immediate to to on think benefits I for I allude began together my studies they're product the increasing next submissions. stand base. and start see leading to next we years, combining designed those out but existing also that to we'd in definitely remarks, And to highlighted anticipate provide but that

Unidentified Analyst

Great.

you Sounds Thank taking exciting. questions. I appreciate my you.

Marty Sumichrast

Thanks, Michael.

Operator

Thank you.

question next Our Equity. today Diamond your My with from Hunter affiliation. announce Diamond is coming Hunter Please Diamond. apologies.

Your line is live.

begin. may You

Hunter Diamond

my Thanks everybody. Hi, for call. taking

big just I'm a fan I product. Firstly, of to want the say

an idea, I been on I just wanted I get at And products the what's website think the is question outreach? deal caused what's the the CBD are terrific, the and know was to development XXX. is the My amazing. decline? preferred.

Marty Sumichrast

Obviously, preferred past concurrently. really X groups is both on to selloff pretty imagine the would done outreach talk concerned, The all preferred. a information I by seen over and same, have treat has common we been Well, I our months. the and sector comment you're as prices. that the far affected our was on same And provide last financing as of dramatic at But both correct. shareholders and the the don't them XXX that. those, cannabis on entire and we both stock the

Hunter Diamond

maybe stock course, headwinds. generally, environment. extremely the and my there's and me, question control yields the anyone no tend There the like to income. secular as can't And older hold rate Absolutely. tend been for of are to And people as to is it. appreciate preferreds professional, here, financial company, be guess looking I And right up. a prices attractive much you interest know

takes of would just it just thrilled I'm I months, myself and of included, years down been the in going company for the investors curious, so the just with half and the it because deal, specifically. proactive preferred be to to two dividends who more it's the did family offices, And breakeven. haven't next couple over possibly Because think, obviously, XX%

hopefully, I'd a So that's curious, your request. be thoughts. I fair Or just think

Marty Sumichrast

in not Well, we of the as -- I far But shareholder shareholders, we industry-wide across certainly reach are the as -- to results a board that lot mean, we to and our of the out and our -- mean intend pricing, negative believe contacting we're continue I the on the the have both preferred. said, been sector. as an to I this common base,

right. I you are think

preferred, XX%-XX%. where the rate of it priced excess is I in of dividend the on think believe, is I now,

think it's the dramatic. can to hopefully new story. some you're that closer And the pretty looking get to into out we So get we discussion going to on you and the about ultimately and ultimately us EBITDA that adjusted of to that drive see, as But get directives which us count about I beginning yeah, talk to. revenue we're get January, positive have,

Hunter Diamond

Perfect. company noticed terrific, said, I development, And great is everything I'm and I've customer all is the think like And well. the the doing a Great. the marketing. I company. fan big the of and the I'm as website points

shareholders want investors, And I think to just I said, obviously, the so company. like of for take the financed preferred who you care the

at I is actually XX% And And outreach the think now. hurt. so additional yield couldn't preferred

company, to product financially. a given is very positioned somewhat easy the me, to market, So it's think, I well

appreciate I again, on congrats the and results. So the time

Marty Sumichrast

Appreciate for you being it. a and a customer shareholder. Thank

Operator

you. Thank

to I the turn now comments. further this call back for no closing to at Marty like queue would in We have the questions time.

Marty Sumichrast

And wish thank you you much. all shareholders. much. happy you the to next appreciate everybody we’ll Thank holidays a our new Thank so I very a And to you safe Well, and wonderful and support year. and talk year. Kate,

Operator

conclude does ladies This and event. you, gentlemen. today's Thank

at have participation. you We this time, for disconnect day. may You thank wonderful a and your