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cbdMD (YCBD)

Participants
Ronan Kennedy Chief Financial Officer and Chief Operating Officer
Marty Sumichrast Chairman and Co-Chief Executive Officer
Sibyl Swift Vice President-Scientific & Regulatory Affairs
Mike Pfeffer Oppenheimer
Call transcript
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Operator

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

Ronan Kennedy

cbdMD's thank and call for Catherine. quarter update. you you, XXXX first And joining Thank the December XX, earnings all

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

provide update an Swift Following the overview our quarterly the Marty Safe for Dr. an Harbor financial business, will summary climate will regulatory will provide I provide on statement, current then results. and of of CBD a the

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

Marty Sumichrast

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market overall with reposition These affected U.S. remain bullish that at we but our caused we include chain during several conditions years, disruptions first As look disruptions next the three accomplish, to have channel distribution, CBD product market. costs we and company softness out by we the must combined set can on for quarters. an what up business for the adjust in last new supply issues, our delays

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now cutting overhead are XXXX, early in target with annualized did savings. $XX million a we As our faced and circumstances, overall we when similar cost with

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conversion Our conversion the in rates significant based standards. top with customer website for five industry on residing rates enjoys cbdmd.com

Joe podcast. new team, is partnerships, marketing Le Board, three brought Coapman generating corporate expansion initiatives, months Marketing on year. exclusive legacy November CBD marketing as Rogan athletic mission revamped Experience, our this traffic our we to Joe digital to and Our include with spend sponsorships, short sales with of of through lead department brand as effort, which just Matt sites. exclusive and proven marketing, cut leader successful drive well Spotify Stugotz Batard customer the co-branding new with focus To and activations Dan in direct sponsorship in BXB category the redefined a in last his our Officer sponsorship podcast, as underperforming and our on Rogan Matt, through sales. and Chief Show advertising Recent the partnership

seeing results. that we Next to partnerships improved month, six can announce over can customers additional sites. we drive new our I expect weeks, that report sales past to are the

While and brands product The making our our we customers, important. improve to brick wholesale mortar the and driving offering wholesale streamlined of sales equally is is our adjusted competitive. our to even growth pricing, online more division and vital, sales our

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convenience operators and store pricing and retailers larger with a to enhancements. strategy sales inroads making also are redefined We product

and international regulation registration, more We compliance as are clear. become expanding into markets

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

new award-winning launched newly the as We and innovative of a awards. product continue to such multi-year as continue products, our functional year recipient, gummies a create

We our obtain group from protecting to such enhancing health internationally. company that this Paw major market which CBD during certifications sports the announced brand only opens that animals to week of highly the the partnerships We National and first continue in the companion to Certified committed the non-profit for that we strengthens NSF and leagues or as Supplement certification designation respected our a door to appeal, the the CBD NASC are Sport throughout USA official country. Animal Council, and of

clarity the Finally, over the unencumbered. please Science for to Swift, and Dr. factor with to Vice turn will FDA biggest at to force and our our Programs, the Dr. FDA's I'll was Office our Sibyl the now single Strategy Supplement that the most to update. clarity ahead. is and Swift, significant, the we are Dietary at Associate of Affairs Regulatory important Director products an With now President now respect products. ability go market sell actively Swift Receiving cbdMD. with call our to regulatory Research formally engaged Dr. and provide from FDA and

Sibyl Swift

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safe to looked able to the the However, now I'll to our over time, field. our highest products quality our science and Financial and a at it's to we be shareholder build We that back and on and dealt providing CBD Kennedy, level turn consumers, feel Ronan to regulation products platforms value. products it and to with Chief are everyday in Thank be invest Ronan? playing all ensure committed and for market the industry useful remain wellness across you. to finally Officer. And Operating drive and Chief health our

Ronan Kennedy

GAAP for first sales XXXX the quarter Thank net from prior and year's a were XX% everyone. decrease first fiscal million, welcome of $X.X you, Sibyl total. Total quarter

E-commerce the business direct-to-consumer total million Our fiscal first XXXX, quarterly a quarterly year-over-year in e-commerce first represented quarter. the of net of decrease. generates sales for XX% sales our of XX% $X.X quarter

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

to XXXX. gross decreased fiscal the inventory profit an XX.X% to charge. GAAP margin first XXX,XXX is XX.X% the partly first quarter This in from in of due quarter Our non-cash

As slower we and moving rationalize product several expiring lines.

adjusted gross in as the totaled compared our our declines, Excluding is product from lower leverage and in prior manufacturing on year. changes This to profit XX% as revenue this well non-GAAP based XX.X% year-over-year charge mix. as operating decline the

in operating Year-over-year Our up increase amortization stock million, depreciation from first the non-cash year. million compensation in expenses totaled by well $XX.X of increased $XXX,XXX of expenses $XX.X operating $XXX,XXX in comprised non-cash quarter as expense. for fiscal $XXX,XXX as XXXX prior and the increase

$X.X prior Our commission of leading operating expense expenses a increase marketing, increased million year-over-year total the XX% quarter. to and sponsorship fiscal or $XXX,XXX from

Goodwill the million $X.X increases by able of as $XX.X million our loss the prior million compared charges intangibles is the to profit. operating first operations period. Excluding end as over $XXX,XXX non-cash were sponsorship of year-over-year. a The Overall, at reduce marketing $X.X and decline commission drop year gross quarter loss expenses, due from fiscal to as remaining GAAP in primarily the non-cash and quarter in expenses a to and well impairment totaled from $XX.X we XXXX, of our for million

contingent the non-GAAP in and loss XXXX operating operating adjusted Our AdBack the million in The non-GAAP a non-cash XXXX, stock adjustment of Cure include to XXXX, of our on statement of adjusted of in $X.X million Based for in XXXX $XXX,XXX X consolidated fiscal our quarter million acquisition non-GAAP fiscal non-GAAP loss we depreciation XXXX operating at of million of first as first Development. by prior in operating $XXX,XXX the including attributed despite and resulting first to $XX.X $X.X to expenses period fiscal quarter related drop gross for gain September a the decline to as December expense, in of quarter profit, related expenses. to compared Other operating XXXX. quarter over in to an income increase $XXX,XXX revenue reduced the primarily the Goodwill well from quarter, December of and increase trade adjusted impairment income operating an the fiscal year as expense name revenue. Sequentially, charge non-GAAP corresponding the first $X.X operating inventory quarter loss XXXX non-cash expenses liability is loss million for non-cash of the our our

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

operations, cash. from – loss $X the acquisitions and $X.X of equivalents million changes coming and During XXXX, and approximately XXXX, of in non-GAAP paid working million, approximately September non-GAAP adjusted dividend approximately balance and compared main cash capital. used XXX,XXX $XX.X the we of We million in cash $XX.X on The $XX.X XX, first working cash from of utilized $X.X of cash with of XX, capital equipment capital our million quarter of included component XXXX. working million had operating fiscal million million and of our equivalents $XX.X of approximately as to cash property December

Our current from December assets decreased XX% of $XX.X as to approximately million. September XXXX XXst,

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

we cut their our current alluded to did of can't Marty the base. steps must prosperity, the As take Several structure rightsize cost we to generate our but initiatives anticipated return. necessary marketing away to earlier, our revenue not

turn We've we attain to We XX% reduced opportunities we days. These over changes MD We've rationalized believe and/or is November, to taken of the return modern taking brand So, million P-and-L underperforming selling are With swift CBD as head eliminate I'd back measure run approximately are can SKUs we've way brand over the committed total, and strategically count of will a top have revenue investments not shareholders. performance. to next the changing to have renew as since consumers we choice rate cost have that Marty. believe growth. over call that our the be identified and cost action. additional CBD several by marketing now our steps choice in like for impact savings annual gummies. and we operating categories, are our significant on to for In such identified several XX and XX to positive non-performing to expanded we XX the

Marty Sumichrast

Thank that With you, I'd open Q&A. line to Ronan. like Catherine, up the for

Operator

[Operator You question Pfeffer coming a have Mike with from Instructions] Oppenheimer.

Your line is live.

Mike Pfeffer

Hi, part this hopeful cost announced with question for cost the is filing, long expenses how into the be will to this in about the you're second then guys citizens With outcome? you the reduction of regard of question measures could talk fit regard will is this the to take accomplishing you And Dr. Swift. Thanks. and this? petition how to of implementing does legal that terms in process

Sibyl Swift

for XXX we but quickly about petition. data petition It typically go to act this process case. XXX not quicker, The from could a to do takes days citizen the the filing in the Absolutely. expect agency

and would CBD supplement in CBD the the that or alternative be discussion, lawful the excluded from issued the that a after food stated that determines under drugs that a comment commissioner of I of outcome the is act. dietary definition my is finding notice regulation and in As is not hopeful

have NPA the petition the As expect do the any to full the of citizen's required any support responses. incur association and member or will and board for we trade a costs a member not of

Mike Pfeffer

you Thank

Operator

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