Q2 2025 cbdMD Inc Earnings Call
Operator: Good afternoon and welcome to the cbdMD, Inc. conference call to discuss results for their second quarter fiscal 2025, period ending March 31st, 2025. This afternoon, the company issued a press release that provided an overview of its second quarter results, which followed the filing of its quarterly report on Form 10-Q.
Good afternoon, and welcome to the C. D. M D Inc Conference call to discuss results for the second quarter fiscal 'twenty to 'twenty five period, ending March 31 2025.
This afternoon, the company issued a press release that provided an overview of our second quarter results, which fell which followed the filing of its quarterly report on Form 10-Q.
Operator: Today's conference call will be recorded and will be available online along with the earnings press release covering financial results and non-GAAP presentation at cbdMD.com in accordance with cbdMD's retention policies. All participants have been joined to the call in listen-only mode, and following the presentation, there will be a question and answer session.
Today's conference call will be recorded and will be available online along with the earnings press release covering financial results. Our non-GAAP presentation at J P. D. M D dot com in accordance with the B D. M. D is retention policies.
Participants have been joined to the call in listen only mode and following the presentation. There will be a question and answer session.
Operator: To join the question queue, you may press star, then 1 on your telephone keypad.
Join the question queue.
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Operator: At this time, I would like to turn the conference over to Brad Whitmore, the company's chief accounting officer. Brad, please go ahead.
Speaker Change: At this time I would like to turn the conference over to Brad Whitmarsh, The company's Chief Accounting Officer, Brad. Please go ahead.
Brad Whitmore: Thank you, Galen, and thank you all for joining cbdMD's March 31, 2025, second quarter of fiscal 2025 earnings call and update.
Speaker Change: Thank you Galen and thank you all for joining <unk> March 31, 2025 second quarter of fiscal 2025 earnings call and update on the call. Today. We also have Brendan Kennedy, our CEO and Chief financial officer, we'd like to remind everyone that various remarks about future expectations plans and prospects constitute forward.
Brad Whitmore: On the call today, we also have Ronan Kennedy, our CEO and chief financial officer. We'd like to remind everyone that various remarks about future expectations plans and prospects constitute forward looking statements for purposes of safe harbor provisions under the private securities litigation reform act of 1995 cbdMD. cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated, including risks described in the company's annual report on Form 10-Q for the fiscal quarter ended March 31, 2025, and our other filings with the SEC, all of which can be reviewed on the company's website at www.cbdMD.com or on the SEC's website at www.sec.gov.
Speaker Change: Looking statements for purposes of Safe Harbor provisions under the private Securities Litigation Reform Act of 1995 C V D M D.
Speaker Change: Cautions that these forward looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated including risks described in the company's annual report on Form 10-K for the fiscal our 10-Q excuse me for the fiscal quarter ended March 31, 2025, and our other filings with the SEC.
Speaker Change: We see all of which can be reviewed on the company's website at www Dot CVD MD dot com or on the Sec's website at Www Dot FCC dot Gov any.
Brad Whitmore: Any forward-looking statements made on this conference call speak only as of today's date, Thursday, May 15, 2025, and cbdMD does not intend to update any of these forward-looking statements to reflect events or circumstances that would occur after today's date, except as may be required by federal security.
Any forward looking statements made on this conference call speak only as of today's date Thursday May 15, 2025, and CBD M D and does not intend to update any of these forward looking statements to reflect events or circumstances that would occur. After today's date, except as may be required by federal securities laws with that I'd like to turn the call over to Brendan.
Ronan Kennedy: With that, I'd like to turn the call over to Runa. Good afternoon, everyone, and thank you for joining us today over the past several quarters. We set 2 clear. One, drive revenue growth and achieve profitability, and two, resolve our capital structure and regain compliance with the NYS America Act. This quarterly update, I'm pleased to report progress on both. Our top priority for the second quarter and into Q3 was preparing for our annual meeting and securing shareholder approval on two mission-critical the conversion of our Series A preferred stock and a reverse. This was a complex undertaking involving multiple shareholder classes and two failed prior attempts over the last I want to thank our shareholders for the strong vote of confidence.
Brendan Kennedy: Good afternoon, everyone and thank you for joining us today.
Brendan Kennedy: For the past several quarters, we set two clear goals.
Brendan Kennedy: One drive revenue growth and achieve profitability and to resolve our capital structure and regain compliance with the NYSE American listing standards.
Brendan Kennedy: This quarterly update I'm pleased to report progress on both fronts.
Brendan Kennedy: Top priority for the second quarter and into Q3 with preparing for our annual meeting and securing shareholder approval on two mission critical proposals the conversion of our series a preferred stock and a reverse split.
Brendan Kennedy: This is a complex undertaking involving multiple shareholder classes and two failed prior attempts over the last 18 months I want to thank our shareholders for the strong vote of confidence.
Ronan Kennedy: The successful approval of these measures represents a major milestone in cbdMD's reset and long-term. With the Series A conversion complete, approximately $6.7 million in accrued dividends in our shares of Series A preferred stock were converted into common stock, raising our pro forma non-gap adjusted book value from approximately $670,000 to over $7 million as of March 31, 2025, well above the $4 million threshold required by the For more information visit www.FEMA.gov The exchange also eliminated legacy obligations, including $4 million in annual dividends and over $50 million in preferred waterfall payouts, and simplified our capital. After discussions with the regulators, a board determined conducting the reverse stock split was an important step to protect against the NYSE American's $0.10 delisting threshold.
Brendan Kennedy: Successful approval. These measures represents a major milestone and sleeping amd's reset and long term positioning.
Brendan Kennedy: With the theory that conversion complete approximately $6 7 million in accrued dividends and our shares of series a preferred stock were converted into common stock raising our pro forma non-GAAP adjusted book value from approximately 670000 to over $7 million as of March 31, 2025, well.
Speaker Change: Above the $4 million threshold required by the NYSE American Nick.
Speaker Change: The exchange also eliminated legacy obligations, including $4 million and annual dividends and over 15 million in preferred waterfall paths and simplified our capital structure.
Speaker Change: After discussions with the regulators our board determined conducting the reverse stock split was an important step to protect against the NYSE American Tencent delisting threshold.
Ronan Kennedy: Between the preferred conversion and the reverse stock split, we now have approximately 8.9 million shares of common stock outstanding, no debt, no warrant overhang, and a clean cap table, putting us in a position to fully regain compliance by the end of our fiscal year. After two years of heavy lifting, cbdMD is now operating with a strong foundation and greater strategic flexibility. We're energized by what this unlocks for the On the operational side, we continue to demonstrate meaningful year-over-year progress across the PNC. Even if q2 performance was not as strong as q1. We're executing against three revenue growth priorities.
Speaker Change: Between the preferred conversion and the reverse stock split we now have approximately eight 9 million shares of common stock outstanding no debt no warrant overhang and a clean capital putting us in a position to fully regain compliance by the end of our fiscal year.
Speaker Change: After two years of heavy lifting C V. D. M. D is now operating with a strong foundation and greater strategic flexibility.
Speaker Change: Just by what this unlocks for the future.
Speaker Change: On the operational side, we continue to demonstrate meaningful year over year progress across the P&L.
Speaker Change: Even if Q2 performance was not as strong as Q1.
Speaker Change: We're executing against three revenue growth priorities first growing our direct to consumer business well, our Q2 marketing performance fell short of expectations, we acted swiftly making leadership changes in March.
Ronan Kennedy: First, growing our direct-to-consumer business. While our Q2 marketing performance fell short of expectations, we acted swiftly, making leadership changes in March, and instilling a renewed urgency across. We're laser-focused on enhancing customer acquisition, experience, and return. second expanding our core wholesale business. Wholesale revenue is up 13% on a trailing 12-month. We've added new sales reps focusing on high-quality partnerships and working to ensure cbdMD remains the preferred brand in our Finally, scalene herbal oasis, or hemp-derived THC cell. I'm excited to officially call it award winning all four flavors recently meddled at the 2025 high spirit. We've added distribution partners in Alabama, Florida, and North Carolina.
Speaker Change: And a renewed urgency across the team we are laser focused on enhancing customer acquisition experience and retention.
Speaker Change: Second expanding our coal core wholesale business.
Speaker Change: Wholesale revenue was up 13% on a trailing 12 month basis, we've added new sales reps focused on the high court focusing on high quality partnerships and working to ensure C. P. M. D remains the preferred brand and our category.
Finally, scaling herbal oasis, our hemp derived THC seltzer brands.
Speaker Change: He started especially call It award winning all four flavors recently met all of the 2025 high spirits War.
Speaker Change: We've added distribution partners in Alabama, Florida, and North Carolina, well, some rollout momentum slowed in Q2 due to legislative activity, we're ramping it up again, and having new markets and have new markets and retail placements in the pipeline, we expect to announce additional wins this third quarter.
Ronan Kennedy: While some rollout momentum slowed in Q2 due to legislative activity, we're ramping it up again and have new markets and retail placements in the pipeline. We expect to announce additional wins this third quarter. The THC seltzer category is booming. According to Euromonitor, sales more than doubled in 2024 and projected to exceed $4 billion by 2020. As alcohol consumption declines, we're seeing a clear sign that consumers are seeking functional social alternatives, and OASIS is built for them. We also know that the long-term success of this category will depend on regulatory clarity. We are currently tracking active legislation in over 23 states, and we strongly support smart regulation that ensures customer safety and trust.
Speaker Change: The GAC Seltzer category.
Speaker Change: According to Euromonitor sales more than doubled in 2024 and projected to exceed $4 billion by 2020.
Speaker Change: As alcohol consumption declines, we're seeing clear signs that consumers are seeking functional social alternatives in a way it is built for that future.
Speaker Change: We also know that the long term success of this category will depend on regulatory cleared. We are currently tracking active legislation and over 23 states and we strongly support smart regulation that insurers customer safety and trust.
Ronan Kennedy: With our internal regulatory and legal experience, we're confident in our ability to adapt quickly to an evolve. All this strategic and operational progress is beginning to show up in our financial Well, we still have work ahead. The year over year trends across revenue and margins EBITDA reflect a business that's becoming more efficient, more disciplined and better positioned to scale.
Speaker Change: With our internal regulatory and legal experience, we're confident in our ability to adapt quickly to an evolving landscape.
Speaker Change: All of the strategic and operational progress is beginning to show up in our financial performance.
We still have work ahead.
Speaker Change: The year over year trends across revenue margins EBITDA. It looks like the business, just becoming more efficient more discipline and better positioned to scale with that I'd like to turn it over to Brad to walk through the financial details of the quarter.
Brad Whitmore: With that, I'd like to turn it over to Brad to walk through the financial details. Thanks, Ronan. Total net sales for the first quarter of fiscal 2025 were $4.7 million, representing an 8.6% increase from the prior year comparative quarter total, and a 7.9% decrease from the first quarter.
Brad Whitmarsh: Thanks, Harlan total net sales for the first quarter of fiscal 2025 were $4 7 million, representing an eight 6% increase from the prior year comparative quarter title and a seven 9% decrease from the first quarter as Ryan mentioned, we're focused on three key areas to improve our quarterly revenue numbers.
Brad Whitmore: As Ronan mentioned, we are focused on three key areas to improve our quarterly revenue numbers. Our quarterly e-commerce direct-to-consumer business was flat year-over-year and generated sales of $3.6 million in the second quarter of fiscal 2020. eCommerce represented 77% of our total net sales for the second quarter of 2025 versus 83% in the prior year comparative quarter. Our wholesale business generated $1.1 million of net sales for the second quarter of fiscal 2025, up 22% as compared to $750,000 for the comparative quarter in fiscal 2025. Our gross profit remained healthy at 62% for the second quarter of 2020.
Our quarterly e-commerce direct to consumer business was flat year over year and generated sales of $3 6 million in the second quarter of fiscal 2025 E. Commerce represented 77% of our total net sales for the second quarter of 2025 versus 83% in the prior year comparative quarter.
Brad Whitmarsh: Our wholesale business generated $1 1 million of net sales for the second quarter of fiscal 2025.
Brad Whitmarsh: 22% as compared to 750000 for the comparative quarter in fiscal 2024.
Brad Whitmarsh: Our gross profit remained healthy at 62% for the second quarter of 2025, the increase in our warehouse where it flowed through in full this quarter, including some one time increases in Cam costs. Despite this we continue to operate with some of the leading gross margins in the industry.
Brad Whitmore: The increase in our warehouse rent flowed through in full this quarter, including some one-time increases in CAM costs. Despite this, we continue to operate with some of the leading gross margins in the industry.
Brad Whitmore: Our SG&A expenses for the second quarter of fiscal 2025 totaled $3.5 million, compared to $4.1 million in the prior year comparative quarter. The expense reduction was primarily due to reductions in payroll, professional fees, and the elimination of the headquarters lease, in addition to other cost-saving initiatives, while slightly offset by an increase in marketing. For the six months ended March 31st, 2025, SG&A's expenses were down $1.8 million across the board and came in at $6.9.
Brad Whitmarsh: Our SG&A expenses for the second quarter of fiscal 2025 totaled $3 5 million compared to $4 1 million in the prior year comparative quarter.
Brad Whitmarsh: The expense reduction was primarily due to reductions in payroll professional fees and the elimination of the headquarters lease. In addition to other cost saving initiatives, while slightly offset by an increase in marketing expense for the six months ended March 31, 2025, SG&A expenses were.
Brad Whitmarsh: We're down $1 8 million across the board and came in at $6 9 million.
Brad Whitmore: We are continuing to review operating costs across the board to ensure we remain efficient and help us return to positive income and EBITDA during the second half of the year. Overall, this resulted in a loss from operations of approximately $485,000 for the second quarter of fiscal 2025. As compared to a 1.5 million loss from the prior year. After adjustment to the fair value of the notes and interest expense, net loss totaled $480,000 as compared to a loss of $3 million in the second quarter of fiscal 2020. Our non-GAAP adjustments to operating expenses for the second quarter of fiscal 2025 included $2,000 in non-cash employee stock expense and $286,000 in depreciation and amortization expense, resulting in non-GAAP adjusted even to loss of $197,000 for the second quarter of fiscal 2025 as compared to $680,000 non-GAAP adjusted even to loss in the second quarter of fiscal 2025.
Brad Whitmarsh: We are continuing to review operating cost across the board to ensure we remain efficient and help us return to positive income in EBITDA during the second half of the year.
Brad Whitmarsh: Overall this resulted in a loss from operations of approximately 485000 for the second quarter of fiscal 2025.
Compared to a $1 5 million loss from the prior year period after adjustments to the fair value of the notes and interest expense net loss totaled 480000 as compared to a loss of $3 million in the second quarter of fiscal 2024.
Brad Whitmarsh: Our non-GAAP adjustments to operating expenses for the second quarter of fiscal 2025 included $2000 of noncash employee stock expense of 286000 in depreciation and amortization expense, resulting in noncash GAAP adjusted EBITDA loss of 197000 for the second quarter of fiscal 2025.
Brad Whitmarsh: As compared to 680000, non-GAAP adjusted EBITDA loss in the second quarter of fiscal 2024.
Brad Whitmore: The EBITDA improvement in non-GAAP-adjusted operating loss over the prior year period is primarily attributed to management's focus on our cost structure and profitability.
Brad Whitmarsh: The EBITDA improvement non-GAAP adjusted operating loss over the prior year period is primarily attributed to management focus on our cost structure and profitability.
Brad Whitmore: We had cash and cash equivalents of approximately $1.7 million and working capital of approximately negative $3.7 million for March 31, 2025, as compared to $2.4 million and working capital deficit of approximately $2.2 million on September 30, 2025. The main factor contributing to the reduction in our net working capital is the incremental $1 million of accrued preferred dividends that is a short-term liability on our balance. Excluding the respective $6.7 and $4.7 million of accrued dividends, we had positive adjusted net working capital of $2.8 million as of March 25 and $2.4 million as of September 25.
Brad Whitmarsh: We had cash and cash equivalents of approximately $1 7 million and working capital of approximately negative $3 7 million in March for March 31, 2025, as compared to $2 4 million and working capital deficit of approximately $2 2 million.
Brad Whitmarsh: September 30th 2024.
Brad Whitmarsh: Main factor contributing to the reduction in our net working capital as the incremental $1 million of accrued preferred dividends that is a short term liability on our balance sheet.
Brad Whitmarsh: Excluding the respective $6 seven and $4 7 million of accrued dividends, we had positive adjusted net working capital of $2 8 million as of March 25, and $2 4 million as of September 24.
Brad Whitmore: We invested approximately $400,000 in inventory during the pandemic. We were running a little too lean at the start of the quarter and needed to bolster a few key skews. Additionally, we invested in our oasis inventory as we get began rolling out to distribute.
Brad Whitmarsh: We invested approximately 400000 in inventory during the quarter, we were running a little too lean at the start of the quarter and needed to bolster our few key skus. Additionally, we invested in our inventory as we get began rolling out to distributors, we continue to focus on improving our working capital and managing our cash carefully with that.
Brad Whitmore: We continue to focus on improving our working capital and managing our cash care.
Ronan Kennedy: With that, I'll turn the call back over to Ronan. Thank you, Brad. Operationally, we've transformed this business.
Robyn: I'll turn the call back over to Robyn.
Robyn: Thank you Brad.
Speaker Change: Operationally, we've transformed this business our mandate is profitable growth and remain firmly committed to delivering a profitable 2025.
Ronan Kennedy: Our mandate is profitable growth and remain firmly committed to delivering a profitable 2020. The successful capital restructuring not only improves our balance sheet, but also opens the door for future strategic opportunities, including. The right transaction could be truly transformational, creating opportunities to expand into new categories, reach broader customer segments, open additional sales channels, and realize meaningful operational synergy. Our capital structure is now clear, our stock is more investable, and we're seeing increased inbound interest since the annual. We are evaluating these opportunities with discipline and clear focus on long-term value.
Speaker Change: The successful capital restructuring not only improves our balance sheet, but also opens the door for future strategic opportunities, including M&A at.
Speaker Change: The right transaction could be truly transformational creating opportunities to expand into new categories reach broader customer segments open additional sales channels and realize meaningful operational synergies.
Speaker Change: Capital structure is now clear our stock is more investable and we're seeing increased inbound interest since the annual meeting.
Speaker Change: In evaluating these opportunities with discipline and clear focus on long term value creation.
Ronan Kennedy: We consider this our great reset. A clean slate to create long-term benefits. We're no longer weighed down by the We're now powered by a lean organization, loyal customer base and category. Our cash fund remains low. We believe we have the working capital to execute our growth. We believe we're in a stronger position than many of our public peers, with stronger gross margins, substantially debt-free, with approximately $1.7 million in cash, and no material liabilities beyond normal working capital. Our battle tested team has showed time and again that we can evolve, adapt and deliver.
Speaker Change: We consider this our great reset a clean slate to create long term value.
Speaker Change: We're no longer weighed down by the pets. We're now powered by a lean organization loyal customer base and category expanding brands.
Speaker Change: Our cash burn remains below we believe we have the working capital to execute our growth plan.
Speaker Change: We believe we're in a stronger position than many of our public peers with stronger gross margins substantially debt free with approximately a million seven in cash and no material liabilities beyond normal working capital only slightly.
Speaker Change: A battle tested team has shown time and again that we can evolve adapt and deliver.
Ronan Kennedy: We're grateful for the shareholder support shown in April, and we're more focused than ever on driving the results in the quarter.
Speaker Change: We're grateful for the shareholder support shown in April and we're more focused than ever on driving the results in the quarters to come. Thank you and let's open up for questions.
Operator: Thank you and let's open it up for questions. Certainly. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two.
Speaker Change: Certainly to join the question queue. You May Press Star then one on your telephone keypad, you'll hear about telling them acknowledging your request.
Speaker Change: We're using a speakerphone please pick up your handset before pressing any key to withdraw your question. Please.
Speaker Change: I then chi.
Operator: Our first question is from Adam Waldo with Lismore Capital. Oh, sorry, he disappeared.
Speaker Change: Our first question is from Adam Waldow with Lismore capital.
Speaker Change: Alright.
Tom McGovern: Our first question is from Tom McGovern with Maxim Group. Please go ahead. Hey, guys. Thanks for taking my question. Yeah, so just want to start first with the Herbal Oasis brand. You know, obviously it's announced that you were launching it back in November. Now you've had some time to, you know, actually commercially roll it out. You mentioned those distributors and plans to really fuel the growth now that you kind of worked through some of the capital structure concerns that were a priority in prior quarters. So just maybe, could you give us a little bit more color on that?
Speaker Change: It disappeared.
Speaker Change: Our first question is from Tom Mcgovern with Maxim Group. Please go ahead.
Tom McGovern: Hey, guys. Thanks for taking my question.
Tom McGovern: So just wanted to start first with the the herbal Oasis brand. Obviously, you announced that you were launching it back in November now you've had some time to actually commercially roll. It out you mentioned those distributors and plans to really fueled the growth now that you've kind of worked through some of the capital structure concerns that we're our priority in prior quarters. So just maybe could you.
Tom McGovern: Give us a little bit more color on that kind of how does that expansion. Both from your perspective. Just you know what are so maybe milestones we should look out for the kind of targets.
Tom McGovern: Kind of how does that expansion look from your perspective? Just, you know, what are some maybe milestones we should look out for? Kind of targets, you know, if there are any specific distribution channels you're looking to get into with the brand or specific markets you're looking to expand into? Any details on that would be helpful. Thank you.
Speaker Change: If there are any specific distribution channels youre looking to get into with the brand or specific markets, you're looking to expand into any details on that would be helpful. Thank you Thomas.
Ronan Kennedy: Sure, Thomas. Look, we had started discussions back in the December quarter with a number of distributors and started getting commitments during the March quarter. You know, in March, we, you know, some of those discussions took a little longer than we liked. And we started seeing some legislation pop up toward the end of March, which kind of slowed some of the shipments into those distributors. We did ship at the end of March into one. We shipped in April, we had some shipments. And then I think we recently announced in May, we started shipping into Charlotte. So I think it was a little frustrating that, you know, I think some of the regulatory stuff that has been sort of resolved itself slowed down our progress a little bit.
Speaker Change: Look we had.
Speaker Change: Had started discussions back in the December quarter with a number of distributors and started getting commitments during during the March quarter.
Speaker Change: In March we some of those discussions took a little longer than we like.
Speaker Change: And we started seeing some legislation pop up towards the end of end of March which kind of slowed some of the shipments into those distributors we do.
Tom McGovern: Did ship at the end of March and into one we shipped.
Tom McGovern: In April we had some shipments and then I think we recently announced in May we started shipping in the Charlotte. So I think it was a little frustrating that you know I think some of the regulatory stuff that there's some sort of resolved itself.
Tom McGovern: Slowed down our progress a little bit but.
Ronan Kennedy: But, you know, we've got, you know, feet on the street in some of our core markets and closing doors on a daily basis. So for us, I think, you know, we're trying to work with key distribution networks in various states. Some states, it's easier to get full state coverage. Others, it's broken up into more kind of county-based systems. So I think, you know, we're out there talking to distributors every day, working to secure opportunities for our brand and continue to march and build our distribution footprint beyond sort of the southeast where we're at.
Tom McGovern: We've got feet on the street and some of our core markets and closing doors on a daily basis. So for US I think you know where we were trying to work with key distribution networks.
Tom McGovern: Various states some states, it's easier to get full state coverage, others, it's broken up into more kind of.
Tom McGovern: County based system. So I think you know where we're out there talking to the distributors are everyday.
Tom McGovern: Working to secure.
Tom McGovern: Opportunities for our brand and continue that March.
Tom McGovern: Build our distribution footprint.
Tom McGovern: Beyond sort of the South east where we're at today.
Tom McGovern: understood. I appreciate that, Collin.
Tom McGovern: Understood I appreciate that color just to follow up on that do you know can we be looking at 25 is kind of a development or commercial went out period, and then maybe start to expect herbal leases to be more of a key driver of growth or a material driver of growth in 'twenty or should we start to we expect that hey, maybe once it starts hitting the distribution channels.
Tom McGovern: Just to follow up on that, um, so, you know, can we be looking at 25 as kind of a development or, you know, commercial ramp period and then maybe start to expect, uh, Herbal Oasis to be more of a key driver of growth or a material driver of growth in 26? Or, you know, should we start to expect that, hey, maybe once it starts hitting the distribution channels, there should be some relatively rapid uptick and we can start to see Oasis materially impacting top line in the back half of the I think we should start being able to see, you know, toward the back end of this year some good contribution.
Tom McGovern: B, it's a relatively rapid uptake and we can start to see oasis materially impacting the top line in the back half of this year.
Tom McGovern: I think we should start being able to see towards the back end of this year. Some some good contribution from the brand.
Ronan Kennedy: Appreciate that clarity and then last question for me. Uh, you know since this Post-con or you know the conversion of preferred into common equity obviously, uh increases financial flexibility for you guys Just maybe walk me through high level how you expect it to impact your strategy moving forward I know that now you'll have access to some shelf registration that was locked up due to the cap structure So just curious, you know, does this alter your expectations for growth or give you any more clarity on what we should be expecting for 2025 in terms of growth Um, yeah, Thomas, I think for the shelf to come back into play, we have to complete our next audit.
Speaker Change: Appreciate that clarity and then last question for me you know.
Tom McGovern: Since this post kind of the.
Tom McGovern: The conversion of preferred into common equity obviously.
Tom McGovern: It increases financial flexibility for you guys, just maybe walk me through high level, how you expect it to impact your strategy moving forward I know that now you'll have access to some shelf registration that was locked up due to the cap structure.
Tom McGovern: Just curious does this alter your expectations for growth or give you any more clarity on what we should be expecting for 2025 in terms of growth initiatives.
Speaker Change: Yeah, Thomas I think for the shelf that come back into play we have to complete our next audit so realistically that doesn't come into the back into.
Ronan Kennedy: So it's realistically that doesn't come into. back into play until December sometime. I think for us, it sort of gives us, I would say a couple of things are critical here. One, you know, we're now in a really great position to maintain our listing, right? We were on a path with the NYSE so that by the end of the year, we potentially were delisted. So from a preservation of value for shareholders and giving, you know, not only customers, shareholders, employees alike, the fact that we now, you know, you know, we're in a great position on a go-forward basis to maintain cbdMD as a listed company on the NYSE.
Speaker Change: Into play until December or sometime I think for us it sort of gives us I would say a couple of things that are critical here. One you know we're now in a really great position to maintain our listing right. We were we were on a path with the NYSE said by the end of the year, we potentially word he listed so for.
Speaker Change: Preservation of value for shareholders and given you know not only customers shareholders employees alike. The fact that we know.
Speaker Change: We're in a great position on a go forward basis to two main C. D. M D. As a listed company on the on the NYSE American I think strategically we had.
Ronan Kennedy: I think, you know, strategically, we've, you know, had to turn off, you know, we've had numerous discussions with various parties over the last few years. And I think, you know, people really didn't see, you know, they saw the YCBD stock and the price and sort of looked at it. And then as they sort of, you know, ended up sort of doing research later down and understood the I think, you know, there wasn't much value or credence in sort of the value of our stock. And that's either for strategic investment, that's for doing M&A, that's for trying to find sort of the right influencers and allow them to sort of participate.
Speaker Change: Had to turn off.
Speaker Change: Numerous discussions with.
Speaker Change: With various parties over the last few years and I think people really didn't see oh, they saw the Y CB Doc and the price and sort of looked at it and then as they sort of.
Speaker Change: Ended up sort of doing research layer down and understood. The preferred I think you know there wasn't much value accretive and sort of the value of our stock and that's either for strategic investment that we're doing M&A. That's for trying to find sort of the right influencers and allow them to sort of participate so I think that now.
Ronan Kennedy: So I think that now is very easy to understand our capital structure and really understand the value of our stock, given that it's just a clean, you know, common stock structure. It allows us to use that currency for the right deals where we believe there's sort of strong alignment and creating value in the future for our stock.
Speaker Change: Very easy to understand their capital structure, and really understand the value of our stock gives.
Speaker Change: Given that it's just a clean cut.
Speaker Change: Common stock structure.
Speaker Change: It allows us to use that currency.
Speaker Change: For the right deals, where we believe there sort of a strong alignment creating value in the future for for for our shareholders.
Tom McGovern: Understood. Well, congrats on working through that. Congrats on the quarter and then, you know, looks like you're positioning yourselves nicely for 25 I appreciate again you taking the time to answer my questions. I'll hop out Thanks, fellas.
Speaker Change: Understood Congrats on working through that congrats on the quarter and then it looks like you're positioning yourselves, but I think for 25 I. Appreciate again your taking the time to answer my questions I'll hop out.
Speaker Change: Thanks Thomas.
Operator: Once again, if you have a question, please press star then 1.
Speaker Change: Once again, if you have a question. Please press Star then one our next question is from Adam Waldow with Lytham partners. Please go ahead.
Adam Waldo: Our next question is from Adam Waldo with Lismore Partners. Please go ahead. A good day, Ronan and Brad, I hope you can hear me okay. Yes, Adam, how are you? I'm well, Ronan, and you? I'm great, thanks.
Brad Whitmarsh: Good day erosion, there Brad I Hope you can hear me okay, yes.
Speaker Change: Yes, Adam how are you.
Speaker Change: Well run in India.
Speaker Change: Oh, great. Thank you.
Adam Waldo: Well, congrats on the conversion. I wonder if we can talk about the working capital situation going forward and how that respectively translates into cash burn or cash generation. So over the last three fiscal quarters, you've averaged a cash burn of about $275,000 a quarter. You did better than that, obviously, here in the latest quarter, around $200,000. Are you still comfortable, based on what you're seeing in terms of the working capital requirements, particularly of the Herbal Oasis Tonics new products, that the company's liquidity runway remains sufficient through the end of fiscal 2026, as you had indicated was your outlook on the fiscal fourth quarter 2024 results call on December 18th.
Speaker Change: Well congrats on the conversion.
Speaker Change: Wonder if we can talk about the working capital situation going forward and how that prospectively translates into cash burn or cash generation. So over the last three fiscal quarters, you've averaged a cash burn of about 275000, a quarter you did better than that obviously here in the last quarter at around 200.
Speaker Change: Are you still comfortable.
Speaker Change: Based on what Youre seeing in terms of the working capital requirements, particularly of the herbal wasted tonics new products that are the company's liquidity runway remains sufficient through the end of fiscal 'twenty.
Speaker Change: 2026, as you had indicated what is your outlook on the fiscal fourth quarter 'twenty 'twenty four results call on December 18th.
Ronan Kennedy: You look at them, I think we understand through what happened this quarter, we're working to tighten that up and make sure that sort of we get back to scenario where, you know, we're in a much better, you know, positive and cash generation situation. So I think we're still feeling comfortable today with where we're at and, and the working capital that we have go forward based Okay and so am I right to correct to infer that you're still comfortable with that guidance that you issued on December 18th that you thought liquidity outlook was sufficient through at least the end of fiscal 2026 in other words another six quarters from here?
Speaker Change: They looked at them I think we understand sort of what happened this quarter, we're working to tighten that up and make sure that sort of we get back to a scenario where.
Speaker Change: You know we're in a much better you know positive EBITDA and cash Gen.
Speaker Change: Generation situations I think we're still feeling comfortable.
Speaker Change: But today with where we're at and AR and the working capital.
Speaker Change: That we have on a go forward basis.
Speaker Change: Okay, and so my right to correct to infer that you're still comfortable with that guidance that you issued on December 18th that you thought liquidity outlook was sufficient through at least the end of fiscal.
Speaker Change: Fiscal 'twenty six in other words, another six quarters from here.
Ronan Kennedy: That that is what we have modeled.
Speaker Change: That that is what we have modeled out.
Ronan Kennedy: Okay, terrific. And then switching gears, you know, you made a number of comments on today's call and in the recent press release around the successful conversion of the preferred to comment about the company being, you know, well positioned going forward for strategic activity. And that was obviously a key criterion for the conversion in the first place. So as you look forward, what types of strategic activity do you think board and management would find most attractive? Can you comment on that at all? Look, I think, you know, as I sort of spoke about in some of my closing statements, I think we're looking at opportunities where we think, you know, there's a really good either, you know, cost synergies to shrink out of a business, open up new channels, and or sort of acquire new customers where we think there's sort of a great customer overlap and are able to sort of look at as one and one equals equals three.
Speaker Change: Okay terrific and then switching gears you know you you've made a number of comments on today's call and in the recent press release or around the successful conversion of the preferred to common about the company being well positioned going forward for strategic activity and that was obviously a key a key criteria.
Speaker Change: For for that conversion in the first place. So as you look forward what types of strategic activity do you think board and management would find most attractive can you comment on that at all.
Speaker Change: Look I think you know as I as I sort of spoke about and some of my closing statements I think we're looking at opportunities, where we think you know there was a really good either.
Speaker Change: Cost synergies are to shrink out of a business open up new channels and or sort of acquire new customers.
Speaker Change: Well, we think there are sort of a great customer overlap and are able to sort of look at it as one and one equals equals three I think that's that's both inside the cannabinoid space and outside the cannabinoid space.
Adam Waldo: I think that's that's both inside the cannabinoid space and outside the cannabinoid. Okay, that's very helpful.
Speaker Change: Yeah.
Speaker Change: Okay. That's very helpful. And then I guess the final question I Eh.
Ronan Kennedy: And I guess the final question, actually, let me go back to the last part of what you said, outside the cannabinoid space. Could you flesh that out anymore or after that? Yeah, I don't think it needs to be a CBD company, Adam. We certainly think there's plenty of opportunity. I think you've seen the number of companies in the space shrink over the last few years. We think there's still plenty of opportunity and plenty of, we'll call it overhead in the space. So for the right brand and the right structure, I think we're interested, where we think one-on-one is going to be great.
Speaker Change: Actually let me go back to the last part of what you said outside the cannabinoid space could you could you flush that out anymore or add to that yeah.
Speaker Change: Yeah, I don't I don't think it needs to be a CBD company Oh, Okay. We start we certainly think there's plenty of opportunity I think you've seen.
Speaker Change: The number of companies in this space shrank over the last few years, we think there's still plenty of opportunity of opportunity and plenty of we'll.
Speaker Change: We'll call it overhead in the space so.
Speaker Change: So for the rights.
Speaker Change: For the right brand and the rights.
Speaker Change: You know structure I think we're interested.
Speaker Change: Well, we think you know one on one.
Speaker Change: There's going to be greater than two.
Ronan Kennedy: Understood, and I guess the final thing following up on something on Thomas's line of questioning around herbal oasis What what kind of sort of financial and operating performance metrics on that new product set? Can you offer us this quarter if any? Or should we look for more disclosure? To come as you'll reach the materiality threshold that you seem to be singling you would expect to see sometime before the end of this fiscal year Um, so so look what I'll say is there there was really. um the the revenue impact came at the very end of the march quarter um and we're starting to see that pick up here moving through the the third quarter here um so i think we're not you know we have i think stated before that you know the the gross margins on this product are not quite the same as our core business but from our standpoint we view it as incremental incremental contribution dollars um and are looking at a sort of volume play because it is a different business than than shipping uh you know gummies and and uh and pills majority direct to consumers Very good.
Speaker Change: Understood and I guess the final thing is following up on something on Thomas his line of questioning around herbal oasis, what what kind of sort of financial and operating performance metrics on that new product set can you offer us this quarter, if any or should we look for more disclosure to come in.
Speaker Change: As you will reach the materiality threshold that you seem to be seen whether you would expect to see sometime before the end of this fiscal year.
Speaker Change: So so look what I'll say is there was really.
Speaker Change: The the revenue impact came at the very end of the March quarter.
Speaker Change: Ryan we're starting to see that pick up here moving through the third quarter here. So I think we're not yeah. We have I think stated before that you know the the gross margins on this product are not quite the same as our core business.
Speaker Change: From our standpoint, we view it as intermune incremental contribution dollars.
Speaker Change: And we're looking at is sort of volume play.
Speaker Change: Because it is a different business than than shipping.
Speaker Change: Gummies, and and and and pills.
Speaker Change: Direct to consumer.
Speaker Change: Very good. Thank you so much and best wishes for upcoming quarters.
Adam Waldo: Thank you so much and best wishes for upcoming quarter. Madam, thank you very much. I appreciate it.
Speaker Change: Thank you very much I appreciate it.
Operator: This concludes the question and answer session.
Speaker Change: This concludes the question and answer session I'd like to turn the conference back over to Brendan Kennedy for any closing remarks.
Ronan Kennedy: I'd like to turn the conference back over to Ronan Kennedy for any closing remarks. Thank you again to our shareholders for your support and everyone for attending today's call. We look forward to our next earnings call in August. Have a great afternoon.
Brendan Kennedy: Thank you again to our shareholders for your support and everyone for attending today's call. We look forward to our next earnings call in August.
Speaker Change: Have a great afternoon.
Operator: This brings to a close today's conference call, you may disconnect your line. Thank you for participating and have a pleasant day.
Speaker Change: This brings to a close today's conference call. You may disconnect. Your line. Thank you for participating and have a pleasant day.
Speaker Change: Yes.
Speaker Change:
Speaker Change:
Speaker Change: Okay.
Speaker Change: Okay.
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Speaker Change: Uh huh.
Speaker Change: Yeah.