Q2 2026 cbdMD Inc Earnings Call

May 14, 2026

Operator: Good afternoon. Welcome to cbdMD, Inc.'s 31 March 2026 Q2 fiscal quarter of 2026 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its Q1 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 at www.cbdmd.com in accordance with cbdMD's retention policies. All participants on this call will be in a listen-only mode.

Speaker #2: 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.

Speaker #2: 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.

Operator: The call will be followed by a question and answer session. At this time, I would like to turn the conference over to Brad Whitford, the company's Chief Accounting Officer. Brad, please go ahead.

Speaker #2: At this time, I would like to turn the conference over to Brad Whitford, the company's Chief Accounting Officer. Brad, please go ahead. Thank you, Audra, and thank you all for joining cbdMD's March 31, 2026, second quarter of fiscal 2026 earnings call and update.

Bradley Whitford: Thank you, Audra, and thank you all for joining cbdMD's 31 March 2026, Q2 of fiscal 2026 earnings call and update. On the call today, we also have Ronan Kennedy, our Chief Executive Officer 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 the 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-K for the second quarter ended 31 March 2026, 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 #2: On the call today, we also have Ronan Kennedy, our Chief Executive Officer 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 the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Speaker #2: 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-K for the second quarter ended March 31, 2026, 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.

Bradley Whitford: 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-K for the second quarter ended 31 March 2026, 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 #2: Any forward-looking statements made on this conference call speak only as of today's date, Thursday, May 14, 2026, 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 securities laws.

Bradley Whitford: Any forward-looking statements made on this conference call speak only as of today's date, Thursday, 14 May 2026, 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 securities laws. With that, I'd like to turn the call over to Ronan.

Speaker #2: With that, I'd like to turn the call over to Ronan.

Speaker #3: Good afternoon, everyone, and thank you for joining us. The second quarter of fiscal 2026 was another step forward for cbdMD and one of the most active quarters we've had in years.

T. Ronan Kennedy: Good afternoon, everyone, and thank you for joining us. The Q2 of fiscal 2026 was another step forward for cbdMD and one of the most active quarters we've had in years, both operationally and across the regulatory landscape we operate in. Let me start with the headline. We delivered another consecutive quarter of sequential revenue growth with net sales of $5.6 million. That's up 19% year-over-year and 12% sequentially from the Q1 of 2026. Importantly, that growth was not solely driven by our acquisition of Bluebird Botanicals. Excluding Bluebird, our core business grew approximately half a million dollars versus the prior year and approximately $300,000 sequentially. Even excluding Bluebird, our core revenue this quarter was the highest quarterly revenue we've generated since our Q1 fiscal quarter in 2024, the December 2023 quarter.

Ronan Kennedy: Good afternoon, everyone, and thank you for joining us. The Q2 of fiscal 2026 was another step forward for cbdMD and one of the most active quarters we've had in years, both operationally and across the regulatory landscape we operate in. Let me start with the headline. We delivered another consecutive quarter of sequential revenue growth with net sales of $5.6 million. That's up 19% year-over-year and 12% sequentially from the Q1 of 2026.

Speaker #3: Both operationally and across the regulatory landscape we operate in, let me start with the headline. We delivered another consecutive quarter of sequential revenue growth, with net sales of $5.6 million.

Speaker #3: That's up 19% year over year and 12% sequentially from the first quarter of 2026. Importantly, that growth was not solely driven by our acquisition of Bluebird Botanicals.

Ronan Kennedy: Importantly, that growth was not solely driven by our acquisition of Bluebird Botanicals. Excluding Bluebird, our core business grew approximately half a million dollars versus the prior year and approximately $300,000 sequentially. Even excluding Bluebird, our core revenue this quarter was the highest quarterly revenue we've generated since our Q1 fiscal quarter in 2024, the December 2023 quarter.

Speaker #3: Excluding Bluebird, our core business grew approximately $500,000 versus the prior year, and approximately $300,000 sequentially. And even excluding Bluebird, our core revenue this quarter was the highest quarterly revenue we've generated since our first fiscal quarter in 2024, the December 2023 quarter.

Speaker #3: That continued core growth quarter after quarter is the most important indicator that the reset work we've done over the past several years is showing through in results.

T. Ronan Kennedy: That continued core growth quarter after quarter is the most important indicator that the reset work we've done over the past several years is showing through in results. From a channel perspective, direct-to-consumer remained our largest channel at approximately 67% of revenue, with wholesale growing to 33% of revenue. Wholesale is up 65% year over year, reflective continued execution in our core cbdMD brand and ongoing progress with our Oasis THC beverage brand. In mid-January, we closed our acquisition of the assets of Bluebird Botanicals, a respected and longstanding CBD brand. This is our first acquisition in years, made possible by the work we've done to repair the balance sheet and regain full NYSE American continued listing compliance.

Ronan Kennedy: That continued core growth quarter after quarter is the most important indicator that the reset work we've done over the past several years is showing through in results. From a channel perspective, direct-to-consumer remained our largest channel at approximately 67% of revenue, with wholesale growing to 33% of revenue. Wholesale is up 65% year over year, reflective continued execution in our core cbdMD brand and ongoing progress with our Oasis THC beverage brand.

Speaker #3: From a channel perspective, direct-to-consumer remained our largest channel at approximately 67% of revenue, with wholesale growing to 33% of revenue. Wholesale was up 65% year over year, reflective of continued execution in our core cbdMD brand and ongoing progress with our Oasis TFC beverage brand.

Speaker #3: In mid-January, we closed our acquisition of the assets of Bluebird Botanicals, a respected and longstanding CBD brand. This was our first acquisition in years, made possible by the work we've done to repair the balance sheet and regain full NYSE American continued listing compliance.

Ronan Kennedy: In mid-January, we closed our acquisition of the assets of Bluebird Botanicals, a respected and longstanding CBD brand. This is our first acquisition in years, made possible by the work we've done to repair the balance sheet and regain full NYSE American continued listing compliance.

Speaker #3: As expected, the acquisition was a drag on earnings during the second quarter, where we absorbed transition costs and integration expenses without the full benefit of a full quarter of Bluebird revenue.

T. Ronan Kennedy: As expected, the acquisition was a drag on earnings during Q2, where we absorbed transition costs and integration expenses without the full benefit of a full quarter of Bluebird revenue. That said, Bluebird turned the corner in March and began generating positive contribution, and we expect to flip that into a positive for both top-line earnings and earnings in Q3 as we roll out additional products and capture costs and revenue synergies. Beyond the numbers, Bluebird is strategically important as it adds loyal customer base, broadens our portfolio beyond just our core cbdMD brand, and brings GRAS status for full-spectrum CBD that complement the safety and clinical data we already have on our THC-free broad-spectrum formulations.

Ronan Kennedy: As expected, the acquisition was a drag on earnings during Q2, where we absorbed transition costs and integration expenses without the full benefit of a full quarter of Bluebird revenue. That said, Bluebird turned the corner in March and began generating positive contribution, and we expect to flip that into a positive for both top-line earnings and earnings in Q3 as we roll out additional products and capture costs and revenue synergies.

Speaker #3: That said, Bluebird turned the corner in March and began generating positive contributions, and we expect to flip that into a positive for both top-line earnings and earnings in the third quarter as we roll out additional products and capture cost and revenue synergies.

Speaker #3: Beyond the numbers, Bluebird is strategically important as a loyal customer base broadens our portfolio beyond just our core cbdMD brand and brings growth status for full-spectrum CBD that complements the safety and clinical data we already have on our THC-free broad-spectrum formulations.

Ronan Kennedy: Beyond the numbers, Bluebird is strategically important as it adds loyal customer base, broadens our portfolio beyond just our core cbdMD brand, and brings GRAS status for full-spectrum CBD that complement the safety and clinical data we already have on our THC-free broad-spectrum formulations.

Speaker #3: We believe this transaction is a useful case study for the kind of disciplined, creative M&A we can execute. And we continue to evaluate additional opportunities across hemp and adjacent health and wellness categories where our infrastructure, marketing engine, and NYSE American listing can unlock value.

T. Ronan Kennedy: We believe this transaction is a useful case study for the kind of disciplined, accretive M&A we can execute, and we continue to evaluate additional opportunities across hemp and adjacent health and wellness categories where our infrastructure, marketing engine, and NYSE American listing can unlock value. The regulatory backdrop has shifted more in the last few months than in any period I can remember. We've seen multiple bipartisan legislative proposals introduced to address the restrictive hemp language in H.R. 5371. The partial rescheduling of cannabis to Schedule III in late April, and most directly relevant to us, the 1 April activation of the CMS Substance Access Beneficiary Engagement Incentive, the first federally supported pathway for hemp-derived CBD products in Medicare. We've been preparing for this opportunity for some time.

Ronan Kennedy: We believe this transaction is a useful case study for the kind of disciplined, accretive M&A we can execute, and we continue to evaluate additional opportunities across hemp and adjacent health and wellness categories where our infrastructure, marketing engine, and NYSE American listing can unlock value. The regulatory backdrop has shifted more in the last few months than in any period I can remember. We've seen multiple bipartisan legislative proposals introduced to address the restrictive hemp language in H.R. 5371.

Speaker #3: The regulatory backdrop has shifted more in the last few months than in any period I can remember. We've seen multiple bipartisan legislative proposals introduced to address the restrictive hemp language and H.R. 5371, the partial rescheduling of cannabis to Schedule III in late April, and most directly relevant to us, the April 1 activation of the CMS Substance Access Beneficiary Engagement Incentive—the first federally supported pathway for hemp-derived CB products in Medicare.

Ronan Kennedy: The partial rescheduling of cannabis to Schedule III in late April, and most directly relevant to us, the 1 April activation of the CMS Substance Access Beneficiary Engagement Incentive, the first federally supported pathway for hemp-derived CBD products in Medicare. We've been preparing for this opportunity for some time.

Speaker #3: We've been preparing for this opportunity for some time. During the quarter, we made deliberate decisions to accelerate our entry into the CMS Substance Access Pathway, moving ahead of our original fiscal 2026 plan because the window to establish a position is now open.

T. Ronan Kennedy: During the quarter, we made deliberate decisions to accelerate our entry into the CMS substance access pathway, moving ahead of our original fiscal 2026 plan because the window to establish a position is now open. That acceleration carried some near-term costs and is reflected in our P&L this quarter. We made the investment with our eyes open because the size of the opportunity justifies it. We stood up a dedicated clinical and healthcare channel built specifically for this pathway. We're in active conversations with ACOs and others to execute on this pathway. We're deepening the clinical evidence base behind our products because in this channel, the science is what unlocks the market. This is not a near-term revenue story. We expect the early phase of BEI to be implementation-led, with provider adoption developing over the course of the next 12 to 18 months.

Ronan Kennedy: During the quarter, we made deliberate decisions to accelerate our entry into the CMS substance access pathway, moving ahead of our original fiscal 2026 plan because the window to establish a position is now open. That acceleration carried some near-term costs and is reflected in our P&L this quarter. We made the investment with our eyes open because the size of the opportunity justifies it. We stood up a dedicated clinical and healthcare channel built specifically for this pathway.

Speaker #3: That acceleration carried some near-term costs and is reflected in our P&L this quarter. We made the investment with our eyes open because the size of the opportunity justifies it.

Speaker #3: We stood up a dedicated clinical and healthcare channel built specifically for this pathway. We're in active conversation with ACOs and others to execute on this pathway.

Ronan Kennedy: We're in active conversations with ACOs and others to execute on this pathway. We're deepening the clinical evidence base behind our products because in this channel, the science is what unlocks the market. This is not a near-term revenue story. We expect the early phase of BEI to be implementation-led, with provider adoption developing over the course of the next 12 to 18 months.

Speaker #3: We're deepening the clinical evidence base behind our products because in this channel, the science is what unlocks the market. This is not a near-term revenue story.

Speaker #3: We expect the early phase of the BEI to be implementation-led, with provider adoption developing over the course of the next 12 to 18 months.

Speaker #3: But we believe the long-term opportunity is significant, and we believe cbdMD's years of investment in manufacturing, quality, safety, and clinical research position the company as a trusted, evidence-based supplier of choice as this channel develops.

T. Ronan Kennedy: We believe the long-term opportunity is significant, and we believe cbdMD's years of investment in manufacturing, quality, safety, and clinical research positions the company as a trusted, evidence-based supplier of choice as this channel develops. On the federal legislative front, we continue to actively support bipartisan efforts to establish a workable federal framework for hemp, including the Hemp Act, the Cannabinoid Safety and Regulation Act, the Hemp Planting Predictability Act, and its Senate companion. We're engaged constructively with industry organizations, policymakers, including time on Capitol Hill, making the case for sensible, science-based regulation. Our view is straightforward. As regulatory clarity emerges, it favors operators built for it, well-capitalized, compliance-focused, with the strong quality, safety, and clinical standards this market will require. That is this company we've built. On the state side, volatility has been a genuine headwind.

Ronan Kennedy: We believe the long-term opportunity is significant, and we believe cbdMD's years of investment in manufacturing, quality, safety, and clinical research positions the company as a trusted, evidence-based supplier of choice as this channel develops. On the federal legislative front, we continue to actively support bipartisan efforts to establish a workable federal framework for hemp, including the Hemp Act, the Cannabinoid Safety and Regulation Act, the Hemp Planting Predictability Act, and its Senate companion.

Speaker #3: On the federal legislative front, we continue to actively support bipartisan efforts to establish a workable federal framework for hemp, including the Hemp Act, the Cannabinoid Safety and Regulation Act, the Hemp Planting Predictability Act, and its Senate companion.

Speaker #3: We're engaged constructively with industry organizations and policymakers, including time on Capitol Hill, making the case for sensible, science-based regulation. Our view is straightforward: as regulatory clarity emerges, it favors operators built for it—well-capitalized, compliance-focused, with the strong quality, safety, and clinical standards this market will require.

Ronan Kennedy: We're engaged constructively with industry organizations, policymakers, including time on Capitol Hill, making the case for sensible, science-based regulation. Our view is straightforward. As regulatory clarity emerges, it favors operators built for it, well-capitalized, compliance-focused, with the strong quality, safety, and clinical standards this market will require. That is this company we've built. On the state side, volatility has been a genuine headwind.

Speaker #3: That is this company we've built. On the state side, volatility has been a genuine headwind. Changing rules across multiple states has driven ongoing packaging changes, repacking costs, and new testing requirements.

T. Ronan Kennedy: Changing rules across multiple states has driven ongoing packaging changes, repacking costs, and new testing requirements, each carrying real expenses and creating confusion at the customer level. Just as significantly, shifting state restrictions continues to narrow what products we can sell and where we can sell them. We expect that the environment to persist, and we're managing through it operationally, but it's worth flagging as a structural cost of operating in this category today. Frankly, it's part of what makes the federal pathway we've been describing so strategically important. With that, I'll turn the call back over to Brad to walk through the financials.

Ronan Kennedy: Changing rules across multiple states has driven ongoing packaging changes, repacking costs, and new testing requirements, each carrying real expenses and creating confusion at the customer level. Just as significantly, shifting state restrictions continues to narrow what products we can sell and where we can sell them.

Speaker #3: Each carrying real expenses and creating confusion at the customer level. Just as significantly, shifting state restrictions continue to narrow what products we can sell and where we can sell them.

Speaker #3: We expect that the environment will persist, and we're managing through it operationally, but it's worth flagging as a structural cost of operating in this category today.

Ronan Kennedy: We expect that the environment to persist, and we're managing through it operationally, but it's worth flagging as a structural cost of operating in this category today. Frankly, it's part of what makes the federal pathway we've been describing so strategically important. With that, I'll turn the call back over to Brad to walk through the financials.

Speaker #3: And frankly, it's part of what makes the federal pathway we've been describing so strategically important. With that, I'll turn the call back over to Brad to walk through the financials.

Speaker #4: Thanks, Brandon. Turning to the financials for the second quarter of fiscal 2026, net sales increased to $5.6 million, or a 19% increase compared to $4.7 million in the prior year period, and increased 12% sequentially from the first quarter of fiscal 2026.

Bradley Whitford: Thanks, Ronan. Turning to the financials for Q2 of fiscal 2026. Net sales increased to $5.6 million or a 19% increase as compared to $4.7 million in the prior year period and increased 12% sequentially from Q1 of fiscal 2026. Excluding Bluebird, net sales increased to $500,000 as compared to a quarter and $300,000 sequentially. Gross margin totaled 58% for the quarter, down from 62% over prior year. This is mostly attributable to a shift in revenue mix to more wholesale, including Oasis. Wholesale was 33% of total sales versus 23% of total sales in the prior year quarter, along with incremental costs related to changes in state-level requirements causing additional repacking and new testing requirements.

Speaker #4: Excluding Bluebird, net sales increased $500,000 compared to the prior quarter and $300,000 sequentially. Gross margin totaled 58% for the quarter, down from 62% over the prior year.

Speaker #4: This is mostly attributable to a shift in revenue mix to more wholesale, including Oasis. Wholesale was 33% of total sales versus 23% of total sales in the prior year quarter.

Bradley Whitford: This is mostly attributable to a shift in revenue mix to more wholesale, including Oasis. Wholesale was 33% of total sales versus 23% of total sales in the prior year quarter, along with incremental costs related to changes in state-level requirements causing additional repacking and new testing requirements.

Speaker #4: Along with incremental costs related to changes in state-level requirements causing additional repacking and new testing requirements, we're continuing to analyze our pricing, product mix, and supply chain, and are implementing initiatives to enhance product quality and documentation, improve formulas, and improve our gross margins going forward.

Bradley Whitford: We're continuing to analyze our pricing, product mix, and supply chain and are implementing initiatives to enhance product quality and documentation, improve formulas, and improve our gross margins going forward. Loss from operations was approximately $801,000 compared to a loss of $486,000 in the prior year period. Excluding a one-time non-cash stock vesting, loss from operations was $405,000. Net loss attributable to common shareholders was approximately $876,000 or $0.08 per share, compared to a net loss of approximately $1.4 million or $1.90 per share in the prior year quarter. As with last quarter, this was a substantial improvement on a per-share basis.

Speaker #4: Loss from operations was approximately $801,000, compared to a loss of $486,000 in the prior year period. Excluding a one-time non-cash stock vesting, loss from operations was $405,000.

Speaker #4: Net loss attributable to common shareholders was approximately $876,000, or $0.08 per share, compared to a net loss of approximately $1.4 million, or $1.90 per share, in the prior year quarter.

Bradley Whitford: Net loss attributable to common shareholders was approximately $876,000 or $0.08 per share, compared to a net loss of approximately $1.4 million or $1.90 per share in the prior year quarter. As with last quarter, this was a substantial improvement on a per-share basis.

Speaker #4: As with last quarter, this was a substantial improvement on a per-share basis. As mentioned on our prior quarter call, this improvement was primarily driven by the elimination of our Series A preferred dividend during fiscal 2025 and the resulting conversion of the Series A into common stock.

Bradley Whitford: As mentioned on our prior quarter call, this improvement was primarily driven by the elimination of our Series A preferred dividend during fiscal 2025 and a resulting conversion of the Series A into common stock. Adjusted non-GAAP EBITDA loss for the quarter totaled $220,000 and was driven by added payroll and other expenses related to the Bluebird acquisition without the benefit of a full quarter of Bluebird revenue and the strategic decision to allocate dollars toward the CMS BEI program, which was not originally in the budget, however, it is important to drive this initiative forward.

Speaker #4: Adjusted non-GAAP EBITDA loss for the quarter totaled $220,000 and was driven by added payroll and other expenses related to the Bluebird acquisition without the benefit of a full quarter of Bluebird revenue, and the strategic decision to allocate dollars toward the CMS BEI program, which was not originally in the budget.

Speaker #4: However, it is important to driving it is important to drive this initiative forward. Cash used in operating activities was approximately $723,000 and reflects a build of accounts receivable of approximately $435,000 tied to revenue growth and wholesale term customers as that becomes a larger part of our sales mix.

Bradley Whitford: Cash used in operating activities was approximately $723,000 and reflects a build of accounts receivable of approximately $435,000 tied to revenue growth and wholesale term customers as that becomes a larger part of our sales mix, coupled with an incremental $240,000 inventory build, excluding inventory acquired in transaction to support the growth of the overall business. We remain encouraged by the momentum across the business and the continued growth in revenue. At the same time, we are maintaining a disciplined approach to expense management and operational efficiency as we focus on improving margins and driving sustainable profitability. With that, I'll turn the call back over to Ronan.

Speaker #4: Coupled with an incremental $240,000 inventory build, excluding inventory acquired in the transaction, to support the growth of the overall business. We remain encouraged by the momentum across the business and the continued growth in revenue.

Speaker #4: At the same time, we are maintaining a disciplined approach to expense management and operational efficiency, as we focus on improving margins and driving sustainable profitability.

Bradley Whitford: At the same time, we are maintaining a disciplined approach to expense management and operational efficiency as we focus on improving margins and driving sustainable profitability. With that, I'll turn the call back over to Ronan.

Speaker #4: With that, I'll turn the call back over to Ronan.

Speaker #5: Thanks, Brad. Stepping back, I want to leave you with a few thoughts on how we're thinking about the rest of fiscal 2026. First, on the core business, several consecutive quarters of sequential growth with our highest core quarterly revenue since December 2023 tells us the underlying business is healthier than it's been in some time.

T. Ronan Kennedy: Thanks, Brad. Stepping back, I want to leave you with a few thoughts on how we're thinking about the rest of fiscal 2026. First, on the core business. Several consecutive quarters of sequential growth with our highest core quarterly revenue since December 2023 tells us the underlying business is healthier than it's been in some time. We're gonna keep pushing on that. High-velocity SKUs, disciplined customer acquisition, and ongoing wholesale expansion across cbdMD, Paw CBD, Oasis, and Bluebird Botanicals. Second, on Bluebird Botanicals. We expect the acquisition to flip from earnings drag in Q2 to a positive contributor in Q3 on both revenue and earnings as integration completes and synergies come through. Bluebird Botanicals also reinforces our M&A thesis. We believe there's a real opportunity to consolidate quality assets in this fragmented category, and we will continue to evaluate disciplined accretive opportunities. Third, on the medical pathway.

Ronan Kennedy: Thanks, Brad. Stepping back, I want to leave you with a few thoughts on how we're thinking about the rest of fiscal 2026. First, on the core business. Several consecutive quarters of sequential growth with our highest core quarterly revenue since December 2023 tells us the underlying business is healthier than it's been in some time. We're gonna keep pushing on that. High-velocity SKUs, disciplined customer acquisition, and ongoing wholesale expansion across cbdMD, Paw CBD, Oasis, and Bluebird Botanicals. Second, on Bluebird Botanicals.

Speaker #5: We're going to keep pushing on that. High-velocity SKUs, disciplined customer acquisition, and ongoing wholesale expansion across CBDMD, PAWS CBD, Oasis, and Bluebird. Second, on Bluebird, we expect the acquisition to flip from earnings drag in the second quarter to a positive contributor in the third quarter on both revenue and earnings as integration completes and synergies come through.

Ronan Kennedy: We expect the acquisition to flip from earnings drag in Q2 to a positive contributor in Q3 on both revenue and earnings as integration completes and synergies come through. Bluebird Botanicals also reinforces our M&A thesis. We believe there's a real opportunity to consolidate quality assets in this fragmented category, and we will continue to evaluate disciplined accretive opportunities. Third, on the medical pathway.

Speaker #5: Bluebird also reinforces our M&A thesis. We believe there's a real opportunity to consolidate quality assets in this fragmented category and we will continue to evaluate disciplined accretive opportunities.

Speaker #5: Third, on the medical pathway, the investment we made this quarter and through the balance of the year to redirect resources toward the CMS BEI program is a deliberate strategic choice.

T. Ronan Kennedy: The investment we made this quarter and through the balance of the year to redirect resources toward the CMS BEI program is a deliberate strategic choice. We accepted near-term earnings pressure because we believe the long-term opportunity is meaningful and because the window to establish provider relationships and clinical credibility is open now. We are going to continue investing thoughtfully in that channel through the back half of 2026, with the expectation that adoption and contribution build over time than rather overnight. Fourth, on the regulatory and state-level environment. We'll continue to engage constructively in Washington on sensible hemp regulation, and we'll continue to manage through the minefield of state-level changes, along with the compliance costs that come with operating in this category today. Neither of those are going away in the near term, and we are building the cost discipline and operational flexibility to absorb them.

Ronan Kennedy: The investment we made this quarter and through the balance of the year to redirect resources toward the CMS BEI program is a deliberate strategic choice. We accepted near-term earnings pressure because we believe the long-term opportunity is meaningful and because the window to establish provider relationships and clinical credibility is open now. We are going to continue investing thoughtfully in that channel through the back half of 2026, with the expectation that adoption and contribution build over time than rather overnight.

Speaker #5: We accept a near-term earnings pressure because we believe the long-term opportunity is meaningful and because the window to establish provider relationships and clinical credibility is open now.

Speaker #5: We are going to continue investing thoughtfully in that channel through the back half of 2026, with the expectation that adoption and contribution build over time rather than overnight.

Speaker #5: Fourth, on the regulatory and state-level environment, we'll continue to engage constructively in Washington on sensible hemp regulation and we'll continue to manage through the minefield of state-level changes along with the compliance costs that come with operating in this category today.

Ronan Kennedy: Fourth, on the regulatory and state-level environment. We'll continue to engage constructively in Washington on sensible hemp regulation, and we'll continue to manage through the minefield of state-level changes, along with the compliance costs that come with operating in this category today. Neither of those are going away in the near term, and we are building the cost discipline and operational flexibility to absorb them.

Speaker #5: Neither of those are going away in the near term, and we are building the cost discipline and operational flexibility to absorb them. Alongside that engagement in Washington, we continue to invest in contingency planning and product iteration ahead of the November 2026 effective date of the Act.

T. Ronan Kennedy: Alongside that engagement in Washington, we continue to invest in contingency planning and product iteration ahead of the November 2026 effective date of the act. We are working through multiple scenarios, including reformulation, pathways, new ingredients, packaging and labeling adjustments, channel mix shifts, and supply chain flexibility so that we are positioned to navigate whatever regulatory outcomes emerge, whether it is the act taking effect as written, a delay, or comprehensive replacement framework. We don't know today which scenario will play out, but we are determined to be prepared for each of them. Finally, on the balance sheet. The work we've done to repair the capital structure, return to NYSE American continued listing compliance and put financial tools like the ELOC in place give us the flexibility to execute deliberately.

Ronan Kennedy: Alongside that engagement in Washington, we continue to invest in contingency planning and product iteration ahead of the November 2026 effective date of the act. We are working through multiple scenarios, including reformulation, pathways, new ingredients, packaging and labeling adjustments, channel mix shifts, and supply chain flexibility so that we are positioned to navigate whatever regulatory outcomes emerge, whether it is the act taking effect as written, a delay, or comprehensive replacement framework.

Speaker #5: We are working through multiple scenarios, including reformulation, pathways, new ingredients, packaging and labeling adjustments, channel mix shifts, and supply chain flexibility so that we are positioned to navigate whatever regulatory outcomes emerge whether it is the Act taking effect as written a delay or comprehensive replacement framework.

Speaker #5: We don't know today which scenario will play out, but we are determined to be prepared for each of them. And finally, on the balance sheet, the work we've done to repair the capital structure returned to NYC American continue vesting compliance and put financial tools like the ELOC in place give us the flexibility to execute deliberately.

Ronan Kennedy: We don't know today which scenario will play out, but we are determined to be prepared for each of them. Finally, on the balance sheet. The work we've done to repair the capital structure, return to NYSE American continued listing compliance and put financial tools like the ELOC in place give us the flexibility to execute deliberately.

Speaker #5: We believe we have a meaningful long-term runway, and we intend to use that money to invest where it counts. This was a quarter where we delivered another period of growth in our core business, completed and began integrating our first acquisition in years, and made deliberate investments ahead of what we believe is meaningful long-term opportunity in Medicare.

T. Ronan Kennedy: We believe we have a meaningful long-term runway, and we intend to use that money to invest where it counts. This was a quarter where we delivered another period of growth in our core business, completed and began integrating our first acquisition in years, and made deliberate investments ahead of what we believe is a meaningful long-term opportunity in Medicare. The foundation we've built over the past several years is showing through, and we believe cbdMD, Inc. is entering the H2 of 2026 on firmer footing than at any point in recent memory. I want to thank our employees, partners, and shareholders for their continued support. With that, I'm now happy to take questions.

Ronan Kennedy: We believe we have a meaningful long-term runway, and we intend to use that money to invest where it counts. This was a quarter where we delivered another period of growth in our core business, completed and began integrating our first acquisition in years, and made deliberate investments ahead of what we believe is a meaningful long-term opportunity in Medicare.

Speaker #5: The foundation we built over the past several years is showing through, and we believe CBDMD is entering the second half of 2026 on firmer footing than at any point in recent memory.

Ronan Kennedy: The foundation we've built over the past several years is showing through, and we believe cbdMD, Inc. is entering the H2 of 2026 on firmer footing than at any point in recent memory. I want to thank our employees, partners, and shareholders for their continued support. With that, I'm now happy to take questions.

Speaker #5: I want to thank our employees, partners, and shareholders for their continued support. And with that, I'm now happy to take questions.

Speaker #1: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We'll take our first question from Adam Waldo at Lismore Partners.

Speaker #1: If you would like to withdraw your question, simply press star one again. We'll take our first question from Adam Waldo at Lismore Partners.

Speaker #6: Good afternoon, Ronan and Brad. I hope you can hear me okay?

Adam Waldo: Good afternoon, Ronan and Brad. I hope you can hear me okay.

Speaker #5: Yes. Hey, Adam. How are you?

T. Ronan Kennedy: Yes. Hey, Adam. How are you?

Ronan Kennedy: Yes. Hey, Adam. How are you?

Speaker #6: Very well, Ronan. A lot of exciting things on the plate for you guys. In that vein, how are you all thinking of let's start out sort of a high level here.

Adam Waldo: Very well, Ronan. A lot of exciting things on the plate for you guys. In that vein, how are you all, let's start out sort of a high level here. In the, in the quarter just ended, the March quarter, how much of that, call it almost 11% organic revenue growth, was attributable to Herbal Oasis versus the core CBD businesses?

Speaker #6: In the quarter descent of the March quarter, how much of that, call it almost 11% organic revenue growth, was attributable to herbal, Oasis, versus the core CBD businesses?

Speaker #5: It was split. Adam only had some growth of some of the core but we'll call it a reasonable amount of that was from the Oasis side of the business as well.

T. Ronan Kennedy: It was split. Adam, we had some growth of some of the core, but, you know, we'll call it a reasonable amount of that was from the Oasis side of the business as well.

Ronan Kennedy: It was split. Adam, we had some growth of some of the core, but, you know, we'll call it a reasonable amount of that was from the Oasis side of the business as well.

Speaker #6: Okay. And I haven't had a chance to look at the queue yet. Will there be more granularity in the queue in terms of the impact herbal, Oasis is having, or is it not material yet?

Adam Waldo: Okay. I haven't had a chance to look at the Q yet. Will there be more granularity in the Q in terms of the impact Herbal Oasis is having, or is it not material yet? Do you think you'll start to report later in the year, in the fiscal year as it might become more material?

Speaker #6: And do you think you'll start to report later in the year in the fiscal year as it might become more material?

T. Ronan Kennedy: We have not segregated out that category yet, and we'll continue to evaluate sort of segmentation as we move through the year and see continued growth there.

Speaker #5: We have not segregated out that category yet. And we'll continue to evaluate sort of segmentation as we move through the year and see continued growth there.

Ronan Kennedy: We have not segregated out that category yet, and we'll continue to evaluate sort of segmentation as we move through the year and see continued growth there.

Speaker #6: Okay. And given that just high-level very dynamic regulatory environment, obviously, and a lot of potential growth opportunities coming to fruition here all at once, while improved, the balance sheet and liquidity profile leave me wondering how you expect to use the balance sheet and liquidity profile to support those growth opportunities in the coming several quarters.

Adam Waldo: Okay. Given that just a high level, very dynamic regulatory environment, obviously, a lot of potential growth opportunities coming to fruition here all at once, while improved the balance sheet and liquidity profile, leave me wondering how you expect to use the balance sheet and liquidity profile to support those growth opportunities in the coming several quarters. I mean, you burned about a little over $700,000 of cash in Q1, just under $1 million in Q4. On the other hand, you have about $2.6 million on the balance sheet, in terms of cash at the end of Q1, and you have the, you know, obviously the equity facility, common equity facility out there in the market.

Speaker #6: I mean, you burned about a little over 700,000 of cash in the March quarter. Just under a million in the December quarter. On the other hand, you have about 2.6 million on the balance sheet.

Adam Waldo: I mean, you burned about a little over $700,000 of cash in Q1, just under $1 million in Q4. On the other hand, you have about $2.6 million on the balance sheet, in terms of cash at the end of Q1, and you have the, you know, obviously the equity facility, common equity facility out there in the market. Any commentary about sort of how you see the liquidity runway and support there for all the growth opportunities you have ahead of you?

Speaker #6: In terms of cash at the end of the March quarter, and you have obviously the equity facility, common equity facility, out there in the market.

Adam Waldo: Any commentary about sort of how you see the liquidity runway and support there for all the growth opportunities you have ahead of you?

Speaker #6: Any commentary about sort of how you see the liquidity runway and support there for all the growth opportunities you have ahead of you?

Speaker #5: Yeah. Sure. Look, I think we made some inventory investments ahead of sort of the growth. So I think we're in a pretty good position there.

T. Ronan Kennedy: Yeah, sure. Look, I think we made some inventory investments ahead of sort of the growth, so I think we're in a pretty good position there. We're continuing to evaluate in some SKUs and some consolidation. We'll continue to work on lowering the cost of some of those as well. We expect, you know, on a go forward to be a little bit more efficient from an inventory standpoint as we move forward. Given some of the steps that we've taken during this quarter, you know, our anticipation is the cash burn is or EBITDA should improve and, you know, not have the same working capital build requirements that we've had in the last two quarters.

Ronan Kennedy: Yeah, sure. Look, I think we made some inventory investments ahead of sort of the growth, so I think we're in a pretty good position there. We're continuing to evaluate in some SKUs and some consolidation. We'll continue to work on lowering the cost of some of those as well. We expect, you know, on a go forward to be a little bit more efficient from an inventory standpoint as we move forward.

Speaker #5: We're continuing to evaluate in some SKUs and some consolidation. We'll continue to work on lowering the cost of some of those as well so we expect on a go-forward to not have such a to be a little bit more efficient from an inventory standpoint as we move forward.

Speaker #5: And then given some of the steps that we've taken during this quarter, our anticipation is the cash burn is our EBITDA should improve. And not have the same working capital build requirements that we've had in the last two quarters.

Ronan Kennedy: Given some of the steps that we've taken during this quarter, you know, our anticipation is the cash burn is or EBITDA should improve and, you know, not have the same working capital build requirements that we've had in the last two quarters.

Speaker #6: Okay. Last one, if you'll permit me. At the annual shareholders' meeting on March 30th, the reverse stock split proposal three passed. It obviously calls for a two-to-one to ten-to-one reverse split to be implemented within a year of the annual meeting.

Adam Waldo: Okay, last one, if you'll permit me. At the annual shareholders meeting on 30 March, the reverse stock split proposal 3 passed.

Adam Waldo: Okay, last one, if you'll permit me. At the annual shareholders meeting on 30 March, the reverse stock split proposal 3 passed. It obviously calls for a 2-to-1 to 10-to-1 reverse split to be implemented within a year of the annual meeting. We're 6 weeks from the annual meeting, the reverse split hasn't been implemented yet. What update can you give on sort of the remaining milestones to implement and any expectation you have for the timeline to implement it?

Adam Waldo: it obviously calls for a 2-to-1 to 10-to-1 reverse split to be implemented within a year of the annual meeting. We're 6 weeks from the annual meeting, the reverse split hasn't been implemented yet. What update can you give on sort of the remaining milestones to implement and any expectation you have for the timeline to implement it?

Speaker #6: We're six weeks from the annual meeting. The reverse split hasn't been implemented yet. What update can you give on the remaining milestones to implement, and any expectation you have for the timeline to implement it?

Speaker #5: Yeah. Adam, we put that in more sort of a protection just knowing that we could have a the markets are incredibly volatile right now with not only our category but with global economic events.

T. Ronan Kennedy: Yeah, Adam, we put that in more sort of a protection, just knowing that we could have a, you know. The markets are incredibly volatile right now with, not only our category, but with global economic events. As I think as we outlined in the proposal, there was not a current need or a plan to execute that on that. It was more in the event that it is needed over the next year, we have that available as a tool, so we can react quickly should something happen. I believe the NYSE is also making some changes to slightly increase their sort of minimum share price under the NYSE. Right now there is no in plan to execute a reverse.

Ronan Kennedy: Yeah, Adam, we put that in more sort of a protection, just knowing that we could have a, you know. The markets are incredibly volatile right now with, not only our category, but with global economic events. As I think as we outlined in the proposal, there was not a current need or a plan to execute that on that. It was more in the event that it is needed over the next year, we have that available as a tool, so we can react quickly should something happen.

Speaker #5: And I think as we outlined in the proposal, there was not a current need or a plan to execute that on that. It was more in the event that it is needed over the next year we have that available as a tool so we can react quickly should something happen.

Speaker #5: I believe the NYC is also making some changes to slightly increase their sort of minimum share price under the NYC. So right now, there is no plan to execute a reverse.

Ronan Kennedy: I believe the NYSE is also making some changes to slightly increase their sort of minimum share price under the NYSE. Right now there is no in plan to execute a reverse. It is more sort of to make sure we have it available, and can react quickly rather than have to go out and proxy shareholders.

Speaker #5: It is more sort of to make sure we have it available and can react quickly rather than have to go out and proxy shareholders.

T. Ronan Kennedy: It is more sort of to make sure we have it available, and can react quickly rather than have to go out and proxy shareholders.

Speaker #6: Okay. If you don't mind my following up on that, but more and more broker-dealers are not permitting trading in stocks under a dollar share price.

Adam Waldo: Okay. If you don't mind my following up on that. More and more broker-dealers are not permitting trading in stocks under $1 share price, in some cases under $5, even if you're, you know, listed on the NYSE or NYSE American.

Speaker #6: In some cases, under $5. Even if you're listed on the NYSE or NYSE American, so does that color your thinking at all as to kind of the urgency to implement the reverse stock split?

Adam Waldo: Does that color your thinking at all as to kind of the urgency to implement the reverse stock split?

T. Ronan Kennedy: It's something we are continuing to evaluate. You know, we'll continue to do so during the balance of the year.

Speaker #5: Look, it's something we're continuing to evaluate. And we'll continue to do so during the balance of the year.

Ronan Kennedy: It's something we are continuing to evaluate. You know, we'll continue to do so during the balance of the year.

Speaker #6: Okay. Fair enough. Thank you very much.

Adam Waldo: Okay, fair enough. Thank you very much.

Speaker #5: Okay. Thanks, Adam.

T. Ronan Kennedy: Okay, thanks, Adam.

Ronan Kennedy: Okay, thanks, Adam.

Speaker #1: We'll move next to Tom McGovern at Maxim Group.

Operator: We'll move next to Tom McGovern at Maxim Group.

Speaker #7: Hey, guys. Thanks for taking the questions here. The first one's just on Bluebird Botanicals, right? So obviously, still kind of working there. But wondering if we can get an update on where you guys stand in terms of realizing some supply chain or shared service synergies? The follow-up to that is just, have you seen already any leading KPIs that would indicate that you've seen some strong cross-selling, or that you're bringing in additional customers?

Tom McGovern: Hey, guys. Thanks for taking the questions here. I guess the first one's just on Bluebird Botanicals, right? Obviously still kind of working there, but wondering if we can get an update on where you guys stand in terms of realizing some supply chain or shared service synergies. A follow-up to that is just, you know, have you seen already any, you know, keeping KPIs that would indicate, you know, that you've seen some strong cross-selling or that, you know, you're bringing in additional customers? Just kind of finally on that front, do you expect Bluebird Botanicals to be accretive to the bottom line in the fiscal Q3 once you guys have a, you know, a full quarter of operation under your belts? Thanks.

Speaker #7: And just kind of finally on that front, do you expect Bluebird Botanical to be a creative to the bottom line in the fiscal third quarter once you guys have a full quarter of operation under your belts?

Tom McGovern: Just kind of finally on that front, do you expect Bluebird Botanicals to be accretive to the bottom line in the fiscal Q3 once you guys have a, you know, a full quarter of operation under your belts? Thanks.

Speaker #7: Thanks.

Speaker #5: Yeah. Adam, or sorry, Thomas. Look, we during the quarter, we incurred sort of the transaction costs that were buried in there. As well as I think there was some other professional sort of just transition expenses as we made this change.

T. Ronan Kennedy: Yeah, Adam, or sorry, Tom, Thomas. Look, we, you know, during the quarter, we incurred sort of the transaction costs that were buried in there and as well as, you know, I think there was some other professional sort of just transition expenses as we made this change. Also, it sort of took us a little bit longer to get some of the marketing ramped up. We, you know, we believe we're pretty much fully integrated, had a good March, had a very strong April with the brand.

Ronan Kennedy: Yeah, Adam, or sorry, Tom, Thomas. Look, we, you know, during the quarter, we incurred sort of the transaction costs that were buried in there and as well as, you know, I think there was some other professional sort of just transition expenses as we made this change. Also, it sort of took us a little bit longer to get some of the marketing ramped up. We, you know, we believe we're pretty much fully integrated, had a good March, had a very strong April with the brand.

Speaker #5: Also, it sort of took us a little bit longer to get some of the marketing ramped up. So we believe we're pretty much fully integrated, had a good March, had a very strong April with the brand.

T. Ronan Kennedy: We're realizing, you know, some of the synergies already across the team and, you know, we've started to integrate more of the supply chain and have been leveraging sort of some of the product portfolio, and that's been so far well received by that customer base.

Speaker #5: We're realizing some of the synergies already across the team. And we've started to integrate more of the supply chain and have been leveraging sort of some of the product portfolio and that's being so far well received by that customer base.

Ronan Kennedy: We're realizing, you know, some of the synergies already across the team and, you know, we've started to integrate more of the supply chain and have been leveraging sort of some of the product portfolio, and that's been so far well received by that customer base.

Speaker #7: Understood. But it'd be correct to say that you guys are still in the process of maybe looking at potential SKU overlap, and we could expect to see potential rationalization of certain SKUs?

Tom McGovern: Understood. It'd be correct to say that you guys are still in the process of maybe, you know, looking at potential SKU overlap, and, you know, we could expect to see potential, you know, rationalization of certain SKUs, or have you guys kind of gone through that process already?

Speaker #7: Or have you guys kind of gone through that process already?

Speaker #5: Yeah. Look, we have. We're working we're managing some of that through kind of inventory sell-through. So it will continue to evolve over the year in ordinary course.

T. Ronan Kennedy: Yeah, look, we have. We're working, you know, we're managing some of that through kind of inventory sell-through. You know, it will continue to evolve over the year in ordinary course, as we look to sort of make sure we can, you know, make transitions through inventory and minimize any sort of inventory impairments as we make this transition.

Ronan Kennedy: Yeah, look, we have. We're working, you know, we're managing some of that through kind of inventory sell-through. You know, it will continue to evolve over the year in ordinary course, as we look to sort of make sure we can, you know, make transitions through inventory and minimize any sort of inventory impairments as we make this transition.

Speaker #5: As we look to sort of make sure we can make transitions through inventory and minimize any sort of inventory impairments as we make this transition.

Speaker #5: But we are seeing that to start the quarter, it's off to a good quarter. A profitable quarter that should contribute to the bottom line.

Tom McGovern: Understood

T. Ronan Kennedy: You know, we are seeing that to start the quarter, it is off to a good quarter, a profitable quarter that should contribute to the bottom line.

Ronan Kennedy: You know, we are seeing that to start the quarter, it is off to a good quarter, a profitable quarter that should contribute to the bottom line.

Speaker #7: Got it. I appreciate that color. Next question is on the BEI channel. Obviously, it seems like a very exciting opportunity. You indicated that it's not necessarily a near-term opportunity.

Tom McGovern: Got it. I appreciate that, caller. Next question is on the DEI channel. Now, obviously, it seems like a very exciting opportunity. You indicated that it's not necessarily, you know, a near-term opportunity, but I was wondering if we could dig in a little bit deeper on kinda what are the next steps for this initiative. What are some of the key challenges you're gonna face when trying to, you know, execute on this initiative? Just if you look at a timeline, maybe just high level, when you think this could translate to, you know, material growth or meaningful contribution to your top line.

Speaker #7: But I was wondering if we could dig in a little bit deeper on kind of what are the next steps for this initiative? What are some of the key challenges you're going to face when trying to execute on this initiative?

Speaker #7: And then just if you look at a timeline, maybe just high level, when you think this could translate to material growth or meaningful contribution to your top line?

T. Ronan Kennedy: Great questions. While I think there's a lot of excitement, it's still laid out in a way where, you know, I guess I'll say our healthcare system is a complicated system, and there's a lot of rules and regs that continue to have to be navigated. I think there's also, given the way it was rolled out, you know, we have to prove that there's also economic benefit for the participants for them to really be excited about the category. There's a lot of work still on educating these groups around the science, the safety. You know, you're selling into a medical community that perhaps, you know, this was not necessarily on their radar, and they're not fully aware of the category.

Speaker #5: Great questions. Look, this is well, I think there's a lot of excitement. It's still laid out in a way where I guess I'll say our healthcare system is a complicated system.

Ronan Kennedy: Great questions. While I think there's a lot of excitement, it's still laid out in a way where, you know, I guess I'll say our healthcare system is a complicated system, and there's a lot of rules and regs that continue to have to be navigated. I think there's also, given the way it was rolled out, you know, we have to prove that there's also economic benefit for the participants for them to really be excited about the category.

Speaker #5: And there's a lot of rules and regs that's continued to have to be navigated. I think there's also given the way it was rolled out, we have to prove that there's also economic benefit for the participants for them to really be excited about the category.

Speaker #5: So there's a lot of work still on educating these groups. Around the science, the safety, you're selling into a medical community that perhaps this was not necessarily on their radar and they're not fully aware of the category.

Ronan Kennedy: There's a lot of work still on educating these groups around the science, the safety. You know, you're selling into a medical community that perhaps, you know, this was not necessarily on their radar, and they're not fully aware of the category. There's still a lot of education that has to occur. Then there's ongoing, you know, science and validation to help, you know, provide that, you know, hemp products can truly be a alternative that provides, you know, a strong care for the patient and can justify the economic expense around it.

T. Ronan Kennedy: There's still a lot of education that has to occur. Then there's ongoing, you know, science and validation to help, you know, provide that, you know, hemp products can truly be a alternative that provides, you know, a strong care for the patient and can justify the economic expense around it.

Speaker #5: So there's still a lot of education that has to occur. And then there's ongoing science and validation to help provide that products can truly be a alternative that provides a strong care for the patient and can justify the economic expense around it.

Speaker #5: So that's kind of big picture kind of what's going on across the industry. So there's a lot of work and focus to develop the relationships with the key parties.

Tom McGovern: Understood

T. Ronan Kennedy: you know, kind of big picture, kind of what's going on across the industry. There's a lot of work and focus to, you know, develop the relationships with the key parties and, you know, continue to invest in science and programs that will help, you know, justify our products as a valued solution in our healthcare system.

Ronan Kennedy: you know, kind of big picture, kind of what's going on across the industry. There's a lot of work and focus to, you know, develop the relationships with the key parties and, you know, continue to invest in science and programs that will help, you know, justify our products as a valued solution in our healthcare system.

Speaker #5: And continue to invest in science and programs that will help justify our products as a valued solution in our healthcare system.

Speaker #7: Sure, that makes sense. Now, looking at the statewide regulations—you discussed them again this quarter as a meaningful headwind, right? So, as we unpack that and just understand that, there's no control just on your level in terms of talking to these guys and saying, 'Hey, look, this is how we see the best way forward.' I know that you guys have done everything you can to position yourselves as a reliable and science-backed brand.

Tom McGovern: Sure, that makes sense. Looking at the statewide regulations, you discussed them again this quarter as a meaningful headwind, right? As we unpack that and just, you know, understand that there's no control, you know, just on your level, in terms of, you know, talking to these guys and saying, Hey, look, you know, this is how we see the best way forward. I know that you guys have done everything you can to position yourselves as a reliable and science-backed brand. Just curious, you know, how are you dealing with, you know, these ongoing challenges? Have you guys done anything strategically to position yourself to stay agile in this dynamic market? Further, could you talk a little bit about which products you're seeing face the most, you know, impact from these changing regulations?

Speaker #7: But just curious, how are you dealing with these ongoing challenges? Have you guys done anything strategically to position yourself to stay agile in this dynamic market?

Tom McGovern: Just curious, you know, how are you dealing with, you know, these ongoing challenges? Have you guys done anything strategically to position yourself to stay agile in this dynamic market? Further, could you talk a little bit about which products you're seeing face the most, you know, impact from these changing regulations? Can it be confined to a certain set of products, category-wise, or is it just kind of broad-based across the business?

Speaker #7: And then further, could you talk a little bit about which products you're seeing face the most impact from these changing regulations? Can it be confined to a certain set of products?

Tom McGovern: Can it be confined to a certain set of products, category-wise, or is it just kind of broad-based across the business?

Speaker #7: Category-wise or is it just kind of broad-based across

Speaker #5: Sure. To I'll start with the last question. It's primarily full-spectrum products that contain hemp-derived Delta-9. Where we are seeing maybe more of the bigger impact is on the OASIS side.

T. Ronan Kennedy: Sure. I'll start with the last question. It's primarily, you know, full-spectrum products that contain hemp-derived delta-9. Where we are seeing maybe more of the bigger impact is on the Oasis side. Perfect example, you know, Alabama was a very good market for us in the December quarter, but effective early January, they made a law change that shows that there is a potential pathway, but it was effectively kind of a ban for hemp-derived products. That sort of category came to a quick halt in Alabama.

Ronan Kennedy: Sure. I'll start with the last question. It's primarily, you know, full-spectrum products that contain hemp-derived delta-9. Where we are seeing maybe more of the bigger impact is on the Oasis side. Perfect example, you know, Alabama was a very good market for us in the December quarter, but effective early January, they made a law change that shows that there is a potential pathway, but it was effectively kind of a ban for hemp-derived products. That sort of category came to a quick halt in Alabama.

Speaker #5: Perfect example, Alabama was a very good market for us in the December quarter. But, effective early January, they made a law change that shows that there is a potential pathway, but it was effectively kind of a ban for hemp-derived products.

Speaker #5: So that sort of category came to a quick halt in Alabama. So we are trying to look at the landscape, look at where we believe there are friendly environments for our category and get as close as we can to key constituents in that state.

T. Ronan Kennedy: We're trying to look at the landscape, look at where we believe there are, you know, friendly environments for our category, and get as close as we can to, you know, key constituents in that state and work with not only our customers and distributors, but make sure that as rules come out, we're working very closely with the states to ensure that sort of our products meet the requirements that they're rolling out.

Ronan Kennedy: We're trying to look at the landscape, look at where we believe there are, you know, friendly environments for our category, and get as close as we can to, you know, key constituents in that state and work with not only our customers and distributors, but make sure that as rules come out, we're working very closely with the states to ensure that sort of our products meet the requirements that they're rolling out.

Speaker #5: And work with not only our customers and distributors, but make sure that as rules come out, we're working very closely with the states to ensure that sort of our products meet the requirements that they're rolling out.

T. Ronan Kennedy: I think, you know, where we are trying to, you know, position ourselves is making sure that we're staying nimble on the supply chain and our inventory to ensure that we can react as quickly and as efficiently as possible, if there's a label change. In other states, there's scenarios where they might require some label changes, and it's not a ban, but you know, product has to be, you know, redone, repacked, in order to be compliant in the markets.

Speaker #5: And I think where we are trying to sort of position ourselves is making sure that we're staying nimble on the supply chain in our inventory.

Ronan Kennedy: I think, you know, where we are trying to, you know, position ourselves is making sure that we're staying nimble on the supply chain and our inventory to ensure that we can react as quickly and as efficiently as possible, if there's a label change. In other states, there's scenarios where they might require some label changes, and it's not a ban, but you know, product has to be, you know, redone, repacked, in order to be compliant in the markets.

Speaker #5: To ensure that sort of we can react quick as quickly and as efficiently as possible. If there's a label change in other states, there's scenarios where they might require some label changes and it's not a ban, but product has to be redone, repacked, in order to sort of be compliant in the markets.

Speaker #7: Understood. I appreciate all the clarity. I'll hop out of the queue, but congrats on the quarter, and a lot of exciting stuff ahead of you guys.

Tom McGovern: Understood. I appreciate all the clarity. I'll hop out of queue, congrats on the quarter and a lot of exciting stuff ahead of you guys.

Speaker #5: Thank you.

T. Ronan Kennedy: Thank you.

Ronan Kennedy: Thank you.

Speaker #1: And we'll go back to Adam Waldo at Lismore Partners.

Operator: We'll go back to Adam Waldo at Lismore Partners.

Speaker #8: I just want to follow up if you don't mind. I'm going to take you through admittedly a simplistic logic string here. But I'm trying to think about sort of incremental free cash flow margins on sales.

Adam Waldo: I just one follow-up, if you don't mind. I'm gonna take you through a admittedly a simplistic logic string here, but I'm trying to think about sort of incremental free cash flow margins on sales as you scale going forward. You know, your gross margins are in the, call it, low to mid 50s, depending on the quarter. I think I have a decent sense for how the inventory build's gonna go now, but it's a little tough to get my arms around quarter to quarter. Would it be reasonable to think about kind of a free cash flow margin on revenue in the 30% range here or a little higher as we go forward? Or is that not really in the ballpark?

Speaker #8: As you scale going forward, your gross margins are in the, call it, low to mid-50s, depending on the quarter. I think I have a decent sense for how the inventory build is going to go now, but it's a little tough to get my arms around quarter to quarter.

Speaker #8: But would it be reasonable to think about kind of a free cash flow margin on revenue in the 30% range here or a little higher as we go forward?

Speaker #8: Or is that not really in the ballpark? And if it is in the ballpark, then are we looking at kind of a low 7 million quarterly revenue to be comfortably free cash flow positive?

Adam Waldo: If it is in the ballpark, then are we looking at kinda a low $7 million quarterly revenue to be comfortably free cash flow positive?

T. Ronan Kennedy: Adam, our modeling is a much lower break-even top line.

Ronan Kennedy: Adam, our modeling is a much lower break-even top line.

Speaker #5: Adam, our modeling is a much lower break-even top line. So keep in mind we had some one-time kind of expenses tied to transaction here this quarter.

Adam Waldo: Okay

T. Ronan Kennedy: You know, keep in mind we had some one-time kind of expenses tied to transaction here this quarter.

Ronan Kennedy: You know, keep in mind we had some one-time kind of expenses tied to transaction here this quarter.

Adam Waldo: Okay.

T. Ronan Kennedy: I would say that the incremental is probably a little higher than you outlined without trying to commit myself to a box that I've gotta stay in going forward.

Speaker #5: And so I would say that the incremental is probably a little higher than you outlined, without trying to commit myself to a box that I've got to stay in going forward.

Ronan Kennedy: I would say that the incremental is probably a little higher than you outlined without trying to commit myself to a box that I've gotta stay in going forward.

Speaker #8: Right. Right. Okay. So as you all model it out, you feel your break-even level of quarterly revenue is south of 7 million a quarter by a margin of comfort.

Adam Waldo: Right. Right. Okay. As you all model it out, you feel your break-even level of quarterly revenue is south of $7 million a quarter.

T. Ronan Kennedy: Yes

Ronan Kennedy: Yes

Adam Waldo: a margin of comfort. Is that fair, Ronan, without trying to pin you down too much?

Speaker #8: Is that fair, Ronan, without trying to pin you down too much?

Speaker #5: Yeah, I mean, I think it should be well below 7.

T. Ronan Kennedy: Yeah. I mean, I think it should be, you know, well below seven.

Ronan Kennedy: Yeah. I mean, I think it should be, you know, well below seven.

Speaker #8: Well below 7. Okay, thank you very much.

Adam Waldo: Well below seven. Okay, thank you very much.

Speaker #5: Sure. Okay. Thanks.

T. Ronan Kennedy: Sure. Sure thing.

Ronan Kennedy: Sure. Sure thing.

Operator: We have no further questions at this time. This concludes today's conference call. We thank you for your participation. You may now disconnect.