cbdMD (YCBD) 13 Aug 222022 Q3 Earnings call transcript

Good afternoon. Welcome to the cbdMD Inc.'s June 30, 2022 Third Quarter of Fiscal 2022 Earnings Call and Update. This afternoon, the Company issued a press release that provided an overview of its third quarter of the fiscal year 2022 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 cbdmd.com, in accordance with cbdMD's retention policies. All participants on this call will be in listen only mode. followed question-and-answer be will call by session. a The I to Kennedy, turn Instructions] Operating Company's At conference like time, this Officer. Chief and Ronan [Operator the would over Financial Officer Chief the to ahead. go please Ronan,

Gailene, XX, third and June update. you, the earnings fiscal XXXX and for quarter all Thank joining you cbdMD's XXXX of call thank

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XXXX, ending quarter the GAAP $XX loss For from recorded of a operations June million. we

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Total third sales Sibyl. $X.X net quarter you, versus million decrease for of quarter of fiscal sequential sales GAAP for million Thank were the the for XXXX, March XX%. XXXX $X.X ending a of

compared sales quarter net comparative quarter. to Our the XXXX were June for down XX% XX, prior

essentially $X million, quarter, the the quarter. generated e-commerce flat XXXX, by reducing business investment quarterly ending over in marketing despite March our million Our $X.X XX,

despite our quarter XXXX. only fiscal XX% a the e-commerce of in XX% quarter E-commerce a ago, total were the to of net represented Our sales during year our sales compared down spend. third XX% marketing reduction

Our occurred The pipeline XX% wholesale decrease disruptions the retail ending outages. quarter as in the of business, sales during including some quarter sequential the or was sequential fills a well XXXX. to versus as part supply $X.X some is March were down $X stock for XXXX and net million million XX%. to compared prior due brick-and-mortar customers, of causing that Wholesale June year ago quarter chain decline

upper including quarters. initiatives we and refine to significant on fixed of Our gross in the XX% improved the X% is product margin of in of a range XX% up effort third coming reductions result in XXXX sequentially. business, in Based to is The GAAP cost third gross quarter margins reduction to fixed forecast, in mix XXXX, overhead. fiscal profit increase our from anticipate the fiscal through and our our team's ongoing the quarter XX% mid-

expenses. led million $X.X Our of fiscal and also quarter. and related that increase SG&A $X.X $X.X of the includes in the expense categories, $X.X exception almost million XXXX down was to quarter of in prior the third RSU a reduction million, sequentially. of a from expense This amortization forfeited options other totaled and third by all increase depreciation for contra-expense stock drop and the intangibles The during year were million with

as Excluding improvements the to made during as from initiatives. well noncash as year expense, $X.X amortization We fourth stock cost-saving benefits last XXXX. anticipate tied million third our further of from adjustments as quarter well adjusted the additional in million costs depreciation, quarter realization full $XX.X to dropped SG&A for the quarter,

driven year. XXXX nine the areas months June for $XX.X and XXXX, For operating all intangibles. decrease offset partially related expenses, options. to expenses in This fiscal was cash million, contra-expense increases also the by down mentioned prior depreciation in previous million reductions $XX.X ending and almost from decrease stock of amortization XX, in totaled This by includes RSUs the forfeited and

expense, Excluding from adjusted to dropped $XX.X amortization noncash depreciation, our $XX.X cash stock operating comp and expenses million million.

fiscal implemented from the forward. quarter rate fiscal former our price $X have prior fourth goodwill navigated compared an impairment XXXX We totaled first ASC run our of the the reduced operational range under we loss ultimately As of $XX.X expenses our and of We cost period. in operations Overall stock loss from resulting the the that year anticipate GAAP half analysis CEO, the mentioned to separation before, operating significantly be while initiatives triggered quarter. further million during a move in for going caused stock XXX to quarter fiscal ending million the charge. for million saw as price year $X.X the third

mainly of offset million. from the a profit year-over-year $X.X operating was of operations non-GAAP drop $X.X revenue, to million $X.X in costs. $XX.X in loss gross our million, due which impairment attributed goodwill reductions of was our decline The dollars to by is million Excluding in noncash the approximately decrease

operations $XX.X loss Our to ending $XX.X prior XXXX, million the June period. XX, GAAP million in compared nine months from as year totaled

by first gross third The $X.X costs. loss $XX.X dollars in $X.X impairment of in noncash operating tied and is goodwill and fiscal XX.X%. decrease million million of drop a was by the intangibles quarters from decrease $X.X of million year-over-year increase driven revenue, to million of operations during partially XXXX, Excluding offset primarily in profit

accrual loss a nonexecutive XXXX fiscal $X.X Our $XXX,XXX, expense fiscal non-GAAP primarily resulting of for share. decrease manufacturing March the $X.X the in non-GAAP the shares noncash operating third income non-GAAP $X.XX as operating our of in from period quarter remaining in income period the attributed primarily stock $XXX,XXX adjusted The the valuation corresponding million, per our XXXX liability goodwill revaluation expenses, drop million million at and in Other $X.XX consolidated to contingent associated we by $XXX,XXX our to of during lower severance statement are included XXXX. of for market quarter the our changes on of our of quarter. and for issued payments of XXX,XXX profit. earn-out net non-GAAP and the the quarter adjustments compared price December acquisition Development. operating from of related by in to associated charge third separation over of adjusted gain, of third fiscal of non-GAAP depreciation common a revenue gain agreement The XXXX stock revaluation gross to $XXX,XXX shares a reduced quarter expenses in the the with quarter. the during of with in the result contingent May, gain XXXX the our operating well of offset CEO, $XX.X our million prior adjusted loss $X.X operating noncash a the to earn-out $X include as of gain to loss assets and operating end loss decrease the as amortization $XX,XXX liability million Based of and year earn-out corresponds is Sequentially, the adjusted This expenses former sale Cure a with of

in approximately our cash million $XX.X capital approximately approximately operations, quarter strong working XXXX. cash making each million as $X operations equivalents third of the of improvements non-GAAP cash we components from We We and of and the in working fiscal September main $X.X $XX.X $XX.X million equivalents cash used The XXXX, cash. million quarters. million and used of XX, in of cash on and paid to XX, XXXX, include flow $X.X loss adjusted dividends. operating capital next of had million approximately During of $X.X from in cash two of compared million June and anticipate

June decreased current cash flow of XX, from is million. primary A decrease approximately XXXX operations. XXXX, to the assets of XX% our September $XX.X cash Our driver in from

million, As which, AP million June $X.X XX, the expenses. current $X.X of approximately total of as as and $X.X XXXX, were million Company's liabilities accrued

We are not progress, results. pleased with our but the satisfied with

Our on is deliver stock attempts at driven not all of leadership team profit to appreciation, and cost. flashy revenue

a know committed the and up that are beyond. get line end sober of a assumptions delivering around balance has to open and the our profitable I'd growth within We that, to revenue to alike. for shareholders remain the of sheet customers cbdMD plan and We profitable team the can now through for like executed potential focused be on our Q&A. year With by and

with Our Jeff Instructions] question first Management. [Operator Porter Capital Porter is from

-- position Could on evolved? to little me investors? market And give Acquisition? potential that the a through transaction did that sell Have you try color to me you decision the in Adara to how to take interest

Sure.

us They or So did -- the noise we the close executives. apparently they to after want for it as the mid-June, Adara a were transaction. made of the to requirement to our related them to not CEO, working tied the any target with came Company fielded association had former either and sort

acquisition. to acceptable worked we quickly the order with that were their terms parties continue in for to with them all negotiate So process to that,

the a market you're payment accurate? I funds Because contingent it, broadly closes. hedge SPAC to equity your return basically and a getting try read deal you of as of private $X is initial Which to that Is your groups? investment? position million Did Okay. if

a time fast what say sponsor return would to from time, be investment. And be I rights That's was initial the that. sure able amount correct. part was the the in would the to I was happening of had entity the significant It first right of of making there within that refusal. not operating its go of challenge market how happening was think a and agreement Jeff, given a it

next of guidance in to what be forward quarter was some mentioned sort profitable. the into going give it I sales of gain trying you some the have in it Can the million on be quarter. you then -- expense Okay. you going of for target a to $X will insight Do And the fourth think would to I'm be what year? take reduction level

Sure.

current of a we about in are sort So fourth And our fiscal then the which our are in quarter. relatively SG&A internal at the quarter. forecast, on for forecasting is similar based quarter, forecasting $X million December

So your sales, the right sort need to around get a quarter if doing hold, neutral? cash margins flow to be gross math of you'll I'm to $XX.X right, if in million

remember, tied there's our Yes. I add-backs mean, and some depreciation to amortization and expense. stock

-- I'm basis. looking cash just Yes on flow a no,

this this look, Yes. the mean, think we're at looking in I at I right not providing but guidance time, you're direction.

just Okay. And a little more color.

have looked a at capital You mentioned is build? significant sheet, million. because we haven't inventory the balance working that of a little I over $XX

a don't we have inventory large No, build.

inventory massive closely don't and We to execute managing increase very a are requirement plan. foresee our our

Is of -- so normal? is sort receivable, a there is which significant that Okay. accounts

operating our typical -- sheet pick receivables, accounts mean have and other do up we some I receivable. a Yes. carry receivables on well. balance have sort normal our -- some we do we We of as did

Okay.

think time, generating you the have start balance you side guys flow? through you get at cash the the So positive sheet present here to other to

That's correct.

question is a Buchler], next [Bob Our private from investor.

The equity firm that previous as the explanation question. correct? group a for is Charlotte, that to back Adara bought in private the Blystone-Donaldson Going it

position are already. That in a entity of have -- the correct, sponsor they and is yes, they part

do. They

Okay.

million that asked again, roughly least -- understand to on just were just able do more $X it sold it. million prior obviously, the $X just a perspective, you have was back. It shareholders' okay. your to anybody. than $X could at so value, least paper how million-plus market at quickly question to right that had guys So they now, And -- I if to have used seems at you But from seems getting it's and all

value And assume, from huge -- so group? where or Company like this wasn't I at or of It the right other to I'm just questioning management, the just There least investors. between, other is would again now. why at relationship no discount seems potential the a is trading stock to shown Blystone-Donaldson board it particular least anything

related correct. is with There that. parties That associated is no

it Company. situation. for There make decision was is a the lot And think, unfortunately, I had we difficult to of not the a best time.

from a it -- is -- for on would the appears time... larger securities to a of there I to think that paper, while hold The stock lockup a us price have reasonable period right? a require a period period value

Six months.

think months. I six

Right.

So...

for sell just that understand But regardless been... and you certainly -- you the have it. purchase it to I I a -- -- condition guess was of I'm would

We to yes. mean, had we have have would've more would -- liked have didn't. Unfortunately, I we to time. more look, liked

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