Earnings call transcript: cbdMD’s Q2 2025 revenue rises, net loss narrows

cbdMD Inc (YCBD) reported a notable improvement in its financial performance for the second quarter of 2025. The company saw its total net sales increase by 8.6% year-over-year to $4.7 million, driven by significant growth in wholesale sales. Despite a net loss of $480,000, this marked a substantial improvement from the $3 million loss in the same period last year. In the aftermarket session, cbdMD shares experienced a decline of 4.06%, trading at $0.95. According to InvestingPro data, the stock has shown significant volatility with a beta of 2.78, while trading at a low revenue valuation multiple. InvestingPro analysis indicates the stock is currently undervalued based on its Fair Value assessment.

Key Takeaways

• Total net sales increased by 8.6% year-over-year.
• Wholesale sales rose by 22%, contributing significantly to revenue growth.
• The net loss was reduced to $480,000 from $3 million a year earlier.
• Gross profit margin remained strong at 62%.
• Stock price fell by 4.06% in the aftermarket session.

Company Performance

cbdMD’s second-quarter results highlight a period of recovery and strategic growth. The company benefited from a robust increase in wholesale sales, which jumped 22% year-over-year. This growth offset flat e-commerce sales, which remained at $3.6 million. The company has been focusing on streamlining operations, as evidenced by a reduction in SG&A expenses to $3.5 million from $4.1 million in the prior year.

Financial Highlights

• Total net sales: $4.7 million (up 8.6% YoY)
• E-commerce sales: $3.6 million (flat YoY)
• Wholesale sales: $1.1 million (up 22% YoY)
• Gross profit margin: 62%
• SG&A expenses: $3.5 million (down from $4.1 million YoY)
• Net loss: $480,000 (improved from $3 million YoY)
• Non-GAAP adjusted EBITDA loss: $197,000 (improved from $680,000)

Outlook & Guidance

Looking ahead, cbdMD is committed to achieving profitability by 2025. The company is exploring mergers and acquisitions to expand its market presence and is focusing on enhancing its direct-to-consumer and wholesale businesses. The launch of the Herbal Oasis THC seltzer brand is expected to contribute to revenue growth in late 2025, with the THC seltzer market projected to exceed $4 billion by 2028. InvestingPro subscribers can access 15+ additional exclusive insights about cbdMD, including detailed analysis of its financial health, growth prospects, and comprehensive valuation metrics in the Pro Research Report, helping investors make more informed decisions about this volatile stock.

Executive Commentary

CEO Ronen Kennedy emphasized the company’s strategic reset, stating, "We consider this our great reset, a clean slate to create long-term value." He highlighted the booming THC seltzer category and the company’s lean organizational structure as key factors positioning cbdMD for future growth. Kennedy also noted, "We’re now powered by a lean organization, loyal customer base, and category-expanding brands."

Risks and Challenges

• Market volatility: The decline in stock price post-earnings reflects investor caution.
• Regulatory environment: Tracking legislation in 23 states could impact operations.
• Competition: The growing THC seltzer market attracts new entrants.
• Consumer trends: Declining alcohol consumption requires adaptation to new consumer preferences.
• Profitability timeline: Achieving profitability by 2025 remains a key challenge.

Q&A

During the earnings call, analysts inquired about the anticipated impact of the Herbal Oasis brand on future revenues. Executives confirmed expectations for contributions beginning in late 2025. Questions also addressed the company’s strategy to maintain its NYSE American listing and potential strategic opportunities both within and outside the cannabinoid space.

Full transcript - cbdMD Inc (YCBD) Q2 2025:

Galen, Conference Call Moderator: Good afternoon, and welcome to the CBDMD, Inc. Conference Call to discuss results for their second quarter fiscal twenty twenty five period ending 03/31/2025. 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. 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. At this time, I would like to turn the conference over to Brad Whitmore, the company’s Chief Accounting Officer. Brad, please go ahead.

Brad Whitmore, Chief Accounting Officer, CBDMD: Thank you, Galen, and thank you all for joining cbdMD’s March thirty one, twenty twenty five, second quarter of fiscal twenty twenty five earnings call and update. On the call today, we also have Ronen 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 ks for the fiscal or 10 Q, excuse me, for the fiscal quarter ended 03/31/2025, 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. Any forward looking statements made on this conference call speak only as of today’s date, Thursday, 05/15/2025, 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 securities laws.

With that, I’d like to turn the call over to Ronen.

Ronen Kennedy, CEO and CFO, CBDMD: Good afternoon, everyone, and thank you for joining us today. Over the past several quarters, we set two clear goals: one, drive revenue growth and achieve profitability and two, resolve our capital structure and regain compliance with the NYS American Listing Standards. This quarterly update, I’m pleased to report progress on both fronts. Our top priority for the second quarter and into Q3 was preparing for our annual meeting and securing shareholder approval on ’2 mission critical proposals: the conversion of our Series A preferred stock and a reverse split. This is a complex undertaking involving multiple shareholder classes and two failed prior attempts over the last eighteen months.

I want to thank our shareholders for the strong vote of confidence. The successful approval of these measures represents a major milestone in CBDMD’s reset and long term positioning. With the Series A conversion complete, approximately $6,700,000 in accrued dividends and our shares of Series A preferred stock were converted into common stock, raising our pro form a non GAAP adjusted book value from approximately $670,000 to over $7,000,000 as of 03/31/2025, well above the $4,000,000 threshold required by the NYC American. The exchange also eliminated legacy obligations, including $4,000,000 in annual dividends and over $50,000,000 in preferred waterfall payouts and simplified our capital structure. After discussions with the regulators, our Board determined conducting the reverse stock split was an important step to protect against the NYSE American’s zero one zero dollars delisting threshold.

Between the preferred conversion and the reverse stock split, we now have approximately 8,900,000.0 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 future. On the operational side, we continue to demonstrate meaningful year over year progress across the P and L, even if Q2 performance was not as strong as Q1. We’re executing against three revenue growth priorities.

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 the team. We’re laser focused on enhancing customer acquisition, experience and retention. Second, expanding our core wholesale business. Wholesale revenue is up 13% on a trailing twelve month basis.

We’ve added new sales reps focusing on high quality partnerships and working to ensure CBMD remains the preferred brand in our category. Finally, Scaling Herbal Oasis, our hemp derived THC seltzer brand. I’m excited to officially call it award winning. All four flavors recently medaled at the 2025 High Spirits Award. We’ve added distribution partners in Alabama, Florida and North Carolina.

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 $4,000,000,000 by 2028. As alcohol consumption declines, we’re seeing clear signs that consumers are seeking functional social alternatives, and Oasis is built for that future.

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. With our internal regulatory and legal experience, we’re confident in our ability to adapt quickly to an evolving landscape. All this strategic and operational progress is beginning to show up in our financial performance. While we still have work ahead, the year over year trends across revenue, margin, EBITDA reflect a business that’s becoming more efficient, more disciplined 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, Chief Accounting Officer, CBDMD: Thanks, Ronan. Total net sales for the first quarter of fiscal twenty twenty five were $4,700,000 representing an 8.6% increase from the prior year comparative quarter total and a 7.9% decrease from the first quarter. As Ronen 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 $3,600,000 in the second quarter of fiscal twenty twenty five. E commerce represented 77% of our total net sales for the second quarter of twenty twenty five versus 83% in the prior year comparative quarter.

Our wholesale business generated $1,100,000 of net sales for the second quarter of fiscal twenty twenty five, up 22% as compared to $750,000 for the comparative quarter in fiscal twenty twenty four. Our gross profit remained healthy at 62 percent for the second quarter of twenty twenty five. The increase in our warehouse rent flowed through in full this quarter, including some onetime increases in CAM costs. Despite this, we continue to operate with some of the leading gross margins in the industry. Our SG and A expenses for the second quarter of fiscal twenty twenty five totaled $3,500,000 compared to $4,100,000 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 expense. For the six months ended 03/31/2025, SG and A expenses were down $1,800,000 across the board and came in at 6,900,000.0 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 twenty twenty five as compared to a $1,500,000 loss from the prior year period. After adjustments to the fair value of the notes and interest expense, net loss totaled $480,000 as compared to a loss of $3,000,000 in the second quarter of fiscal twenty twenty four. Our non GAAP adjustments to operating expenses for the second quarter of fiscal twenty twenty five included $2,000 in noncash employee stock expense and $286,000 in depreciation and amortization expense, resulting in non GAAP adjusted EBITDA loss of $197,000 for the second quarter of fiscal twenty twenty five as compared to a $680,000 non GAAP adjusted EBITDA loss in the second quarter of fiscal twenty twenty four.

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. We had cash and cash equivalents of approximately $1,700,000 and working capital of approximately negative $3,700,000 in March for 03/31/2025, as compared to $2,400,000 and working capital deficit of approximately $2,200,000 on 09/30/2024. The main factor contributing to the reduction in our net working capital is the incremental $1,000,000 of accrued preferred dividends that is a short term liability on our balance sheet. Excluding the respective $6,700,000 and $4,700,000 of accrued dividends, we had positive adjusted net working capital of $2,800,000 as of March 25 and $2,400,000 as of September 24. We invested approximately $400,000 in inventory during the quarter.

We were running a little too lean at the start of the quarter and needed to bolster a few key SKUs. Additionally, we invested in our Oasis inventory as we began rolling out to distributors. We continue to focus on improving our working capital and managing our cash carefully. With that, I’ll turn the call back over to Ronen.

Ronen Kennedy, CEO and CFO, CBDMD: Thank you, Brad. Operationally, we’ve transformed this business. Our mandate is profitable growth, and we remain firmly committed to delivering a profitable 2025. The successful capital restructuring not only improves our balance sheet, but also opens the door for future strategic opportunities, including M and A. 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.

Our capital structure is now clear, our stock is more investable, and we’re seeing increased inbound interest since the annual meeting. We are evaluating these opportunities with discipline and clear focus on long term value creation. We consider this our great reset, a clean slate to create long term value. We’re no longer weighed down by the past. We’re now powered by a lean organization, loyal customer base and category expanding brands.

Our cash burn remains low. We believe we have the working capital to execute our growth plan. We believe we’re in a stronger position than many of our public peers with stronger gross margins, substantially debt free with approximately $1,000,000 cash and no material liabilities beyond normal working capital and lease liabilities. Our battle tested team has showed time and again that we can evolve, adapt and deliver. 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 it up for questions.

Galen, Conference Call Moderator: Certainly. Our first is from Tom McGovern with Maxim Group. Please go ahead.

Tom McGovern, Analyst, Maxim Group: Hey, guys. Thanks for taking my question. Yes. So just want to start first with the Herbal Oasis brand. Obviously, 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 fuel the growth now that you kind of work 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 kind of how does that expansion look from your perspective? Just what are some maybe milestones we should look out for kind of targets? 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.

Ronen Kennedy, CEO and CFO, CBDMD: Sure, Thomas. Look, we had started discussions back in the December with a number of distributors and started getting commitments during the March. In March, we some of those discussions took a little longer than we liked, and we started seeing some legislation pop up toward the March, which kind of slowed some of the shipments into those distributors. We did ship at the 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 I think some of the regulatory stuff that has since sort of resolved itself slowed down our progress a little bit, but, 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 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 today.

Tom McGovern, Analyst, Maxim Group: Understood. I appreciate that color. Just a follow-up on that. So can we be looking at 2025 as kind of a development or commercial ramp period and then maybe start to expect Herbal Oasis to be more of a key driver of growth or a material driver of growth in 2026? Or should we start to expect that, hey, maybe once it starts hitting the distribution channel, there should be some relatively rapid uptick and we could start to see Oasis materially impacting top line in the back half of this year?

Ronen Kennedy, CEO and CFO, CBDMD: I think we should start being able to see toward the back end of this year some good contribution from the brand.

Tom McGovern, Analyst, Maxim Group: Appreciate that clarity. And then last question for me. Since this post or the conversion of preferred into common equity, obviously, 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 registration that was locked up due to the cap structure.

So 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?

Ronen Kennedy, CEO and CFO, CBDMD: Yes, Thomas. I think for the shelf to come back into play, we have to complete our next audit. 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, we’re now in a really great position to maintain our listing, right?

We were on a path with the NYSE. So by the end of the year, we potentially were delisted. So from a preservation of value for shareholders and giving not only customers, shareholders, employees alike, the fact that we now we’re in a great position on a go forward basis to remain CBDMD as a listed company on the NYC American. 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 YCB stock and the price and sort of looked at it.

And then as they sort of, you know, ended up sort of doing research layer down and understood the preferred, I think 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 and A, that’s for trying to find sort of the right influencers and allow them to sort of participate. 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, 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 shareholders. Understood. Well, congrats on working through that.

Congrats on the quarter.

Tom McGovern, Analyst, Maxim Group: And it looks like you’re positioning yourselves nicely for 25%. I appreciate again you taking the time to answer my questions. I’ll hop out of queue. Thanks. Thanks,

Galen, Conference Call Moderator: Our next question is from Adam Waldo with Lismore Partners. Please go ahead.

Adam Waldo, Analyst, Lismore Partners: Hi. Good day, Logan and Brad. I hope you can hear me okay.

Ronen Kennedy, CEO and CFO, CBDMD: Yes, Adam. How are you?

Adam Waldo, Analyst, Lismore Partners: I’m well, Ronan. And you?

Ronen Kennedy, CEO and CFO, CBDMD: I’m great. Thank you. Well, congrats on the

Adam Waldo, Analyst, Lismore Partners: conversion. I 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 $275,000 a quarter. You did better than that obviously during last quarter at around 200 Are you still comfortable based on what you’re seeing in terms of the working capital requirements particularly of the Herbal Oasis Tonic’s new products that the company’s liquidity runway remains sufficient through the end of fiscal twenty twenty six? As you had indicated, what’s your outlook on the fiscal fourth quarter twenty twenty four results call on December 18?

Ronen Kennedy, CEO and CFO, CBDMD: Look, Adam, 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 in a much better positive EBITDA and cash generation situation. So I think we’re still feeling comfortable as of today with where we’re at and the working capital that we have on a go forward basis.

Adam Waldo, Analyst, Lismore Partners: Okay. And so am I right to correct to infer that you’re still comfortable with that guidance that you issued on December 18 that you thought liquidity outlook was sufficient through at least the end of fiscal twenty twenty six, in other words, another six quarters from here?

Ronen Kennedy, CEO and CFO, CBDMD: That is what we have modeled out.

Adam Waldo, Analyst, Lismore Partners: Okay. Terrific. And then switching gears, you made a number of comments on today’s call and in the recent press release 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 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?

Ronen Kennedy, CEO and CFO, CBDMD: Look, I think as I sort of spoke about in some of my closing statements, I think we’re looking at opportunities where we think there’s a really good either 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 it as one and one equals three. I think that’s both inside the cannabinoid space and outside the cannabinoid space.

Adam Waldo, Analyst, Lismore Partners: Okay. That’s very helpful. And then I guess the final question, let me go back to the last part of what you said outside the cannabinoid space. Could you flesh that out anymore or add to that? Yeah, I

Ronen Kennedy, CEO and CFO, CBDMD: don’t think it needs to be a CBD company, Tom. Okay. 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 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 greater than two.

Adam Waldo, Analyst, Lismore Partners: Understood. And I guess the final thing, following up on something on Thomas’ line of questioning around Herbal Oasis. 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 signaling you would expect to see sometime before the end of this fiscal year?

Ronen Kennedy, CEO and CFO, CBDMD: So look, what I’ll say is there was really the the revenue impact came at the very end of the March. Right. And we’re starting to see that pick up here moving through the third quarter here. So I think we’re not we have, I think, stated before that the gross margins on this product are not quite the same as our core business. But from our standpoint, we view it as incremental contribution dollars and are looking at sort of volume play because it is a different business than shipping gummies and pills, majority direct to consumer.

Adam Waldo, Analyst, Lismore Partners: Very good. Thank you so much and best wishes for upcoming quarters. Adam, thank you

Ronen Kennedy, CEO and CFO, CBDMD: very much. I appreciate it.

Galen, Conference Call Moderator: This concludes the question and answer session. I’d like to turn the conference back over to Bronen Kennedy for any closing remarks.

Ronen Kennedy, CEO and CFO, CBDMD: 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.

Galen, Conference Call Moderator: This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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