cbdMD Posts $15 Million in Net Income Improvement over Prior Year Quarter
Company continues to make headway despite challenging consumer environment.
Charlotte, North Carolina--(Newsfile Corp. - February 13, 2023) - cbdMD, Inc. (NYSE:YCBD) (NYSE:YCBDPA), one of the nation's leading and most highly trusted and recognized CBD companies, and operator the leading CBD brands – including its flagship brand cbdMD, and its animal health brand Paw CBD, today announced our first quarter of fiscal 2023 results.
For the first quarter of fiscal 2023 Net Loss improved to $3.9 million on sales of $6.1 million as compared to a $19.1 million Net Loss on sales of $9.3 million in the prior year comparative quarter. Year over year saw marked gains in gross margins and continued significant improvements in SG&A costs.
"Despite a challenging quarter for consumer brands in general and the CBD Category specifically, we continued to aggressively manage our cost structure. We encountered some external headwinds and internal challenges as we pivoted our portfolio to a unique clinically studied higher-potency product offering. We reduced a significant amount of unprofitable spend and are seeing revenues stabilize and margins improve during the second quarter. We continue to execute on our plan and remain very encouraged about the pipeline of opportunities and anticipated improvement in our operating income for the second quarter of fiscal 2023," says Kevin MacDermott, cbdMD's President.
Financial Highlights from our First Quarter of Fiscal 2023:
- We reported that our net sales for the December 31, 2022 quarter were $6.1 million versus net sales of $7.8 million quarter ending September 30, 2022, a decrease of 22%. Our net sales for the quarter ended December 31, 2022 were down 35% compared to the prior year quarter ended December 31, 2021.
- We reported that our quarter ending December 31, 2022 direct to consumer (DTC) net sales were $4.9 million, versus $7.1 million for our quarter ending December 31, 2021, or a year over year decline of 31%. Our e-commerce net sales were down 22% sequentially.
- We reported that our quarter ending December 31, 2022, wholesale sales (including brick and mortar retail customers) were $1.2 million, versus $1.6 million for quarter ending September 30, 2022 or sequential decrease of 26%. Wholesale net sales were down 46% compared to the prior year quarter ended December 31, 2021. We have added a number of specific food, drug, mass, and convenience channel focused resources during the quarter and anticipate building wholesale inertia as we execute our plan over the next 2 quarters and beyond.
- We reported that our quarter ending December 31, 2022, gross profit margin was 59% versus 54% for the prior year period.
- We committed to ongoing cost reductions and SG&A expense improvements on our last call in December. For the quarter ending December 31, 2022, the Company continued delivering on cost rationalizations and recorded SG&A Costs of $7.6 million for the quarter as compared to $11.9 million in the prior year period. SG&A has improved $4.8 million or 38% compared to the prior year quarter ended December 31, 2021. We anticipate further reductions in SG&A during the second quarter based on ongoing management efforts to right size our costs.
- We reported GAAP loss from operations of approximately $4.0 million for the quarter ending December 31, 2022 compared to a $25.1 million loss from operations for our quarter ending December 31, 2021, a reduction of approximately $21 million or 84% year over year. This decrease is primarily related to the $18.1 million in goodwill and intangibles impairment. Excluding these non-cash impairment charges, year over year non-GAAP operating income improved $2.9 million on lower revenues.
- We reported non-GAAP adjusted operating loss of approximately $2.6 million in our December 31, 2022 quarter, compared to $4.6 million for the December 31, 2021 quarter. This reduction was primarily related to management's actions taken to right size our cost structure over the last few quarters.
Highlights for the First Quarter and Notable Business Updates:
- The Company successfully launched cbdMD Max with patented Univestin™ that has clinical pain claims. The Company holds an exclusive license to formulate CBD Products with Univestin.
- The Company is taking swift action to reinvigorate sales, hired new marketing leadership and retained an outside agency to aide in improving sales trends.
- The Company's Japanese market sales showed growth during the first fiscal quarter and continues to trend during the second quarter.
- cbdMD Therapeutics completed our human clinical study and results indicated our proprietary broad spectrum reduces pain in healthy adults, in addition to other significant indications on mood, immunity and sleep. The data is currently being used to support product development and marketing campaigns. After we publish our findings sometime in fiscal 2023, the data will be used to support the submission of structure function claim notifications to FDA.
- Adara Acquisition Corporation completed its merger with Alliance Entertainment Inc. on February 10, 2023 and the Company received back its $1 million investment in Adara Sponsor, LLC.
- cbdMD entered into an Agreement for Advertising Placement with a360 Media, LLC ("a360") in which a360 will provide professional media support and advertising placement in exchange for shares of the Company's common stock. This will expand access and marketing on a360's platform and we believe this will help add customers and brand awareness and allow us to preserve cash during 2023.
We will host a conference call at 4:15 p.m., Eastern Time, on Monday, February 13, 2022, to discuss our December 31, 2022, first quarter financial results and business progress.
CONFERENCE CALL DETAILS
| Monday February 13, 2022, 4:15 p.m. Eastern Time | ||
| USA/Canada: | 800-319-4610 | |
| International: | 604-638-5340 | |
| Teleconference Replay dial in: | ||
| USA/Canada: | 855-669-9658 | |
| International: | 412-317-0088 | |
| Replay Passcode: | 9893 | |
| Webcast/Webcast Replay link - available through February 13, 2023: https://www.gowebcasting.com/12471 | ||
About cbdMD, Inc.
cbdMD, Inc. is one of the leading and most highly trusted and most recognized cannabidiol (CBD) brands with a comprehensive line of U.S. produced, THC-free1 CBD products as well as our new Full Spectrum products. Our cbdMD brand currently includes high-grade, premium CBD products including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD bath bombs, CBD sleep aids and CBD drink mixes and an array of Farm Act compliant Delta 9 products. Our Paw CBD brand of pet products includes veterinarian-formulated products including tinctures, chews, topicals products in varying strengths, and our CBD Botanicals brand of beauty and skincare products including facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care. To learn more about cbdMD and our comprehensive line of U.S. grown, THC-free1 CBD oil and Full Spectrum products, please visit www.cbdmd.com, follow cbdMD on Instagram and Facebook, or visit one of the thousands of retail outlets that carry cbdMD's products.
Forward-Looking Statements
This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified using words such as ''should,'' ''may,'' ''intends,'' ''anticipates,'' ''believes,'' ''estimates,'' ''projects,'' ''forecasts,'' ''expects,'' ''plans,'' and ''proposes.'' These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. You are urged to carefully review and consider any cautionary statements, including but not limited to expectations on our ability to continue as a going concern, increasing our revenues, cost reductions, potential need for additional working capital, future profitability, results from clinical studies and other disclosures, including the statements made under the heading "Risk Factors" in cbdMD, Inc.'s Annual Report on Form 10-K for the fiscal year ended September 30, 2022 as filed with the Securities and Exchange Commission (the "SEC") on December 15, 2022 and as amended on December 20, 2022 and our other filings with the SEC. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of cbdMD, Inc. and are difficult to predict. cbdMD, Inc. does not undertake any duty to update any forward-looking statements except as may be required by law. The information which appears on our websites and our social media platforms, including, but not limited to, Instagram and Facebook, is not part of this press release.
1 THC-free is defined as below the level of detection using validated scientific analytical methods.
Non-GAAP Financial Measures
This press release includes a financial measure that excludes the impact of certain items and therefore has not been calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). cbdMD, Inc. has included adjusted loss from operations because management uses this measure to assess operating performance in order to highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The adjusted operating loss has not been prepared in accordance with GAAP. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, net loss from operations as an indicator of our operating performance. Further, this non-GAAP financial measure, as presented by cbdMD, Inc., may not be comparable to similarly titled measures reported by other companies. cbdMD, Inc. has attached to this press release a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure.
| cbdMD, INC. | ||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| DECEMBER 31, 2022 AND SEPTEMBER 30, 2021 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| December 31, | September 30, | |||||||||||||
| 2022 | 2022 | |||||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ | 3,352,664 | $ | 6,720,234 | ||||||||||
| Accounts receivable | 898,720 | 1,447,831 | ||||||||||||
| Accounts receivable – discontinued operations | - | 1,375 | ||||||||||||
| Marketable securities, at cost | - | - | ||||||||||||
| Investment other securities | 1,000,000 | 1,000,000 | ||||||||||||
| Inventory | 4,690,609 | 4,255,914 | ||||||||||||
| Inventory prepaid | 170,659 | 511,459 | ||||||||||||
| Prepaid sponsorship | 66,784 | 1,372,845 | ||||||||||||
| Prepaid expenses and other current assets | 1,349,784 | 701,945 | ||||||||||||
| Total current assets | 11,529,220 | 16,011,603 | ||||||||||||
| Other assets: | ||||||||||||||
| Property and equipment, net | 900,567 | 823,310 | ||||||||||||
| Operating lease assets | 4,201,204 | 4,477,841 | ||||||||||||
| Deposits for facilities | 138,708 | 244,606 | ||||||||||||
| Intangible assets | 17,557,194 | 17,834,549 | ||||||||||||
| Goodwill | - | - | ||||||||||||
| Investment in other securities, noncurrent | 1,400,000 | 1,400,000 | ||||||||||||
| Total other assets | 24,197,673 | 24,780,306 | ||||||||||||
| Total assets | $ | 35,726,893 | $ | 40,791,909 | ||||||||||
| Liabilities and shareholders' equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 1,689,527 | $ | 2,036,558 | ||||||||||
| Deferred revenue | 2,650,337 | 2,060,762 | ||||||||||||
| Accrued expenses | 1,202,797 | 1,178,683 | ||||||||||||
| Note payable | 9,758 | 9,609 | ||||||||||||
| Total current liabilities | 5,552,419 | 5,285,612 | ||||||||||||
| Long term liabilities: | ||||||||||||||
| Long term liabilities | - | 125,491 | ||||||||||||
| Operating leases - long term portion | 3,368,713 | 3,680,375 | ||||||||||||
| Contingent liability | 215,000 | 276,000 | ||||||||||||
| Total long term liabilities | 3,583,713 | 4,081,866 | ||||||||||||
| Total liabilities | 9,136,132 | 9,367,478 | ||||||||||||
| shareholders' equity: | ||||||||||||||
| Preferred stock, authorized 50,000,000 shares, $0.001 | ||||||||||||||
| par value, 5,000,000 and 500,000 shares issued and outstanding, respectively | 5,000 | 5,000 | ||||||||||||
| Common stock, authorized 150,000,000 shares, $0.001 | ||||||||||||||
| par value, 60,712,262 and 60,665,595 shares issued and outstanding, respectively | 60,712 | 60,666 | ||||||||||||
| Additional paid in capital | 178,905,176 | 178,782,328 | ||||||||||||
| Accumulated deficit | (152,380,127 | ) | (147,423,563 | ) | ||||||||||
| Total shareholders' equity | 26,590,761 | 31,424,431 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 35,726,893 | $ | 40,791,909 | ||||||||||
| cbdMD, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 and 2021 | ||||||||
| (Unaudited) | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Gross Sales | $ | 6,240,526 | $ | 9,856,767 | ||||
| Allowances | (155,308 | ) | (534,945 | ) | ||||
| Total Net Sales | 6,085,218 | 9,321,822 | ||||||
| Cost of sales | 2,517,452 | 4,328,310 | ||||||
| Gross Profit | 3,567,766 | 4,993,512 | ||||||
| Operating expenses | 7,613,947 | 11,955,284 | ||||||
| Impairment of Goodwill and other intangible assets | - | 18,183,285 | ||||||
| Loss from operations | (4,046,181 | ) | (25,145,057 | ) | ||||
| Realized and Unrealized loss on marketable and other securities, including impairments | - | (33,351 | ) | |||||
| Decrease of contingent liability | 61,000 | 5,950,000 | ||||||
| Other income | - | 70,738 | ||||||
| Interest income (expense) | 29,119 | (3,234 | ) | |||||
| Loss before provision for income taxes | (3,956,062 | ) | (19,160,904 | ) | ||||
| Benefit for income taxes | - | - | ||||||
| Net Loss | (3,956,062 | ) | (19,160,904 | ) | ||||
| Preferred dividends | 1,000,502 | 1,000,502 | ||||||
| Net Loss available to cbdMD, Inc. common shareholders | $ | (4,956,564 | ) | $ | (20,161,406 | ) | ||
| Net Loss per share: | ||||||||
| Basic earnings per share | (0.08 | ) | (0.35 | ) | ||||
| Diluted earnings per share | (0.08 | ) | (0.35 | ) | ||||
| Weighted average number of shares Basic: | 60,357,449 | 57,825,367 | ||||||
| Weighted average number of shares Diluted: | 60,357,449 | 57,825,367 | ||||||
| cbdMD, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||||||||
| FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 and 2021 | ||||||||
| (Unaudited) | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Net Loss | $ | (3,956,062 | ) | $ | (19,160,904 | ) | ||
| Comprehensive Loss | (3,956,062 | ) | (19,160,904 | ) | ||||
| Preferred dividends | (1,000,502 | ) | (1,000,502 | ) | ||||
| Comprehensive Loss attributable to cbdMD, inc. common shareholders | $ | (4,956,564 | ) | $ | (20,161,406 | ) | ||
| cbdMD, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
| FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 and 2021 | ||||||||
| (Unaudited) | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | $ | (3,956,062 | ) | $ | (19,160,904 | ) | ||
| Adjustments to reconcile net loss to net | ||||||||
| cash used by operating activities: | ||||||||
| Stock based compensation | 79,446 | 505,466 | ||||||
| Restricted stock expense | 43,449 | 508,754 | ||||||
| Write off of prepaid assets due to termination of contractual obligation | 884,892 | - | ||||||
| Marketing stock amortization | - | 220,000 | ||||||
| Issuance of stock / warrants for service | - | - | ||||||
| Inventory and materials impairment | - | 878,142 | ||||||
| Intangibles Amortization | 277,354 | - | ||||||
| Depreciation | 100,112 | 340,701 | ||||||
| Impairment of goodwill and other intangible assets | - | 18,183,285 | ||||||
| Gain on sale of fixed assets | - | - | ||||||
| Decrease in contingent liability | (61,000 | ) | (5,950,000 | ) | ||||
| Realized and unrealized loss of Marketable and other securities | - | 33,351 | ||||||
| Amortization of operating lease asset | 276,636 | 318,017 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 549,111 | 4,554 | ||||||
| Deposits | 105,898 | 121,875 | ||||||
| Inventory | (434,695 | ) | (723,483 | ) | ||||
| Prepaid inventory | 340,799 | (8,189 | ) | |||||
| Prepaid expenses and other current assets | (226,670 | ) | (303,391 | ) | ||||
| Accounts payable and accrued expenses | 39,203 | (127,254 | ) | |||||
| Operating lease liability | (287,547 | ) | (321,464 | ) | ||||
| Deferred revenue / customer deposits | 203,341 | 3,723 | ||||||
| Collection on discontinued operations accounts receivable | 1,375 | 8,342 | ||||||
| Deferred tax liability | - | - | ||||||
| Cash used by operating activities | (2,064,358 | ) | (5,468,475 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of other investment securities | - | - | ||||||
| Purchase of other investment securities | - | - | ||||||
| Purchase of DirectCBDOnline.com | - | - | ||||||
| Purchase of property and equipment | (177,370 | ) | (231,030 | ) | ||||
| Cash flows from investing activities | (177,370 | ) | (231,030 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of preferred stock | - | - | ||||||
| Note payable | (125,341 | ) | (14,498 | ) | ||||
| Preferred dividend distribution | (1,000,502 | ) | (1,000,502 | ) | ||||
| Cash flows from financing activities | (1,125,843 | ) | (1,015,000 | ) | ||||
| Net increase (decrease) in cash | (3,367,570 | ) | (6,714,505 | ) | ||||
| Cash and cash equivalents, beginning of period | 6,720,234 | 26,411,424 | ||||||
| Cash and cash equivalents, end of period | $ | 3,352,664 | $ | 19,696,919 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| 2022 | 2021 | |||||||
| Cash Payments for: | ||||||||
| Interest expense | $ | 2,638 | $ | 3,234 | ||||
| Non-cash financial activities: | ||||||||
| Issuance of Contingent earnout shares: | $ | - | $ | 405,000 | ||||
| cbdMD, Inc. | ||||||||
| SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||
| RECONCILIATION OF NON-GAAP ADJUSTED LOSS FROM OPERATIONS | ||||||||
| (unaudited) | ||||||||
| Three Months | Three Months | |||||||
| Ended | Ended | |||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| GAAP (loss) from operations | $ | (4,046,181 | ) | $ | (25,145,057 | ) | ||
| Adjustments: | ||||||||
| Depreciation & Amortization | 377,466 | 340,701 | ||||||
| Employee and director stock compensation (1) | 137,144 | 1,014,220 | ||||||
| Other non-cash stock compensation for services (2) | 884,893 | - | ||||||
| Inventory adjustment (3) | - | 878,142 | ||||||
| Impairment of goodwill and other intangible assets (4) | - | 18,183,285 | ||||||
| Accrual / expenses for discretionary bonus | - | 150,000 | ||||||
| Non-GAAP adjusted (loss) from operations | $ | (2,646,678 | ) | $ | (4,578,709 | ) | ||
(1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(2) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(3) Represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory.
(4) Represents non-cash impairment of the cbdMD trademark of $4,285,000 and $13,898,285 of goodwill impairment during the first fiscal quarter of 2022.
Contacts:
Investors:
cbdMD, Inc.
Ronan Kennedy
Chief Financial Officer
[email protected]
(704) 445-3064
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/154610