CbdMD, Inc. Earnings Call: Restructuring and Growth Prospects

Cbdmd INc ((YCBD)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for cbdMD, Inc. presented a mixed sentiment, highlighting significant strides in capital restructuring and cost reduction, which position the company for potential future growth. However, challenges persist, notably with stagnant e-commerce sales, a decline in overall net sales, and a working capital deficit.

Successful Series A Preferred Stock Conversion

The conversion of Series A Preferred Stock into common stock was a pivotal move for cbdMD, Inc., significantly boosting the company’s pro forma non-GAAP adjusted book value from approximately $670,000 to over $7 million as of March 31, 2025. This strategic financial maneuver is expected to strengthen the company’s financial foundation.

Improved Financial Position

CbdMD, Inc. now boasts approximately 8.9 million shares of common stock outstanding, with no debt and a simplified capital structure. This improved financial position is crucial for regaining compliance with NYSE American listing standards, providing a more stable platform for future operations.

Wholesale Revenue Growth

The company reported a notable 22% increase in wholesale revenue, reaching $1.1 million in the second quarter of fiscal 2025, compared to $750,000 in the same quarter of the previous year. This growth underscores the potential of cbdMD’s wholesale segment as a significant revenue driver.

Cost Reduction Achievements

CbdMD, Inc. achieved significant cost reductions, with SG&A expenses for the second quarter of fiscal 2025 reduced to $3.5 million from $4.1 million in the prior year. These savings were primarily due to reductions in payroll, professional fees, and the elimination of the headquarters lease.

Improved EBITDA

The company reported a non-GAAP adjusted EBITDA loss of $197,000 for the second quarter of fiscal 2025, a substantial improvement from the $680,000 loss in the same quarter of fiscal 2024. This improvement reflects effective cost management and operational efficiencies.

E-commerce Sales Flat

Despite other areas of growth, cbdMD’s e-commerce direct-to-consumer business remained flat year-over-year, generating $3.6 million in sales for the second quarter of fiscal 2025. This stagnation highlights a key area for potential improvement.

Overall Net Sales Decrease

Total net sales for the second quarter of fiscal 2025 were $4.7 million, marking a 7.9% decrease from the first quarter. This decline in sales is a concern that the company will need to address moving forward.

Working Capital Concerns

CbdMD, Inc. reported a working capital deficit of approximately $3.7 million as of March 31, 2025. This deficit poses a challenge to the company’s liquidity and operational flexibility.

Forward-Looking Guidance

Looking ahead, cbdMD, Inc. plans to capitalize on its improved financial position to pursue strategic growth initiatives. These include potential mergers and acquisitions and the expansion of its Herbal Oasis brand, with expected contributions to the top line in the latter half of the year. The company aims to leverage these opportunities to drive future growth and enhance shareholder value.

In summary, cbdMD, Inc.’s earnings call revealed a company making significant strides in financial restructuring and cost management, setting the stage for future growth. However, challenges such as flat e-commerce sales and a working capital deficit remain. The company’s forward-looking strategies, including potential M&A and brand expansion, will be crucial in overcoming these hurdles and achieving sustainable growth.