Q1 2023 cbdMD Inc Earnings Call

Participants

Bradley Whitford

Kevin MacDermott; Principal Executive Officer & President; cbdMD, Inc.

T. Ronan Kennedy; CFO, COO, Secretary & Treasurer; cbdMD, Inc.

Todd Justice

Presentation

Operator

Good afternoon. Welcome to cbdMD Inc.'s December 31, 2022 First Quarter of Fiscal 2023 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its first quarter 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. (Operator Instructions) At this time, I would now like to turn the conference over to Brad Whitford, the company's VP of Finance. Please, Brad, go ahead.

Bradley Whitford

Thank you, Brenda, and thank you all for joining cbdMD December 31, 2022, First Quarter of Fiscal 2023 Earnings Call and Update. On the call today, we also have Kevin MacDermott, our President; and Ronan Kennedy, our Chief Financial and Chief Operating 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 and that may cause our actual results to differ materially from those indicated, including risks described in the company's annual report on Form 10-Q for the quarter ended December 31, 2022, 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.

Kevin MacDermott

Thank you, Brad. Hi, good afternoon, everybody, especially to our shareholders. Just a few months ago, we spoke about how 2022 was a reset year for cbdMD. The calendar year culminated with us predominantly completing that process. This reset was critical for us to get the business healthy and reestablish a foundation for what we feel best positions us for growth. We made great strides in rightsizing our cost structure, along with making sure we have the talent and proper outside relationships to drive that growth. We made a lot of hard organizational decisions and we had to unwind from past initiatives and sponsorships that never delivered on the promise. That is behind us. We have now segue to an all-out focus on revenue, our approach is purposeful. We expect to grow the top line while holding our expenses relatively flat, accelerating along the path to profitability.

T. Ronan Kennedy

Thank you, Kevin. Total net sales for the first quarter of fiscal 2023 were $6.1 million or a 34% decrease from the prior year comparative quarter total. Our quarterly e-commerce business generated sales of $4.9 million in the first quarter of fiscal 2023. This was a 31% year-over-year quarterly decrease. We believe sales were impacted during the quarter by pantry loading prior to our new high-strength product offering launch, a pullback in marketing spend and macroeconomic forces on consumers. E-commerce represented 81% of our total net sales for the first quarter of 2023 versus 76% in the prior year comparative quarter. Our wholesale business generated $1.2 million of net sales for the fourth quarter of fiscal 2023, down 46% as compared to $2.2 million for the comparative quarter in fiscal 2022.

Question and Answer Session

Operator

(Operator Instructions)

Todd Justice

First question is for Kevin. So with our marketing efforts and the hiring of the new CMO. Can you give us some background on Shannon, what she's going to bring to the table?

Kevin MacDermott

Sure. Shannon comes out of the food and supplement space. She's been involved with just a whole host of curated marketing initiatives around consumer wellness. And I think that's going to be little bit of an add to the organization, getting that direct-to-consumer wellness product and branding into our portfolio. And I think what we haven't done a great job of in the past is opening up our efforts to a broader set of demographics. I think we've been really good at the fringe athlete and the Joe Rogan demographic, if you will. And we'll continue to support that, but now opening up to that wider set of consumers. We're pretty confident that's going to bring added growth and Shannon has been pretty successful with that in the past.

Todd Justice

Where has she been successful at. I'm failing to see what her experience -- what positions she's held in the past at this level.

Kevin MacDermott

Well, I don't want to get too heavily into Shannon's qualifications. But most recently, at Naturade, she did a great job of taking that brand from relative obscurity into a high growth and a subsequent acquisition. And we're pretty confident that she is going to help us out quite a bit.

Todd Justice

Yes, okay. And so my other question is, where do we stand on cash available to run the company?

T. Ronan Kennedy

At the end of the quarter, we had $3.3 million cash on hand. We just got back $1 million and we've made some pretty large strides with the activity that happened through the end of December and into January. So we are anticipating a much sort of improved quarter -- for the second quarter going forward.

Todd Justice

Yes. But Adara, obviously, was our last -- unfortunately, we got that money back because if we could have kept that in there, I think that had been a great thing for the company, we would have made money, but we got $1 million in capital back, right? But that's it. There's no other landmines coming, no other big windfalls of cash. So it's only going to be a sales and how well we run the company at this point, right? So with our cash burn, I mean, I can do the math, I can -- with our cash burn and the cash that we have on hand, say starting today, I mean, I figure we got 4 to 6 months at best of cash.

T. Ronan Kennedy

Look, we're not making any specific projections on that, although we can say as we continue to sort of make progress.

Todd Justice

I get you're not making projections. I don't need the projections. I can see -- I can do my math. My question is what are we going to do? I mean the cuts we're making aren't anywhere close to seeing being deep enough to salvage the kind of cash position we're in.

T. Ronan Kennedy

I guess we feel like we've made the cuts that have needed to are focused on our top line and have been very focused on our liquidity position and making sure we have enough capital in the business to operate going forward.

Todd Justice

And so based off -- if your assessment, how much capital we have, how much runway do we have at this point?

T. Ronan Kennedy

Look, I guess I'll go back to what our balance was at the end of the quarter and plus the incremental capital that we had and believe we're in a much better spot today than we were 30 days ago, both on sort of our cash position and our operating run rate.

Todd Justice

That's a tempered optimistic outlook, but we'll see. I guess we'll see.

Operator

This concludes today's question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.