cbdMD Reports Second Quarter Results
cbdMD reported its financial results for Q2 of fiscal 2024, showing a slight increase in operational losses from $1.4 million to $1.5 million YoY. Net sales decreased by 30% to $4.4 million, with DTC sales dropping 26% and wholesale sales falling 44%. Despite these setbacks, the company launched its ATRx Platinum line in GNC stores, aiming to expand market presence. Cost-cutting measures are projected to save $2.4 million annually, potentially leading to positive cash flow by August. The company also closed $1.25 million in net financing through convertible notes. Net loss for the quarter was $4 million, or $1.35 per share, attributable to a non-cash contingency liability.
- Launch of ATRx Platinum line in GNC stores.
- Cost-cutting measures projected to save $2.4 million annually.
- Consolidation of executive offices and warehouse to save $0.6 million per quarter.
- Closed $1.25 million in net financing through convertible notes.
- DTC sales accounted for 82.8% of total net sales.
- Projected revenue increase for the third fiscal quarter of 2024.
- Operational losses increased from $1.4 million to $1.5 million YoY.
- Net sales decreased by 30% YoY to $4.4 million.
- DTC sales dropped by 26% YoY.
- Wholesale sales fell by 44% YoY.
- Gross profit decreased to 59% from 64% YoY.
- Net loss attributable to common shareholders increased to $4 million or $1.35 per share.
- Working capital decreased from $4.1 million to $3.2 million.
Insights
cbdMD's latest financial results reveal some mixed signals for investors. Net sales for the quarter dropped
Investors should note the declining gross profit margin from
In summary, while short-term financials show a decline, the aggressive cost-cutting measures and restructuring efforts might buoy the company in the long term.
cbdMD's launch of its ATRx functional mushroom line into GNC's national retail chain presents a strategic move. The partnership with GNC, which boasts around 1,500 corporate locations, reinforces cbdMD's market presence and could potentially tap into a growing consumer interest in natural and functional products. Functional mushrooms have been gaining traction for their purported health benefits and entering a well-known retail space like GNC could provide significant brand validation and exposure.
However, it's vital to consider the competition in this market segment, as the natural and functional products industry is becoming increasingly crowded, which might limit cbdMD’s market share gain. Also, while the expansion is promising, the financial health of the company needs to stabilize to fully capitalize on this new product line.
Overall, this move could be beneficial in the long term if the company manages to maintain its financial strategies and keep the operational losses in check.
cbdMD's new line of functional mushroom products, ATRx, launches into national retailer
Charlotte, North Carolina--(Newsfile Corp. - May 15, 2024) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBDpA), one of the nation's leading and most highly trusted and recognized CBD companies, and operator of the leading CBD brands cbdMD and Paw CBD, along with its new functional mushroom brand ATRx Labs today announced its financial results for the March 31, 2024 second quarter of fiscal 2024 year end.
While year-over-year operational losses showed a slight increase from
"Transformation is not always linear, and while our second fiscal quarter 2024 results fell short of our ambitions, we believe the operational changes we've enacted are set to propel us forward," remarked Ronan Kennedy, cbdMD's CEO & CFO. "We're particularly excited about our ATRx Platinum line national rollout at GNC, which not only broadens our market presence but also validates our expansion into functional mushrooms."
In response to financial challenges, cbdMD has executed aggressive cost-cutting measures, projecting approximately
Kennedy added, "Our shareholders have spoken: profitability is imperative. Their input has further fueled our commitment to making tough yet crucial decisions, setting us up for success by the fiscal year's end. With revenues currently on pace for third fiscal quarter 2024 to surpass those of the March 2024 quarter, we are optimistic about making significant strides in this current fiscal period."
Financial Highlights from our Second Quarter of Fiscal 2024:
- Net sales totaled
$4.4 million for the March 31, 2024 quarter or a decrease of30% compared to$6.2 million for the prior year comparative fiscal quarter. For the six months ended March 2024, Net sales totaled$9.8 million as compared to$12.3 million for the prior year period.
- We reported direct to consumer (DTC) net sales of
$3.6 million or82.8% of total net sales in the second quarter of fiscal 2024, a decrease from$4.9 million , or26% from first quarter of fiscal 2023.
- We reported wholesale net sales of
$0.75 million in the second quarter of fiscal 2024, a decrease from$1.3 million , or44% from second quarter of fiscal 2023.
- During the quarter we incurred a
$0.44 million credit issued to a wholesale customer related to related to the$1 million order shipped during the March 2022 quarter. - Our gross profit for the quarter totaled
59% in compared to64% in the second quarter of fiscal 2023, mostly due to the issued credit.
- Our loss from operations was
$1.5 million during the second quarter of fiscal 2024 as compared to a loss of$1.4 million in second quarter of fiscal 2023.
- Net loss attributable to common shareholders for second quarter of 2024 was approximately
$4.0 million , or$1.35 per share, as compared to a net loss for the second fiscal quarter of 2023 of approximately$2.3 million , or$1.74 per share. The decrease in the second fiscal quarter of 2024 was principally attributable to a$1.4 million non-cash contingency liability increase related to the potential convertible liability of the Notes issued during the quarter along with a corresponding increase in the Company's stock price from issuance to March 31, 2024.
- At March 31, 2024, we had working capital of approximately
$3.2 million (excluding the accrued preferred dividend) and cash on hand of approximately$2.1 million as compared to working capital of approximately$4.1 million (excluding the accrued preferred dividend) and cash on hand of approximately$1.8 million at September 30, 2023.
- Our non-GAAP adjusted loss from operations during the second quarter of fiscal 2024 was approximately
$0.68 million as compared to our non-GAAP adjusted loss from operations during the second quarter of fiscal 2023 of approximately$0.80 million , despite the decrease in overall revenue.
Highlights for the Second Quarter of 2024 and Notable Business Updates
- During the quarter, the Company closed on
$1.25 million in net financing through a series of Convertible Notes ("Notes") with a total principal balance of approximately$1.54 million . The Company intends to use the proceeds from the issuance of the Notes for working capital and general corporate purposes. As of the filing date, there is approximately$1 million in principal balance remaining on the Notes.
- The Company has consolidated its executive offices and warehouse and entered into agreements with its current landlord on its historical executive offices. Should the Company fulfill the obligations in these agreements, including making payments through July, the lease would terminate at the end of July 2024.
- The Company has implemented what it believes are over
$200,000 in monthly operating costs savings that will be in place by August.
- Since January the Company made several non-executive personnel changes, including the hiring of a new VP of Wholesale and Director of Digital Marketing to combat ongoing revenue attrition and focus on profitability. We anticipate revenues to increase over the
$4.8 million adjusted net revenue (excluding the$0.44 million credit) during the third quarter of fiscal 2024.
- As a follow-up to the Company's launch of its functional mushroom brand, ATRx Labs, during the first fiscal quarter, the Company launched the ATRx Platinum line throughout GNC's approximate 1,500 corporate locations during the second ficcal quarter of 2024. GNC national presence gives the brand the support and added credibility of a national retailer and further substantiates the growing demand for functional, natural products.
We will host a conference call at 4:20 p.m., Eastern Time, on Wednesday, May 15, 2024, to discuss our March 31, 2024, second quarter of fiscal 2024 financial results and business progress.
CONFERENCE CALL DETAILS
| Wednesday, May 15, 2024, 4:20 p.m. Eastern Time | ||
| USA/Canada: | 844-763-8274 | |
| International: | 647-484-8814 | |
| Teleconference Replay dial in: | ||
| USA/Canada: | 855-669-9658 | |
| International: | 412-317-0088 | |
| Replay Passcode: | 0905 | |
| Webcast/Webcast Replay link- available through May 15, 2025: https://www.gowebcasting.com/13342 | ||
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, including NSF Certified for Sport® 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 sleep aids, and an array of Farm Act compliant Delta 9 products. Our Paw CBD brand of pet products includes veterinarian-formulated products including tinctures and chews products in varying strengths, and our ATRx brand of natural functional mushroom support. To learn more about cbdMD and our comprehensive line of U.S. grown, THC-free1 CBD oil and Full Spectrum products as well as our other brands, please visit www.cbdmd.com, www.pawcbd.com, or ATRxlabs.com, follow cbdMD on Instagram and Facebook, or visit one of the thousands of retail outlets that carry cbdMD's products.
1 THC-free is defined as below the level of detection using validated scientific analytical methods.
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, development and sales of new products, 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, 2023 as filed with the Securities and Exchange Commission (the "SEC") on December 22, 2023, as amended on January 29, 2024, Form 10-Q for the quarterly period ended December 31, 2023 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.
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. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| MARCH 31, 2024 AND SEPTEMBER 30, 2023 | ||||||||||
| (unaudited) | ||||||||||
| March 31, | September 30, | |||||||||
| 2024 | 2023 | |||||||||
| Assets | ||||||||||
| Cash and cash equivalents | $ | 2,105,396 | $ | 1,797,860 | ||||||
| Accounts receivable, net of allowance for credit losses of | 868,217 | 1,216,090 | ||||||||
| Inventory | 3,174,005 | 4,052,972 | ||||||||
| Inventory prepaid | 277,794 | 182,675 | ||||||||
| Prepaid sponsorship | 52,078 | 70,061 | ||||||||
| Prepaid expenses and other current assets | 932,770 | 750,383 | ||||||||
| Total current assets | 7,410,260 | 8,070,041 | ||||||||
| Other assets: | ||||||||||
| Property and equipment, net | 667,979 | 716,579 | ||||||||
| Operating lease assets | 2,766,290 | 3,350,865 | ||||||||
| Deposits for facilities | 132,203 | 138,708 | ||||||||
| Intangible assets, net | 2,873,406 | 3,219,090 | ||||||||
| Investment in other securities, noncurrent | 700,000 | 700,000 | ||||||||
| Total other assets | 7,139,878 | 8,125,242 | ||||||||
| Total assets | $ | 14,550,138 | $ | 16,195,283 | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| DECEMBER 31, 2023 AND SEPTEMBER 30, 2023 | ||||||||||
| (continued) | ||||||||||
| December 31, | September 30, | |||||||||
| 2023 | 2023 | |||||||||
| Liabilities and shareholders' equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 1,291,306 | $ | 1,906,319 | ||||||
| Accrued expenses | 1,282,028 | 629,648 | ||||||||
| Accrued dividends | 2,668,000 | 667,000 | ||||||||
| Deferred revenue | 468,472 | 187,793 | ||||||||
| Operating leases - current portion | 1,226,764 | 1,277,089 | ||||||||
| Note payable | - | 2,492 | ||||||||
| Total current liabilities | 6,936,570 | 4,670,341 | ||||||||
| Long term liabilities: | ||||||||||
| Convertible notes | 2,702,000 | - | ||||||||
| Other long term liabilities | - | 9 | ||||||||
| Operating leases - long term portion | 1,824,721 | 2,403,286 | ||||||||
| Contingent liability | - | 90,363 | ||||||||
| Total long term liabilities | 4,526,721 | 2,493,658 | ||||||||
| Total liabilities | 11,463,291 | 7,163,999 | ||||||||
| cbdMD, Inc. shareholders' equity: | ||||||||||
| Preferred stock, authorized 50,000,000 shares, | ||||||||||
| par value, 5,000,000 and 500,000 shares issued and outstanding, respectively | 5,000 | 5,000 | ||||||||
| Common stock, authorized 150,000,000 shares, | ||||||||||
| par value, 3,045,204 and 2,960,573 shares issued and outstanding, respectively | 3,045 | 2,961 | ||||||||
| Additional paid in capital | 183,456,639 | 183,387,095 | ||||||||
| Comprehensive other expense | (6,000) | - | ||||||||
| Accumulated | ||||||||||
FAQ
How did cbdMD's sales perform in Q2 2024?
What is the financial outlook for cbdMD after cost-cutting measures?
What is cbdMD's net loss for Q2 2024?
How did cbdMD's operational losses change year-over-year?
What impact did the ATRx Platinum line launch have?
What is the significance of cbdMD's $1.25 million financing?
How did cbdMD's gross profit change in Q2 2024?
What are the projections for cbdMD's revenue in the third fiscal quarter of 2024?
