Net Quarterly Sales Jumped 67%
Year-Over-Year To $9.4 million
E-commerce Sales Increased To 72% of Total
Net Sales
Confirms Its On Track To Reach Positive Cash
Flow This Year
cbdMD, Inc. (NYSE American: YCBD, YCBD PR A) (the “Company”),
one of the leading, highly trusted, and most recognized cannabidiol
(CBD) brands, reported today its second fiscal 2020 quarter ended
March 31, 2020 results, as well as some significant developments,
the highlights of which were:
- The Company reported net sales of $9.4 million, a
year-over-year quarterly increase of approximately 67%.
- The Company reported a significant shift in online sales as an
overall percentage of net sales, with direct to consumer e-commerce
online sales reporting 72% of overall sales, up from 67% from the
prior quarter.
- The Company reported an increase in its gross profit margin as
a percent of net sales to 70.9% as compared to 66.0% in prior year
same period.
- The Company reported a quarterly loss from operations of $5.6
million, of which approximately $665,000 was non-cash items,
resulting in a 9% improvement in sequential quarterly results.
- The Company reported a $21.2 million decrease in the Company’s
non-cash contingent liability and net income before provision for
income tax of $14.8 million.
- The Company reported net income for the first quarter of fiscal
2020 of $14.8 million or $0.40 cents per diluted share.
- Working capital was $19.1 million at March 31, 2020 and cash on
hand was $14.8 million as of March 31, 2020.
- The Company announced that its has reduced its overall
operating costs in the month of April by 40% which has resulted in
a reduction in operating loss of over approximately 85%, both as
compared to our prior quarter monthly average, and that this trend
is continuing through this current quarter.
- The Company reiterates that it expects to reach cash flow
positive by the end of calendar 2020, and based on the current
operating trends, expects to reach this milestone with a
significant cash cushion.
- The Company has expanded its B2B retail reach to over 6,300
doors worldwide, an increase of 1,000 doors from prior
quarter.
- The Company announced that it is expanding its exclusive CBD
partnership with Life Time Inc. (“Life Time”) to include the sales
of cbdMD products through both Life Time’ e-commerce and in-club
retail channels.
“We are pleased to report strong second quarter results, as well
as provide a mid-quarter update on operations. We reported $9.4
million in quarterly net sales, a 67% increase over the same
quarter last year. Our gross profit margin remains strong at 67%
year-to-date and 70.9% for the quarter. Our overall direct to
consumer e-commerce sales for the March fiscal quarter were $6.8
million or 72% of our total net sales, an increase of $2.5 million
or 58% from the prior year’s quarter. Our B2B brick and mortar
sales were $2.6 million or 28% of our total net sales, an increase
of $1.2 million or 85% from the prior year’s quarter. Direct to
consumer e-commerce sales for the six months ending March were
$13.6 million or 70% of our total net sales, an increase of $8.9
million or 189% from the prior year period. Our B2B brick and
mortar sales were $5.9 million or 30% of total net sales, an
increase of $4.5 million or 321% from the prior year period. Our
operating expenses for the March quarter were $12.2 million, of
which approximately $665,000 was non-cash expenses, resulting in a
cash use of $4.2 million for the quarter. Year to date our
operating expenses were $24.8 million, of which approximately $1.5
million was non-cash expenses, resulting in a cash use of
approximately $9.1 million for the six months ending March 31,
2020,” said Martin Sumichrast, Chairman and co-CEO of the
Company.
“In addition, in early March we started to take measures at our
Company to help secure the health of our employees and vendors.
When the stay at home order in North Carolina was implemented, we
temporarily closed our corporate office, instituted a remote work
structure and altered work schedules at our manufacturing and
warehouse facilities. We also took steps to increase production to
build up our finished goods inventory as well as purchased
additional raw material inventory items thereby allowing us to
maintain production if supply chain interruptions were to happen,
which at this point I am happy to say has not happened. In short,
while we have had to make significant logistical changes during the
past 60 days, our team has risen to the challenge and our business
has remained fully open and operational. We are also happy to
report that as of today, we are not aware of any of our employees
who have tested positive for COVID-19,” said Sumichrast.
“Along with taking the necessary safety measures, we also
immediately instituted a rigorous cost containment plan across all
departments and shifted our resources from our B2B retail brick and
mortar sales to our direct to consumer online sales. The result has
been quite remarkable. While we normally don’t discuss mid quarter
results, we are in an unprecedented time, and therefore we have
decided to discuss our company’s operations for April, our first
full post COVID-19 impacted month.”
“First of all, our overall sales in April were in line with
sales in March. Second, we are seeing a significant shift in our
overall sales blend, where now our direct to consumer online sales
are tracking at 80%, up from 62% of overall sales in fiscal 2019.
This of course has helped us maintain a very healthy overall gross
profit margin, which we believe we can maintain at 65% or higher.
Third, and most dramatic, our overall operating expenses have been
reduced by approximately 40% in April from our monthly average in
the prior quarter. Some of this operational cost reduction is the
direct result of cancellations of certain marketing spends, but
others, such as travel and trade shows, are a direct effect from
the changing environment brought on by the COVID-19 pandemic. The
net result of all of these changes is that in April we are showing
an approximate 85% decrease in our loss from operations from just a
few months prior, and we are seeing this carry through as we cross
the mid-way point in May. While the uncertainty caused by the
pandemic has required us to withdraw our fiscal 2020 financial
revenue guidance, based on what we experiencing, we remain
confident that we will achieve our target of positive cash flow by
the end of calendar 2020, and perhaps sooner. In addition, with
approximately $14.8 million in cash on hand at March 31, 2020, and
the dramatic improvement in our operating results, we believe we
have more than enough financial cushion to get us to profitability.
Despite these truly unprecedented times, we are thankful that early
this year we made bold strategic decisions, such as becoming fully
capitalized in January of 2020, paying for our infrastructure so we
have almost no debt, promoting our online direct to consumer
business model which has allowed us to pivot when needed, and
choosing to operate our business with a view towards variable cost
initiatives,” said Sumichrast.
“We are pleased to announce that our agreement with Life Time,
Inc., where cbdMD is the Exclusive CBD Partner of Life Time, is
expanding to include the sales of cbdMD products through both Life
Time e-commerce and retail (in-club) channels. With approximately
two million active members, Life Time provides an incredible
opportunity to directly offer our robust line of THC-free CBD
products to this targeted base of customers, who are laser focused
on the importance of health and wellbeing each and every day. We
feel confident that, as our products are introduced online through
https://shop.lifetime.life/ and in their 145+ fitness facilities
nationwide, sales will be significant. One indication of the
potential demand among their membership is that research provided
to us by Life Time indicated that “cbdMD” was the number one
searched term on the Life Time e-commerce website since our
partnership began in October 2019. We are excited to get our
products in Life Time's Spas and Cafes as well as in the hands of
all the nutritionists and fitness coaches serving their two million
members. cbdMD, and our commitment to health and wellness,
represents a perfect fit with Life Time since our roster of Team
cbdMD athletes include some of the biggest and most notable
individuals in their respective sports, our products are THC-Free
and, like Life Time, cbdMD is a leading, trusted brand, which as
consumer purchase data regarding CBD suggests, is a dominant factor
in decision making,” said Sumichrast.
CONFERENCE CALL DETAILS
Monday, May 18, 2020, 4:15 p.m. Eastern
Time
Domestic:
1-844-407-9500
International:
1-862-298-0850
Replay dial in – Available through June
18, 2020
Domestic:
1-877-481-4010
International:
1-919-882-2331
Replay ID:
34790
Webcast Replay link – available through
June 18, 2020:
https://www.webcaster4.com/Webcast/Page/2206/34790
About cbdMD, Inc.
cbdMD, Inc. is a nationally recognized consumer cannabidiol
(CBD) brand whose current products include CBD tinctures, CBD
capsules, CBD gummies, CBD topicals, CBD bath bombs, and CBD pet
products. cbdMD is also a proud partner of Bellator MMA and Life
Time, Inc., and has one of the largest rosters of professional
sports athletes who are part of “Team cbdMD.” To learn more about
cbdMD and our comprehensive line of over 100 SKUs of U.S. produced,
THC-free1 CBD products, please visit www.cbdMD.com, follow cbdMD on
Instagram and Facebook, or visit one of the 4,000 retail outlets
that carry cbdMD 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 by the use of 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 and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements,
including, without limitation, statements made with respect to the
expansion of the consumer market for CBD products and our ability
to increase our market share, our limited operating history, our
ability to expand our business and significantly increase our
revenues, our ability to effectively leverage our brand
partnerships and sponsorships, our ability to effectively compete
in our market, our ability to achieve our net sales guidance, and
our ability to report profitable operations in the future. You are
urged to carefully review and consider any cautionary statements
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, 2019 as filed with the
Securities and Exchange Commission (the "SEC") 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
valid scientific analytical tools.
cbdMD, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
MARCH 31, 2020 AND SEPTEMBER
30, 2019
(Unaudited)
March 31,
September 30,
2020
2019
Assets
Current assets:
Cash and cash equivalents
$
14,835,699
$
4,689,966
Accounts receivable
662,531
1,425,697
Accounts receivable other
-
160,137
Accounts receivable – discontinued
operations
791,998
1,080,000
Marketable securities
83,375
198,538
Investment other securities
-
600,000
Deposits
28,365
6,850
Merchant reserve
280,322
519,569
Inventory
6,571,696
4,301,586
Inventory prepaid
517,309
903,458
Deferred issuance costs
-
93,954
Prepaid software
167,852
206,587
Prepaid equipment deposits
115,555
868,589
Prepaid expenses and other current
assets
830,565
688,104
Total current assets
24,885,267
15,743,035
Other assets:
Property and equipment, net
3,224,446
1,715,557
Operating lease assets
7,413,256
-
Deposits for facilities
755,383
754,533
Intangible assets, net
21,635,000
21,635,000
Goodwill
54,669,997
54,669,997
Total other assets
87,698,082
78,775,087
Total assets
$
112,583,349
$
94,518,122
cbdMD, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
MARCH 31, 2020 AND SEPTEMBER
30, 2019
(continued)
(Unaudited)
March 31,
September 30,
2020
2019
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable
$
3,506,663
$
3,021,271
Accrued expenses
1,044,992
681,269
Operating leases – short term
liabilities
1,076,907
-
Note payable
163,858
-
Customer deposit – related party
-
7,339
Total current liabilities
5,792,420
3,709,878
Long term liabilities:
Long term liabilities
-
363,960
Note payable
205,732
-
Operating leases - long term
liabilities
6,607,553
-
Contingent liability
7,820,000
50,600,000
Deferred tax liability
-
2,240,300
Total long term liabilities
14,633,285
53,204,260
Total liabilities
20,425,705
56,914,138
cbdMD, Inc. shareholders' equity:
Preferred stock, authorized 50,000,000
shares, $0.001 par value, 500,000 and 0 shares issued and
outstanding, respectively
500
-
Common stock, authorized 150,000,000
shares, $0.001 par value, 51,335,648 and 27,720,356 shares issued
and outstanding, respectively
51,336
27,720
Additional paid in capital
124,082,811
97,186,524
Accumulated deficit
(31,977,003
)
(59,610,260
)
Total cbdMD, Inc. shareholders'
equity
92,157,644
37,603,984
Total liabilities and shareholders'
equity
$
112,583,349
$
94,518,122
cbdMD, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS
ENDED MARCH 31, 2020 AND 2019
(Unaudited)
Three months
Three months
Six months
Six months
Ended
Ended
Ended
Ended
March 31,
2020
March 31,
2019
March 31,
2020
March 31,
2019
Total Gross Sales
$
9,703,800
$
7,752,478
$
20,116,291
$
8,436,207
Allowances
(304,764
)
(2,115,900
)
(569,019
)
(2,333,942
)
Total Net Sales
9,399,036
5,636,578
19,547,272
6,102,265
Cost of sales
2,732,076
1,914,716
6,432,613
2,080,027
Gross Profit
6,666,960
3,721,862
13,114,659
4,022,238
Operating expenses
12,267,637
5,749,463
24,827,934
7,141,274
Income (Loss) from
operations
(5,600,677
)
(2,027,601
)
(11,713,275
)
(3,119,036
)
Realized and Unrealized gain (loss) on
marketable securities
(53,152
)
9,524
(115,162
)
(64,640
)
Impairment on investment other
securities
(600,000
)
-
(600,000
)
-
Impairment accounts receivable other
(160,000
)
-
(160,000
)
-
(Increase) decrease on contingent
liability
21,261,994
(30,914,074
)
38,160,000
(30,914,074
)
Interest income
35,607
6,274
42,875
43,959
Income (loss) before provision for
income taxes
14,883,772
(32,925,877
)
25,614,438
(34,053,791
)
Benefit for income taxes
-
1,075,000
2,240,300
1,208,000
Net Income (Loss) from continuing
operations
14,883,772
(31,850,877
)
27,854,738
(32,845,791
)
Net Income (Loss) from discontinued
operations, net of tax (Note 15)
-
603
(41,202)
(1,193,345
)
Net Income (Loss)
14,883,772
(31,850,274
)
27,813,536
(34,039,136
)
Net (Loss) attributable to noncontrolling
interest
-
(58,536
)
-
(137,685
)
Preferred dividends
100,016
-
166,750
-
Net Income (Loss) attributable to
cbdMD, Inc. common shareholders
$
14,783,756
$
(31,791,738
)
$
27,646,786
$
(33,901,451
)
Net Income (Loss) per share:
Basic earnings per share
$
0.41
$
(3.13)
$
0.76
$
(3.35)
Diluted earnings per share
$
0.40
$
-
$
0.74
$
-
Weighted average number of shares
Basic:
36,503,005
10,160,947
36,503,005
10,107,144
Weighted average number of shares
Diluted:
37,336,505
10,160,947
37,336,505
10,107,144
cbdMD, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS
ENDED MARCH 31, 2020 AND 2019
(Unaudited)
Three months
Three months
Six months
Six months
Ended
Ended
Ended
Ended
March 31,
2020
March 31,
2019
March 31,
2020
March 31,
2019
Net Income (Loss)
$
14,883,772
$
(31,850,274
)
$
27,813,536
$
(34,039,136
)
Comprehensive Income (Loss)
14,883,772
(31,850,274
)
27,813,536
(34,039,136
)
Comprehensive Income (loss) attributable
to non-controlling interest
-
(58,536
)
-
(137,685
)
Preferred dividends
(100,016
)
-
(166,750
)
-
Comprehensive Income (Loss)
attributable to cbdMD, Inc. common shareholders
$
14,783,756
$
(31,791,738
)
$
27,646,786
$
(33,901,451
)
cbdMD, INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH
31, 2020 AND 2019
(unaudited)
Six Months Ended March 31,
Six Months Ended March 31,
2020
2019
Cash flows from operating
activities:
Net income (loss)
$
27,813,536
$
(34,039,136
)
Adjustments to reconcile net income
(loss) to net cash used by operating activities:
Stock based compensation
972,225
163,148
Restricted stock expense
138,000
-
Issuance of stock / warrants for
service
28,250
19,313
Impairment on discontinued operations
asset
38,002
-
Depreciation and amortization
287,457
171,356
Gain on settlement of Note
-
(20,000
)
Other than temporary impairment other
securities and other accounts receivable
760,000
-
Increase/(Decrease) in contingent
liability
(38,160,000
)
30,914,074
Realized and unrealized loss of marketable
securities
115,162
1,207,617
Non-cash lease expense
585,020
-
Merchant reserve settlement
132,657
-
Non-cash consideration received for
services
-
(470,000
)
Changes in operating assets and
liabilities:
Accounts receivable
763,303
32,156
Accounts receivable – related party
-
204,902
Other accounts receivable
-
(137,043
)
Note receivable
-
(18,000
)
Note receivable – related party
-
156,147
Deposits
(22,365
)
-
Merchant reserve
106,590
(199,907
)
Inventory
(2,270,110
)
(1,194,186
)
Prepaid inventory
386,149
-
Prepaid expenses and other current
assets
649,308
168,041
Marketable securities
-
440,211
Accounts payable and accrued expenses
849,113
43,076
Accounts payable and accrued expenses –
related party
-
(393,016
)
Operating lease liability
(496,834
)
-
Note payable
175,124
-
Deferred revenue / customer deposits
(7,339
)
(303,125
)
Cash provided by discontinued
operations
250,000
-
Deferred tax liability
(2,240,300
)
(1,208,000
)
Cash used by operating activities
(9,147,052
)
(4,462,372
)
Cash flows from investing
activities:
Net cash used for merger
-
(1,177,867
)
Purchase of intangible assets
-
(79,999
)
Purchase of property and equipment
(1,796,346
)
(102,204
)
Cash used by investing activities
(1,796,346
)
(1,360,070
)
Cash flows from financing
activities:
Proceeds from issuance of common stock
16,771,756
6,356,997
Proceeds from issuance of preferred
stock
4,421,928
-
Preferred dividend distribution
(166,750
)
-
Deferred issuance costs
62,197
(177,521
)
Cash provided by financing activities
21,089,131
6,179,476
Net increase (decrease) in cash
10,145,733
357,034
Cash and cash equivalents, beginning of
period
4,689,966
4,282,553
Cash and cash equivalents, end of
period
$
14,835,699
$
4,639,587
cbdMD, INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH
31, 2020 AND 2019
(unaudited) (continued)
Supplemental Disclosures of Cash Flow
Information:
Six Months ended March 31,
Six Months Ended March 31,
2020
2019
Cash Payments for:
Interest expense
$
17,097
$
23,938
Non-cash financial activities:
Warrants issued to secondary selling
agent
$
524,113
$
86,092
Stock received for prior period services,
adjusted for other accounts receivable write down prior to
receipt
$
-
$
1,352,000
Adoption of ASU 2016-01
$
-
$
2,512,539
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200518005199/en/
Investors: John Weston Director of Investor Relations
john.weston@cbdmd.com 704-249-9515
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