10-Q: cbdMD Reports First Quarter Fiscal 2025 Results, Achieves Net Income and Positive EBITDA

cbdMD, Inc. reports its first quarter fiscal 2025 results, highlighting net income achievement and positive EBITDA, marking a turning point in the company's financial performance.

Summary

• cbdMD, Inc. reported its financial results for the first quarter of fiscal year 2025, which ended on December 31, 2024.
• The company achieved net income and positive EBITDA for the first time as a public company.
• Net sales totaled $5.1 million, a decrease of 4.9% compared to $5.4 million in the same quarter of the previous year.
• E-commerce sales decreased to $3.95 million from $4.42 million, while wholesale sales increased to $1.16 million from $0.95 million.
• The company's cost of sales was 33.5% of net sales, a slight decrease from 33.8% in the prior year.
• Operating expenses decreased by 26% to $3.49 million, driven by cost-cutting initiatives.
• The company reported a net income of $15,095, a significant improvement from a net loss of $996,501 in the prior year.
• The net loss attributable to common shareholders was $985,406, compared to $1,997,002 in the prior year.
• The company launched a line of hemp-derived, ready-to-drink beverages under the Herbal Oasis line.
• As of February 12, 2025, there were 6,262,833 shares of common stock outstanding.
• The company's goal is to deliver positive earnings through product optimization, cost structure adjustments, and marketing investments.

Sentiment

Score: 7

Explanation: The document presents a mixed sentiment. While the company achieved net income and positive EBITDA, indicating a positive turning point, there are still challenges related to sales decline, working capital deficit, and compliance with NYSE American listing standards. The cost cutting measures are a positive sign, but the overall outlook is cautiously optimistic.

Positives

• The company achieved net income and positive EBITDA for the first time as a public company.
• Operating expenses decreased by 26% due to cost-cutting initiatives.
• Wholesale sales increased, indicating growth in that channel.
• The company launched a new product line, Herbal Oasis, in the growing beverage category.
• The company is focused on product innovation and expanding revenue channels.

Negatives

• Net sales decreased by 4.9% compared to the same quarter last year.
• E-commerce sales decreased, indicating a potential challenge in the direct-to-consumer channel.
• The company has a working capital deficit of $2.8 million.
• The company is not in compliance with an additional NYSE American continued listing standard.

Risks

• The company's ability to continue as a going concern is dependent on improving profitability and acquiring additional funding.
• The company's working capital position may not be sufficient to support daily operations for the next twelve months.
• The company faces the risk of being delisted from the NYSE American if it does not regain compliance with listing standards.
• The company's Series A Preferred Stock and accrued dividends, a liability totaling $5.7 million on December 31, 2024, into shares of Common Stock.

Future Outlook

Management is focused on delivering positive earnings through product optimization, cost structure adjustments, and marketing investments. The company aims to grow in a smart, profitable manner with appropriate cost controls. They are also focused on profitability growing the Company in order to strengthen its balance sheet.

Management Comments

• Management continues to be very focused on our goal of delivering positive earnings through a combination of optimizing our product portfolio, right-sizing our cost structure and investing in marketing that will provide positive return on customer acquisition.
• We remain focused on growing the Company in a smart, profitable manner along with appropriate cost controls.

Industry Context

The company is operating in the CBD and functional mushroom market, which is subject to evolving regulations and consumer preferences. The launch of the Herbal Oasis beverage line indicates a move to capitalize on the growing hemp beverage category.

Comparison to Industry Standards

• It is difficult to compare cbdMD's results directly to industry standards without specific competitor data.
• However, the achievement of net income and positive EBITDA is a positive sign, as many companies in the CBD industry have struggled with profitability.
• The company's focus on product innovation and expanding revenue channels aligns with common strategies in the consumer packaged goods industry.

Stakeholder Impact

• Shareholders may be encouraged by the achievement of net income and positive EBITDA.
• Employees may benefit from the company's improved financial stability.
• Customers may see continued product innovation and availability.
• Suppliers and creditors may have increased confidence in the company's ability to meet its obligations.

Next Steps

• The company is committed to undertaking a transaction or transactions in the future to achieve compliance with the NYSE Americans requirements, including but not limited to seeking shareholder approval to convert its outstanding Series A Preferred Stock and accrued dividends, a liability totaling $5.7 million on December 31, 2024, into shares of Common Stock.
• The company will continue to focus on product innovation, expanding revenue channels, international expansion, and cultivating additional brands.
• The company will continue to pursue cost-saving initiatives and monitor marketing expenses.

Key Dates