Full Transcript: cbdMD Q2 2026 Earnings Call

cbdMD (AMEX:YCBD) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation. The full earnings call is available at https://app.webinar.net/PGD52PJopeq Summary cbdMD Inc reported net sales of $5.6 million for Q2 2026, marking a 19% year-over-year increase and a 12% sequential increase from Q1 2026, with core business growth despite the acquisition of Bluebird Botanicals. The company is focusing on strategic initiatives such as expanding its Direct to Consumer and wholesale channels, integrating Bluebird Botanicals, and entering the CMS Substance Access Pathway for hemp-derived products, which poses long-term growth potential. Management highlighted regulatory challenges at the state level as a headwind, but is actively engaging in federal legislative efforts to create a stable regulatory framework for hemp products. The acquisition of Bluebird Botanicals is expected to become a positive contributor to both revenue and earnings in the coming quarters as integration progresses. cbdMD Inc continues to implement cost discipline and operational flexibility to manage compliance costs and aims for sustainable profitability, with a focus on improving margins and leveraging its improved balance sheet. Full Transcript OPERATOR Good Afternoon. Welcome to cbdMD Inc.'s March 31, 2026 second fiscal quarter of 2026 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@cbdmd.com In accordance with cbdMD's retention policies, all participants on this call will be in a listen only mode. The call will be followed by a question and answer session. At this time I would like to turn the conference over to Brad Whitford, the Company's Chief Accounting Officer. Brad, please go ahead. Brad Whitford (Chief Accounting Officer) Thank you Audra and thank you all for joining cbdMD's March 31, 2026 second quarter of fiscal 2026 earnings call and Update on the call today, we also have Ronan Kennedy, our Chief Executive Officer and Chief Financial Officer. We'd like to remind everyone that various remarks about future expectations, plans and prospects constitute forward looking statements for purposes of the 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 that may cause our actual results to differ materially from those indicated, including risks described in the Company's Annual report on Form 10-K for the second quarter ended March 31, 2026 and our other filings with the SEC, all of which can be reviewed on the company's website at cbdmd.com or on the SEC's website at sec.gov. any forward looking statements made on this conference call speak only as of today's date, Thursday, May 14, 2026 and cbdMD does not intend to update any of these forward looking statements to reflect events or circumstances that would occur after today's date except as may be required by federal securities laws. With that, I'd like to turn the call over to Ronan Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Good afternoon everyone and thank you for joining us. The second quarter of fiscal 2026 was another step forward for cbdMD and one of the most active quarters we've had in years, both operationally and across the regulatory landscape we operate in. Let me start with the headline. We delivered another consecutive quarter of sequential revenue growth with net sales of 5.6 million. That's up 19% year over year and 12% sequentially from the first quarter of 2026. Importantly, that growth was not solely driven by our acquisition of Bluebird Botanicals. Excluding Bluebird, our core business grew approximately half a million dollars versus the prior year and approximately 300,000 sequentially. And even excluding Bluebird, our core revenue this quarter was the highest quarterly revenue we've generated since our first fiscal quarter in 2024, the December 2023 quarter. That continued core growth quarter after quarter is the most important indicator that the reset work we've done over the past several years is showing through in results. From a channel perspective, Direct to Consumer remained our largest channel at approximately 67% of revenue with wholesale growing to 33% of revenue. Wholesale was up 65% year over year. Reflective Continued execution in our core cbdMD brand and ongoing progress with our Oasis THC Beverage brand. In mid January we closed our acquisition of the assets of Bluebird Botanicals, respected and long standing CBD brand. This is our first acquisition in years, made possible by the work we've done to repair the balance sheet and regain full NYSE American continued listing compliance. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) As expected, the acquisition was a drag on earnings during the second quarter where we absorbed transition costs and integration expenses without the full benefit of a full quarter of Bluebird revenue. That said, Bluebird turned the corner in March and began generating positive contribution and we expect to flip that into positive for both top line earnings and earnings in the third quarter as we roll out additional products and capture costs and revenue synergies. Beyond the numbers. Bluebird is strategically important as it adds loyal customer base, broadens our portfolio beyond just our core cbdMD brand, and brings GRAS status for full spectrum CBD that complements the safety and clinical data we already have on our THC free broad spectrum formulations. We believe this transaction is a useful case study for the kind of disciplined accretive M&A we can execute, and we continue to evaluate additional opportunities across hemp and adjacent health and wellness categories where our Infrastructure, Marketing, Engineering and NYSE American listing can unlock value. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) The regulatory backdrop has shifted more in the last few months than in any period I can remember. We've seen multiple bipartisan legislative proposals introduced to address the restrictive hemp language in HR5371, the partial rescheduling of cannabis to Schedule 3 in late April, and most directly relevant to us, the April 1 activation of the CMS Substance Access Beneficiary Engagement Incentive, the first federally supported pathway for hemp derived CBD products in Medicare. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) We've been preparing for this opportunity for some time. During the quarter we made deliberate decisions to accelerate our entry into the CMS Substance Access Pathway, moving ahead of our original fiscal 2026 plan because the window to establish a position is now open. That acceleration carried some near term costs and and is reflected in our P and L this quarter. We made the investment with our eyes open because the size of the opportunity justifies it. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) We stood up a dedicated clinical and healthcare channel built specifically for this pathway. We're in active conversations with ACOs and others to execute on this pathway. We're deepening the clinical evidence base behind our products because in this channel the science is what unlocks the market. This is not a near term revenue story. We expect the early phase of the BEI to be implementation led with provider adoption developing over the course of the next 12 to 18 months. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) But we believe the long term opportunity is significant and we believe cbdMD's years of investment in manufacturing quality, safety and clinical research positions the company as a trusted evidence based supplier of choice as this channel develops on the federal legislative front, we continue to actively support bipartisan efforts to establish a workable federal framework for hemp, including the Hemp act, the Cannabinoid Safety and Regulation act, the Hemp Planting Predictability act and its Senate companion. We're engaged constructively with industry organizations, policymakers, including time on Capitol Hill making the case for sensible science based regulation. Our view is straightforward. As regulatory clarity emerges, it favors operators built for it, well capitalized, compliance focused with the strong quality, safety and clinical standards this market will require. That is this company we built. On the state side, volatility has been a genuine headwind. Changing rules across multiple states has driven ongoing packaging changes, repacking costs and new testing requirements, each carrying real expenses and creating confusion at the customer level. Just as significantly, shifting state restrictions continues to narrow what products we can sell and where we can sell them. We expect that the environment to persist and we're managing through it operationally, but it's worth flagging as a structural cost of operating in this category today. And frankly, it's part of what makes the federal pathway we've been describing so strategically important. With that, I'll turn the call back over to Brad to walk through the financials. Brad Whitford (Chief Accounting Officer) Thanks, Renan. Turning to the Financials for the second quarter of fiscal 2026, net sales increased to 5.6 million or 19% increase as compared to 4.7 million in the prior year period and increased 12% sequentially from the first quarter of fiscal 2026. Excluding Bluebird, net sales increased 500,000 as compared to a quarter and 300,000 sequentially. Gross margin totaled 58% for the quarter, down from 62% over prior year. This is mostly attributable to a shift in revenue mix to more wholesale including Oasis. Wholesale was 33% of total sales versus 23% of total sales in the prior year quarter. Along with incremental costs related to changes in state level requirements causing additional repacking and new testing requirements, we're continuing to analyze our pricing, product mix and supply chain and are implementing initiatives to enhance product quality and documentation, improve formulas and improve our gross margins going forward. Loss from operations was approximately 801,000 compared to a loss of 486,000 in the prior year period. Excluding a one time non cash stock vesting was 405,000. Net loss attributable to common shareholders was approximately 876,000 or $0.08 per share compared to a net loss of approximately 1.4 million or $1.90 per share in the prior year quarter. As with last quarter, this was a substantial improvement on a per share basis. As mentioned on our prior quarter call, this improvement was primarily driven by the elimination of our Series A preferred dividend during fiscal 2025 and the resulting conversion of the Series A into common stock. Adjusted non GAAP EBITDA loss for the quarter totaled $220,000 and was driven by added payroll and other expenses related to the Bluebird acquisition. Without the benefit of a full quarter of Bluebird revenue and the strategic decision to allocate dollars toward the CMS program, which was not originally in the budget, however, is important to driving it is important to drive this initiative forward. Cash used in operating activities was approximately 723,000 and reflects a build of accounts receivable of approximately 435,000 tied to revenue growth and wholesale term customers. As that becomes a larger part of our sales mix, coupled with an incremental 240,000 inventory build excluding inventory acquired in the transaction to support the growth of the overall business, we remain encouraged by the momentum across the business and the continued growth in revenue. At the same time, we are maintaining a disciplined approach to expense management and operational efficiency as we focus on improving margins and driving sustainable profitability. With that, I'll turn the call back over to Ronan. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Thanks Brad. Stepping back, I want to leave you with a few thoughts on how we're thinking about the rest of fiscal 2026. First, on the core business. Several consecutive quarters of sequential growth with our highest core quarterly revenue since December 2023 tells us the underlying business is healthier than it's been in some time. We're going to keep pushing on that high velocity SKUs, disciplined customer acquisition and and ongoing wholesale expansion across cbdMD, PAW, CBD Oasis and Bloober. Second, on Bloober, we expect the acquisition to flip from earnings drag in the second quarter to a positive contributor in the third quarter on both revenue and earnings as integration completes and synergies come through. Bluebird also reinforces our M&A thesis. We believe there's a real opportunity to consolidate quality assets in this fragmented category and we will continue to evaluate disciplined accretive opportunities. Third, on the medical pathway, the investment we made this quarter and through the balance of the year to redirect resources toward the CMS BEI program is a deliberate strategic choice. We accepted near term earnings pressure because we believe the long term opportunity is meaningful because the window to establish provider relationships and clinical credibility is open now. We are going to continue investing through thoughtfully in that channel through the back half of 2026 with the expectation that adoption and contribution build over time than rather overnight. Fourth, on the regulatory and state level environment, we'll continue to engage constructively in Washington on sensible hemp regulation and we'll continue to manage through the minefield of state level changes along with the compliance costs that come with operating in this category today. Neither of those are going away in the near term and we are building the cost discipline and operational flexibility to absorb them. Alongside that engagement in Washington we continue to invest in contingency planning and product iteration ahead of the November 2026 effective date of the Act. We are working through multiple scenarios including reformulation pathways, new ingredients, packaging and labeling adjustments, channel mix shifts and supply chain flexibility so that we are positioned to navigate whatever regulatory outcomes emerge, whether it is the act taking effect as written, a delay or comprehensive replacement framework. We don't know today which scenario will play out, but we are determined to be prepared for each of them. And finally, on the balance sheet, the work we've done to repair the capital structure return to NYSE American continued listing compliance and put financial tools like the E lock in place give us the flexibility to execute deliberately. We believe we have a meaningful long term Runway and we intend to use that money to invest where it counts. This was a quarter where we delivered another period of growth in our core business, completed and began integrating our first acquisition in the years and made deliberate investments ahead of what we believe is meaningful long term opportunity and Medicare. The foundation we've built over the past several years is showing through and we believe cbdMD is entering the second half of 2026 on firmer footing than at any point in recent memory. I want to thank our employees, partners and shareholders for their continued support. With that, I'm now happy to take questions. OPERATOR Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press star one again. We'll take our first question from Adam Waldo at Lismore Partners. Adam Waldo Good afternoon, Ronan and Brad. I hope you can hear me okay. Yes. Hey, Adam, how are you? Very well, Ronan. A lot of exciting things on the plate for you guys. In that vein, how are you all thinking of? Let's start out sort of a high level here in the quarter descent of the March quarter. How much of that? Call it almost 11% organic revenue growth was attributable to herbal oasis versus the core CBD businesses. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) It was split, Adam. We had some growth of some of the core, but a, you know, we'll call it a reasonable amount of that was from the Oasis side of the business as well. Adam Waldo Okay. And I haven't had a chance to look at the queue yet. Will there be more granularity in the Q in terms of the impact Herbal Oasis is having or is it not material yet and do you think you'll start to report later in the year, in the fiscal year as it might become more material? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) We have not segregated out that category yet and we'll continue to evaluate sort of segmentation as we move through the year and see continued growth there. Adam Waldo Okay. And given just high level, very dynamic regulatory environment, obviously, and a lot of potential growth opportunities coming to fruition here all at once while improved the balance sheet and liquidity profile. Leave me wondering how you expect to use the balance sheet and liquidity profile to support those growth opportunities in the coming several quarters? I mean, you burned about a little over 700,000 of cash in the March quarter, just under a million in the December quarter. On the other hand, you have about 2.6 million on the balance sheet in terms of cash at the end of the March quarter. And you have obviously the equity facility, common equity facility out there in the, in the market. Any commentary about sort of how you see the liquidity Runway and support there for all the growth opportunities you have ahead of you? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Yes, sure. Look, I think we made some inventory investments ahead of sort of the growth. So I think we're in a pretty good position there. We're continuing to evaluate some SKUs and some consolidation. We'll continue to work on lowering the cost of some of those as well. So we expect on a go forward to not have such a to be a little bit more efficient from an inventory standpoint as we move forward. And then given some of the steps that we've taken during this quarter, our anticipation is the cash burn is our EBITDA should improve and not have the same working capital build requirements that we've had in the last two quarters. Adam Waldo Okay, last one, if you'll permit me. At the annual shareholders meeting on March 30, the reverse stock split proposal three passed. It obviously calls for a 2 to 1 to 10 to 1 reverse split to be implemented within a year of the annual meeting. We're six weeks from the annual meeting. The reverse split hasn't been implemented yet. What update can you give on sort of the remaining milestones to implement and any expectation you have for the timeline to implement it? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Adam, we put that in more sort of a protection just knowing that we could have a. The markets are incredibly volatile right now with not only our category but with global economic events. And I think as we outlined in the proposal, there was not a current need or a plan to execute that on that. It was more in the event that it is needed over the next year, we have that available as a tool so we can react quickly should something happen. I believe the NYC is also making some changes to slightly increase their sort of minimum share price under the nyse. So right now there is no plan to execute a reverse. It is more sort of to make sure we have it available and can react quickly rather than have to go out and proxy shareholders. Adam Waldo Okay, if you don't mind my following up on that. But more and more broker dealers are not permitting trading in stocks under a dollar share price, in some cases under $5 even if you're listed on the NYSE or NYSE American. So does that color your thinking at all as to kind of the urgency to implement the reverse stock split? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Look, it's something we are continuing to evaluate and we'll continue to do so during the balance of the year. Adam Waldo Okay, fair enough. Thank you very much. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Okay, thanks Adam. OPERATOR We'll move next to Tom McGovern at maximum. Tom McGovern Hey guys, thanks for taking the questions here. First one's just on Bluebird Botanicals. Right. So obviously still kind of working there but wondering if we can get an update on where you guys stand in terms of realizing some supply chain or shared service synergies. Then a follow up to that is just have you seen already any key performance indicators (KPIs) that would indicate that you've seen some strong cross selling or that, you know, you're bringing in additional customers. And just kind of finally on that front, do you expect Bluebird Botanical to be accretive to the bottom line in the fiscal third quarter once you guys have a, you know, a full quarter of operation under your belts? Thanks. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Yeah, Thomas. Look, we, you know, during the quarter we incurred sort of the transaction costs that were buried in there as well as I think there was some other professional sort of just transition expenses as we made this change. Also, it sort of took us a little bit, a little bit longer to get some of the marketing ramped up. So we, you know, we believe we're pretty much fully integrated. Had a good March, had a very strong April with the brand. We're realizing some of the synergies already across the team and we've started to integrate more of the supply chain and have been leveraging some of the product portfolio and that's been so far well received by that customer base. Tom McGovern Understood. But it'd be correct to say that you guys are still in the process of maybe looking at potential SKU overlap. We could expect to see potential rationalization of certain SKUs or have you guys kind of gone through that process already? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Yeah, look, we have, we're working, you know, we're managing some of that through kind of inventory sell through. So, you know, it will continue to evolve over the year in ordinary course as we look to sort of make sure we can, you know, make transitions through inventory and minimize any sort of inventory impairments as we make this transition. But, you know, we are seeing that to start the quarter, it's off to a good quarter, a profitable quarter that should contribute to the bottom line. Tom McGovern Got it. I appreciate that. Color. Next question is on the BEI channel. Obviously it seems like a very exciting opportunity. You indicated that it's not necessarily a near term opportunity, but I was wondering if we could dig in a little bit deeper on what are the next steps for this initiative? What are some of the key challenges you're going to face when trying to execute on this initiative? And if you look at the timeline, maybe just high level, when you think this could translate to, you know, material growth or meaningful contribution to your top line. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Great, great questions. Look, this is. While I think there's a lot of excitement, it's still laid out in a way where, you know, I guess I'll say our healthcare system is a complicated system and there's a lot of rules and regs that continue to have to be navigated. I think there's also, given the way it was rolled out, we have to prove that there's also economic benefit for the participants, for them to really be excited about the category. So there's a lot of work still on educating these groups around the science, the safety, you know, you're selling into a medical community that perhaps, you know, this was not necessarily on their radar and they're not fully aware of the category. So there's still a lot of education that has to occur. And then there's ongoing science and validation to help, you know, provide that, you know, hemp products can truly be a alternative that provides a strong care for the patient and can justify the economic expense around it. So that's kind of big picture, kind of what's going on across the industry. So there's a lot of work and focus to, you know, develop the relationships with the key parties and continue to invest in science and programs that will help justify our products as a valued solution in our healthcare system. Tom McGovern Great, that makes sense. Now, looking at the statewide regulations, you discussed them again this quarter as a meaningful headwind. Right. So as we unpack that and just understand that there's no control just on your level in terms of talking to these guys and saying, hey, look, this is how we see the best way forward. I know that you guys have done everything you can to position yourselves as a reliable and science backed brand. But just curious, how are you dealing with these ongoing challenges? Have you guys done anything strategically to position yourself to stay agile in this dynamic market? And then further, can you talk a little bit about which products you're seeing face the most impact from these changing regulations? Can it be confined to a certain set of products category wise, or is it just kind of broad based across the business? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Sure. I'll start with the last question. It's primarily full spectrum products that contain hemp derived delta 9. Where we are seeing maybe more of the bigger impact is on the Oasis side. Perfect example. You know, Alabama was a very good market for us in the December quarter, but effective early January they made a law change that shows that there is a potential pathway, but it was effectively kind of a band for hemp derived products. So that sort of category came to a quick halt in Alabama. So we are trying to look at the landscape, look at where we believe there are friendly environments for our category and get as close as we can to key constituents in that state and work with not only our customers and distributors, but make sure that as rules come out, we're working very closely with the states to ensure that sort of our products meet the requirements that they're rolling out. And I think where we are trying to sort of position ourselves is making sure that we're staying nimble on the supply chain and our inventory to ensure that sort of we can react quick, as quickly and as efficiently as possible. If there's a label change in other states, there's scenarios where they might require some label changes. And it's not a ban, but product has to be redone, repacked in order to sort of be compliant in the markets. Tom McGovern Understood. I appreciate all the clarity. I'll hop out of here. But congrats on the quarter and a lot of exciting stuff ahead of you guys. Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Thank you. OPERATOR And we'll go back to Adam Waldo at Lismore Partners. Adam Waldo I just want to follow up, if you don't mind. I'm going to take you through admittedly a simplistic logic string here, but I'm trying to think about sort of incremental free cash flow (FCF) margins on sales as you scale going forward. Your gross margins are in the call it low to mid-50s, depending on the quarter. I think I have a decent sense for how the inventory build's going to go now, but it's a little tough to get my arms around quarter to quarter. But would it be reasonable to think about kind of a free cash flow (FCF) margin on revenue in the 30% range here or a little higher as we go forward, or is that not really in the ballpark? And if it is in the ballpark, then are we looking at kind of a low 7 million quarterly revenue to be comfortably free cash flow (FCF) positive? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Adam, our modeling is a much lower break even top line. So, you know, keep in mind we had, we had some one time kind of expenses tied to transaction here this quarter and then so I would say that the incremental is probably a little higher than you outlined. Without trying to get commit to a specific figure that I've got to stay in going forward. Adam Waldo Right, right. Okay. So as you all model it out, you feel your break even level of quarterly revenue is south of 7 million a quarter by a margin of comfort. Is that fair, Ronan, without trying to pin you down too much? Ronan Kennedy (Chief Executive Officer and Chief Financial Officer) Yeah, I mean, I think it should be, you know, well below seven. Adam Waldo Well below seven. Okay, thank you very much. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.