cbdMD, Inc. (YCBD) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a mixed picture: improved operating results and gross margin are positive, but declining e-commerce sales and marketing inefficiencies are concerning. The Q&A section reveals cautious optimism about regulatory developments but lacks clarity on strategic plans. While the elimination of preferred dividend obligations and growth in wholesale sales are positives, the company's reliance on equity financing and potential dilution remain concerns. Overall, the sentiment is neutral due to balanced positive and negative aspects, with no clear catalyst for a strong stock price movement in either direction.

Key Financial Performance

Operating Loss Reduced by $1.2 million to approximately $2.1 million loss in fiscal 2025, marking the third straight year of improved operating results. This improvement was driven by disciplined cost control, more efficient marketing spend, supply chain optimization, and tighter focus across core brands.

Adjusted Non-GAAP EBITDA Improved from a $1.7 million loss in 2024 to a $900,000 loss in 2025. Gains were driven by disciplined cost control, efficient marketing, and supply chain optimization.

Net Sales Totaled $19.1 million in fiscal 2025 compared to $19.5 million in 2024, a slight decrease. The decline was attributed to a shift in consumer preference to the hemp beverage category.

E-commerce Sales Generated $14.7 million in fiscal 2025 compared to $15.7 million in 2024, a 6% decrease. The decline was tied to a shift in consumer preference to the hemp beverage category.

Wholesale Sales Generated $4.5 million in fiscal 2025 compared to $3.8 million in 2024, an increase of 18%. This growth was despite ongoing state-level regulatory changes.

Gross Margin Improved to 63% in fiscal 2025 from 62% in 2024. The improvement was due to better cost management and SKU rationalization.

SG&A Expenses Dropped by $1.2 million from $15.3 million in 2024 to $14.1 million in 2025. The reduction was due to cost-saving measures.

Cash and Cash Equivalents Approximately $2.2 million as of September 30, 2025, with working capital improving to $3.3 million from negative $1 million in 2024. The improvement was driven by the elimination of accrued preferred dividends and proceeds from Series B preferred stock sales.

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Operating Highlights

New Beverage Brand - Oasis: Invested in growing a new beverage brand, Oasis, which positions cbdMD in the functional alcohol alternative beverage market. Distribution has expanded to 9 states, with additional markets under evaluation.

Market Expansion for Oasis: Oasis is now distributed across 9 states, including North Carolina, Florida, Alabama, Texas, Tennessee, Georgia, South Carolina, and Minnesota, with additional markets under evaluation.

Operating Loss Reduction: Reduced operating loss by $1.2 million to approximately $2.1 million in fiscal 2025, marking the third consecutive year of improved operating results.

Adjusted Non-GAAP EBITDA Improvement: Improved adjusted non-GAAP EBITDA from a $1.7 million loss in 2024 to a $900,000 loss in 2025.

Cost Control and Efficiency: Achieved gains through disciplined cost control, efficient marketing spend, supply chain optimization, and tighter focus on core brands.

Balance Sheet Strengthening: Increased net book value from under $2 million to over $7 million, eliminated over $7 million in annual accrued preferred dividend obligations, and improved working capital materially year-over-year.

Regulatory Positioning: Focused on THC-free and broad-spectrum CBD products, cGMP manufacturing, rigorous testing, and compliance to benefit from evolving regulatory clarity.

Strategic Opportunities: Engaging with strategic opportunities to add revenue, contribution dollars, and bolster product offerings.

Federal Policy Evolution: White House executive order signals modernization of federal cannabis policy, including rescheduling cannabis and exploring Medicare reimbursement pathways for hemp-derived CBD products.

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Risk or Challenges

Regulatory Volatility: Ongoing state-level regulatory changes and federal uncertainty, including restrictive hemp language in H.R. 5371, could impact operations and market dynamics.

Financial Performance: Despite improvements, the company still reported a $2.1 million operating loss for fiscal 2025, indicating ongoing financial challenges.

E-commerce Sales Decline: E-commerce sales decreased by 6% year-over-year, reflecting a shift in consumer preferences and potential challenges in maintaining direct-to-consumer revenue.

Warehouse Lease Costs: Increased warehouse lease costs contributed to higher operating losses in the fourth quarter of fiscal 2025.

Marketing Spend Efficiency: Marketing spend as a percentage of direct-to-consumer revenue increased to 30% from 27%, indicating potential inefficiencies in marketing strategies.

Inventory Write-offs: The company wrote off $113,000 in legacy inventory during the fourth quarter, highlighting challenges in inventory management.

Capital Structure Complexity: While improvements were made, the company’s reliance on equity financing and the potential for dilution remain concerns.

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Guidance & Outlook

Revenue Growth: The company aims to scale its Oasis beverage brand responsibly as distribution matures, focusing on high-growth beverage categories and shifting consumer preferences.

Regulatory Environment: The company is optimistic about evolving federal cannabis policy, including potential Medicare reimbursement pathways for legal full-spectrum hemp-derived CBD products. This could significantly increase demand for quality CBD products.

Capital Flexibility: cbdMD has established a $20 million equity line of credit with minimal fees, providing flexibility to raise capital under favorable market conditions.

Operational Efficiency: The company plans to drive efficient, profitable direct-to-consumer (D2C) growth through disciplined marketing execution and cost control measures.

Strategic Opportunities: cbdMD is exploring strategic opportunities to add revenue, enhance product offerings, and strengthen its position in the market.

Market Trends: The company is focusing on functional alcohol alternatives and high-margin, high-velocity products to align with shifting consumer preferences.

Financial Performance: The company aims to convert its improved financial foundation into better performance in fiscal 2026, leveraging its cleaner balance sheet and lower operating losses.

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Shareholder Return Plan

Accrued Preferred Dividend Obligations: Over $7 million in annual accrued preferred dividend obligations were eliminated.

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Key Q&A

Q:What do you think will be the biggest driver of growth in 2026 among your brands?

A:The company sees opportunities to grow with the core cbdMD brand, which has undergone significant transformation. They also see growth potential in the beverage side, depending on regulatory developments.

Q:Can you explain the year-over-year decline in the direct-to-consumer business?

A:The decline is attributed to organizational changes made in early 2025, which took time to stabilize. The business is now trending slightly up over prior year periods.

Q:Do you have any insight on a possible timeline for Medicare coverage of CBD or hemp-derived products?

A:The company understands that a pilot program may start on April 1, with potential reimbursement of up to $500 per year for CBD products. They are optimistic about regulatory progress but acknowledge the need for smart regulations.

Q:What are your thoughts on the executive order regarding CBD products and its potential impact on your business?

A:The executive order could lead to significant demand for CBD products, with a potential $30 billion Medicare spend. However, the company is cautious and plans to position itself prudently while monitoring regulatory developments.

Q:Was there a typo in the press release regarding Medicare and Medicaid?

A:Yes, there was a typo. The executive order explicitly addresses Medicare, not Medicaid. However, there is potential for expansion to Medicaid in the future.

Q:How are you prioritizing growth investment for fiscal 2026 between the traditional core business and Herbal Oasis?

A:For the next quarter, the focus will be more on the Herbal Oasis side. The company will continuously evaluate regulatory developments to adjust priorities.

Q:What is the fully diluted share count after the Series C preferred closing, and are there any new executive compensation plans?

A:The fully diluted share count is around 8.9 million shares, with additional shares from Series B and C. A new 2025 employee compensation plan has been approved, subject to shareholder vote.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on how they plan to model the potential $30 billion Medicare spend into their business. They also used vague language when discussing contingency plans and regulatory strategies, citing competitive reasons for withholding details.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

YCBD Transcript

cbdMD, Inc. (YCBD) Q4 2025 Earnings Call Transcript

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The earnings call reveals mixed signals: a slight revenue increase and improved cost structure are positive, but regulatory challenges and liquidity risks temper optimism. The new product expansion and capital structure improvements could yield future benefits, yet current financial constraints and market competition pose challenges. Analysts' cautious sentiment in the Q&A further supports a neutral outlook.

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The earnings call presents a mixed picture. Financial performance shows improvement with a revenue increase and reduced losses, but there are concerns like competitive pressures, supply chain issues, and a working capital deficit. The Q&A section reveals optimism about future growth, particularly with Herbal Oasis, and improved capital structure. However, management's vague responses on specific metrics and the working capital deficit pose risks. Considering these factors, the stock price is likely to remain neutral in the short term.

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The earnings call reveals mixed signals: revenue growth, debt-free status, and improved profitability are positive. However, the flat e-commerce sales, competitive pressures, and financial risks temper this optimism. The Q&A section highlights potential growth from Herbal Oasis, but regulatory issues and unclear guidance on financial metrics raise concerns. The conversion of preferred stock aids capital structure, but the impact of accrued dividends and liquidity remains uncertain. Overall, the sentiment is neutral, with no strong catalysts to drive significant stock price movement in the short term.

YCBD Report

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