cbdMD(US:YCBD)2025-05-15 21:20Financial Data and Key Metrics Changes - Total net sales for Q2 2025 were $4.7 million, representing an 8.6% increase year-over-year but a 7.9% decrease from Q1 2025 [13] - Gross profit margin remained healthy at 62% for Q2 2025, despite increased warehouse rent and one-time CAM costs [14] - SG&A expenses decreased to $3.5 million in Q2 2025 from $4.1 million in the prior year, primarily due to reductions in payroll and professional fees [15] - The net loss for Q2 2025 was approximately $480,000, significantly improved from a loss of $3 million in Q2 2024 [15] Business Line Data and Key Metrics Changes - E-commerce direct-to-consumer sales were flat year-over-year at $3.6 million, accounting for 77% of total net sales in Q2 2025, down from 83% in the prior year [13] - Wholesale revenue increased by 22% to $1.1 million in Q2 2025 compared to $750,000 in Q2 2024 [14] - The company is focusing on three revenue growth priorities: enhancing direct-to-consumer business, expanding wholesale, and scaling the Herbal Oasis brand [8][10] Market Data and Key Metrics Changes - The THC seltzer category is experiencing significant growth, with sales projected to exceed $4 billion by 2028 [10] - The company is tracking active legislation in over 23 states, which is crucial for the long-term success of the THC seltzer category [11] Company Strategy and Development Direction - The company aims to drive revenue growth and achieve profitability while resolving its capital structure [5] - The successful conversion of Series A preferred stock and the reverse stock split are seen as major milestones for long-term positioning [6] - The company is exploring strategic opportunities, including M&A, to expand into new categories and customer segments [19][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to regulatory changes and emphasized a commitment to profitable growth in 2025 [19][21] - The company believes it is in a stronger position than many public peers, with no debt and a low cash burn rate [21] - Management is optimistic about the potential contributions from the Herbal Oasis brand in the latter half of 2025 [30] Other Important Information - The company has approximately $1.7 million in cash and cash equivalents, with a working capital deficit of $3.7 million as of March 31, 2025 [16] - The capital restructuring has simplified the capital structure, making the stock more investable and increasing interest from potential investors [20] Q&A Session Summary Question: Expansion plans for Herbal Oasis brand - Management indicated that discussions with distributors began in December, and shipments have started, with expectations for growth contributions by the end of 2025 [25][30] Question: Impact of preferred to common equity conversion on strategy - The conversion enhances financial flexibility and positions the company to maintain its NYSE listing, allowing for potential strategic investments [31][33] Question: Working capital situation and cash burn outlook - Management remains comfortable with the liquidity outlook through the end of fiscal 2026, aiming for improved cash generation [39][40] Question: Types of strategic activities being considered - The company is looking for opportunities that provide cost synergies and customer overlap, both within and outside the cannabinoid space [42][44] Question: Financial performance metrics for Herbal Oasis - Revenue impact from Herbal Oasis was minimal in Q2 but is expected to pick up in Q3, with a focus on volume contribution [45]