cbdMD(US:YCBD)2025-05-15 21:22Financial Data and Key Metrics Changes - Total net sales for Q2 fiscal 2025 were $4.7 million, representing an 8.6% increase year-over-year but a 7.9% decrease from Q1 [14] - Gross profit margin remained healthy at 62% for Q2 fiscal 2025, despite increased warehouse rent and one-time CAM costs [15] - SG&A expenses decreased to $3.5 million in Q2 fiscal 2025 from $4.1 million in the prior year, primarily due to reductions in payroll and professional fees [15][16] - The net loss for Q2 fiscal 2025 was $480,000, significantly improved from a loss of $3 million in the same quarter of the previous year [16] 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, down from 83% in the prior year [14] - Wholesale revenue increased by 22% to $1.1 million in Q2 fiscal 2025 compared to $750,000 in the same quarter of the previous year [15] Market Data and Key Metrics Changes - The THC seltzer category is experiencing significant growth, with sales projected to exceed $4 billion by 2028, driven by a shift in consumer preferences towards functional social alternatives [11] Company Strategy and Development Direction - The company aims to drive revenue growth and achieve profitability while resolving its capital structure and regaining compliance with NYSE American listing standards [5] - The successful conversion of Series A preferred stock into common stock and the reverse stock split are seen as major milestones that simplify the capital structure and eliminate legacy obligations [6][7] - The company is focused on three revenue growth priorities: enhancing the direct-to-consumer business, expanding the wholesale business, and scaling the Herbal Oasis brand [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to regulatory changes and emphasized the importance of regulatory clarity for the long-term success of the THC seltzer category [12] - The company is committed to delivering profitable growth in 2025 and is evaluating strategic opportunities for mergers and acquisitions [19][20] Other Important Information - The company reported cash and cash equivalents of approximately $1.7 million and a working capital deficit of $3.7 million as of March 31, 2025 [17] - The company invested approximately $400,000 in inventory during the quarter to bolster key SKUs and support the rollout of the Herbal Oasis brand [18] Q&A Session Summary Question: Update on Herbal Oasis brand expansion - Management indicated that discussions with distributors began in December, with shipments starting in March and April, and further expansion into Charlotte announced in May [25][30] Question: Expectations for Herbal Oasis as a growth driver - Management expects to see contributions from the Herbal Oasis brand toward the end of 2025, with potential for material impact on top-line revenue [30] Question: Impact of preferred to common stock conversion on strategy - The conversion enhances financial flexibility and positions the company to maintain its NYSE listing, allowing for strategic investments and M&A opportunities [31][33] Question: Working capital and cash burn outlook - Management remains comfortable with the liquidity outlook through the end of fiscal 2026, despite recent cash burn trends [39][40] Question: Types of strategic activities being considered - Management is looking for opportunities that provide cost synergies and customer overlap, both within and outside the cannabinoid space [42][44]