Executive Summary

Q3 FY2021 net sales were $10.6M, flat year-over-year but down ~10% sequentially vs Q2, while gross margin remained strong at ~68% and DTC mix was 74% .
GAAP diluted EPS was $0.02, driven primarily by a $6.9M non-cash decrease in contingent liability tied to prior acquisition earnout; non-GAAP adjusted operating loss widened to $5.39M as OpEx rose 40.6% YoY .
Management reduced Q1 FY2022 net sales guidance to $14.9M–$15.5M (from $15.5M–$16.25M) due to vendor production delays on new product launches; gross margin outlook maintained at 65–70% .
Strategic positives included Paw CBD sales up 20.6% YoY, wholesale up 13.7% YoY, NASC certification for Paw CBD, and continued brand/sponsorship momentum (CrossFit, Bellator); cash was $18.9M at quarter-end .

What Went Well and What Went Wrong

What Went Well

Gross margin improved to ~68% (vs ~65% prior-year), with CFO reiterating a 65–70% target driven by category mix and an asset-light model .
Paw CBD net sales grew 20.6% YoY to $1.5M; NASC quality certification secured, which management views as gating for mass retail distribution .
Wholesale net sales increased 13.7% YoY to $2.7M as brick-and-mortar channels reopened, and management cited rising specialty retail opportunities and brand leverage from sponsorships .

“Getting back to achieving net sales growth in the near term is our top priority…based on [new products], partnerships… distribution and new international markets” — Chairman & Co-CEO Martin Sumichrast .
“We expect to maintain our gross profit margins between 65% and 70% on our cbdMD and Paw CBD business” — CFO Ronan Kennedy .

What Went Wrong

Sequential revenue decline (~10% vs Q2) and OpEx escalation ($13.9M, +40.6% YoY) pressured operating results; GAAP operating loss widened to $6.68M and non-GAAP adjusted operating loss to $5.39M .
Guidance cut for Q1 FY2022 (to $14.9M–$15.5M) due to vendor production delays on key launches (e.g., drink mixes), introducing near-term execution risk .
Positive GAAP EPS ($0.02) was largely non-operational, driven by a contingent liability revaluation linked to share price, masking underlying operating losses .

Financial Results

Income Statement Comparison

Metric	Q1 2021	Q2 2021	Q3 2021
Revenue ($USD Millions)	$12.3	$11.8	$10.6
Gross Profit Margin %	72%	69%	68%
Operating Expenses ($USD Millions)	$10.7	$12.3	$13.9
GAAP Operating Income (Loss) ($USD Millions)	$(1.76)	$(4.17)	$(6.68)
Non-GAAP Adjusted Operating Loss ($USD Millions)	$(0.523)	$(2.77)	$(5.39)

EPS vs Prior Period (and estimates, if available)

Metric	Q2 2021	Q3 2021
GAAP Diluted EPS ($USD)	$(0.24)	$0.02
Wall St. EPS Consensus (S&P Global)	Unavailable	Unavailable

Note: Wall Street consensus estimates from S&P Global were unavailable at the time of request. We attempted retrieval but were unable to obtain values.

Segment/Channel Breakdown

Metric	Q1 2021	Q2 2021	Q3 2021
E-commerce DTC Net Sales ($USD Millions)	$9.7	$8.4	$7.8
Wholesale Net Sales ($USD Millions)	$2.6	$3.4	$2.7
Paw CBD Net Sales ($USD Millions)	—	$1.4	$1.5
DTC % of Net Sales (%)	78%	71%	74%

Notes: Paw CBD Q1 2021 net sales not disclosed in transcript excerpts.

Balance Sheet KPIs

Metric	Q1 2021	Q2 2021	Q3 2021
Cash And Equivalents ($USD Millions)	$28.8	$23.7	$18.9
Working Capital ($USD Millions)	$30.6	$27.9	$23.2

Additional Operating Detail

YoY DTC net sales declined 4.9% to $7.8M; Wholesale rose 13.7% to $2.7M; Paw CBD increased 20.6% to $1.5M .
Sequential operating income decline vs Q2 driven by ~$1.0M lower gross profit, ~$0.75M higher marketing/influencer expense, ~$0.59M higher R&D, and ~$0.54M higher compensation .
Other income included $1.5M PPP loan extinguishment and $6.8M non-cash contingent liability gain (earnout revaluation) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($USD Millions)	Q1 FY2022 (Dec-2021)	$15.5–$16.25	$14.9–$15.5	Lowered
Gross Margin (%)	Ongoing	65–70% outlook	65–70% outlook	Maintained

Management cited vendor production delays on new product launches (e.g., drink mixes) as the driver of the net sales guidance reduction .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Supply chain & production	No material delays flagged Q1; cost efficiency focus. Q2 highlighted ERP implementation and supply chain visibility .	Vendor production delays impacting new launches; guidance reduced accordingly .	Emerging headwind
Sponsorships/brand partnerships	TV campaign, podcast ROI; expanding athlete roster (Ken Block) . CrossFit and Patrick Reed deals signed .	Activating CrossFit and Bellator; plan to leverage for retail expansion; “brand of champions” trademark .	Scaling
International expansion & regulatory	UK/EU novel food submissions; >31 countries .	Products represented in 31 countries; push into UK/EU and Asia .	Progressing
cbdMD Therapeutics & R&D	Subsidiary formed; hired former FDA official Dr. Sibyl Swift .	$615K invested this quarter; ongoing studies (e.g., pet osteoarthritis) .	Continued investment
Wholesale channel	Brick-and-mortar recovering from COVID impacts .	Wholesale +13.7% YoY; optimism in specialty retail .	Improving
Amazon channel potential	—	Company “ready” if Amazon opens to CBD; cautiously optimistic .	Potential catalyst
Paw CBD category	Strong momentum; awards .	$1.5M sales (+20.6% YoY), NASC certification pivotal for mass retail .	Growth
Gross margin outlook	65–70% expected .	Maintained 65–70% margin outlook .	Stable

Management Commentary

“We are now revising down our net sales guidance for the first quarter of fiscal 2022…to a range of $14.9M to $15.5M…due to production delays from vendors on new product launches” — Chairman & Co-CEO Martin Sumichrast .
“We expect to maintain our gross profit margins between 65% and 70% on our cbdMD and Paw CBD business” — CFO Ronan Kennedy .
“Paw CBD has received its official certification from the NASC…a pivotal step to access mass retail distribution” — Chairman & Co-CEO .
“We launched cbdMD Therapeutics…commencement of several industry leading studies on CBD safety” — Chairman & Co-CEO .
“We plan to leverage [sponsorships]…result in a more rapid expansion of our retail footprint” — Chairman & Co-CEO .

Q&A Highlights

Cash flow positivity and OpEx: Management emphasized strategic investments (sponsorships, therapeutics) and expects adjusted EBITDA to improve with revenue growth; acknowledged marketing spend reduction underway .
Pet CBD market: Management sees Paw CBD among top players; market estimates vary widely ($50M–$350M); NASC certification viewed as gating for mass retail .
Near-term guidance: No guidance for September quarter; December quarter guidance reduced to $14.9M–$15.5M .
Amazon channel: Team prepared to go live quickly if Amazon opens to CBD; working through correct channels; no guarantees .
CrossFit opportunity: Management highly bullish after Games activation; plans athlete additions and co-branding; expected significant branding and financial impact .
DirectCBDOnline acquisition: Strategic for talent (CRO, procurement), customer insights; operations consolidation targeted within the quarter .

Estimates Context

We attempted to retrieve Wall Street consensus estimates (EPS and revenue) via S&P Global but values were unavailable at the time of request; therefore, formal beat/miss vs consensus cannot be determined. In absence of consensus, note that the reported GAAP EPS ($0.02) was aided by non-cash contingent liability gains, while operating losses widened due to higher OpEx .

Key Takeaways for Investors

Strong gross margins (68%) within 65–70% target provide support for unit economics, but sequential revenue softness and elevated OpEx widened operating losses; focus on marketing spend normalization is key .
Guidance reduction for Q1 FY2022 highlights execution/supply chain risk; monitor timing of new product launches (drink mixes) and vendor throughput .
Paw CBD momentum and NASC certification create an entry point into mass retail; track wholesale onboarding and category expansion .
Sponsorships (CrossFit, Bellator) and potential Amazon channel opening are meaningful distribution catalysts; watch for concrete retail wins and channel updates .
cbdMD Therapeutics investment underscores longer-term scientific/regulatory differentiation; near-term P&L impact from R&D spend requires balancing with revenue growth .
Cash of $18.9M and working capital of $23.2M provide flexibility; however, cash burn tied to adjusted operating losses and dividends should be monitored alongside margin maintenance .
Without consensus estimates, recalibration hinges on operational execution and launch cadence; near-term narrative will be driven by supply chain resolution, wholesale growth, and DTC performance .

cbdMD, Inc. (YCBD)·Q3 2021 Earnings Summary