Name: cbdMD, Inc. Q4 2020 Earnings Call
Start: 2020-12-23T00:24:03.000Z

Executive Summary

Record net sales of $11.7M (+23% YoY, +10% QoQ) and record DTC net sales of $8.6M, but GAAP gross margin compressed to 54.4% due to a $1.66M non‑cash inventory adjustment; non‑GAAP adjusted gross margin was 68% .
FY 2020 net sales rose 77% to $41.9M; DTC reached $30.5M (73% of total, +106% YoY) amid strong brand and marketing execution .
Management shifted its target for achieving positive adjusted operating income from calendar 2020 to early fiscal 2021, citing optional marketing opportunities; gross margin guidance maintained at 63–70% .
Key catalysts: launch of national TV campaign, exclusive Joe Rogan partnership, expanding retail distribution (GNC, Life Time, c‑stores), and accelerating Paw CBD growth .

What Went Well and What Went Wrong

Record quarterly and annual net sales; Q4 net sales $11.7M (DTC $8.6M) and FY net sales $41.9M (DTC $30.5M), demonstrating strength in core e‑commerce competency .
Strategic brand partnerships and marketing scaled: exclusive Joe Rogan partnership and first national TV campaign; improved KPIs (AOV ~$88, purchase median every 39 days, +13% new site traffic QoQ) .
Wholesale rebound in Q4 ($3.1M, +29% QoQ) and expanding doors (GNC online + 90 franchise locations; Life Time from 23 to 124; c‑stores up to 3,000 locations starting Jan 2021) .

GAAP gross margin fell to 54.4% in Q4 (from 56.8% in Q4’19) on a $1.66M non‑cash inventory adjustment (write‑offs of old raw materials and valuation of non‑core inventory) .
GAAP operating loss was $4.5M in Q4 despite revenue records; non‑GAAP adjusted operating loss increased sequentially to ~$1.06M due to higher marketing/affiliate spend (+$533K) and IP‑related expenses .
Management does not expect near‑term FDA guidance for CBD, sustaining regulatory uncertainty and potential constraints for category expansion .

Metric	Q2 2020	Q3 2020	Q4 2020
Revenue ($USD Millions)	$9.4	$10.6	$11.7
GAAP Gross Margin %	70.9%	64.7%	54.4%
Adjusted Gross Margin %	67.0% (non‑GAAP, post adjustment)	67.7% (non‑GAAP)	68.0% (non‑GAAP)
DTC Net Sales ($USD Millions)	$6.8	$8.2	$8.6
Paw CBD Net Sales ($USD Millions)	~$0.75	~$1.229	~$1.67

Segment breakdown (where disclosed):

Segment Metric	Q2 2020	Q4 2020
Wholesale Net Sales ($USD Millions)	$2.6	$3.1

KPIs (Q4 specific where disclosed):

KPI	Q4 2020
Average Order Value (AOV)	~$88
Median Purchase Frequency	39 days
New Website Traffic QoQ Change	+13%

Notes:

Q4 GAAP gross margin includes $1.66M non‑cash inventory adjustment; adjusted gross margin excludes it .

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Operating Income	Calendar 2020 vs Early FY 2021	Achieve positive adjusted operating income during calendar 2020	Confident to reach milestone in early fiscal 2021 (could extend later in FY depending on marketing opportunities)	Extended
Gross Margin Target	Ongoing	Maintain 63–70%	Maintain 63–70%	Maintained
Paw CBD Net Sales (Calendar Year)	CY 2020	Project ~$6M for calendar 2020	Reported ~$4.5M for FY 2020; Q4 ~$1.67M (calendar 2020 update not provided)	Actual (FY) reported; CY guidance not updated
DTC Mix of Net Sales	FY 2020	Expect 71–72% of net sales	Reported 73% of net sales	Raised
Preferred Stock Dividend	Jan 2021	n/a	$0.0667 per share monthly cash dividend payable Jan 15, 2021 (Series A)	New

Topic	Previous Mentions (Q2, Q3)	Current Period (Q4)	Trend
Regulatory/Legal (FDA)	Expect guidance by end 2020 or early 2021; committed to compliance and NDI readiness	Do not expect near‑term FDA guidance; focus on GMP/state compliance	Delayed
Marketing/TV	Planning TV entrance leveraging Bellator/Viacom	Launched first national TV campaign; strong early metrics	Accelerating
Distribution Expansion	Life Time partnership and e‑commerce retail; ~6,300 doors	GNC online + 90 franchises; Life Time to 124; c‑store distribution up to 3,000 locations from Jan 2021	Expanding
Pet Brand (Paw CBD)	Trending ~5–6% of sales; strong online momentum	Q4 ~$1.67M; FY ~$4.5M; low competition cited; significant growth expected (no formal guidance)	Strong growth
Macro/COVID & Channel Mix	Shift to DTC; Wholesale impacted; supply chain stable	Wholesale rebounded 29% QoQ; DTC record quarter	Improving mix
Pricing & Input Costs	Isolate prices down; no price compression	Pricing held firm; limited compression	Stable
R&D/IP	Provisional patent; proprietary “hybrid broad spectrum” spec	Continued IP spend (allocation noted)	Building IP moat

“We believe cbdMD is now one of the most successful CBD companies in the world… we have grown quarterly sales over 900% in eight quarters.”
“We launched cbdMD’s first nationally viewed TV advertising campaign… Average orders continue to strengthen since launching in September 2020.”
“Our goal has always been to maintain a gross profit margin between 63% to 70%… Q4 GAAP gross margin was after a non‑cash inventory adjustment of $1.66M; non‑GAAP adjusted gross margin was 68%.”
“We have recently more than doubled our liquidity… approximately $30 million in cash, with virtually no debt.”
“We have secured distribution for up to 3,000 new c‑store locations, expected launch in January 2021.”

Product pipeline and partnerships: Expect new product lines early in the year; actively expanding partnerships with large brands to drive sales and recognition .
Joe Rogan & Barstool exclusivity: Joe Rogan exclusive for 2021; Barstool non‑exclusive but a major CBD presence; MLM CBD sellers not viewed as core competition given brand focus .
Paw CBD growth: Significant growth expected in 2021; category has fewer competitors; FY 2020 ~$4.5M from a cold start .
Pricing: Pricing held firm; minimal compression observed .
Wholesale strategy: Retail expansions with GNC and Life Time; c‑store channel entry to broaden reach .

Wall Street consensus (S&P Global) for Q4 2020 EPS and Revenue was unavailable at the time of query; as a result, formal beat/miss analysis versus consensus cannot be provided [GetEstimates error: Daily Request Limit Exceeded].

DTC engine remains the growth driver with record Q4 DTC net sales; continued investment in data‑driven marketing and national TV should support near‑term momentum .
Gross margin pressure in Q4 was driven by identifiable non‑cash inventory adjustments; adjusted margins remain within long‑term target range, implying underlying unit economics intact .
Distribution breadth is expanding across GNC, Life Time, and c‑stores, which should diversify channel risk and support wholesale recovery into FY 2021 .
Paw CBD is scaling rapidly with low perceived competition; cross‑sell from cbdMD.com and planned subscription/rewards could enhance LTV and retention .
Liquidity (~$30M cash) and limited debt provide strategic flexibility to fund marketing, IP, and product expansion while targeting adjusted operating income in early FY 2021 .
Regulatory clarity is unlikely near term; operational focus on GMP and state compliance remains prudent and may be a relative advantage versus smaller brands .
Near‑term trading implications: Watch for continued DTC strength, margin normalization post inventory adjustments, TV campaign conversion metrics, and traction in new retail channels; medium‑term thesis hinges on brand leadership, channel diversification, and execution toward adjusted profitability .

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