cbdMD's 2025 Q4 Earnings Call: Contradictions in Growth Strategy, Inventory, DTC, and Beverage Categories

Date of Call: December 19, 2025

Financials Results

• Revenue: $19.1M for FY2025, down ~2.1% YOY (FY2024: $19.5M); Q4 net sales $4.7M, up 2% YOY; Q4 DTC $3.5M, down 6% YOY
• Gross Margin: FY2025 gross margin 63% vs 62% FY2024; Q4 gross margin 59% vs 54% prior-year quarter
• Operating Margin: Q4 loss from operations ~$0.6M vs $0.3M prior-year quarter; FY operating loss $2.1M vs $3.3M FY2024

Business Commentary:

* Operational Improvement and Cost Control: - cbdMD reduced its operating loss from $3.3 million in 2024 to $2.1 million in 2025. - The improvement was driven by disciplined cost control, efficient marketing spend, supply chain optimization, and SKU rationalization.

• E-commerce and Wholesale Sales:
• E-commerce direct-to-consumer sales decreased 6% year-over-year to $14.7 million.

• The decline was partly due to a shift in consumer preference towards the hemp beverage category, while the wholesale business saw a 25% increase in Q4.

• Balance Sheet Strengthening:

• cbdMD's net book value increased from under $2 million to over $7 million through a Series A preferred equity conversion and financing.
• This enhanced liquidity and reduced capital structure complexity, enabling the company to focus on driving P&L performance.

• Regulatory Compliance and Strategic Positioning:
• The company received confirmation from NYSE American that all prior compliance deficiencies were resolved, removing a significant overhang.

• cbdMD's focus on THC-free and broad-spectrum CBD positioning is believed to benefit from regulatory clarity and pressures on less compliant competitors.

• Innovation and New Product Launch:

• cbdMD's new beverage brand, Oasis, is expanding distribution across multiple states, including North Carolina and Georgia.
• The brand's growth is supported by shifting consumer preferences towards functional alcohol alternatives, positioning cbdMD in a fast-growing segment.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted a third consecutive year of operating improvement, adjusted EBITDA loss narrowed to $0.9M from $1.7M, restored NYSE compliance, closed $2.25M financing and a $20M equity line, and stated they enter 2026 with a very strong liquidity position and focus on driving P&L performance.

Q&A:

• Question from Thomas McGovern (Maxim Group): What will be the key driver of top-line growth in 2026 among your brands?
  Response: Core cbdMD can grow, but the highest visible upside is Oasis beverage expansion into new states—growth contingent on regulatory developments.

• Question from Thomas McGovern (Maxim Group): Can you unpack the year-over-year decline in your direct-to-consumer business—SKU cuts or weakening KPIs?
  Response: DTC decline largely reflects organizational changes and SKU rationalization earlier in 2025; trends have bottomed and DTC is beginning to recover versus prior periods.

• Question from Thomas McGovern (Maxim Group): Any timeline for Medicare coverage of CBD/hemp-derived products and how have you adjusted strategy?
  Response: They believe a pilot could start April 1 but details are unsettled; company will maintain prudence while positioning for opportunities and emphasizing safety/compliance.

• Question from Mark Taci (Private Investor): Is the executive order hype overdone or a game changer for your business?
  Response: The order could imply up to ~$30B addressable Medicare spend (60M beneficiaries × ~$500), but timing/details are uncertain; cbdMD will prepare aggressively yet remain cautious and prudent.

• Question from Adam Waldo (Lismore Partners, LLC): The press release references Medicare and 60M Medicaid seniors—was that a typo or does the order address both?
  Response: It was a typo; the executive order explicitly addresses Medicare now; Medicaid extension could occur later but is not specified.

• Question from Adam Waldo (Lismore Partners, LLC): Given regulatory fluidity, how are you prioritizing incremental working capital between Oasis and core CBD products?
  Response: Near-term allocation will be slightly more weighted to Oasis for the next quarter, with continual reassessment as regulatory clarity evolves.

• Question from Adam Waldo (Lismore Partners, LLC): Pro forma fully diluted share count after Series C and any new executive comp plans?
  Response: Pro forma common outstanding roughly 8.9M; Series B ~1.7M, Series C ~1.0M; board approved a 2025 employee equity compensation plan subject to shareholder vote.

Contradiction Point 1

Growth Drivers and Strategic Focus

It involves differing perspectives on the key drivers of growth and strategic focus, which are crucial for investors to understand the company's direction and expectations.

What will be the key driver of top-line growth in 2026? Will it be Herbal Oasis expanding into new states or CBDMD core brand innovation? - Thomas McGovern(Maxim Group)

2025Q4: We do think there's opportunity to continue to grow with the core cbdMD brand. Our team is feeling good about where the core business is. And there's a huge growth opportunity that we have visibility on the beverage side. - T. Kennedy(CEO, CFO, Principal Executive Officer & Director)

Can you elaborate on the drivers behind the 500-basis-point year-over-year decline in gross margin for the most recent quarter? - Adam Baldo(Lismore Partners LLC)

2025Q3: We're very excited about the potential for the Oasis brand as well. We've seen a nice trajectory on sales growth and strong customer engagement. And we're very excited about the potential as we see limited competition there. - Ronen Kennedy(CEO and CFO)

Contradiction Point 2

Inventory Management and Growth Strategy

It involves differing statements on inventory management and growth strategy, which are critical for understanding the company's operational efficiency and financial planning.

Can you provide more details on inventory management practices? - Unknown Attendee(Private Investor)

2025Q4: We do think inventory is well-positioned here at the end of the year. - T. Kennedy(CEO, CFO, Principal Executive Officer & Director)

Your inventory increased $700,000 this fiscal year, with $300,000 in the last quarter. Can you provide more details on whether this is driven by the Oasis product line? - Adam Waldo(Lismore Partners, LLC)

2025Q3: We may require additional investment based on growth velocity. - Ronen Kennedy(CEO and CFO)

Contradiction Point 3

Direct-to-Consumer Business Trends

It involves differing interpretations of the trend in the direct-to-consumer business, which could impact investor perceptions of the company's operational health and growth prospects.

What caused the year-over-year decline in your direct-to-consumer business: SKU reductions or declining customer retention/acquisition metrics? - Thomas McGovern (Maxim Group)

2025Q4: If we look at sort of our 24-month trend, I think we see the business right now trending slightly up over prior year periods on the DTC side. - T. Kennedy(CEO, CFO)

What are your expectations for the DTC business and how do you view its role in your growth strategy moving forward? - Tom McGovern (Maxim Group)

2025Q2: We've got an opportunity to drive margin improvement as we go forward, as we get more scale and as we drive more efficiencies in our DTC business. - Ronan Kennedy(CEO and CFO)

Contradiction Point 4

Beverage Category Growth and Strategy

It involves differing statements regarding the growth and strategy in the beverage category, which is a key area of focus for the company.

What will be the key driver of 2026 top-line growth: Herbal Oasis expansion into new states or CBDMD core brand innovation? - Thomas McGovern (Maxim Group)

2025Q4: We do think there's opportunity to continue to grow with the core cbdMD brand. Our team is feeling good about where the core business is. And there's a huge growth opportunity that we have visibility on the beverage side. - T. Kennedy(CEO)

Can you discuss the trends in your product categories, especially for the Oasis beverage line? - Thomas McGovern (Maxim Group)

2025Q1: The beverage market is the fastest-growing category, with significant growth in 2024 and continued momentum in 2025. A national retailer is lined up, but distribution will depend on state regulations. The Oasis beverages provide another growth channel. - Ronan Kennedy(CEO)

Contradiction Point 5

Liquidity Runway and Financial Stability

It involves differing statements regarding the company's liquidity runway and financial stability, which are critical for investor confidence.

Can you provide a breakdown of cash and cash equivalents, marketable securities, and other assets as of quarter-end? - Unknown Attendee (Private Investor)

2025Q4: The company is in a strong liquidity position, with cash on hand and a focus on achieving profitability. The outlook remains positive, and the expectation is for normal working capital relationships in upcoming quarters. - Ronan Kennedy(CFO)

Do you still expect at least eight quarters of liquidity runway through fiscal 2026? - Adam Waldo (Lismore Partners, LLC)

2025Q1: The company is in a strong liquidity position, with cash on hand and a focus on achieving profitability. The outlook remains positive, and the expectation is for normal working capital relationships in upcoming quarters. - Ronan Kennedy(CFO)