cbdMD's Q4 2025 Earnings Call: Contradictions Emerge on Medicare CBD Coverage, Executive Order Impacts, and Brand Strategy Shifts

Date of Call: None provided

Financials Results

• Revenue: Net sales: Q4 $4.7M, up 2% YOY; FY 2025 $19.1M vs $19.5M prior year (down ~2%).
• Gross Margin: Gross profit: Q4 59% vs 54% prior year; FY 63% vs 62% prior year.
• Operating Margin: Loss from operations: Q4 approx $0.6M loss vs $0.3M prior year; FY operating loss $2.1M vs $3.3M prior year.

Business Commentary:

* Financial Performance and Operating Improvements: - cbdMD reported a $1.2 million reduction in operating loss to approximately $2.1 million for fiscal 2025, representing the third consecutive year of improved operating results. - The improvement was driven by disciplined cost control, efficient marketing spend, supply chain optimization, and a focus on core brands, despite investing in the new beverage brand, Oasis.

• E-commerce and Wholesale Sales Trends:
• Direct-to-consumer e-commerce sales generated $14.7 million in fiscal 2025, a 6% decrease from the prior year.

• The decrease was attributed to a shift in consumer preference towards hemp beverages, while the wholesale business grew by 25% in the fourth quarter.

• Capital Structure and Balance Sheet Strengthening:

• Through various financing transactions, cbdMD increased its net book value from under $2 million to over $7 million, eliminating $7 million in accrued preferred dividends, and improving working capital.

• The strengthened capital structure and balance sheet were achieved through strategic refinancing and restructuring efforts.

• Regulatory Environment and Strategic Positioning:

• The company has resolved all past compliance deficiencies with the NYSE American and received formal confirmation in December 2025.
• Additionally, a recent executive order from the White House supports exploring Medicare reimbursement pathways for hemp-derived CBD products, which cbdMD views as an important direction signal for regulatory evolution and potential market growth.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized "disciplined execution and meaningful progress," noting a third consecutive year of operating improvement, adjusted EBITDA improvement from a $1.7M loss to a $0.9M loss, strengthened balance sheet (net book value > $7M) and restored NYSE compliance, positioning the company as well positioned for regulatory changes.

Q&A:

• Question from Thomas McGovern (Maxim Group): What do you expect will be the key driver(s) of top-line growth in 2026 — Oasis beverage expansion or innovation within the cbdMD core brand?
  Response: Management expects growth from both: continued improvement in the core cbdMD DTC business and significant visible opportunity in the Oasis beverage rollout, though beverage upside is partially dependent on regulatory developments.

• Question from Thomas McGovern (Maxim Group): Can you unpack the year-over-year decline in the direct-to-consumer business — is this due to SKU rationalization or weakening KPIs?
  Response: Management said the DTC decline reflected organizational changes and SKU rationalization earlier in 2025, and that trends are bottoming and beginning to improve versus prior-year periods.

• Question from Thomas McGovern (Maxim Group): Any timeline insight on Medicare coverage or pilot for CBD/hemp-derived products and how you've adjusted strategy given regulatory fluidity?
  Response: Management indicated a pilot is targeting an April 1 start and while details remain uncertain, the announcement gives the industry encouragement; they emphasize safety/quality and are monitoring implementation closely.

• Question from Mark Taci (Private Investor): Is the White House executive order overhyped or a potential game changer for cbdMD — what could it realistically do for your business?
  Response: Management views the order as potentially transformative long-term (citing a theoretical $30B opportunity assuming $500/year for ~60M Medicare beneficiaries) but stressed it will not be immediate, details matter, and the company will position prudently to capture demand if enacted.

• Question from Adam Waldo (Lismore Partners, LLC): Was the press release reference to Medicaid a typo — does the executive order address Medicare only or both Medicare and Medicaid?
  Response: Management confirmed it was a typo: the executive order explicitly addresses Medicare today, with potential for Medicaid consideration later depending on demonstrated outcomes.

• Question from Adam Waldo (Lismore Partners, LLC): Given regulatory uncertainty, how are you prioritizing incremental working capital between the Oasis beverage business and traditional CBD (non-beverage) inventory?
  Response: Management said near-term incremental working capital will be weighted more toward Oasis for the next quarter, with continuous reevaluation as regulatory clarity evolves through 2026.

• Question from Adam Waldo (Lismore Partners, LLC): Post-Series C closing, what is the pro forma fully diluted share count and are there new executive compensation equity plans that could meaningfully change share count?
  Response: Management reported pro forma outstanding shares of roughly 8.9 million (including Series B ~1.7M and Series C ~1.0M) and noted the Board approved a 2025 employee compensation plan subject to shareholder vote, with details to be disclosed in filings.

Contradiction Point 1

Possible Timeline for Medicare Coverage of CBD

It involves differing perspectives on the potential timeline for Medicare coverage of CBD or hemp-derived products, which could impact strategic planning and investor expectations.

What is the potential timeline for Medicare coverage of CBD or hemp-derived products, and how has your strategy adapted to the current regulatory environment? - Thomas McGovern (Maxim Group)

20251220-2025 Q4: There's a little bit of change in sort of the script over the last 24 hours, given what happened yesterday. Look, I think what we understand is they are trying to pilot a program starting on April 1. - T. Kennedy(CEO)

When might Medicare cover CBD or hemp-derived products? - Thomas McGovern (Maxim Group)

2025Q4: We understand there is a potential for a pilot starting in April. The executive order suggests a positive direction, and we hope this leads to smart regulations that support consumer access to effective CBD products. - T. Kennedy(CEO)

Contradiction Point 2

Potential Benefits and Impacts of the Executive Order

It highlights differing interpretations of the potential benefits and impacts of the executive order on the company's business, which could influence investor expectations and strategic planning.

How will the executive order affect your business? - Mark Taci (Private Investor)

20251220-2025 Q4: Clearly, the way we viewed it is he made a statement that he wanted to make CBD product available as an alternative solution for people in Medicare. By our -- from what we understand, there's over 60 million consumers on Medicare. And as part of the statements, they spoke about potentially up to $500 a year in reimbursement for CBD products. - T. Kennedy(CEO)

What are the potential impacts of the recent executive order on your business? - Unknown Attendee (Private Investor)

2025Q4: The executive order potentially opens up $30 billion in demand with Medicare reimbursement for CBD products. We are excited but will approach this carefully to build a profitable, long-term organization. - T. Kennedy(CEO)

Contradiction Point 3

Growth Strategy and Product Focus

It highlights a shift in the company's growth strategy and product focus, which is crucial for investor expectations and market positioning.

What will be the key growth driver for your brands in 2026? - Thomas McGovern (Maxim Group)

20251220-2025 Q4: We do think there's opportunity to continue to grow with the core cbdMD brand. We've made a significant transformation this year with our team, and they're starting to really dial things in. There's still huge growth opportunity that we have visibility on the beverage side, at least through November, and we're still sort of depending on where some of the regulatory framework shakes out for the year. - T. Kennedy

What is Oasis's expansion strategy for the remainder of the year? - Tom McGovern (Maxim Group)

2025Q3: We are optimistic that we will accelerate the growth of the company. We believe that in order to achieve this, we need to shift the company's focus to a more consumer-centric, brand-driven strategy... Our strategy to date has been to prioritize our expansion with the most successful part of our core CBD brand. - Ronen Kennedy

Contradiction Point 4

Regulatory Environment and Strategic Adaptation

It demonstrates differing views on the regulatory environment and how the company is adapting its strategy in response, which impacts business operations and market positioning.

What is the timeline for Medicare coverage of CBD or hemp-derived products, and how has your strategy adjusted to the current regulatory environment? - Thomas McGovern (Maxim Group)

20251220-2025 Q4: There's a little bit of change in sort of the script over the last 24 hours, given what happened yesterday. Look, I think what we understand is they are trying to pilot a program starting on April 1. With his commitment to trying to use the category to help consumers, it gives most of the industry, I think, encouragement that they're going to solve for some of the language restrictions that was in the bill in November. - T. Kennedy

Can you update us on the Board’s strategic priorities since the last call? - Adam Baldo (Lismore Partners LLC)

2025Q3: We will continue to invest in our DTC platform, which has grown significantly over the past few quarters. As we have discussed, we view this as our core platform for our growth strategy. - Ronen Kennedy

Contradiction Point 5

Herbal Oasis Brand Expansion and Impact on Growth

It directly impacts expectations regarding the growth and impact of the Herbal Oasis brand, which is a key strategic focus for the company.

Which of your brands will be the primary revenue growth drivers in 2026? - Thomas McGovern (Maxim Group)

20251220-2025 Q4: We do think there's opportunity to continue to grow with the core cbdMD brand. We've made a significant transformation this year with our team, and they're starting to really dial things in. There's still huge growth opportunity that we have visibility on the beverage side, at least through November, and we're still sort of depending on where some of the regulatory framework shakes out for the year. - T. Kennedy(CEO)

Can you provide details on the Herbal Oasis brand expansion and its impact on growth? - Tom McGovern (Maxim Group)

2025Q2: We've started discussions with distributors and begun shipping products. Legislative activity has slowed progress. We're working with major distributors to secure opportunities and build our footprint. We expect some contribution from the brand in the latter part of the current year. - Ronan Kennedy(CEO and CFO)