Good afternoon. Welcome to the cbdMD Incorporated Fourth Quarter and Fiscal Year Ended September 30, 2020 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its fourth quarter and fiscal year-end results, which followed the filing of its annual report on its Form 10-K. Today’s conference call is being recorded and will be available online at cbdmd.com in accordance with cbdMD’s retention policies. All participants on this call will be in a listen-only mode. The call will be followed by a question-and-answer session. At this time, I would like to now turn the call over to your host, Ronan Kennedy, the company’s Chief Financial Officer. Ronan, please go ahead.

Thank you, Katherine, and thank you all for joining the cbdMD fourth quarter and fiscal year-end September 30, 2020 earnings call and update. On the call today, we also have our Chairman and Co-CEO, Marty Sumichrast; as well as our Chief Marketing Officer, Ken Cohn. Following the Safe Harbor statement, Marty and Ken will provide an overview of our business, and then I’ll provide a summary of the quarterly and fiscal year-end financial results. Following that, we’ll open up the call for questions. We’d like to remind everyone that various remarks about future expectations, plans and prospects constitute forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. cbdMD cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated, including the risks described in the company's annual report on Form 10-K for the year ended September 30, 2020, and our other filings with the SEC, all of which can be reviewed on the company's website cbdMD.com or on the SEC's website at www.sec.gov. Any forward-looking statements made on this conference call speak only as of today's date, Tuesday, December 22, 2020, and cbdMD does not intend to update any of these forward-looking statements to reflect events or circumstances that would occur after today's date except as maybe required by federal securities laws. With that, I'd like to turn the call over to cbdMD's Chairman and Co-CEO, Marty Sumichrast.

Ronan, thank you, and welcome to everyone who is joining us this afternoon. We believe cbdMD is now one of the most successful CBD companies in the world, and cbdMD and Paw CBD have become two of the world's most recognizable and valuable CBD brands. cbdMD continues to attract international attention from customers and investors alike. Our brand social media dominance has fueled our online business, which continues to drive our sales growth. In fact, based upon a November 2020 Google Analytics report, cbdMD.com ranks at the top as one of the most visited CBD websites in the world. As we look ahead into 2021, we believe our plan to expand our reach into new product categories will not only drive sales, but will also diversify and expand our customer demographics. As we continue to attract world-class partnerships, as we did with Bubba Watson, Bellator MMA, Life Time Fitness and Barstool Sports, our brands growing status and recognition on the world stage. Here is another example of how our brands attract world-class partners. Today, I'm proud to announce that cbdMD has become the exclusive CBD partner of the Joe Rogan Experience Podcast, which plays exclusively on Spotify and has over 200 million monthly downloads. We believe that these achievements help our brands dominate in the CBD industry and also help us deliver on our financial goals as well. Since taking the cbdMD brand public in December 2018, we have grown quarterly sales over 900% in eight quarters. We've done this by remaining focused on our core competency, which is our direct-to-consumer engine. Despite the COVID-19 pandemic, we continue to show remarkable growth throughout fiscal 2020. We have maintained one of the strongest balance sheets in the CBD industry and, in fact, recently more than doubled our liquidity, which now stands…

Thanks, Marty, and welcome, everyone. I believe that 2020 is the year of separation within the CBD category. And for cbdMD, 2020 has offered a landscape of opportunities to continue to drive and solidify both our cbdMD and Paw CBD brands distinction. We continue to lean heavily on making data-driven decisions with insights garnered each quarter. We faced a number of questions and challenges coming into this most recent quarter. How do we continue to accelerate the brand, drive our consumers’ trust and capitalize on our surging e-commerce traffic, while at the same time, educate, inform and convert our new and returning customers? As we consider these important questions, we focused on key performance indicators or KPIs, such as average order value, retention rate and website traffic to name just a few. We utilize these non-GAAP measures in internally analyzing the effectiveness of our advertising spend and marketing initiatives, and believe these metrics are important to our investors in their review of our financial performance. Our customer retention rate representing existing customers who purchased at least once during the quarter continue to increase throughout the year. In this past quarter, returning customers spent more money per order reaching approximately $88 in average order value, purchased more frequently, now a median of once every 39 days and bought more items per order as compared to the previous three quarters. And regarding our direct-to-consumer website traffic in the fourth quarter of fiscal 2020, our new website traffic increased 13% over the prior quarter, with the largest increase being via organic traffic. Data continued to aid us in amplifying the effectiveness of our e-mail marketing. While we sent less e-mails to our entire growing database, we focused on segmented relevant content and information. As such, we have experienced continued growth in our open…

Thank you, Ken. I'm going to start with a brief summary of our GAAP based results. On a GAAP basis, total net sales for the fourth quarter hit another all-time high of $11.7 million, or 23% year-over-year increase and a 10% sequential quarterly gain. For the fiscal year ended September 30, audited net sales were $41.9 million. This was a 77% increase over the fiscal 2019 results. Our quarterly direct-to-consumer sales also hit a record high of $8.6 million in the fourth quarter of fiscal 2020, a 58% year-over-year increase. For fiscal 2020 direct-to-consumer sales totaled $30.5 million and represented 106% increase over fiscal 2019. Our marketing investments and emphasis on developing a direct relationship with our customers paid off well during the year, resulting in our direct-to-consumer sales growing to 73% of our total net sales in fiscal 2020 compared to 63% in the prior year. Our wholesale business generated $11.3 million of net sales for fiscal 2020. Despite the challenges presented by COVID-19 during the fiscal 2020, this still represents a 29% year-over-year increase. We did see a rebound during the fourth quarter in wholesale business which generated a total of $3.1 million in net sales, representing a 29% sequential quarterly growth. Our goal has always been to maintain a gross profit margin between 63% to 70%. Our GAAP gross profit as a percent of net sales came in at 54.4% for the fourth quarter of fiscal 2020, compared to 56% for the comparative prior year period. For fiscal 2020, our gross margin was 63% compared to 61.4% for fiscal 2019. The fourth quarter GAAP gross profit margin was after accounting for a non-cash inventory adjustment of $1.6 million. We generated a fourth quarter non-GAAP adjusted gross profit of 68%. The $1.6 million non-cash adjustments is mostly due…

Thanks, Ronan. With that, I'd like to open the call up for Q&A. Katherine?

Certainly. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Your first question is coming from Paul Cooney. Your line is live.

Hey, Marty, hey, team, congratulations on a great year. Great quarter. Love to see the growth in the company and the brand. Marty, I’m just – outside of what you're talking to us about in the conference call, what else can we expect going forward as far as the products are concerned? Just like what are the kinds of surprises can come up for us in the coming quarters, as far as your product and your brand?

Well, thank you, Paul, and really appreciate your support. Look, I think we've always been innovative, I think you're going to see us rolling out some new product lines first to the year and we're excited to start talking about that shortly. The other thing that we, I think, have done a really good job of is partnering with some really great brands. We mentioned, Joe Rogan, Barstool, Life Time, Bellator, Bubba, so many of our athletes, I think, you'll see us expanding that list, and really matching up with some very large brands that want to get into the CBD space, and have really come to us to be their partner in it. And I think that's going to not only help the brand value and the recognition as we partner with some of these bigger brands, but also certainly helps us on a customer side and a sales side.

Now, as far as that's concerned, Marty, are you talking about like getting more sponsorships, or you are talking about maybe somebody coming in and using your brand to enhance their brand?

I would say both, Paul. I'd say we are talking to groups to do all the above. It's a very exciting time for us next year, because we think all the work we've done to grow the brand to get such high brand recognition, and on the regulatory side, really meet the challenges in front of us and be running the few companies that are existing in the CBD space that can achieve that both with our organization and also our balance sheet and our financial wherewithal. I think big companies are concerned about who they partner with. And when they see us and they see our financial performance and they see our strong balance sheet, I think, they're very comfortable. And I think that's going to pay off for us next year and we're excited to get these deals done and get them announced and start working on them.

Okay. Thanks.

Thanks, Paul.

Your next question is coming from Michael Galantino . Your line is live.

Hey, Marty, how you doing?

Hey, how are you?

Hey, congratulations on a great quarter. This growth is incredibly impressive. And our firms just got introduced through this transaction and we're thrilled to be working with you guys, we are excited to be involved with the company. I have two questions. Number one, do you have exclusivity when it comes to the Joe Rogan relationship and also the Barstool Sports relationship? Do you have like time constraints on that? You have them for a year, do you have them for I don't know, for whatever? And then the second question I have is, do you see the direct multi-level marketing guys out there regarding CBD to be any kind of competition to you going forward? Thank you.

Yes, thank you. Joe Rogan is an exclusive deal for 2021. We've had a good strong relationship with Joe. We were very excited that he got on with Spotify, which just enhances his brand, which certainly enhances our position being his partner. So that one is exclusive. Barstool is not exclusive, but we think we're probably one of the biggest CBD brands that are through their platform. And we love Barstool and everything they're doing, so we're going to continue a very strong commitment to Barstool. As far as the multi-level marketing, look, we don't really see that the MLM guys are necessarily our competition, because they don't really focus on brand as much as we do. And I think that's such a big distinction. And I'm not sure, certainly, the distribution channels are significantly different. So, look, it's a huge market out there. As I said, it's about $2.5 billion now, it's growing to, depending on who you talk to $10 billion, $15 billion, $20 billion in the next three to five years. And the current, say, top 20 CBD companies only have about 20% of the market share. And so you have this huge piece of market out there that other 80% that we are gaining into on top of you've got the pie getting bigger. So there's just an enormous amount of runway for us. We sit at the top of the branding space in CBD, both at cbdMD and, of course, our Paw brand is doing really great for us. So, we don't necessarily see the MLM crowd as a direct competitor. Certainly, they sell CBD product, but not certainly the way we do it.

That's what I thought. Thank you. One follow-up question on the Paw brand. What kind of growth you expect in 2021 in that division?

Well, we haven't given out guidance, but I will tell you that we were really pleased with our growth. I mean, we basically started it from scratch and did $4.5 million in the first 10, 11 months of operation, and that's also in a COVID environment where a lot of that was. The other thing I'll tell you is this, unlike cbdMD, where there is a lot of competition, the pet business – the CBD pet business, there's just not a lot of competition. So we went from nowhere to the top in one year. We think the opportunity is really big in the pet market. And if anybody on the call knows if you own a pet, you spend just about anything on your pet. So we think it's a great market. We're excited and we think we got a great opportunity to grow that brand very quickly in the next year, but we haven't given out guidance, but we expect to see significant growth.

Thank you.

Sure.

Your last question is coming from Ben Mandel [ph]. Your line is live.

Yes. Barry Mendel. Couple of things. How are you going to market your pet brands, your Paw's brands and kind of marketing program do you have, number one? Number two, can you talk about pricing in the CBD area? What the competitive landscape looks like in the CBD area?

Ken, why don't you talk about the marketing on Paw CBD?

Sure. What has happened is we've been able to take a lot of the learnings that we've gained on the cbdMD side of the business, and apply it successfully on the Paw CBD business. And certainly, when it comes to tactics, whether it be e-mail, whether it be display, whether it be social, whether it be influencers, we've seen a very similar trajectory as Paw's CBD becomes synonymous with the CBD category, like we're seeing on the consumer side, on the human side. So we're going to continue to let the success on the MD side kind of point us in the right direction on Paw, because it's done so since the outset. So Marty, why don't you jump on the second question?

Yes, look as far as pricing, pricing has held firm. And we don't see right now much price compression out there.

Okay. Thanks.

Sure.

With no further questions in the queue that does conclude our conference call for today. Thank you for your participation. You may now disconnect.