cbdMD (NYSE American: YCBD), a nationally recognized cannabidiol (CBD) brand with products on the shelves of more than 2,100 retailers in the US, reported $5.7 million in net sales for the quarter ended March 31, 2019, up 84% year-over-year and up 55% sequentially from the December 31 quarter.

YCBD’s March quarter results put the company on pace to meet or exceed the established revenue earn-out targets for its first year of operations for cbdMD, which was $20 million for calendar 2019. In fact, the March quarter was 78% ahead of those earn-out projections, and the company is currently trending a full year ahead of the revenue earn-out projections.

"The cbdMD brand has shown consistent month-over-month double-digit growth rates and, with the capital we have available, we believe we can significantly accelerate the revenue growth and execute on an aggressive expansion and brand positioning plan, which should yield continued significant growth rates,” said Martin Sumichrast, Chairman and CEO of YCBD.

The latest quarterly results build on an unbroken track record of sequential sales growth since its launch in early 2018. Sales increased throughout calendar 2018, with net sales of $580,000, $1,618,000, $1,696,000 and $3,625,000, for the quarters ending March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively.

With a strong cash position and the benefit of the expected increase in major retailer acceptance from the passage of the 2018 Farm Bill, cbdMD believes it can accelerate revenue growth in this rapidly expanding market. The Company has set a target of $300 million in aggregate sales over the next five years.

Peers in the CBD space command high multiples, trading for an average price-to-sales ratio of more than 60x. Comparatively, cbdMD currently trades for just over 16x its trailing 12-month sales.

ThinkEquity, a division of Fordham Financial, initiated coverage of YCBD in March with a buy rating and price target of $8 per share. Based on YCBD’s recent performance, these expectations could prove rather conservative.

The 2018 Farm Bill, signed into law by President Trump in late December, is expected to catapult the nascent but booming $1 billion cannabidiol (CBD) market into mainstream acceptance and multi-billion-dollars in sales.

"The passing of the Farm Bill is transformational for the industry, allowing for the national cultivation, production, distribution, and marketing of hemp-derived products in the United States," stated Hess Moallem, President and CEO of Charlotte's Web, a leader in hemp-derived CBD products.

That’s good news for consumers who use or want to try various products infused with CBD, which is non-psychoactive. And it could soon mean more products for consumers on retail store shelves.

Level Brands cbdMD products

Although consumers have been able to purchase CBD products in the 47 states where CBD sales are permitted, legality at the federal level has kept major retailers and other key players away.

But times have changed, and many in the medical community and in the public say that CBD can be potentially helpful for certain health conditions. Most notably, it has clearly been proved to help reduce the number of seizures in people who suffer from two devastating forms of epilepsy. The FDA approved the CBD-based drug Epidiolex in mid-2018.

Now with the passing of the Farm Bill and the legalization of industrial-hemp production, experts expect the CBD market to expand rapidly.

"The passing of the farm bill will most certainly open up the marketplace for hemp products, specifically hemp extracts that are high in CBD," says Josh Hendrix, the director of domestic product business development for the cannabis company CV Science. “It will provide a higher comfort level for retailers and consumers and will lead to more investment and opportunity in the industry as it will continue to see rapid expansion."

According to cannabis industry analysts the Brightfield Group, the hemp-derived CBD market could hit $22 billion by 2022.

cbdMD was founded by Scott Coffman, the founder of well-known e-cigarette brand Blu, which he later sold to Lorillard Tobacco for $135 million. Coffman continues to lead cbdMD, is on the company’s board, and is now one of its largest shareholders.

“We have built a reputation as a premier manufacturer of high-quality products at a very affordable price, giving our customers a great value. Now with the passage of the Farm Bill, we expect not only that our business will expand as major retail chains start to carry CBD, but also this mass retail acceptance will encourage a larger customer base who will want to try our products. In addition, our access to athletes and the sporting world should enhance the marketability of our products," said Coffman.

cbdMD reached a revenue run rate of nearly $23 million at the end of the March quarter, well on pace to surpass its first-year target of $20 million in net sales in calendar 2019. Sales are expected to accelerate thereafter as new retailers are signed, and marketing and sponsorship campaigns gain traction with consumers.

cbdMD has secured a large roster of celebrity athlete sponsorships for its brand.

In May, former UFC Light Heavyweight Champion, Quinton "Rampage" Jackson, joined cbdMD president Caryn Dunayer and Chairman and CEO Martin Sumichrast on the NYSE trading floor for the company’s official launch under its new ticker.

Bubba Watson, two-time Masters Champion and 12-time PGA Tour, teamed up with the company in May as well, teeing off at the PGA Championship with cbdMD as his sponsor.

cbdMD is the first CBD company to partner with a PGA majors champion.

In June, cbdMD partnered with Ballator MMA, a leading mixed martial arts organization featuring the best fighters in the world broadcast to nearly one billion people in over 160 countries. In the U.S., Bellator can be seen on Paramount Network and DAZN, the world's first truly dedicated LIVE sports streaming service.

As part of the partnership – which began at Bellator 222 in New York City – cbdMD will receive a depth of integrated partnership assets, including category exclusive branding inside the Bellator cage, to promote cbdMD.

"We're excited to have our company represented in the cage alongside some of the fiercest competitors on the planet" said Caryn Dunayer, President of cbdMD. "Our partnership with Bellator and Viacom/Paramount will facilitate a unique opportunity to educate athletes and fans about the many benefits of CBD. We believe we've started a lasting relationship that will help push both industries into the future."

"While our products are currently in over 2,100 retail outlets in the U.S. and we are gearing up to expand our retail footprint, we also believe in growing our e-commerce channel. We believe we will separate ourselves from our competitors through our unique online marketing campaigns,” said Dunayer.

The current distribution footprint of 2,100 retail outlets represents a 200% increase since the passage of the Farm Bill at the end of the December quarter.

Despite its strong foundation and recent successes, YCBD is still relatively unknown on Wall Street.

On a trailing 12-month basis, based on cbdMD’s sales of $11.5 million, the stock currently trades for price-to-sales ratio of around 16x.

Its peer group, including Charlotte’s Web (CWEB.CN), Canopy Growth (NYSE: CCG), Curaleaf (CURA.CN), Liberty Health (LHS.CN), and 1933 Industries (TGIF.CN), trade for an average trailing 12-month price-to-sales multiple of more than 60x.

Cash rich from a recent offering that raised $13.8 million, YCBD is positioned to win big in CBD, and we believe YCBD’s steep discount relative to its peers will begin to correct itself this year as the company executes on its proven growth strategy.

To learn more about cbdMD, be sure to read our full research report on this exciting story.

Questions? Contact a RedChip Specialist today at 1-800-RedChip.