CV Sciences, Inc. Reports Third Quarter 2019 Financial Results
Increased Retail Distribution by Over 800 Stores
SAN DIEGO, Nov. 05, 2019 (GLOBE NEWSWIRE) — CV Sciences, Inc. (OTCQB:CVSI) (the “Company”, “CV Sciences”, “our”, “us” or “we”), a preeminent supplier and manufacturer of hemp cannabidiol (CBD) products, today announced its financial results for the quarter ended September 30, 2019.
Third Quarter 2019 and Recent Financial and Operating Highlights
- Revenue of $12.6 million for the third quarter of 2019;
- Total retail distribution increased to more than 5,400 stores as of September 30, 2019, an 18% increase from June 30, 2019;
- Broadened retail presence in the food, drug and mass channel (FDM) and in active discussions for further expansion of the PlusCBD™ Oil brand;
- Announced expanded distribution partnership with The Kroger Co. by an additional 400 locations to a total of 1,350 stores;
- Announced distribution partnership with Harris Teeter for 150 locations;
- Announced distribution partnership with The Vitamin Shoppe for 383 locations during the third quarter of 2019, which has grown to 515 locations;
- Expanded e-commerce sales to 21.6% of total net revenue;
- Gross margin of 66.9% for the third quarter of 2019;
- Maintained total cash balance of $14.2 million at quarter end;
- Announced expansion of additional production and warehouse space;
- Appointment of three new independent board members; and
- Launched seven new body care hemp products.
“We continued to execute our expansion efforts, growing our retail distribution by 18% during the third quarter. We added new national retail partners in both the food, drug and mass (FDM) and natural products channels and we continue to see strong retailer interest across all channels. We broadened our product offerings, with the launch of a new body care line, further expanding our presence in hemp-derived CBD topicals, while allowing us to capitalize on the growing interest of national retailers,” stated Joseph Dowling, Chief Executive Officer of CV Sciences. “We generated $12.6 million of third quarter revenue, representing a modest decline compared to the prior year, reflecting the uncertain regulatory environment for CBD resulting in state by state ambiguities that are impacting retailer activities, as well as the short-term impact of new competition in the natural product channel. We expect both of these near-term challenges to abate as the regulatory environment develops, providing more structured guidance on the CBD market and establishing quality standards that benefit all consumers and expand availability. We are encouraged by the recent USDA establishment of the U.S. domestic hemp production program, and look for additional regulation to be established, particularly by the FDA. There is a significant opportunity to expand the market across all channels of distribution by broadening product availability beyond topicals, currently the only products adopted in many national retail chains. Further regulatory clarity will expand availability of ingestibles, which account for many of our top selling products.”
We believe that we are at an important period in the hemp-derived CBD market. Consumer demand is strong and growing, and there is growing interest from all parties in establishing the regulatory lanes that will drive the market forward.
Joseph Dowling, Chief Executive Officer of CV Sciences
CV Sciences is uniquely positioned as an experienced market leader, with industry-leading quality standards, a broad offering and distribution footprint, and a commitment to science and regulatory compliance as well as our corporate governance. We remain highly confident in our long-term growth opportunity and will continue to focus on building an industry-leading portfolio of products, broadening retail distribution and supporting the growth of the hemp-derived CBD market.
Operating Results – Third Quarter 2019 Compared to Third Quarter 2018
Sales for the third quarter of 2019 were $12.6 million, a decrease of 7% from $13.6 million in the third quarter of 2018. Third quarter sales were impacted by increased market competition in the natural product category, and the continued impacts on retail customers as a result of the uncertain regulatory environment for CBD. The Company’s retail store count increased to 5,435 stores nationwide as of September 30, 2019, up from 4,591 stores as of June 30, 2019.
The Company recognized an operating loss of $1.8 million in the third quarter of 2019, compared to an operating income of $3.5 million in the third quarter of the prior year. The decline in operating income is primarily related to reduced sales and additional investment in sales, marketing and R&D activities.
As reported under U.S. generally accepted accounting principles (GAAP), our third quarter 2019 net loss was $1.8 million, compared to our GAAP net income of $3.3 million in the same period in 2018. Net loss in the third quarter of 2019 was impacted by increased R&D, additional management resources and marketing activities to leverage future growth. Diluted net loss per share was $0.02 for the third quarter of 2019 compared to a diluted net income per share of $0.03 for the same period in 2018.
Non-GAAP net loss for the third quarter of 2019 was $1.1 million, or $0.01 per diluted share based on weighted average shares outstanding of 98.7 million. This compares to non-GAAP net income of $3.8 million or $0.03 per diluted share based on weighted average shares outstanding of 115.9 million for the same period in 2018.
Adjusted EBITDA for the third quarter of 2019 was a loss of $0.9 million, compared to income of $4.1 million in the third quarter of 2018.
Business Outlook
For fiscal year 2019, the Company expects revenue to be in the range of $55 million to $57 million.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss these results today at 4:30 pm EST/1:30 pm PST. The webcast of the conference call will be available on the Investor Relations section of the Company’s web site at https://ir.cvsciences.com/news-events and at http://public.viavid.com/index.php?id=136763. Investors interested in participating in the live call can also dial (877) 407-0784 from the U.S., or international callers can dial (201) 689-8560. A telephone replay will be available approximately two hours after the call concludes, and will be available through Tuesday, November 12, 2019, by dialing (844) 512-2921 from the U.S. or (412) 317-6671 from international locations, and entering confirmation code 13695960.
About CV Sciences, Inc.
CV Sciences, Inc. (CVSI) operates two distinct business segments: a consumer product division focused on manufacturing, marketing and selling plant-based CBD products to a range of market sectors; and a drug development division focused on developing and commercializing CBD-based novel therapeutics utilizing CBD. The Company’s PlusCBD™ Oil products are sold at more than 5,500 retail locations throughout the U.S. and it is the top-selling brand of hemp-derived CBD on the market, according to SPINS, the leading provider of syndicated data and insights for the natural, organic and specialty products industry. CV Sciences’ state-of-the-art facility follows all guidelines for Good Manufacturing Practices (GMP) and the Company’s full spectrum hemp extracts are processed, produced, and tested throughout the manufacturing process to confirm the cannabinoid content meets strict company standards. With a commitment to science, PlusCBD™ Oil’s benefits in healthy people are supported by human clinical research data, in addition to three published clinical case studies available on PubMed.gov. PlusCBD™ Oil was the first hemp CBD supplement brand to invest in the scientific evidence necessary to receive self-affirmed Generally Recognized as Safe (GRAS) status. CV Sciences, Inc. has primary offices and facilities in San Diego, California. Additional information is available from OTCMarkets.com or by visiting www.cvsciences.com.
CV SCIENCES, INC.
NON-GAAP FINANCIAL MEASURES
We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures such as net income and loss per share and Adjusted EBITDA included in this press release are different from those otherwise presented under GAAP. We use non-GAAP measures internally to evaluate our performance and make financial and operational decisions that are presented in a manner that adjusts from their equivalent GAAP measures or that supplement the information provided by our GAAP measures. The non-GAAP financial measures exclude non-cash compensation expense for stock options and other non-recurring items. When evaluating the performance of our business and developing short and long-term plans, we do not consider share-based compensation charges. Although share-based compensation is necessary to attract and retain quality employees, our consideration of share-based compensation places its primary emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. Because of the varying availability of valuation methodologies and subjective assumptions, we believe that the exclusion of share-based compensation allows for more accurate comparison of our financial results to previous periods. In addition, we believe it useful to investors to understand the specific impact of the application of the fair value method of accounting for share-based compensation on our operating results.
Adjusted EBITDA is defined by us as EBITDA (net income (loss) plus depreciation expense, amortization expense, interest and income tax expense (benefit), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We use Adjusted EBITDA because we believe it more clearly highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since Adjusted EBITDA eliminates from our results specific financial items that have less bearing on our core operating performance.
We use Adjusted EBITDA in communicating certain aspects of our results and performance, including in this press release, and believe that Adjusted EBITDA, when viewed in conjunction with our GAAP results and the accompanying reconciliation, can provide investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of Adjusted EBITDA is useful to investors in making period-to-period comparison of results because the adjustments to GAAP are not reflective of our core business performance.
A reconciliation from our GAAP net income (loss) to non-GAAP net income (loss) for the three and nine months ended September 30, 2019 and 2018 is detailed below:
