SAN DIEGO — CV Sciences, Inc., a consumer wellness company specializing in hemp extracts and other proven science-backed, natural ingredients and products, today announced its financial results for the year and quarter ended December 31, 2023.
Fiscal 2023, Fourth Quarter 2023 and Recent Financial and Operating Highlights
- Generated revenue of $16.0 million for fiscal 2023 compared to $16.2 million for 2022; Revenue of $3.8 million for the fourth quarter 2023 compared to $4.1 million in the third quarter 2023;
- Recognized gross margin of 44.3% for fiscal year 2023, a significant improvement from 34.2% for 2022; Gross margin of 45.8% for the fourth quarter 2023, a sequential improvement from 45.1% for the third quarter 2023;
- Cash balance of $1.3 million at year end compared to $0.6 million at the end of 2022;
- Generated cash flow from operations of $2.3 million in the fiscal year 2023 compared to cash used in operations of $1.9 million in 2022; cash flow from operations in 2023 included employee retention credit (ERC) under the CARES Act for a total of $2.5 million;
- Continued to reduce operating expenses, excluding the benefit from reversal of accrued payroll taxes, by 20% to $9.9 million for fiscal year 2023 compared to $12.4 million for 2022;
- Further established number one position as top-selling hemp extract brand in the natural product retail sales channel, according to SPINS, the leading provider of syndicated data and insights for the natural, organic and specialty products industry;
- Launched +PlusCBDTM Reserve Collection Extra Gummies and Reserve Collection 30ct softgels to support stress relief and relaxation (Q1 2023);
- Launched +PlusCBDTM Daily Balance, a new line of THC-free gummies and softgels (Q1 2023);
- Received formal notice of patent issuance from Japan Patent Office for formulations containing CBD and nicotine for treating smokeless tobacco addiction (Q1 2023);
- Received employee retention credit (ERC) under the CARES Act for a total of $2.5 million and extinguished outstanding note payable with Streeterville (Q1 2023);
- Reversed accrued payroll tax associated with RSU release to founder in 2019 due to the expiration of the statute of limitations (Q1 2023);
- Received preliminary approval of proposed settlement of shareholder derivative lawsuit (Q1 2023);
- Launched +PlusCBDTM Reserve Collection Extra Gummies to support healthy sleep, faster recovery, deeper relaxation and a brighter mood (Q2 2023);
- Launched +PlusCBDTM Reserve Sleep Gummies, specifically designed for better sleep (Q3 2023);
- Expanded +PlusCBDTM Pet product offering with the launch of pet chews for hip and joint health and calming care chews (Q1 2024);
- Acquired Cultured FoodsTM, a leading manufacturer and distributor of alternative plant-based vegan foods, providing the Company with manufacturing and distribution foothold in the EU that will allow for leverage of our key strengths and competencies (Q4 2023); and
- Continued to build an efficient and cost effective consumer products platform and continue to evaluate inbound and outbound merger, sale, acquisition or other options for the Company.
“We are very pleased with our fiscal year 2023 results. In a challenging environment, our revenues stayed flat at $16 million in FY23 compared to prior year. Our 44.3% gross margin in FY23 is significantly improved from 34.2% in FY22,” stated Joseph Dowling, Chief Executive Officer of CV Sciences. “Our 2023 progress demonstrates our continuous commitment to innovation and cost-efficient execution as we move closer to profitability and positive cash flow. As the CBD category consolidates, we have increased our market share in key sales channels, including the natural product retail channel. We will continue to focus our resources on new product development, as evidenced by our pet line expansion with our recent launch of pet chews for hip and joint health and calming care. During FY23, with the acquisition of Cultured Foods, we launched our transition to a global health and wellness company that will use M&A as a vehicle to leverage the strengths and assets of our Company.”
Operating Results – Full Year 2023 Compared to Full Year 2022
Sales for fiscal 2023 were $16.0 million, a decrease of 1.2% from $16.2 million in 2022. The decline is primarily due to lower B2C sales of $0.4 million because of lower average order value. B2B sales increased by $0.2 million or 1.5% to $9.2 million in 2023. The total number of units sold during fiscal 2023 decreased by 6.7%, partially offset by increases in average sales price per unit. We generated an operating income of $3.4 million in fiscal 2023, compared to an operating loss of $6.8 million in, mostly due to the reversal of accrued payroll tax of $6.2 million, improved gross margins and lower operating expenses. The Company had negative adjusted EBITDA of $2.3 million for fiscal 2023, an improvement of 62%, compared to negative adjusted EBITDA of $6.1 million in 2022.
Fourth Quarter 2023 Results
During the fourth quarter of 2023, sales decreased 2% to $3.8 million compared to $3.9 million in the same prior year period. The total number of units sold during the fourth quarter 2023 slightly increased, offset by decreases in average sales price per unit. Fourth quarter sales decreased sequentially by 7% compared to the third quarter of 2023. We generated an operating loss $0.9 million in the fourth quarter of 2023, compared to an operating loss of $2.1 million in the fourth quarter 2022, mostly due to improved gross margins, lower operating expenses and lower intangible assets impairment charges. The Company had negative adjusted EBITDA for the fourth quarter of 2023 of $0.5 million, compared to negative adjusted EBITDA of $0.7 million in the fourth quarter of 2022.
About CV Sciences Inc.
CV Sciences, Inc. (OTCQB:CVSI) is a consumer wellness company specializing in nutraceuticals and plant-based foods. The Company’s hemp extracts and other proven, science-backed, natural ingredients and products are sold through a range of sales channels from B2B to B2C. The Company’s +PlusCBD™ branded products are sold at select retail locations throughout the U.S. and are the top-selling brands of hemp extracts in the natural products market, according to SPINS, the leading provider of syndicated data and insights for the natural, organic and specialty products industry. With a commitment to science, +PlusCBD™ product benefits in healthy people are supported by human clinical research data, in addition to three published clinical case studies available on PubMed.gov. +PlusCBD™ was the first hemp extract supplement brand to invest in the scientific evidence necessary to receive self-affirmed Generally Recognized as Safe (GRAS) status. The Company’s Cultured FoodsTM brand provides a variety of 100% plant-based food products. Committed to crafting nutritious and flavorful alternatives, Cultured FoodsTM caters to individuals seeking vegan, gluten-free, or flexitarian options for a wholesome and satisfying culinary experience. CV Sciences, Inc. has primary offices and facilities in San Diego, California, and Warsaw, Poland. The Company also operates a drug development program focused on developing and commercializing CBD-based novel therapeutics. Additional information is available from OTCMarkets.com or by visiting www.cvsciences.com.
Forward Looking Statements
This press release may contain certain forward-looking statements and information, as defined within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and is subject to the Safe Harbor created by those sections. This material contains statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Such forward-looking statements by definition involve risk and uncertainties. CV Sciences does not undertake any obligation to publicly update any forward-looking statements, except as required by applicable law. As a result, investors should not place undue reliance on such forward-looking statements.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
We prepare our financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures, such as net income (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. 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, amortization, and interest expense, net), minus income tax 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.
