CVSI - Earnings call transcript Q1 2019

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Operator

Greetings and welcome to the CV Sciences' First Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode and this conference is being recorded. With us today with prepared remarks is CV Sciences' Chief Executive Officer, Joseph Dowling; and Joerg Grasser, Chief Financial Officer.

Following the formal presentation, management will take questions from the analyst community.

Before I turn the call over to management, I would like to remind you that during this call management's prepared remarks may contain forward-looking statements, which are subject to risk and uncertainties. additional during make Q&A may management forward-looking the statements session. And risk statements and are forward-looking and subject materially. These differ to uncertainties, may actual results estimate, as they this anticipate, to CV will, in the such relate project, intend, forward-looking are enable, statements. should, expressions used potential, expect, similar When and Sciences believe, call, could, words actual CV all materially from differ that cautioned risk Sciences’ are to this statements involve and anticipated results by uncertainties Investors forward-looking that at time. may cause those

Sciences’ more be are with fully risks public other CV Exchange can filings U.S. in which addition, reviewed and Securities In the described www.sec.gov. Commission, at

may I have first to the on summary Officer, developments who Company conference the then a XXXX. wish this documents as not and of over provide to a note, at management reconciliation to financial XX-Q today like financials Executive financial run certain comparable results. announcing call, non-GAAP Company's the this Sciences’ Please already Company the the please Finally, Participants Sciences’ full from provides may done from quarter of of and on earlier expenses most on measures. afternoon, CV CV results through Sciences' the who Mr. the call to will measures Dowling, with and results. press issued XX-Q will would for performance non-GAAP refer SEC the excludes May Joseph this activities now release CV the which today This a refer and Chief an release to filed overview GAAP look call. so, those X, its financial business to the GAAP of financial measures for its its turn press

end open and up remarks, of for these the questions Following conference. Thank the you. at we answers will

begin. may You

Joseph Dowling

an and the recently in me Officer in have Financial to of as served than finance, for a pleasure December, Joerg most of Thank reporting subsidiary joined Brands. our more Chief recently thank you our financial and background Grasser, It today. extensive my a background Company Joerg experience today. Prior of much. Chief Officer afternoon, joining coming accounting, with to Brewing, is from operations. Accounting call you Sciences, our Constellation everyone, Good very appointed of as Controller joining CV Point Ballast he XX years and XXXX

comments he's was to During to minute the and few fill the let of role. that, last team months, highlights With invaluable an through clear been choice our take this me member off will quarter a run and remarks prepared Joerg run with business Q&A. developments let before the opening our I through of on then will the I our for finish our financials. line

states. Balm record a across revenue performance flow. available customer, In first $XX.X during positive million a half XX% growth retail doors total, publicly. given since but our alone permission with dozen gross discuss to added and generated CBD we is with food, The of did large milestone not for disclose our across this was expansion as Sciences believe drug agreement account to a marking under will merchandiser CVS, name We we drug be first the new the shipped new have in cash Currently, margin a broad the stores and good to about mass X,XXX beginning order CV we national what of of quarter first quarter national the over accounts. PlusCBD retailer, products been the initially and

Our to natural the line hemp-based according CBD PlusCBD number channel SPINS. products in one product continues selling to data retail aggregator the brand the be

other retailers several currently pilot programs addition, appropriate conducting look FDM on these to large at In providing forward an update and we an with partnerships are time.

in from communicated in on state the state four XXXX a On statements level the or disruption of discussed California call, CBD despite anticipated health on last comments earnings play are year-over-year result Public short-term both states the our process period cautionary particularly growth policy a out the that sequentially The who quarter. the differences due of Department retailers on have achieved and issued the awaits aggressive regulatory industry first been public we state-by-state level FDA. was accessibility. to CBD we three or of pressure departments difficult quarter has oversight The to at action hemp-based being state regulations with as Health. by differing placed

states category. a people with an important is is and product of legislation extremely products legislation who this and to provide as is there beverages we clarity expected prosper. market or committees done state An his passed population We support the legislative of California Governor is early to Assembly including two The XXX in hemp we Bill hemp to will industry. derivatives XX extremely that industry industrial beneficial working administration thinker in cosmetics. continue widely legislative in or true are positive with efforts California some know champion cannabinoids critical cannabis a bill allow example as the this have hemp to legislation California. inclusion and with food, very However, as to other Newsom is as that to X. be and has the industry this look just we in This million and California of pass expand through forward our July in and unanimous extracts allow and and hemp-based forward CBD timely would

Now, financials. turn it Joerg to our to through let me over run

Joerg Grasser

look excited speak you, Thank my honored today. to you role and a very of you I'm and good dialogue about new the with I'm all to Joe, starting with everyone. forward afternoon future. in

distribution further to footprint. This to was revenue the sold end interest in quarter. contributed Rising XXXX. rising XX% by CBD, first our a consumer during quarter the the XX% channels $XX.X QX of and growth driven generated quarter with our growth distribution from Oil and hemp-based across each and in we strong X,XXX ended consumer fourth stores demand for new of products expansion product first $X.X launches, retail growth branded quarter, increase PlusCBD first of million compared the to the our retail During nationwide, in million of XXXX. revenue We demand growth

end new did our our not quarter came note of largest that first to the and near However, initial account net significantly contribute revenue. quarter to shipments the please

of in year-over-year to into gross quarter, of of Our translated point increase of fully in a net $X.X QX our systems in first net a first or modest to first income to XXXX. million net $X.XX we the revenue investments EBITDA per the loss million XX.X% a XX.X% million we XXXX. XXXX. compared margin have basis The support profit reflects share revenue QX in increase adjusted compared XXX to continued XX% of additional growth in GAAP quarter XXXX, $X.X In decline $X.X quarter gross and On or the strong to share we reported made of the $X.XX management generated resources diluted for the first and in quarter growth. of XXXX million per business an compared $X.X basis,

mentioned diluted So in period diluted of of $X.X net of income stock million in was loss expense net first income non-cash $X.XX quarter per retirement $X.X or stock net million with prior to share. XXXX compares for fully payroll share. million these $X.X both the million $X.XX non-cash expense current I compensation Adjusted the expenses excluded as the $X.X per or adjusted the This $X.X included fully million of of of associated compensation and as well additional expense. Founder period our

XXXX continued of growth organic the of to $X.X cash of million increased during scaled and up we and million. million at XXXX our the We balance at up operations Inventory amounted million our slightly operations $X.X demand. balance from the of Our with from ended million the to strengthen market are year-end. quarter to Inventories first generated first quarter by as end $X.X cash to have sheet $XX.X meet quarter cash. of continuing $X first be

over Now turn to Joe the I'll development. call back discuss business to

Joseph Dowling

you, Thank Joerg.

business remain development activities Our robust.

quarter, quarter. last expanded of has first distribution, the the passage new which new interest As into Bill retailer we distribution significantly the in of Farm XXXX channels across materialized noted

pilot in cases national with with additional retailers. are in retailers multiple conversations some and We currently in programs

months. wins to the see We distribution additional expect new coming over

capabilities, quality with the our and in are history science production category, Our retailers. product resonating

also topical retailer we greatest topical to are products additional growth the as including of seen near-term retail new We support developing products. acceptance our have

skew Our opportunities our see area second bestselling portfolio. already and Balm of to we expand this our is

a growth, including sales we For our On To product are expansion. XXXX are initiatives on it Roll example, marketing enhance our and e-commerce and of of currently testing resources initiatives our deployment has all support making implementation our from and and retailers. and we progress salesforce to automation the response received support favorable including efficiency

to XXXX. well for fulfillment In planning the addition, our and our we into of support an manufacturing expansion also capabilities needs beyond growth are phase

of diligently European sources material our support growth Bill, we transition passage the of domestic XXXX With This Farm XXXX sources in XXX% have to to worked secure of beyond. and for needs. in from also is domestic planned the raw

to position company are investments markets. larger industry to retail opening in leader new, of is the be and goal Our the support these

CBD me that Journal and we the with patients PlusCBD Let the medicine of for published traumatic of disorder. committed for providing complimentary to study to post in clinical and recent benefit examine studies. proud One are in use products note our researchers in also clinical stress small April; Alternative

CBD, With market research component believe invaluable the additional we environment evolving an for growth. long-term of hemp-based regulatory is

update drug on our development operating a brief segment. Now

presenting progress. of both tobacco studies combining tobacco treatment drug We use XXXX addiction anticipate be on will cannabidiol our of program strategy. in of Our to need clinical QX CVSI-XXX make discussion multibillion the and drug in huge preclinical in results that from smokeless addiction. and the We believe unmet we and our QX program opportunity dollar and preclinical use strongly for candidates, of addressing and initial smokeless treating development continues our potential the our lead and of nicotine

will on announcements. We timing posted the keep of you those

NASDAQ of a want initially XXXX for application July, our to a provide in for I efforts this brief to be announced and investors. I uplisting continues We uplisting. on focus update our Finally, know

to asked We on CBD outlook. reiterate have turn our remain the you the the from would With over analysts. and To recently to look met the demand us to for driving maintaining of like let in to standards business, value. supplied respond in all and confidence as necessary and and about our our questions continues. to commitment with the I We process further close, me the additional Operator? documentation products questions that, any operator continue updating our answers NASDAQ will for to-date call NASDAQ review to future. environment the current hemp-based to We forward positive and optimism high shareholder the growth, representatives and

Operator

a Thank time, session. ahead. At Instructions] Grondahl Great. first be question Please we’ll Markets. from Northland is [Operator you. Mike go question-and-answer Capital conducting this Our

Michael Grondahl

Congratulations Thanks Yes. guys. on the progress.

give us said with that how for discussions retailers just many a you you talked and is maybe in of sense in Could one exactly? multiple range of that the You number currently mentioned you're pilots. a several, and you're also it is kind of couple, a that each

Joseph Dowling

be question. you Joerg This And you Hi, are Mike. to for Thank I and pleased the call the on with Joe. joining. everyone. for Thank is

active how those being result doing each talking mentioned as It's And retailer. many that we've more as number but to involved. FDM of major getting assume in that can I think or CVS and sounds of know the on first much I past hard became active that either might numbers quickly, to mover. for may with broad not pilot provide nearly CVS comprehensive, every of that those in studies that the be been you so the stores exact we're that a that have we're

to even I've to more we're in comfortable And saying expect what shortly. everybody have that several pilot my is Mike now on have quarter we're remarks, indicated specific do what we we're is second and going programs I wins that that think during underway. guidance prepared than be able can to are providing hopefully I rather said significant that that to that, you the talking report we assume

fronts. progress so question, not to a I a say but of the generally careful But lot I misleading dodging be lot I'm on And that of can about anybody. making not want we're

Michael Grondahl

pilots. to and Great. like more sounds number retailers number the of you're of couple the it talking a Well than for definitely

So store end that talking you're market to? a good. Is is that’s the channel, convenience

Joseph Dowling

that Yes, total on think how could We depending the as number stores. in significant a it count the depending It we're market thousand on that as couple pursuing high it a aggressively. think and about be number of opportunity you hundred how of is. channel. it's addressable and It’s you stores

opportunity. and products excited merchandising and different is little a are an significant we're as market. it are points than So very market The they a significant about that it's for retail or but still the FDM the price channel, very a bit natural

Michael Grondahl

do you you on two future growth? spending then say the making support And investments to kind some the across in maybe the are Great. What of most release you're too, areas organization.

Joseph Dowling

easiest one-year will We've at end two two full-time At So the equivalent our everybody. significant most increased ago XX, sense of Today, XX the the think employees. XXX significantly XXXX, ones the today. in first to quarter ones I make end and of March the we headcount from XXXX. we have had

a is increase. that So XXX%

to staying some is of senior but the it Some pace future including with revenue especially of company a that just lot in growth, for up management really Joerg Grasser to position is investment, growth. positions, the

and so it's on. is investment big would a other area in SEO, across the marketing area, media, that headcount big print marketing, one other types area So marketing and is significant social making I would R&D. conventional besides Mike, we One say, more of and all whether be personnel advertising are

investments as for side that believe positions our making in we R&D, are development process as future growth. product pharmaceutical the company We again development, in again, in well strong

And be expect so that of to areas those investment major would today very the the down road. returns we on good get

Michael Grondahl

jump back queue. the I'll guys. it. Thank in you, Got

Joseph Dowling

Okay.

Operator

next Capital Please ROTH Partners. from Our from Scott Fortune ahead. is here question go

Scott Fortune

year retail of the a you. guys. Good Real continue kind you rollout regional coming Thank side level do quick many of expect how CVS of to distribution, rest is to quarter CVS over from the X,XXX stores, how on that national from you of the mentioned afternoon. now a things throughout the and here? Good that

Joseph Dowling

on strategy, that. rollout them they with say discussion I but and we're very of entire the working So can the CVS part strategy, stores Scott. share don't their We're XXX approximately is closely,

desire I initial think including a initial it the types beyond it there beyond offering. expand think vertical expand launch. is initial a desire to that product to the there's the in And I they're

it's and only we're relationship. industry, think not a only We good for for increase be excited the our So company. but to that going thing about

Scott Fortune

the is into end X,XXX quarter? that real included at stores So the quick for XXX clarification, stores of

Joseph Dowling

Yes.

Scott Fortune

strength kind topical Okay. product, you the on And as standpoint? Can right on move have and the like what the kind what for, products, are clarity focused Seems topicals have the the looking FDA with of product said number products retailers we'll would product you offerings. side in of you as from waiting the SKUs a you step then pilot far and programs on and to other we're a of at, the into forward are lot through of get side? and now the retail balms

Joseph Dowling

Sure. Yes. That's a great question.

You're absolutely right.

To drug I that the think with any mass and in topicals knowledge, retailers my retailer launch. that merchandise topicals. included a than starting haven't large large initial other food, I seen are has

to I think to so that. you're see And going continue

the two standpoint, Extra launch. our an a of Strength and CVS initial we've from Strength included So and SKUs Balm in Regular sort

get we or we've shelf are a great prepared as hoping my development and had FDM which it's on under in CVS we for new ready mentioned very other I that product can launched. we're at retailers retailer topical that whether product, to those with response As remarks, have launch and favorable role placement

Scott Fortune

supply, whether they it's of retail meet are you critical hearing Okay. follow-up accounts? the positioned needs diligence, guys are Is it's looking versus statements points guys, far separate on you to issues competitors? side. or talking it when that toxicology as what their as how One really to GRAS for you you're these more whether or What kind the due and are large

Joseph Dowling

and that company GRAS trust store. of are of fact very the having think since retailers. on and safety the a that lot issue there's only So retail this a the remember, in the retail experience really, to the that retailer They status, category. product The are, a big mentioned, studies, our things from and interested all they these brand very it's achieve foresight had standpoint we started initiated the with and that well, are side we in. of do very I resonates pharmacy retailers sort that drug well especially you the Scott, the Clearly, of running top that understand

better So of our other data they some the to related retailers. perhaps safety the understand product, than the importance of

So the differentiation, those a start understand to consumers from behind consumer they the of are consumers product lot just very, things awareness, the And are the moving as think qualities companies to well. side, same I brand and to important kind of products very resonating that quality products as the the better well. the behind retailer and

Scott Fortune

comments, the about the moving off I know a I'll you fiber, retailers Then federal seeds lot dietary hearing of that you genetic of the pathway into Okay. as laws think holding does, you've kind California's FDA, far sense supplement from the follow-up they're as paying and beverages strain. mentioned talked to the the as on pure origin, side and beverage in are for out this, FDA forward? your genetics on food, your in of going laws, the CBD clarity. and more little FDA guys to CBD, them? food What's have the a food retail What clear you as of carve a and as Trump

Joseph Dowling

We’re questions there. going several –

me let to them some try me Let in take order.

a of very we're on and May the will the slot about we we're interaction be lanes MacKay have USDA. the that Dr. swim Bill. Farm a And blurred, your a that right Vice in only those where fair lanes kind And XX Duffy will in is and amount will where period that from Regulatory now kind swim Affairs. with think President of are And be be public our with do guidance to covered of First, we or that and FDA of comment, FDA observation there we excited And is established. the Scientific by our holding. presentation had speaking Senior fact have hearings

and with you guidance place. will as will framework seed I in to and is think we'll with likely think that start and start mentioned guidance, that certification we but think change USDA the a regulatory genetic, significantly from not it I that put be some

think ground. don't try as I I President there's will well think as that USDA Europe. And new for Canada to break in

look elsewhere while. where there a very they'll think programs for been I quite similar have place in

some As to some California as there's around looks the other Public there's the been say primarily products, yet Department And first of of kind California Health within CBD and proceed. an to available. the California, way of legalize State is confusion ambiguity of enforcement lot was it's Fed California terms would to Department of incredible that try Public irony irony. a far to Marijuana, I to other understand, there's with confusion how Medical the the in Health, so of interesting consumer states, that as products are and that

with ironed as will out quickly California as State legislative through think gone I it committees some which support. the my Assembly already I has possibility a of And being two that Bill early in X. remarks, XXX, unanimous July mentioned get as has of that discussion there's prepared with in enacted

that think lanes swim terms this would level at establish I law of – lot be California we the the harmonize in So that to a product with to allow to be of realized. I really discussion federal the are category think going think

Scott Fortune

your of be a last on added an sense couple just Okay. large second forward, quarter-over-quarter obviously this X% do you with that last here? But Thank kind it. the the what's growth of kind is board quarters some how going you. accounts in the quarter-over-quarter X%, to of And averaging year potentially will look coming change at seasonality question, last quarter there the obviously Is of year. can growth

Joseph Dowling

hard beyond we're – our you annualized able an can to is quarterly to is We so planning – to positioning goal choppy response million upward. quarters run but that that for as because it's going to quarterly as we future choppy said this company fully we that a achieve and speak. of pretty the internally the be that Yes, provide that to expect guidance continue do be and to to we're get that quickly goal you our this and in as are guidance, very we sequential can on isn't rate $XXX growth. very expect tell and – to I we basis and consistently kind internally of of sort to

we with that we're over the of And so very we're that growth to think have I to prospect. prepared going fully expect the in and mentioned next wins remarks that about coming excited kind the that we that be several expected as quarters

Scott Fortune

Okay. queue. Thank I'll you. I and jump back in appreciate the

Operator

Northland from next Our go Please question Grondahl ahead. is Capital from Mike Markets.

Michael Grondahl

Yes, Joe.

have it there a any skews reorders at So stuff placed through at the extra if sell you just topical, – on March, and the CVS some end any or early? sense of strength regular and too two strength you is sense or

Joseph Dowling

lag we early. to one think I it's will more before that ability we a to and a an good too that two a respond I would understanding question expect accurately. have have to quarter

Michael Grondahl

a Is it. couple the Got In good. reception pilots, a couple favorable the Roll where you're has that's been On, just so if that testing the smaller retailers, takeaway?

Joseph Dowling

I is we're takeaway has shelf. the across the Board. think on with placement only is then a and FDM – that about product one been don't the that good retailer excited they've for of very reception it's that opportunity speaking this has praised there only The

Michael Grondahl

something production good a in order places? is to for Is On, And Is if big you that Roll you it, go? deliver? with kind can of that got everything

Joseph Dowling

Yes.

Michael Grondahl

a for lot. Well, me. Thanks Great. that’s it

Operator

session. management now like This concludes I the to to turn floor for over closing back any question-and-answer the would comments.

Joseph Dowling

for Well us today. to joining everyone I want thank

you much. we the very of that on first progress to look lie the and rest updating call our made you the in opportunities year We the a of and the look are pleased forward next please and forward with great day. for XXXX to we have quarter Thank ahead

Operator

concludes This teleconference. today's

this disconnect at again you participation. Thank for your lines may your time. You

CV Sciences (CVSI) 8 May 192019 Q1 Earnings call transcript