CVSI - Earnings call transcript Q3 2020

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Operator

Good afternoon and welcome to the CV Sciences' Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I would now like to turn the conference over to Elisa Dunn [ph]. Ms. ahead, go Please Dunn.

Unidentified Company Representative

to differ good materially are used and CV cause they to With forward-looking should, Joseph Sciences' such statements as words Officer, relate statements expressions may to Q&A statements. actual would Chief and Sciences call, the during intend, CV will, prepared prepared uncertainties during risks may management's in Dowling today estimate, make and believe, remarks Financial remarks expect, as the When like forward-looking those may I that Grasser. are Chief from to at forward-looking Joerg These you subject afternoon, you that and us this call, statements anticipate, everyone. contain time. CV with by could, and similar remind management are project potential, anticipated Thank session. results Executive this this Sciences forward-looking Officer, additional

provides to the wish afternoon found at summary look call, results. of Participants at may who non-GAAP The be please release financial note most of release press issued in on a refer Company press performance today on management non-GAAP Sciences November today's may this announcing CV call. the Xth, which as this results. done call, Finally, a full GAAP refer for the already the that earlier its may measures certain press a its cvsciences.com. measures. press from Sciences' comparable financial This its financial company the to to CV so, Please release financial results not GAAP measures from on excludes release expenses have reconciliation to will

community. Officer, from like will for Joseph Q&A I Executive Dowling. now to Chief the CV prepared open turn Mr. remarks, the we Following over call would Joe. the Sciences' to up analyst

Joe Dowling

impacted by for those is our this and to been you out that safe hearts to go this everyone afternoon. hope continuing us We and have Thank all joining stay healthy pandemic.

focus be one been Sciences continues number at here CV has and safe. to Our employees our keeping

our for Daily remote work safety the practices protective response of temperature social each initiated We utilize mandatory implemented checks, and we health in to employees and this including. remained continue enhancing including use confident protocols, protocols covering, hygiene initiatives and face equipment We to the distancing challenges rotating where and schedules health and screening personal including pleased external inherent possible. COVID-XX continue and adapt to pandemic. with business have our

continue of functional provide As we company uninterrupted the noted, have all to customers. areas to our service

of to uncertainty. and growth category and COVID-XX to of The have deliver team privileged year this our competition that mission regulatory as level corporate increase daily committed our the a employees dedicated and ongoing challenges Including upon are remain. strategy. We impacting industry well exceeds as and

positioned industry leading really to well it be is take Our and deliver capitalize focus innovation to begins on long-term quality to a significant and when opportunity off.

brand Our and into new position recent as new well sales immunity as category including for us a innovation introduction channel the CBD product expansion. expansion

the products, in channel. right right with communication packaging brand the the and have and right We

our broaden to and portfolio opportunity our upon build revenue to continue drive will We growth.

ability examples launches product to of during QX bring our are market. to and Our products innovate

specialty since distribution products, food flagship CBD natural been and including Our and is single Plus brand have channels a XXXX been sales which the our with ecommerce. at to-date brand, in assets has aimed market drug accomplished mass, and

reaction flagship and during in public which in fresh alone of health new CV at decision keeping have out These retailers us time insights. launch Plus double-digit sciences based heavily of under is decades a support refresh facing packaging brand experienced that times made the CAGR palette supplements are expected and XXXX, well billion market. to and relevant is and the Also with our five brand CBD first branding and extremely immune products well. and has the represented CV positive. and refresh challenging clinical The This a spent and market and very is SKUs of is been most brand. a our trials Defense. of that has XX launched thought conjunction improved season health. or immunity consumers distributors, the We years. In supported have great especially new of North as from to with is We we on value America enhanced all served in by QX, new the with brand we Acute While brand CBD understand two consumer Plus color health. products; our big the flu a $X this grow over we next our deal global plus to upcoming important one head immune into This of two are packaging,

use. do products immunity for Our intended Which think not is CBD. formulation contain the we the right any

our believe immunity on we doing. sold product platform. its categories very and be across can not now products which we we immunity Right opportunities is CBD Amazon any on Also our allowing with to our today, products sell merchandising line However, promising. are Amazon are CBD

and product immunity line immunity product very Amazon customer is encouraging. response Early the an Our important platform. allowing foothold distributor, is distribution establish line to to us on retail our

multiple all as very is channel. Lane store channel as Our THC convenience discussions in zero anticipated this the with offering penetrate positioned believe we're priced Happy $XX. well under with We Lane delivers recent the to for a brand launch distributors SKUs progressing of and Happy is

a communication Our initial six and and tinctures, specific gummies. targeted include roll-ons, chews to SKUs softgels, brand demographic. packaging With

leverage Pet $XXX growth. category the opportunity brand exclusively expected are And in targeting Line, trusted billion same by to announced distribution with for our Pet The channels. and this hemp $X.X earlier specifically the exciting CBD flagship products the end launch that of Lane excited Pet, distribution CBD in extracts Plus of to full we're we're cats. our used extract new last equity across Happy with a to begin opportunities week, dogs grow formulated billion brand the to the has produced our hemp us we is channel, provide of These XXXX CBD Plus line existing and sales participating convenience and an our store, in brand channels. While

you and can we're remain positioned well have which anticipate of channel opportunities. we As expanding the brand, exceptionally believe, busy established. once our the confident We acceleration industry further see, framework we and a categories in is highly category growth been long-term outlook regulatory for

front, regulatory to enforcement. advocating stakeholders we a with of Washington oversight diverse are work On and the CBD regulation, that group DC continue for

XX-XX. energized the CBD DC consumers Market sales will if, believe has growth is put all CBD clarity. but and introduced Full anticipated release the enforcement the CBD science, Protection lead XXXX. a and companies conversation catalyst pressure and CBD which in have provide Policy in of most Stabilization and compliance. when. only to FDA with highly across regulatory a regulatory have not quality invested that credible this successfully best Enforcement We Consumer be which occurs. HR retailers with FDA and retailers will distributors supplements significant will of CBD We channels, It dietary matter partnering to and Act on of Which the

be will and be are regulatory products We framework of sensible will a where high-quality implemented self-evident. confident that clarity companies

company. are We that

provide our now channels. update brief me a on direct-to-consumer BXB and Let

continues quarter a level relatively During basis. reflect with second on as quarter nation-wide. third This significant stores QX, ended a with the our X,XXX to store count we remained consistent year-over-year growth

Our in channel. FDM position to strategy remains ourselves the

a component channel regulatory the brand. remains expansion our overall with and For strategy. focus The investment we Lane DTC target channel, our post market of where convenience store critical expansion and and of significant a Happy the into leading is are area

We Plus are We've continue Amazon invested launched support CBD our improve website immunity website, and add enhanced heavily product invest in ecommerce an our our updated and recently CV capability line. to updated capabilities an Sciences' and distribution resources and to of operations.

sustained growth that confident and are our all for brands will these products. investments of long-term We achieve

move our drug onto I'll development program. Now

mentioned and during validation of QX and USPTO XX, our providing our work our Patent As continue on Notice toxicological and COVID-XX. Issuance program. operations logistics We impacted through planned We've call. studies May the clinical XXXX our pharmacological global X Drug for support by received in for from to Phase of Formal the study completed

not X for effective forward we and to of spite trial. developing believe we of clinical the program In this potential strongly for in of an challenges, a smokeless date As continue Phase do guidance addition. a a therapeutic result, move treatment success commencing these have the tobacco

over industry. Joerg, I a of I turn to confidence want Before continued CBD sustained the it and reiterate development and our expansion to

the that confident headwinds will the and uncertainty regulatory are including pandemic, competitive resolve. current We environment

like growing take normalized will respected As competitive sustainable, advantage this Sciences' and most occurs and this the CV exist trusted in more market. companies thrive and will a of environment

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

Joerg Grasser

everyone. afternoon, good and Joe you, Thank

reflects second During million we period. to in the of increase revenue channel regulatory uncertain while and our for the continues the COVID-XX to from up The sequentially competition the third year of quarter of $X.X improved which to reflect impact the prior quarter market and million decline generated million $XX.X largely sales XXXX, $X.X sequential compared revenue environment increased year-over-year due is in the natural in CBD.

significant FDM replenishment see as reflecting year decline in within compared continue as CBD our revenue channel well specific product operations limited a challenges natural foot to traffic year-over-year was of as in generated partners orders prior the sector. significantly Our in have timing to the the retail and increase the the ongoing period. channel primarily markets the less We year-over-year

as for third FDM Off to as Our refresh Retail the of period second retail With a XX.X% in on second basis. lower stores branded increased in a same retailers year. constant the the pricing, Website quarter, result last the the Plus a year-over-year X,XXX a The approximately the of revenue was XX.X% lower reduced from But the lower X,XXX year-over-year quarter basis sold of second third to our consistent XX%. branding. in more product production improvement quarter. result quarter approximately we prior margin XX.X% and visitors end retail at XX.X% new reflecting X,XXX was ecommerce XXXX in relatively to of stores gross quarter's nation-wide increased revenue sequential by stores transition margin XXXX. growth of in with pricing pricing than CBD quarter. as distribution compared the rose and a is cost quarter over of XX.X% declining from an our with Gross from of remained of XXXX. third total of on result

we SG&A by of to GAAP of and basis, of of period. in lower is loss XXXX. R&D net of million we per compared loss adjusted loss a same quarter XXXX, quarter EBITDA $X.X $X.XX generated third the $X.XX. in or compared lower $X.X loss a for quarter result per share an million compares $X.X profit of the net Adjusted million the or partially of offset EBITDA to or was net in share. loss reported gross a or loss of million year XXXX quarter XXXX the year reduced a On adjusted net an prior The This EBITDA million of prior adjusted period $X.X per million third expenses. $X.XX For to $X.X third share $X.X $X.XX the

balance turn me our to Let sheet. now

continue We end operations manage development was XXXX. we third of used of million on XXXX months nine million $X.X the with first the during cash XXXX $X.X of drug approximately of ended our spend $X.X at our to quarter and total in efforts. million cash $X.X which million carefully compared the to position of fiscal Cash very

in capital $X.X of end also to third our Inventory for end channels. amounted to million ecommerce of at We the $X.X the of million the mostly compared XXXX. $XX XXXX to fiscal quarter support expenditures at technology invested million

cash during in modest in savings. we've natural particularly model achieve We us the need our focusing remain channel. $XX As to of we've the end discussed encouraged confident the over allowing cost improvement the investment track remain and right-sized our business. QX quarters, target we controlling on set of sequential have We with for the on business of current few revenue its to been which OpEx heavily annualized appropriately We're the last minimal by nimble capital at million remain environment.

the to Joe. I'll Now over call turn

Joe Dowling

Joerg. you Thank

open a few line Before the we to final comments. Q&A,

We channels, or Understanding refreshed have with requires and the and a where customer pandemic. been period launching products, the In with new new very SKUs. price. packaging, be brands from or strategy customer and this have August the than XX-day three XX the at A speaking busy XXXX more successful we the through are, strategy. in the will directly sales brand right they right brand communication our right to during right drives the right November

We doing are that.

the winning safety, can level backed With confident by that, commitment continued Operator. a start the all of of highest are strategy. that quality, our to We Q&A. we science innovation, it rigorous product is

Operator

from and Eric of first question Private our comes Please Instructions] Burger [Operator Investor. question. with line the your begin [ph],

Unidentified Analyst

on out, you information find July see square to you if any that me can of give wanted to you. me if a bought facility I aboard can XXXX. Thank I was any XX,XXX foot in color used. investment wanted get

Joerg Grasser

Eric, Joerg CFO. Grasser. this is I'm the

facility agreement XXXX this during and the landlord. a of facility return of termination facility entered into of So quarter third point at [indiscernible] to we the facility back its this time we the

Unidentified Analyst

thank Okay, you.

Operator

Roth Our line with Market. the your Please next question. Scott question proceed from Capital comes Fortune with of

Unidentified Analyst

future several color stepping This for new for looking is you've lines past of in the months. around initiatives some your product Scott. over Nick just out rolled I'm marketing as couple

initiatives guys on marketing some product that launches pursuing me give will are and be new support you your with shelf just can great. you color If conjunction in what

Joe Dowling

Yes, This refresh it in it and CBD made that we're were while marketing And traditional marketing I we materials also support least since our that thank the But refreshing clear is of feedback the the gotten that. at mileage sales marketing importantly needed digital channel. looking brand was environment, all as brand, market we on been it clear which might are that really see you brand direct-to-consumer lot Joe. has to Plus today's as and we of brand were in Nick. out we getting and think materials XXXX, that the you brand materials a communication of including our at to the BXB all support refreshed support to more well in those with go more that that of we support

another. variety products and goes well a individual support one are of that it's different as collateral from quite that really effort each brand so marketing And for as

really our have all our CBD it's So immunity Plus brands our But line it's three, we thing. not across Lane line. now anyone as and well Happy line, as

and and effort significant a it's to So BXC. BXB very individualized

Unidentified Analyst

it, if more the you that I guys. on that? Plus store for Happy mentioned compared up suite the competitors color the to opportunity in large pricing of CBD does obviously one in. selling price remains products? this Where in a Got and segment guys you thanks just Lane C and a at squeeze guys those your into consumers strategy shift to of shelf could you Do on channel, for have full top your competitive

Joe Dowling

same product our and market the process of Happy we're is pricing innovation channels Lane. evaluate of that to to really the Part expecting enter with we did the

currently and So that was with existing we competitive penetrated market surveyed are store there. to products entire the much into the the very C we our be that space markets priced

as work company a we product the bringing that done put products every We and our the are pricing market. also we've on that trusted not But with brand that to the think only each we're safety science competitively. our that we well all quality as brings

offering consumers. value it's for that very think to price high we So a

was no, currently. it that products are with there existing out the So we that made competitive sure

customers and question second Lane to that's way your products? we our CBD transferring do currently see Happy products you could possibly other up sell absolutely think moving it was, that go locations think Plus Lane an I I too. products. into So could CBD distribution Where have or Plus can the opportunity Happy

the and with same immunity is think both our line. I is there cross-merchandising for products a opportunities So true

these channels. we're opportunities excited new very and across multiple all offerings So about sales product

Unidentified Analyst

Got for the color. it. Thanks

Operator

the with Our question. next Please with Cowen. question of Gerald comes from line proceed your Pascarelli

Gerald Pascarelli

the Thanks well. much questions. very taking Hope you're for

brand my refresh Plus CBD. is first for So one

a to on sequentially expectations. brand see initial the will Any is Thank online on early particular. close offer color reads And any offer since any Just I how you could October, you third relative kind where so of think now. selling early anything performing then, quarter? month the pick almost in it's e-commerce Do up to be could you. relative you helpful. you been

Joe Dowling

hope you're I up for you little question. the and are too. and comment. all Gerald appreciate cooped the We bit thank you, I Thank a well

over of XX new can really has last that We tell the continue that, it's sales and and SKUs, What and are is have saying stronger Plus through November. the average QX. to it what really tell did days launching right. than too You're CBD you refresh is. October our I been all impact We're early that brand will on

that encouraging launch And so the is because and new partly of product.

little if not our So we this line impact products Lane to and this we'll for refresh see be revenue. The for is But new bit Happy the that as distributors, immediate enter nervous. our but top retailers important and probably an consumers true, positive. Plus our also because the and line feedback just from CBD more is in brand overwhelmingly feedback weren't

you boxes and to really more the know as tell to boxes in went that real story and in outstanding positive. gave is the retailers may reaction our As And consumers connect from very, being and lot being with very said a distributors, estate from us not customer. I

QX confidence gives only first of us but going also a into half that lot of about So not the XXXX.

Gerald Pascarelli

That's Joe, for question next much just thoughts your is competitive growth great, encouraging. very the very My color. on prospects in just dynamic. the Thanks

a examples. CBD you from with as know Happy the So right. momentum few Cronos quite we've There's LPs Canadian Canopy seen two from US Dance entry the Growth, as into market,

some levels of from the thoughts like natural hand in on But to And CBD just your environment? you so as get that these Thank a a think US both. here saturated high So the you. products coming you your on have other channel what then players have presumably Canadian you should albeit a out the part be longer-term push is, to weeded which as do prospects the because result continued question in color. you the landscape one challenged happens does the in opinion even LPs into then, market growth of second competitive validate

Joe Dowling

question. standpoint. a room this elephant of what the regulatory is, It's happens challenging The a all in for from

I in that whether guess or strong catalyst think a for know space, this, into open including regulated companies to regulated how open competitors Amazon and it's significant the And FDM, function CPG that is channels the other sales get environment all to channels a that going I it's really whether decides best a the LP up that to that all of having it's is remind may positive. channels be to will up a Canadian retail example. to big environment

it's out bad actors help it's be think fly-by-night the environment. not the So and crowd that function some I to okay, going think a of able to regulated I companies will in

And few Gerald. more a so, players strong

I bring - and the think is category. It's while at for increase more it our competition. least now credibility to okay probably may

Gerald Pascarelli

Super I'll helpful much color. Thanks the Joe. into very back queue. hop

Joe Dowling

Thanks Gerald.

Operator

next and Instructions] Piper your Lavery question Michael with our Please Sandler. with question. of the [Operator line comes proceed from

Unidentified Analyst

This for is [indiscernible] taking Jeff for Michael. question. the Thanks

pet So to how question somewhat Plus products next entry space, market On to the you to related your and into pet products differently CBD humans? do your distribute earlier. compared regular plan for your

Joe Dowling

There's packaging for and Jeff. go new we brand. the existing if press considering that to can so believe do week product earlier this trust lot question. innovation I'm Whenever first in the brand a on things ask That's line. is, lot we of leverage legacy to release of because development, on our we're rendering our pet good I our process. consumer a you back earlier product going have line in the saw what there, Thank we absolutely said our was our can we about pet yes, we our answer of value you, a one this the

it a that pet saw is Plus CBD line. You

existing definitely flagship leveraging Plus CBD our we're line. So

if immediately. assets intend can and on We is slot yes. existing those question easily working our can The two be we asked the distribution? into can and slot very second something we to can really And this that last questions our existing do years those for that that been into leverage we that six we have answered, is, so we channels

But launch believe launch certainly that can and to of specifically. because can launch is to they leverage channels our do the contain channels the that regulatory lastly, we have this certainly that be we so immediately. FDM as the we shelf we CBD. so clarity. which channel products We But able part have, FDM do these plan we channel existing do also into go cannot space the immediately have DTC And will relationships are intend we natural and They we well. when other specialty and of into and into because our

our asset leveraging line. So we product as pet accept intend to distribution channels, going then well existing is we as stores specialty are pet for as were it primarily, that as stores significant. develop be assets brand to we other appropriate have would other If that be we well a that line, we our pet to think the equity specialty would

Unidentified Analyst

Great, question especially and really being entry And expectations? you. distribution secure you your just to but your distribution and evolve? it early boosting would immunity That's as I large of compared how thanks. on helpful. benefit relates Amazon into your know how to Thank space the has is, do ability retailers expect other my and the it's love color

Joe Dowling

So the channel mentioned fit immunity that product into for product I is line? which existing and the a channel. our natural retail innovation perfect comment slot It's we same for regarding can distribution this our just

products relationships as are put the on new a flu great there. we trusted very to have They Sciences certainly potentially the anxious are like with from in season, shelf challenging We upcoming CV especially suppliers pandemic.

strong So backed by they're companies for looking products, science. strong

as sold Amazon. potentially mindshare. with think merchandise on for we opportunity Sciences a cannot which establish for foothold being those back only is brand it's Amazon channel. fit consumers with our also cross very products product to lot and CV a able and to shopper we currently partner us But there's Prime our natural the website company us also, Amazon So of to relationship can to great But allow of CBD on it's direct-to-consumer where be a establish not for the our Amazon a potentially CBD and really true for direct channel. get our that that as well Same establishing to true Plus

So are very we The retailers strong smart it from consumers. only a think Early not us. distributors promising. strategically very signs very is for as move is well feedback as but

So prospects very our for optimistic we're very, about immunity the line.

Unidentified Analyst

pass much. Good. I'll so Thanks along.

Operator

the turn ahead. the go conclude does Joseph call for conference call That back Please I'll today. to Dowling.

Joe Dowling

joining confident support We for our growth and appreciate you really today. remain with your us Thank long-term opportunity.

continue to will to industry again. our to our on offerings, focus and distribution, We great to allow growing and environment revenues product the day. a leadership Have broadening our our sensible a you providing much-needed regulatory advance expanding responsible realize its potential. Thank

CV Sciences (CVSI) 6 Nov 202020 Q3 Earnings call transcript