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CV Sciences Inc. (CVSI) reported its financial results for the fourth quarter and full year of 2024, showing steady revenue figures and strategic operational shifts. The company’s revenue for the year was $15.7 million, slightly down from $16 million in 2023, continuing a trend of revenue decline (-2.8% over the last twelve months). Despite the revenue decrease, the company improved its gross margin and reduced operating expenses. The stock price rose by 1.29% following the announcement, reflecting a positive market response to the company’s strategic initiatives. According to InvestingPro analysis, the company’s current market capitalization stands at $5.79 million, with a concerning overall Financial Health Score of 1.48, rated as "WEAK."
Key Takeaways
- CV Sciences’ full-year revenue dipped slightly to $15.7 million.
- Gross margin improved to 45.6% from 44.3% in 2023.
- Operating expenses were reduced by 5.4% to $9.4 million.
- The company launched new product lines contributing to 28% of 2024 revenue.
- Stock price increased by 1.29% post-announcement.
Company Performance
CV Sciences maintained a stable performance in 2024, despite facing challenges in a fragmented CBD market. The company reported a slight revenue decrease but managed to improve its gross margin to 45.6%, which aligns with the last twelve months’ gross profit margin of 46.3%. Operating expenses were cut by 5.4%, reflecting the company’s focus on cost efficiency. The launch of new products, including a cannabinoid-free supplement line and an expanded pet product line, played a crucial role in the company’s revenue, accounting for 28% of the total. InvestingPro analysis reveals that while the company holds more cash than debt on its balance sheet, it remains unprofitable over the last twelve months. For deeper insights into CVSI’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Financial Highlights
- Full Year Revenue: $15.7 million, down from $16 million in 2023
- Gross Margin: 45.6%, up from 44.3% in 2023
- Operating Expenses: $9.4 million, reduced by 5.4%
- Q4 Revenue: $3.9 million, flat year-over-year
- Direct-to-Consumer Revenue: Increased by 1.6% year-over-year
Outlook & Guidance
Looking ahead, CV Sciences plans to focus on achieving profitability and positive cash flow, which is crucial given its current Return on Invested Capital of -36%. The company is exploring mergers and acquisitions opportunities with Maxim Group and expects to realize synergies from recent acquisitions in the second half of 2025. The company also plans to in-source 100% of its softgel and tincture production by the end of 2025. InvestingPro data indicates the stock generally trades with high price volatility, with analysts anticipating sales growth in the current year. InvestingPro subscribers have access to 5 additional ProTips and extensive financial metrics that can help evaluate the company’s turnaround potential.
Executive Commentary
CEO Joseph Dowley emphasized the company’s efforts to streamline operations and increase cost efficiency, stating, "We continue to realign the company for growth and profitability." CFO Joerg Grasser noted, "We anticipate some modest cash usage in the very near future until we recognize the synergies of our acquisitions." Dowley also highlighted the significant growth potential in the global vegan food market, expected to expand fivefold by 2030.
Risks and Challenges
- Market Fragmentation: The CBD market remains highly fragmented and competitive.
- Cash Flow Concerns: The company reported a decrease in its cash position, which could impact future operations.
- Market Saturation: There is a risk of market saturation in the hemp extract segment.
- Economic Pressures: Macroeconomic factors could affect consumer spending and demand for CV Sciences’ products.
The earnings call provided insights into CV Sciences’ strategic direction, focusing on cost efficiency and product innovation. While the company faces challenges in a competitive market, its recent initiatives and future plans aim to position it for sustainable growth.
Full transcript - CV Sciences Inc (CVSI) Q4 2024:
Conference Operator: Greetings, and welcome to the CV Sciences Fourth Quarter and Year End twenty twenty four Financial Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brendan Hawkins.
Thank you, sir. You may begin.
Brendan Hawkins, Investor Relations, CV Sciences: Thank you, and good morning, everyone. With us today with prepared remarks are CV Sciences’ Chief Executive Officer, Joseph Dowley and Joerg Grasser, Chief Financial Officer. After prepared remarks, we will take questions from the analyst community. I’d like to remind everyone that during this call, management’s prepared remarks may contain forward looking statements. These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated by CV Sciences at this time.
When used in this call, the words anticipate, should, could, estimate, intend, expect, believe, potential, will, project and similar expressions as they relate to CV Sciences are as such forward looking statements. Finally, please note that on today’s call, management will refer to non GAAP financial measures in which CV Sciences excludes certain expenses from its GAAP financial results. Please refer to CV Sciences’ press release from earlier today for a full reconciliation of its non GAAP performance measures to the most comparable GAAP financial measures. This morning, the company issued a press release announcing its financial results. Participants who are on this call who may not have already done so may wish to look at the press release as the company provides a summary of the results on this call.
The press release may be found at cdsciences.com. I’d like to now turn the call over to CV Sciences’ Chief Executive Officer, Mr. Joseph Dowling. Joe?
Joseph Dowley, Chief Executive Officer, CV Sciences: Good morning, everyone. Thank you for joining our call. This morning, we issued a press release reporting results from our fourth quarter and for the full year ended 12/31/2024. We are pleased with our Q4 and full year results, especially given the very challenging market and regulatory conditions that our industry faces. In spite of the challenges, we continue to pursue our primary goals, which include increasing the scale of our business, achieving continuous cost efficiency improvement and with of course all this leading to profitability and positive cash flow for the company.
We are very focused on our transition to a global health and wellness company and achieved several milestones in that effort during 2024. Joerg will cover our financial highlights in more detail, but some key points achieved during 2024 included. We generated revenue of $15,700,000 for fiscal twenty twenty four compared to $16,000,000 for 2023. Year over year revenue is slightly down in a very challenging environment. Our gross margin of 45.6% for fiscal year twenty twenty four represents a significant improvement compared to 44.3% for 2023.
During 2024, we reduced operating expenses by 5.4% to $9,400,000 compared to $9,900,000 for 2023. Cost reduction efforts are continuous and we are constantly looking at areas for greater cost efficiency. We are the number one selling hemp extract brand in the natural product retail sales channel and continue to see market share of the top four brands in the 60% range according to SPINS, the leading provider of syndicated data and insights for the natural, organic and specialty products industry. Our primary goal as a company is to grow profitably. We recognize that greater scale is needed to achieve this goal.
Our strategy to grow profitably starts with product innovation, which will include both product line extensions and brand extensions. The second part of our strategy is to grow profitably is to achieve greater cost efficiency, including production in sourcing of select form factors. The third part of our growth strategy is to increase scale through M and A. Over the last fifteen months, we have completed two acquisitions, Cultured Foods and Elevated Softgels and continue to evaluate synergistic acquisitions. Let me go into more detail on each of these strategic areas.
First, product innovation. During 2024, we launched PlusHealth, an all new line of cannabinoid free supplements, delivering targeted formulations for optimized health, improved performance and increased vitality. The initial launch of our PlusHealth brand includes three new innovative supplements. Our first new product is Clarity, a cognitive enhancer. Our second is Peace for help with occasional stress.
And third, ReShape for metabolic support. Our PlusHealth product line, extension, allows us to leverage our existing distribution and infrastructure in both our B2B and B2C channels and provides diversification alongside our traditional cannabinoid supplement and topical products. Consumers and retailers have responded extremely well to these new products and we are evaluating additional product line extensions under our new PlusHealth brand. We expanded our PlusCBD Pet line during 2024 with the launch of our new CBD Chews tailored for pets. These new products include plus CBD pet hip and joint health chews and plus CBD pet calming care chews.
These wellness treats are produced at the highest quality level and are supported by extensive research and are now further validated by a landmark study backed by the National Animal Supplement Council, NASC. The NASC is the leading trade association advocating for the health and wellness of companion animals that are given health supplements by their owners. Our distribution of CBD pet products is also increasing. In September 2024, we entered a strategic relationship with Chewy, the preeminent online source for pet products. This relationship has strengthened our pet offering and provides a robust online channel for further pet product innovation.
Our acquisition of Cultured Foods over a year ago continues to make progress in its established EU market. One of our goals with this acquisition was to bring similar plant based products to The U. S. Market, leveraging our distribution and infrastructure to increase sales with a brand extension tailored for The U. S.
Market. Yesterday, we issued a press release announcing The U. S. Launch of our new plant based company and product line, Lunar Fox, which will leverage our success with cultured foods in Europe. Our initial offering includes seven products that provide plant based alternatives for traditional animal based proteins, including vegan cheese, egg and meat products.
All Lunar Fox products are vegan, sustainable and nutritious food alternatives addressing consumer needs for the growing vegan category. The global vegan food market is expected to grow five times by 02/1930 with millennials and flexitarians as the driving force behind soaring vegan food sales. Our Lunar Fox products are now available at select retailers throughout The U. S. And online at lunarfoxfoods.com.
The launch of our Lunar Fox product line represents a key milestone in our transition to a global health and wellness company. The second focus area for achieving profitable growth is cost efficiency. During 2024, we made significant progress to improve cost efficiency, including by reducing our operating expenses by 5.4% as I mentioned earlier. Also during 2024, we realigned our warehouse fulfillment operations, which resulted in much lower shipping costs during 2024. We continue to work diligently on both cost areas to achieve even greater savings moving forward.
Our acquisition of Elevated Softgels in May 2024 represents a major opportunity for savings and margin improvement. We have historically outsourced all product manufacturing, which has advantages, but can also result in higher costs and lower margins. Elevated Softgels provides us with not only a functioning contract manufacturing business, but also allows us to in source the company’s Softgel and Tincture manufacturing. This acquisition provides us with operational flexibility allowing low to large minimum order quantities, MOQs, for our customers and our internal production. This provides for an efficient use of capital and the ability to increase speed to market of new product development for our customers and for our own product innovation.
Our strategy with elevated softgels is twofold. First, to increase the CMO business opportunity and second, to in source production of all of our softgel and liquid tincture products. We hope to in source 100% of these form factors before the end of twenty twenty five, which we expect will significantly improve our cost structure and gross margin. The third focus area for us to increase scale and grow profitably is to continue our M and A activities. As mentioned during our Q3 earnings call, we retained the Maxim Group as our advisor to provide strategic financial and investment banking services.
Working with Maxim, we will continue to evaluate inbound and outbound transactions, merger, sale, acquisition or other options for the company. A few comments on the regulatory front. Regulatory matters continue to be a challenge to our industry. We remain active with numerous advocacy groups including the U. S.
Hemp roundtable to provide Congress, the FDA and other federal and state agencies with data and the information needed to advance sensible legislation for both the hemp and cannabis industries. The absence of federal regulation has led many states to enact regulations that are extremely challenging and costly for companies to comply with. This creates confusion for both retailers and consumers and has established an environment where bad actors are allowed to proliferate. However, we will continue our active involvement at both the federal and state level and will remain persistent in pushing Congress, FDA and other federal and state agencies to make progress. Many of the challenges in our industry continue, but we are positioning our company to diversify and grow profitably in the current environment.
We continue to streamline our operations, increase cost efficiency and realign the company for growth and profitability. We have made great progress in structuring a very lean, cost efficient organization that is positioned to leverage our strengths. Let me pause now and I will turn the call over to Jorg.
Joerg Grasser, Chief Financial Officer, CV Sciences: Thank you, Joe, and also good morning to everyone. During the fourth quarter twenty twenty four, we saw the results of several of our key initiatives, which we talked about in previous earnings calls. In FY 2024, we maintained our top line revenue at $15,700,000 very close to our run rate of $4,000,000 which we have been trending on over the last several quarters. We essentially maintained our quarterly revenue in a very competitive market where most of our competitors are experiencing significant sales declines. We also continue to see a positive financial impact of our cost efficiency measures, mostly in our gross margins compared to previous years, but also in several other functional areas of our company.
Our gross margins improved from 44.3% in fiscal twenty twenty three to 45.6% in fiscal twenty twenty four. Over the last several years, we have significantly reduced our cost structure without significant productivity losses and we are well positioned for operating leverage as we continue to increase revenues, all with the main goal of creating shareholder value. Our fourth quarter revenue came in at $3,900,000 compared to $3,800,000 in the fourth quarter of twenty twenty three and to $3,900,000 in the third quarter of twenty twenty four. Our unit sales were flat in the fourth quarter of twenty twenty four compared to 2023. Our increase in revenue was mostly due to sales of cultured foods, plant based products and third party CMO business of elevated softgels.
Our new product introductions were successful, and our team is doing an effective job on executing on our go to market strategy. New products introduced since the beginning of 2023 represented 28% of our full year 2024 revenue, which shows the importance of new product innovation. The overall CBD market continues to be fragmented and very competitive. We don’t see this changing anytime soon, but we see further brand consolidation and brand contraction, which are opportunities to further increase our market share and revenue base. Our direct to consumer business continues to perform well and associated sales represented 45.7% of total revenue in the fourth quarter of twenty twenty four compared to 46.5% a year earlier and 42.8% in the third quarter of twenty twenty four.
On a year over year basis, we were able to increase our B2C revenue for 2024 by 1.6% compared to 2023. We were able to increase our B2C revenue mostly due to improvements to our subscription program and effective email marketing campaigns despite the fact that we significantly reduced our digital advertisement spend by 54.3% in 2024 compared to 2023. Our team continues to make solid improvement to our main digital KPIs, all good signs for sustainable and continued growth in this channel. Gross margin for the fourth quarter of twenty twenty four was 43.2%. We recognized gross margin of 45.8% in the fourth quarter of twenty twenty three and forty six point zero percent in the third quarter of twenty twenty four.
Our improvement in gross margin throughout fiscal twenty twenty four compared to the prior year is mostly due to our product and channel mix, reduced freight and additional cost savings. In fiscal twenty twenty five, we will see the full year impact of our reduced shipping costs as we transition to a new service provider during fiscal twenty twenty four. We are also working on further cost efficiencies, especially on in sourcing some of our key products. As Joe mentioned, we are planning to in source the production of all of our soft gel and tincture SKUs during fiscal twenty twenty five. We will have an immediate cash saving impact in fiscal twenty twenty five, but we will recognize associated cost savings in our P and L in the second half of twenty twenty five when we begin selling our in house manufactured products.
SG and A expense for the fourth quarter was $2,300,000 down from $2,600,000 a year ago, representing a decrease of 11.3%. The decrease in SG and A expense is mostly due to goodwill impairment of $300,000 in the prior year period. On a year over year basis, we reduced SG and A expense from $9,500,000 to $9,200,000 mostly related to reduced marketing activities, partially offset by increased legal expense. For the fourth quarter twenty twenty four, we generated an operating loss of $600,000 compared to an operating loss of $900,000 a year ago. The improvement was mostly due to our goodwill impairment charge in the prior year.
Our adjusted EBITDA loss for the fourth quarter was $400,000 improved from $500,000 in the fourth quarter of twenty twenty three. On a GAAP basis, we reported a fourth quarter twenty twenty four net loss of $700,000 compared to a net loss of $900,000 in the fourth quarter of twenty twenty three. Now let me turn to our balance sheet. We ended the fourth quarter of twenty twenty four with $500,000 of cash compared to $1,300,000 at the end of fiscal twenty twenty three. In February 2025, we entered into a financing agreement with an institutional investor and brought in $1,600,000 of additional cash to help us with our growth strategy.
During the fourth quarter twenty twenty four, we used cash from operations of $200,000 compared to $100,000 in the third quarter of twenty twenty four and the fourth quarter of twenty twenty three. On a year over year basis, we reduced our operating cash usage from $1,900,000 for fiscal year twenty twenty three to $900,000 for fiscal twenty twenty four. We continue to manage our overall cash position with improved cash collections on our outstanding AR and daily management of our inventory and vendor payables. We continue to adjust our cost structure to be in line with our expected revenue with the overarching goal of generating positive operating cash on a continuous basis. We anticipate some modest cash usage in the very near future until we recognize the synergies of our acquisitions and generate positive cash flow in the second half of twenty twenty five.
Our inventory was $4,900,000 at the end of twenty twenty four compared to $5,700,000 at prior year end as we continue to focus on efficient cash management and converting our raw materials into cash. Our raw materials mostly consist of hemp oil, which we previously purchased and continue to convert into finished products. Our raw material balance has decreased from the end of twenty twenty three. We consolidated the results of cultured foods and elevated softgels into our financials and we anticipate realizing the associated synergies of these two acquisitions in the second half of twenty twenty five. With our improved balance sheet
Joseph Dowley, Chief Executive Officer, CV Sciences: and our reduced cost structure in place, we have the financial flexibility to continue executing our growth plan and look forward to improving trends going forward. Now, I’ll turn the call back over to Joe. Joerg, thank you. As Joerg and I have discussed this morning, we continue to align our company to the scale of the industry, but also to allow for flexibility to pivot into new areas such as in source manufacturing and non cannabinoid and plant based products as discussed during my earlier remarks. Investors are looking for leaders like CV Sciences to achieve positive financial fundamentals such as profitability and free cash flow to demonstrate the viability of our industry.
We have made very tough decisions over the last several years to ensure that we are scaled properly, operating efficiently and are focused on adding long term shareholder value. We believe that the acquisition of Cultured Foods and Elevated Softgels are bringing increased scale and distribution as well as greater cost efficiency to our company. We will continue to participate in the contraction and consolidation of both the cannabis and hemp industries through our ongoing M and A efforts. We are optimistic about the opportunity for our company to remain a competitive force in the health and wellness industry and to add long term shareholder value through our strategic initiatives. We are a company of determined employees.
Our energy is focused on the needs of our customers, while at the same time positioning the company to create long term shareholder value. In closing, I would like to encourage our shareholders and everyone on the call to visit our various websites, including pluscbdoil.com, where you can check out and shop for our high quality products and where you can also access valuable product benefit information that is very helpful for our existing and new customers. Also, as I mentioned earlier on the call, our brand new lunarfoxfoods.com website is now operational, ready for visitors and product purchase. The initial Lunar Fox offering includes seven exciting products that I believe you will enjoy. Be part of the health and wellness community that is embracing plant based foods as an alternative to their current health and wellness routine.
And last, if shareholders have questions for us, please contact us at our Investor Relations website at ircbsciences.com. Thank you, everyone. Now I will turn the call back over to the operator for any calls from the analyst community.
Conference Operator: Thank you. We will now be conducting a question and answer session. Thank you. Mr. Dowling, it appears we have no questions at this time.
I’d like to turn the floor back to you for closing comments.
Joseph Dowley, Chief Executive Officer, CV Sciences: Thank you. Thank you again for your time this morning. We are excited about the future and look forward to speaking again soon. Thank you and have a great day.
Conference Operator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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