Hemp CBD company CV Sciences, Inc. (OTCQB:CVSI) announced its financial results for the year ended December 31, 2019, with total revenue of $53.7 million for the fiscal year 2019. During the fourth quarter of 2019, sales declined 34% to $9.4 million compared to $14.2 million in the prior-year period. The company blamed the decline on increased market competition in the natural product category and the continued impact on retail customers as a result of the uncertain regulatory environment for CBD.
Even more concerning is that CV Sciences said that it expects revenue to drop sequentially to the range of $6-8 million in the first quarter of fiscal 2020. The fiscal year non-GAAP EPS of $0.00 missed by $0.01 and the GAAP EPS of -$0.17 missed by $0.07.
Still, the company delivered an operating loss of $17.2 million in 2019, compared to an operating income of $10.2 million in the prior year. The decline in operating income is primarily related to additional stock-based compensation and payroll expense associated with the separation of the company’s founders of $11.1 million, and additional investment in sales, marketing, and R&D activities.
“In the face of near-term headwinds, including regulatory ambiguities, heightened competition aided by a lack of regulatory clarity, and occasional unfavorable media attention as the regulatory environment develops, CV Sciences managed to achieve the highest annual sales in our company history. We are focused on further strengthening our brand, product offerings and adding new categories as we monitor the ongoing development of the market and position ourselves for future opportunities,” stated Joseph Dowling, Chief Executive Officer of CV Sciences. “We continue to work with the FDA to support market development and ensure CV Sciences is leading the industry in quality and safety. We are confident that FDA regulatory clarity will lead to a ‘flight to quality’ among both retailers and consumers and believe that CV Sciences is best positioned to secure long-term brand loyalty and trust due to our proven track record and relentless focus on quality, safety, and regulatory compliance.”
The company reported that its total retail distribution increased to more than 5,500 stores as of December 31, 2019, a 148% increase from December 31, 2018, including new and/or expanded partnerships with national retail chains. The gross margin was 65% for the fiscal year 2019 and the reported a total cash balance of $9.6 million at year-end.
Dowling added, “As we look towards 2020, we are aggressively adapting to the business environment, working to manage costs while further building distribution and driving innovation. These efforts include a temporary delay of our drug development efforts. We anticipate that the near-term challenges will continue, but we are confident in our ability to navigate the market and align our financial model to the current environment. We remain focused on the long term and are committed to positioning our business to capitalize on the promising future for the hemp-derived CBD market.”