Cv Sciences Inc

Hello, and welcome to the CB Sciences Inc. second quarter 2023 conference call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session for the analyst community will follow the formal presentation. You may press star one at any time to be placed into question queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Brendan Hawkins. Please go ahead.

Thank you, and good morning, everyone. With us today with prepared remarks are CB Science's Chief Executive Officer, Joseph Dowling, and Jorg Grasser, Chief Financial Officer. After prepared remarks, we will take questions from the analyst community. I'd like to remind you that during this call, management's prepared remarks may contain forward-looking statements. These forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those anticipated by CB 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 CVScience's 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 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 www.cvsciences.com. I would like to now turn the call over to CVSciences Chief Executive Officer, Mr. Joseph Dowling. Joe?

Thank you, Brandon. Good morning, everyone. Thank you for joining our call. This morning, we issued a press release reporting results for our second quarter ended June 30, 2023. We are pleased with our continued progress as we move closer to profitability and generating free cash flow on a sustained basis. Significant highlights during Q2 included we generated revenue of $4 million for the second quarter 2023 compared to $4.1 million for the same period in the prior year. We recognized gross margin of 43.3% in the second quarter 2023, a sequential increase from 43% when compared to Q1 2023, and a significant improvement when compared to a gross margin of 30.7% from Q2 2022. For the first six months of 2023, we generated cash flow from operations of $2.4 million compared to cash used in operations of $1.5 million for the first six months of 2022. We continue to maintain our number one position in the natural products retail channel and we continue to increase our market share in this important retail channel. We are managing our working capital through diligent collection of our receivables, monetizing our inventory, especially our investment in raw materials, and we continuously scrutinize all vendor relationships. All of these efforts contributed to a sequential increase in our cash balance at the end of Q2. Our cost efficiency efforts continue to result in a lower overall company cost structure with efficiency gains and cash savings in several areas, including SG&A. Jorg will provide details on each of these areas during his remarks. Our Q2 results give us optimism that we will remain a competitive force in our industry. In spite of the continuing challenges we have faced since early 2020, including brand saturation and inaction by FDA and Congress to provide a regulatory framework for our industry. We continue to believe that our asset-light business model is well positioned to take advantage of an industry that is contracting and maturing. Q2 was a continuation of the diligent work of our team as we continue to see the positive financial impact of several years of hard work and properly scaling the company, putting us in a position to leverage the strength of our assets, including our strong plus CBD brand and our B2B and B2C distribution channels. On the revenue side, our short-term goal remains to get the company back to a 5 million plus per quarter revenue run rate and higher. During Q2, we continued to make progress in overcoming the supply chain issues we experienced during 2022. Brand contraction in all B2B channels is continuing as retailers are working through old inventory and removing slow-moving brands. As I already mentioned, we are the number one selling brand in the natural product retail channel, and we continue to see market share concentrations of the top three brands in the 50% range. Customers are loyal to brands they trust, and we continue to see consumers moving to brands that they know are trustworthy, and we continue to be at the top of the list in the important natural product retail channel. Our B2C sales channel continues to improve. Our B2C infrastructure is scalable and can support nearly unlimited traffic and activity. On a daily basis, our team works to optimize our merchandising and marketing efforts to optimize our ROI to ensure that we are achieving our return on ad spend targets. We are seeing results in all critical B2C KPIs, including new visitors and most notably during Q2, an increase of 8% in subscription revenue. Brand contraction, increased education, and consumer trust will all help grow the B2C channel, and we are prepared to grow the channel and take market share as the category contracts and evolves. We believe our B2B and B2C channels work closely together as our customers often learn about or even try our products from a B2B retailer and then over time transition to a B2C customer. Product development will continue to be important for our growth strategy. More and more we know that consumers are looking for high quality brands like our Plus CBD products, but they increasingly want multi-active ingredient products that carry a structure function claim that can be trusted. We continue to address this trend and plan to launch new products similar to our wellness line, including our sleep, calm, and relief products and our over-the-counter topical line. Earlier this year, we launched our innovative reserve line to extremely favorable customer reviews and demand. We will continue to innovate and launch new products that are responsive to our customers and their specific needs states including for anxiety, pain, and sleep disorders. We strongly believe that our science supports our product claims and will win the trust and loyalty of our existing and new customers. On regulatory matters, we are extremely active with the US Hemp Roundtable and other advocacy groups to provide Congress and the FDA with data, and the information needed to advance sensible legislation for the hemp industry. A recent subcommittee hearing of the House Oversight Committee included strong testimony regarding CBD safety. During the same hearing, industry experts provided clear regulatory recommendations to FDA and Congress to regulate CBD as a dietary supplement and food and beverage additive. We strongly agree with this recommendation and believe that current regulations governing dietary supplements are the starting point to establish a regulatory framework for the CBD industry. After the subcommittee hearing, a request for information, an RFI, was announced. The response date for the RFI is actually later this week on August 18th. We are taking a leadership role in working with the US Hemp Roundtable on their response to this important RFI. We are also working with other advocacy groups on their RFI response and what will hopefully be a unified response to Congress and the FDA to quickly establish a legal framework for our industry. The absence of federal regulation has led to a very messy disjointed patchwork of state regulations that are extremely challenging and costly for companies to comply with. This has led to confusion by both retailers and consumers. Inaction by FDA and Congress is frustrating, but we will continue to be actively involved at both the federal and state level and will remain persistent in pushing Congress and FDA to make progress. We all know that a sensible regulatory framework will significantly benefit our industry and consumers and will create an environment where quality companies and products can be trusted to grow the category responsibly. The challenges in our industry continue, but we are well positioned with an efficient business model and operating structure. We continue to streamline operations increased cost efficiency, and are positioned to leverage our company's assets and strengths, which includes our employees, the quality of our products, the trust in our brands, and our distribution footprint. We will be able to achieve profitability and cash flow positive in the near term because of the tough decisions that we have made over the last several years. Let me pause now, and I will turn the call over to York.