CV Sciences (OTC:CVSI) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

Access the full call at https://viavid.webcasts.com/starthere.jsp?ei=1769578&tp_key=ae0ce79bc9

Summary

CV Sciences reported second-quarter 2026 revenue of $3 million, a 7% sequential decline and 17% year-over-year decrease, with gross margins stable at 48.6%.

The company expanded its non-cannabinoid Plus Health supplement line and launched PlusHealth.com to support its transition into a health and wellness company.

Despite challenging market conditions, CV Sciences maintained its top position in the hemp extract brand market and achieved a positive operating cash flow of approximately $20,000.

The regulatory environment remains complex, but recent legislative developments provide optimism for more time to achieve regulatory clarity.

The company is focusing on cost efficiency, reducing operating expenses by 10%, and aligning its structure with current revenue levels for long-term sustainability.

Full Transcript

OPERATOR

Thank you. Brendan, you may begin.

Brendan, Investor Relations

Thank you, and good afternoon, everyone. With us today with prepared remarks are CV Sciences Chief Executive Officer Joseph Dowling and Joerg Grasser, Chief Financial Officer. After the 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 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, could, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to CV Sciences are forward-looking statements. Finally, please note that in 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 the CV Sciences press release from earlier this afternoon for a full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures.

As I just mentioned, this afternoon 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 cvsciences.com. I would like to now turn the call over to CV Sciences Chief Executive Officer, Mr. Joseph Dowling.

Joseph Dowling, Chief Executive Officer

Thank you, Brendan. Good afternoon, everyone. Thank you for joining our call. Earlier today we issued a press release reporting results for our second quarter ended June 30, 2026. We continue to make progress against our top priorities, maintaining strong margins, reducing our cost structure, and moving the business towards sustainable profitability. We are pleased with our second quarter performance, particularly given the challenging market and regulatory environment facing our economy and industry.

Despite these headwinds, we are focused on our core objectives of scaling the business, driving cost efficiency, and achieving profitability and positive cash flow. At the same time, we are advancing our transition into a global health and wellness company and achieved several important milestones during the quarter. Some of the significant highlights during the second quarter included we generated revenue of 3 million, slightly down when compared to 3.2 million for the first quarter of 2026.

While revenue declined sequentially on a quarterly basis, our second quarter revenue demonstrates our resilience in a difficult, constrained revenue operating environment. Our gross margin held steady at 48.6% compared to 48.9% for the first quarter of 2026, demonstrating our ability to control cost of sales during an economic environment of rising expenses. Operating expenses were reduced by 7.9% to 1.7 million compared to 1.9 million for the first quarter of 2026.

Reflecting our ongoing focus on cost discipline, we achieved an adjusted EBITDA loss of 0.1 million for the second quarter 2026, consistent with the 0.1 million loss for the first quarter of 2026. We continue to hold steady and are making adjusted EBITDA improvements from prior periods. We maintained our position as the number one selling hemp extract brand in the natural product retail sales channel and continue to work closely with our retail partners to gain market share and launch new products.

We expanded our non-cannabinoid Plus Health supplement portfolio with additional formulations supporting cellular integrity, metabolism, cognitive health, cardiovascular wellness, and long-term mobility. And earlier this week we announced the launch of PlusHealth.com, a new direct-to-consumer destination dedicated exclusively to our growing Plus Health product line. The launch of PlusHealth.com represents an important milestone for our long-term strategy to expand beyond cannabinoids and establish Plus Health as a leading brand focused on healthy aging, performance, and everyday health.

This new site creates a distinct home for our Plus Health products while PlusCBDOil.com remains focused on the company's industry-leading hemp-derived CBD product line. PlusHealth.com creates a stronger connection with our consumers for non-cannabinoid products and, as the brand grows, the site provides a platform to introduce new products, provide meaningful education, and create an experience that evolves alongside our customers. The PlusHealth.com site currently offers a growing range of non-cannabinoid nutritional products including targeted dietary supplements in capsule and gummy formulations.

Also, during the first half of 2026 we launched our new Empower product which contains 20 grams of protein, 5 grams of creatine, active probiotics, and supports strength, recovery, mental clarity, and gut health. We believe this product positions us well across a broad consumer base, with our customers increasingly interested in creatine for energy, performance, and healthy aging. Looking ahead, we plan to launch multiple non-cannabinoid products throughout 2026, expanding the Plus Health product line with new formulations and delivery formats designed to address evolving consumer needs.

These products are expected to drive organic growth, leverage our existing infrastructure, and help offset revenue pressure from regulatory challenges. We will continue to innovate and launch new cannabinoid-focused products under our PlusCBD brand, aligning these efforts with the unfolding regulatory environment. We continue to believe in the long-term strength and viability of the CBD market. We also plan to expand into select international markets through our European subsidiary, Cultured Foods.

Cultured Foods remains a key component of our innovation strategy. In addition to being a manufacturer, brand owner, and distributor, it provides us with in-region production and distribution capabilities for European and global markets. Cultured Foods will play an increasing role in new product launches and future revenue growth. Now I'd like to make a few comments on the regulatory front. The regulatory environment continues to be very complicated.

We are working with several advocacy organizations to support the development of clear, science-based regulations. Inconsistent federal guidance continues to create challenges including increased costs and uneven state regulations. As we stated in our year-end call, the November 2025 Appropriations Act could have mixed implications for the industry. On the one hand, it could serve as a catalyst for long overdue regulatory clarity. On the other hand, if the act remains unchanged, we would need to modify our product offering away from certain products.

We are prepared to make those changes if necessary. There is, however, some recent good news regarding the November 2025 Appropriations Act. Just last week, on August 8, the U.S. Senate approved continuing resolution H.R. 6500 that I will refer to as the 2027 Continuing Resolution. The 2027 Continuing Resolution includes language that would delay most of the implementation of the regulatory changes applicable to hemp-derived cannabinoid products described in the November 2025 Appropriations Act.

Specifically, the effective date of those provisions would be delayed from November 12, 2026 to December 11, 2026 if the bill is enacted with its current language. This extension would provide the hemp industry with valuable time and, importantly, a legislative vehicle to work with Congress toward a longer-term solution and sensible regulatory framework for hemp-derived products. The 2027 Continuing Resolution must still be approved by the U.S. House of Representatives and signed by the President before it becomes law.

Nevertheless, there is reason for optimism, particularly given the bipartisan 61 to 32 vote in the Senate approving this legislation. While there is still uncertainty ahead, this development provides the industry with additional time to engage with policymakers and pursue a more workable long-term regulatory solution. Other recent federal developments supporting increased research and potential rescheduling of cannabis, as well as efforts to modernize the regulatory framework for hemp-derived products, are encouraging.

We are actively monitoring these developments and positioning the company to capitalize on emerging regulatory changes and opportunities. In summary, while industry challenges remain, we are positioning the company to diversify, scale, and grow profitably. We have streamlined our operations, improved cost efficiency, and built a lean organization capable of leveraging our strengths as we move forward. I will now turn the call over to Joerg.

Joerg Grasser, Chief Financial Officer

Thank you, Joe, and good afternoon, everyone. During the second quarter of 2026, we continued to execute on the initiatives we have discussed on prior calls, with a particular focus on strengthening our cost structure, improving operating efficiency, and managing cash very carefully. The revenue environment remained challenging and highly competitive. Revenue for the quarter was $3 million, down 7% sequentially and 17% year over year, driven primarily by a 15% decline in unit sales.

While the pressure on the top line continues across the broader CBD category, we remain focused on the area within our control—managing expenses, improving operating efficiency, and positioning the business to benefit when market conditions improve. Gross margin was 48.6% in the second quarter of 2026 compared to 50.9% in the prior-year period and 48.9% in the first quarter. Our gross margin remained relatively consistent throughout the first half of 2026.

The year-over-year decrease was driven primarily by slightly higher freight costs and changes in product and channel mix. We continue to focus on disciplined pricing, product mix, and cost management as we work to improve our gross margins over time. Our direct-to-consumer channel represented 46.2% of total revenue in the second quarter. While revenue in this channel was slightly lower than in prior periods, we continue to see improvements across key digital performance metrics.

We remain focused on improving the efficiency and profitability of our direct-to-consumer business and believe this channel represents an important long-term opportunity for the company. One of the more significant areas of progress this quarter was our continued reduction in operating expenses. SG&A expenses were 1.7 million in the second quarter compared to 1.9 million in the prior-year period, representing a reduction of approximately 10%. The decrease was driven primarily by lower legal and professional fees, reduced marketing spend, and broader administrative efficiencies.

Importantly, we believe a meaningful portion of these reductions is structural in nature. Over the past several years we have worked to reduce our operating cost base and create a more disciplined and scalable organization. These efforts are helping us better align our expense structure with current revenue levels and should provide greater operating leverage as revenue recovers. Operating loss for the second quarter was 0.3 million compared to an operating loss of approximately 0.1 million in the prior-year period.

Adjusted EBITDA loss was 0.1 million, which improved slightly on a sequential basis. On a GAAP basis, net loss for the quarter was 0.8 million compared to 0.3 million in the prior-year period. While we recognize that we still have work to do to achieve sustainable profitability, we believe the continued reduction in our operating cost structure represents meaningful progress towards a more sustainable operating model. Importantly, despite the continued pressure on revenue, we generated positive operating cash flow of approximately $20,000 during the second quarter after generating positive operating cash flow also in the first quarter of 2026.

We view this as an important milestone and a reflection of the cost reductions and working capital discipline we have implemented. We continue to actively manage liquidity through improved collections on accounts receivable, disciplined inventory management, and very close oversight of vendor payables. Aligning our operating cost structure with current revenue remains a key priority as we work towards generating consistently positive operating cash flow.

Turning to the balance sheet, we ended the second quarter with approximately 0.3 million of cash, approximately in line with our cash balance at the end of the first quarter and year end. During the quarter, conversions under our amended notes payable and convertible note structure reduced our outstanding convertible note balance by approximately $0.7 million. The fair value of the outstanding convertible note was $1 million as of June 30, 2026. We also continue to focus on working capital management.

Inventory at the end of the second quarter was approximately 4.0 million compared to 4.1 million at the end of the year, reflecting our continued focus on inventory optimization and efficient use of working capital. As we continue to optimize the integration of Cultured Foods and Elevated Softgels into our operating platform, we see additional opportunities to improve manufacturing efficiency, reduce costs, and better leverage our existing infrastructure.

Looking ahead, our priorities remain: we are focused on managing our cost structure, improving margins, strengthening cash flow, and maintaining disciplined working capital management while continuing to invest selectively in the areas of the business that can drive long-term growth. The CBD market remains fragmented and highly competitive, and we expect those conditions to continue. At the same time, we are seeing continued market contraction and consolidation, which we believe may create opportunities for stronger operators to gain market share over time.

While the near-term revenue environment remains challenging, we believe CV Sciences is becoming a leaner and more efficient organization with a lower operating cost base and a clear path towards sustainable positive operating cash flow. We remain focused on disciplined execution and positioning the company to capitalize on opportunities as the market evolves. With that, I will turn the call back over to Joe.

Joseph Dowling, Chief Executive Officer

Thank you, Joerg. As we've discussed today, we are continuing to align the company with current industry realities while preserving the flexibility to capitalize on emerging opportunities, including in-house manufacturing capabilities and expansion into non-cannabinoid health and wellness products with our Plus Health line. Our primary goal as a company is to grow profitably, and achieving greater scale is critical to that objective. Our strategy to increase scale is centered on product innovation, cost efficiency, and strategic M&A. Over the past several years we have taken decisive steps to streamline operations, improve efficiency, strengthen our balance sheet, and position the company for sustainable long-term value creation. Joerg covered the company's focus on cost efficiency and cash flow improvement. As a result, we are approaching cash flow break-even even in a constrained revenue and rising environment. Our recent acquisitions enhancing scale, broadening our capabilities, and improving our overall cost structure and create stronger foundation for future growth, including into new markets, especially through our Cultured Foods subsidiary in Europe.

We believe the hemp and cannabis industries will continue to experience contraction and consolidation, and we intend to remain a disciplined and strategic participant in that process when opportunities align with our operational and financial objectives. Importantly, we are increasingly positioning the company to compete more broadly within the health and wellness marketplace, leveraging our infrastructure, manufacturing expertise, distribution network, and brand portfolio to pursue attractive growth opportunities beyond our traditional markets.

Through disciplined product innovation, operational focus, strategic expansion, and execution, we remain committed to driving long-term shareholder value. Before closing, I encourage our shareholders, partners, listeners to visit our websites, especially our new PlusHealth.com website, to learn more about our brands, products, and long-term vision for the company. Thank you for your time and continued support. Operator, please open the line for questions.

OPERATOR

Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Please hold for one more moment while we poll for questions. Seeing no questions at this time, we have reached the end of our question and answer session. I would now like to turn the floor back over to Mr. Joseph Dowling for closing comments.

Joseph Dowling, Chief Executive Officer

Thank you again for your time today. We look forward to speaking again soon. Have a great day. Thank you.

OPERATOR

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.