Friday , 10 July 2020

Charlotte’s Web Holdings, Inc. Q2 Earnings Disappoint

Charlotte’s Web Holdings, Inc. stock is under pressure today in light of Q2 earnings which reported a lower than estimated revenue and profit for the second quarter. Profits for the period stood at $2.2 million, which reflected a significant drop from the $3.7 million that the company generated in the second quarter last year.

By Lorimer Wilson

Charlotte’s Web Holdings, Inc. (TSX:CWEB, OTCQX:CWBHF), the market share leader in whole-plant CBD hemp extract wellness products, has reported financial results for the second quarter ended June 30, 2019: (All comparable figures are for the second quarter ended June 30, 2018)

  • Organic consolidated year-over-year revenue of $25M
  • Growth in year-over-year revenue of 45%
  • Total retail channel revenue accounted for approximately 53% of total revenue
  • Number of retail outlets increased from 1,926 to 7,871
  • Gross profit of $18.8M
  • Gross margin increased to 75.3%, from 76.7%
  • Adjusted EBITDA of $3.9M (16% of consolidated revenue) compared to $6.1M (35% of consolidated revenue) reflecting continued investment in infrastructure and personnel as the Company builds its internal capabilities to support expected revenue growth for the remainder of 2019 and beyond.
  • Net income of $2.2M which was down 40.5%
  • Earnings per share of $0.02 basic and diluted
  • Operating expenses increased 98% year-over-year to support its expansion
  • Employee headcount increased by 41.6% to 320
  • Expected revenue guidance for 2019 of between $120M and $170M remains in place.

During the quarter, Charlotte’s Web:

  • Commenced trading on the Toronto Stock Exchange (TSX)
  • Introduced new products including new hemp extract infused CBD gummies in three flavors, and a new twelve SKU pet product line including functionally focused chews with synergistic ingredients to support specific health functions and
  • Increased the total acres planted for 2019 by 187%.

Subsequent to the second quarter, the Company:

  • Signed two distribution partners for its pet line that will service 5,000 independent pet store retailers in all 33 states where the sale of such products is legal
  • Created and filled the executive positions of Chief Customer Officer, Chief Information Officer, and Chief Financial Officer.


In spite of the above financial results for the second quarter:

  • analysts maintain that Charlotte’s Web Holdings’ business strategy is beyond reproach having helped the company emerge as the market leader in hemp-based CBD helped in large part with the passing in 2018 of The Farm Bill that legalized hemp in the United States.
  • In addition to that, it is necessary to keep in mind that the CBD market is expected to grow at a breakneck pace over the next few years. According to one estimate, it could be worth as much as $22 billion in 2022, and Charlotte’s Web is building towards cornering a major chunk of that market.