Charlotte's Web Reports 2024 Third quarter Financial Results
Sequential quarterly growth returns for 2024
New Product Innovations Driving Omni-Channel Expansion
"Our return to quarter-over-quarter growth in 2024 signals that our strategic direction is paying off," said
In response to consumer preferences for convenient formats, Charlotte's Web introduced its new Soft Gel Capsule, offering easy-to-swallow gel caps that provide precise, potent dosing of full-spectrum CBD. The new gel caps have received positive consumer feedback for their portability, convenience, and effectiveness.
In the third quarter of 2024, Charlotte's Web expanded beyond hemp wellness with the launch of its latest innovation, a new line of Functional Mushroom Gummies, tapping into the rapidly growing mushroom wellness category. This product line includes three formulations tailored to specific wellness needs:
- Focus (Lion's Mane): Supports cognitive health, focus, and memory.
- Stress Support (Reishi + Ashwagandha): Helps manage daily stress and promotes calm.
- Energy Support (Cordyceps): Enhances energy and endurance.
These gummies leverage Charlotte's Web's botanical expertise, blending mushroom extracts with targeted botanicals for wellness support. The introduction of mushroom gummies marks a key step in diversifying Charlotte's Web's product offerings and broadening its portfolio. This expansion allows the Company to reach new wellness-focused consumers, particularly millennials and Gen X, who prefer alternative, plant-based solutions. With this new product line, Charlotte's Web is positioning to participate in the transition of functional mushroom supplements from niche adoption to mainstream availability. The mushroom gummies have initially rolled out to over 200 retail locations, enabling the Company to capitalize on a growing market with an expected CAGR of over 11% through 2030, according to the
"At Charlotte's Web, we believe our dedication to quality and transparent hemp offerings has established us as a wellness thought leader, and we're thrilled to extend that legacy with the launch of our new Functional Mushroom Gummies," said CEO
Omni-Channel Expansion for Broader Consumer Access
As Charlotte's Web diversifies its product portfolio with innovations like gel caps, mushroom gummies, and minor cannabinoid isolate products (CBN Stay Asleep Gummies), it is implementing a robust omni-channel strategy to maximize distribution and accessibility. This approach integrates multiple sales channels, expanding its established brick-and-mortar retail network and its new e-commerce platform to include third-party retail websites and online sales portals of retail partners. With more regulatory clarity around products like cannabinoid isolates and mushroom supplements, Charlotte's Web has access to more channels, allowing for greater flexibility in distribution. Through this omni-channel strategy, Charlotte's Web believes that it is positioned to drive growth, enhance consumer engagement, and strengthen its market presence, allowing each product category to reach its target channels while ensuring operational flexibility.
Canada Gummy Launch with
Our collaboration with
At the end of the third quarter, Charlotte's Web gummies were launched in
Regulatory Progress
The Company, in collaboration with One Hemp—a coalition of responsible, industry-leading hemp CBD companies—is proactively engaging with industry and consumer organizations to advance federal and state legislation that protects consumer access to safe, non-intoxicating hemp wellness products. This coalition serves as a resource for crafting regulatory frameworks on the federal and state level that prioritizes public health while protecting the rights of millions of CBD consumers who depend on these rigorously tested, quality-assured products. Federal momentum continues, with
DeFloria is finalizing its Phase 1 trial data for the
Financial Review – Q3 2024
The following table sets forth selected financial information for the periods indicated.
|
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Three Months Ended, |
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2024 |
|
2023 |
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
Cost of goods sold |
|
5.9 |
|
6.4 |
|
Gross profit |
|
6.7 |
|
7.9 |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
12.7 |
|
19.9 |
|
Operating loss |
|
(6.0) |
|
(12.0) |
|
|
|
|
|
|
|
Other income (expense), net |
|
(1.2) |
|
0.8 |
|
Change in fair value of financial instruments |
|
1.4 |
|
(4.0) |
|
|
|
|
|
|
|
Net loss |
|
( |
|
( |
|
Net loss per common share, basic and diluted |
|
( |
|
( |
"Expense and cash flow management have been our top priorities this year. The cost reduction initiatives in the first half of the year to reorganize and streamline our operations have delivered a leaner overhead structure, reducing cash burn moving forward," said
Consolidated net revenue for the third quarter ended
Gross profit was
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Three Months Ended |
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Segmented Net Revenue |
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|
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||
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|
2024 |
|
2023 |
|
% Decrease |
|
|
Direct-to-consumer ("DTC") net revenue |
|
|
|
|
|
(13.4) % |
|
Business-to-business ("B2B") net revenue |
|
|
|
|
|
(10.7) % |
Direct-to-consumer net revenue through the Company's web store was
Business-to-business retail net revenue was
On a quarter-over-quarter basis, B2B net revenue was essentially flat compared to the second quarter of 2024, when Charlotte's Web rolled out its new CBD topical isolates to more than 800 Walmart retail locations. The Company's leading gummy lines continue to deliver growth, with third-quarter sales increasing more than 10% year-over-year, further supported by its new CBN 'Stay Asleep' gummies. The distribution improvements in the first half of 2024, combined with CBN Stay Asleep gummy retail placements, increased overall retail Q3 distribution in the Natural channel by more than 20% year-over-year.
SG&A Expenses
Total selling, general, and administrative ("SG&A") expenses in the quarter were
Net Income and Adjusted EBITDA1
Charlotte's Web reported a net loss of
Adjusted EBITDA1 loss for the third quarter of 2024 was
Cash Flow and Balance Sheet
Net cash used for operations for the three months ended
At
Consolidated Financial Statements and Management's Discussion and Analysis
The Company's unaudited consolidated financial statements and accompanying notes for the three and nine months ended
Conference Call
Management will not host an earnings conference call this quarter. As part of the Company's expense reduction and operational streamlining initiatives, management intends to host two earnings conference calls per year: in March, following the Company's year-end results report, and in August, following the issuance of the Company's second quarter and six-month results.
Shareholders with questions specific to the Q3 2024 financial results or business operations can contact Charlotte's Web investor relations directly.
Subscribe to Charlotte's Web investor news.
About
© Major
Forward-Looking Information
Certain information provided herein constitutes forward-looking statements or information (collectively, "forward-looking statements") within the meaning of applicable securities laws. Forward-looking statements are typically identified by words such as "may", "will", "should", "could", "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. This press release includes forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties, and other factors which may cause actual results, levels of activity, and achievements to differ materially from those expressed or implied by such statements. The forward-looking statements contained in this press release are based on certain assumptions and analysis by management of the Company in light of its experience and perception of historical trends, current conditions and expected future development and other factors that it believes are appropriate and reasonable.
Specifically, this press release contains forward-looking statements relating to, but not limited to: organizational changes, marketing plans and operational platform upgrades, and the impact of these initiatives, operational efficiencies, cash flow, revenue and e-commerce monetization; expectations relating to IT upgrades, marketing optimization and operational integrations; product expansion activities and the corresponding results thereof; sales volume and gross margin expectations; anticipated timing for, and business impact of, in-house manufacturing of topical and gummy products; the impact of the Company's product innovations on product development; regulatory developments and the impact of developments on both consumer action and the Company's opportunities and operations; activities relating to, and sponsorship of, legislation to advance regulatory framework; the impact of insourcing on operating margins, capital expenditures and R&D; anticipated consumer trends and corresponding product innovation; anticipated future financial results, including expectations regarding targeted reduction in SG&A costs ; improvements in cash flow; sufficient working capital; the impact of the Company's partnership with the MLB on the Company's exposure and sales; the Company's ability to increase online traffic and demographic exposure through new products and marketing; and the impact of certain activities on the Company's business and financial condition and anticipated trajectory.
The material factors and assumptions used to develop the forward-looking statements herein include, but are not limited to: regulatory regime changes; anticipated product development and sales; the success of sales and marketing activities; product development and production expectations; outcomes from R&D activities; the Company's ability to deal with adverse growing conditions in a timely and cost-effective manner; the availability of qualified and cost-effective human resources; compliance with contractual and regulatory obligations and requirements; availability of adequate liquidity and capital to support operations and business plans; and expectations around consumer product demand. In addition, the forward-looking statements are subject to risks and uncertainties pertaining to, among other things: supply and distribution chains; the market for the Company's products; revenue fluctuations; regulatory changes; loss of customers and retail partners; retention and availability of talent; competing products; share price volatility; loss of proprietary information; product acceptance; internet and system infrastructure functionality; information technology security; available capital to fund operations and business plans; crop risk; economic and political considerations; and including but not limited to those risks and uncertainties discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ending
Any forward-looking statement in this press release is based only on information currently available to the Company and speaks only as of the date on which it is made. Except as required by applicable law, the Company assumes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. All forward-looking statements, whether written or oral, attributable to the Company or persons acting on the Company's behalf, are expressly qualified in their entirety by these cautionary statements.
|
(1) |
Non-GAAP Measures: The press release contains non-GAAP measures, including EBITDA and Adjusted EBITDA. Please refer to the section in the tables captioned "Non-GAAP Measures" below for additional information and a reconciliation to GAAP for all Non-GAAP metrics. |
|
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|||
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CONSOLIDATED BALANCE SHEETS |
|||
|
(in thousands of |
|||
|
|
|||
|
|
|
|
|
|
|
2024 (unaudited) |
|
2023 |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ 24,620 |
|
$ 47,820 |
|
Accounts receivable, net |
1,605 |
|
1,950 |
|
Inventories, net |
19,532 |
|
21,538 |
|
Prepaid expenses and other current assets |
4,236 |
|
6,864 |
|
Total current assets |
49,993 |
|
78,172 |
|
Property and equipment, net |
27,102 |
|
27,513 |
|
License and media rights |
14,816 |
|
17,070 |
|
Operating lease right-of-use assets, net |
13,275 |
|
14,601 |
|
Investment in unconsolidated entity |
11,400 |
|
11,000 |
|
SBH purchase option and other derivative assets |
1,328 |
|
2,602 |
|
Intangible assets, net |
1,082 |
|
887 |
|
Other long-term assets |
648 |
|
703 |
|
Total assets |
$ 119,644 |
|
$ 152,548 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ 3,357 |
|
$ 2,860 |
|
Accrued and other current liabilities |
5,601 |
|
8,682 |
|
Lease obligations – current |
2,316 |
|
2,252 |
|
License and media rights payable - current |
5,209 |
|
9,852 |
|
Total current liabilities |
16,483 |
|
23,646 |
|
Convertible debenture |
45,170 |
|
42,528 |
|
Lease obligations |
13,937 |
|
15,655 |
|
License and media rights payable |
11,636 |
|
11,338 |
|
Derivatives and other long-term liabilities |
2,175 |
|
3,823 |
|
Total liabilities |
89,401 |
|
96,990 |
|
Commitments and contingencies |
|
|
|
|
Shareholders' equity: |
|
|
|
|
Common shares, nil par value; unlimited shares authorized; 157,495,042 and 154,332,366 shares issued and outstanding as of |
1 |
|
1 |
|
Additional paid-in capital |
328,443 |
|
327,280 |
|
Accumulated deficit |
(298,201) |
|
(271,723) |
|
Total shareholders' equity |
30,243 |
|
55,558 |
|
Total liabilities and shareholders' equity |
$ 119,644 |
|
$ 152,548 |
|
|
|||||||
|
|
|||||||
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
|
(in thousands of |
|||||||
|
|
|||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Revenue |
$ 12,587 |
|
$ 14,294 |
|
$ 37,000 |
|
$ 47,310 |
|
Cost of goods sold |
5,914 |
|
6,365 |
|
20,834 |
|
20,546 |
|
Gross profit |
6,673 |
|
7,929 |
|
16,166 |
|
26,764 |
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
12,693 |
|
19,889 |
|
42,700 |
|
57,029 |
|
Operating loss |
(6,020) |
|
(11,960) |
|
(26,534) |
|
(30,265) |
|
|
|
|
|
|
|
|
|
|
Gain on initial investment in unconsolidated entity |
— |
|
— |
|
— |
|
10,700 |
|
Change in fair value of financial instruments |
1,422 |
|
(4,024) |
|
702 |
|
5,588 |
|
Other income (expense), net |
(1,189) |
|
841 |
|
(584) |
|
(1,234) |
|
Loss before provision for income taxes |
(5,787) |
|
(15,143) |
|
(26,416) |
|
(15,211) |
|
Income tax expense |
— |
|
— |
|
(62) |
|
— |
|
Net loss |
$ (5,787) |
|
$ (15,143) |
|
$ (26,478) |
|
$ (15,211) |
|
|
|
|
|
|
|
|
|
|
Per common share amounts |
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted |
$ (0.04) |
|
$ (0.10) |
|
$ (0.17) |
|
$ (0.10) |
|
|
|||||||||
|
|
|||||||||
|
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY |
|||||||||
|
(in thousands of |
|||||||||
|
|
|||||||||
|
|
Common Shares |
|
Additional |
|
Accumulated Deficit |
|
Total |
||
|
|
Shares |
|
Amount |
|
|
|
|||
|
Balance—December 31, 2023 |
154,332,366 |
|
$ 1 |
|
$ 327,280 |
|
$ (271,723) |
|
$ 55,558 |
|
Common shares issued upon vesting of restricted share units, net of withholding |
2,895,489 |
|
— |
|
(98) |
|
— |
|
(98) |
|
Share-based compensation |
— |
|
— |
|
842 |
|
— |
|
842 |
|
Net income (loss) |
|
|
— |
|
|
|
(9,634) |
|
(9,634) |
|
Balance— |
157,227,855 |
|
$ 1 |
|
$ 328,024 |
|
$ (281,357) |
|
$ 46,668 |
|
Common shares issued upon vesting of restricted share units, net of withholding |
267,187 |
|
— |
|
(20) |
|
— |
|
(20) |
|
Share-based compensation |
— |
|
— |
|
237 |
|
— |
|
237 |
|
Net income (loss) |
— |
|
— |
|
— |
|
(11,057) |
|
(11,057) |
|
Balance—June 30, 2024 |
157,495,042 |
|
$ 1 |
|
$ 328,241 |
|
$ (292,414) |
|
$ 35,828 |
|
Common shares issued upon vesting of restricted share units, net of withholding |
267,187 |
|
— |
|
(15) |
|
— |
|
(15) |
|
Share-based compensation |
— |
|
— |
|
217 |
|
— |
|
217 |
|
Net income (loss) |
— |
|
— |
|
— |
|
(5,787) |
|
(5,787) |
|
Balance—September 30, 2024 |
157,762,229 |
|
$ 1 |
|
$ 328,443 |
|
$ (298,201) |
|
$ 30,243 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance—December 31, 2022 |
152,135,026 |
|
$ 1 |
|
$ 325,431 |
|
$ (247,927) |
|
$ 77,505 |
|
Common shares issued upon vesting of restricted share units, net of withholding |
297,888 |
|
— |
|
(69) |
|
— |
|
(69) |
|
Share-based compensation |
— |
|
— |
|
375 |
|
— |
|
375 |
|
Net income (loss) |
— |
|
— |
|
— |
|
(2,912) |
|
(2,912) |
|
Balance—March 31, 2023 |
152,432,914 |
|
$ 1 |
|
$ 325,737 |
|
$ (250,839) |
|
$ 74,899 |
|
Common shares issued upon vesting of restricted share units, net of withholding |
392,204 |
|
— |
|
(6) |
|
— |
|
(6) |
|
Share-based compensation |
— |
|
— |
|
624 |
|
— |
|
624 |
|
Net income (loss) |
— |
|
— |
|
— |
|
2,844 |
|
2,844 |
|
Balance—June 30, 2023 |
152,825,118 |
|
$ 1 |
|
$ 326,355 |
|
$ (247,995) |
|
$ 78,361 |
|
Common shares issued upon vesting of restricted share units, net of withholding |
954,738 |
|
— |
|
(127) |
|
— |
|
(127) |
|
Share-based compensation |
— |
|
— |
|
647 |
|
— |
|
647 |
|
Net income (loss) |
— |
|
— |
|
— |
|
(15,143) |
|
(15,143) |
|
Balance—September 30, 2023 |
153,779,856 |
|
$ 1 |
|
$ 326,875 |
|
$ (263,138) |
|
$ 63,738 |
|
|
|||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||
|
(in thousands of |
|||
|
|
|||
|
|
Nine Months Ended |
||
|
|
2024 |
|
2023 |
|
Cash flows from operating activities: |
|
|
|
|
Net loss |
$ (26,478) |
|
$ (15,211) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Depreciation and amortization |
7,505 |
|
11,509 |
|
Inventory provision |
3,926 |
|
730 |
|
Convertible debenture and other accrued interest |
2,836 |
|
2,916 |
|
Share-based compensation |
1,296 |
|
1,646 |
|
Changes in right-of-use assets |
1,373 |
|
1,453 |
|
Allowance for credit losses |
138 |
|
1,187 |
|
Change in fair value of financial instruments |
(702) |
|
(5,588) |
|
Gain on initial investment in unconsolidated entity |
— |
|
(10,700) |
|
Gain on foreign currency transaction |
(870) |
|
(63) |
|
Other |
524 |
|
1,657 |
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable, net |
(167) |
|
(1,151) |
|
Inventories, net |
(1,884) |
|
3,593 |
|
Prepaid expenses and other current assets |
1,305 |
|
(589) |
|
Accounts payable, accrued and other liabilities |
(1,266) |
|
(328) |
|
Operating lease obligations |
(1,701) |
|
(1,722) |
|
License and media rights |
(5,000) |
|
(6,000) |
|
Income taxes receivable |
— |
|
4,261 |
|
Other operating assets and liabilities, net |
(304) |
|
(449) |
|
Net cash used in operating activities |
(19,469) |
|
(12,849) |
|
Cash flows from investing activities: |
|
|
|
|
Purchases of property and equipment and intangible assets |
(3,631) |
|
(3,015) |
|
Proceeds from sale of assets |
33 |
|
119 |
|
Net cash used in investing activities |
(3,598) |
|
(2,896) |
|
Cash flows from financing activities: |
|
|
|
|
Other financing activities |
(133) |
|
(202) |
|
Net cash used in financing activities |
(133) |
|
(202) |
|
Net decrease in cash and cash equivalents |
(23,200) |
|
(15,947) |
|
Cash and cash equivalents —beginning of period |
47,820 |
|
66,963 |
|
Cash and cash equivalents —end of period |
$ 24,620 |
|
$ 51,016 |
|
Non-cash activities: |
|
|
|
|
Non-cash purchase of property and equipment and intangible assets |
(8) |
|
(81) |
|
Non-cash issuance of note receivable |
— |
|
(142) |
(1) Non-GAAP Measures – Adjusted EBITDA
Earnings before interest, taxes, depreciation, and amortization ("EBITDA") is not a recognized performance measure under
|
(1) |
Adjusted EBITDA is a non-GAAP financial measure with reconciliations provided in the table below. |
Adjusted EBITDA for the three and nine months ended
|
|
||||||
|
Statement of Adjusted EBITDA |
||||||
|
(In Thousands) |
||||||
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
||
|
|
|
|
|
|
||
|
|
|
(unaudited) |
|
(unaudited) |
||
|
|
|
2024 |
2023 |
|
2024 |
2023 |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ (5,787) |
$ (15,143) |
|
|
|
|
Depreciation of property and equipment and amortization of intangibles |
|
2,523 |
3,741 |
|
7,505 |
11,509 |
|
Interest expense |
|
577 |
289 |
|
1,557 |
1,436 |
|
Income tax expense |
|
- |
- |
|
62 |
- |
|
EBITDA |
|
(2,687) |
(11,113) |
|
(17,354) |
(2,266) |
|
|
|
|
|
|
|
|
|
Stock Comp |
|
217 |
647 |
|
1,296 |
1,646 |
|
Mark-to-market financial instruments |
(1,422) |
4,024 |
|
(702) |
(5,588) |
|
|
Inventory Provision |
|
- |
410 |
|
3,926 |
730 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ (3,892) |
|
|
|
|
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