Charlotte's Web Reports 2024 Second Quarter Financial Results
New DTC e-commerce platform launched
First sequential Q2 revenue growth since 2021
Additional expense reductions taken to improve future cash flow
"Our strategic turnaround initiatives and innovations are yielding promising results towards a return to growth, despite lower revenue," said
In June, Charlotte's Web launched new CBD isolate topical products with Walmart in 827 Walmart stores across five states including
"Following our first-quarter operating expense reductions, we took additional measures after the close of the second quarter to further align with current revenue levels," said
DeFloria's Phase 1 trial data processing is nearly complete. DeFloria expects to include the Phase 1 data in its investigational new drug (IND) application with the
Federal Regulatory Update
Encouraging progress continues regarding The Hemp Derived Consumer Protection and Market Stabilization Act of 2023 (H.R. 1629), and Hemp Access and Consumer Safety Act (S. 2451). The proposed legislation seeks to regulate hemp extract products under the
The proposed bills are poised to establish comprehensive FDA regulations for food and beverage (F&B) products and dietary supplements, specifically targeting non-intoxicating CBD products. By creating a clear regulatory pathway, these measures would ensure consistent oversight and consumer protection for non-intoxicating CBD products in the marketplace.
Financial Review – Q2 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 |
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|
|
|
|
Revenue |
|
|
|
|
Cost of goods sold |
|
9.7 |
|
7.1 |
Gross profit |
|
2.6 |
|
8.9 |
|
|
|
|
|
Selling, general and administrative expenses |
|
14.7 |
|
19.6 |
Operating loss |
|
(12.1) |
|
(10.7) |
|
|
|
|
|
Other income (expense), net |
|
- |
|
(1.4) |
Change in fair value of financial instruments |
|
1.1 |
|
14.9 |
|
|
|
|
|
Net income (loss) |
|
|
|
|
Net loss per common share, basic and diluted |
|
|
|
|
Consolidated net revenue for the second quarter ended
Gross profit was reduced to
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Three Months Ended |
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Segmented Net Revenue |
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2024 |
|
2023 |
|
% Decrease |
|
Direct-to-consumer ("DTC") net revenue |
|
|
|
|
|
(27.1) % |
Business-to-business ("B2B") net revenue |
|
|
|
|
|
(16.6) % |
Direct-to-consumer net revenue through the Company's web store was
Business-to-business retail net revenue was
B2B net revenue increased 8.8% quarter-over-quarter compared to the first quarter of 2024. During the second quarter of 2024, Charlotte's Web rolled out its new CBN 'Stay Asleep' gummies to retailers. The Company also added Walmart as a retail partner. The distribution improvements in the first half of 2024, combined with CBN Stay Asleep gummy retail placements, increased overall retail distribution in the Natural channel by 10% 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 second quarter of 2024 was
Cash Flow and Balance Sheet
Net cash used for operations for the three months ended
The Company's cash and working capital as of
Consolidated Financial Statements and Management's Discussion and Analysis
The Company's unaudited consolidated financial statements and accompanying notes for the three and six months ended
Conference Call
Management will host a conference call to discuss the Company's 2024 second quarter at
There are three ways to join the call:
- Register and enter your phone number at https://emportal.ink/4cfgOMf to receive an instant automated call back, or
- Dial 1-416-764-8659 or 1-888-664-6392 approximately 10 minutes before the conference call, or
- Listen to the live webcast online.
Earnings Call Replay
A recording of the call will be available through
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© 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. |
CONSOLIDATED BALANCE SHEETS
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|
|
2024 (unaudited) |
|
2023 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 32,531 |
|
$ 47,820 |
Accounts receivable, net |
1,869 |
|
1,950 |
Inventories, net |
18,673 |
|
21,538 |
Prepaid expenses and other current assets |
3,857 |
|
6,864 |
Total current assets |
56,930 |
|
78,172 |
Property and equipment, net |
28,198 |
|
27,513 |
License and media rights |
16,590 |
|
17,070 |
Operating lease right-of-use assets, net |
13,740 |
|
14,601 |
Investment in unconsolidated entity |
11,200 |
|
11,000 |
SBH purchase option and other derivative assets |
1,436 |
|
2,602 |
Intangible assets, net |
1,166 |
|
887 |
Other long-term assets |
534 |
|
703 |
Total assets |
$ 129,794 |
|
$ 152,548 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ 4,350 |
|
$ 2,860 |
Accrued and other current liabilities |
6,669 |
|
8,682 |
Lease obligations – current |
2,376 |
|
2,252 |
License and media rights payable - current |
5,072 |
|
9,852 |
Total current liabilities |
18,467 |
|
23,646 |
Convertible debenture |
43,455 |
|
42,528 |
Lease obligations |
14,456 |
|
15,655 |
License and media rights payable |
14,093 |
|
11,338 |
Derivatives and other long-term liabilities |
3,495 |
|
3,823 |
Total liabilities |
93,966 |
|
96,990 |
Commitments and contingencies |
|
|
|
Shareholders' equity: |
|
|
|
Common shares, nil par value; unlimited shares authorized; 157,495,042 and |
1 |
|
1 |
Additional paid-in capital |
328,241 |
|
327,280 |
Accumulated deficit |
(292,414) |
|
(271,723) |
Total shareholders' equity |
35,828 |
|
55,558 |
Total liabilities and shareholders' equity |
$ 129,794 |
|
$ 152,548 |
CONSOLIDATED STATEMENTS OF OPERATIONS
|
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|
Three Months Ended |
|
Six Months Ended |
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Revenue |
$ 12,289 |
|
$ 16,006 |
|
$ 24,413 |
|
$ 33,016 |
Cost of goods sold |
9,707 |
|
7,088 |
|
14,920 |
|
14,181 |
Gross profit |
2,582 |
|
8,918 |
|
9,493 |
|
18,835 |
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
14,727 |
|
19,627 |
|
30,007 |
|
37,140 |
Operating loss |
(12,145) |
|
(10,709) |
|
(20,514) |
|
(18,305) |
|
|
|
|
|
|
|
|
Gain on initial investment in unconsolidated entity |
— |
|
10,700 |
|
— |
|
10,700 |
Change in fair value of financial instruments |
1,140 |
|
4,229 |
|
(720) |
|
9,612 |
Other income (expense), net |
(6) |
|
(1,376) |
|
605 |
|
(2,074) |
Income (loss) before provision for income taxes |
(11,011) |
|
2,844 |
|
(20,629) |
|
(67) |
Income tax benefit (expense) |
(46) |
|
— |
|
(62) |
|
— |
Net income (loss) |
$ (11,057) |
|
$ 2,844 |
|
$ (20,691) |
|
$ (67) |
|
|
|
|
|
|
|
|
Per common share amounts |
|
|
|
|
|
|
|
Net income (loss) per common share, basic |
$ (0.07) |
|
$ 0.02 |
|
$ (0.13) |
|
$ — |
Net income (loss) per common share, diluted |
$ (0.07) |
|
$ 0.02 |
|
$ (0.13) |
|
$ — |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
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|
Common Shares |
|
Additional |
|
Accumulated |
|
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, |
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, |
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 |
|
|
|
|
|
|
|
|
|
|
Balance—December 31, 2022 |
152,135,026 |
|
$ 1 |
|
$ 325,431 |
|
$ (247,927) |
|
$ 77,505 |
Common shares issued upon vesting of restricted share units, |
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, |
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 |
|
|||
|
|||
|
Six Months Ended |
||
|
2024 |
|
2023 |
|
|
|
|
Cash flows from operating activities: |
|
|
|
Net loss |
$ (20,691) |
|
$ (67) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
Depreciation and amortization |
4,982 |
|
7,769 |
Inventory provision |
3,926 |
|
320 |
Convertible debenture accrued interest |
1,931 |
|
1,954 |
Share-based compensation |
1,079 |
|
999 |
Changes in right-of-use assets |
908 |
|
976 |
Change in fair value of financial instruments |
720 |
|
(9,612) |
Gain on investment in unconsolidated entity |
— |
|
(10,700) |
(Gain)/loss on foreign currency transaction |
(1,430) |
|
979 |
Other |
238 |
|
957 |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable, net |
(154) |
|
(1,104) |
Inventories, net |
(1,025) |
|
2,878 |
Prepaid expenses and other current assets |
1,732 |
|
764 |
Accounts payable, accrued and other liabilities |
(286) |
|
183 |
Operating lease obligations |
(1,121) |
|
(1,436) |
License and media rights |
(2,500) |
|
(4,000) |
Income taxes receivable |
— |
|
4,261 |
Other operating assets and liabilities, net |
(192) |
|
(130) |
Net cash used in operating activities |
(11,883) |
|
(5,009) |
Cash flows from investing activities: |
|
|
|
Purchases of property and equipment and intangible assets |
(3,316) |
|
(187) |
Proceeds from sale of assets |
28 |
|
36 |
Net cash used in investing activities |
(3,288) |
|
(151) |
Cash flows from financing activities: |
|
|
|
Other financing activities |
(118) |
|
(75) |
Net cash used in financing activities |
(118) |
|
(75) |
Net decrease in cash and cash equivalents |
(15,289) |
|
(5,235) |
Cash and cash equivalents —beginning of period |
47,820 |
|
66,963 |
Cash and cash equivalents —end of period |
$ 32,531 |
|
$ 61,728 |
Non-cash activities: |
|
|
|
Non-cash purchase of property and equipment and intangible assets |
(269) |
|
(163) |
Non-cash issuance of note receivable |
— |
|
(156) |
(1) Non-GAAP Measures – Adjusted Gross Profit, EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation, and amortization ("EBITDA") is not a recognized performance measure under
(1) |
Adjusted Gross Profit, EBITDA and Adjusted EBITDA are non-GAAP financial measures with reconciliations provided in the tables below. |
Adjusted Gross Profit for the three and six months ended
|
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Statement of Adjusted Gross Profit |
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(In Millions) |
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|
|
|
|
|
|
|
|
|
Three Months Ended |
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Six Months Ended |
||
|
|
|
|
|
||
|
|
(unaudited) |
|
(unaudited) |
||
|
|
2024 |
2023 |
|
2024 |
2023 |
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
|
Cost of goods sold |
|
9,707 |
|
|
14,920 |
14,181 |
Gross profit before inventory provision |
|
2,582 |
|
|
9,493 |
18,835 |
Inventory provision, net |
|
3,830 |
|
|
3,926 |
320 |
Adjusted gross profit |
|
|
|
|
|
|
Adjusted gross margin % |
|
52.2 % |
56.5 % |
|
55.0 % |
58.0 % |
Adjusted EBITDA for the three and six months ended
|
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Statement of Adjusted EBITDA |
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(In Thousands) |
||||||
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|
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|
Three Months Ended |
|
Six Months Ended |
||
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|
|
(unaudited) |
|
(unaudited) |
||
|
|
2024 |
2023 |
|
2024 |
2023 |
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and |
|
2,489 |
3,977 |
|
4,982 |
7,769 |
Interest expense |
|
493 |
348 |
|
980 |
1,147 |
Income tax expense |
|
(46) |
- |
|
(62) |
- |
EBITDA |
|
(8,121) |
7,169 |
|
(14,791) |
8,849 |
|
|
|
|
|
|
|
Stock Comp |
|
237 |
624 |
|
1,079 |
999 |
Mark-to-market financial instruments |
(1,140) |
(4,229) |
|
720 |
(9,612) |
|
Inventory Provision |
|
3,830 |
127 |
|
3,926 |
320 |
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
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