Charlotte’s Web Holdings, Inc. Reports Q2-2021 Results

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Return of retail activity supports 11.4% YoY growth with market share gains

DENVER, Aug. 12, 2021 /PRNewswire/ – (TSX: CWEB) (OTCQX: CWBHF), Charlotte’s Web Holdings, Inc. (“Charlotte’s Web” or the “Company”) the market share leader in full spectrum hemp extract wellness products, today reported financial results for the second quarter ended June 30, 2021. All amounts are expressed in United States’ dollars, unless otherwise noted. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures.

Q2-2021 Financial Highlights   

  • Revenue increased 11.4% to $24.2 million vs. $21.7 million in Q2-2020
  • DTC eCommerce revenue increased 1.0% to $15.7M, contributing 64.9% of Q2 revenue and holding onto the pandemic online shopping boost
  • B2B revenue increased 37.7% year-over-year
  • Gross profit increased to $15.8 million, or 65.5% of consolidated revenue
  • Operating expense reduced by 15.2% year-over-year
  • Adjusted EBITDA of ($3.9 million), an improvement vs prior year ($5.7 million) and prior quarter ($4.7 million)
  • $27.1 million cash (plus $10.9 million pending IRS tax receivable) and $90.1 million working capital at June 30, 2021
  • $10 million unused line of credit with JPMorgan; opportunity to extend to $20 million

Business Highlights

  • Grew #1 market share across core retail channels including total US Food/Drug/Mass retail (“F/D/M”) and US natural specialty retail
  • Secured future optionality to enter the US cannabis wellness category through a purchase option agreement to acquire Stanley Brothers cannabis business pending US federal legalization of cannabis
  • Planted first crop of (proprietary) patented hemp cultivars approved by Health Canada in the Okanagan Valley in British Columbia, Canada
  • CW Labs announced a scientific collaboration, researching hemp CBD efficacy with Harvard Medical School’s Dr. Staci Gruber, Ph.D.
  • Invested $1.6 million capex primarily related to substantially completing phase III expansion of new 137,000 sq. ft. facility with extraction infrastructure and R&D expansion
  • Supported federal and state legislative actions to help develop a comprehensive regulatory framework with Federal Bill H.R. 841 and proposed regulations in CA and NY
  • Wes Booysen appointed as Chief Financial Officer, bringing international operating, finance and regulatory experience as former Molson Coors executive
  • Tim Saunders, former CFO of Canopy Growth appointed to board of directors, adding Canadian cannabis and hemp sector governance and finance expertise

“The ongoing economic recovery from the pandemic that began in Q1 strengthened through the second quarter, driving a 38% increase in our retail revenue as many consumers transitioned from online shopping back to brick and mortar retail. This was especially evident within our largest and most established medical and healthcare practitioner channels,” said Deanie Elsner, CEO of Charlotte’s Web. “We believe we are best positioned to take advantage of the return to brick and mortar retail as we hold the number one share position in the food/drug/mass and natural specialty retail channels in the US.  Internationally, we recently planted our first hemp crop in Canada and anticipate initial product sales by early 2022.”

Q2-2021 Financial Review
The following table sets forth selected financial information for the periods indicated.


Three months ended June 30,

U.S. $ millions, except per share data

2021

2020




Revenue

$

24.2

$

21.7

Gross profit before biological assets adjustment

15.8

11.5

Net impact, fair value of biological assets

Gross profit

15.8

11.5

Operating expenses

25.0

29.5

Operating loss

(9.2)

(18.0)

Change in fair value of financial instruments, net

(4.1)

(3.9)

Net loss and comprehensive loss

(5.4)

(14.4)

Loss per share – basic

$

(0.04)

$

(0.13)

Loss per share – diluted

$

(0.04)

$

(0.13)

Adjusted EBITDA¹

$

(3.9)

$

(5.7)







Assets:

June 30, 2021

December 31, 2020

Cash and cash equivalents

$

27.1

$

52.8

Total assets

$

285.9

$

310.9

Liabilities:



Long-term liabilities

$

22.6

$

27.7

Total liabilities

$

46.8

$

56.7

The following information sets forth selected quarterly revenue information for the Company’s recent fiscal quarters.

U.S. $ millions

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3


2021

2021

2020

2020

2020

2020

2019

2019

Revenue

$

24.2

$

23.4

$

26.9

$

25.2

$

21.7

$

21.5

$

22.8

$

25.0

Consolidated revenue for the three months ended June 30, 2021 increased 11.4% year-over-year to $24.2 million.

Consolidated business-to-business (“B2B”) revenue increased 37.7% year-over-year reflecting consumers returning to brick & mortar retail shopping following the economic reopening from pandemic lockdowns. Similarly, B2B healthcare practitioner (“HCP”) and medical channels experienced increased activity and revenue, additionally supported by the Company’s acquisition of Abacus Health in June 2020.

Direct-to-consumer (“DTC”)  ecommerce net sales grew by 1.0% year-over-year, reflecting some consumer transition back to retail shopping. Year-over-year new subscriptions increased 43% and conversion rates increased 27%. DTC accounted for  64.9% of total revenue in the second quarter of 2021 versus 71.6% for the same period in 2020. 

Increased retail volumes have resulted in ongoing incremental quarterly gains in retail market share. Charlotte’s Web grew its number one market share across its core retail channels, including total US Food/Drug/Mass retail, total US natural specialty retail.


Three months ended

Year-over-year


June 30,

% Increase


2021

2020







Revenue – U.S. $ millions

$

24.2

$

21.7

11.4%







Direct-to-consumer (“DTC”)

$

15.7

$

15.5

1.0%

Business-to-business (“B2B”)

$

8.5

$

6.2

37.7%

Gross profit of $15.8 million strengthened to 65.5% of revenue compared to $11.5 million, or 52.9% of revenue in Q2-2020, which included inventory provisions of $2.5 million taken in the quarter for expiring product (gross profit before inventory provisions was 64.6%).   The Company anticipates gross profit improvements as its new production and fulfillment facility becomes fully operational. 

Operating expenses were $25.0 million, a 15.2% year-over-year improvement from $29.5 million. In response to lower B2B retail sales during the pandemic, in Q4-2020 management took actions to better align operating expenses through an expense optimization program targeting reductions of more than 10% of the Q3-2020 consolidated expense run rate. Operating expenses reductions for the first half of 2021 were ahead of plan and were achieved despite incurring the additional operating expenses from the CW Labs R&D division as well as the acquisition of Abacus Health, which were not present for the full first six months of 2020.

Adjusted EBITDA for the quarter was negative $3.9 million, or (16.3)% of consolidated revenue, a 31.1% improvement from negative Adjusted EBITDA of $5.7 million, or (26.6)% of consolidated revenue, for the second quarter of 2020.

Balance Sheet and Cash Flow
The Company used $6.5 million of cash in operations during the second quarter of 2021 compared to $7.1 million of cash used in operations during the second quarter of 2020. The Company’s cash and working capital at June 30, 2021 were $27.1 million and $90.1 million, respectively, compared to $52.8 million and $113.6 million at December 31, 2020. Charlotte’s Web has a near-term IRS tax receivable of $10.9 million and maintains a unused $10 million line of credit with JPMorgan, with opportunity to extend to $20 million.


Three months ended




June 30



U.S. $ millions

2021

2020

$ Change

% Change

Cash beginning of period

$

35.0

$

53.0

$

(18.0)

(34.0)%

Cash flows from (used in):





Operating activities

(6.5)

(7.1)

0.6

(8.5)%

Investing activities

(1.3)

0.8

(2.1)

(262.5)%

Financing activities

(0.1)

53.1

(53.2)

(100.2)%

Cash, end of period

$

27.1

$

99.8

$

(72.7)

(72.8)%

Consolidated Financial Statements and Management’s Discussion and Analysis
The Company’s unaudited financial statements and accompanying notes for the periods ended June 30, 2021 and 2020 and related management’s discussion and analysis of financial condition and results of operations (“MD&A”) are available under the Company’s profile on SEDAR at www.sedar.com and…

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