Charlotte’s Web Holdings, Inc. (CWEB) (CWBHF) Reports 2019 Q2 Earnings

Q2-2019 Financial Review

Second Quarter 2019 Results

The following table sets forth selected financial information for the periods indicated.

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

Second quarter revenue increased 45% year-over-year to $25.0 million as broader demand for CBD based products continues to drive increased usage in all product categories. Human nutrition products, topicals and animal nutrition products growing by 32%, 493% and 91%, respectively year-over-year. Retail channel growth increased as large mass retailers began carrying Charlotte’s Web products. During the second quarter 2019, total retail channel revenue accounted for approximately 53% of total revenue.

Gross margin was 75.3%, compared to 76.7% for the same period in 2018. Gross margin prior to biological asset adjustments was 73.9% and 75.2% for the same period in 2018.  Second quarter operating expenses increased 98% year-over-year to $16.2 million to support its expansion, including senior management additions to the leadership team. Employee headcount was 320 at June 30, 2019 , a 41.6% increase from 226 at June 30, 2018 .

Adjusted EBITDA for the second quarter was $3.9 million or 16% of consolidated revenue compared to $6.1 million and 35% of consolidated revenue for the same period in the previous year. The Adjusted EBITDA ratio during the second quarter reflects 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.

“We forecast revenue growing at a faster pace than operating expenses in the back half of the year,” stated Rich Mohr , Chief Financial Officer of Charlotte’s Web. “This supports our financial forecast for increases in adjusted EBITDA percentages in future periods. As product volumes shipped continue to increase on a quarterly basis, we’re expecting continued top-line revenue growth during the last half of the year. Our previously communicated revenue guidance for 2019 of between $120 million and $170 million remains in place. Where we fall within this range will substantially be determined by future developments with the FDA, associated retailer response, and the timeline of these events.”

Balance Sheet and Cash Flow

The Company used $15.2 million of cash in operations during the first six months of 2019 compared to $6.1 million of cash provided from operations during the same period in 2018. Cash used in operations during the first six months of 2019 primarily reflects the investment in inventory required to supply increasing retail and consumer demand. Cash was also used for the 2019 hemp crop that was increased to 862 acres from 300 acres planted in 2018. The Company’s cash at June 30, 2019 was $51.4 million compared to $73.4 million on December 31, 2018 . Working capital at June 30, 2019 grew to $97.0 million compared to $93.8 million at December 31 , 2018.

Consolidated Financial Statements and Management’s Discussion and Analysis

The Company’s unaudited interim condensed financial statements and accompanying notes for the periods ended June 30, 2019 and 2018 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 on the Investor Relations section of the Company’s website at https://investors.charlottesweb.com.

Conference Call

Management will host a conference call to discuss the Company’s second quarter 2019 results at 10:00 am ET on Wednesday, August 14, 2019 . To participate in the call, please dial 1-647-427-7450 or 1-888-231-8191 approximately 10 minutes before the conference call and provide conference ID 8685806. A recording of the call will be available through August 21, 2019 . To listen to the rebroadcast please dial 1-416-849-0833 and provide the same conference ID.

A webcast of the call can be accessed through the investor relations section of the Charlotte’s Web website.

About Charlotte’s Web Holdings, Inc.

Charlotte’s Web Holdings, Inc. is the market leader in the production and distribution of innovative hemp-based cannabidiol (“CBD”) wellness products. Founded by the Stanley Brothers, the Company’s premium quality products start with proprietary hemp genetics that are responsibly manufactured into whole-plant hemp extracts naturally containing a full spectrum of phytocannabinoids, including CBD, terpenes, flavonoids and other beneficial hemp compounds.  Charlotte’s Web product categories include CBD Oil tinctures (liquid products), CBD capsules, CBD topicals, as well as CBD pet products.  Charlotte’s Web hemp-based whole plant extracts are sold through select distributors, brick and mortar retailers, and online through the Company’s website at www.CharlottesWeb.com. The rate the Company pays for agricultural products reflects a fair and sustainable rate driving higher quality yield, encouraging good farming practices, and supporting U.S. farming communities.

Charlotte’s Web is a socially conscious company and is committed to using business as a force for good and a catalyst for innovation. The Company weighs sound business decisions with consideration for how its efforts affect its employees, customers, the environment, and the communities where its employees live and where it does business, while maximizing profits and strengthening its brands. The Company’s management believes that socially oriented actions have a positive impact on the Company, its employees and its shareholders. Charlotte’s Web donates a portion of its pre-tax earnings to charitable organizations.

Shares of Charlotte’s Web trade on the Toronto Stock Exchange (TSX) under the symbol “CWEB” and are quoted in U.S. Dollars in the United States on the OTCQX under the symbol “CWBHF”.  As at August 12, 2019 Charlotte’s Web had 49,253,934 Common Shares outstanding and 120,529.07 Proportional Voting Shares convertible at 400:1, for an effective equivalent of 97,565,562 Common Shares outstanding.

Forward-Looking Information

This press release may contain forward-looking information within the meaning of applicable securities legislation. In the interest of providing the shareholders and potential investors of Charlotte’s Web Holdings, Inc. with information about the Company and its subsidiaries, including management’s assessment of the Company and its subsidiaries’ future plans and operations, certain information provided in this press release constitutes forward-looking statements or information (collectively, “forward-looking statements”). 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. Although these forward-looking statements are based on assumptions the Company considers to be reasonable based on the information available on the date such statements are made, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on 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 information contained in this press release is 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.

The Company’s forward-looking statements are subject to risks and uncertainties pertaining to, among other things, revenue fluctuations, nature of government regulations, economic conditions, loss of key customers, retention and availability of executive talent, competing products, common share price volatility, loss of proprietary information, product acceptance, internet and system infrastructure functionality, information technology security, cash available to fund operations, availability of capital and, international and political considerations, including but not limited to those risks and uncertainties discussed under the heading “Risk Factors” in the MD&A and the Company’s other filings with securities regulators. The impact of any one risk, uncertainty, or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent, and the Company’s future course of action depends on Management’s assessment of all information available at the relevant time. Except to the extent required by law, the Company assumes no obligation to publicly update or revise any forward-looking statements made in this press release, whether as a result of new information, future events, or otherwise. All subsequent 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.

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SOURCE Charlotte’s Web Holdings, Inc.