Charlotte’s Web Holdings, Inc. (TSX: CWEB)(OTCQX: CWBHF), a producer of whole-plant CBD hemp extract products, reported its financial results for the second quarter ending June 30, 2019. The company’s revenue grew 45% to $25 million over last year’s $17.2 million for the same time period. The net income fell to $2.2 million from last year’s $3.7 million.
Charlotte’s Web noted that 53% of its revenue came from retail outlets and that its gross margin was a whopping 75% producing gross profits of $18.8 million. Operating expenses doubled from $8.2 million last year in the second quarter to this year’s $16.2 million. The company attributed the increasing expenses to adding more personnel to address the company’s growth. Employee headcount increased by 41% over the past year.
“We have been experiencing increased sales through both our e-commerce and retail sales channels,” said Deanie Elsner, Charlotte’s Web Chief Executive Officer. “Top tier mass retailers are entering the market as several national grocery and drugstore brands have announced their CBD plans. The majority of these are now carrying Charlotte’s Web products. This is a significant development for the hemp CBD category. To effectively service projected growth, we have been building our executive leadership with experienced consumer-packaged-goods (CPG) executives in sales, marketing, finance, data, and operations. Similarly, we are expanding our capabilities in cultivation, R&D, production, and distribution.” The company’ products are now available for sale in 8,000 locations.
In order to fund this expansion, Charlotte’s Web 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. The company said it 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.
“We are experiencing increased momentum with large retailers as consumer awareness and interest in CBD grows,” said Deanie Elsner. “We believe we’ll continue to see additional large retailers coming onboard and expect an increase in the number of states and locations with our existing retail partners throughout the year. Kroger is the most recent example as they added four new states to their distribution in July, including Texas, which is the latest state to approve hemp CBD products.”
Charlotte’s Web 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 – Calming, Hips & Joints and Cognition. Subsequent to the second quarter, the Company signed two distribution partners for its pet line; Pacific Pet in California, one of the largest distributors of pet food and pet products on the west coast, servicing 1,000 independent pet stores in California, Arizona, Nevada, and Hawaii; and “Pet Food Experts”, servicing over 4,000 retailers in 33 states out of five distribution centers located in Rhode Island, Pennsylvania, Illinois, Washington, and Colorado.
“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.” Russ Hammer has been named as the company’s new Chief Financial Officer.