Charlotte's Web Revenue Declines But On Target For Estimates

Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) reported financial results for the third quarter ended September 30, 2020, with revenue rising to $25.2 million versus $25.1 million in 2019 and on target for the Yahoo Finance average estimate. The net loss was $6.6 million which was high than last year’s net loss of $1.3 million. The company also reported that the earnings per share were ($0.05) which was in line with the Yahoo Finance average analyst estimate.

The company blamed lower B2B sales which were 29.2% lower year-over-year, accounting for 33.7% of total revenue in the quarter. On a positive note, DTC (direct to consumer) net sales grew by 27.5% year-over-year as online traffic and high conversion rates increased through ongoing marketing and social media programs. Charlotte’s Web said year-over-year new consumer acquisitions increased 52% and conversion rates increased 98%. DTC net revenue accounted for 66.3% of total revenue in the third quarter compared to 52.2% for the same period in the prior year. Sequentially, though, the third quarter was an improvement over the second quarter as revenue increased for both DTC by 8% and B2B by 39%.

“The strength of our leading e-commerce sales continued to offset slower B2B retail sales during the pandemic,” said Deanie Elsner, CEO of Charlotte’s Web. “Within our B2B business, we are seeing signs of improvement with a return to consecutive quarterly revenue growth of +36%, led by the natural channel +20%, and the health care practitioner channel +101% quarter-over-quarter.  In addition, we continued to expand our footprint in terms of distribution in Q3 by adding nearly 1000 new doors to our retail footprint, including natural retailers, nearly 300 independent pet stores and approximately 500 new F/D/M retail doors.”

Expenses Jump

Charlotte’s Web did say that operating expenses jumped 44% to $28.3 million over last year’s $19.6 million. The company attributed the increase to its investments in capacity expansion and transition to a consumer-packaged goods operating company capable of supporting mass retail channel growth. In response, management said it has taken actions to better align operating expenses and initiated an expense optimization program targeting reductions of more than 10% of the consolidated expense run rate by the end of 2020. The company used $21.5 million of cash in operations during the third quarter of 2020 compared to $9.6 million of cash used in operations during the third quarter of 2019, primarily due to the increase in changes in working capital.

The company’s cash and working capital on September 30, 2020, were $65.9 million and $128.6 million, respectively, compared to $68.6 million and $116.9 million on December 31, 2019. 

The stock was lately trading at $3.80, far below its 52-week high of $12.99.

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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