Charlotte's Web Revenue Falls In Fourth Quarter As Losses Rise

Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) reported that fourth-quarter revenue fell 7.8 % to $24.8 million from $26.9 million for the same time period in 2020. This missed the Yahoo Finance average analyst estimate for revenues of $27 million.

The company blamed the drop on sales and channel mixes and competitive DTC pricing. The net loss for the quarter was an eye-popping $118 million or ($0.86) per share. This missed the analyst estimates for a loss of ($0.05) per share. Charlotte’s Web said it recognized impairments of $76 million related to goodwill and $22 million related to customer relationships, trade names, and other long-lived assets. The impairments were primarily triggered as a result of the decrease in the company’s market capitalization in the fourth quarter of 2021. This resulted in impairment charges of $98 million which were factored into the net losses.

Fourth-quarter DTC net revenue was 12.1% lower year-over-year due to product mix and lower-than-expected online sales during the December holiday season. New DTC subscriptions increased 116% year-over-year and e-commerce conversion rates were strong at 11.8%. DTC accounted for 62% of total revenue in the fourth quarter of 2021 versus 65% for the same period in 2020.

“At the beginning of 2022, we took organizational actions, better-aligned leadership, and employees with shareholder interests, and simplified our business for focus, speed, and executional excellence. Our organization is fully engaged and we intend to grow our business,” said Jacques Tortoroli, Chief Executive Officer of Charlotte’s Web. “We have substantially completed our multi-year investment in our production capacity to effectively service a sophisticated mass retail channel when federal regulations are set for the CBD wellness category in the U.S. In the interim, regardless of regulatory actions, we are focused on developing sustainable revenue growth with our current customers and through new customer acquisitions, and new channels, as well as selective innovation in new products, and international market expansion.”

Full Year Results

For the full year of 2021, net revenue grew 1.0%, to $96.1 million. The net loss for the year was $137 million versus 2020’s net loss of $30 million. The company said that growth for 2021 from increased unit sales volumes was largely offset by an industry-wide consumer shift to lower-priced CBD products; primarily gummies and topical products, where Charlotte’s Web is the market share leader.

Direct-to-consumer (“DTC”) e-commerce revenue decreased 2.3% year-over-year to $62.3 million while business-to-business (“B2B”) revenue grew 7.5%, to $33.8 million, increasing the company’s leading market share position in total food/drug/mass retail (“F/D/M”), and U.S. natural specialty retail. Charlotte’s Web said it maintains the largest e-commerce business in the CBD industry and outperformed the overall DTC category. Gummies and topical products represented 31% and 19% of gross sales for the company in 2021 respectively, versus 22% and 14% in 2020. DTC sales contributed 65% of the Company’s total net revenue in 2021 and B2B retail contributed 35%, versus 67% and 33% in 2020.

The adjusted EBITDA loss for the fourth quarter was $4.5 million, or 18.1% of net revenue, as compared to Adjusted EBITDA loss of $3.1 million, or 11.5% of consolidated revenue, for the fourth quarter of 2020. The higher loss is primarily due to lower gross profit as well as lower net revenue.

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor 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 Master's degree in Business Journalism from New York University.


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