Hemp extract giant Charlotte’s Web Holdings Inc. (TSX: CWEB) (OTCQX: CWBHF) reported its financial results for the second quarter ending June 30, showing depressed numbers across its balance sheet.
The company recorded consolidated net revenue of $16 million, down from $18.9 million during the same period in 2022. However, Charlotte’s Web believes upcoming legislative progress in Washington D.C. regarding CBD regulation could bolster consumer confidence and open fresh customer avenues for revenue.
Gross profit margin reached 55.7% this quarter versus 49.4% in the same period last year. The company attributed this rise mainly to higher inventory provisions last year.
Direct-to-consumer net revenue through the company’s webstore fell nearly 20% to $10.7 million, down from $13.3 million in 2022. Factors such as aggressive online competition and lower website traffic contributed to the decline. Despite the setbacks, Charlotte’s Web believes it remains a force in the e-commerce sector, holding the top market share position, according to Brightfield Group data.
In comparison, the business-to-business sector only fell 5% in the quarter, moving from $5.6 million in the second quarter last year to $5.3 million this quarter.
Second-quarter SG&A expenses grew by 13.7%, reaching $19.6 million, influenced by marketing timing and a new Major League Baseball license, which wasn’t a factor at this time last year.
On a positive note, Charlotte’s Web recorded net income of $2.8 million, a meaningful improvement from a net loss of $7.9 million during the same period in 2022. The company benefitted from non-cash gains, which included a $4.2 million gain in derivative instrument value and a $10.7 million boost from a non-cash investment in DeFloria.
“We reported positive cash flow in the second quarter, including collecting our $4.2 million IRS Employee Retention Credit,” CFO Jessica Saxton said in a statement.
She also highlighted the company’s increased cash balance of $61.7 million at the end of this quarter, “providing ample working capital to support continued execution of our strategy.”
On the regulatory front, the company said that the U.S. Food & Drug Administration is speeding up efforts to devise a regulatory pathway for hemp-derived CBD, but recent rumblings in on the Hill show that the agency has likewise been questioning the continued legislative lull on the issue. Charlotte’s Web said that the company, along with industry peers, is actively sharing safety and toxicology data with Congress to support future regulation initiatives.
Jared Stanley, chief operating officer of Charlotte’s Web, said that the push for regulation on the issue has somewhat of a united front with influential partners like the American Legion expressing support for the Coalition for Access Now’s initiatives.