Jacques Tortoroli Archives - Green Market Report

Adam JacksonMarch 23, 2023


Despite inking major deals, Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) saw falling revenue in 2022 due in part to waning demand in an increasingly saturated cannabidiol (CBD) industry.

The hemp extract wellness company, which is the largest in the world, reported financial results for the fourth quarter and year ending December 31, 2022.

Net revenue for the fourth quarter of 2022 was $18.9 million, a downtick of 23.8% versus $24.8 million in the fourth quarter of 2021. The decline was mostly due to lower retail and online sales, it said. Earnings were for a loss of $0.23 cents.

For the entire year of 2022, the company reported a net revenue of $74.1 million, a 22.8% decrease from $96.1 million in 2021.

The company posted a fourth quarter net loss of $35.2 million, meaningful progress from the $118.2 million net loss in the same period in 2021. The net loss for 2022 was $59.3 million, also a marked improvement from the $137.7 million net loss in 2021.

The CBD industry has witnessed a shift towards lower-priced CBD products, primarily gummies and topical products.

Still, Charlotte’s Web in 2022 held the number one share position across the food, drug, mass (FDM), and natural retail channels. It also maintained its position as the market leader in e-commerce sales, according to cannabis research firm Brightfield Group.

CEO Jacques Tortoroli said that the company has focused on strategic initiatives and partnerships outside of lobbying regulatory action, which he said “has created uncertainty and confusion for the CBD industry overall.”

Charlotte’s Web received a $56.8 million investment from British American Tobacco (BAT), which strengthened its financial position, though the exact value and cost of that debt will play out over the next few years.

The company also became the “official CBD of Major League Baseball,” which will help it tap the sports industry and expand brand recognition, in addition to obtaining a certification from quality assurance firm NSF.

Charlotte’s Web gained new distributor partnerships to expand retail opportunities across new industry verticals – inking a distribution deal with Southern Glazer’s Wine & Spirits, along with new partnerships in Canada and other regions as part of its asset-light international strategy.

However, business-to-business (B2B) net revenue dropped 32.6% year-over-year from $9.5 million to $6.4 million. The decrease was mainly attributed to lower comparable shipments to retail customers, some of which reduced total shelf space for CBD products. However, B2B net revenue did increase by 20.8% sequentially, reflecting seasonal holiday sales demand.

Direct-to-consumer (DTC) net revenue saw an 18.3% drop over the year from $15.3 million to $12.5 million, due to lower traffic to the company’s online webstore and competitive discounting. Sequentially, DTC net revenue increased by 6.0%, again reflecting seasonal holiday sales demand.

Brightfield Group released a mid-year CBD report in July, which stated that growth in the CBD industry is “heavily dependent” on Food and Drug Administration (FDA) regulation. However, there has been little progress on federal regulation for CBD since the provisions legalizing hemp and hemp derivatives were passed in the Farm Bill of 2018.

The lack of regulations has led to a competitive market with a constantly-changing product mix. Still, companies are finding ways to integrate CBD into the broader wellness market, creating non-CBD products to sell through mainstream outlets, and partnering with retailers that don’t sell CBD to reach new customers.

According to the Brightfield Group, if federal regulation were implemented by 2024, sales could reach $11 billion by 2027, driven by accelerated growth of ingestible products like capsules and gummies and increased acceptance by mainstream retailers. Without such guidance, the CBD market is expected to remain decidedly lower.

Charlotte’s Web said it has been active in supporting federal and state legislative pushes for a comprehensive CBD regulatory framework. The company is part of a coalition in Washington D.C. to support Congressional legislation, and has shared quantitative safety data study results with the FDA, it said.

CFO Jessica Saxton said that the company made its business operations simpler and more efficient, resulting in a cost reduction of nearly $30 million. The fall in total cash usage from $29.6 million in 2021 to $5.3 million in 2022 more than compensated for the decrease in revenue, she said.

Thanks to the investment from BAT, the company was able to finish 2022 with a cash balance of $67 million.

“We remain committed to being good stewards of capital through prudent expense and cash management. Our strong liquidity position enables us to be choiceful when investing in our growth initiatives,” Saxton added. “Moreover, our key strategic partners – MLB and BAT – have become important stakeholders in the company.”

Adjusted EBITDA losses showed a positive trend, with a 45.8% improvement in the fourth quarter and a 42.5% improvement over 2022.

Adam JacksonNovember 2, 2022


Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY) has inked a partnership with U.S.-based CBD giant Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) to sell hemp extract products in Canada.

Under the agreement, Charlotte’s Web’s full-spectrum CBD products will be reach dispensary shelves through Tilray’s distribution network. The company said that its products had previously only been available to those that qualified for a special access medical exemption through Health Canada for specific need-states.

“Partnering with Charlotte’s Web, the market leading CBD brand, opens new opportunities for Tilray Brands in Canada as we evolve our distribution channels from the dispensary model to natural wellness retail channels and eventually mass retail opportunities,” Tilray Canada president Blair MacNeil said.

Charlotte’s Web will sell the same core hemp extract products it has in the U.S., with Tilray handling licensing, manufacturing, quality, marketing, and distribution.

“This underscores our strategic expansion into international markets with leading domestic partners by leveraging well-established infrastructure, co-production, and route-to-market capabilities,” Charlotte’s Web CEO Jacques Tortoroli said in a news release.

The company expects Charlotte’s Web CBD products to be widely available in Canadian dispensaries by early next year.

Hemp-derived CBD falls under the same regulatory framework in Canada as cannabis, so Canadians for now can only purchase CBD products legally through a licensed cannabis retailer or through prescription by a doctor.

However, with Health Canada signaling a move toward simplifying CBD’s legal status, the company said that establishing Charlotte’s Web’s supply chain and distribution in the country also prepares for the possible introduction of natural health products regulations and potential ability to sell CBD products through traditional retailers.

Cory Pala, director of investment relations at Charlotte’s Web told Green Market Report in August that the company — which is based in the U.S. — is “particularly excited” about Health Canada’s inquiry to make CBD more accessible.

Charlotte’s Web cannot export its products to Canada under current law, “which is sort of ironic” considering it is federally legal in both countries, he said, so it has mapped out a plan to partner with cultivators in the country instead.

“In the U.S., we have 2,500 different competitors that have similar products,” Pala said. “But in Canada, we have maybe half a dozen, if that. And so it’s really, really compelling to us as a market opportunity. This is big for multiple reasons.”

Charlotte’s Web has been focused on expanding its presence in the U.S. and abroad. Last month, the company also became the “official CBD of Major League Baseball” after the two organizations struck a lucrative sponsorship deal.

Adam JacksonAugust 9, 2022


Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) missed expectations as the CBD company continues to struggle amid a patchwork regulatory landscape. The company reported its financial results for the second quarter ending June 30, 2022.

For the key metric of total revenue, Charlotte’s Web missed expectations as it delivered approximately $18.9 million during the period — missing the Yahoo Finance Average analyst estimate for revenues of $27.13 million. The revenue decreased 21.8% versus $24.2 million in the same period last year. The company said that the decrease was primarily due to lower comparable customer shipments, consumer shift to lower priced formats, a return reserve as well as lower comparable online traffic.

Charlotte’s Web also reported a second-quarter net loss of $7.9 million compared to a net loss of $5.9 million in the same period last year. The company said that the net result was primarily impacted by “lower net revenues, higher return reserves and increased inventory provisions, which were offset by significantly reduced operating expenses.” The earnings were for a loss of five cents per share, a cent below analysts’ loss estimates of four cents a share.

“While we are disappointed with the second quarter revenue, we achieved significant distribution and customer wins consistent with our growth priorities to expand our coverage in existing channels and enter new vertical,” CEO Jacques Tortoroli said. “We’re also focused on improving operating cash flow as we progress through the second half of the year. Operating expenses were down over 31.5% year-over-year in the second quarter. In July, we further lowered our staffing levels and administration expenses. In aggregate, our focus on right-sizing our business is bringing operating expenses below $70M on an annualized run rate.”

The company also saw a $2.4 million decline in the e-commerce platform versus $15.7 million at the same time last year. Charlotte’s Web maintains the largest e-commerce business in the CBD industry; and e-commerce represents the largest channel in the industry with an approximate 40% market share, according to the Brightfield Group.

Business-to-business net revenue was $5.6 million after a $0.9 million returns reserves — representing $2.9 million, or 33.9%, lower year-over-year “primarily due to lower comparable shipments to some of the company’s largest retail customers.”

“Charlotte’s Web holds the number one share position across major retail channels including food/drug/mass retail, natural grocery & vitamin retailers, and e-commerce, based on market share data from leading third-party analysts such as The Nielsen Company and Brightfield Group,” the release said.

Gross profit was $9.3M, or 49.4% of revenue versus $15.8 million and 65.5% of revenue respectively in same period last year. The company said the decrease was primarily related to lower net revenue “including a $0.9 million customer return reserve, and $1.9 million of inventory provisions.” Excluding the return reserve and inventory provisions, gross profit was 61.0% of revenue, it said.

Adjusted EBITDA fell to $5.4 million in the second quarter, versus a loss of $5.1 million in the same period last year.

Net cash used from operations during the first half of the current fiscal year was $4.3 million versus $16.2 million for the same period last year.  The company’s cash and working capital as of the second quarter were $14.8 million and $64.6 million, respectively, versus $19.5 million and $75.6 million in the latter half of the previous fiscal year.

Total selling, general and administrative expenses of $17.3 million improved 31.5% year-over-year due to a $7.9 million reduction versus the second quarter last year. The company said the improvement reflects lower staff levels and compensation as well as increased operating efficiencies “resulting from actions implemented year-to-date.”

New Pathways For CBD

As companies in the cannabis sector suffer from a lack of regulatory guidance from the federal government, new opportunities are opening up for CBD companies.

Overseas, the company’s original CBD oil formula has been placed on the Foods Standards Agency list of products allowed to be sold in the U.K — making Charlotte’s Web the only substantially vertically-integrated U.S. company with a full-spectrum hemp extract to have passed the validation phase and advance to the safety assessment phase in the United Kingdom, it said.

Also, the Scientific Advisory Committee for Health Canada unanimously agreed CBD is “safe and tolerable for short-term use” — recommended hemp CBD products should be considered for mainstream retail availability.

Cory Pala, Director of Investment Relations, told The Green Market Report at the time that the company is “particularly excited” about the recommendation.

The company cannot legally export its products to Canada under current law “which is sort of ironic” considering it is federally legal in both countries, he said, so it has partnered with cultivators in the country instead. The new recommendation presents a juncture for the company.

“In the US, we have 2,500 different competitors that have similar products,” Pala said. “But in Canada, we have maybe half a dozen, if that. And so it’s really, really compelling to us as a market opportunity. This is big for multiple reasons.”

The health board will take consultation with stakeholders and advocates to hash out regulation guidelines and figure out whether it actually wants to move in that direction before seeking approval from the Canadian government.

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