Charlotte's Web 2019 Q4 en eindejaarsresultaten


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BOULDER, CO, March 24, 2020 /PRNewswire/ – (TSX:CWEB, OTCQX:CWBHF), Charlotte’s Web Holdings, Inc. (“Charlotte’s Web” or the “Company”) the market share leader in full spectrum cannabidiol (CBD) hemp extract products, today reported financial results for the fourth quarter and year ended December 31, 2019. All amounts are expressed in United States dollars unless otherwise noted. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures.

Charlotte's Web (CNW Group/Charlotte's Web Holdings, Inc.)
Charlotte’s Web (CNW Group/Charlotte’s Web Holdings, Inc.)

Subsequent event:

On March 23, 2020 Charlotte’s Web entered into an agreement to acquire Abacus Health (“Abacus”) (CSE:ABCS, OTCQB: ABAHF) in an all-stock transaction valued at C$99M (US$69M). The transaction is expected to close in Q2 of this year subject to customary closing conditions and approval of the shareholders of Abacus, after which Abacus shareholders would own 15% of Charlotte’s Web effective outstanding common shares.

Abacus is a leading provider of over-the-counter (“OTC”) topical products for pain relief and skincare containing CBD hemp extracts. Abacus distributes the industry’s widest portfolio of topical CBD SKUs through more than 12,000 doors including the three largest U.S. pharmacy chains, and also reaches 16,500 health care practitioners. Combined, the Companies currently represent approximately 35%1 market share of the food/drug/mass (“F/D/M”) retail segment. The acquisition greatly extends Charlotte’s Web’s product offerings and reach, and solidifies a commanding position in the U.S. hemp CBD topicals category which is forecasted to become fastest growing and largest CBD segment by 20212.

“With our respective market leadership in CBD ingestible and topical products, the acquisition of Abacus positions Charlotte’s Web as the most developed CBD company across every channel and segment,” said Deanie Elsner, Chief Executive Officer of Charlotte’s Web.  “As the largest and most established vertically integrated hemp CBD company we aim to lead the evolution of the category.” 

 2019 12-Month Financial Highlights

  • Organic revenue growth of 36% year-over-year to $94.6 million

  • DTC eCommerce sales grew 39% contributing 57% of 2019 revenue

  • Gross profit (before biological asset adjustments and increases in inventory provision) of $65.9 million was 70% of consolidated revenue

  • Commenced investments into management and infrastructure to expand production, extraction and distribution capacity

  • Adjusted EBITDA loss of $1.7 million

  • Non-cash inventory reserve of $15.5M

  • $68.6 million cash and $116.9 million working capital at December 31, 2019

2019 Fourth Quarter Financial Highlights

  • Organic revenue growth of 6.0% year-over-year to $22.8 million

  • DTC eCommerce sales grew 14%, contributing 65% of fourth quarter revenue

  • Gross profit (before biological asset adjustment and inventory provision) of $12.2M was 54% of consolidated revenue

  • Adjusted EBITDA loss of $10.2 million

  • Fourth quarter $13.9M inventory provision against delay of anticipated adoption of ingestible products by F/D/M channel

  • Completed $49.8 million (C$66.3M) financing December 2019

2019 Business Highlights

  • Developed consumer-packaged good (“CPG”) CPG leadership team and commenced capacity expansion for production, distribution, and R&D ahead of anticipated mass retail channel growth

  • Jacques Tortoroli joined the Company’s Board of Directors. Mr. Tortoroli is former Chief Administration Officer of Bacardi Limited in Bermuda, the largest privately held spirits company in the world

  • Surpassed 10,000 retail doors selling Charlotte’s Web products

  • Increased retail breadth and product depth with new product introductions including 24 new pet product SKUs

  • Record 2019 hemp harvest; 245% increase to 2.34 million lbs biomass, 22% potency increase, 10% yield increase/acre Estimated 36,000 kg CBD with 33% reduced cost/kg, and 52% acres earning organic certification

  • Executed actions to support regulatory progress at the federal and state levels

  • Integrated financial systems, controls and corporate governance in pursuit of an eventual cross-listing on a major U.S. stock exchange

Highlights Subsequent to December 31, 2019

  • Acquisition of Abacus Health, solidifying Charlotte’s Web leadership in CBD topical and ingestible product segments

  • Launched CW Labs R&D Sciences Division, part of SUNY network of 64 universities and medical centres

  • Self-affirmed GRAS status achieved for full spectrum hemp extract

  • NASC certification received for Charlotte’s Web pet products

  • Added to NSF International’s dietary supplements Good Manufacturing Practice (GMP) registration

  • J.P. Morgan engaged for commercial banking services and $10 million line of credit (extendable to $20M)

“In 2019 we began a transition from startup to a standup CPG company capable of servicing the mass retail channels,” said Deanie Elsner, Chief Executive Officer of Charlotte’s Web. “We assembled highly experienced CPG management, sales, and marketing teams that rapidly captured the broadest retail customer footprint in the category. Management systems and processes were implemented to drive operational excellence, and to support the next phase of mass retail growth we commenced expansion of our cultivation and production capacity. Infrastructure investments will continue throughout 2020 and position the Company to launch into the F/D/M channel once an appropriate regulatory framework is passed. And finally, we are bringing scientific legitimacy to the category with the recent launch of CW Labs which is partnering with leading Universities and medical centers to deliver clinical data and drive innovation within the hemp wellness space.”

Regulatory Comments

The hemp CBD industry continues to work with the U.S. Food and Drug Administration (FDA) to develop a regulatory framework.  The Company had anticipated more progress by the end of 2019. The delay has stalled broader adoption of CBD dietary supplements within the F/D/M channel. Recent public comments and reports from the FDA have been more encouraging towards establishing regulatory oversight for hemp derived dietary supplements. A definitive timeline has not been provided. However, the enormous hemp CBD wellness market opportunity remains intact and Charlotte’s Web believes it is well positioned to dominate the category. The Company’s robust 2019 harvest is expected to support demand into 2022, and to ensure product availability, important to those who rely on Charlotte’s Web™ products, as well as (F/D/M) partners who require shelf-stocking certainty.

Q4 Business Review

F/D/M retail channel: Q4 sales to F/D/M increased 68% year-over-year as the Company added several new channel partners in 2019 representing more than 5,000 retail locations. Approximately 75% of the F/D/M locations continue to only carry topical products due to an uncertain regulatory environment. Expansion of the F/D/M market slowed in the fourth quarter after anticipated regulatory clarity did not materialize. However, Charlotte’s Web has been encouraged by recent public comments from the Agency. Ongoing discussions with channel partners indicate a meaningful increase in additional store locations intend to add Charlotte’s Web products to their shelves over the coming months including national pet retailers.  Charlotte’s Web intends to introduce new topical products in April, 2020, an important focus of the F/D/M channel in particular.

Natural health channel: Q4 sales within the natural channel declined 11% year-over-year and 21% quarter-over-quarter due to competitive crowding and to low barriers to entry, partly due to lack of regulatory oversight. In 2019 thousands of new brands entered the channel, diluting market share and consumer spending. As consumer education increases and regulatory oversight is implemented, the Company expects a competitive culling of brands with unsustainable business models or subpar products. In April, Charlotte’s Web will launch competitive new product formats into the channel leveraging its trusted brand name.

Direct-to-consumer (DTC) ecommerce channel: Q4 DTC sales through the Company’s online store increased 14% year-over-year. The Company completed a significant upgrade to its ecommerce platform during the fourth quarter adding a more robust technical platform that enables greater segmentation and marketing capability. The enhanced shopping experience has resulted in a significant lift in conversion rates and Charlotte’s Web is increasing its investments into this top-performing channel in 2020. Further enhancements are underway to deliver shopping experience optimizations including significant checkout, content and mobile enhancements.

“We actively adapt our strategies with the changing market dynamics within our sales channels,” said Ms. Elsner. “In 2020 we are bolstering our ecommerce channel, launching additional topical products into the F/D/M channel, and introducing competitive new products into the natural health retail channel.” 

Financial Review

Financial summary for the three and twelve months ended December 31, 2019:

Three months ended

Year ended

December 31,

December 31,

U.S. $ millions, except per share data

2019

2018

2019

2018

Revenue

$

22.8

$

21.5

$

94.6

$

69.5

Gross (loss) profit before biological

assets adjustment

(1.7)

15.4

50.4

52.5

Net impact, fair value of biological

assets

(0.4)

0.8

0.2

(0.2)

Gross (loss) profit

(2.1)

16.3

50.6

52.3

Operating expenses

26.4

13.0

75.4

37.3

Other (income) and expense, net

(2.9)

(0.3)

(3.6)

(0.5)

(Loss) income before taxes

(25.5)

3.6

(21.2)

15.5

Net (loss) income

$

(18.8)

$

3.2

$

(15.6)

$

11.8

EPS basic

$

(0.19)

$

0.03

$

(0.16)

$

0.14

EPS diluted

$

(0.19)

$

0.02

$

(0.16)

$

0.12

Adjusted EBITDA

$

(10.2)

$

3.4

$

(1.7)

$

19.4

Assets:

Dec 31, 2019

Dec 31, 2018

Cash and cash equivalents

$

68.6

$

73.4

Total assets

$

222.9

$

139.1

Liabilities:

Long-term liabilities

$

39.8

$

3.5

Total liabilities

$

69.2

$

17.6

Quarterly revenue growth for the Company’s nine most recent fiscal quarters:

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

U.S. $ millions

2019

2019

2019

2019

2018

2018

2018

2018

2017

Total revenue

$

22.8

$

25.1

$

25.0

$

21.7

$

21.5

$

17.7

$

17.2

$

13.1

$

12.5

For the year, DTC sales grew to 57% of total revenues compared to 56% in 2018. B2B sales contributed 43% of total revenue compared to 44% in 2018. 

Segmented sales for the three and twelve months ended December 31, 2019:

2019

2018

% Change

Q4-19

Q4-18

% Change

YoY

Q3-19

% Change

QoQ

Channel

DTC

$

53.8

$

38.7

39%

$

14.8

$

13.0

14%

$

14.2

4%

B2B

$

40.8

$

30.8

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