Charlotte’s Web Holdings Weaves Some Solid Results

Charlotte’s Web Holdings, Inc. (TSX:CWEB), one of the U.S. CBD stocks, continues to report profitable growth

SmallCapPower | June 6, 2019: Charlotte’s Web Holdings, Inc. (TSX:CWEB), one of the Canada-listed U.S. CBD stocks, reported recently financial results for the first quarter ended March 31, 2019. First-quarter revenue surged 66% YoY to US$21.7 million on the back of broader consumer awareness of CBD-based products. This led to a surge in demand across all product categories. Human nutrition products, topicals and animal nutrition products grew by 67%, 455% and 79%, respectively. More than 51% of the revenue came in through large mass retailers as they started carrying the Company’s products.

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Charlotte’s Web Holdings reported a gross profit of $15.9 million for Q1 2019, compared to $10.5 million during the same period last year. Gross margin came in at 73.4% as compared to 80.5% for the same period in 2018. Gross profit prior to biological asset adjustments as a percentage of revenue for Q1 2019 and 2018 was 72.8% and 79.0%, respectively.

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Adjusted EBITDA for the quarter came in at $4.5 million, representing an EBITDA margin of 21% (vs. $4.6 million and margin of 35%). Adjusted EBITDA ratio reflects continued investment in infrastructure and staff & personnel in line with its growth plans estimated for 2019 and beyond. Further, the Company reported a net income of $2.3 million, or $0.02 per dilutive share, as compared with $3.1 million, or $0.04 per dilutive share, during the same period last year.

As of March 31, 2019, Charlotte’s Web Holdings had cash and equivalents of $69.1 million and total assets of $171.7 million.

Charlotte’s Web Chief Executive Officer Deanie Elsner said, “Charlotte’s Web has established itself as the market leader in sales, and more importantly as a trusted brand with an impeccable reputation. As someone with an extensive career in the CPG industry leading global brands, I see a tremendous opportunity to further influence, shape and grow the CBD category while turning Charlotte’s Web into a household product name that consumers can rely on around the world. My priority is to raise the Company’s level of operational effectiveness and accelerate growth opportunities acting with urgency and decisiveness.”

On the operational front, the Company commenced shipments to three national brand supermarket/grocery and drugstore retailers in select states. Post this quarter, Charlotte’s Web added a fourth national retailer and now is available in 6,000 retail locations. More than 2,300 new retail stores were added since the start of the year. The Company expects additional states and stores to be added by these retailers throughout 2019.

Charlotte’s Web recently launched a line of pet products, including functionally-focused chews with synergistic ingredients to target specific health functions, including: Calming, Hips & Joints and Cognition. Further to support the growth, the Company is more than doubling the number of acres planted for 2019 to over 700 acres.

Charlotte’s Web shares climbed more than 3% following the announcement to close at a market capitalization of C$1.9 billion with a price-to-book multiple of 17.5x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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