Charlotte’s Web Holdings, Inc., (TSX:CWEB) (OTCQX:CWBHF), producer of full-spectrum hemp extract wellness products, reported its financial results on Monday for the third quarter ended September 30, 2022.
Q3-2022 Financial Review
For the three-month period ended September 30, 2022, net revenue was $17.0 million, a decrease of 28.1% versus $23.7 million in Q3-2021. Direct-to-consumer e-commerce net revenue was $11.8 million, a decrease of $3.4 million or 22.5% due to lower year-over-year traffic. Adjusted EBITDA for the third quarter of 2022 was positive $0.6 million, an improvement of $5.5 million as compared to Adjusted EBITDA of negative $4.8 million in Q3-2021.
Business-to-business net revenue was $5.3 million, a decrease of $3.3 million, or 38.1%, lower year-over-year primarily due to lower comparable shipments to some of the company’s largest retail customers. Several new distributors were added during the quarter as a result of a strategic transition from direct sales to a distributor model, however, these take time to develop and did not materially impact sales in the quarter.
Gross profit was $8.9 million, or 52.5% of revenue versus $14.9 million and 62.9% of revenue respectively in Q3-2021. The decrease was primarily related to lower net revenue and sales mix with the consumer trend shift from oil tinctures to lower-cost gummies.
Total selling, general, and administrative expenses were $11.0 million, including an Employee Retention Credit tax benefit of $4.1 million, due from the IRS, recorded in the third quarter of 2022. Excluding the ERC, SG&A expenses were $15.1 million, a 37.7% year-over-year reduction as compared to SG&A expenses of $24.3 million in Q3-2021.
An operating loss of $3.9 million in the third quarter of 2022 improved by $5.5 million, or 58.3%, as compared to an operating loss of $9.4 million in Q3-2021.
Business highlights
Charlotte’s Web significantly expanded its U.S. coverage, adding several new distributors and entering new channels:
- SBM LLC: A new vertical and industry first for CBD, through this employer-sponsored benefit plan, US employers can now confidently provide employees and their pets with coverage and access to Charlotte’s Web products as an alternative health and wellness therapy.
- During the third quarter, Charlotte’s Web announced a new product line for the sports channel and in October, unveiled the first product “Charlotte’s Web Sport – Daily Edge” broad spectrum oil tincture – the first and only broad spectrum CBD oil to be certified NSF for Sport.
'Official CBD of Major League Baseball'
Charlotte’s Web was named the “Official CBD of Major League Baseball” on October 12, 2022, which coincided with the launch of Daily Edge. This marked the first major professional sports league to form a strategic partnership agreement with a CBD company. Charlotte’s Web commends MLB’s recognition of the broad interest and value of CBD for supporting the daily health and wellness of its players and fans.
“The MLB partnership is a home run for Charlotte’s Web and CBD. We expect its well-established and trusted profile to positively influence consumers, government regulators, and Congressional leadership," said Jacques Tortoroli, CEO of Charlotte’s Web. "The partnership has already paid significant dividends through the awareness and education enabled by the enormous exposure that MLB provides through its base of 180 million fans throughout the year."
Executing its asset-light model for international markets by partnering with leading local market partners, on November 2, 2022, Charlotte’s Web announced a strategic alliance with Tilray Brands (NASDAQ:TLRY) for manufacturing and distribution in Canada.
Photo by Shannon Potter on Unsplash.
