Charlotte’s Web Sees Marginal Quarter over Quarter Sales Growth

This morning Charlotte’s Web (TSX: CWEB) release their second quarter earnings. Some of the highlights from the quarter include:

  • Revenue of $25M, a quarter on quarter growth of 15.3%, and year over year of 45%.
  • Adjusted EBITDA of $3.9 million, down 15% quarter on quarter and down 35% year over year
  • Net income of $2.2 million
  • 53% of revenue from retail outlets
  • Earnings per share of $0.02 basic and diluted

At the Deep Dive, we broke down some of the key metrics into quarter on quarter comparisons:

     Q1’19Q2’19% Change
Revenue $  21,700  $   25,020 15.3%
Gross Margin $  15,794  $   18,494 17.1%
Gross Margin % 73% 74%  
Operating Income $    3,020  $      2,836 -6.1%
Adjusted EBITDA $    4,600  $      3,900 -15.2%
Net Income $    2,334 $   2,188-6.3%
Inventory  $  26,944  $   34,534 28.2%
Receivables $    5,473  $      8,830 61.3%
Payables $    2,863  $      2,077 -27.5%
Operating Cash Flow $  (3,689) $ (11,555)-213.2%
Investing Cash Flow $     (707) $       (382)-46.0%
Retail Store Count 6,000 7,88731.5%

“We have been experiencing increased salesthrough both oure-commerce and retailsales channels,….. Top tier mass retailers are entering the market as several national grocery and drugstore brands have announced their CBD plans. The majority of these are now carrying Charlotte’s Web products. This is a significant development for the hemp CBD category. To effectively service projected growth, we have been building our executive leadership with experienced consumer-packaged goods (CPG) executivesin sales,marketing, finance, data and operations. Similarly, we are expanding our capabilities in cultivation, R&D, production and distribution.”

Deanie Elsner, Charlotte’s Web, CEO
Image result for Deanie Elsner
Deanie Elsner, Charlotte’s Web, CEO

Some of the other highlight include:

  • Five leading national retailers such as CVS and Kroger are selling Charlotte’s Web products
  • Over 8,000 retail locations carrying Charlotte’s Web products today.
  • Launched new CBD gummies line and new pet line.

While growing at a marginal rate for a claimed growth sector, Charlotte’s Web’s earnings present a slight problem for other players within the CBD market across the US. Despite significant growth in its retail footprint, with total retail outlets now totaling 7871, the quarterly sales figures have not picked up at an equivalent pace. The firms retail footprint expanded by 32% over the quarter, while sales only increased 15% on a quarter over quarter basis. While we don’t expect sales to be instant, the delta between these two figures is of concern.

In addition to their footprint growth, the firm reported that it had entered several national retailers over the course of the quarter, as well as added several products to its sales mix. Yet, these efforts have yet to provide a significant increase in quarter over quarter sales.

Information for this briefing was found via Sedar and Charlotte’s Web. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.