Debra Borchardt
Charlotte’s Web Holdings, Inc. (OTCQX: CWBHF) looks like it has been able to regain some ground after the pandemic caused the company a lot of disruption as retailers were closed for some time. Charlotte’s Web reported revenue increased 17.9% to $26.9 million in the fourth quarter of 2020 versus $22.8 million for the same time period in 2019. The company said DTC (direct-to-consumer) sales increased 21.2% year-over-year, contributing $17.4 million or 64.8% of the fourth-quarter revenue. While it was a positive turn of events, the company missed revenue estimates of $27.5 million according to Yahoo Finance.
For the full year, total net revenue increased to $95.2 million vs. $94.6 million in 2019. The company said DTC eCommerce sales grew 27.6% in 2020 contributing 67.0% of total revenue, substantially offsetting a decline of 29.5% in B2B sales impacted by the COVID-19 pandemic.
“We turned a challenging start to 2020 into a strong finish, taking multiple actions and outperforming much of the competitive set to extend our brand and market share leadership,” said Deanie Elsner, CEO of Charlotte’s Web. “We filled product and channel gaps with competitive offerings and advanced the science of hemp CBD through CW Labs and collaborative studies with top-tier institutions. We have now protected our intellectual property with 5 patents awarded for our proprietary cultivars and have defended our trademarked Charlotte’s Web brand through a recent judgment.”
E-Commerce Business Builds
During 2020 Charlotte’s web said it implemented a competitive pricing realignment strategy across its product portfolio resulting in increased unit sales and expanded market share in the second half offsetting some of the headwinds created by COVID-19. B2B net sales increased 12.4% year-over-year supported by expanded topical product offerings. DTC net sales grew by 21.2% year-over-year supported by the pricing realignment and higher conversion rates through ongoing marketing and social media programs. Year-over-year new consumer acquisitions increased 52% and conversion rates increased 98%.
Cutting Expenses
Charlotte’s Web also made headway as it cut Operating expenses by 10.4% to $23.6 million from $26.4 million. The company noted that the high operating expenses were due to its investments in capacity expansion and transition to a consumer-packaged-goods (“CPG”) operating company capable of supporting mass retail channel growth. In response to lower B2B retail sales growth during the pandemic, management said it took actions to better align operating expenses through an expense optimization program successfully achieving reductions of more than 10% of the consolidated expense run rate by the end of 2020. “This was achieved despite the addition of the CW Labs R&D division and the Abacus acquisition during the year. As a percent of revenue operating expenses improved from 136%, to 113% and 88% for Q2, Q3 and Q4, respectively in 2020.”
The company said it used $5.1 million of cash in operations during the fourth quarter of 2020 compared to $8.6 million of cash used in operations during the fourth quarter of 2019. Charlotte’s Web cash and working capital at December 31, 2020, were $52.8 million and $113.6 million, respectively, compared to $68.6 million and $116.9 million on December 31, 2019.
Elsner added, “In 2021 we are positioning for long-term growth and shareholder value creation as we evolve towards establishing Charlotte’s Web as a leading global botanicals wellness company by expanding into cannabis wellness where federally permissible. To support our international growth we have an exclusive agreement with one of Israel’s largest medical cannabis producers, and in the U.S. we secured future optionality through a strategic option to acquire Stanley Brothers cannabis business pending US federal legalization of cannabis.”
