There was a 57.7% improvement in the adjusted EBITDA loss over the year.
Hemp-based CBD giant Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) reported its first-quarter financial results on Thursday ending March 31, 2023. Despite a 12.1% year-over-year fall in net revenue, the company managed to reduce operating expenses by 14%, ending with a solid $61 million cash balance.
The financial review for the quarter painted a nuanced picture. While consolidated net revenue was $17 million, down 12.1% from $19.4 million since the same period last year, gross profit remained strong at $9.9 million or 58.3% of revenue.
Total selling, general, and administrative expenses were successfully reduced by 14.0% to $17.5 million, down from $20.4 million in Q1 2022. The company attributed the reduction as a reflection of actions taken in 2022 to improve operating efficiencies and align personnel and marketing expenses with current revenues.
Although the company reported a net loss of $2.9 million for the first quarter, there was a significant improvement in the adjusted EBITDA loss, which was $3.3 million, a 57.7% improvement compared to the $5.3 million loss in the first quarter last year.
Jessica Saxton, CFO of Charlotte’s Web, cited these cost controls as a successful strategy to counterbalance the softness in the CBD category due to the unregulated environment.
“We continue to maintain healthy gross profit margins and have improved our operating margins, despite a net revenue decline,” Saxton said. The financial maneuvering has enabled the company to support growth plans, notably the launch of ReCreate, a new NSF Certified for Sport lifestyle brand.
On the regulatory front, CEO Jacques Tortoroli expressed optimism. The company is actively supporting federal and state legislative initiatives, including the reintroduction of bill H.R. 1629, aimed at regulating hemp CBD as dietary supplements.
Tortoroli also noted the formation of DeFloria LLC, a collaboration with AJNA BioSciences PBC and British American Tobacco PLC. This new venture is targeting a botanical investigative new drug through the FDA drug development pathway, specifically for a neurological condition.
“We anticipate further progress throughout this year,” said Tortoroli.
Charlotte’s Web in April launched a new lifestyle brand, “ReCreate,” aimed at Millennials and GenZers. The brand’s first offering is “ReCreate Daily Edge,” a broad-spectrum CBD oil tincture developed for sports and cultural lifestyle.
According to the company, the product is meant to aid recovery from intense workouts, promotes calmness under pressure, and supports healthy sleep cycles and focus. The ReCreate brand will also bear the iconic MLB logo and tap into MLB’s base of approximately 180 million fans.
Additionally, the company, in collaboration with AJNA BioSciences PBC and British American Tobacco PLC, has formed DeFloria LLC. This entity is set to pursue a botanical investigative new drug from Charlotte’s Web’s proprietary hemp genetics, aiming at a neurological condition. The first set of phase I clinical trials is slated for the summer of 2023.
The company’s cash and working capital were $60.8 million and $78.5 million, respectively. (Full Story)