Charlotte's Web Net Revenue Declines 22.8% To $74.1M, What About Profit?

Charlotte's Web Holdings, Inc. CWBHF CWEB net revenue for the twelve months ended December 31, 2022, was $74.1 million, a decrease of 22.8% from $96.1 million in 2021, due to lower DTC and B2B sales.

Q4 2022 Financial Highlights

• Gross profit was negative $10.5 million due to non-cash inventory provisions of $21.5 million taken in the quarter. This compares to gross profit of $4.2 million in the fourth quarter of 2021, which included inventory provisions of $9.7 million. During the fourth quarter of 2022, it was determined that certain aging hemp biomass inventory would no longer meet long-term product specifications, due to pending legislative changes in Colorado.

• Consolidated net revenue for the fourth quarter ended December 31, 2022, was $18.9 million, a decrease of 23.8% year-over-year from $24.8 million in the fourth quarter of 2021, primarily due to lower retail and online sales through the company's webstore. On a sequential quarterly basis, Q4 2022 net revenue increased 10.7%, versus $17.0 million in Q3 2022.

• Net loss for the fourth quarter was $35.2 million, or ($0.23) per share on a basic and diluted basis, compared to a net loss of $118.2 million, or ($0.86) per share, on a basic and diluted basis in Q4 2021. Additionally, Q4 2022 included a negative change of $6.8 million in the fair value of the company's SBH Purchase Option, which was a non-cash charge.

• Adjusted EBITDA loss for the fourth quarter of 2022 was $4.5 million, an improvement of $3.8 million, or 45.8% as compared to adjusted EBITDA loss of $8.3 million, for the fourth quarter of 2021.

FY 2022 Financial Highlights

• Gross profit was $19.4 million, or 26.2% of consolidated revenue, versus $48.6 million, or 50.6%, in 2021.

• Net loss for 2022 was $59.3 million, or $(0.40) per share on a basic and diluted basis and included changes in fair value of the company's SBH Purchase Option of negative $10.7 million, and a $1.8 million operating lease impairment, partially offset by a net gain of $3.1 million in fair value of the company's debt derivative. This compares to a net loss of $137.7 million, or $(0.98) per share on a basic and diluted basis for 2021, which included $107.7 million of non-cash impairments in goodwill, customer relationships, trade names, inventory provisions, and other long-lived assets.

• Adjusted EBITDA loss for 2022 was $11.8 million, an improvement of $8.7 million, or 42.5% as compared to adjusted EBITDA loss of $20.6 million, for 2021.

• The company's cash and working capital at December 31, 2022, were $67.0 million and $82.3 million respectively, compared to $19.5 million and $75.6 million respectively at December 31, 2021.

"We simplified and streamlined our business in 2022, significantly reducing costs by almost $30 million, which helped to lower total cash use in 2022 to $5.3 million from $29.6 million in 2021, more than offsetting lower revenue," stated Jessica Saxton, CFO. "As a result of these actions and the investment from BAT, we ended 2022 with a cash balance of $67 million. We remain committed to being good stewards of capital through prudent expense and cash management. Our strong liquidity position enables us to be choiceful when investing in our growth initiatives. Moreover, our key strategic partners – Major League Baseball and BAT BTI – have become important stakeholders in the company."

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