Yesterday saw Charlotte’s Web Hemp (CNQ: CWEB) provide an update on its financial health as it released earnings details for the most recent quarter, ending September 30. Overall, the performance was what was to be expected, as revenue continues to rise. Federal stalling on cannabis reform, however, is also preventing the company from seeing even greater performance.
Year-over-year revenue grew 41.8% to reach $25.1 million, an impressive number, given the limited distribution possibilities for hemp and cannabidiol (CBD) products. CWB’s B2C eCommerce sales increased by 38.7%, while its B2B retail sales jumped 66.4%.
Gross profit of $17.9 million was achieved in the quarter thanks to a gross margin of 71.3%. This also helped CWB maintain a positive EBITDA (earnings before interest, taxes, depreciation and amortization) of $0.7 million. It also provided some extra financial cushion, allowing the Colorado-based company to report that it has $35 million on hand and $96 million in working capital.
Coming up, CWB intends to continue its operation investments in preparation of FDM (food/drug/mass) channel growth and expects to be able to pick up that investment pace. It also is going to invest into larger production capabilities, research and development and extraction capabilities.
CWB CEO Deanie Elsner states of the company’s future, “In an increasingly crowded, noisy and confusing CBD market, brands matter, and Charlotte’s Web is the most trusted hemp extract in the world. Consumers are becoming more informed about product ingredients, production quality, and variances between CBD isolate and full spectrum hemp extract efficacy. Consumer education is increasing and a 68% year-over-year increase in traffic through our online store drove Q3 B2C sales to new highs.”
The company has been actively pursuing new commercial partnerships and those efforts are paying off. It now has more than 9,000 retail locations offering its products and is entering new agreements on a consistent basis. It has been able to offer new retail products, through CBD oils and gummies, that are helping with those expansion efforts, as well. A new 136,610-square-foot facility will help CWB increase its current capacity by a factor of ten, while allowing it to reduce production costs. The results of these endeavors should be noticeable by the end of the third quarter of next year.
Elsner added, “As the CBD category’s flagship brand, we saw a similar 66% increase in sales pull into our B2B segment which includes the food/drug/mass (“FDM”) and natural health retail channels. This helped drive Q3 growth to 42% year-over-year [and] the majority of our FDM channel partners to only sell CBD topicals while awaiting legal and regulatory clarity from the U.S. Food and Drug Association (“FDA”). Topicals account for less than 15% of our sales at independent stores that carry both our topical and ingestible CBD product lines. This indicates the potential revenue catalyst of a broad adoption of ingestible products within the FDM channel. We are prudently investing in the expansion of our production and distribution capacities as planned, ahead of anticipated FDA regulatory clarity that could enable wider adoption of our product portfolio. We remain hopeful that broad political support will help drive quick regulatory resolutions in 2020.”