Charlotte's Web Q3 Financials Dismal: Net Income Turns Negative, Adj. EBITDA Declines 82%

Charlotte's Web Holdings Inc., the market leader in the production and distribution of innovative hemp-based CBD wellness products, has reported financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights (All amounts are expressed in USDs and all figures are in comparison to Q2.)

• Revenue was unchanged
• Gross Profit declined 4.8%
• Operating Expenses increased by 21%
• Net Income declined to a loss of $1.3M from a profit of $3.9M
• Adjusted EBITDA declined 82%
• Cash & Equivalents declined 32%

Third Quarter 2019 Business Highlights

• Surpassed 9,000 doors carrying Charlotte's Web™ products
• Expanded into new states and locations with current and new retail partners
• Increased retail breadth and product depth with new CBD oil flavors, pet and gummy SKUs
• Evolved CPG leadership team
• Commenced buildout of infrastructure to expand production, distribution, R&D and extraction capacity processes ahead of the anticipated mass retail channel growth
• Expected 10X increase in current capacity as a result of the completion of a new 136,610 sq ft facility
• Executed additional actions to support regulatory progress at the federal and state levels
• Expanded distribution of its products to:
  • 1,350 Kroger Co. stores in 5 new states to a total of 22 states
  • 738 Vitamin Shoppe stores across 45 states
• Added 2 pet food and pet products distribution partners that cover more than 5,000 potential retail customers
• Increased its senior management team to include several CPG experienced individuals 
• Signed a lease on a newly constructed 136,610 square-foot industrial building to expand production, distribution, R&D and extraction capacity
• Relocated into larger office facilities in Boulder, Colorado 

Subsequent to the Quarter Highlights

•  Kroger has further expanded the distribution of its products into 149 additional stores for a total now of 1,497 locations. 

Guidance

• should achieve full year revenue for 2019 of $95M to $100M and 
• should maintain growth rates for 2020 in the 40% to 50% range or until clear regulations are set.

Charlotte's Web Holdings trades on the Toronto Stock Exchange (CWEB) in Canadian dollars and in U.S. Dollars in the United States on the OTCQX (CWBHF). Below is a chart of its stock performance over the past year.

(Click on image to enlarge)

Not surprisingly, with such disappointing Q3 financials as conveyed above, the stock was down more than 7% in early trading and is now trading at 38% below its October 28th close and down a full 62.5% since the market closed on August 5th.