28% reduction in 12-month operating
expenses
Net cash of $67M
at December 31, 2022
LOUISVILLE, Colo., March 23,
2023 /CNW/ - (TSX: CWEB) (OTCQX: CWBHF),
Charlotte's Web Holdings, Inc. ("Charlotte's Web" or the
"Company"), the market leader in full spectrum hemp extract
wellness products, today reported financial results for the fourth
quarter and year ended December 31,
2022. All amounts are expressed in United States dollars unless otherwise
indicated. Percentage changes are calculated to the nearest
thousand dollars.
"In the fourth quarter, Charlotte's Web cemented an
authoritative brand leadership position following our NSF
certification for professional sport, becoming the Official CBD of
Major League Baseball and receiving a $56.8
million investment from British American Tobacco,"
Jacques Tortoroli, Chief Executive
Officer of Charlotte's Web, said. "We also maintained our leading
market share position across key metrics despite a challenging
sales environment due to ongoing regulatory inaction, which has
created uncertainty and confusion for the CBD industry overall.
Additionally, we gained new distributor partnerships to expand our
retail opportunities across new industry verticals and better
service some existing retail customers. At the same time, we
entered into new partnerships in Canada and other regions as we continue to
selectively execute on our asset-light international strategy. On
the regulatory front, we significantly increased our engagement in
Washington D.C., as part of a
broad coalition to support Congressional legislation for
appropriate regulatory development related to the hemp CBD
category. Additionally, we have been active with a range of states
as they look to implement regulations."
"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," Jessica Saxton, Chief
Financial Officer, said. "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 – MLB and BAT – have become important
stakeholders in the Company."
Fourth Quarter 2022 Strategic Highlights
- Reinforced the balance sheet, with $52.7
million net cash proceeds, through a convertible debenture
investment from a subsidiary of BAT (LSE: BATS and NYSE: BTI). The
debenture is convertible at C$2.00
per common share on the Toronto Stock Exchange (TSX) at BAT's
discretion for a non-controlling equity stake in Charlotte's Web of
approximately 19.9%. The 7-year debenture bears interest at a rate
of 5% per annum (stepping down to 1.5% following approved federal
regulations for hemp CBD) which can be paid in cash (or cash
equivalence in shares) at conversion or maturity.
- Charlotte's Web was named the "Official CBD of Major League
Baseball©", marking the first major professional sports league to
form a strategic partnership agreement in CBD to support the daily
health and wellness of its players and fans. Through the
partnership MLB also became a 4% shareholder of Charlotte's Web
with aligned interests to leverage exposure through MLB's base of
approximately 180 million fans.
- Launched new "Charlotte's Web Sport – Daily Edge" broad
spectrum oil tincture - the first and only broad spectrum CBD oil
to be certified NSF for Sport®. Daily Edge is part of a new product
line for the sports and cultural lifestyle pillars that provide
athletes and consumers with natural options to support recovery,
help keep calm under pressure, and maintain healthy sleep cycles
and focus.
- Expanded U.S. retail coverage with several new distributors and
new industry verticals including employer-sponsored benefits plan
through SBM LLC, rapid home delivery through Go Puff, and spas with Massage Envy.
- International expansion initiatives progressed. In November,
Charlotte's Web announced a strategic alliance with Tilray for
manufacturing and distribution in Canada. For the first time, Canadians will
have the ease of nationwide availability of Charlotte's Web full
spectrum CBD products through Tilray's distribution network.
First availability is expected in mid-2023 for hemp extract oil
tinctures, followed by gummies and topicals.
- Charlotte's Web is supporting federal and state legislative
initiatives to help advance a comprehensive U.S. CBD regulatory
framework. Charlotte's Web is part of a coalition in Washington D.C. to support Congressional
legislation and has shared quantitative safety data study results
with the U.S. Food and Drug Administration (FDA).
- The Company has been strengthening organizational leadership
with changes and additions to senior management.
Q4 2022 Financial Review
The following table sets forth selected financial information
for the periods indicated.
|
|
Three Months Ended,
December 31,
|
U.S. $ millions, except
per share data
|
|
2022
|
|
2021
|
|
|
|
|
|
Revenue
|
|
$18.9
|
|
$24.8
|
Cost of goods
sold
|
|
29.4
|
|
20.6
|
Gross profit
|
|
(10.5)
|
|
4.2
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
21.4
|
|
24.4
|
Goodwill and asset
impairments
|
|
0.1
|
|
98.0
|
Operating
loss
|
|
(32.0)
|
|
(118.2)
|
|
|
|
|
|
Other income,
net
|
|
0.5
|
|
(0.3)
|
Change in fair value of
financial instruments
and other
|
|
(3.6)
|
|
0.3
|
Income tax (expense)
benefit
|
|
(0.1)
|
|
(0.2)
|
Net loss
|
|
$(35.2)
|
|
$(118.2)
|
Net loss per common
share, basic and diluted
|
|
$(0.23)
|
|
$(0.86)
|
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. Adjusted Gross Profit1 in
Q4 2022, prior to the impact of inventory provisions was
approximately $11.0 million, or 58.1%
of revenue, an improvement from Q4 2021 Adjusted Gross Profit,
which was $13.8 million, or
55.4%.
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.
Fourth quarter business-to-business ("B2B") net revenue was
$6.4 million, a decrease of 32.6%
year-over-year from $9.5 million,
primarily due to lower comparable shipments to retail customers,
some of which have reduced total shelf space for CBD products. On a
comparative basis, Q4 2021 included significant relative expansion
following the passing of Assembly Bill 45 in California, while there was not a similar
positive regulatory event affecting Q4 2022.
On a sequential quarterly basis, B2B net revenue in Q4 2022
increased 20.8% versus $5.3 million
in Q3 2022, reflecting seasonal holiday sales demand. New
distribution partners were added in new channel categories
throughout the year, including the fourth quarter; however, they
require time to materially impact sales.
Fourth quarter direct-to-consumer ("DTC") net revenue was
$12.5 million, a decrease of 18.3%
year-over-year from $15.3 million,
due to lower traffic to the Company's online webstore and
competitive discounting. Declines in traffic to the webstore
continue to be the biggest challenge to e-commerce revenue
performance.
On a sequential quarterly basis, DTC net revenue in Q4 2022
increased 6.0%, versus $11.8 million
in Q3 2022, reflecting seasonal holiday sales demand. New
subscriptions increased 21% year-over-year and e-commerce
conversion rates were strong at 7%. In 2023, the Company is
launching initiatives to increase online traffic to broaden
demographic exposure, with partners such as MLB. Charlotte's Web
maintains the largest e-commerce business in the CBD industry, with
e-commerce sales for the total CBD industry estimated at
approximately $2 billion annually,
making it the largest channel, generating approximately 40% of
total industry sales according to the Brightfield Group.
DTC and B2B contributed 66% and 34% of revenue respectively in
the fourth quarter of 2022 versus 62% and 38% respectively for the
fourth quarter of 2021.
|
|
Three Months
Ended
|
|
|
|
December
31,
|
|
|
2022
|
|
2021
|
|
Total Revenue - U.S.
$ millions
|
|
$18.9
|
|
$24.8
|
|
Direct-to-consumer
("DTC")
|
|
$12.5
|
|
$15.3
|
|
Business-to-business
("B2B")
|
|
$6.4
|
|
$9.5
|
|
Total selling, general and administrative ("SG&A") expenses
were $21.4 million, a 12.2%
year-over-year reduction from $24.4
million in Q4 2021. The year-over-year net improvement
reflects actions taken in 2022 to improve operating efficiencies
and reduce personnel and marketing expenses to be reflective of
current revenues.
An operating loss of $32.0 million
for the fourth quarter of 2022 was an improvement of $86.2 million, or 71.5%, as compared to an
operating loss of $118.2 million in
Q4 2021. The significant improvement was primarily due to Q4 2021
impairment charges of $98.0 million
related to the goodwill and intangible assets of the 2020
acquisition of Abacus.
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 EBITDA1 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.
2022 12-Months Financial Review
On a year-over-year basis, consolidated 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. Throughout 2022 there was
also a continuing industry-wide consumer shift to lower unit-priced
CBD products, primarily gummies and topical products, where
Charlotte's Web is the market share leader. For 2022, Charlotte's
Web held the number one share position across the food, drug, mass
("FDM") and natural retail channels, based on dollar share data
from leading third-party analysts, The Nielsen Company and SPINS,
and remains the market share leader in e-commerce sales according
to the Brightfield Group. DTC revenue decreased 18.7%
year-over-year to $50.7 million, and
B2B revenue was 30.6% lower, at $23.4
million. DTC and B2B sales contributed 68% and 32% of net
revenue in 2022 respectively, and 65% and 35% in 2021,
respectively.
Gross Profit was $19.4 million, or
26.2% of consolidated revenue, versus $48.6
million, or 50.6%, in 2021. Cost of goods sold included
inventory provisions of $23.4
million and $9.7 million for
2022 and 2021, respectively. Excluding inventory provisions,
Adjusted Gross Margin1 was 57.7% in 2022, versus 61.7%
in 2021. Lower margin gummy products represented 46.6% of gross
sales for the Company in 2022 versus 38.7% in 2021,
respectively.
Total SG&A expenses for 2022 decreased $27.6 million, or 28.2%, year-over-year to
$70.1 million, from $97.6 million in 2021, as a result of management
actions taken during the year to simplify the business and
streamline operations.
A 2022 operating loss of $52.5
million was an improvement of $94.6
million, or 64.3%, as compared to an operating loss of
$147.1 million in 2021. The
improvement was primarily attributable to impairment charges of
$98.0 million taken 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 EBITDA1 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.
Balance Sheet and Cash Flow
Net cash used from operations, for the year ended December 31, 2022, was $5.3 million as compared to $29.6 million in 2021. The decrease is related to
reduced operating expenses and the collection of $10.8 million in IRS tax refunds, partially
offset by lower revenues.
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.
Consolidated Financial Statements and Management's Discussion
and Analysis
The Company's audited consolidated financial statements and
accompanying notes for the year ended December 31, 2022 and 2021 and related
management's discussion and analysis of financial condition and
results of operations ("MD&A") are reported in the Company's
10K filing on the Securities and
Exchange Commission website at www.sec.gov and on SEDAR at
www.sedar.com, and will be available on the Investor Relations
section of the Company's website at
https://investors.charlottesweb.com.
Conference Call
Management will host a conference call to discuss the Company's
2022 fourth quarter and year-end results at 11:00 a.m. ET on March 23,
2023. There are three ways to join the call:
- Register and enter your phone number at
https://emportal.ink/3Zj6SdP to receive an instant automated
call back, or
- Dial 1-416-764-8659 or 1-888-664-6392 approximately 10 minutes
before the conference call and provide confirmation number
89462125, or
- Listen to the live webcast online.
A recording of the call will be available through April 1, 2023. To listen to the rebroadcast
please dial 1-416-764-8677 and provide conference ID 462125. A
webcast of the call can be accessed through the investor relations
section of the Charlotte's Web website.
About Charlotte's Web Holdings, Inc.
Charlotte's Web Holdings, Inc., a Certified B Corporation
headquartered in Louisville,
Colorado, is the market leader in innovative hemp extract
wellness products under a family of brands that includes
Charlotte's Web™, CBD Medic™, and CBD Clinic™. Charlotte's
Web whole-plant CBD extracts come in full-spectrum and
broad-spectrum (THC-free) options, including the world's only
broad-spectrum CBD certified NSF for Sport®, which is
the official CBD of Major League Baseball©. Founded by the seven
Stanley Brothers, Charlotte's Web
ignited the CBD industry when the brothers came to global
prominence with the coverage of a young girl's astounding reaction
to their hemp extract. Their advocacy changed laws, public
perception, and research around the vast health potential of
plant-based solutions. The Stanleys built their business with the
mission to bring botanical options to health seekers worldwide.
Charlotte's Web branded premium quality products start with
proprietary hemp genetics that are American farm-grown using
organic and regenerative cultivation practices. The Company's hemp
extracts have naturally occurring botanical compounds including
cannabidiol ("CBD"), CBC, CBG, terpenes, flavonoids, and other
beneficial compounds. The Company's CW Labs R&D division
advances hemp science at a center of excellence in Louisville, Colorado. Charlotte's Web product
categories include CBD oil tinctures (liquid products) CBD gummies
(sleep, stress, exercise recovery), CBD capsules, CBD topical
creams and lotions, as well as CBD pet products for dogs.
Through its substantially vertically integrated business model,
Charlotte's Web maintains stringent control over product quality
and consistency with 20+ product lot testing for quality assurance.
Charlotte's Web products are distributed to retailers
and health care practitioners throughout the U.S.A, and online through the Company's
website at www.charlottesweb.com.
Shares of Charlotte's Web trade on the Toronto Stock Exchange
(TSX) under the symbol "CWEB" and are quoted in U.S. Dollars in
the United States on the OTCQX
under the symbol "CWBHF". As of March 22,
2023, Charlotte's Web had 152,422,498 Common Shares
outstanding.
© Major League Baseball trademarks and copyrights are
used with permission of Major League Baseball. Visit MLB.com.
Forward-Looking Information
In the interest of providing the shareholders and potential
investors of Charlotte's Web Holdings, Inc. with information about
the Company, certain information provided herein constitutes
forward-looking statements or information (collectively,
"forward-looking statements") within the meaning of applicable
securities laws. Forward-looking statements are typically
identified by words such as "may", "will", "should", "could",
"anticipate", "expect", "project", "estimate", "forecast", "plan",
"intend", "target", "believe" and similar words suggesting future
outcomes or statements regarding an outlook. Although these
forward-looking statements are based on assumptions the Company
considers to be reasonable based on the information available on
the date such statements are made, such statements are not
guarantees of future performance and readers are cautioned against
placing undue reliance on forward-looking statements. By their
nature, these statements involve a variety of assumptions, known
and unknown risks and uncertainties, and other factors which may
cause actual results, levels of activity, and achievements to
differ materially from those expressed or implied by such
statements. The forward-looking statements contained in this press
release are based on certain assumptions and analysis by management
of the Company in light of its experience and perception of
historical trends, current conditions and expected future
development and other factors that it believes are
appropriate.
Specifically, this press release contains forward-looking
statements relating to, but not limited to: activities relating to,
and sponsorship of, legislation to advance regulatory framework;
anticipated consumer trends and corresponding product innovation;
anticipated future financial results; the conversion of the
convertible debenture held by BAT; international expansion
activities and strategy, including the Company's strategic alliance
with Tilray and the availability of the Company's products through
Tilray's distribution network in Canada; sales volume, product, channel and
international expansion plans; growth of the Company's market share
position; the impact of the Company's partnership with the MLB on
the health and wellness of its players and fans; the impact of the
Company's new distribution partners on sales; the
ratification of legislative changes in Colorado and other states; the Company's
ability to increase online traffic and demographic exposure through
new products and marketing; anticipated new marketing partners; the
impact of certain activities on the Company's business and
financial condition; suggested regulatory developments; and the
Company's anticipated trajectory, long-term growth expectations and
shareholder value creation.
The material factors and assumptions used to develop the
forward-looking statements herein include, but are not limited to,
the following: the impact of the COVID-19 pandemic; the regulatory
climate in which the Company currently operates and may in the
future operate; successful sales of the Company's products; the
success of sales and marketing activities; there will be no
significant delays in the development and commercialization of the
Company's products, including in relation to supply chain
disruptions; outcomes from R&D activities; ability for the
Company to leverage R&D and brand recognition for product
sales; the Company's ability to deal with adverse growing
conditions (due to pests, disease, fungus, climate or other
factors) in a timely and cost-effective manner; there will be no
significant reduction in the availability of qualified and
cost-effective human resources; new products will continue to be
added to the Company's portfolio; demand for the Company's products
will grow in the foreseeable future; there will be no significant
barriers to the acceptance of the Company's products in the market,
including in international markets; the Company will be able to
maintain compliance with applicable contractual and regulatory
obligations and requirements; there will be adequate liquidity
available to the Company to carry out its operations and business
plans; the Company will have sufficient capital to pursue its sales
volume, product, channel and international expansion; and products
do not develop that would render the Company's current and future
product offerings undesirable and the Company is otherwise able to
minimize the impact of competition and keep pace with changing
consumer preferences.
The Company's forward-looking statements are subject to risks
and uncertainties pertaining to, among other things, the adverse
impact of the COVID-19 pandemic to the Company's operations, supply
chain, distribution chain, and to the broader market for the
Company's products; revenue fluctuations; nature of government
regulations (both domestic and foreign); economic conditions; loss
of key customers; retention and availability of executive talent;
competing products; common share price volatility; loss of
proprietary information; product acceptance; internet and system
infrastructure functionality; information technology security;
available capital to fund operations and business plans; crop risk;
international and political considerations; regulatory changes; and
including but not limited to those risks and uncertainties
discussed under the heading "Risk Factors" in the Company's Annual
Report on Form 10-K for the year ending December 31, 2022 available on
www.sec.gov and www.sedar.com,
and other risk factors contained in other filings with the
Securities and Exchange Commission available on
www.sec.gov and filings with Canadian securities
regulatory authorities available on
www.sedar.com. The impact of any one risk,
uncertainty, or factor on a particular forward-looking statement is
not determinable with certainty as these are interdependent, and
the Company's future course of action depends on management's
assessment of all information available at the relevant
time.
Except as required by applicable law, the Company assumes no
obligation to publicly update or revise any forward-looking
statements made, whether as a result of new information, future
events, or otherwise. All forward-looking statements, whether
written or oral, attributable to the Company or persons acting on
the Company's behalf, are expressly qualified in their entirety by
these cautionary statements.
(1) Non-GAAP Measures
The press release contains non-GAAP measures, including EBITDA
and Adjusted EBITDA. Please refer to the section in the
tables captioned "Non-GAAP Measures" below for additional
information and a reconciliation to GAAP for all Non-GAAP
metrics.
CHARLOTTE'S WEB
HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
amounts)
|
|
December
31,
|
|
2022
|
|
2021
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
66,963
|
|
$
19,494
|
Accounts receivable,
net
|
1,847
|
|
4,882
|
Inventories,
net
|
26,953
|
|
52,077
|
Prepaid expenses and
other current assets
|
7,998
|
|
8,590
|
Income taxes
receivable
|
—
|
|
10,764
|
Total current
assets
|
103,761
|
|
95,807
|
Property and equipment,
net
|
29,330
|
|
36,085
|
License and media
rights
|
26,871
|
|
—
|
Operating lease
right-of-use assets, net
|
16,519
|
|
20,679
|
Intangible assets,
net
|
1,771
|
|
2,843
|
SBH purchase option and
other derivative assets
|
3,620
|
|
13,000
|
Notes receivable -
noncurrent
|
—
|
|
1,037
|
Other long-term
assets
|
5,770
|
|
2,062
|
Total assets
|
$
187,642
|
|
$
171,513
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
4,018
|
|
$
5,049
|
Accrued and other
current liabilities
|
6,899
|
|
9,570
|
Cultivation
liabilities – current
|
445
|
|
3,448
|
Lease obligations –
current
|
2,306
|
|
2,103
|
License and media
rights payable - current
|
7,759
|
|
—
|
Total current
liabilities
|
21,427
|
|
20,170
|
Cultivation liabilities
– noncurrent
|
6
|
|
385
|
Lease obligations –
noncurrent
|
17,905
|
|
20,500
|
Derivative and other
long-term liabilities
|
12,995
|
|
12
|
License and media
rights payable - noncurrent
|
20,383
|
|
—
|
Convertible
debenture
|
37,421
|
|
—
|
Total
liabilities
|
110,137
|
|
41,067
|
Commitments and
contingencies
|
|
|
|
Shareholders'
equity:
|
|
|
|
Common shares, nil par
value; unlimited shares authorized as of December 31, 2022
and 2021, respectively; 152,135,026 and
144,659,964 shares issued and
outstanding as of December 31, 2022 and
2021
|
1
|
|
1
|
Additional paid-in
capital
|
325,431
|
|
319,059
|
Accumulated
deficit
|
(247,927)
|
|
(188,614)
|
Total shareholders'
equity
|
77,505
|
|
130,446
|
Total liabilities and
shareholders' equity
|
$
187,642
|
|
$
171,513
|
CHARLOTTE'S WEB
HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share
amounts)
|
|
|
Year Ended
December 31,
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
Revenue
|
$
|
74,139
|
|
$
|
96,092
|
Cost of goods
sold
|
|
54,728
|
|
|
47,507
|
Gross profit
|
|
19,411
|
|
|
48,585
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
70,060
|
|
|
97,641
|
Goodwill and asset
impairments
|
|
1,837
|
|
|
98,003
|
Operating
loss
|
|
(52,486)
|
|
|
(147,059)
|
|
|
|
|
|
|
Other income,
net
|
|
744
|
|
|
51
|
Change in fair value
of financial instruments and other
|
|
(7,480)
|
|
|
9,429
|
Loss before provision
for income taxes
|
$
|
(59,222)
|
|
$
|
(137,579)
|
Income tax
expense
|
|
(91)
|
|
|
(143)
|
Net loss
|
$
|
(59,313)
|
|
$
|
(137,722)
|
Net loss per common
share, basic and diluted
|
$
|
(0.40)
|
|
$
|
(0.98)
|
Weighted-average shares
used in computing net loss per share, basic and
diluted
|
|
146,631,767
|
|
|
140,769,247
|
CHARLOTTE'S WEB
HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
(in thousands, except share amounts)
|
|
Proportionate
Voting Shares
|
|
Common
Shares
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Total
Shareholders'
Equity
|
|
Shares
|
|
Shares
|
|
Amount
|
|
|
|
Balance—December 31, 2020
|
81,177
|
|
107,060,237
|
|
$
1
|
|
$
305,133
|
|
$
(50,892)
|
|
$
254,242
|
Exercise of stock
options
|
—
|
|
8,261
|
|
—
|
|
30
|
|
—
|
|
30
|
Conversion to common
shares
|
(81,177)
|
|
32,471,060
|
|
—
|
|
—
|
|
—
|
|
—
|
Exercise of
warrants
|
—
|
|
98,788
|
|
—
|
|
441
|
|
—
|
|
441
|
Withholding of common
shares upon vesting of
restricted share units
|
—
|
|
182,727
|
|
—
|
|
(146)
|
|
—
|
|
(146)
|
Harmony Hemp contingent
equity compensation
|
—
|
|
338,091
|
|
—
|
|
1,460
|
|
—
|
|
1,460
|
ATM Program, net of
share issuance costs
|
—
|
|
4,500,800
|
|
—
|
|
8,118
|
|
—
|
|
8,118
|
Share-based
compensation
|
—
|
|
—
|
|
—
|
|
4,023
|
|
—
|
|
4,023
|
Net loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(137,722)
|
|
(137,722)
|
Balance—December 31, 2021
|
—
|
|
144,659,964
|
|
$
1
|
|
$
319,059
|
|
$
(188,614)
|
|
$
130,446
|
Common shares issued
upon vesting of restricted
share units, net of withholdings
|
—
|
|
947,396
|
|
—
|
|
(190)
|
|
—
|
|
(190)
|
Harmony Hemp contingent
equity compensation
|
—
|
|
169,045
|
|
—
|
|
164
|
|
—
|
|
164
|
Common share issuance
for license and media
agreement
|
|
|
6,119,121
|
|
—
|
|
3,060
|
|
—
|
|
3,060
|
ATM Program, net of
share issuance costs
|
—
|
|
239,500
|
|
—
|
|
(65)
|
|
—
|
|
(65)
|
Share-based
compensation
|
—
|
|
—
|
|
—
|
|
3,403
|
|
—
|
|
3,403
|
Net loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(59,313)
|
|
(59,313)
|
Balance—December 31, 2022
|
—
|
|
152,135,026
|
|
$
1
|
|
$
325,431
|
|
$
(247,927)
|
|
$
77,505
|
CHARLOTTE'S WEB
HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands
|
|
Year Ended
December 31,
|
|
2022
|
|
2021
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
Net loss
|
$
(59,313)
|
|
$
(137,722)
|
Adjustments to
reconcile net loss and comprehensive loss to net cash used in
operating activities:
|
|
|
|
Depreciation and
amortization
|
8,968
|
|
11,025
|
Goodwill and asset
impairments
|
1,837
|
|
98,003
|
Change in fair value
of financial instruments
|
7,480
|
|
(9,305)
|
Allowance for credit
losses
|
1,226
|
|
1,509
|
Inventory
provision
|
23,394
|
|
9,729
|
Share-based
compensation
|
3,403
|
|
5,483
|
Changes in
right-of-use assets
|
2,146
|
|
2,368
|
Loss (gain) on
disposal of assets
|
(184)
|
|
390
|
Other
|
958
|
|
—
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
2,946
|
|
(948)
|
Inventories,
net
|
1,730
|
|
1,023
|
Prepaid expenses and
other current assets
|
3,781
|
|
694
|
Operating lease
obligations
|
(2,012)
|
|
(2,230)
|
Accounts payable,
accrued and other liabilities
|
(3,577)
|
|
(2,911)
|
License and media
rights
|
(500)
|
|
—
|
Income tax
receivable
|
10,764
|
|
676
|
Cultivation
liabilities
|
(4,000)
|
|
(7,166)
|
Other operating assets
and liabilities, net
|
(4,362)
|
|
(177)
|
Net cash used in
operating activities
|
(5,315)
|
|
(29,559)
|
Cash flows from
investing activities:
|
|
|
|
Purchases of property
and equipment and intangible assets
|
(265)
|
|
(4,918)
|
Proceeds from sale of
assets
|
660
|
|
13
|
Issuance of notes
receivable, net of collections
|
—
|
|
510
|
Investment in Stanley
Brothers USA Holdings purchase option
|
—
|
|
(8,000)
|
Other investing
activities
|
—
|
|
606
|
Net cash used in
investing activities
|
395
|
|
(11,789)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from public
offerings, net of issuance costs
|
(64)
|
|
8,257
|
Proceeds from stock
option exercises
|
—
|
|
30
|
Proceeds from
convertible debenture
|
52,761
|
|
—
|
Other financing
activities
|
(308)
|
|
(248)
|
Net cash provided by
financing activities
|
52,389
|
|
8,039
|
Net decrease in cash
and cash equivalents
|
47,469
|
|
(33,309)
|
Cash and cash
equivalents —beginning of year
|
19,494
|
|
52,803
|
Cash and cash
equivalents —end of year
|
$
66,963
|
|
$
19,494
|
Non-cash
activities:
|
|
|
|
Non-cash purchase of
license and media rights assets
|
(31,399)
|
|
—
|
Non-cash share issuance
for license and media rights agreement
|
(3,060)
|
|
—
|
Non-cash purchases of
property and equipment
|
—
|
|
(2,500)
|
Reduction to
cultivation liabilities for inventory provision
|
—
|
|
(543)
|
(1) Non-GAAP Measures – Adjusted Gross Profit and adjusted
EBITDA
Earnings before interest, taxes, depreciation, and amortization
("EBITDA") is not a recognized performance measure under U.S.
GAAP. The term EBITDA consists of net loss and excludes
interest, taxes, depreciation, and amortization. Adjusted
EBITDA also excludes other non-cash items such as changes in fair
value of financial instruments (Mark-to-Market), Share-based
compensation, and impairment of assets. These non-GAAP financial
measures should be considered supplemental to, and not a substitute
for, our reported financial results prepared in accordance with
GAAP. The non-GAAP financials measures do not have a
standardized meaning prescribed under U.S. GAAP and therefore may
not be comparable to similar measures presented by other
issuers. The primary purpose of using non-GAAP financial
measures is to provide supplemental information that we believe may
be useful to investors and to enable investors to evaluate our
results in the same way we do. We also present the non-GAAP
financial measures because we believe they assist investors in
comparing our performance across reporting periods on a consistent
basis, as well as comparing our results against the results of
other companies, by excluding items that we do not believe are
indicative of our core operating performance. Specifically, we use
these non-GAAP measures as measures of operating performance; to
prepare our annual operating budget; to allocate resources to
enhance the financial performance of our business; to evaluate the
effectiveness of our business strategies; to provide consistency
and comparability with past financial performance; to facilitate a
comparison of our results with those of other companies, many of
which use similar non-GAAP financial measures to supplement their
GAAP results; and in communications with our board of directors
concerning our financial performance. Investors should be aware,
however, that not all companies define these non-GAAP measures
consistently.
(1)
|
Adjusted Gross Profit,
EBITDA and Adjusted EBITDA are non-GAAP financial measures with
reconciliations provided in the tables below.
|
Adjusted gross margin for the three and twelve months ended
December 31, 2022, and 2021 is as follows:
Charlotte's Web
Holdings, Inc.
|
Statement of
Adjusted Gross Profit
|
(In
Millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
(unaudited)
|
|
(audited)
|
U.S. $
millions
|
|
2022
|
2021
|
|
2022
|
2021
|
|
|
|
|
|
|
|
Total
revenue
|
|
$18.9
|
$24.8
|
|
$
74.1
|
$ 96.1
|
Cost of goods
sold
|
|
29.4
|
$20.6
|
|
$54.7
|
47.5
|
|
|
|
|
|
|
|
Gross profit before
inventory
provision
|
|
(10.5)
|
$4.2
|
|
19.4
|
48.6
|
Inventory provision,
net
|
|
21.5
|
$9.6
|
|
23.4
|
9.7
|
Adjusted gross
profit
|
|
$11.0
|
$13.8
|
|
$42.8
|
$58.3
|
Adjusted gross margin
%
|
|
58.1 %
|
55.4 %
|
|
57.7 %
|
50.6 %
|
Adjusted EBITDA for the three and twelve months ended
December 31, 2022, and 2021 is as follows:
Charlotte's Web
Holdings, Inc.
|
Statement of
Adjusted EBITDA
|
(In
Thousands)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
(unaudited)
|
|
(audited)
|
U.S. $
Thousands
|
|
2022
|
2021
|
|
2022
|
2021
|
|
|
|
|
|
|
|
Net loss
|
|
$
(35,230)
|
$
(118,247)
|
|
$
(59,314)
|
$
(137,721)
|
|
|
|
|
|
|
|
Depreciation of
property and
equipment and amortization of
intangibles
|
|
3,206
|
2,798
|
|
8,968
|
11,025
|
Interest (income)
expense
|
|
649
|
(12)
|
|
580
|
(45)
|
Income tax
expense
|
|
91
|
151
|
|
91
|
143
|
EBITDA
|
|
(31,284)
|
(115,310)
|
|
(49,675)
|
(126,598)
|
|
|
|
|
|
|
|
Stock Comp
|
|
882
|
970
|
|
3,567
|
5,482
|
Mark-to-market
financial instruments
|
3,580
|
2,039
|
|
7,480
|
(9,429)
|
Impairment
|
|
16
|
98,003
|
|
1,837
|
98,003
|
Inventory
Provision
|
|
21,537
|
5,809
|
|
23,394
|
9,729
|
Severance
|
|
766
|
180
|
|
1,566
|
2,238
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$ (4,503)
|
$
(8,309)
|
|
$ (11,831)
|
$
(20,575)
|
|
|
|
|
|
|
|
Certain prior year amounts in the table above have been
conformed to the current year presentation in accordance with how
the Company is defining the EBITDA and Adjusted EBITDA calculation
at December 31, 2022
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SOURCE Charlotte's Web Holdings, Inc.