Charlotte's Web (CWBHF) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $12.3M, down 23.2% year-over-year, but marked the first sequential Q2 increase since 2021, driven by new products and expanded Walmart distribution.

• B2B retail segment improved 8.8% over Q1, while D2C completed e-commerce migration, temporarily impacting June sales but showing strong July performance.

• Significant cost reductions and operational efficiencies, including workforce reductions, lowered SG&A by 25% year-over-year.

• Net loss for Q2 was $11M or $0.07 per share, compared to net income of $2.8M in Q2 2023, which included a $10.7M gain from DeFloria LLC formation.

• Launched new CBN 'Stay Asleep' gummies and expanded retail presence, including Walmart partnership.

Financial highlights

• Q2 net revenue was $12.3M, down from $16M year-over-year, but up from $12.1M in Q1; six-month revenue was $24.4M, down 26.1% year-over-year.

• Gross margin for Q2 2024 was 21% due to a $3.8M non-cash inventory provision; adjusted gross margin was 52.2% (vs. 56.5% in Q2 2023).

• Operating loss for Q2 2024 was $12.1M; adjusted EBITDA loss was $5.2M.

• Cash and cash equivalents at June 30, 2024, were $32.5M, with $38.5M in working capital.

• Cash flow for Q2 was -$6M; net cash used in operations for the first half of 2024 was $11.9M.

Outlook and guidance

• Expense reductions are expected to lower SG&A by over $20M for the year, with a break-even cost structure at $65M annual net revenue.

• Gross margin is expected to remain in the low- to mid-fifties for the remainder of the year, with improvement as in-house gummy production ramps up.

• Management anticipates meeting liquidity requirements for at least the next twelve months through cash on hand and operations.

• Optimism for revenue growth in 2025, supported by new e-commerce capabilities, product launches, and expanded retail partnerships.

• Ongoing regulatory changes in several states may impact product formulations, packaging, and revenue.