Charlotte's Web (CWBHF) Q4 2021 Earnings Call Transcript

Charlotte's Web (CWBHF -0.25%)
Q4 2021 Earnings Call
Mar 24, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen and welcome to Charlotte's Web Holdings, Inc.'s fourth quarter and year-end conference call. [Operator instructions] This call is being recorded on March 24th, 2022. I would now like to turn the conference over to Mr. Cory Pala, director of investor relations.

Please go ahead.

Cory Pala -- Director of Investor Relations

Thank you and good morning, everyone. Thank you for joining us for the 2021 fourth quarter and year-end earnings conference call for Charlotte's Web Holdings. My name is Cory Pala, director of investor relations. Leading the call this morning is Charlotte's Web's CEO, Jacques Tortoroli.

Jacques was appointed CEO in December of last year and has been a member of Charlotte's Web board of directors since 2019. Jacques is joined by Wes Booysen in his recently expanded role as chief financial and operating officer; and also on the call is Andy Digateri, our chief accounting officer. Our earnings press release and financial statements for the fourth quarter and year-end have been posted on the Investor Relations section of our website and filed on sedar.com in Canada, as well as in the U.S. with the SEC as a Form 8-K, including exhibits.

In addition, we have also filed our first 10-K in the U.S. on EDGAR, which may be accessed through the SEC's website at sec.gov. Charlotte's Web became an SEC filer in January of this year. Now as a U.S.

registrant, our financial statements have been prepared in accordance with U.S. GAAP financial reporting, whereas previously, our financial statements were prepared in accordance with IFRS reporting standards. Our comparable 2021 and 2020 U.S. GAAP financial statements can be found on the SEC website in the U.S.

and in SEDAR in Canada. On today's call, Jacques will share some high-level comments on 2021 and an update on the business initiatives for 2022 and beyond, Wes will review the details of our Q4 financial results and we will take questions from our analysts at the end of our prepared remarks. A replay of this call will be available through the next week, accessible for the details provided in our earnings release and a webcast replay of this call will also be available for an extended period of time accessible through the IR section on our website at charlottesweb.com. And finally, a reminder to our listeners that certain statements made on today's call, including some answers we may provide to certain questions, may include content that is forward-looking in nature and therefore, subject to risks and uncertainties and other factors, which could cause actual future results or company performance to differ materially from implied expectations.

Such risks surrounding forward-looking statements are all outlined in detail within the company's regulatory filings on sedar.com and our Form 10-K for the year ended December 31, 2021, and our other filings with the SEC, all of which can be viewed on the SEC's website. In addition, during this call, we will refer to supplemental non-GAAP accounting measures, including adjusted EBITDA and adjusted gross profit, which do not have any standardized meaning prescribed by GAAP. Please refer to the earnings release contained in the Form 8-K that we filed today for a description of adjusted EBITDA and other non-GAAP accounting measures as well as a reconciliation of such measures to their respective most directly comparable GAAP financial measures. And with that, I now hand over the call to Charlotte's Web chief executive officer, Jacques Tortoroli.

Jacques Tortoroli -- Chief Executive Officer

A very good morning from Denver and thank you all for joining our call. As Cory said, I have been a member of Charlotte's Web's board of directors since 2019. So moving into the CEO position on December 16 of last year made for a really smooth transition enabling Wes, Joel Stanley, and I to quickly take actions that better position the company for 2022 and beyond. I will speak more of these following Wes' review of our Q4 and full year 2021 financial results.

Let me start with a couple of 2021 themes, however. The year saw consumers, customers, and investors eager for a regulatory resolution and a catalyst for CBD growth in the industry in the U.S., either from the FDA or congressional legislation. As you well know, this didn't happen. But in 2021, some positives for hemp regulation were announced with two of the biggest markets, New York and California, passing favorable legislation for food and beverages.

In 2022, our focus will be a full-court press on federal legislation and support of H.R. 841. H.R. 841 has shown some momentum since our Q3 call in November, picking up six more cosponsors for a total of 39 bipartisan support.

H.R. 841 also passed into committee on February 5 and it will be imperative to engage and support its momentum. The reason H.R. 841 is so important is because it not only forces the FDA's hand to regulate CBD as a dietary supplement, it also utilizes the FDA's NDI process for regulating CBD.

We are maintaining our position and we will be immediately resubmitting our application to the FDA upon passage of H.R. 841. Additionally, on March 11, the U.S. Senate Appropriations Committee directed the FDA to regulate CBD and study products in the market.

As you know, Charlotte's Web invested substantial resources to prepare for FDA regulation and is well-positioned to effectively service a sophisticated mass retail and other consumer channels when regulations do come. With that said, we are not simply waiting for this to happen. As the number one brand in the sector, we have laid out plans to grow the business and our industry share. And I'll again discuss those later.

Despite a challenged environment, Charlotte's Web grew revenue, albeit modestly in 2021. Net revenues were up 1% to $96.1 million. Unit volume grew at a modestly higher rate, but at lower average selling prices as part of the consumer trend to lower-priced products such as gummies and topicals and away from higher-priced tincture oils continued. Charlotte's Web has the number one market share position in gummies.

And just last quarter, we introduced three new CBD gummy formulas: Immunity, Daily Wellness, and THC-Free. Of course, these add to our market-leading gummy formulations to Sleep, Calm, and Recovery. Charlotte's Web continued to gain market share in B2B and has the largest e-commerce business in the CBD industry. We nevertheless have bigger ambitions and we are planning for the long game by expanding into new products, formats, channels, and countries, where we believe we have the right to win.

We continue to be the envy of the industry with the most recognized brand, not only in the U.S. but even among multiple international markets where we are not yet present. You see our reputation precedes us in many international markets. Our mission hasn't changed since the founding by the Stanley Brothers.

We are uniquely positioned in our science credentials including five hemp patents with the advantage of vertical integration and quality standard second to none. So before going into our initiatives for '22 and beyond, let me first turn the call back over to Wes to walk you through the fourth quarter and full year financials.

Wes Booysen -- Chief Financial and Operating Officer

Thank you, Jacque. Good morning, everyone and thank you again for joining us today. As Cory mentioned, we performed an assessment of our foreign private issuer status as of June 30th, 2021, and concluded that more than 50% of our shareholders are residents of the U.S. As a result, we are now an SEC registrant and now follow U.S.

GAAP versus IFRS financial reporting. We have successfully completed a financial reporting conversion from IFRS to U.S. GAAP and effectively became an SEC registrant as of January 4th, 2022. Our U.S.

GAAP financial statements were filed in a Form 10 and two subsequent amendments with the SEC and included the years ended 2020 and 2019, along with interim periods for six months and nine months ended June 30th and September 30th for both 2021 and 2020. Our first 10-K filed today will reflect a two-year comparative for the years ended 2021 and 2020. Before unpacking the Q4 financial results, I would like to start by addressing the impairment charges to goodwill, intangible, and other long-lived assets taken during the quarter. We test goodwill annually for impairment and review our definite-lived intangible assets and other long-lived assets for events that may indicate they are impaired.

During the quarter, we identified a triggering event related to a sustained decrease in our share price in the fourth quarter of 2021, partly associated with a significant decline to the equity value of the overall category. As a result of the subsequent fair value analysis performed, we concluded that both goodwill and the intangible assets related to our 2020 Abacus acquisition were fully impaired along with impairment charges on other long-lived assets. This resulted in impairment charges of $98 million, which are factored into our net loss for Q4 and the full year. These are non-cash charges on our P&L and do not affect our cash working capital.

Now, turning to a detailed review of our Q4 financial results, the product and channel mix shifts of 2021 continued in the fourth quarter with some consumer transition from online shopping to brick-and-mortar retail and a continued shift to lower price point products, such as gummies and topicals partially offset by higher volume sales of these products. Q4 GAAP net revenue of $24.8 million increased by 4.7% versus Q3, but was 7.8% lower on a year-over-year basis, primarily due to lower than expected direct-to-consumer e-commerce sales. Q4 DTC revenue was on par with prior quarters of 2021 and 1.1% higher than Q3, but 12.1% lower year over year compared to Q4 of 2020, which was the highest ever quarter for our DTC business during a peak pandemic online shopping period. DTC channel sales were below expectations in the quarter, partially due to lower-than-expected traffic to our website, although sequentially up from Q2 and Q3 and continued promotional pricing.

Conversion rates remained strong at 11.8%, yet lower than the 13.8% conversion rate in Q4 of 2020. Average order volumes were also down 7.2% year over year due to product sales mix and the current DTC pricing environment. For the 12 months of 2021, DTC revenue was down 2.3% year over year, primarily due to product mix and traffic. The Brightfield Group reported overall DTC having a larger decline.

In terms of DTC market share, Charlotte's Web maintains its lead in online CBD sales at 4.9% of the total market at the end of Q4 2021, compared to our nearest competitor with 3.1%. Shifting to our B2B revenue, on a consecutive basis for the four quarters of 2021, our B2B business contributed an increasing portion of total quarterly net revenue. For the full year, B2B contributed 35% of net revenue. Q4 B2B net revenue was consistent year over year and up 11.2% versus Q3.

For the year, B2B increased 7.5%. In B2B retail, we expanded new and existing customers in California following the passing of Assembly Bill 45 during the fourth quarter, adding approximately 400 new doors within the grocery natural, and pit channels. We also expanded retail doors nationally, adding GNC as a customer, contributing nearly 800 new doors in 24 states with more doors to follow in additional markets this year. As a result, we continued to increase our No.

1 market share position in food/drug/mass and natural specialty retail. At year-end, Charlotte's Web FDM market share was 23.2%, up 3.1 share points versus prior year. We also made gains and share gains in natural specialty channel, gaining approximately one percentage point to 14.5% according to SPINS data. In total retail, our products are represented at more than 15,000 retail locations and through over 8,000 healthcare practitioners' offices.

With this leading distribution coverage, Charlotte's Web is well-positioned to grow with our existing customers as well as new customer opportunities. As a reminder, our products are available across the country and the Commonwealth of Puerto Rico. Q4 gross profit, excluding the impact attributable to inventory provisions, was $13.8 million or 55.4% of consolidated net revenue versus $16.4 million or 60.8% in Q4 of 2020 due to product and channel mix and lower overall net revenue year over year. Gross margin fluctuations each quarter primarily reflect product and channel mix.

We anticipate realizing COGS improvements in the second half of 2022 as we achieve further efficiencies from our new production and distribution facility. Net inventory provisions of $9.6 million were taken in the fourth quarter across all of our classes of inventory primarily related to obsolescence and aged goods. We also decided not to remediate certain out-of-spec extract and made a strategic decision to move more of our products to USDA-certified organic. Our number one priority is quality and consistency built on the foundation of science.

Purity, safety, and quality are critical to our brands. Our products are tested as many as 20 times prior to sale and we leave no margin for poor quality keeping in mind that consumers rely on our products on a daily basis. Q4 SG&A expenses of $24.4 million were 4.7% higher versus prior year due to increased marketing spend, severance charges related to our recent reorganization, and one-time professional fees related to our transition to U.S. GAAP reporting and SEC filings.

Adjusted EBITDA loss for the fourth quarter was $4.5 million or 18.2% of consolidated net revenue, as compared to negative adjusted EBITDA of $3.1 million or 11.6% of consolidated revenue for the fourth quarter of 2020, primarily the result of lower revenue and gross margin and higher operating expenses. This excludes asset impairments. The company recognized impairments of $76 million related to goodwill and $22 million related to customer relationships, trade names, and other long-lived assets. Including these non-cash write-downs, we reported a net loss of $118.2 million for the fourth quarter of 2021, compared to a net loss of $14.3 million for the fourth quarter of 2020.

Total capex in Q4 was $0.8 million primarily related to completing the final phase of our R&D, production, and distribution facility, bringing our total capex for the year to approximately $4.9 million. Turning to cash and liquidity, total cash used for 2021 was $33.3 million. For context, a significant amount of cash used during this period was non-recurring. Approximately $22 million was attributable to one-time cash use items in 2021, including $8 million relating to the strategic purchase option for the Stanley Brothers U.S.

cannabis business, $7 million for cultivation liabilities. $5 million relating to final stand up of our new facilities and $2 million related to a name and like this agreement with the Stanley Brothers. We also added cash with our at-the-market equity program raising $8.3 million. Turning to the full year 2021.

In summary, for the 12 months, net revenue increased 1% to $96.1 million with D2C revenue decreasing 2.3%, while B2B revenue increased 7.5% versus 2020. D2C and B2B contributed 65% and 35% of revenue, respectively. Gross margin, excluding inventory provisions, was 61% versus 63% in 2020. SG&A expenses decreased by 6% in 2021 and adjusted EBITDA loss was $18.6 million, an improvement of $5 million.

We ended the year with $75.6 million of working capital, $19.5 million of cash and an impending $10.8 million of IRS tax refund. Our $10 million line of credit facility with JPMorgan remains unused. In Q4, this facility was put on hold after not meeting certain covenants. As always, we will continue to explore financing alternatives to add to our liquidity toolbox.

In addition, we have no long-term debt we remain focused on being cash generative this year. We remain focused on growing our top line and being choiceful in our SG&A spend and improving our cash flow through the year and beyond. We expect capex investment for 2022 to be immaterial, and we intend to provide better visibility in our Q1 earnings report in May. I will now turn the call back over to Jack.

Jacques Tortoroli -- Chief Executive Officer

Thank you, Wes. So welcome the CW 2.0. That's what I said in my first town hall with employees on December 17th. I also said it, it was all upside, and I meant it, growing revenues being cash generative, and acting with the confidence of the leading brand in CBD, those are our goals.

The U.S. CBD market is a multibillion-dollar category. The truth is we haven't done enough to amplify our brand equity or our unparalleled science credentials with consumers. That is most evident with three data points.

Our e-commerce traffic is down by reinforcing our brand equity, we can rely less on promotional pricing. By the way, as does the competitive set, and reengaging the Stanley Brothers in storytelling and innovation, while keeping us grounded in the mission of the company to improve 1 billion lives again and again. Internally, I believe we overcomplicated our business. And look, that's all in a rearview mirror.

So now let's look through the windshield to CW 2.0. In my first weeks as CEO, we laid down five pillars that support our priorities for 2022 and our long game, better aligning our leadership team with shareholders, rightsizing our expenses to the size of the current business, and being choiceful in the use of cash. We're bringing back a culture of founders, family, and fearless. Growing revenues regardless of regulatory action and simplifying our business with speed and executional excellence.

Let me briefly unpack these pillars. First, executive management compensation is now more heavily equity-based. We have also modified employee incentive plans to equally be more equity-based not only to align our interest with shareholders but also as a retention incentive vehicle. Secondly, we significantly reduced the cash cost of the business, which will benefit EBITDA in each quarter of 2022 versus 2021.

We eliminated a layer of leadership to increase agility. We now have a fit-for-purpose cost base in people and discretionary expenditures. And we will be choiceful in prioritizing P&L investments to advance revenue and have a long-term acceptable return. That said, we have never, we will never compromise on our science, quality, or consumer experience.

Third, we're reigniting an entrepreneurial culture. Just do the right thing, it's that simple. Each employee brings their best self each day, embracing the values of family, founders, and fealess for the company, our customers, and our consumers. Charlotte's Web began as a mission of compassion before it was a business with Stanley Brothers helping a little girl in need and subsequently helping countless others that follow.

This was Charlotte's Web's founding culture with a mission to improve lives through the healing powers of botanicals and compassionate science, benefiting the planet and all those who live on it. These are fearless values. Charlotte's Web's origin story, leading brand recognition, and consumer trust are unique in the CBD category. From this foundation, we've built valuable thought leadership, science credentials, and optionality into our business, presenting substantial opportunities to be unlocked at home and abroad over time.

We're eager to lead this category with a revitalized approach and a renewed energy. These are founder's values. Our December reorganization actions mark a return to the founding principles of a passionate fast-moving entrepreneurial spirit. We flattened the organization and reengaged the bulk culture that Charlotte's Web was founded upon.

We transitioned to a horizontal organizational structure, as well as empower employees with increased decision-making and enable more efficient collaboration, creativity across the company, driving faster action and better customer service. Simplified structure also aligns employees more closely with our business goals. These are family values. Fourth, we simply must grow our revenues.

In B2B, it's a multi-approach. Growing our existing customers more doors. We aren't penetrated 100% in customers' retail locations yet and GNC and Lifetime are but two examples of that: higher sell-through in in-trade activations and consumer marketing, have the right products at the right prices in the right accounts. Gain incremental facings at retail for products with the highest consumer pool.

Here, our SKU rationalization and our optimization initiative underway already will play an important role, reorganizing sales to be accountable for key customer and national accounts, with executive sponsorship, not just managing channels, growing new customers in existing industry channels as we did with GNC last year, expanding availability by penetrating new industry verticals or channels if you will, where our products can and should be available. Think hospitality, for example. Our exclusive partnership with Lifetime gives us access in 2022 to their villages, a new line of business for them. Again, just one example, each of these priorities grow existing, grow new, expand across new verticals, each has specific commission incentives.

To support these actions, we've recently brought on a global lead for strategic customers and new business. We've hired additional sales leadership and reorganized the team. We've also staffed a small dedicated team focused on international opportunities. Turning to D2C, turning around the decline in e-commerce traffic is job one for us.

Yes, we can conclude that our traffic has been impacted by the return of the store shopping, but we really haven't given potential consumers a reason to come to our brand world. So we will be always on in paid and earned media across owned and third-party platforms. We will interrupt socially relevant conversations with equally relevant, compelling, and on-brand content. As the market leader, we must constantly build consumer knowledge of the CBD category generally and of the relevance, esteem, and differentiation of Charlotte's Web story and brand qualities.

We will do that by amplifying our stories through smart PR, media, and, of course, the Stanley Brothers. We will also be better in SCO, our targeted email, SCM, and healthcare practitioners, and word-of-mouth referrals. And by the way, if we execute this with excellence, I believe in the power of community to influence regulatory change. Next, selectively innovating, putting the consumer at the heart of everything we do when it comes to innovation.

We previously announced plans to launch beverages in late 2022 and we believe we have a right to win in cosmeceuticals given the strength of our topicals and science and other innovation in the pipeline for near horizon and beyond. And finally, growing our international presence overtime in an asset-light route-to-market approach, I mean strategic partners on a market, a region, or a global basis we are prepared to follow the globe on regulatory changes. Let me quickly take you through three markets. We're encouraged by what's now happening in Israel.

Recently, the Israeli Minister of Health announced that CBD will be removed from Dangerous Drugs Act. We expect the Israeli policymakers will follow and produce favorable legislation in the medium to long term, which permits retail sales of products containing hemp-derived CBD, including dietary supplements, topicals, and over-the-counter pet products. We have an exclusive CBD partnership with InterCure that has tremendous scale in the country, including distribution through Altman Health, the market leader with an unmatched shelf space of OTC and nutritional supplements at over 1,700 points of sale, including all major pharmacies. InterCure and Altman Health plan to register market and distribute Charlotte's Web branded products in Israel as soon as possible.

In Canada, last quarter, we completed the harvest of our first ever international hemp crop. The Canadian harvest included our original formula patented Cultivar among others. The hemp biomass, we produced into whole-plant hemp extract for Charlotte's Web CBD wellness products and manufacturing to a final product through strategic third-party relationships. Charlotte's Web will prioritize original formula for medical cannabis patients in Canada and launch a diversified CBD portfolio in the recreational market.

We're engaging with potential Canadian manufacturing and distribution partners for product availability in mid-2022. Equally importantly, Canada provides us with a gateway to international markets through export. Finally, turning to the UK. In the UK, we eagerly await updates from the SSA and validation of our novel foods application submitted for our full-spectrum products.

However, we do have a competitive advantage by already being in the UK market before regulations required an application process for new market entrants. We announced earlier this week an exclusive distribution agreement with Savage Cabbage Limited, one of the first and most trusted CBD companies in the UK. Under a new and clear novel foods regulatory framework, we will work to leverage Savage Cabbage extensive UK distribution network with potential access to other EU markets to expand the presence of Charlotte's Web. Finally, Jade Proudman, the founder, and CEO of Savage Cabbage, also recently was named our global brand ambassador, working directly with me and the leadership team.

Fifth and finally, we must simplify rationalizing SKUs to focus on the core products that consumers want, streamlining processes for faster decisions, and better leveraging investments in technology, like our salesforce platform for B2B. So look, in closing, we think we've done a lot in 90 days. We have designed our priorities. We created a fit-for-purpose organization supported by the right incentives to grow this business.

And we will be choice-full to ensure we only invest against our priorities. If something doesn't work, we fail fast and we move on. All-in the entrepreneurial spirit of accelerating growth as we go through this year and beyond. Jared, Wes, and I are setting the foundation for long-term sustainable growth regardless of regulatory circumstances.

While staying true to the mission of the founders and never conceding on the quality of our products and the equity Charlotte's Web has with our consumers. So with that, I will turn the call over to questions.

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] Your first question comes from Gerald Pascarelli with Cowen. Please go ahead.

Gerald Pascarelli -- Cowen and Company -- Analyst

Hi. Good morning. Thank you very much for taking the questions. So, if we could just start on the top line, there is a week left in 1Q.

So, if you could provide any color in terms of how your revenues are trending in 1Q relative to the 24.8 that Charlotte's did in 4Q, that would be helpful, and then maybe some commentary just by channel, DTC versus B2B. Thank you.

Jacques Tortoroli -- Chief Executive Officer

Yeah. I am going to let Wes answer that question. But keep in mind, the seasonality is our fourth quarter is typically stronger than our first quarter. So, with that context, I will hand it over to Wes.

Wes Booysen -- Chief Financial and Operating Officer

Hi, Gerald. Good morning. Look, January is typically a slow month post the December holiday season, and we again saw that trend this year. February, however, was better.

And in March, we had a record Pi Day. I think most importantly, we remain optimistic that we can continue to take share and maintain our leadership and market leadership growing consumer interest in alternative forms like gummies where we are growing rapidly, by the way. And we will stay focused in meeting the consumer where they are at driving traffic to our largest platform, which is the e-commerce, to Jacques' earlier point. Hopefully, that helps.

At this point, I can't give you any more color on where Q1 where we think Q1 is going to land, but we will have more data on that here soon in the May earnings call.

Gerald Pascarelli -- Cowen and Company -- Analyst

OK. Thank you, Wes. Last one for me just on gross margin, kind of given some of the commentaries in negative mix shift associated with lower-priced products, consumers looking at products outside of higher-priced tinctures and the like. When you take that and then you couple it with the high levels of inflation that's affecting all of consumer packaged goods companies.

Is it fair to assume that the target gross margin may be below the low-60s, I think that was the target laid out on the last call, is mid-50s the number? Are you still targeting a low-60s margin? Just any color you can provide on gross profitability would also be helpful. Thank you.

Wes Booysen -- Chief Financial and Operating Officer

Yeah. Happy to do that, Gerald, and help unpack that a bit more. As we all know, inflation is at the highest rate in four decades. And I think it reached close to 8% in February as consumer demand increases and supply shortages prevail.

And so we are keeping a close eye on inflation and the impact it will have on our cost of goods sold. That being said, I think what would be helpful for you to know is, as we mentioned in the script, a couple of minutes ago. We continue to see a shift in the consumer preference into more gummies. And in Q4, we continue to see that shift from tinctures to gummies.

We have also seen that from a full year perspective, as you know, gummies have a lower margin versus the tinctures. In addition to the changes from a consumer shift from tinctures as an example to gummies, there is also the shift from DTC to more B2B, which also impacts the mix. But I think the good news here is we have seen that offset by higher volumes. So, volumes certainly have increased quarter over quarter and year over year on a total basis.

So, we will continue to monitor from a COGS perspective from an inflation, as I mentioned perspective. And yes, we continue to see a range of, call it, high-50s to low-60s from a gross profit perspective.

Jacques Tortoroli -- Chief Executive Officer

And Gerald, it's Jack. I will just add two other points. One is, as Wes alluded to in his remarks, we will see some offset to that downward pressure on COGS from the shifts in channel and product mix through our facility coming fully onboard. The other thing I would say is gross margin percentage, and we are going to stay to the guidance that Wes just gave you.

But what I am really looking at as well is gross margin dollars, right. And that's where the volume shift to gummies and to lowest-priced products, we are seeing a lift in volume. And that's something we expect to see going forward as well.

Gerald Pascarelli -- Cowen and Company -- Analyst

Got it. Thank you for the color. I will hop back into the queue.

Operator

Thank you. Your next question comes from Scott Fortune with ROTH Capital Partners. Please go ahead.

Scott Fortune -- ROTH Capital Partners -- Analyst

Good morning and thank you for the questions. You mentioned in your comments, California, the AB45, and then also your kind of even the regulatory stance on MTBE for ingestibles. What are you seeing kind of the uptake from that in California and New York and kind of being able to add doors and products into those states? And are you seeing other states kind coming onboard with similar potential rules here to drive sales into 2022 here?

Wes Booysen -- Chief Financial and Operating Officer

Scott, good morning. Good to hear your voice again. We are needless to say super excited about the legalization in California. And to give you some perspective, in the fourth quarter, we actually opened more than 400 new doors in California, of which roughly 200 of those doors were in the natural channel, including vitamin shop.

And we will continue to explore incremental distribution opportunities to drive incremental value, and not only in California, but other states that might follow. And as you know, a few states have developing regulations for the full portfolio of CBD products. And we are bullish for what this means across other states and for our business. And so needless to say, we are staying close to that process.

Scott Fortune -- ROTH Capital Partners -- Analyst

OK. I appreciate the color. And then just shifting kind of your international global kind of expansion opportunities here, you mentioned Canada, Israel and UK coming onboard. Kind of can you kind of help us understand the timing of that? Is this more of a second half story for 2020 from revenue growth? And then how does that opening up for the rest of Europe? Kind of how do you look at the rest of Europe, Germany being a big market there for continuing to expand the international opportunities here?

Jacques Tortoroli -- Chief Executive Officer

Yeah. I think -- well, first, thanks for the question. For sure, both -- well, all three of the markets we talked about will grow over time and starting pretty much in the second half of the year. I mean we are probably going to be a little bit more advanced when it comes to the UK than the other two markets, but still, we are excited about each of those markets, giving us potential, frankly, more for the mid to long-term, then adding substantive revenue to our base business this year.

There will be some, but it will be modest in that regard. Look, we have different ways to get into Germany. We are in discussions with different partners. We can potentially use Savage Cabbage and their e-commerce platforms in the EU as well.

And part of our deal with InterCure in Canada for solely up the possibility of working with them as our partners in Germany. And what I have said to them is, we will get to Germany after we see how well you do in Israel. We are not going to be awarding markets unless we are comfortable with the partners and their performance. So, we are going to be deliberate about it, but we are excited about the opportunities in the EU, Germany, particularly, and the rest of the world.

As I said in my remarks, we are prepared to follow the globe as regulations open up for CBD products.

Wes Booysen -- Chief Financial and Operating Officer

Yes. Scott, maybe just to add to Jack's point, I think what's interesting to note in Germany, as you know, the new coalition government in 2021 signaled that the intent is for CBD to remove be removed from drug restrictions and legalize up to 1% THC. And as Jack said in his earlier remarks, we continue to look at this regulatory environment as it evolves. And we will very much follow an asset-light approach looking for capable and reputable partners around the world.

Scott Fortune -- ROTH Capital Partners -- Analyst

I appreciate it and look forward to kind of the return to normal growth here for you. Thanks. I will jump back in the queue.

Jacques Tortoroli -- Chief Executive Officer

Thank you. Well, just to add, both the Wes and I with our background, we are excited to get back into international markets as well over time. So, we are looking forward to that.

Operator

Thank you. Your next question comes from Derek Dley with Canaccord. Please go ahead.

Derek Dley -- Canaccord Genuity -- Analyst

Yeah. Hi everybody. Can you just comment on the new production facility now that it's commissioned, and it will be ramping up over the course of this year? Are you capable of producing all of your different product formats within that facility? I know you mentioned you are seeing increased volumes in gummies versus tinctures. Can you make those in that facility?

Jacques Tortoroli -- Chief Executive Officer

Yeah. Listen, at the moment, we have the facility, which we stood up, it's up and running. And we don't see, in the near-term, bringing all of our production and distribution capabilities to what we call the lost. We are always looking at the economic trade-offs between the capital investment to bring production in-house versus the fees we pay to Coleman's.

And so that's an ongoing evaluation for us. The good news here is that we have sufficient space capacity to really meet the needs of the business going forward for quite some time. So, we built it early and now that we have it, we are delighted with it. It will give us some savings, as Wes had said.

But one of the things, too, it does for us is it gives us significant savings in the extraction process and as well as our COGS for gummies as well, right. And that will continue to -- particularly gummies, we will continue to see some benefit in COGS as we go forward here.

Derek Dley -- Canaccord Genuity -- Analyst

OK. That's helpful. On the SG&A side, I think there was a line in the press release where you mentioned you are now more comfortable with the operating expense line versus your revenue. But when I look at it for the quarter, it was a $24 million operating expense line and $25 million in revenue.

So, I am assuming there is more to go, and you are referring to a run rate, but where should we expect SG&A to amount to you in 2022.

Wes Booysen -- Chief Financial and Operating Officer

Derek, good morning. Let me take that question and help unpack the opex. As you mentioned, yes, we did have some incremental opex in the fourth quarter versus prior year, and we referenced that earlier in the commentary. But if you exclude some of these one-time SG&A items in Q4, SG&A is actually down 5% versus prior year.

But more importantly, we have restructured the organization now, as we mentioned earlier, to be more fit for purpose. And we have reduced both headcount and discretionary spend. But I think what you would probably find more helpful for your modeling purposes is we anticipate our overall full year opex to probably be in the range of high-70s to low-80s.

Derek Dley -- Canaccord Genuity -- Analyst

OK. That's great. OK. That's terrific.

And then just the last one for me, I appreciate the update on the market share across a number of categories. That was very helpful. Which channels are growing faster and slower as you head into '22?

Jacques Tortoroli -- Chief Executive Officer

They are all growing slower than we would like. That's I will start out with that. But we are excited with the new customer focus for our sales organization as well, we are really -- we are still looking at the business from a channel point of view, but we are really focused on really having customer relationships that are a bit more strategic, doing joint business planning. And as well as working on the activations and in-store trade activity that we haven't really done enough of going in the past, but we will do more of going forward.

Medical and pet channels are growing the fastest. And I would say FDM, natural and of course, DTC now of late are the slowest-growing channels that we have experienced over the last year or so.

Derek Dley -- Canaccord Genuity -- Analyst

OK. Great. Thank you very much.

Operator

Thank you. There are no further questions at this time. Please proceed.

Cory Pala -- Director of Investor Relations

Well, thank you, everyone, for joining us for our fourth quarter earnings call today. We will be reporting our Q1 in mid-May and look forward to speaking to you then.

Operator

[Operator signoff]

Duration: 48 minutes

Call participants:

Cory Pala -- Director of Investor Relations

Jacques Tortoroli -- Chief Executive Officer

Wes Booysen -- Chief Financial and Operating Officer

Gerald Pascarelli -- Cowen and Company -- Analyst

Scott Fortune -- ROTH Capital Partners -- Analyst

Derek Dley -- Canaccord Genuity -- Analyst

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