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How Charlotte's Web Turned Things Around in Q4

By Keith Speights - Updated Mar 25, 2021 at 11:41AM

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The CBD leader's pricing realignment and cost-cutting strategies paid off.

After a disastrous 2020, Charlotte's Web Holdings (CWBHF -0.50%) appears to be on the right track so far this year. The CBD pioneer's shares have soared more than 30% year to date as of the market close on Wednesday.

The outlook for Charlotte's Web now looks even brighter. The company announced its fourth-quarter results before the market opened today, and the cannabis stock jumped more than 6% in early trading before giving up some of the gains. Here are the highlights from the fourth-quarter update.

Hand holding a dropper with CBD in it in front of a marijuana field.

Image source: Getty Images.

By the numbers

Charlotte's Web reported fourth-quarter revenue of $26.9 million, a year-over-year increase of 18%. However, it missed the average analyst estimate of $27.6 million.

The company announced a net loss in the fourth quarter of $14.7 million, or $0.11 per share. In the prior-year period, it posted a net loss of $18.8 million, or $0.19 per share. 

Charlotte's Web recorded an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $2.1 million in the fourth quarter. This was an improvement from the adjusted EBITDA losses of $6.7 million in the third quarter of 2020 and $10.1 million in the prior-year period.

The CBD leader ended the fourth quarter with cash and cash equivalents of $52.8 million. 

Behind the numbers

Anyone wondering if Charlotte's Web could turn things around in the fourth quarter after delivering weak performances in previous quarters in 2020 got their answer. And it was a resounding "yes."

The company's direct-to-consumer sales jumped 21.2% year over year to $17.4 million. These sales represented nearly 65% of the company's total revenue in the fourth quarter. This improvement was driven by Charlotte's Web's competitive pricing realignment that boosted sales and expanded market share.

Business-to-business net sales increased 12.4% year over year. The company attributed this growth to expanded topical product offerings.

This performance enabled Charlotte's Web to finish 2020 as the clear market-share leader in total food/drug/mass retail CBD products. It also finished the year as the leader in the U.S. natural specialty retail and direct-to-consumer channel markets.

The company's bottom-line improvement was due partly to revenue growth. But management's expense optimization program also helped. Total operating expenses fell 10.4% year over year to $23.6 million.

Looking ahead

CEO Deanie Elsner said, "In 2021 we are positioning for long-term growth and shareholder value creation as we evolve toward establishing Charlotte's Web as a leading global botanicals wellness company by expanding into cannabis wellness where federally permissible." In particular, the company has an option to acquire Stanley Brothers' cannabis business if U.S. cannabis laws are changed.

The chances of that happening are better now than they've been in the past. Democrats control both houses of Congress and are generally supportive of federal cannabis reform.

Look for Charlotte's Web to expand internationally as well. The company has an exclusive five-year distribution agreement with Intercare/Canndoc, one of the largest medical cannabis producers in Israel. This is Charlotte's Web's first big step in moving into international cannabis markets.

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