Charlotte's Web Holdings, Inc. Reports 2018 Q4 and Year-End Earnings

. Combined, these extraordinary expenses resulted in Adjusted EBITDA margins for the quarter below the Company's historical average.  While growth and margins may vary quarterly, management anticipates Adjusted EBITDA to generally be within 30% to 35% of revenue on an annualized basis, in line with its historical norms.      " data-reactid="71">For Q4-2018 and Q4-2017, general and administrative expenses were $8.1 million and $4.2 million, respectively (year-to-date $22.3 million and $11.5 million, respectively). As a percent of revenue, general and administrative expenses for the quarters ending Q4-2018 and Q4-2017 were 37.7% and 33.4%, respectively (year-to-date 32.1% and 28.7%, respectively). General and administrative expenses during Q4-2018 included non-recurring expenses for legal related expenditures associated with regulatory activities (both domestic and international), governance and securities related activities associated with its recent public company status. Combined, these extraordinary expenses resulted in Adjusted EBITDA margins for the quarter below the Company's historical average.  While growth and margins may vary quarterly, management anticipates Adjusted EBITDA to generally be within 30% to 35% of revenue on an annualized basis, in line with its historical norms.      

Net Income for Q4-2018 was $3.2 million, or $0.03 per share, (year-to-date $11.8 million or $0.14 per share) compared to $2.4 million, or $0.03 per share, (year-to-date $7.5 million or $0.09 per share) during the same period in 2017. Excluding IPO related costs of $1.3 million in 2018, net income for the year was $13.1 million, or $0.16 per share, a 76% year-over-year increase.

 

Adjusted EBITDA¹ as a percentage of consolidated revenue for Q4-2018 and Q4-2017 was 20% and 37%, respectively. For the year 2018 and 2017, adjusted EBITDA as a percentage of consolidated revenue was 30% and 36%, respectively.

Balance Sheet and Cash Flow

The Company used $2.4 million of cash in operations during Q4-2018 compared to $2.7 million of cash provided from operations during Q4-2017. The reduction in cash flows from operations primarily reflects the investment in inventory associated with the 2018 hemp crop and other raw materials used in the production process in anticipation of materially increasing revenue opportunities. The Company's cash at December 31, 2018 was $73.4 million compared to $7.1 million on December 31, 2017. Working capital at December 31, 2018 was $93.8 million.

 

Consolidated Financial Statements and Management's Discussion and Analysis

The Company's audited consolidated annual financial statements and accompanying notes for the years ended December 31, 2018  and 2017 and related management's discussion and analysis of financial condition and results of operations ("MD&A") are available under the Company's profile on SEDAR at www.sedar.com and on the Investor Relations section of the Company's website at https://investors.cwhemp.com.

Conference Call

Management will host a conference call to discuss the Company's fourth quarter and annual 2018 results at 8:30 am ET on Friday, March 29, 2019. To participate in the call, please dial 1-647-427-7450 or 1-888-231-8191 approximately 10 minutes before the conference call and provide conference ID 3092088. A recording of the call will be available through April 5, 2019. To listen to the rebroadcast please dial 1-416-849-0833 and provide the same conference ID.

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. is the market leader in the production and distribution of innovative hemp-derived cannabidiol ("CBD") wellness products. Founded by the Stanley Brothers, the Company's premium quality products start with proprietary hemp genetics that are responsibly manufactured into hemp-derived CBD extracts naturally containing a full spectrum of phytocannabinoids, including CBD, terpenes, flavonoids and other beneficial hemp compounds. Industrial hemp products are non-intoxicating. Charlotte's Web product categories include CBD Oil tinctures (liquid products), CBD capsules, CBD topicals, as well as CBD pet products.  Charlotte's Web hemp-derived CBD extracts are sold through select distributors, brick and mortar retailers, and online through the Company's website at www.CharlottesWeb.com. The rate the Company pays for agricultural products reflects a fair and sustainable rate driving higher quality yield, encouraging good farming practices, and supporting U.S. farming communities.

Charlotte's Web is a socially conscious company and is committed to using business as a force for good and a catalyst for innovation. The Company weighs sound business decisions with consideration for how its efforts affect its employees, customers, the environment, and the communities where its employees live and where it does business, while maximizing profits and strengthening its brands. The Company's management believes that socially oriented actions have a positive impact on the Company, its employees and its shareholders. Charlotte's Web donates a portion of its pre-tax earnings to charitable organizations.

Shares of Charlotte's Web trade on the Canadian Securities Exchange under the symbol "CWEB" and in the United States on the OTCQX under the symbol "CWBHF".  Charlotte's Web has 24,095,294 Common Shares outstanding and 172,896.15 Proportionate Voting Shares convertible at 400:1, for an effective equivalent of 93,253,754 Common Shares outstanding. 

 

Forward-Looking Information

This press release may contain forward-looking information within the meaning of applicable securities legislation. In the interest of providing the shareholders and potential investors of Charlotte's Web Holdings, Inc. with information about the Company and its subsidiaries, including management's assessment of the Company and its subsidiaries' future plans and operations, certain information provided in this press release constitutes forward-looking statements or information (collectively, "forward-looking statements"). 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 information contained in this press release is 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.

The Company's forward-looking statements are subject to risks and uncertainties pertaining to, among other things, revenue fluctuations, nature of government regulations, 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, cash available to fund operations, availability of capital and, international and political considerations, including but not limited to those risks and uncertainties discussed under the heading "Risk Factors" in the MD&A and the Company's other filings with securities regulators. 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 to the extent required by law, the Company assumes no obligation to publicly update or revise any forward-looking statements made in this press release, whether as a result of new information, future events, or otherwise. All subsequent 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.