Charlotte’s Web Holdings Inc Reports Strong Financials—Last Results Before Hemp Legalized

Charlotte's Web Holdings Inc Reports Strong Financials—Last Results Before Hemp Legalized.
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Charlotte’s Web Holdings Inc Ends 2018 Strong

Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF, CNSX:CWEB) ended 2018 strongly, with fourth-quarter revenue up 71% and full-year revenue up 74%. The company also harvested a record amount of raw hemp.

While Charlotte’s Web’s 2018 results were strong, 2019 looks like it will be a banner year for the Boulder, Colorado-based company.

The Agriculture Improvement Act of 2018, which passed in December 2018, removed hemp as a controlled substance. The one-time illicit product is now governed by the United States Department of Agriculture (USDA) and the U.S. Food and Drug Administration (FDA).

This provides the needed catalyst for expansion of the hemp industry and opens up a world of financial opportunity for Charlotte’s Web Holdings Inc.

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“We believe this important legislation will have a positive impact on consumer access to hemp-derived CBD products and for our valuable farming communities throughout the country,” said CEO and President Hess Moallem. (Source: “Charlotte’s Web Holdings, Inc. Reports 2018 Q4 and Year-End Earnings,” Charlotte’s Web Holdings Inc, March 29, 2019.)

Charlotte’s Web Holdings Inc Overview

Charlotte’s Web Holdings Inc describes itself as “the world’s leading brand by market share in the production and distribution of innovative hemp-based cannabidiol (‘CBD’) wellness products.” (Source: “Investor Relations,” Charlotte’s Web Holdings Inc, last accessed April 2, 2019.)

The company’s products include CBD tinctures and CBD capsules. You can find its products in more than 4,000 retail locations throughout the United States, and that number is growing fast.

In 2018, Charlotte’s Web planted 300 acres of hemp, up from just 70 acres in 2017. This might help explain why it was able to harvest a record 675,000 pounds of raw hemp in 2018. That’s more than 10 times the 63,000 pounds of hemp it harvested in 2017.

The company’s 2018 hemp harvest provides Charlotte’s Web with enough raw material to help it build inventory for 2020.

Charlotte’s Web Stock Information
Market Cap $1.9 billion
52-Week High $21.19
52-Week Low $8.13
Shares Outstanding 93.1 million
Float 20.8 million
50-Day Moving Average $16.07
200-Day Moving Average $13.09

(Source: “Charlotte’s Web Holdings, Inc. (CWBHF),” Yahoo! Finance, last accessed April 2, 2019.)

In August 2018, Charlotte’s Web quietly closed the largest hemp initial public offering (IPO) in history, raising total proceeds of CA$115.1 million. The company was initially looking to raise just CA$50.0 million.

This gave Charlotte’s Web a valuation of around CA$650.0 million, with shares priced at the top end of its previously announced range of between CA$6.00 and CA$7.00. (Source: “Charlotte’s Web Holdings, Inc. Completes Initial Public Offering,” Charlotte’s Web Holdings Inc, August 30, 2018.)

Despite a strong September open, the company’s share price was volatile in the fourth quarter of 2018. It didn’t help that the broader markets experienced a sell-off and it was the worst December on Wall Street since the Great Depression.

Since the beginning of 2019 though, Charlotte’s Web stock has been on a tear, up 84%. While many pot stocks have been taking full advantage of the prolonged January effect, CWBHF stock has also benefiting from strong financials.

The stock just hit a new record high on March 29. With industrial hemp now legal in the U.S., investors expect Charlotte’s Web’s share price to reach even loftier levels if the company announces strong results for the 2019 first quarter.


Chart courtesy of StockCharts.com

Charlotte’s Web Holdings Inc Announces Strong Q4 and 2018 Results

On March 29, Charlotte’s Web announced its financial results for the fourth quarter and fiscal 2018.

Fourth-quarter revenue increased 71% year-over-year to $21.5 million. Fourth-quarter gross profit totaled $16.3 million, a 63% increase over the $10.0 million recorded in the same period in 2017. (Source: “Charlotte’s Web Holdings, Inc. Reports 2018 Q4 and Year-End Earnings,” Charlotte’s Web Holdings Inc, op cit.)

Net income for the fourth quarter was $3.2 million ($0.03 per share), compared to $2.4 million ($0.03 per share) during the same period in 2017.

Revenue for fiscal 2018 totaled $69.5 million, a 74% increase from the $40.0 million for 2017.

Gross profit totaled $52.3 million for 2018, a 75% year-over-year increase from $29.9 million. As a percentage of total revenue, gross profit for both 2017 and 2018 was 75%.

Full-year net income was $11.8 million ($0.12 per diluted share), a 58% increase from the $7.5 million ($0.09 per share) in 2017. Excluding the IPO-related costs of $1.3 million in 2018, net income for the year was $13.1 million ($0.16 per share), a 76% year-over-year increase.

Analyst Take

Charlotte’s Web Holdings Inc had a busy 2018; it went public, reported strong third- and fourth-quarter results, harvested a record amount of hemp, and surpassed 4,000 retail locations.

The company already has a loyal customer base, but the passing of the Agriculture Improvement Act of 2018 should make the company even more popular.

All that should make 2019 a great year for Charlotte’s Web and its shareholders.