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Charlotte’s Web Holdings, Inc. (TSX:CWEB) (OTC:CWBHF), a Colorado-based provider of hemp-derived CBD wellness products, announced its financial performance Thursday for the second quarter ended June 30, 2024.
Despite experiencing its first sequential Q2 revenue growth since 2021, total revenue for the quarter decreased to $12.3 million from $16 million year-over-year. The company attributed this dip to declines in both direct-to-consumer and business-to-business segments amid ongoing challenges in the CBD industry, including regulatory ambiguities and intense competition.
Read Also: U.S. Cannabis Sales Hit Record High in June: LeafLink Report
Cost of goods sold rose to $9.7 million from $7.1 million, pushing gross profit down to $2.6 million, or 21% of revenue, significantly lower than the $8.9 million, or 56.5%, recorded in the previous year. Adjusted for one-time inventory provisions, the gross margin would have been 52.2%.
Operating expenses saw a reduction, with selling, general and administrative costs decreasing to $14.7 million from $19.6 million in Q2 2023, reflecting stringent cost controls and efficiency improvements. The company anticipates these measures will lower its cash burn in the latter half of 2024, targeting a breakeven cash flow at approximately $65 million in annual net revenue.
“Our strategic turnaround initiatives and innovations are yielding promising results towards a return to growth, despite lower revenue,” said Bill Morachnick, CEO of Charlotte’s Web. “During the second quarter, we successfully migrated to our new e-commerce platform, which has enhanced the consumer experience and provided more effective customer relationship management tools.”
In response to the shifting market dynamics, CFO Erika Lind remarked, “Following our first-quarter operating expense reductions, we took additional measures after the close of the second quarter to further align with current revenue levels. These prudent reductions are designed to decrease future cash burn and position us for positive cash flow as we return to growth. We expect a reduction in SG&A for 2024 of more than $20 million from 2023, effectively lowering our cash burn in the second half of 2024. With our newly refined cost structure, we would be able to achieve cash flow breakeven at approximately $65 million in annual net revenue.”
The quarter also saw advancements in legislative efforts, with Charlotte’s Web actively supporting the Hemp Derived Consumer Protection and Market Stabilization Act of 2023, which seeks to establish clear FDA regulations for CBD products.
CWBHF Price Action
CWBHF's shares were trading 0.66% lower at $0.15 per share at the time of this writing around 9:40 AM ET Thursday.
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