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Charlie's Holdings, Inc. (CHUC)·Q2 2017 Earnings Summary

Executive Summary

  • Revenue accelerated to $1.95M in Q2 2017, up 27% sequentially and up 300%+ year-over-year as AquaBall distribution and velocity improved; gross margin held in the high-30s with gross profit of $0.71M and loss per share narrowed to $0.01 .
  • Operating loss improved year-over-year (−$2.39M vs −$2.66M in Q2 2016) on higher volume; record first-half revenue reached $3.46M (+225% YoY) signaling traction in children’s better-for-you beverages .
  • Management emphasized expanding retail presence to 15,000+ stores and double-digit velocity gains; packaging and cost initiatives (lower-cost six-pack, hot-fill process) supported margins .
  • Subsequent update (Sept 26) withdrew full-year 2017 guidance due to Q3 category weakness and channel inventory build—near-term stock narrative likely shifts to sell-through and reorders resuming .

What Went Well and What Went Wrong

What Went Well

  • Record first-half performance: H1 revenue $3.46M (+225% YoY); Q2 revenue $1.93M and gross profit $0.71M, with margins maintained in the “high thirties,” per CFO .
  • Distribution and velocity: AquaBall available in 15,000+ stores by end of June; Nielsen velocity up ~23% over the latest four weeks, per CEO, highlighting brand momentum .
  • Cost/margin actions: Lower-cost six-pack introduced; hot-fill process and Niagara alignment improved consistency and margins (company noted gross margin progression to 33–35% exiting 2016) .

What Went Wrong

  • Still operating at scale below profitability: Q2 operating loss −$2.39M despite revenue growth, underscoring the need for further operating leverage and demand depth .
  • Elevated OpEx burden: Q2 selling and marketing plus G&A totaled $3.09M vs $2.62M YoY, indicating continued investment intensity to drive brand awareness and distribution .
  • Subsequent guidance withdrawal: September update cited children’s beverage category softness and channel inventory overhang; near-term order flow uncertainty emerged (Q3 sales weaker than expected) .

Financial Results

MetricQ2 2016Q1 2017Q2 2017
Revenue ($USD)$482,969 $1,529,752 $1,934,953
Gross Profit ($USD)$(39,734) $556,139 $709,700
Gross Margin (%)−8.2% 36.4% 36.7%
Operating Loss ($USD)$(2,656,773) $(2,445,300) $(2,385,296)
Operating Loss Margin (%)−550.1% −159.8% −123.2%
Net Loss ($USD)$(3,838,668) $(270,274) $(2,413,896)
EPS (Basic & Diluted, $USD)$(0.03) $(0.00) $(0.01)
KPIsQ1 2017Q2 2017
Retail store count“Over 14,000” stores by end of May “Over 15,000” stores by end of June
Velocity (Nielsen)Double-digit growth indicated Latest four weeks up ~23% vs prior four weeks
H1 Revenue ($USD)—$3,464,705; +225% YoY vs $1,066,267

Note: Company operates a single segment; no segment revenue breakout disclosed .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (Full-year)FY 2017Guidance previously provided (not specified in filings) Guidance withdrawn due to Q3 category weakness and inventory overhang Withdrawn

Earnings Call Themes & Trends

No Q2 2017 earnings call transcript was available in our document catalog; we searched and found none for the period. We use press releases and filings to track themes.

TopicPrevious Mentions (Q4 2016 / Q1 2017)Current Period (Q2 2017)Trend
Cost/packaging efficiencyHot-fill process adoption; margins improved to 33–35% in late 2016 Lower-cost six-pack launched; margins held high-30s Improving cost structure; sustaining margins
Distribution footprintTargeting national/regional accounts; 14,000+ stores by end of May 15,000+ stores by end of June Expanding footprint
Velocity (sell-through)Double-digit velocity gains +23% latest four weeks; category momentum cited Strengthening sell-through
Licensing/brandDisney/Marvel licensing central to brand, Disney term through 3/31/2017, Marvel through 12/31/2017 Continued use of characters on AquaBall Ongoing brand leverage; renewal risk noted in 10-K
Macro/category—Subsequent Q3 update: category weakness in summer; inventory build; guidance withdrawn Near-term softness post-Q2
Product innovation—Multi-channel marketing test; evaluating line extensions for next year Active pipeline/testing

Management Commentary

  • CFO Dan Kerker: “The strong growth in the second quarter of 2017 was primarily the result of continued gains by AquaBall… We are pleased that we have maintained gross margins in the high thirties… we introduced the lower cost six-pack… and will soon begin testing a multi-channel marketing campaign” .
  • CEO James Greco: “As of the end of June, AquaBall was available in over 15,000 stores… Velocity… continues to grow by double digits… the latest four-week period up nearly 23%… The growing distribution coupled with increased velocity means our sales volume continues to grow by double-digit percentages” .
  • Subsequent update: “Sales thus far in Q3 have been considerably weaker than expected… our distribution partners and retailers have more inventory than expected… Due to uncertainty… we are withdrawing our previous guidance for the full year 2017” .

Q&A Highlights

No Q2 2017 earnings call transcript was located; therefore, Q&A highlights and guidance clarifications are not available from an earnings call record for this period. We searched the earnings-call-transcript catalog for CHUC in Q2 2017 and found none.

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2017 EPS and revenue was unavailable to us at this time; coverage for microcap/OTC issuers can be limited and our SPGI request encountered access limits. As a result, we cannot provide a vs-consensus comparison for Q2 2017.
  • Implication: In the absence of consensus anchors, investor models should benchmark to disclosed actuals and internal run-rate trends (distribution, velocity, and margin trajectory) until estimates become available .

Key Takeaways for Investors

  • Demand traction: Q2 revenue $1.93M with H1 revenue $3.46M (+225% YoY) and gross margin ~36–37% demonstrate improving unit economics as distribution widens and velocity lifts .
  • Operating leverage path: Operating loss narrowed YoY; continued margin resilience plus packaging and marketing effectiveness are pivotal to driving breakeven as scale builds .
  • Near-term risk: Guidance withdrawal and Q3 category weakness point to a tactical period focused on sell-through and channel inventory normalization before reorders resume .
  • Channel/brand drivers: 15,000+ stores and Disney/Marvel licensing remain differentiators; monitor licensing renewals and brand marketing tests (New England campaign) for demand signals .
  • Liquidity/cash burn: H1 operating cash flow −$4.02M and short-term debt increases underscore the importance of sustained revenue growth and disciplined OpEx .
  • Execution priorities: Maintain gross margin discipline, accelerate multi-channel marketing ROI, and deepen DSD coverage to convert distribution into higher turns .
  • Positioning: AquaBall aligns with health/wellness preferences; category normalization should allow the narrative to revert to velocity and distribution-led growth once inventory clears .

Document Availability and Searches Conducted

  • Q2 2017 8-K 2.02 press release (full document read) .
  • Prior quarter Q1 2017 8-K 2.02 press release (full document read) .
  • FY 2016 10-K (risk factors, margin context, licensing, operations) .
  • Other relevant Q2-period press releases: None found for Q2 timeframe; subsequent management update 8-K on Sept 26, 2017 (guidance withdrawal) .
  • Earnings call transcript Q2 2017: Searched and not found in catalog (none listed).