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CW

Charlotte's Web Holdings, Inc. (CWBHF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $12.7M, down 20% year over year but up slightly quarter over quarter; gross margin compressed to 40.2% due to holiday promotions and shipping inefficiencies, while Adjusted EBITDA turned positive at $0.3M .
  • Management modeled gross margin to return above 50% in 2025, driven by in-house gummy/topical production, shipping carrier diversification, and e-commerce threshold changes; cash burn fell to $1.8M in Q4 and is expected to decline further in 2025 .
  • Wall Street consensus revenue for Q4 2024 was ~$12.8M; actual $12.7M was a slight miss. EPS consensus was unavailable; EBITDA consensus data is limited and mixed. Values retrieved from S&P Global.*
  • Strategic catalysts: first meaningful Amazon presence via functional mushroom gummies, expanding Walmart and Chewy retail partnerships, and DeFloria’s FDA clearance to proceed to Phase 2 trials for AJA001 (ASD), creating a potential long-term manufacturing and revenue opportunity .

What Went Well and What Went Wrong

What Went Well

  • Positive Adjusted EBITDA in Q4 2024 ($0.3M), a $6.8M improvement year over year; SG&A reduced 43% YoY to $10.6M, reflecting disciplined cost controls .
  • Omnichannel progress (Walmart, Chewy) and new product innovation (functional mushroom gummies; CBN “Stay Asleep”) strengthened brand reach; upcoming Amazon launch broadens access and potential conversion .
  • Management quote: “Our e-commerce platform… a total game changer… 20% reduction in shopping cart abandonment… optimizing individualized transactions and maximizing consumer value” .

What Went Wrong

  • Revenue down 21.4% for FY 2024 amid category headwinds and reduced retailer shelf allocations; Q4 gross margin fell to 40.2% (vs 56.0% YoY) due to holiday promos, shipping tier inefficiencies, and fixed-cost absorption .
  • State-level regulatory patchwork negatively impacted retail in Q4, contributing to lower-than-expected revenue and complicating retailer shelf decisions; retail <1/3 of revenue in Q4 .
  • Cash decreased to $22.6M at year-end (from $47.8M), reflecting operating cash use ($21.2M in FY), MLB rights payments, and capex; net loss widened to $29.8M for FY 2024 vs $23.8M in FY 2023 due to absence of 2023 non-cash gains .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$12.3 $12.6 $12.7
Gross Margin % (GAAP)21.0% 53.0% 40.2%
SG&A ($USD Millions)$14.7 $12.7 $10.6
Operating Loss ($USD Millions)$(12.1) $(6.0) $(5.5)
Net Loss ($USD Millions)$(11.0) $(5.8) $(3.4)
EPS ($USD)$(0.07) $(0.04) $(0.02)
Adjusted EBITDA ($USD Millions)$(5.19) $(3.89) $0.26

Segment breakdown (available in prior quarters):

Segment Net Revenue ($USD Millions)Q2 2024Q3 2024
Direct-to-consumer (DTC)$7.8 $8.2
Business-to-business (B2B)$4.4 $4.3

KPIs and balance sheet:

KPIQ2 2024Q3 2024Q4 2024
Quarterly Revenue Trend ($M)——Q1 $12.1; Q2 $12.3; Q3 $12.6; Q4 $12.7
Net Cash Used in Operations ($M)$(4.7) $(7.6) $(1.8)
Cash and Cash Equivalents ($M)$32.5 $24.6 $22.6
Working Capital ($M)—$33.5 $31.1
Walmart Stores (#)827 827 847

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross MarginFY 2025Not provided“Return above 50%” modeled; driven by in-house manufacturing, shipping carrier diversification, threshold adjustments Raised (qualitative)
SG&A Run-RateFY 2025Not providedQ4 SG&A baseline ~$10.6M quarterly; full-year effect of 2024 reductions expected Maintained/clarified
Cash BurnFY 2025Not providedSignificant reduction expected vs prior years; no specific figure Improved (qualitative)
CapExFY 2025Elevated in prior yearsLower than past two years; in-house production to pay back quickly Lowered
RevenueFY 2025Not providedFocus on returning to YoY growth; no numeric range Initiated qualitative target

Note: No formal numeric guidance ranges for revenue, EPS, OI&E, tax rate, or dividends were provided.

Earnings Call Themes & Trends

TopicQ2 2024 (Prev-2)Q3 2024 (Prev-1)Q4 2024 (Current)Trend
E-commerce platform/technologyNew platform launched; improving CRM; DTC softness; adjusted gross margin framework DTC up 4.4% QoQ; platform ramps; functional mushrooms rollout 20% cart abandonment reduction; tailored bundles/promos; enhanced conversion insights Improving
Omnichannel retail (Walmart, Chewy)Walmart topical rollout (827 stores); retail B2B +8.8% QoQ Mushroom gummies into 200+ locations; Canada gummies with Tilray Walmart 847 stores and Walmart.com; Chewy ramp; Amazon entry (mushrooms) forthcoming Expanding
Product performance/innovationCBN “Stay Asleep” launched; price cuts on tinctures impacted margins Functional mushroom gummies launched; gummies +10% YoY New mushroom SKUs (Vital Defense, Muscle Restore) unveiled; broader botanical wellness portfolio Diversifying
Regulatory/legalAdvocating for FDA framework; category headwinds Continued engagement; retailer shelf pressure State-level restrictions hurt retail; retail <1/3 revenue; federal clarity needed Mixed; uncertainty persists
Supply chain/shippingInventory provision hit gross margin; no MLB payments in Q2 Operating cash use includes MLB payments; minor capex Shipping tier headwinds in Q4; carrier diversification and thresholds implemented Improving from Q4 anomaly
R&D/DeFloria (medical)Phase 1 data processing; IND planned Phase 1 results presented; IND submission planned FDA cleared IND for Phase 2; CW has manufacturing rights; LT rev optionality Advancing
Cost structure/SG&AAdditional reductions post-Q2; >$20M YoY cut expected in 2024 SG&A down 36% YoY; two calls/year to reduce cost SG&A down 43% YoY; positive Adj. EBITDA; cash burn down to $1.8M Improving

Management Commentary

  • Strategy: “The improved quarter-on-quarter revenue and operating performance reflect the synergy between our upgraded e-commerce platform, high-impact omnichannel strategy, disciplined cost management and operational efficiencies… positions us well for growth in 2025 and beyond” — CEO Bill Morachnick .
  • E-commerce: “20% reduction in shopping cart abandonment… unprecedented clarity… a total game changer” — CEO .
  • Margin path: “We anticipate incremental margin improvement in 2025 as we execute our manufacturing strategy, bringing a higher percentage of gummy and topical production in-house” — CFO Erika Lind .
  • Cash discipline: “Substantial progress… Q4 adjusted EBITDA was positive $0.3M… cash burn $1.8M… $22.6M cash reserves” — CFO .
  • Medical catalyst: “FDA accepted DeFloria’s IND for Phase II… exclusive manufacturing rights… very significant long-term revenue opportunity” — CEO .

Q&A Highlights

  • State restrictions impact: Regulatory patchwork is “chaotic” and keeps major retailers sidelined; CW will adapt via isolates and botanical expansion; emphasis on consumer access — CEO .
  • Retail exposure: Retail is “less than 1/3” of Q4 revenue; impacts are meaningful but not material — IR .
  • Gross margin >50% in 2025: Drivers include shipping tier normalization, carrier diversification, e-comm thresholds, and in-house manufacturing; ramp through year with faster cash flow impact — CFO .
  • Cash burn outlook: Significant reduction expected in 2025 due to lower capex, savings from insourcing, higher revenue/margins, and full-year effect of 2024 cost cuts — CFO .

Estimates Context

MetricQ2 2024Q3 2024Q4 2024
Revenue Consensus ($USD)$14.2137M*$13.0730M*$12.8000M*
Revenue Actual ($USD)$12.289M $12.587M $12.667M
Beat/Miss vs ConsensusMiss*Miss*Miss*
  • EPS consensus: Not available (no published Primary EPS Consensus Mean). Values retrieved from S&P Global.*
  • Implications: Consensus appears too high relative to current category headwinds and retail shelf constraints; positive Adjusted EBITDA and cost reductions are supportive, but topline expectations may need to drift lower until Amazon and in-house manufacturing benefits scale .

Key Takeaways for Investors

  • Near-term setup: Slight Q4 revenue miss vs consensus but a meaningful cost execution story; Q4 Adjusted EBITDA turned positive, and SG&A reductions continued, offering downside protection while topline stabilizes .
  • 2025 margin path: In-house production, shipping changes, and mix initiatives support gross margin >50% modeled; watch cadence as inventory flows through COGS — expect gradual improvement with faster cash flow impact .
  • Growth catalysts: Amazon launch of functional mushrooms, Walmart expansion (847 stores), Chewy pet channel, and e-commerce conversion gains should incrementally lift volumes through 2025 .
  • Medical optionality: DeFloria Phase 2 clearance with CW’s exclusive manufacturing rights introduces long-term asymmetric upside; monitor Phase 2 data and regulatory milestones .
  • Regulatory risk: State-level restrictions remain a headwind; positioning into isolates and broader botanicals can mitigate; federal clarity would be a tailwind .
  • Cash discipline: Q4 cash burn trimmed to $1.8M; capex to decline in 2025; runway looks adequate to bridge to margin/volume uplift .
  • Trading lens: Narrative likely shifts to margin recovery and Amazon ramp; stock may respond positively to confirmation of >50% gross margins and sustained Adj. EBITDA improvements, with DeFloria milestones as additional catalysts .

Values retrieved from S&P Global.*