Charlotte's Web (OTC: CWBHF)
On August 14, Charlotte's Web reported its second-quarter earnings and held an investor conference call.
Results were more or less in line with our expectations... This is a growing company that is positioning itself nationally for an onslaught of CBD-product demand.
Revenue achieved its highest quarterly level ever at $25 million. Adjusted EBITDA declined from the second quarter of 2018 as operating expenses spiked. These expenses relate directly to infrastructure investment in the company. As revenue ramps during the second half of the year, we believe scale will come into play and EBITDA will improve.
Remember, the company increased its acres planted from 300 to 867 in 2019. This takes some operating investment to get started up.
Lastly, the company reiterated revenue guidance of $120 million to $170 million. This is a wide range. It's primarily dependent on the pace of adoption by retailers selling Charlotte's Web products. The current estimate is $131 million, which is toward the lower end of the range. This is a good estimate, as it allows for more upside than downside.
Deanie Elsner, the company's new CEO, continues to impress us. She's close to completing her first 100 days at the company, and her presence on the call was confident and comfortable.
A new CFO has come onboard... Russell Hammer will be taking over for Rich Mohr. Often, a new CFO is something to take note of. However, we don't believe this transition is concerning. Mohr took over when the company was very small, built out a larger financial team, and managed the process of going public.
Hammer has international public company experience in consumer product goods. His experience will serve the company well as it accelerates growth across the U.S. This looks to be a healthy, natural transition for the company.
On the conference call, Elsner made comments about the FDA potentially providing additional guidance this Fall. This would be the first official comment from the federal agency since its May open meeting on CBD. We would welcome further regulatory guidance, as it reduces uncertainty in the exploding cannabis market segment. We will watch closely for more information.
We're not concerned by anything we see in the quarter for this company. Charlotte's Web (OTC: CWBHF) remains a buy up to $30.