Earnings call transcript: Charlotte’s Web Q2 2025 revenue beats, stock stable

Charlotte’s Web Holdings Inc. reported its second-quarter 2025 earnings, showcasing a mixed financial performance. Despite missing EPS forecasts with an actual EPS of -$0.04 against a -$0.03 forecast, the company surpassed revenue expectations, reporting $12.8 million, a 15.73% surprise over the forecasted $11.06 million. According to InvestingPro data, the company’s overall Financial Health Score stands at 2.24 (FAIR), with particularly concerning metrics in cash flow management. The stock price remained stable in pre-market trading, reflecting cautious investor sentiment.

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Key Takeaways

• Revenue exceeded expectations by 15.73%, reaching $12.8 million.
• EPS missed forecasts, reported at -$0.04 compared to a -$0.03 forecast.
• Stock price remained stable in pre-market trading despite mixed results.
• New product launches and expanded distribution channels highlight growth strategies.
• Net loss reduced to $6.3 million from the previous year’s $11.1 million.

Company Performance

Charlotte’s Web Holdings Inc. demonstrated resilience with a 4.2% year-over-year revenue growth in Q2 2025. The company is actively expanding its product offerings and distribution channels, which is expected to drive future growth. Despite the EPS miss, the reduction in net loss and improved revenue performance indicate positive momentum compared to previous quarters.

Financial Highlights

• Revenue: $12.8 million, a 4.2% year-over-year increase.
• Earnings per share: -$0.04, missing the forecast by 33.33%.
• Gross profit: $6 million, representing a 46.8% margin.
• Net loss: $6.3 million, improved from $11.1 million in the prior year.
• Adjusted EBITDA: -$3.5 million, a 37.1% improvement.

Earnings vs. Forecast

The company reported an EPS of -$0.04, missing the forecast of -$0.03. However, revenue outperformed expectations by 15.73%, totaling $12.8 million against the forecasted $11.06 million. The revenue surprise suggests strong sales performance, although the EPS miss highlights ongoing profitability challenges.

Market Reaction

Charlotte’s Web’s stock price remained stable in pre-market trading following the earnings release. InvestingPro data reveals impressive recent performance, with a 30.49% return over the past week and a 22.85% gain over the last six months. The stock has shown a 7.81% increase from its last close, indicating positive investor sentiment despite the EPS miss. With a beta of 2.61, the stock exhibits significant volatility compared to the market. The current price is closer to the 52-week high of $0.16, reflecting confidence in the company’s growth strategies.

Outlook & Guidance

The company aims for positive cash flow by 2026, with sequential improvements expected in Q4 2025. Key strategic initiatives include expanding the BrightSide product line and optimizing distribution channels. These efforts are anticipated to support future revenue growth and profitability.

Executive Commentary

CEO Bill Marocznik stated, "We’ve stabilized the business, returned to growth, and are now building sustainable momentum." CFO Erica Lynn emphasized, "Our reengineered cost structure, strategic expanded margins, and targeted revenue momentum create a path to positive cash flow."

Risks and Challenges

• Continued net losses may impact long-term financial sustainability.
• Profitability challenges, as indicated by the EPS miss, require attention.
• Market saturation in the CBD sector could limit growth opportunities.
• Regulatory changes in the CBD market could affect operations.
• Supply chain disruptions may impact product availability and costs.

Q&A

During the earnings call, analysts inquired about the timing and implementation of cost savings, cash flow trajectory, and the potential of the BrightSide product line. The company’s responses highlighted ongoing efforts to optimize operations and capitalize on growth opportunities.

Full transcript - Charlotte’s Web Holdings Inc (CWBHF) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Charlotte’s Web Holdings Inc. Twenty twenty five Second Quarter Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 08/13/2025.

I would now like to turn the conference over to Corey Pala, Investor Relations. Please go ahead.

Corey Pala, Investor Relations, Charlotte’s Web: Thank you, and good morning, everyone. Welcome to Charlotte’s Web Second Quarter twenty twenty five Earnings Conference Call. On the call with me today are Bill Morocznyk, our Chief Executive Officer and Erica Lynn, our Chief Financial Officer. This morning, we will review our financial results and provide commentary on the business performance and outlook. Following our prepared remarks, we’ll answer questions from our covering analysts.

Before we begin, I need to remind you that certain statements made during this call may constitute forward looking statements within the meaning of applicable securities laws. These forward looking statements are based on current expectations and assumptions and are subject to risks and uncertainties, which could cause actual future results to differ materially from those expressed or implied. We direct you to review the cautionary language in this morning’s earnings press release, as well as the risk factors and other important considerations detailed in our filings with the Securities and Exchange Commission and in Canada on SEDAR plus particularly our most recent Form 10 ks and 10 Q reports. We undertake no obligation to update these forward looking statements, except as required by law. During today’s call, we will also reference non GAAP measures, including adjusted EBITDA and adjusted gross profit.

Reconciliations to comparable GAAP measures can be found within our earnings press release. A replay of this call will be available for one week via the instructions contained within this morning’s earnings press release, and a webcast replay will be accessible for an extended period through our Investor Relations website. And with that, I’ll now turn over the call to Bill Marocznik, Charlotte’s Web Chief Executive Officer.

Bill Marocznik, Chief Executive Officer, Charlotte’s Web: Good morning, everyone, and thank you for joining us today. So let’s jump right in. I’m pleased to report that Q2 marked another meaningful step forward in our transformation journey. We delivered our second consecutive quarter of year over year revenue growth, building on the momentum established in Q1 when we achieved our first year over year increase since 2021. This sustained improvement validates our strategic initiatives and demonstrates that Charlotte’s Web is successfully navigating through industry headwinds while positioning for accelerated growth.

For the second quarter, we reported net revenue of $12,800,000 representing 4.2% year over year growth and sequential improvement from Q1. While these growth rates remain modest, they represent a fundamental inflection point in our trajectory. After several challenging years, we’ve stabilized the business, returned to growth, and are now building sustainable momentum. So let me highlight some critical areas of progress that are driving our transformation. Our Q2 top line performance was fueled by enhanced e commerce capabilities and innovative product launches.

Our direct to consumer channels remain the cornerstone of our revenue architecture, powered by the enhanced e commerce platform deployed in 2024. These investments are yielding measurable returns through improved conversion rates, reduced cart abandonment, and just an overall better consumer experience. Our subscription programs continue to reflect the loyalty and trust consumers place in the Charlotte’s Web brand. In addition, our strategic expansion across Amazon, TikTok shop and Fare is delivering incremental revenue while broadening our addressable market. Each of these platforms serves distinct consumer segments, allowing us to meet wellness seekers wherever they shop.

Now it is important to mention that innovation remains at the heart of our growth. The launch of BrightSide during the second quarter represents perhaps our boldest innovation to date. These precision formulated low dose hemp derived delta-nine THC gummies have exceeded our projections with initial SKUs selling out during Memorial Day weekend. What sets Bright Side apart is our proprietary time infusion technology, which delivers effects in five to fifteen minutes versus the typical one to two hour onset time for traditional edibles. This fast acting formulation combined with our need state based approach really differentiates us in the marketplace.

Our fast acting gummies outperform most competitive offerings in onset time and efficacy due to our precision dosing and unique cannabinoid blends. Bright side collection addresses the multi billion dollar hemp delivered THC market, which is one of the fastest growing segments in the botanical wellness industry. Now following the success of our CBN Stay Asleep gummies, which is now our second best selling gummy, we recently launched our new CBG Focus and Attention gummies. The US CBG market grew 47% year over year in 2023, and we are really well positioned to capture share with our science backed formulations and brand trust. Our diversification beyond hemp is also gaining momentum to expand our omnichannel footprint.

Our four functional mushroom gummies, including a new muscle recovery product, are now available across multiple platforms, including walmart.com, Amazon, and our direct to consumer website. This new product line is tapping into a rapidly growing wellness category with fewer regulatory constraints. Our portfolio expansion into non hemp botanical products creates strong opportunities for nationwide omnichannel distribution, as these products face fewer regulatory restrictions than hemp derived offerings. We have several innovative products pending launch in the 2025, which will further strengthen our position as a leading botanical wellness innovation company. Alright, turning to our key operational updates.

We have made major strides in in house manufacturing, which is a critical component of our cost optimization efforts. I’m particularly pleased to report that our new Bright Side Gummy line is entirely produced in house, which not only enhances our control over quality and supply chain, but also positions us for meaningful cost savings. This milestone represents an important achievement in our manufacturing optimization strategy. By next year, we anticipate that our in house manufacturing could yield up to $3,000,000 in annual savings, improving our margins and our cash flow profile. Looking at the broader market, we’re still operating in a complex hemp regulatory environment.

However, lately we’ve seen some of the most promising developments in years for establishing clear federal pathways for hemp derived products. Coalition for Access Now, a group that we support, is actively engaged with both Congress and the new administration on advancing comprehensive CBD regulations. The appointment of representative Morgan Griffith as chair of the House Energy and Commerce Healthcare Subcommittee is particularly significant, as he now has direct jurisdiction over the FDA and has been a longtime champion of hemp regulation. Both Chairman Griffith and Senator Wyden have indicated their intention to introduce legislation this year that would provide the FDA with clear authority to regulate CBD as a dietary supplement and food ingredient. This represents a fundamental shift from the regulatory stalemate we’ve faced since 2018.

While the administration’s position continues to evolve, we’re encouraged by the growing recognition that a regulated market better serves public health than the current patchwork of state approaches. The US CBD market, despite challenges, was still $2,900,000,000 in 2024, with potential growth to $3,800,000,000 by 2030 under favorable regulatory scenarios, according to latest estimates from the Brightfield Group. We view eventual FDA regulation as a potential catalyst that could consolidate the market in favor of established compliant brands like Charlotte’s Web. Let me touch quickly on the clinical development front. Our DeFloria joint venture was cleared to commence FDA phase two clinical trials for AJA-one, an investigational new drug or IND as it’s known, for potential treatment of irritability associated with autism spectrum disorder.

This represents a significant long term opportunity with Charlotte’s Web retaining exclusive manufacturing rights for commercial supply. While we maintain focus on our core consumer business, this pharmaceutical pathway provides material upside potential in a multibillion dollar addressable market. Quickly, before I turn the call over to Erica to discuss our financial results in detail, I just want to emphasize what excites me most about Charlotte’s Web’s position today. As I’ve noted earlier, we stabilized the business, we’ve returned to growth, we’ve dramatically improved our cost structure, and launched innovative products that are resonating with consumers. We’re not simply navigating market challenges, but we’re helping to define the future of botanical wellness with a combination of brand trust, scientific rigor, and operational excellence.

With that, I’ll turn the call over to our CFO, Erica Lynn, to walk through our Q2 financial performance.

Erica Lynn, Chief Financial Officer, Charlotte’s Web: Thank you, Bill, and good morning, everyone. Our Q2 financial results reflect the operational momentum Bill described with progress across key metrics. Net revenue for the quarter reached $12,800,000 marking our second consecutive quarter of year over year expansion, up 4.2% compared to Q2 of last year. This performance is particularly noteworthy given the continued headwinds in the broader CBD category. Our ability to grow while the category contracts underscores the strength of our brand, the effectiveness of our innovation strategy, and the success of our omnichannel expansion.

Gross profit for the quarter was $6,000,000 representing a gross margin of 46.8% compared to $2,600,000 or 21% of revenue in 2024. It’s important to note that last year’s second quarter included a substantial $3,800,000 noncash inventory provision related to a onetime wholesale biomass transaction. Excluding this provision, Q2 of last year adjusted gross profit was $6,400,000 or 52.2% of revenue. The current quarter’s margin of 46.8% reflects several temporary factors that we expect to normalize in coming months. These include startup costs associated with transitioning gummy production in house, promotional activities during our successful Memorial Day campaign, and approximately 300 basis points of margin impact from zero margin Diflora extract sales to support their Phase II clinical trials.

Excluding the Diflora component, our underlying gross margin would have been approximately 50% for the quarter. As Bill mentioned, the transition to in house manufacturing will drive meaningful margin expansion over time. We model gross margins returning to the low to mid fifties as we achieve full run rate savings from internalized production and as we optimize our product mix. As you’ve seen in our Q2 results, we lowered SG and A expenses to $10,100,000 down from $14,700,000 a year ago. This 4,600,000 decrease is a substantial 31.7% improvement, driven partly by a $1,900,000 reduction in amortization expense related to the termination of our MLB promotional rights agreement during the quarter.

In total, that change has eliminated over $18,000,000 in future cash outlays, preserving that cash for future growth. The results also reflect the decreased personnel costs between comparable periods as part of our focus on operational efficiency. Our disciplined approach to cost management has fundamentally restructured our expense base. Building on this momentum, this month we implemented additional expense reduction measures that are expected to bring our annualized operating expenses down by an additional $6,000,000 next year. Looking ahead to 2026, we expect to achieve approximately $9,000,000 in annualized cost savings with $6,000,000 from the operational efficiencies implemented post quarter and an additional $3,000,000 from our transition manufacturing as we complete the internalization of our gummy portfolio and evaluate topical production.

These combined initiatives significantly accelerate our path to positive cash flow while maintaining our innovative growth capabilities. Net loss for the quarter improved to 6,300,000 or $04 per share compared to a net loss of $11,100,000 or $07 per share in the prior year. This 43% improvement in net loss demonstrates the combined impact of our growth initiatives and cost discipline. To provide greater visibility into our operational performance, our second quarter twenty twenty five adjusted EBITDA was negative $3,500,000 representing a 37.1% improvement over the second quarter adjusted EBITDA loss of $5,200,000 last year. We ended Q2 with 15,300,000 in cash and a working capital position of $29,300,000 which provides adequate flexibility to execute our growth initiatives while maintaining financial discipline.

While cash utilization remains a focus area, we remain confident in a significant reduction in cash burn as we approach cash flow positive in 2026 based on modest growth and effective cost management. So in summary, our reengineered cost structure, strategic expanded margins, and targeted revenue momentum create a path to positive cash flow. To get there, we’re targeting steady quarter over quarter revenue growth, gross margins in the low to mid fifties range, continued SG and A discipline, and approaching cash flow positive in 2026. With that, I’ll turn the call back to Bill for closing remarks.

Bill Marocznik, Chief Executive Officer, Charlotte’s Web: Thank you, Erica. All right, so as I’ve indicated before, we’re going through a pivotal inflection point in our transformation story. We’ve demonstrated consistent improvement in our financial performance and are focusing on accelerating strategic initiatives that can drive us towards profitability. Following the close of the second quarter, we implemented additional cost optimization measures to shorten our path to positive cash flow. These initiatives, which were not reflected in our Q2 results, position us for reduced cash burn and better cash preservation throughout the remainder of 2025 and beyond.

First, the substantial SG and A reductions already implemented in Q2, including eliminating over $18,000,000 in future cash outlays, were followed by a comprehensive operational review to identify additional efficiency opportunities without compromising our growth trajectory or innovation pipeline. Second, we are further refining channel strategies to ensure capital allocation toward our most profitable opportunities. Our omni channel expansion across Amazon, TikTok, Shop and Fare has validated the diversification strategy, and we’re now applying rigorous ROI metrics to optimize our channel mix. Direct to consumer remains our highest margin channel, and we’re implementing targeted initiatives to enhance customer lifetime value and subscription program penetration. Third, we’re building on our bright side success.

The Memorial Day weekend sellout exceeded our projections, confirming significant market demand for precision formulated low dose Delta nine THC. We’re evaluating addressable areas of market expansion for our BrightSide portfolio. So in closing, the transformation we began two years ago is now delivering tangible results. We’ve returned to growth, we’re targeting positive cash flow, which is just on the horizon, and we’re building a platform for sustained success in the expanding botanical wellness market. I want to thank you all for your continued confidence and patience in Charlotte’s Web.

We look forward to updating you on our continued progress. And operator, we’re now ready for questions from our analysts.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Please go ahead.

Pablo, Analyst: Good morning, Bill and Eric. And thank you for taking my questions and congratulations on all the progress you are making. I have a few questions. My first one regarding cost savings. You have outlined $9,000,000 in annualized cost savings for 2026, split $6,000,000 in SG and A, 3,000,000 for manufacturing.

Can you walk us through the timing of when those savings will begin to show in the P and L and how much impact we should expect in 3Q and 4Q? And as part of that, can you give us more color on the transition to in house manufacturing and how that is influencing your gross margin? Thank you.

Erica Lynn, Chief Financial Officer, Charlotte’s Web: Good morning, Pablo. Thank you for the question. On SG and A, most of the $6,000,000 in savings comes from actions we implemented two weeks ago, so the benefit will phase in over time. We expect meaningful savings beginning in Q4 with the full run rate realized in ’26. These savings represent structural changes that further align our cost base with our revenue to stem the cash burn.

On manufacturing, we’ve always produced our tincture oil extracts in house. Over the past several quarters, we’ve transitioned gummy production internally, and later this year, we’ll begin bringing topicals in house as well. Last year, a 100% of BrightSight gummies were produced on-site sorry, last quarter. By year end, approximately 75% of all gummies will be made in house, and we’re leaving about 25% intentionally kept with our co manufacturer for capacity flexibility and risk management. We’re also evaluating topicals for in house production in ’26, furthering the vertical integration, which is a critical milestone for both margin expansion and quality control, as Bill mentioned.

When the transition is complete, we do expect annualized savings of roughly $3,000,000 which will contribute meaningfully to that path towards positive cash flow.

Pablo, Analyst: Understood. That’s great color. Look, I have a few more questions. I don’t know if there’s other people on queue here, so apologies to them if they’re on the queue. My next question is regarding cash flow.

You’ve been clear about targeting positive cash flow for ’26. For the remainder of ’25, can you give us more granularity on the quarterly progression again you expect through 3Q and 4Q and the key operational milestones you need to hit to support that trajectory on cash flow? Thank you.

Erica Lynn, Chief Financial Officer, Charlotte’s Web: Sure, Pablo. Our focus remains squarely on positioning the business for positive cash flow in ’26. That said, we do expect sequential improvements in cash flow in the second half of this year, most visibly in q four. Q3 will be a transitional quarter as these initiatives take hold, but by Q4 we do expect material improvement from both SG and A savings and internal manufacturing benefits. Two milestones are critical.

First, the manufacturing transition I just outlined, which will be substantially completed by year end and generate that 3,000,000 in annualized cash savings. And second, the s g and a reductions, really start contributing in q four, but have their full impact in 2026. Together, those initiatives along with the continued revenue growth put us on the trajectory we’ve communicated. With the full 9,000,000 in annual savings, modest revenue growth, and improved margins from vertical vertical integration, we have multiple paths to achieving our 2026 target, which gives us confidence in our outlook. For the ’25, we did reduce our cash burn by 52% year over year.

So our current cash position of 15,300,000.0 and working capital of 29,400,000.0 provide adequate runway.

Pablo, Analyst: Got it. Now now moving on to your channel mix evolution. You expanded, as you outlined, into new digital and specialty channels, such as Amazon, TikTok, Shop, Fare, alongside your existing retail and medical distribution. My question is, how is your overall channel mix evolving, and what does this mean for margin profile and long term channel strategy?

Bill Marocznik, Chief Executive Officer, Charlotte’s Web: Yeah, thanks, Pablo. Good to hear your voice wherever you are in the world right now. So the whole channel strategy has been a really big deal for us, certainly since I got here, to figure out ways how we can improve and optimize it. So we’ve done a really deep dive into our channel performance. And for the most part, it’s reinforced what we’ve known for a while.

Our direct to consumer remains our strongest performer, both in terms of engagement and profit margins, as you would expect. What is new is the emergence of channels that give us a nice combination of reach and margin over the typical traditional retail channels. And some of that includes retail.com with folks like walmart.com, Amazon, and others. I think what’s important to highlight as well is it’s not just optimizing for margin, but we’re doing a deep dive into understanding the channels that we work within that allow us to engage with consumers where we can effectively execute educated trial at scale, meaning an informed consumer who understands our product proposition and the unique elements of our products have a higher inclination towards repeat purchase and to share the story with others. A good example of this is our medical channel.

This is one of those where it really enables, whether it’s a healthcare practitioner or peer to peer support kind of recommendation, that presents a higher return on investment value because the cost of acquisition comes down there, and the peer to peer element allows this somewhat flywheel effect to kick in at scale. So we’ll continue to refine our channel mix, but we’re feeling really good about the broadening of it that we’ve experienced in the last nine months in earnest. And now it’s a matter of how do we optimize that and put the dollars against the best performing ones. Does that address your question, Yes,

Pablo, Analyst: of course. That’s good color. Thank you. Look, and before I ask my last question, I guess I’ll answer your question. I’m actually in Australia at conference here, and I have to say the Stanley Brothers brand is quite visible here in the market.

So congratulations to them. Look, my last question is regarding, it’s a two part question regarding Bright side. First, on category outlook, there seems to be strong consumer enthusiasm for your BrightSide, hem derived Delta nine gummies, including a sellout over the Memorial Day weekend, as you indicated. Can you share your perspective on the category’s potential and how BrightSide fits into your broader growth category, especially given the fluid regulatory environment around hemp? And the second part of the question is more on product expansion, right?

Right now BrightSide is primarily a gammy product line. Do you see opportunities to expand the format, for example, into beverages or introduce other unique formulations that build on brand’s early momentum? Thank you.

Bill Marocznik, Chief Executive Officer, Charlotte’s Web: Yeah, thanks, Pablo. Me address your first question and then hit the second one. I’m balancing my excitement and enthusiasm for what we’ve seen so far with a bit of caution. So, we’re a long way from spiking the ball, as it were, on our D9 entry. But we feel really, really good about the early signal.

Obviously, we wouldn’t have sold out if we had anticipated the demand that we received when we launched it. It’s encouraging to put a smile on it, to sell out on a new introduction. I wish we had more. We didn’t. But here we are.

It’s early days. Let me frame it that way. We do believe that our current D9 portfolio in its dummy format is addressing an underserved segment of the market. And by that, I mean we’re not targeting super high THC concentrations. We’re really providing a curated experience to address a number of specific need states where a higher concentration of THC can be advantageous for the consumer.

We believe that segment of the market is underserved. And with our brand, with our quality, with our innovative science, we’ve got a really strong potential to win big in this segment. That being said, as you alluded to, the regulatory environment is I’ll euphemistically categorize it as fluid. But we’re playing to win. So we’re not playing to hedge.

We’re going to address it in the markets that are open to us with the intention of grabbing as much share as we possibly can. In terms of, I think, what you were asking, are there different formats beyond gummies? We are very actively evaluating opportunities, both formats, formulations, etcetera. But it would still play to the unique approach that Charlotte’s Web has historically done. So we believe there’s really compelling white space within other formats where we could be highly successful and significantly differentiated.

I’m not in a position at this moment to get into those specifics, so stay tuned. But that is something that I’m looking forward to sharing in the not too distant future, and we’re really pumped about it. So hopefully, it’s not too much of a non answer. And I got to what you were seeking there, Pablo.

Pablo, Analyst: No, that’s good. Thank you very much. That’s all for me. Thank you.

Bill Marocznik, Chief Executive Officer, Charlotte’s Web: Great. Thank you, Pablo.

Conference Operator: Thank you. We have no further I will turn the call back over to Corey Paola for closing comments.

Corey Pala, Investor Relations, Charlotte’s Web: Okay. Well, thank you, everyone, for participating in our call today, and we will look forward to speaking to you on our next earnings call. Thank you.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.

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