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Charlotte's Web — Q3 2026 Earnings Summary

CWBHF

  • Financial Performance:

    • Revenue for the three months ended September 30, 2026, was $9.4 million, a 18.3% decrease from $11.5 million in the same period in 2025 and a 13.5% decrease from $10.9 million in Q2 2026.
    • Revenue for the nine months ended September 30, 2026, was $31.4 million, a 14.1% decrease from $36.6 million in the prior-year period.
    • Gross profit was $4.4 million (46.9% margin) for Q3 2026, compared to $4.5 million (38.9% margin) in Q3 2025; gross margin for the first nine months was 47.0%, up from 45.7% in the prior year.
    • Selling, general, and administrative (SG&A) expenses were $8.1 million for Q3 2026, a 16.8% decrease from $9.7 million in Q3 2025, and $27.1 million for the nine-month period, down 13.5% from $31.4 million.
    • Operating loss was $3.7 million for Q3 2026, narrowing from $5.3 million in Q3 2025 and $4.4 million in Q2 2026; for the nine months, operating loss improved 15.7% to $12.4 million from $14.7 million.
    • Net loss was $3.5 million ($0.01 per share) for Q3 2026, compared to $5.8 million ($0.04 per share) in Q3 2025; for the nine months, net loss was $20.7 million ($0.10 per share) versus $18.3 million ($0.12 per share).
    • Adjusted EBITDA was a loss of $0.7 million for Q3 2026, improving from a loss of $2.2 million in Q3 2025; for the nine months, Adjusted EBITDA was a loss of $5.3 million compared to $8.5 million in the prior year.
    • Total liabilities decreased to $19.4 million at September 30, 2026, from $77.3 million at December 31, 2025.
    • Shareholders' equity turned positive to $53.1 million at September 30, 2026, compared to a deficit of $2.0 million at year-end 2025.
    • Cash and cash equivalents were $11.4 million at September 30, 2026, compared to $9.8 million in Q3 2025 and $14.0 million at June 30, 2026.
    • Net cash used in operating activities was $2.6 million for Q3 2026 and $6.3 million for the nine months, compared to $12.2 million in the prior-year period.
    • A $1.4 million inventory reserve addition was recorded in Q3 2026 related to product line simplification.
    • The company recognized a $0.1 million non-cash gain from the change in fair value of its investment in DeFloria in Q3 2026, versus a $1.2 million non-cash charge in Q3 2025.

  • Guidance and Future Outlook:

    • Management aims to return to growth by building the business on a more profitable footing through refined customer acquisition and retention strategies.
    • The company targets a gross margin of approximately 50%, though quarterly results may vary with inventory adjustments and federal rule outcomes.
    • The company expects some customers to purchase ahead of the December 11, 2026, federal THC limit deadline, which may shift sales between periods.
    • Management does not view near-term purchasing ahead of the December 11 deadline as indicative of ongoing demand.
    • The company intends to host a corporate update call in December after December 11, 2026, to provide an outlook based on actual plans rather than speculation.
    • The company does not anticipate meaningful revenue from the Substance Access Beneficiary Engagement Incentive (BEI) program in 2026.

  • Business Segments and Product Lines:

    • Revenue in California has begun to recover following the reintroduction of broad-spectrum products, regaining approximately 40% of sales lost after July restrictions.
    • The company simplified its product range, resulting in Q3 inventory charges.
    • A partnership was announced in August with Edibles.com, an online marketplace and retailer, which now carries Charlotte's Web products.
    • A dedicated ordering portal and affiliate program for healthcare practitioners were launched to facilitate product supply to patients.
    • The company is in negotiations with Accountable Care Organizations (ACOs) regarding a potential pilot of the BEI program expected to begin in 2027.
    • The company is laying groundwork to participate in the Medicare Advantage channel, developing relationships and infrastructure pending regulatory clarity.
    • DeFloria, Inc., in which the company owns approximately one-third, is developing AJA001 Oral Solution; the company holds exclusive commercial manufacturing rights upon potential FDA approval.
    • DeFloria's Phase 2 program for irritability associated with autism spectrum disorder remains substantially advanced, pending resource funding.
    • DeFloria is evaluating rare pediatric neurological indications for AJA001, which would be eligible for orphan drug designation.
    • A peer-reviewed paper on DeFloria's Phase 1 trial results was accepted for publication in The Journal of Clinical Pharmacology.

  • Market and Competitive Landscape:

    • Federal hemp policy continues to evolve, with the Continuing Appropriations and Extensions Act, 2027, delaying restrictions on non-synthetic hemp products to December 11, 2026.
    • Under current law effective December 11, 2026, hemp products containing more than 0.4 milligrams of total THC per container will be restricted; the company's full-spectrum products would fall within these restrictions.
    • The company advocates for a framework distinguishing non-intoxicating full-spectrum products from synthetic and intoxicating products through the ONE HEMP coalition and legislative efforts like the HEMP Act.
    • Consumer concern has grown as the December 11 deadline approaches, with over 42,000 advocacy letters sent to Congress to preserve access to full-spectrum products.
    • Some competitors have exited the market, and others may follow, potentially affecting the company's share of a smaller category.
    • The company has reduced deep discounting nationally to align pricing with premium quality, which lowered near-term revenue but improved margins.

  • Risks and Challenges:

    • The company cannot predict whether or when Congress will act to adjust Section 781 or protect full-spectrum hemp products.
    • The full application of Section 781 on December 11, 2026, without further legislative relief, poses a risk to product eligibility and revenue.
    • Regulatory changes, including FDA definitions and state restrictions (e.g., California), could affect manufacturing, distribution, or retail availability.
    • The initiation of DeFloria's Phase 2 program is subject to securing the resources required to fund it.
    • The net effect of near-term purchasing ahead of the December 11 deadline on future sales cannot yet be determined.
    • The company faces risks related to limited adoption of the BEI incentive by participating healthcare organizations.
    • Risks include loss of customers and retail partners, share price volatility, and crop risk.

  • Management Commentary and Tone:

    • CEO Bill Morachnick stated that the third quarter reflected the lowest operating loss since 2019 despite lower revenue, driven by improved costs and margins.
    • Morachnick noted that the company has reintroduced broad-spectrum products in California and reduced deep discounting to reflect premium quality.
    • CFO Erika Lind highlighted that the balance sheet is in a "very different place" following the removal of the convertible debenture, with total liabilities down from $77.3 million to $19.4 million.
    • Lind emphasized that the company prioritized margin over volume in 2026, with SG&A reduced by 17% year-over-year.
    • Management indicated that spending was held back pending clarity on federal rules, which contributed to the SG&A reduction.

  • Other Key Points:

    • The convertible debenture was converted into common shares in May 2026, resulting in a higher share count and the elimination of the debenture from the balance sheet.
    • A private placement of common shares occurred in May 2026, raising $10 million.
    • The company recognized a $4.2 million non-cash loss on the extinguishment of debt related to the debenture conversion during the nine months ended September 30, 2026.
    • The company's investment in DeFloria was carried at fair value of $8.4 million at September 30, 2026.
    • The company is a Certified B Corporation headquartered in Louisville, Colorado, with a vertically integrated business model.
    • Shares trade on the TSX (CWEB) and OTCQX (CWBHF).
    • The company will not hold a shareholder earnings call on November 12, 2026, but will host a single corporate update call in December.