Charlotte's Web Holdings Inc Q4 2018 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Derek Dley - Canaccord Genuity - Analyst : Could you quantify the one-time items that you did have in the quarter related to, as you said, legal, governance and security expenses?

Question: Derek Dley - Canaccord Genuity - Analyst : Okay. In terms of your commentary just on being in many new mass-market retail shelves, can you comment on who some of these retail partners may be? Or at least give us a split? Is it a combination of grocer, drugstore and other channels?

Question: Derek Dley - Canaccord Genuity - Analyst : Okay, that's helpful. In terms of your market share, in 2016 I believe you guys were roughly 8% of the CBD extract market or the hemp extract CBD market. That grew to 14% in 2017. Do you have any updated data on where you guys ended 2018 in terms of market share? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 29, 2019 / 12:30PM, CWEB.TO - Q4 2018 Charlotte's Web Holdings Inc Earnings Call

Question: Derek Dley - Canaccord Genuity - Analyst : Okay, that's very helpful. Moving to your supply chain, Hess, appreciate your comments on the fact that you guys are vertically integrated and view that as a key differentiating factor versus other CBD players. What have you seen in terms of the wholesale market? Given the Farm Bill passed, I know we've seen a number of new competitors look to enter the space. Are you seeing anything in terms of supply shortages or price increases on the wholesale market?

Question: Derek Dley - Canaccord Genuity - Analyst : Okay, and then just the last one from me, more of a housekeeping update. But I believe you guys mentioned on your Q3 call the potential for an uplisting onto the TSX and potentially a US listing. Can you provide an update where you are in that process?

Question: Jason Zandberg - PI Financial - Analyst : I just wanted to -- you talked about the fantastic harvest this year, the fact that you will potentially double the acres in terms of the forward harvest. Just wanted to get a better understanding of your manufacturing and packaging capabilities. Do you expect there to be a bottleneck that you may need to invest in on the manufacturing and packaging to keep up with the huge amount of supply you now have of hemp? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 29, 2019 / 12:30PM, CWEB.TO - Q4 2018 Charlotte's Web Holdings Inc Earnings Call

Question: Jason Zandberg - PI Financial - Analyst : Okay. And if I could touch base as well on the national retailers. Can you discuss how many doors you are in of these three national retailers and also which states they have chosen to initially launch in?

Question: Jason Zandberg - PI Financial - Analyst : Yes, just which states that these national retailers are initially launching.

Question: Jason Zandberg - PI Financial - Analyst : Okay. And then just finally, your international sales, you talked about some of these international initiatives. Can you speak to sales volumes, when we would expect to see a significant ramp on your international sales profile?

Question: Scott Fortune - Roth Capital Partners - Analyst : Congrats on the quarter. To follow up on the large retail rollouts, you mentioned drug stores and grocery. Can you step through the timing of -- obviously a few states from a regional to a national level? And your sense of other mass market or of potentially convenience stores coming on board here?

Question: Jason Zandberg - PI Financial - Analyst : And then a follow-up on that, what are you seeing from the retailers as far as product and formats that they are looking for to fill the shelves? And what's your initiative as far as new product rollouts we can see going forward here?

Question: Jason Zandberg - PI Financial - Analyst : Okay. And then last question, I know you are building out the infrastructure for 2020 and potentially larger accounts, more doors. As far as expenses, are you putting more into research and development on studies here going forward? And as far as a harvest, CBD is the focus; are you looking at different cannabinoids to potentially harvest going forward in the future?

Question: Jenny Wang - Eight Capital - Analyst : Congratulations on the quarter.

Question: Jenny Wang - Eight Capital - Analyst : So, I'm just wondering in terms of your of agreements or your agreements with the three retailers, could you talk a little bit about whether you've seen any reorders yet? And also if you have any data on the sell-through?

Question: Jenny Wang - Eight Capital - Analyst : Okay. And on top of that, in terms of your B2B line, could you talk a little about what's the split between your wholesale customers versus your distributor and retailers?

Question: Jenny Wang - Eight Capital - Analyst : Okay, no worries. And I'm wondering in terms of your -- we are seeing a lot of topical products becoming more interested -- interesting. And in terms of the margins on those versus your human nutritionals, could you give us a little bit of color on that?

Question: Jenny Wang - Eight Capital - Analyst : Okay, thank you so much. I will leave it at that.

Question: Alan Brochstein - New Cannabis Ventures - Analyst : I have just a couple questions. The first is on international, I appreciate your forward outlook. I'm just curious if you can explain -- the international part has never been a big part of your overall sales to date, but it fell in 2018. I'm just wondering is that due to regulatory uncertainty in some of these other domains outside of the United States?

Question: Alan Brochstein - New Cannabis Ventures - Analyst : Got it, thanks. And then I find your comments curious -- just, everybody's excited about the new distribution into stores like CVS and Walgreens apparently. But if I hurt you correctly, you said that you expect a shift to this channel for now, but over time for your e-commerce to actually get larger as a percentage. Can you explain how you see that playing out?

Question: Alan Brochstein - New Cannabis Ventures - Analyst : Got it. That makes sense. And then I assume, but could you verify that putting your products on the shelves in the stores sounds like maybe not a loss leader, but just a way to get your branding out there. You'd rather sell online, the margins are higher online. Is that correct?

Question: Alan Brochstein - New Cannabis Ventures - Analyst : Okay, and then my last question is -- CVS at least; I haven't seen the Walgreens, I think it is in -- no ingestibles as well, but they are taking a conservative tact. This isn't that surprising by going with the topicals only. And that's good because your brand gets out there and if somebody wants to try oral now they know your brand. But I'm just curious if you guys have a view of what it's going to take to get these larger chains to go deeper into the CBD. Is it going to actually take this FDA type of ruling that's supposed to come out maybe in two years or would it happen before then?

Question: Alan Brochstein - New Cannabis Ventures - Analyst : Okay, and I have one more question. And you alluded to putting yourselves in a position to, quote/unquote, strengthen your claims. Can you elaborate on what steps you're taking to be able to do that?

Question: Alan Brochstein - New Cannabis Ventures - Analyst : Got it. Okay, so, I thought maybe where you were going with that, so as a follow-up, my last question is -- have you guys looked into OTC registration with the FDA? Because I don't think your products are registered yet. Have you looked into what that would entail and what the timeline would be?

Question: Alan Brochstein - New Cannabis Ventures - Analyst : Got it. Okay, thanks a lot and congratulations on this great quarter. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 29, 2019 / 12:30PM, CWEB.TO - Q4 2018 Charlotte's Web Holdings Inc Earnings Call

Question: Josh Felker - CB1 Capital - Analyst : Congrats on the year and everything you've done so far. I'm just wondering, we're seeing such a wide variety in the efficacy of all the CBD products that we are seeing on the market right now. I'm just wondering where do you guys see your strengths at or where do you think you're building competitive advantage specifically in regards to your SKUs and your formulations of these products versus your competitors that we're starting to see hit these shelves?

Question: Josh Felker - CB1 Capital - Analyst : Okay, and then just a follow-up regarding your SKUs. Especially because we saw the topicals hit the shelves first. We know that topical CBD is tremendously hard to actually get through the dermis just inherently. So, we're starting to see these nano emulsifications and lipid emulsifications as add-ons to the IP in order to increase absorption and bioavailability. Do you see your competitive advantage there also holding across your suite of SKUs? And do you see any weaknesses there versus your competitors?