Charlotte's Web Holdings, Inc.

Good morning ladies and gentlemen, and welcome to the Charlotte's Web Holdings Inc. 2023 First Quarter Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session with the company's analyst. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Friday, May 12, 2023. I would now like to turn the conference over to Corey Palla, Director of Investor Relations. Please go ahead.

Thank you, Sergio. Good morning, everyone. Thank you for joining us for our 2023 first quarter earnings conference call for Charlotte's Web Holdings, Inc. Our earnings press release was issued this morning and posted on our website along with our financial statements. Our 10Q has been filed on CDAR and EDGAR. Leading our call this morning is CEO Jacques Tortoroli, CFO Jessica Saxon, and COO Jared Stanley. Jacques and myself are each joining from remote locations today. On this morning's call, we will review our Q1 financial results and provide some color on some recent strategic initiatives. We'll take questions from our analysts at the end of our prepared remarks. A replay of this call will be available through the next week, accessible for the details provided in our earnings press release. And a webcast replay of this call will be available for an extended period, accessible through the IR section of our website. Certain statements made on today's call, including some answers we may provide to certain questions, may include content that is forward-looking in nature and therefore is subject to risks, uncertainties, and factors which could cause actual future results or company performance to differ materially from implied expectations. Risks surrounding such forward-looking statements are all outlined in detail within the company's regulatory filings. In addition, during the call, we will refer to supplemental non-GAAP accounting measures, including Adjusted EBITDA, which does not have any standardized meaning prescribed by GAAP. Please refer to the earnings release that we filed this morning for description of adjusted EBITDA as well as a reconciliation to the comparable gap financial measures. With that, I'll now hand over the call to Charlotte's Web Chief Executive Officer, Jacques Tortoroli. Jacques?

Thank you for joining our call. Thank you, Corey. And happy Friday. This morning we reported Q1 revenue of $17 million, down 12%. with volumes down 5% versus the prior year, modestly below our expectations. Jessica will review selected financials momentarily, but I wanted to ground this in the market and then give you an update on the progress in our strategic initiatives. Looking at the CBD category, the CBD market is approximately $4.4 billion, according to Brightfield. The top 20 brands share 17% with Charlotte's Web at number one. while the one FDA-approved cannabinoid drug represents 16% share. That leaves over 60% of the market, or roughly $3 billion, to some 2,000 brands, by the way, down from over 3,500 brands in 2021. Therein lies the size of the prize, before regulation, which we shouldn't lose sight of as we discuss each quarter. Dollops Web is number one, with 3% share of the total market and 6% share if you exclude the channels, formats, and pharma sectors we don't today participate in. We are number one in brand metrics, like awareness and loyalty, number one in retail. Retail represents 25% of the total market, and we have category-leading shelf velocities. In e-commerce, which is 35% of the market, we rank number one with less than 4% share. Finally, given the high fragmentation of very small brands in the market, we'd expect to see a significant culling of the number of competitors to continue without regulation in Washington, D.C., and certainly when regulation happens. Our brand equity, full spectrum, NSF-certified broad-spectrum products, innovation pipeline, and our IP, and the opportunity to expand our consumer reach and relevance through Recreate starting later this summer, Our partnership with MLB and our balance sheet uniquely position us to grow our number one share over time. And our recently announced partnership to enter into an IND path for a botanical drug with the FDA opens the potential longer term for us to participate in a substantial part of the market that we don't do today. We've previously framed our strategy with you, namely returning to growth, winning in D.C., and unlocking the value of Charlotte's Web IP and botanical wellness. Let me briefly update you on some significant progress in the quarter on each pillar. First, returning to growth. Last month, we announced the launch of ReCreate, a new botanical lifestyle brand designed for young and attractive active wellness seekers in sports and other valuable cultural verticals. ReCreate capitalizes on the growing trend of CBD-infused functional botanical wellness formulations self-care, and mental well-being, certainly among millennials and Gen Zers who make up approximately 47% of this multibillion-dollar CBD market. They're also among the most active daily users of CBD when they wake up throughout the day across different occasions, making this a very important demographic for broad-spectrum CBD. Launching this new Neat States-driven brand with new formulations across multiple formats coincides with the first year of our MLB partnership and packaging that bears the iconic MLB logo with NSF certification. We launched Recreate Daily Edge Tincture last month, exclusively available on our e-commerce site, and we'll begin rolling out new formats starting with a line of Neat State gummies, which will be available on our site in the summer and retail during the second half of this year. Recreate products have secured early interest from leading retailers, including Fresh Thyme, The Vitamin Shop, and others, as well as Southern Glaciers Wine and Spirits. We recently appointed Andrew Schaefer as our Chief Marketing Officer, leading our cross-platform activations with MLB and the Sports Vertical for Recreate to drive online traffic and sales. Andrew comes to us from two decades of Verizon, leading brand strategy, digital experience, social marketing, while benefiting as well from his work with professional sports partnerships. Finally, we recently announced a partnership with Phillips Pet Food and Supplies, the largest pet specialty channel distributor, servicing over 14,000 retail dogs across the country. And by the way, PET is a $400 million channel, but today less than 10% of our revenue is in the quarters. Second pillar of our strategy is regulatory. In Washington, D.C., and increasingly at the state level, we are actively progressing both. Garrett has taken a critical leadership role in these initiatives and will speak more to Doug in his remarks. We also activated the third strategic pillar, unlocking the value of the company's IP in botanical wellness. This means formally pursuing an IND pathway seeking an FDA-approved botanical drug based on our proprietary cultivars. through the right partnerships and structures. Jessica and Jared will each touch on this in their remarks. So with that, I'll now pass the call over to our CFO, Jessica Saxon.