Q4 2022 Charlotte's Web Holdings Inc Earnings Call

Speaker 2: presentation we will conduct a question and answer session. If at any time during this call you require immediate assistance please press star 0 for the operator. This call is being recorded today on March 23rd, Thursday, 2023. I would now like to turn the conference over to Corey Paula, Director of Investor

Speaker 3: Thank you, Julie, and good morning, everyone. Thank you for joining us for our 2022 fourth quarter and year-end earnings conference call for Charlotte's Web Holdings, Inc. Our earnings release was issued this morning and posted on the investor relations section of our website along with our financial statements. Our annual 10K report for the full 2022 year is also available.

Speaker 3: and has been filed on CEDAR.com in Canada as well as in the US with the SEC.

Speaker 3: Leading our call this morning is CEO Jacques Tortoroli, COO Jared Stanley, and the company's new Chief Financial Officer Jessica Saxon, who joined Charlotte's Web at the start of this year. She comes to Charlotte's Web following a career in finance at Anheuser-Busch InBev and brings both large and small company financial leadership. On this morning's call, we will review the financial results for the fourth quarter and the end of the full year.

Speaker 3: call will also be available for an extended period accessible through the IR section of our website at charlottesweb.com. As a reminder to our listeners, 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 subject to risks and uncertainties and factors which could cause actual future results.

Speaker 3: company performance to differ materially from implied expectations.

Speaker 3: Such risks surrounding forward-looking statements are all outlined in detail with the company's annual report on Form 10-K filed on cedar.com in Canada and scc.gov in the United States.

Speaker 3: In addition, during the call we will refer to supplemental non-GAAP accounting measures including adjusted gross profit and adjusted EBITDA. We should not have any standardized meeting prescribed by GAAP. Please refer to the earnings release contained in the Form 8K that we filed this morning for a description of adjusted gross profit and adjusted EBITDA, as well as a reconciliation of such measures to the respective and most directly comparable GAAP financials.

Speaker 4: quick study. She understands our business and has demonstrated impressive insights in a short time.

Speaker 4: providing constructive leadership across our business.

Speaker 4: Jared and I very much look forward to partnering with Jessica as we move our strategic initiatives forward.

Speaker 4: This morning we reported results for our fourth quarter in full year 2022. Before turning the call to Jessica for commentary on our Q4 and full year results, I want to highlight several points.

Speaker 4: 2022 is a difficult year for the CBD sector with disappointing sales as a result of ongoing inaction from the FDA on setting regulatory guidelines, continuing a marketplace of too many brands, isolate and delta products, oversupply, and inevitable consumer confusion. As a result, we began to see retailers contract shelf-spending sales for the CBD sector.

Speaker 4: It's a tough year for Charlotte's Web. Revenues declined over 20 million year over year. However, we maintained our market leadership across all key retail, e-commerce, and brand metrics.

Speaker 4: which underscores the strength of our competitive position and the state of the overall category.

Speaker 4: The e-commerce channel represents $2 billion, or about 40% of the CBD market.

Speaker 4: Charlotte's Web continued to operate the largest e-commerce business in CBD, but with only $51 million of revenue in 2022.

Speaker 4: Revenues of $12.5 million were down 18.3% in Q4 due to lower traffic and higher depth and frequency of competitive price promotions and discounting.

Speaker 4: However, subscriptions increased 21% from a year ago and conversion rates were strong at 7%.

Speaker 4: which shows the opportunity we have by focusing on filling the top of the funnel by bringing more consumers into our brand ecosystem.

Speaker 4: For the full year, subscribers represented about 35% of our e-commerce revenues.

Speaker 4: Our number one challenge in turning around revenues remains bringing you consumers into our e-commerce and social channels.

Speaker 4: While we have initiatives for better returns on paid and earned media, this is where our MLP partnership comes in.

Speaker 4: On October 11th, on the back of the announcement, and about $30 million of earned media throughout the quarter, resort traffic increases.

Speaker 4: We also saw new consumers buying our NSF certified for support daily edge product. Also buying other CBD products on Charlotte's Web.com.

Speaker 4: Retail channels where we compete in represent about 25% of the CBD market or about a billion three annually.

Speaker 4: We continue to lead in retail despite a 3 million year over year decline in revenues to 6.4 million in Q4 and 23 million dollars for the full year.

Speaker 4: Our sales to food, drug, mass retail were down 10% year over year, while the total category in these channels was down 12%.

Speaker 4: As a result, we held 19% and 18% share in retail unit value and volume respectively.

Speaker 4: the number one market position.

Speaker 4: Distribution losses and price promotions were the principal drivers of year-over-year revenue declines.

Speaker 4: In the natural channel, our Q4 sales were down 14% year over year, while the category was down 19%.

Speaker 4: As a result, we gain three points in distribution.

Speaker 4: We turn into the MLB partnership with a full baseball season in 2023 beginning later this month. We're encouraged that the combination of MLB's 180 million or so fans, our NSF broad spectrum products, dual event activations, and a new CW e-commerce platform later this year.

Speaker 4: are all levers in growing the top of the funnel.

Speaker 4: Once consumers are in our ecosystem, they stay with us across their journey, becoming loyal repeat purchasers and subscribers, driving strong conversion.

Speaker 4: AOV rates and ultimately meaningful lifetime values.

Speaker 4: In the coming weeks, to coincide with the start of the MLB season, we'll be announcing a strategic decision to launch a lifestyle brand of NSF-certified products targeted for millennial and Gen Z consumers and valuable cultural verticals to drive our larger growth business vision.

Speaker 4: This is the perfect time to bring this brand to market, backed by the amplifier of MLB, including the iconic MLB logo on packaging.

Speaker 4: BRAND will soft launch with one product on our ecommerce platform in April .

Speaker 4: with further products launching on ecommerce and retail this fall.

Speaker 4: We'll provide a lot more color on this during our next earnings call.

Speaker 4: Jessica and Jared will provide more color in their remarks, and I'll close with a 22 wrap-up as we progress into 2023 before opening up the call to our analysts for questions.

Speaker 4: Before I do that, let me turn the call over to Jessica for a review of our Q4 and full-year financial highlights.

Speaker 4: Jessica?

Speaker 5: Thank you, Jacques. As noted by Jacques in his opening remarks, I have recently joined Charlotte's Web from Evergreen Ingredients, an innovative sustainability company owned by Anheuser-Busch, where I gained valuable venture experience as their CFO . This, in conjunction with my experience at several world-class organizations, provides me with a unique skill with the assistancewo

Speaker 5: advocacy, and most importantly, delivering consumer needs.

Speaker 5: I came to Charlotte's Web as a strong believer and authentic user of their products. While CBD has certainly had a beneficial influence on my well-being, my decision to join Charlotte's Web was also driven by a strong personal and professional connection to the company's mission. It is an honor to be part of a company that adheres to B Corp principles, which include prioritizing the health of our planet.

Speaker 5: I have a strong passion towards sustainability, and as someone in finance, I understand the significant role we can play in creating sustainable solutions that will transform the way we do business.

Speaker 5: Ultimately, it is clear that our health and the planet's well-being are strongly intertwined.

Speaker 5: I am aware of the obstacles that the CBD market faces, but I am optimistic. I believe Charlotte's Web is the best positioned in terms of brand recognition, trust, and loyalty, but also in terms of quality, IP, and capabilities.

Speaker 5: Along with this, our safety data and certifications are industry leading. Before I take you through a high-level review of the financial results, I would like to review four key accounting items that impacted Q4. Firstly, in the fourth quarter, due to pending regulatory changes in Colorado, it was determined that the useful life of certain hemp biomass inventory could be improved.

Speaker 5: would not meet long-term product specifications and labeling requirements. Jared will speak in more detail about this.

Speaker 5: hemp biomass has modest degradation over time and analysis of our biomass on hand resulted in taking a non-cash inventory provision of $21.5 million in Q4 for a total of $23.4 million for the year. inventory provisions are expensed to cost of goods sold.

Speaker 5: which reduced our reported gross profit and margin in the fourth quarter and for the year overall. However, this is a non-cash item.

Speaker 5: Secondly, we recorded a negative change related to the fair value of the SBUSA purchase option in Q4 in the amount of $6.8 million for a total change of negative $10.7 million for the year.

Speaker 5: This increases our net loss for the period but is also a non-cash item.

Speaker 5: The reduction primarily reflects a reduced near-term valuation of the business due to slower than anticipated progress on federal legalization for cannabis.

Speaker 5: Both the fair value change and inventory provisions, again, are non-cash items that do not affect our cash position.

Speaker 5: Moving to the MLB partnership in Q4 2022, in connection with the promotional rights agreement, the company paid $500,000 as well as recognized $2 million in expense.

Speaker 5: As we have discussed previously, this is more than a rights deal. It is a strategic deal where MLB not only has a revenue share on the NSF Certified for sport product, however, they are also a substantial shareholder of the company.

Speaker 5: Regarding the balance sheet, this transaction resulted in a license and media asset of approximately $30 million and a corresponding payable at the end of 2022.

Speaker 5: The fourth significant item in the fourth quarter was the 52.7 million net proceeds from a seven-year convertible venture with BAT.

Speaker 5: This investment strengthened our balance sheet, significantly improving liquidity.

Speaker 5: We believe this generated value for our shareholders, providing liquidity for the company at a great price.

Speaker 5: at a time when capital access is extraordinarily limited. Now, turning to revenue. As Jacques discussed earlier, Q4 revenue was 18.9 million, down 23.8% compared to revenue.

Speaker 5: of $24.8 million in the fourth quarter of 2021, with both our D2C and B2B businesses reporting lower net sales.

Speaker 5: The comparative result is lapping a stronger Q4 in 2021.

Speaker 5: following the pass of Bill AR-45 in California, which resulted in materially larger shipments during the period amplifying the year-over-year comparative decline.

Speaker 5: Moving to our fourth quarter gross profit. The inventory provision of $21.5 million in the fourth quarter resulted in a gross profit of negative $10.5 million.

Speaker 5: For better transparency, excluding the inventory provision, gross profit was approximately 11 million or 58.1% of revenue. Looking forward, we expect gross margins to continue being in the mid 50s depending on both product and channel mix within the period.

Speaker 5: Furthermore, in full year 2022, we reported gross margin of 28.6% due to the previously mentioned inventory provision.

Speaker 5: Gross margin before the inventory provision was 58%, which compares to a 2021 gross margin of 61% before provisions.

Speaker 5: Turning to SG&A, notably, in 2022 we were able to deliver substantial reductions in SG&A of $27.6 million for the full 12 months.

Speaker 5: Total SG&A for 2022 was $70.1 million, a year-over-year decrease of 28.2% from $97.6 million in 2021. This excludes a $4.1 million pandemic-related employee retention credit recognized in 2022.

Speaker 5: With that, cash is now receivable on our balance sheet. The material reduction in operating expenses was critical to right sizing the business and significantly reduces our cash burn to a manageable level going forward.

Speaker 5: SG&A expenses in the fourth quarter were $21.4 million or 12.2% lower year over year.

Speaker 5: Combined with our $67 million cash position at the end of the year, this has put the business in a solid financial position moving forward. And we believe this is unique among the bulk of our competitive set.

Speaker 5: Net loss in the fourth quarter was $35.2 million or 23 cents per share loss.

Speaker 5: with 21.5 million of the loss being inventory provisions, plus 3.5 million loss from fair market value changes.

Speaker 5: This compares to a fourth quarter net loss of $118.2 million for 86 cents per share loss last year, which included $103.8 million in impairments related to goodwill, inventory provisions and other long-lived assets.

Speaker 5: For better transparency of operations, excluding depreciation and amortization, and other extraordinary and non-cash items, Q4 adjusted EBITDA was negative $4.5 million, a year-over-year improvement from negative $8.3 million for Q4 of last year, despite lower revenue. This was primarily a result of SG&A reductions.

Speaker 5: On a full year basis, adjusted EBITDA improved by 8.7 million versus 2021, resulting in a smaller adjusted EBITDA loss of 11.8 million.

Speaker 5: As a result of prudent expense management in 2022, net cash used for operations for the full year was $5.3 million in 2022 versus $29.6 million in 2021.

Speaker 5: The decrease is a result of reduced operating expenses and the collection of $10.8 million in IRS tax refunds, partially offset by lower revenues and cultivation payments. Cash at the end of 2022 was $67 million compared to $19.5 million at the end of 2021.

Speaker 5: Additionally, our working capital at the close of 2022 stood at $84.1 million.

Speaker 5: I will now turn the call over to co-founder and COO Jared Stanley. Thank you Jessica.

Speaker 6: Prior to going into regulatory, I'd like to give a brief update on Canada. In Q4, we announced a strategic alliance with Tilray, licensing our brands and formulations to make Charlotte's Web products available in Canada.

Speaker 6: We are progressing on these plans with tinctures launching in Q2 and capsules, topicals, gummies to follow.

Speaker 6: All products are subject to royalties payable to Charlotte's Web on a revenue basis over the four-year term. More to come as we progress.

Speaker 6: This is just one example of our AssetLight International strategy and one path for unlocking value of our IP.

Speaker 6: To shift to regulatory, I would like to begin by providing some perspective on the recent position made by FDA on January 26.

Speaker 6: We support the US Food and Drug Administration's recent call for Congress to regulate hemp derived CBD.

Speaker 6: Over the past four years of investigation, the FDA has not provided a regulatory framework that works under its purview.

Speaker 6: Statements from the FDA indicate that, absent Congressional legislation, the situation is unlikely to change.

Speaker 6: With the FDA's call to action, we have seen more engagement from Congress in the last two months than ever before.

Speaker 6: Support and credibility from VAT and MLB drive value that cannot be viewed on our balance sheet.

Speaker 6: Our leadership in DC starts with our engagement. Congress has requested industry data to understand and address the concerns made by the FDA.

Speaker 6: Charlotte's web and industry peers have compiled and shared with Congress the safety and toxicology data that addresses these concerns.

Speaker 6: Shortly afterwards, Representatives Morgan Griffith and Angie Craig reintroduced two bipartisan bills, the Hemp-Derived Consumer Protection and Market Stabilization Act of 2023, and just last week this bill was designated H.R. 1629.

Speaker 6: to regulate hemp extract products under dietary supplement regulatory framework. And secondly, the CBD product safety and standardization act of 2023 designated HR 1628, which would establish regulations for CBD as a food and beverage additive. We are moving to create a sensible regulatory framework for hemp derived...

Speaker 6: that have also actively been engaged in state by state regulation necessary to address Delta 8 THC.

Speaker 6: Our home state, Colorado, was a first mover to address the issue of Delta 8. In late 2022, we sat on the Colorado Task Force established to make a recommendation to the General Assembly by January 1 of this year.

Speaker 6: Our voice was strong as we led a favorable outcome for the Colorado hemp industry as the current draft of the bill addresses intoxicating cannabinoids, but preserves consumers access to highly therapeutic full spectrum CBD products.

Speaker 6: Additionally, the Colorado bill will establish transparency to consumers by creating THC billing requirements.

Speaker 6: In order to maintain consistency in Charlotte's web products and get ahead of state labeling requirements, we have to set a shelf life on our biomass to ensure future specification set will comply with pending state labeling regulations.

Speaker 6: The substantial biomass that was produced in 2019 in preparation for an anticipated FDA-regulated category that hasn't yet come created a supply of aging biomass inventory that will not meet future specifications due to THC degradation. These labeling requirements are the triggering event behind our decision to write down Voters

Speaker 6: We also recently announced the appointment of our new Chief Scientific Officer, Marcel Bonn-Miller. Marcel comes to us with over two decades of excellence in cannabinoid research. He is leading product development, clinical research, scientific regulatory support.

Speaker 6: and more specifically interfacing with the FDA science teams to support a regulatory pathway for hemp CBD extracts. His experience is key to supporting our regulatory and scientific goals as we innovate.

Speaker 6: And as we navigate and lead the regulatory landscape, we are excited to bring the market and innovation pipeline to accelerate growth in the back half of 2023 and 2024.

Speaker 6: The NSF certified for sport daily edge tincture was the tip of the iceberg. We are strategically innovating with the consumer at the heart of every decision.

Speaker 6: The MLB partnership has played a pivotal role in this. We presented at MLB winter meetings in December and connected with more than 20 teams over spring training to educate trainers and decision makers on broad spectrum CBD.

Speaker 6: If our NSF certified products can support Premier athletes to faster recovery, mental clarity, energy and sleep, imagine what they can do for the everyday consumer.

Speaker 6: Our MLB partnership and innovation pipeline are core to our primary strategy, grow the business. Our engagement with Congress to land a regulatory landscape for CBD is driving the second leg of our strategy, win in DC. I would like to provide additional color to the third leg of our strategy, botanical wellness.

Speaker 6: On the Q2 2022 earnings call, we discussed that we were exploring an investigational new drug pathway through the FDA. On our Q3 call, we further discussed the reasons why and how we could do this on a capital-free basis through potential partnering.

Speaker 6: Charlotte's Web's unique advantage lies in its intellectual property including seven hemp patents, safety and toxicology studies, GMP quality control systems, and a state-of-the-art manufacturing and distribution facility. RIP can be licensed into a biotech partnership.

Speaker 6: leveraging a clinical science and regulatory team to seek an IND and navigate clinical trials to ultimately create a botanical drug.

Speaker 6: The CBD market is estimated at 5 billion today with approximately 1 billion from Epidiolex, the only FDA approved CBD drug to date. By partnering on an IND path, we provide risk mitigated upside to our shareholders by unlocking IP value created since the inception of the company and leveraging our core strengths.

Speaker 6: We are progressing with speed on this strategy and we look forward to updating deeper as this leg unfolds All now hand the call back to Jock

Speaker 4: Thanks, Jarret. From what we learned in 2022, we're going to be cautious about our outlook for 2023, considering it would still be another year of federal ambiguity and state movements.

Speaker 4: but we'll be ready when regulations do land. To that end, we continue to focus on what we can control by executing on our three-pillar strategy of returning to growth, winning in DC, and unlocking the value of IP in botanical wellness.

Speaker 4: We significantly reset the company in 2022, right sizing the cost base by lowering personnel costs.

Speaker 4: product offerings, and operating complexity.

Speaker 4: We intend to maintain these efficiency improvements.

Speaker 4: We added a new leadership team across key business functions in sales, e-commerce, operations, sports marketing, quality and science, manufacturing, and of course Jessica.

Speaker 4: We entered new distributor partnerships including the first ever employer CBD wellness program, and new customers in new industry verticals such as Wynn Hotels in Las Vegas.

Speaker 4: These partnerships will become more meaningful contributors to our top line over time.

Speaker 4: In October , we struck a groundbreaking strategic partnership with MLB via the only NSF certified broad spectrum product for sports called Daily Edge. MLB also became a meaningful shareholder in our company and the partnership unlocks enormous relevance reach and audience for us.

Speaker 4: while supporting the league's commitment to mental and overall wellness for its players and about 180 million fans.

Speaker 4: We're excited for the new season getting on the way and executing across its dual events as well.

Speaker 4: As Jared mentioned, in November we partnered with Tilray for the manufacturing and distribution of Charlotte's Web products in Canada. This was the first of its kind agreement for Charlotte's Web to license our brand's intellectual property and formulations to a trusted international partner. It's a good example of our asset light model for international market penetration.

Speaker 4: have the liquidity to choice fully invest in growth initiatives consistent with our strategy.

Speaker 4: Capital excess has become very limited within the category and we see this as only reinforcing a right to win and an enormous competitive advantage.

Speaker 4: Finally, we took a hard look at our existing consumer brands, products, formats, and our innovation pipeline.

Speaker 4: We did consumer research and drove deep into consumer segmentations.

Speaker 4: We looked at the competitive land pricing scapes.

Speaker 4: We are prepared to leverage our unique partnership with MLD and our NSS certification with a pipeline of innovation over the coming years.

Speaker 4: We are prepared to leverage our unique partnership with MLD and our NSS certification with a pipeline of innovation over the coming years. All this sets up 2023.

Speaker 4: We have the right to win and build our leadership positions.

Speaker 4: Our 2022 partnerships with new distributors, MLD and VAT clearly evidence that.

Speaker 4: While we can't control the regulatory landscape, we have a voice that is respected and we're engaged. Our brands, people, IP, science and full and broad spectrum formulations.

Speaker 4: unique seat-to-shelf supply chain, and a state-of-the-art facility. Our quality all put us on top of the category today.

Speaker 4: And our strategy, with the liquidity it executed, clearly sets the path for the long game.

Speaker 4: When you're breaking ground in a new and entirely new health and wellness category, it takes a combination of persistence, strategic thinking, and unwavering tenacity to stay on the top despite these obstacles. We're committed to seeing this category through regulatory hurdles.

Speaker 4: ensuring consumer access to natural CBD, and expanding our business to serve natural wellness seekers worldwide.

Speaker 4: That's our legacy. That's 2023. That's the path forward we walk by putting the consumer at the heart of everything we do and don't.

Speaker 2: With that, let's open the floor to questions. Thank you. Ladies and gentlemen, we will now take questions from our analysts. Should you have a question, please press the star followed by the one on your touchtone phone. If you'd like to withdraw your question, please press the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys.

Speaker 2: One moment please for your first question.

Speaker 2: Your first question comes from Derek Dele from Canon Co. Argenuity. Please go

Speaker 7: Just a few questions here. So one on in terms of the right sizing of the cost structure, namely as it relates to the OPEX or the SG&A, that 70 million rate that you had in 2022, is that an effective run rate that we should use going forward or is there more optimization to be at in 2023? Nope. That is our expected run rate going into 2022.

Speaker 4: Hey Derek, it's Jack. Thanks for the question.

Speaker 4: Predicting revenue is, you know, as we've seen last year and this year, is not something we're going to try to do. What we are going to do, though, is continue our commitment to ensure that the savings that we made last year are maintained. While at the same time, within that,

Speaker 4: existing run rate that Jessica mentioned, choice fully invest behind the right initiatives that fit our strategy across innovation, across the right way to spend paid media to support MLB activations and return to the top of the funnel growth in our e-commerce business.

Speaker 4: So, you know, we're focused on minimizing the amount of cash burn, but we're focused on choice fully investing within that SG&A run rate to really amplify the ability to get the top line to be in a better place than it was last year.

Speaker 7: Okay, given the actually just in terms of the mix that you guys had DTC versus business to business is that again a mix we should use going forward call it sort of two-thirds direct-to-consumer.

Speaker 4: Yeah, Derek, Jack again, I think that's fair. You know, look, I mean, look at the size of ecommerce in the category. It's twice the size of. The retail categories we play in, I think we have opportunity obviously given our position, but relatively small percentage of the market and still being the leader in both of those channels within the market.

Speaker 4: know I would expect that that the ratio of ecom and D2D stay relatively constant in the short term. Okay and just remind me ecom is higher margin right?

Speaker 4: Yeah and I was going to say you know that that's also an element to the mix of margin and the guidance that Jessica mentioned so clearly you know the the margin in e-commerce is better than the margin in retail. Okay and then last one for me just in terms of you know I know you've spoken to it in the past.

Speaker 7: in terms of competition given the high fragmentation of really small brands, which presumably, given your comment on access to capital, are starting to go away. But have you seen any stabilization in pricing? Is it mostly on the value end? Is it across the entire channel? How are you viewing that? Yeah, look, I'm not sure I'd say it's stabilization.

Speaker 4: And the average retail price in natural channel, for example, was down slightly. While in the food, drug and mass channel, it was down 11% in 2022. I mean, the reality is because, you know, the consumer pool isn't there for a lot of these other brands, and they don't have the brand equity that Charlotte's Web has, the only lever they have is to reduce pricing to try to move.

Speaker 4: that's a key advantage for us in maintaining our relative price point relative to the competition rather than following. Okay great, thank you very much.

Speaker 4: maintaining our relative price point relative to the competition rather than following. Okay, great. Thank you very much. You're welcome.

Speaker 2: Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. Your next question comes from Scott Fortune from RothMKM. Please go ahead.

Speaker 8: Good morning and thanks for the questions. Looking back now, congrats on obviously the capital infusion with the AT agreement, but just want to get a sense now that you have had a chance to work with the AT a little bit on the broader botanical wellness platform. Can you provide a little more color on the kind of strategic initiatives there and one of your,

Speaker 4: and moving forward with the VAT? Look, the VAT obviously is a strategic partner of the company and a commitment, obviously through the convertible debt instrument that they invested in in November . We don't have much more color to add than what Jared mentioned in his remarks, Scott. So we'll leave it there. Okay.

Speaker 8: Then follow up, I know you've put a lot of new distribution agreements in place and a good job of adding to that and more feet on the street. As you said, obviously, it's still a challenging market. With the MLB and a little focus initiatives online, just kind of step us through kind of where the initiatives are primarily for you on the DTC side.

Speaker 8: And when you expect some of these activations and the prominent positioning that you have now in the stores to kind of start to flow through or to help the top line, are we looking at kind of more mid to the second half growth that all these initiatives get in place? Just kind of a timing from that standpoint.

Speaker 4: Yeah, great series of questions there. Look, again, you know, as Jessica mentioned, we're not going to be providing revenue guidance for the year. What I will say is that as we go through the year, the partnerships that we struck in 2022 and

Speaker 4: and other conversations that are happening and will continue over the course of the year. You know, ultimately those new partnerships, new market and retail and industry vertical coverages that they provide us, will over time increase the ability to effectuate our position and how we show up in retail.

Speaker 4: I'll give you one example. We've talked about increasing our presence in new industry verticals. In Q1, we did a partnership with the Wynn and Encore Hotel group in Las Vegas.

Speaker 4: We kicked off by selling our topicals in their Wynn and Encore stores, and that success is leading to an expansion with them in Q2 and beyond. And so we're excited about that as evidence again of our ability to penetrate new verticals with some of these new distribution partners and directly as well.

Speaker 4: You know, in terms of D2C, as I mentioned in my remarks, it's all about growing the top of the funnel. Because we know when we bring people into our ecosystem and they go through their journey from awareness to purchase to repeat purchasing to loyalty and to be subscribers that...

Speaker 4: you know, we keep them, right? And so for us, you know, our conversion rates, our AOVs are very strong, and it's really just about bringing more people into our brand world. And that's where, again, MLB comes in by amplifying, you know, the amount of marketing and otherwise, you know, sort of reach that we can do on our own.

Speaker 4: to activate against their key jewel events, particularly as we get into the back half of the year and into the fall around their playoffs and the World Series ultimately, but with the ability to have a new brand, a lifestyle brand in the marketplace should be well received, we believe, by consumers.

Speaker 8: I appreciate the color and the detail there, Jock. And the last one for me, probably for Jira, just to touch base, it's nice to see the momentum starting to move forward. You know, obviously, THC and CBD needs a lot more lobbying in Congress for them to push forward.

Speaker 8: you know the pressure of Delta 8 THC out there it seems like the legislators are willing to act now. Just kind of step us through with these new congressional measures and that meeting towards the 23 farm bill you didn't mention that but kind of some of the priorities that you think could really open up the opportunities for the CP industry with the farm.

Speaker 6: the only way. We've been most engagement that we've had in Congress has been with Griffith staff. This is the staff that requested our safety and talk studies and you know when the FDA made their position it was obviously you know this is the co-author of what was HR 841 which is now reintroduced as HR 1629.

Speaker 6: Cultural Committee.

Speaker 6: So you know when you zoom out this is the same reason why the 2018 Farm Bill really focused on the definitions of CBD and hemp but didn't go on to regulate the category.

Speaker 6: There is a way, and the only way this goes through the Farm Bill in the House, is if the Energy and Commerce supports a bill and it's made in order through the Rules Committee.

Speaker 6: So that's the house side of the farm bill and then in the Senate It could be added as a floor amendment to the farm bill, but in either case If it's not in both chambers bills, it's not going into conference and it could be dropped What we're seeing is actually the more likely path is either attaching to another energy and commerce or health committee bill

Speaker 6: possibly a dietary supplement legislation, or any end of the year spending bill. But regardless, we're looking at all avenues and trying to push all options.

Speaker 8: Thanks. I will jump back in the queue.

Speaker 2: Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. And we have no further questions from our analyst. I will turn the call back over to Corey for closing remarks.

Speaker 3: Well, thank you, Julie, and thank you everyone for taking the time to listen to our earnings call today. And we will look forward to speaking to you again in mid-May following the publishing of our first quarter results of 2023.

Speaker 3: Well, thank you, Julie, and thank you everyone for taking the time to listen to our earnings call today. And we will look forward to speaking to you again in mid-May following the publishing of our first quarter results of 2023. Thank you.

Speaker 2: Ladies and gentlemen, this concludes the conference call for today. We thank you for joining and I have that you may

Speaker 2: Ladies and gentlemen, this concludes the conference call for today. We thank you for joining and I have that you may disconnect your lines. Thank you.