Good morning, ladies and gentlemen, and welcome to the Charlotte's Web Holdings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 8, 2024. I would now like to turn the conference over to Cory Pala, Head of Investor Relations. Please go ahead. Thank you. Good, good morning, everyone. Thank you for joining us for our 2024 second quarter earnings conference call for Charlotte's Web Holdings, Inc. Our earnings press release was issued this morning and posted on the investor relations section of our website, along with our financial statements, and our 10-Q report for the quarter is also available and has been filed on sedarplus.ca in Canada and on EDGAR with the SEC. CEO Bill Morachnick and CFO Erika Lind are leading our call this morning. On this morning's call, we'll review the financial results for the quarter and provide some color around the business and the outlook. Afterwards, we'll answer some questions submitted by our analysts. A replay of this call will be available through the next week, accessible via the details provided on our earnings press release. Additionally, a webcast replay of this call will be available for an extended period, accessible through the IR section at our website at charlottesweb.com. As a reminder to our listeners, certain statements made on today's call, including 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 or company performance to differ materially from implied expectations. Such risks surrounding 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 and Adjusted Gross Margin, which do not have any standardized meaning prescribed by GAAP. Please refer to the earnings press release that we filed this morning for a description of these measures, as well as a reconciliation to the respective and most directly comparable GAAP financial measures. Now I will hand over the call to Charlotte's Web Chief Executive Officer, Bill Morachnick. Good morning, and thank you for joining us today. So let me first summarize our second quarter results issued this morning. Q2 revenues were lower year-over-year, but increased slightly over Q1 as e-commerce and retail sales both grew quarter-over-quarter. Our B2B retail business segment has been improving, up 8.8% over Q1, supported by increased distribution, new products, retail partners, and a more simplified, integrated, and focused approach we've been taking with our retail partners and channels. In our direct-to-consumer, D2C business, we completed the important migration to our new e-commerce platform in June. It's important for me to note that during the migration, we had to temporarily pause online promotions during periods in June to better facilitate the transition, and this resulted in softer sales and overall revenue growth for June. However, I'm pleased to report that the new platform has been performing well and is already delivering encouraging results in July. In general, the ongoing headwinds in the CBD market remain for 2024, and it's hindered by a lack of federal regulatory action and a related emergence of inconsistent competitive alternatives, which creates ongoing consumer confusion. Perhaps more prominent this year have been the inflationary impacts on consumer discretionary spending. As the premium price CBD brand, we believe that Charlotte's Web sales have been impacted more than some of our competitors in the first half of the year. As you may recall, we took price action against inflation during the first quarter of this year with a permanent 25% reduction across our leading hemp CBD extract oils to help consumers maintain access to these products. As you can imagine, it takes some time for the price reduction impacts to filter through, but we continue to see volume increases with these products that can eventually offset the price decreases and result in overall margin growth. Now, regarding gross margin, as we approach the completion of our in-source manufacturing capabilities in Q4, this is gonna allow us to better address pricing around gummies, which is our largest revenue product segment. I want to also note that in Q2, we introduced more affordably priced CBD isolate topical products, which we launched in over 800 Walmart stores across several states. Sales of these products are performing well, and we're very excited about the significant growth potential they represent. One final comment to summarize the quarter is on the actions that we've taken regarding operating expenses. With the impact of external headwinds on our growth, we've been proactively reducing our operating costs to better align with revenue levels. Following actions that we took in the first quarter to reduce 2024 SG&A, we took further expense reductions after the close of Q2. These actions reduced cash burn to provide us with the runway we need to execute on our return to long-term growth. The full impact of these actions will continue to decrease our SG&A throughout the second half of this year and beyond. We're extremely encouraged that with our newly refined cost structure, we can see a clear path to cash flow breakeven. This will allow us to preserve our well-funded cash on hand, so we can take advantage of several different growth catalysts on the horizon. These include ongoing optimization of our D2C and B2B platforms, strategic expansion of our product portfolio, and the continued achievements happening with the DeFloria, which I'll touch on later. So to review our Q2 results and financial position further, I'll now hand over the call to our CFO, Erika Lind. Thank you, Bill. As Bill mentioned, stringent expense and cash flow management have been top priorities in the current environment. Executing further on this business pillar, in the first quarter, we initiated substantial SG&A reductions for 2024, with the goal of a $15 million increase for the full year compared to 2023. In Q2, we identified additional cost and operating efficiencies and took further expense reduction actions after the close of the quarter. We have reorganized, streamlined and reduced our overhead costs. This will materially impact the second half of 2024 and should significantly reduce our cash burn to a manageable and sustainable level. We expect to enter 2025 with a cost structure that aligns to a break-even level of approximately $65 million in annual net revenue. This is down from a break-even level of approximately $85 million at the start of 2024. With a return toward growth in 2025, we can more readily achieve cash flow neutrality. Now let's turn to the financial results for the quarter. For the second quarter of 2024, net revenue was $12.3 million, down from $16 million in the prior year. However, this was up over Q1 revenue of $12.1 million. While only a modest increase, it is the first time we have reported a quarter-over-quarter increase in a second quarter since 2021. In our D2C business, e-commerce net revenue was $7.8 million, a decrease of $2.9 million versus the prior quarter. The decline was primarily driven by lower comparable online traffic websites, traffic to our web store. However, D2C net revenue was up 0.6% versus Q1. This was only a modest increase. It may have been higher, if not for a temporary pause in online promotions in June as we migrated to a new e-commerce platform. Now with the migration complete and our promotions, paid media, and search improved, we have an encouraging early long-term outlook for this channel. Turning to our B2B business, retail net revenue was $4.4 million, down from $5.3 million in the prior year. Similar to recent quarters, lower revenues are primarily related to the overall CBD category decline at retail, due to certain retailers discontinuing or reducing total shelf space for CBD products over the past year. Despite the retail category declines, our distribution improvements in the first half of this year produced positive results, and combined with our CBD-CBN Stay Asleep retail placements, we have increased our overall retail distribution by 10% within the natural channel during the second quarter. As a result, our B2B net revenue increased 8.8% compared to the prior quarter. Q2 retail sales growth was supported by top retail accounts in the natural channel that began to carry our new CBN Stay Asleep gummies. Our CBN launch was excellent and sales velocity has been very good. Despite declines in the overall CBD category this year, Charlotte's Web has generally outperformed the category at retail. Our reported Q2 gross margin was significantly impacted by a non-cash inventory provision of $3.8 million, related to a one-time wholesale hemp biomass sale. Inventory provisions are expensed to cost of goods sold, which reduced our reported gross profit and margin. This resulted in a Q2 gross margin of 21%. However, this was a non-cash item and is not part of normal business operations. For better business transparency, our gross margin was 52.2%, excluding the one-time non-cash inventory provision. This compares to a gross margin of 56.5% before the provision in Q2 last year. We continue to model gross margin in the low fifties for the remainder of the year, reflecting the Q1 price reductions in our oil tinctures, partially offset by improved production costs. As our in-house production for gummies comes online later this year, we anticipate further improvements in production costs and therefore margin. SG&A for the second quarter decreased 25% year-over-year, reflecting some of the expense reductions we took in Q1 to rightsize the business. As I stated earlier, we took additional cost mitigation actions in July based on Q2 results. This will provide a reduction in SG&A for the year of more than $20 million compared to the prior year. Our Q2 operating loss was $12.1 million, which includes the non-cash inventory provision of $3.8 million. This compares to an operating loss of $10.7 million in the prior year. Net loss for the quarter was $11 million or $0.07 per share. This is compared to a net income of $2.8 million or $0.02 per share in Q2 of last year, which was favorably impacted by non-cash gains of $14.9 million related to financial instruments and ownership valuation in the DeFloria venture. Despite our lower revenue and gross margin, our significant expense reductions have improved our cash burn. Cash flow for the quarter was -$6 million. We are lapping the receipt of the IRS Employee Retention Credit in the prior year. This year, we experienced an increase in the conversion of hemp biomass to extract that, coupled with lapping the Employee Retention Credit, would have made the cash burn flat compared to the prior year. At the close of the second quarter, we had cash of $32.5 million and working capital of $38.5 million. With our substantial expense reductions and prudent cash management, we believe that we have sufficient capital to meet our near-term objectives and return to revenue growth. And so with an increased runway, our new e-commerce platform, and focused turnaround objectives, we are increasingly optimistic looking forward. I will now turn the call back over to Bill. Thank you, Erika. All right, so let's talk about the progress that we've made in our key focus areas. And let's start with D2C. The key component underlying our e-commerce business pillar to create an excellent consumer experience was the migration to our new e-commerce platform, which we launched in June. This was a top priority for the company. This new platform provides improved software integrations, advanced target marketing tools, and a superior customer relationship management capability. With this transition to the new e-commerce platform, we can offer a consistent, streamlined user experience, effective campaign performance, and agility to increase market speed. It's already proving to be a game changer for us, with July revenue improving over June in D2C. There's obviously a lot more to do, and we continue to refine and optimize the platform, but it is encouraging to see the immediate impact we are already experiencing. On the B2B front, we've also been executing well against our retail business pillar, which is to be a most valued partner with retailers and distributors. We are intently focused on profitable growth in key B2B channels, which includes a range of retail partners as well as healthcare practitioners. Strong distribution and retail relationships have been a foundation of Charlotte's Web market share leadership. To further support these critical relationships, we've been aligning closely with retailers on new innovations and marketing integrations tailored to the unique needs of our retail partners. These collaboration efforts are intended to enable attractive opportunities for retail expansion with new wellness products and formats. To this end, we were successful in working with Walmart as a retail partner for the first time. We worked with them to develop competitively priced CBD topicals in smaller formats and formulated with CBD isolate. The good news is that we've had positive momentum in early adoption of the Walmart customers to these new, affordable products. In addition, the medical channel, which has displayed resilience, also represents a promising area for strategic repositioning and stands out as one of our more lucrative B2B channel opportunities. More to come on that in future quarters. Supporting another core pillar, reinforcing and amplifying CW's influential voice, we are leveraging our traditional and digital marketing capabilities to drive our brand equity across the entire o mni-channel shopping continuum. We know that our current, as well as prospective new consumers, can experience our brand throughout a wide range of shopping experiences. So we want to ensure that we're maximizing synergy between our D2C and B2B channels. So whether consumers first see a digital ad that brings them to our website, but they end up purchasing a portion of their future Charlotte's Web products from one of their favorite retailers or healthcare providers, we just want to ensure that they have a well-informed, consistent, and pleasant experience. Now, turning to our pillar focused on increased access and federal regulatory oversight. We have previously shared how we've been supporting industry partners and stakeholders engaged in pushing forward the regulatory process at the congressional level. Let me quickly update you on where we left off. We aim to support active FDA engagement to the draft Senate and House bills. These bills were introduced after the FDA pivoted to congressional legislation as the resolution to regulatory questions around CBD. I'm pleased to report that we have recently received an updated draft legislation of the Wyden-Paul Senate bill, with FDA comments included. This is S.2451, the Hemp Access and Consumer Safety Act. Industry stakeholders we support, including the Coalition for Access Now and the Industry Working Group, One Hemp, are actively engaged. Once the final drafts are introduced, we are hopeful the legislative process can advance. One final comment I'd like to make today pertains to the FDA IND pathway being pursued by DeFloria, which is our collaboration with British American Tobacco and Ajna BioSciences. I am pleased to report that DeFloria is completing the processing of its Phase I clinical trial data in preparation for an IND filing with the FDA. Phase I was conducted to determine the safety and tolerability, as well as the pharmacokinetic and pharmacodynamic effects of the botanical compound to inform a Phase II clinical trial program, which would follow a no objection letter from the FDA. We look forward to providing further updates as appropriate in the coming months as we continue to monitor DeFloria's progress. With that update, Cory will now share the questions submitted by our analysts. Yes, today, for better effectiveness, we've changed the format for our call, and we've had our analysts who are on the call today submit their questions earlier today, allowing us to provide more time to provide some fulsome and thoughtful answers. So our first question comes from Luke Hannan at Canaccord Genuity. He's asking, on Walmart, Luke would like us to go through the process of how we were able to get on shelf at Walmart, and is there potential to expand the presence nationwide? Okay. Yeah, thanks, Cory. Thanks, Luke. So with Walmart, yeah, it's a really exciting initiative for us and hopefully for Walmart as well. The thing about Walmart, you know, it's not a mystery of what they're looking for when they decide to work with a new partner and list new products. This isn't a comprehensive list, but you can imagine, as a Walmart shopper, they're looking for high-quality products at attractive prices, good gross margins for them, partners that they can trust, which is a really critical component, and they want to see a high rate of turnover or, you know, consumer offtake, or velocity. We check all those boxes in spades. So, getting listed in the account, I always look at that—I, I've been. I started my career in trade sales for a major CPG company about 40 years ago, and a lot of things have changed since then, but a lot of things haven't. So those same criteria that I just listed out were the same challenges that I had way back in my career. I think where the game really begins is what happens after you're in store. So we're starting with Walmart in 827 locations across 5 states. That means we're penetrating about, you know, 17%-18% of the current Walmart footprint, so we still have 80% to go. So, what I'm really excited about is we now get a chance to demonstrate how well our products are gonna perform, and we've got a really comprehensive, fully integrated marketing plan to ensure attractive consumer offtake and high velocity numbers that I think Walmart's gonna be very excited about. Our early indications in these initial 827 stores are quite strong. So we're meeting the mutually defined criteria of what success looks like thus far, and we're just getting started. We also obviously Walmart.com is a big opportunity within the Walmart ecosystem, and that's something that excites us very much as well. Given that we have a really well-structured and thought-out omni-channel strategy, we see the.com component of any major retailer fitting in very nicely with our strategy. So, highly enthusiastic for where we take this. Luke's second question is on our new e-commerce platform, and he's asking: How successful has the new site been in terms of KPIs that we might be able to share for performance to date? Okay. Thanks, Cory, and thanks, Luke, again. I'll grab that one. So as you all know, it's extremely early days. So we just are getting out of the gate with, you know, July first full month, where we've gone to this new e-commerce platform, which is just one component of an overarching e-commerce digital marketing infrastructure that we're deploying along with accompanying strategies. I mentioned it in my thoughts before, that the early indications are very encouraging. But it's, I don't wanna get too much into the detail around KPIs just yet because a month, you know, doesn't indicate a fulsome trend. But let me hit on the things that objectively are working far better than they were before. One of the things... I mean, I think all of us are online e-commerce shoppers, and one of the most frustrating experiences you can have is when pages take a long time to load. And that was certainly the experience we had with our site prior to the conversion. We are now operating, and we haven't even optimized it, but our page loads are at a little bit more than 2x the speed that they were prior. And what you'll see happen as a result of that, and this is what we're seeing again in these early days, is that it creates not just a better desktop, but a better mobile experience. And we're seeing a significant increase in conversion and a significant drop-off in bounce rates. I think a lot of that is being driven so far by the speed with which we're able to load. The other thing it's going to do for us moving forward is our previous platform required a ton of custom coding as well as in-house engineering that was really just around maintaining the site. In the Shopify environment, we moved rapidly away from a custom coding environment into a full suite of tools that we can access through APIs that will allow our e-commerce team to focus much more on the consumer experience and not just the stability of the site. What excites me more than the results thus far is what we're gonna see in the coming months and coming quarters. As we deploy these tools, they're gonna continue to drive a fundamentally different experience. Again, I referenced it earlier, our ability to target, our ability to offer dynamic content, dynamic offers, to increase the subscription experience, the word of mouth, the gamification, all the, all the things that were part of our core strategy that we were somewhat prohibited from deploying, all become feasible within this new platform. But just seeing these early indications before we've really put the tools against it, get me really excited. Okay, the final question from Canaccord is on cash flow breakeven, and when we expect to achieve the $65 million in annual net revenue required to be cash flow neutral. Thanks, Cory. I'll take that. And, thanks, Luke, for the question. This is Erika. You know, while we don't really, we're not giving specific guidance at this time, as we tend to not, we are anticipating and modeling that we will return to growth based just on our recent and upcoming initiatives that Bill's talked about and that we've all talked about. But the important takeaway is really that the actions that we have taken in Q1 and very recently here in July are providing. Are adjusting our operating expenses to give us the runway we need to get to cash flow breakeven, even at modest growth. So, the steps we're taking now are going to get us there much faster than we otherwise would have been able to get to. I mentioned that in my recent comments, that just this year, we're going to save more than $20 million in operating expenses as compared to prior years. So that gets us much closer in operating expenses as a percent of net revenue to our peer set, and that's where we need to be to reach that point. Okay, turning to Scott Fortune, Research Analyst at Roth MKM. Scott's first question is pertaining to DTC metrics on the e-commerce platform. Bill, you've addressed that thoroughly. We'll move to his second question. On the B2B side of the business, Scott's asking if the quarter-over-quarter growth in B2B was primarily associated with Walmart versus the new CBN Gummies launch, and can we expect follow-on orders and further distribution expansion with Walmart as a customer, which I guess you've addressed to a degree. Yeah. Cory, thanks for that. I can shed some light on that as well for Scott. The B2B sales quarter growth in the quarter was definitely driven by the excellent CBN launch that we had and the new distribution points, as we discussed previously. We are seeing Walmart sales meet the early velocity expectations in store, and it does give us a lot of optimism about the potential expansion in the future that Bill mentioned earlier, but it is still early. We've had an encouraging start, and in addition to the encouraging in-store sales, there's definitely an opportunity to expand, as Bill mentioned. So, we're hopeful, we're expectant, and it does allow us to reach some new retail demographics that are important for the expansion of the business. So we're expectant, is what we can say about that. Can you provide some color around how Walmart affects our gross margins? The question is around our, our decline in gross margin on the quarter in terms of adjusted gross margin. Yeah. What would be the gross margins expectations going forward then? You bet. You know, our sales with Walmart are early, so they're not material enough to be impactful to our gross margins at this point yet. Our gross margins initially have more to do, as I mentioned, just with the price reductions that we took on our oil tinctures, in addition to some promotional activity and just the lower revenue impacting our fixed cost leverage. In terms of the gross margin modeling, we have been consistent in modeling in the mid- to low- to mid-fifties, and we expect that to continue until we get into the latter part of this year and into next year with our in-house gummy production. Scott is asking, in terms of the additional reductions that are planned to reduce our costs, does that entail workforce shrinkage? And, as we right-size the business, is there sales support to support forward growth initiatives? Sure. We did have a workforce reduction in July as part of the cost actions we took. As you know, we definitely have given a lot of thoughtful consideration to all the actions that we're taking right now to ensure that we have all the right people in the right place. So, we're being very surgical in precision with everything that we do with our dollars as we have right-sized to the size of business we are right now, to ensure that we do have the right people and the right support in place to achieve our initiatives. So we're being very careful, we're being very precise. But we have seen efficiencies in particular in our warehouse operations that have helped us achieve some of these actions without loss of support. Obviously, we'll have a lot more efficiencies come online with the full ramp-up of our in-house production. Okay, and that's it for the analyst questions that were submitted. We'd like to thank everyone for participating today, and we look forward to speaking to you on our next earnings call. Operator, I'll hand over the call to you to close it out. Thank you, ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.