Charlotte’s Web (TSE:CWEB) used its fourth-quarter 2025 earnings call to highlight what CEO Bill Morachnick called a “not business as usual” period for the company, pointing to a balance sheet restructuring with British American Tobacco (BAT), a new Medicare-related distribution pathway for hemp-derived CBD products, and progress in a pharmaceutical-adjacent clinical program through DeFloria.
BAT transaction converts debt to equity and adds new capital
Morachnick said the company entered into a financial transaction with BAT tied to BAT’s existing convertible loan note. The deal has two components: the conversion of BAT’s outstanding $55 million convertible debenture plus roughly $10 million in accrued interest into Charlotte’s Web common shares at a conversion price of CAD 0.94 per share, and a new $10 million equity investment through a private placement.
Following completion, Morachnick said BAT will hold about 40% of the company on a non-diluted basis, with combined equity commitment of approximately $75 million under the transaction.
CFO Erika Lind called the deal “transformational for our balance sheet,” emphasizing that it eliminates the $55 million principal plus interest while adding $10 million in working capital. She also said completion requires approval by a majority of shareholders, noting BAT does not vote and the decision “rests entirely with the independent shareholders.”
In response to analyst questions about BAT’s ownership, Lind said the investment is made through BT DE Investments, a Delaware-incorporated subsidiary, and that the agreement includes a “hard 49% cap of ownership.” She added that anything beyond that would be subject to securities laws, TSX rules, and potentially shareholder approval, and said governance terms are designed to preserve board independence and management autonomy.
Medicare pilot program opens federally authorized channel for CBD
Management repeatedly pointed to the Center for Medicare and Medicaid Innovation (CMMI) pilot program as a key growth opportunity. Morachnick said that, under the pilot, seniors can gain access to “science-backed CBD products through a federally authorized Medicare pilot,” and that CMS recently issued additional guidance establishing the Substance Access Beneficiary Engagement Incentive (Substance Access BEI) as the mechanism for the program.
According to Morachnick, CMS guidance confirmed that hemp-derived CBD products, including non-intoxicating full-spectrum products containing up to 3 milligrams per serving of naturally occurring THC, are eligible. He said this would include Charlotte’s Web’s core portfolio of full-spectrum CBD wellness products.
Chief People Officer and Corporate Secretary Mindy Garrison said participating organizations are existing healthcare organizations already enrolled in CMS innovation models, including:
- ACO REACH
- Enhancing Oncology Model (EOM)
- ACO LEAD Model (expected to launch in January 2027)
Garrison said ACO REACH and EOM participants could begin offering the Substance Access BEI starting April 1, 2026, and characterized the organizations as established physician practices and healthcare systems organized under accountable care organizations.
On program economics, Garrison stressed that “Medicare is not directly reimbursing these products.” Instead, she said participating ACOs and EOM entities purchase eligible hemp-derived CBD products using their own funds and furnish them to beneficiaries as part of a broader care strategy. The stated incentive, she said, is that better outcomes and reduced utilization may lower total cost of care, enabling ACOs to benefit through savings under the CMS model. She described the $500 per beneficiary annually as a maximum amount the ACO can invest per patient, funded from the ACO’s own program economics, “not a traditional reimbursement.”
Garrison said Charlotte’s Web built an online portal for ACO and EOM programs to order eligible products, with products drop-shipped to patients’ homes. She said access is based on a healthcare provider recommendation rather than a prescription.
When asked about revenue expectations, management declined to provide specific guidance. Morachnick said the pilot begins April 1 and described it as “really early days,” noting the need for education and adoption among healthcare networks. He said he did not foresee “massive revenue opportunity” for the remainder of the year, describing a gradual build over the next 12 to 18 months. He added there is “no exclusivity” and other companies could participate, but suggested quality, safety, and efficacy standards would matter, and said Charlotte’s Web believes it is positioned “at the highest standard.”
Morachnick also referenced a separate, longer-term Medicare pathway: in November, CMS proposed allowing Medicare Advantage plans to include hemp-derived CBD products in benefit design. He said timing and details are still being finalized.
Regulatory backdrop: momentum and uncertainty
Morachnick pointed to federal legislative activity, including Rep. Morgan Griffith’s Hemp Enforcement, Modernization, and Protection Act (the “Hemp Act”), which he said would establish a science-based federal framework for hemp-derived products under FDA oversight. He said the company is working with ONE HEMP partners and expects the bill to proceed through regular order in the House Energy and Commerce Committee this year, with potential advancement via broader legislative vehicles such as a continuing resolution in September.
However, Morachnick acknowledged uncertainty surrounding what he described as a potential “hemp ban” that could trigger in November 2026 based on language inserted into an agricultural appropriations measure. He said the language could cap the industry at 0.4 milligrams of THC per container, which he said would “demolish the CBD industry as we know it,” contrasting that with CMS guidance permitting up to 3 milligrams of THC per serving under the Substance Access BEI.
Asked whether uncertainty could slow healthcare participation, Morachnick said early outreach to ACOs and EOM practices suggested “a reasonably high level of enthusiasm,” citing interest in CBD for sleep, anxiety, and pain.
DeFloria program preparing for Phase II autism-related trial
Morachnick also discussed DeFloria, a collaboration with Ajna BioSciences and BAT. He said DeFloria received FDA clearance last year to proceed with Phase II clinical trials for an investigational new drug using the FDA’s botanical drug pathway, targeting irritability associated with autism spectrum disorder.
He said the program uses Charlotte’s Web’s proprietary full-spectrum CBD extract derived from patented hemp cultivars and is being prepared for entry into Phase II, with preparations “substantially advanced” and the program expected to initiate mid-year, subject to customary development activities and resource alignment. Morachnick said Phase II includes multiple studies across distinct patient populations to evaluate safety and tolerability and provide early signals of therapeutic effectiveness to inform a subsequent Phase III program.
Morachnick said Charlotte’s Web owns about one-third of DeFloria and holds exclusive commercial manufacturing rights should the product ultimately receive FDA approval.
Q4 and full-year financial results show modest growth and continued losses
Lind reported consolidated net revenue of $13.3 million for Q4 2025, up 15.8% sequentially and up 4.7% from $12.7 million in Q4 2024. She attributed growth to continued direct-to-consumer momentum across the company’s botanical wellness portfolio, including expanded sleep and functional mushroom gummies, the Brightside low-dose hemp THC gummy line, and new minor cannabinoid formulations.
Gross profit was $5.0 million with a gross margin of 37.5%. Lind said results were impacted by a non-recurring $1.3 million inventory charge tied to disposal of legacy gummy product that did not meet quality standards, which she said reduced gross margin by about 10 percentage points. Excluding that item, she said underlying gross margin improved, citing in-house manufacturing contributing roughly 400 basis points of benefit net of one-time inventory charges.
SG&A expenses were $10.6 million in Q4, which Lind said included non-recurring items such as a $600,000 state sales tax audit accrual and certain contract termination and timing adjustments. The company posted a Q4 net loss of $11.4 million, or $0.07 per share, compared to a net loss of $3.4 million, or $0.02 per share, in Q4 2024.
For the full year, Lind reported revenue of $49.9 million, up 0.5% year over year, which she said was the company’s first annual revenue increase since 2021. Full-year SG&A declined 21.2% to $42.0 million from $53.3 million in 2024. Lind said cost optimization reduced annualized SG&A by about $33.6 million, or 44.5%, over the past two years, and that restructuring is “largely complete.” She said normalized quarterly SG&A for the core business is expected to be about $10 million to $11 million, excluding anticipated Medicare pilot launch spend.
Full-year net loss was $29.7 million, or $0.19 per share, compared with $29.8 million, or $0.19 per share, in 2024. Lind said results included a $6.4 million non-cash change in fair value tied to the company’s debt derivative and its investment in DeFloria. She also reported operating loss improved more than 36% to $20.3 million from $32.0 million in the prior year.
Charlotte’s Web ended 2025 with $8.0 million in cash and $21.7 million in working capital as of Dec. 31, 2025, which Lind noted does not include the $10 million BAT private placement proceeds. Fourth-quarter net cash used in operating activities was $1.9 million, compared with $5.5 million in Q3 and $1.8 million in Q4 2024.
Morachnick said the company also completed its annual NSF Dietary Supplement Good Manufacturing Practices audit with “0 findings,” calling it a key indicator of operational readiness for regulated healthcare channels.
About Charlotte’s Web (TSE:CWEB)
Charlottes Web Holdings Inc is engaged in the production and distribution of hemp-based cannabidiol (CBD) wellness products. Its product categories include ingestible products (tinctures, capsules, and gummies), topicals, and pet products. The company distributes its products through an e-commerce website, third-party e-commerce websites, select distributors, health practitioners, and a variety of brick and mortar specialty retailers.
