Charlotte’s Web (TSE:CWEB) used its fourth-quarter 2025 earnings call to highlight what CEO Bill Morachnick called a “non-business-as-usual period” for the company, pointing to balance sheet restructuring with British American Tobacco (BAT), a new Medicare-related distribution channel for hemp-derived CBD products, and progress on the Defloria clinical program.
Morachnick said the company entered into a financing agreement with BAT tied to BAT’s existing revolving credit facility. The deal has two parts: the conversion of the remaining $55 million of convertible BAT and an interest of approximately $10 million in common shares of Charlotte’s Web at a conversion price of CAD 0.94 per share, and a new equity investment of $10 million through a private placement.
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Morachnick said the conversion eliminates the company’s “significant balance sheet debt” and avoids about $3 million in annual interest over the next 3.5 years. He also said that, without mentioning the debt, the company would face “additional interest of $12 million or more” by the maturity of the note in November 2029.
Upon completion, Morachnick said BAT will hold about 40% of the company on a non-diluted basis, with a combined equity commitment of about $75 million under the deal.
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CFO Erika Lind called the deal a “transformation of our balance sheet,” stressing that it eliminates $55 million in principal and interest while adding $10 million in working capital. He also said that liquidation needs to be approved by a majority of shareholders, noting that BAT does not vote and the decision “depends entirely on the private shareholders.”
In response to an analyst’s questions about BAT’s ownership, Lind said the investment was made through BT DE Investments, a Delaware-incorporated subsidiary, and that the deal included “a solid 49% ownership”. He added that anything beyond that would be subject to securities laws, TSX rules, and possible shareholder approval, and said governance principles were designed to preserve board independence and management independence.
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Administrators repeatedly point to the Center for Medicare and Medicaid Innovation (CMMI) evaluation program as a significant opportunity for growth. Morachnick said that, under the pilot, seniors can gain access to “science-supported CBD products through a federally approved Medicare pilot,” and that CMS recently issued additional guidance establishing the Substance Access Beneficiary Engagement Incentive (Substance Access BEI) as a program mechanism.
According to Morachnick, the CMS guidance confirmed that hemp-derived CBD products, including non-alcoholic spectrum products containing up to 3 milligrams per serving of naturally occurring THC, are eligible. He said this will include Charlotte Web’s core portfolio of full-spectrum CBD health products.
Chief People Officer and Business Secretary Mindy Garrison said participating organizations are existing health care organizations that have signed up to CMS’ innovation models, including:
Garrison said ACO REACH and EOM participants can begin offering the Substance Access BEI starting April 1, 2026, and feature organizations such as established physician practices and managed care organizations.
In economics, Garrison emphasized that “Medicare does not directly reimburse these products.” Instead, he said, ACOs and participating EOM organizations purchase hemp-derived CBD products using their own funds and provide them to beneficiaries as part of a comprehensive care plan. The stated incentive, he said, is that better outcomes and reduced utilization may lower the overall cost of care, allowing ACOs to benefit from savings under the CMS model. He described the $500 per beneficiary per year as the maximum amount an ACO can invest per patient, funded by the ACO’s own economic plan, “not a general reimbursement.”
Garrison said Charlotte’s Web is creating an online portal for ACO and EOM programs to order eligible products, have the products dropped off and delivered to patients’ homes. He said access is based on a healthcare provider’s 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 “early days,” noting the need for education and adoption among health care networks. He said he did not foresee a “major revenue opportunity” for the rest of the year, describing a gradual build-out over the next 12 to 18 months. He added that “there is nothing special” and other companies may participate, but he raised the quality, safety, and efficiency standards, saying that Charlotte’s Web believes it is set “at the highest level.”
Morachnick also outlined a different, long-term approach for Medicare: in November, CMS proposed allowing Medicare Advantage plans to include hemp-derived CBD products in the benefit structure. He said the time and details are still being finalized.
Morachnick pointed to federal legislative work, including the Hemp Enforcement, Modernization, and Protection Act by Rep. Morgan Griffith (“Hemp Act”), which he said would establish a science-based regulatory framework for hemp-based products under FDA supervision. He said the company is working with OTHER HEMP partners and expects the bill to move forward on a regular basis in this year’s Energy and Commerce Committee, with possible progress through broader legislative vehicles such as an ongoing decision in September.
However, Morachnick acknowledged the uncertainty surrounding what he described as a “hemp shutdown” that could begin in November 2026 based on language included in the agricultural appropriations measure. He said the language would cap the industry at 0.4 milligrams of THC per container, which he said would “destroy the CBD industry as we know it,” compared to CMS guidance that allows 3 milligrams of THC for use under the Substance Access BEI.
Asked if the uncertainty could delay healthcare participation, Morachnick said early access to ACOs and EOM processes has raised a “high level of enthusiasm,” citing interest in CBD for sleep, anxiety, and pain.
Morachnick also discussed DeFloria, the collaboration with Ajna BioSciences and BAT. He said DeFloria received FDA approval last year to proceed with Phase II clinical trials of a new investigational drug using the FDA’s herbal formula, which targets irritability associated with autism spectrum disorder.
He said the program uses Charlotte’s Web’s proprietary full-spectrum CBD extract obtained from patented hemp plants and is being prepared to enter Phase II, with “highly advanced” preparations and the program expected to start in the middle of the year, depending on culture development activities and resource compatibility. Morachnick said Phase II includes multiple studies across different patient populations to assess safety and tolerability and provide early signs of therapeutic efficacy to inform the next Phase III program.
Morachnick said Charlotte’s Web owns about one-third of DeFloria and has exclusive manufacturing rights if the product ultimately receives FDA approval.
Lind reported consolidated revenue of $13.3 million for Q4 2025, up 15.8% sequentially and up 4.7% from $12.7 million in Q4 2024. He attributed the growth to continued direct consumer momentum across the company’s plant health portfolio, including low-Thc dormancy, and low-Thc dormancy, including brightside low sleep and THC. line, and a new small cannabinoid structure.
Net income was $5.0 million and net income was 37.5%. Lind said results were impacted by a $1.3 million nonrecurring inventory charge related to the disposal of a legacy gummy product that did not meet quality standards, which it said reduced gross margin by about 10 percent. Aside from that, he said gross margin has improved, citing internal production that offers about 400 basis points of one-time cost benefit.
SG&A expenses were $10.6 million in Q4, which Lind said included non-recurring items such as a $600,000 state sales tax assessment accrual and certain contract termination and term 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 it said was the company’s first revenue increase since 2021. Full-year SG&A decreased 21.2% to $42.0 million from $53.3 million in 2024. Lind said cost improvements reduced $3.34&A by about $3 million last year, from about $5.4 million in the past two years. years, and that reorganization is “very thorough.” He said typical SG&A for the core business quarter is expected to be $10 million to $11 million, excluding the expected Medicare rollout.
Net loss for the full year was $29.7 million, or $0.19 per share, compared to $29.8 million, or $0.19 per share, in 2024. Lind said the results included a non-cash change of $6.4 million in fair value associated with the company’s debt issuance and its investment in DeFloria. He also reported that the operating loss improved more than 36% to $20.3 million from $32.0 million last year.
Charlotte’s Web ended 2025 with $8.0 million in revenue and $21.7 million in operating income as of December 31, 2025, which Lind noted does not include BAT’s $10 million in secret earnings. The remaining fourth quarter cash used in operations was $1.9 million, compared to $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 survey with “0 results,” calling it an important indicator of operational readiness for regulated health care practices.
Charlottes Web Holdings Inc is engaged in the production and distribution of hemp-based cannabidiol (CBD) health products. Its product categories include edibles (tinctures, tablets, and gums), topicals, and pet products. The company distributes its products through an e-commerce website, third-party e-commerce websites, selected distributors, healthcare providers, and a variety of specialty brick-and-mortar retailers.
The article “Charlotte’s Q4 Web Call Highlights” was first published by MarketBeat.
