Greenlane Holdings, Inc. (Nasdaq: GNLN) reported financial results for the first quarter ended March 31, 2021, as total revenue increased 0.4% to $34.0 million versus $33.9 million for the same time period a year ago. Greenlane missed the Yahoo Finance average analyst estimate for revenues of $39 million. Net losses were trimmed to $7.7 million from last year’s $16.7 million for the same time period. The net loss per share was ($0.28), which was lower than last year’s ($0.43) but was way off from the estimate for ($0.05)
Net sales in the first quarter were significantly less reliant on nicotine revenue, as Greenlane continues to focus on core (non-nicotine) sales and higher-margin products, including Greenlane Brands. Greenlane Brands sales grew 9.4% from the fourth quarter to $8.5 million in the first quarter and 18.4% year-over-year. The company said that VIBES performed exceptionally well during the quarter and achieved a quarterly sales revenue record of $2.7 million, a 72.8%, increase over last year. Greenlane Brands accounted for 25.1% of total revenue in the first quarter.
“Our first quarter 2021 results demonstrate our continued forward momentum on the heels of a successful 2020,” said Aaron LoCascio, Greenlane’s Chairman and Chief Executive Officer. “This quarter saw significant progress on the execution of one of our key growth strategies, with the acquisition of Eyce, further adding to our portfolio of premium owned brands and the announcement of our impending transformative merger with KushCo. During the quarter we also saw further proof our strategy to focus on growing our portfolio of owned brands is delivering significant results as we transition away from lower-margin revenue categories, with our Greenlane Brands accounting for a quarter of our revenue in the first quarter of 2021. The continued improvement in revenue mix backed by our robust pipeline of potential acquisitions and continued organic growth, combined with our pending merger with KushCo we believe will strongly position us as the leader in the cannabis ancillary space as we drive further revenue growth and profitability improvements in 2021, and continue to build value for both shareholders and customers.”
The company though burned through quite a bit of cash during the quarter. As Of the end of March, cash totaled $12.3 million a drop of approximately $30.4 million at the end of December 2020. Greenlane said this was due in large part to payments to vendors decreasing its accounts payable by $10.2 million over the period, payments to European tax authorities totaling $2.7 million, and $2.4 million in cash paid as partial consideration for the acquisition of Eyce. As of March 31, 2021, working capital was $43.0 million, compared to working capital of $58.2 million as of December 31, 2020. On a positive note, the company received a refund from the Dutch tax authorities of approximately $4.1 million in April 2021
PACT Act Uncertainty
The company said in its filing that as a result of the PACT Act amendments, FedEx and UPS adopted policies banning the shipment of certain vaping products starting on March 1st, 2021, and April 5th, 2021, respectively. “Substantial uncertainty exists regarding which products may not be shipped pursuant to the PACT Act and the policies of FedEx and UPS. In the event USPS, FedEx, or UPS determine that their bans apply broadly to all or almost all vaporizers, our shipping costs will be adversely and materially impacted, and we could lose our ability to deliver products to customers in a timely and economical manner. We are unable to determine the extent of the impact to the business until further guidance and clarification is issued.”
Despite the PACT Act, Greenlane believes it is well-positioned and may derive several advantages from the amended PACT Act. “We already maintain the required state licensure and have a compliance infrastructure that is already being utilized to satisfy the PACT Act’s requirements. In contrast, we believe many of our competitors do not currently have the required licensure and may have to devote significant resources to achieve compliance with the PACT Act if they can achieve compliance at all. Moreover, our shipping volumes enable us to obtain relatively favorable terms with private carriers who permit the shipment of ENDS. Additionally, our compliance and logistics capabilities also allow us to offer fulfillment services to companies that cannot or do not wish to directly ship ENDS to customers, potentially creating an additional revenue stream.”