Greenlane Holdings, Inc. (NASDAQ: GNLN) slumped in trading Tuesday morning with company revenue dropping, as it moves to offload its packaging division — KushCo — in order to reinvest in its brand houses and find more profits. The smoking accessory e-commerce platform reported financial results for the first quarter ending June 30, 2022.
Greenlane delivered approximately $39.9 million in total revenue during the period, falling from $46.5 million in the previous quarter and missing the Yahoo Finance Average analyst estimate for revenues of $50.33 million.
The company also reported a second-quarter net loss of $14.5 million versus an $18.75 million loss sequentially; and a net loss of $5.84 million in the same period last year, according to SEC filings. The earnings were for a loss of $2.27 per share — missing analyst expectations of a five-cent loss per share — versus a loss of $0.17 cents per share in the previous quarter.
“We have been very vocal about our plans to build the premier ancillary house of consumer brands, and we feel we are in pole position to achieve this goal,” company management said. “As we continue to execute on our plan, we intend to run a sales process and exit our packaging business. The packaging business is a thriving business, but one that ties up a lot of our resources, space, and working capital.
We expect to achieve significant proceeds from the sale of this business unit allowing us to generate substantial non-dilutive capital that will be re-invested into growing our consumer business. For Greenlane to complete our transition to a higher-margin, higher-value consumer business, it’s imperative that we further simplify and streamline our offering and focus on the upmost valuable pieces of our business, especially in today’s current climate.”
Greenlane posted an adjusted EBITDA loss of $5.8 million, or $1.09 per share, versus a loss of $3.7 million, or $3.92 per share, in the same period last year. Adjusted EBITDA loss was $11.1 million, or $2.25 per share for the first half of 2022, versus a loss of $8.9 million, or $11.05 per share during the corresponding period in 2021.
Gross margins were 20.3% during the quarter versus 26.1% during the second quarter last year and 16.3% during the first half of 2022 compared with 25.6% in 2021.
The company said it plans to actively explore opportunities to sell its packaging business — KushCo — and reinvest in its consumer brands business. This comes alongside a series of moves the company has made over the past year in order to cut costs and become more profitable — including issuing layoffs, selling off its headquarters, and exiting its nicotine ventures; as well as reshaping senior leadership.
Tellingly, the earnings report did not list CEO Nick Kovacevich as the voice of the company statement. The quote gave no attribution and Kovacevich had been the CEO of KushCo prior to the merger. He assumed the role as the leader of Greenlane and today’s statement brings that role into question now. In addition to the absence of the CEO being mentioned in the statement, Greenlane did say it promoted Craig Snyder, the company’s Chief Commercial Officer, to President.
“This action comports with the Company’s strategy to build a world-class house of brands and serves to unlock the significant unrecognized value of its packaging business, which we believe is not properly priced in our market capitalization today and makes up approximately 15-20% of overall Company revenue,” the release said. “If a transaction or series of transactions are consummated, the sale is also expected to significantly reduce the Company’s working capital and warehousing requirements. We can provide no assurances as to the timing of this sale and will provide further updates as they are available.”
“As we move toward the sale of this division, we have already started realigning our senior leadership team to support the future Greenlane consumer business and further reduce expenses,” company management wrote. “Rodrigo de Oliveira, our current Chief Operating Officer, will be stepping down as COO at the end of September. Rodrigo was essential to the 2020 turnaround efforts at KushCo where we went from losing over $5M of aEBIDTA per quarter to achieving positive aEBIDTA several quarters later.
Following the merger of Greenlane and KushCo, Rodrigo utilized his extensive integration and transformation experience to help Greenlane properly integrate and reduce our costs and expenses. I would like to extend my sincerest thank you to Rodrigo. We would not be where we are today without his unwavering passion, work ethic and leadership!”
Yet, the company issued a cautionary statement for forward-looking statements include, “among others,” statements regarding; the company’s plans to sell its non-core assets and to exit its packaging business, the current and future performance of the company’s business, including comments relating to the company’s beliefs regarding its public market capitalization and valuation, the company’s expectations regarding capital raising and cost savings related to the 2022 plan and the company’s financial outlook and expectations.
“We are proud of the tremendous accomplishments we have achieved thus far,” the company wrote, “however; we consider these to be lagging indicators for future success, meaning the results of many of these initiatives have yet to fully impact our P&L. We expect to gain significant efficiencies from the efforts to simplify and streamline our business, improve our systems and go-to-market offerings, and fully recognize our lower operating costs.”