Smoking accessories e-commerce brand Greenlane Holdings, Inc. (GNLN) reported falling revenue for the first quarter ending March 31, 2020. Net sales fell 32% to $33.9 million in the first quarter of 2020 versus $49.9 million for the same time period in 2019.
Greenlane blamed the drop on the FDA’s restriction on the sale of certain products, primarily mint-flavored JUUL, and the execution of Greenlane’s plan to deliberately move away from low-margin JUUL sales, to focus on higher-margin products. The company also delivered a first-quarter net loss of $16.8 million, slightly better than last year’s net loss of $17.7 million for the same period in 2019. The company also took a $9 million goodwill impairment charge in the quarter.
“We have made significant strides in the execution of our business transformation plan and are focused on pursuing higher-margin revenue opportunities while strategically right-sizing our operations to the current environment,” said Aaron LoCascio, Greenlane’s Chairman and Chief Executive Officer. “We’re beginning to see the positive impact of the investment we made to develop and launch our Greenlane Brands, which accounted for a record 18.5% of net sales and drove the sequential improvement in our gross margin.”
The popular candy-flavored vape product JUUL came under fire for its targeted approach to teens and young adults. The fallout was that sales decreased for Greenlane to roughly $4.4 million in the quarter, from approximately $21.0 million in the first quarter of 2019. The company has switched its focus to Greenlane Brands whose net sales grew to $6.3 million dollars or 18.5% of total revenue in the first quarter of 2020 versus $4.6 million in the first quarter of 2019.
The Greenlane Brands category is made up of child-resistant packaging innovator Pollen Gear; VIBES rolling papers; the Marley Natural accessory line; the Keith Haring Collection accessory line; Aerospaced & Groove grinders, and Higher Standards, which is both an upscale product line and an innovative retail experience with flagship stores at New York City’s Chelsea Market and in Malibu, California.
The company said that net sales of its third-party brands, including Firefly, Santa Cruz Shredder, and MJ Arsenal increased by approximately $1.2 million in Q1 2020 as compared to Q1 2019.
Greenlane clearly saw the writing on the wall and moved quickly to adapt to the changing landscape with regards to losing its cash cow in JUUL. The company closed its brick-and-mortar retail store in Ponce City Market. In addition, Greenlane closed its Schenectady, NY, and Delta, Canada distribution centers on May 14, 2020, and May 15, 2020, respectively, and expects to close its Jacksonville, FL, Torrance, CA, and Visalia, CA distribution centers in June 2020. The company did enter into a new lease agreement for a new retail store located in Barcelona, Spain, which opened to the public on May 26, 202
Salaries, benefits, and payroll taxes in the quarter decreased to $1.5 million, or 18.2% due to a decrease in equity-based compensation expense of $2.5 million. The company also said it had a targeted reduction of approximately 50 employees which is expected to positively impact its results in future quarters
Cash and cash equivalents were $43.9 million and total debt was $8.3 million as of March 31, 2020, compared to $47.8 million and $8.3 million, respectively, as of December 31, 2019.