Greenlane Holdings, Inc. (NASDAQ:GNLN) announced layoffs, cost-cutting efforts and leadership changes in order to become profitable. The company also provided preliminary financial results for its fourth quarter and full year ended December 31, 2021.
Greenlane had been flying high on sales of JUUL flavored vape pens. However, problems arose over the excessive teen usage of the candy flavored vapes and regulations caused the market to pull back heavily. That was followed by the vape crisis in the cannabis market when illicit market vapes began causing health problems. At that point Greenlane joined forces with cannabis packaging company KushCo Holdings, which in turn made the move to cut out its small customers and only focus on the big ones that had no trouble paying the bills.
“We recognize the importance of achieving profitability, especially in this current inflationary climate, which has seen COVID-related supply chain disruptions increase the expenses and working capital needs of virtually every industry,” said Nick Kovacevich, CEO of Greenlane. “We have made meaningful efforts to eliminate nonessential and duplicative costs as a result of our merger with KushCo. However, now is the time to take our cost-cutting initiatives to the next level. We have taken another hard look at our business and where we can reduce additional expenses without disrupting the current operations or future growth of Greenlane. Our recent reduction in force will help us generate approximately $8 million in additional annual cash compensation savings, significantly accelerating our path to profitability. Along with other cost-cutting initiatives that we intend to implement in the coming weeks and months, we expect to drastically lower our cost structure and reduce our current Adjusted SG&A expenses by nearly 40% year-over-year by Q3 2022. Meanwhile, we have been investing in technology to improve the customer experience and drive further efficiencies.
Greenlane reported that it is reiterating its expectation of net sales to be between $55.5 million and $56.5 million for the fourth quarter and between approximately $165.5 million and $166.5 million for the full year ended December 31, 2021. The year-over-year increase in net sales was primarily driven by an increase in sales of Greenlane Brands, as well as the KushCo merger. The increase was partially offset by lower nicotine sales and sales of lower-margin third-party brands, as part of the company’s continued focus on shifting away from these product categories and focusing more on higher-margin proprietary Greenlane Brands.
Adjusted SG&A is expected to be between approximately $20.0 million and $22.0 million for the fourth quarter ended December 31, 2021, and between $75.0 million and $77.0 million for the full year ended December 31, 2021.
The net loss is expected to be between approximately $11.0 million and $13.0 million for the fourth quarter ended December 31, 2021, and between approximately $53.0 million and $55.0 million for the full year ended December 31, 2021.
Kovacevich continued, “Lastly, we are pursuing several initiatives to capitalize the business and increase liquidity, while limiting dilution to our shareholders. This includes selling our corporate headquarters building and non-core assets; discontinuing and disposing of slow-turning, low-margin inventory; and securing an asset-based loan that can support the company’s working capital needs. We recognize the difficulties in raising equity capital at our current trading price, and will continue to evaluate ways to support the business with as little dilution as possible. Overall, we remain as optimistic and encouraged as ever with our strategy to grow our higher-margin Greenlane Brands and to become the leading house of brands in the ancillary cannabis industry. And with these strategic changes, we believe we are that much closer toward achieving our vision.”
Greenlane said it expects the reduction in workforce to result in approximately $8.0 million in annualized cash compensation cost savings. Layoffs took place in the U.S. and abroad. In addition to cutting back on employees, the company said it was reducing its facility footprints worldwide and adjusting its go-to-market strategy significantly to reduce its operating costs and enhance liquidity. These changes should result in between approximately $14.0 million and $16.0 million in savings on a quarterly basis by Q3 2022, down from approximately $26.6 million in Q3 2021.
Adam Schoenfeld will step down as Chief Marketing Officer, effective March 31, 2022. Mr. Schoenfeld is a co-founder and board member of Greenlane. Greenlane said it would not seek to fill the vacant role of Chief Marketing Officer at this time and Schoenfeld will continue to serve on the company’s board of directors.
In addition, the Company has appointed Craig Snyder as its new Chief Commercial Officer, effective March 28, 2022. Mr. Snyder is an experienced leader with over 20 years of success in driving growth and development of high tech and emerging technology organizations. Mr. Snyder has held senior leadership positions at two Fortune 100 companies (Pepsi Cola & Citibank) with executive leadership experience in two successful startup to Nasdaq IPO success stories (Go2Net & Marchex), as well as significant experience with large scale M&A integration and restructuring.
Kovacevich added, “In addition, we are implementing various leadership changes at both the executive and other levels to support our new strategic plan. We are incredibly fortunate for Adam’s many contributions and insights while serving in his various executive roles at the Company. Adam is a true pioneer and industry leader, and we are pleased to continue to leverage his strategic insights as a member of our Board. We are also excited to announce the appointment of Craig as our new Chief Commercial Officer. Craig is a proven business leader with deep commercial, restructuring, M&A, and leadership experience that we believe will be invaluable for our business as we continue to scale our Greenlane Brands. He has already contributed significantly in his current role as a restructuring consultant, and we look forward to his additional guidance and insights once his appointment becomes effective.