Adam JacksonApril 4, 2023
The company's total revenue was down 17.4% from the previous year.
Greenlane Archives - Green Market Report
Adam JacksonApril 4, 2023
Debra BorchardtOctober 28, 2022The company is fighting for survival by selling stock and excess inventory.
Debra BorchardtJune 24, 2022
The Food & Drug Administration (FDA) decided to ban the popular vape product Juul and issued a marketing denial orders (MDOs) to JUUL Labs Inc. for all of its products currently marketed in the United States. That’s a long-winded way of saying the products are now banned. The company must stop selling and distributing these products. The ban doesn’t mean that people who continue to use Juuls or have them in their possession will get into trouble, the product just can’t be sold.
In addition, those currently on the U.S. market must be removed, or risk enforcement action. The products include the JUUL device and four types of JUULpods: Virginia tobacco flavored pods at nicotine concentrations of 5.0% and 3.0% and menthol-flavored pods at nicotine concentrations of 5.0% and 3.0%.
“Today’s action is further progress on the FDA’s commitment to ensuring that all e-cigarette and electronic nicotine delivery system products currently being marketed to consumers meet our public health standards,” said FDA Commissioner Robert M. Califf, M.D. “The agency has dedicated significant resources to review products from the companies that account for most of the U.S. market. We recognize these make up a significant part of the available products and many have played a disproportionate role in the rise in youth vaping.”
What trigged the FDA response was the company’s lack of data regarding the toxicological profile of the products. “In particular, some of the company’s study findings raised concerns due to insufficient and conflicting data – including regarding genotoxicity and potentially harmful chemicals leaching from the company’s proprietary e-liquid pods – that have not been adequately addressed and precluded the FDA from completing a full toxicological risk assessment of the products named in the company’s applications.”
Cannabis Industry Worries
Vaping products in the cannabis industry are hugely popular, so the ban has attracted a great deal of attention among producers. Seattle-based data-analytics firm Headset recently reported that vapes were the second-largest category by revenue behind flower in the U.S. cannabis market during 2020 and 2021. The category logged nearly $2.6 billion in retail sales across six adult-use markets last year. Vape pens are also growing with sales rising 28% in 2021. Despite the sustainability issues, disposable vapes are proving to be very popular as well growing by 64%. Likely because disposable vape products tend to be cheaper.
Arun Kurichety, chief operating officer and general counsel of Petalfast said, “ While the FDA’s decision to prohibit Juul from marketing its products in the US does not directly impact the cannabis industry, it suggests we may continue to expect scrutiny on all vaping products — nicotine and cannabis alike. For licensed businesses in the highly regulated cannabis industry, this shouldn’t be huge news. Rather than prohibition, this further highlights the need for consumer education regarding the risks of obtaining vape products in the illicit markets where product testing for safety is non-existent.”
E-cigarettes were originally hailed as an effective way for nicotine-addicted consumers to inhale with fewer terrible side effects. Tobacco companies all created versions for their tobacco-smoking customers with limited success. Yet, when Juul began marketing cotton candy flavored nicotine vapes, teens and young adults swarmed the products. Instead of helping already addicted adults, it created a whole new generation of Juul-addicted consumers. Parents complained and the FDA jumped in to address the situation. At first, it was just a clamp down on the flavors, but now it is banning the entire product line.
Cannabis vapes also proved to be a nice option for consumers who didn’t want to smoke regular flower. Cannabis vapes were discreet, easy to carry, and didn’t create the distinct smell that burned flower did. They could be expensive, but cannabis consumers were willing to spend money for the convenience of being able to pop a vape in their pocket and ramble on.
Arnaud Dumas de Rauly, CEO and co-founder of the Blinc Group said, “If the FDA took the time to look at the science surrounding vaping instead of having knee jerk reactions to statistics over youth consumption, they would see that vaping has been beneficial to countless individuals looking to quit smoking. For years, the European markets have embraced vape as such a necessary tool for the cessation of smoking that they offer health insurance breaks to those who vape.”
He went on to add, “If you look down the road to what this decision could mean for the cannabis vape industry, the federal illegality of cannabis will keep the space safe for now since the FDA is unwilling to regulate the industry while it remains a schedule one drug. However, this doesn’t mean that will be the case forever. I would hope when that time comes that the FDA will recognize that vape is considered one of the safest consumption methods, particularly for medical patients who are looking for the purest stream of cannabinoids and terpenes, and the absence of combustion means less hazardous substances and it’s easier on the lungs.”
A Post Juul World
One company that the trouble has already impacted in the Juul market is Greenlane (NASDAQ: GNLN). At one point in 2019, Greenlane was selling almost $50 million worth of Juul products. With the first ban on flavored products, sales fell over 30% to $33 million in 2020. Just this week, Greenlane noted that it was selling off assets in order to generate cash. The company has been weaning itself off its Juul dependence, but $50 million is a big number to make up elsewhere.
In Closing
Juul has said it will appeal the ban and try to keep its products on the shelves while it fights the ban. Cannabis vapes may luck out purely due to the fact that the FDA can’t decide what to do about the federally illegal product. Since the FDA can’t seem to make a decision on CBD products, tackling cannabis vape pens seems unlikely. Cannabis consumers haven’t been complaining about the product as evidenced by the growing sales. Like Dumas noted, the FDA was mostly reacting to angry parents of Juul-addicted teens. In the cannabis industry, not many people are complaining and that seems to have kept the product off the radar for now.
StaffJune 22, 2022
The Daily Hit is a recap of the top cannabis business stories for June 22, 2022.
ON THE SITE
Supreme Court Just Says No
Two Supreme Courts rejected employee requests to have employers reimburse for medical cannabis costs. On Tuesday, the U.S. Supreme Court said it would not hear an appeal that pits the Controlled Substances Act (CSA) against a state workers’ compensation law requiring employers to reimburse workers for medical cannabis. Like many issues within the cannabis industry, there are competing and conflicting government positions. In this situation, the CSA says cannabis is federally illegal, while state law is saying employers need to reimburse employees for medical costs. Read more here.
Analysts Downgrade Scotts, Cuts Targets on Hydrofarm, GroGen
When Scotts Miracle-Gro (NYSE: SMG) first began telling shareholders that its hydroponic subsidiary Hawthorne was slowing in sales, it seemed like a temporary situation. That might not be the case. A new in-depth report by Wells Fargo analyst Chris Carey based on survey data collected by Cannabiz Media is depressing, to say the least. Reality bites. Carey’s response to the study has promoted him to downgrade shares of Scotts to Equal Weight and roping his price target to $85 (from $115). Read more here.
Greenlane Sells Off Assets to Generate Cash
Greenlane Holdings, Inc. (NASDAQ: GNLN) has said it has a plan to generate more than $30 million in liquidity. Part of the company’s strategy to achieve this goal includes getting a loan to cover its working capital needs, selling the company’s headquarters building in Boca Raton Florida, and getting rid of non-sore and lower-margin inventory. Greenlane has been through a series of struggles since the company’s salad days of selling Juul vapes. Read more here.
IN OTHER NEWS
High Tide Inc.
High Tide Inc. (Nasdaq: HITI) (TSXV: HITI) (FSE: 2LYA), a retail-focused cannabis company with bricks-and-mortar as well as global e-commerce assets, announced that it has closed a short-term debt financing from an arm’s length credit provider for CAD$5 million. The company has chosen to proceed with a small debt facility at this time as the company’s proposed non-dilutive credit facilities with ConnectFirst Credit Union for CAD$30 million (as previously announced on April 18, 2022) has been delayed until July 2022. Read more here.
Tilray Brands, Inc.
Tilray Brands, Inc. (NASDAQ: TLRY; TSX: TLRY), a global cannabis-lifestyle and consumer packaged goods company, welcomed the Luxembourg Ministry of Health Delegation to the Company’s European campus and facility located in Cantanhede, Portugal. Tilray’s EU-GMP-certified medical cannabis cultivation and manufacturing facility in Portugal provides patients in Luxembourg and across Europe, where permitted by law, with safe and reliable access to high-quality medical cannabis. Read more here.
Ultimate Sports, Inc.
Ultimate Sports, Inc. (OTC: USPS), a men’s health services provider, announces negotiations to acquire Sannabis S.A.S., a Colombian cannabis company. Sannabis, and affiliated companies, hold all four cannabis licenses: Seed Use, THC-Cultivation, Non-THC (Hemp)-Cultivation, and Fabrication/Export. Read more here.
Kiva Sales and Service, Jones Soda Co.
Jones Soda Co. (OTCQB: JSDA) (CSE: JSDA), a craft soda known for its unconventional flavors and user photo-submitted labels, today announced an exclusive partnership with Kiva Sales and Service, a cannabis industry sales and distribution platform, to launch its new line of cannabis-infused beverages, Mary Jones, into the California market. Read more here.
The Valens Company Inc., Coldhaus Distribution
The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS)), a manufacturer of branded cannabis products, today announced that it has secured an exclusive cannabis partnership with Coldhaus Distribution to provide integrated logistics solutions for Valens-branded cannabis products across Ontario, Alberta, and British Columbia. Read more here.
Debra BorchardtJune 22, 2022Greenlane Holdings, Inc. (NASDAQ: GNLN) has said it has a plan to generate more than $30 million in liquidity. Part of the company’s strategy to achieve this goal includes getting a loan to cover its working capital needs, selling the company’s headquarters building in Boca Raton Florida, and getting rid of non-sore and lower-margin inventory. Greenlane has been through a series of struggles since the company’s salad days of selling Juul vapes. When regulators cracked down on flavored vapes that were drawing teen consumers, Greenlane lost a lot of business. It moved into cannabis accessories, but that wasn’t nearly enough to offset the loss of business and then the company merged with KushCo cannabis packaging. KushCo ran into its own problems with the cannabis vape crisis, which was followed by supply chain disruptions during the pandemic. Since then the company has struggled to steady itself.
Getting a Loan
Greenlane said in a statement that for the past three months it has been engaged in an intensive and comprehensive process to select the ideal partner for an asset-based loan that can support its working capital needs. The company said it expects to execute an agreement by the early third quarter of 2022, which is expected to result in more than $10 million of liquidity. As of the last quarter, the company has current liabilities of $77 million and total liabilities of $91 million. In December 2021, Greenlane entered into a Secured Promissory Note with Aaron LoCascio, the co-founder, former Chief Executive Officer, President, and a current director of the company, in which LoCascio provided a bridge loan in the principal amount of $8.0 million which accrues interest at a rate of 15% and is due monthly, and the principal amount is due in full in June 2022.
Selling Building
In addition, Greenlane has listed its headquarters building for sale in May 2022 and that it has gotten significant interest from several buyers amidst a strong Florida commercial real estate market. “Given management’s decision to move to a hybrid work model, the company plans to lease the top floor to another tenant until the building is sold. Along with this initiative, the company is in the process of selling other non-core assets, which if sold together with the building at the sales price anticipated by management, is expected to generate an additional $10 million of liquidity.”
Selling Off Inventory
Finally, the Company is working to sell through its excess & obsolete (“E&O”) inventory of lower-margin, non-strategic products, along with reducing the overall level of inventory on hand. In May, the Company commenced its official E&O sales program internally and has since sold more than $1 million of previously reserved E&O inventory. Management anticipates that the proceeds from these E&O sales, combined with a general sell-down of other non-core third-party brand inventory, is expected to generate more than $10 million of liquidity for the Company.
With all of these moves, Greenlane thinks it can generate more than $30 million of liquidity on a non-dilutive basis by the end of 2022 if all these measures are successful.
“We are excited by the speed and scale of our efforts to generate substantial non-dilutive liquidity, especially against the backdrop of this challenging macro environment,” said Nick Kovacevich, CEO of Greenlane. “Given the current depressed state of the broader capital markets, we are hyper focused on fully executing this plan to drive the liquidity we need to run and grow the business.”
Debra BorchardtMarch 10, 2022Greenlane 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.
Preliminary Earnings
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.
Layoffs
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.
Leadership Changes
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.
Debra BorchardtNovember 15, 2021Greenlane Holdings, Inc. (Nasdaq:GNLN) reported financial results for the third quarter ended September 30, 2021, as total revenue increased 16% to $41.3 million versus last year’s $35.8 million. Net losses at Greenlane increased 108% to $$28.7 million versus last year’s net loss of $13.7 million.
Nick Kovacevich, CEO of Greenlane Holdings, said: “Q3 was a transformational quarter for Greenlane, with the completion of our merger with KushCo creating the industry’s leading ancillary cannabis company and house of brands. Our first few months as a combined company have been off to a strong start, as demonstrated through several realized revenue and cost saving synergies, including the consolidation of certain vendors and infrastructure and the development of go-to-market cross-selling strategies across each of our respective platforms. We are extremely pleased with the progress we have made on our integration efforts to date, while simultaneously driving meaningful progression in the business. We also generated another strong quarter of sales for our Greenlane Brands, which, despite the normal and expected challenges of closing a merger, still represented the second-highest quarterly revenue contribution in company history.”
Revenue Breakdown
Greenlane said it had reached its second-highest sales level in company history for Greenlane Brands, which grew to $8.4 million in the quarter, up 26% versus $6.7 million in sales for in the same time period in 2020. Greenlane Brands accounted for 20.4% of the quarter’s total revenue compared with 18.7% of total revenue for last year.
Net sales in the U.S. increased 29.4%, to $37.5 million, while net sales for Canada fell to $1 million from last year’s $4.4 million, primarily due to an expected decrease in nicotine sales as a result of the company’s strategic shift away from low-margin nicotine sales. Net sales for Europe increased 21.3% to $2.8 million, primarily due to an increase in B2B and third-party marketplace website sales.
Looking Ahead
The Company is targeting to achieve $70 million and $100 million in Greenlane Brands revenue for 2022 and 2023, respectively. In addition, the Company expects Greenlane Brands, as a whole, to generate 45% product margins, and to comprise between 22% and 28% of total revenue in 2022.
Kovacevich continued, “Looking ahead, we will continue to build our portfolio of higher-margin proprietary brands, as seen by our recent announcement to acquire leading high-margin vaporizer brand DaVinci, which expands our Greenlane Brands portfolio, and is expected to strengthen our overall margins and profitability in the near-term. With our enhanced operations, customer base, and product portfolio, we are in a stronger position than ever to execute on our growth strategy and drive significant value for our customers, partners, and shareholders.”
Debra BorchardtAugust 17, 2021Greenlane Holdings, Inc. (Nasdaq: GNLN) reported financial results for the second quarter ended June 30, 2021, with revenue increasing 7.1% to $34.7 million from last year’s $32.4 million. It was a slight miss for Greenlane from the average analyst estimate from Yahoo Finance for revenue of $35.5 million.
The net loss fell 7.5% to $5.8 million from last year’s $6.3 million net loss. The net loss per share was $0.16, which also missed the estimate for a net loss per share of $0.14. The company said that core revenue (defined as non-nicotine revenue) grew 14.9% to $34.5 million versus last year’s $30.0 million.
“Our second quarter 2021 results reflect the success of our efforts to drive growth in our core business lines and higher-margin Greenlane brands,” said Aaron LoCascio, Greenlane’s Chairman and Chief Executive Officer. “I am proud of our accomplishments and want to thank our entire team for their ongoing dedication as we execute on the opportunity ahead. During the quarter, we drove solid Greenlane Brands revenue growth, up 62% year over year and representing 26% of our total Q2 revenue, supported by strong organic growth.”
The company continues to make efforts to lessen its dependence on nicotine products like Juul that fueled the company’s early growth. Greenlane said its net sales included negligible nicotine revenue compared to the prior-year period. Core revenue accounted for 99.3% of the quarter’s total revenue.
Mr. LoCascio added, “Our focus on growing our portfolio of owned brands and driving strong performance from our existing brand portfolio, combined with our pending merger with KushCo, has positioned our business to be the leader in the ancillary cannabis space and to build strong, long-term value for both our customers, partners, employees, and shareholders.”
Greenlane said that cash totaled $11.6 million as of June 30, 2021. As of June 30, 2021, working capital was $36.4 million, compared to working capital of $54.2 million, as of December 31, 2020. After the quarter ended, the company completed a $32.0 million registered direct offering priced at the market.
PACT Act
Greenlane also addressed the issue of the “Consolidated Appropriations Act, 2021,” when Congress amended the Prevent All Cigarette Trafficking Act (“PACT Act”) to apply to electronic nicotine delivery systems (ENDS). The PACT Act prohibits the use of the U.S. Postal Service to deliver ENDS. The PACT Act also requires that sellers of ENDS implement certain age verification measures for direct-to-consumer sales, register with the Bureau of Alcohol, Tobacco, Firearms and Explosive and the tobacco tax administrators of the states into which shipments are made, and file monthly reports demonstrating payment of applicable taxes.
The company said in its filing, “Additionally, possibly as a result of the PACT Act amendments, FedEx and UPS adopted policies banning the shipment of 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 determines that the mail ban applies broadly to all or almost all vaporizers, and FedEx and UPS continue to maintain restrictive shipping policies, 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.”
Greenlan said it believes it is well-positioned in comparison to its competitors 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, some 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. Finally, we are well-positioned to take advantage of other opportunities that may arise, including favorable acquisition valuations from companies that are unable to comply with the PACT Act and the ability to attract customers from competitors who cannot be able to ship vaporizers compliantly.”
Debra BorchardtJuly 30, 2021Greenlane Holdings, Inc. (Nasdaq: GNLN) announced preliminary financial results for its second-quarter ending June 30, 2021, but gave little detail. Greenlane said it had net sales of $34.5 million and that the gross margins were between 21% and 22%. Greenlane delivered $34 million in revenue for the first quarter of 2021 making the sequential growth to be basically flat. The total cash balance is roughly $11.5 million.
However, the company recalled its March proforma outlook for the calendar year ending in December. Greenlane blamed headwinds created by uncertainty in its supply chain and lingering impacts of Covid-19. The company said it expects to reestablish a pro forma outlook at a later date. In March, Greenlane had suggested that the combined company would have “pro forma revenue of over $250 million for the year ended December 31, 2020, and a pro forma market capitalization in excess of $350 million based on the respective share prices of Greenlane and KushCo (OTC: KSHB) as of market close on March 30, 2021. Following completion of the Transaction, the combined company is expected to generate pro forma revenue of between $310 million and $330 million for the year ended December 31, 2021.”
Greenlane also said it continues to expect the proposed merger with KushCo Holdings will close in the third quarter of 2021, subject to the satisfaction or waiver of all remaining conditions in the agreement, including the receipt of all necessary approvals.
KushCo recently reported its earnings on July 8 where the company said it had revenue of $28.3 million, or 27% year-over-year growth, in fiscal Q3 2021, driven by increased sales to the company’s top 25 customers, including leading multi-state operators (“MSOs”) and licensed producers (“LPs”). SG&A expenses were approximately $9.1 million, compared to $12.7 million in the prior-year period. The decrease was primarily driven by reductions in headcount, bad debt expense, consulting spend, and stock compensation expenses, largely as a result of the COVID-19 pandemic and the Company’s implementation of the 2020 Plan.
At the time, Nick Kovacevich, KushCo’s Co-founder, Chairman and Chief Executive Officer said, “”Our gross margins for fiscal Q3 continued to reflect the uncontrollable shipping delays we, and other importers of goods, have been experiencing for the past couple of quarters. Even though the situation has somewhat improved since the end of 2020-where there were record-breaking shipments during the holiday season, severe COVID-19-related restrictions at domestic ports and a global shortage of containers-a significant percentage of all products coming from overseas continue to experience delays, resulting in higher freight costs across the board. In addition, we experienced lower direct material margins on several of our products, as we cycle through higher-priced inventory and continue to work with our vendors to obtain more favorable pricing.”
Debra BorchardtMay 18, 2021Greenlane 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.”
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