Greenlane Reports Q2 2022 Revenue of $39.9 Million, Up 15% Year-over-Year

Greenlane Holdings, Inc. (“Greenlane” or the “Company”) (NASDAQ:GNLN), one of the largest global sellers of premium cannabis accessories, child-resistant packaging, and specialty vaporization products, today reported financial results for the second quarter and six months ended June 30^th, 2022.

Recent Highlights:

Financial Results

• Revenue for Q2 2022 increased 15% to $39.9M, compared to $34.7M in Q2 2021. For the six months ending June 30, 2022, revenue was $86.5 million, a 25.8% increase from the $68.7 million reported for comparable prior year period.
• Basic and diluted net loss of $2.27 per share compared to a loss of $3.23 per share for the prior year quarter, and a loss of $5.57 for the trailing six months versus a loss of $9.07 for the comparable prior year period.
• Adjusted EBITDA loss for Q2 2022 was $5.8 million or $1.09 per share compared to a loss of $3.7 million or $3.92 per share for Q2 of 2021. For the six months ending June 30, 2022, adjusted EBITDA loss was $11.1 million or $2.25 per share versus a loss of $8.9 million or $11.05 per share for the comparable period.

Strategic Initiatives

• Announces plans to sell its packaging division
• Promotes Craig Snyder, the Company’s Chief Commercial Officer, to President
• Secured a $15 million asset-based credit facility to support working capital needs
• Completed $5.4 million registered direct offering of common stock and warrants
• Sold its interest in Vibes Holdings, LLC, for $5.3 million, and its Azarius retail location and business in Amsterdam
• Exited facilities for savings of over $900,000 annually
• Restructured contract with key vendor for approximately $500,000 of annual savings
• Sold previously reserved E&O inventory for over $2 million
• Finalized USPS PACT Act implementation and began shipments to customers under USPS B2B Exemption program
• The Company reaffirms its belief in raising a total of $30M of non-dilutive capital under the previously announced liquidity plan
• The Company adjusts previously announced expectation of achieving adjusted SG&A reductions to $14M – $16M by Q3 of 2022 to now $16M – $18M by Q3 to account for higher-than-expected shipping expenses
• The Company withdraws its previously issued guidance of achieving positive adjusted EBIDTA in Q3 2022

Results from Operations

Net sales for the three months ending June 30, 2022, were $39.9 million, an increase of $5.2 million or 15% over the prior year quarter. For the six months ending June 30, 2022, net sales were $86.5 million, an increase of 25.8% compared with net sales $68.7 million during the corresponding 2021 period.

Gross margins were 20.3% during the quarter versus 26.1% during the second quarter of 2021 and 16.3% during the first half of 2022 compared with 25.6% in 2021.

Net loss attributable to Greenlane Holdings, Inc. was $12.1 million, or $2.27 per share, compared with a loss of $3.0 million, or $3.23 per share, in the first quarter of 2021. Net loss was $27.5 million, or $5.57 per share for the first half of 2022, versus a net loss of $7.3 million, or $9.07 per share during the corresponding period in 2021.

Adjusted EBITDA loss was $5.8 million, or $1.09 per share, compared with a loss of $3.7 million, or $3.92 per share, in the first quarter of 2021. 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.

Plan to Sell the Company’s Packaging Business

The Company announces plans to actively explore opportunities to sell its packaging business and reinvest in the Company’s consumer brands business. 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. 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.

Promotion of Craig Snyder

The Company announces the promotion of Craig Snyder, Chief Commercial Officer, to President. Mr. Snyder has been responsible for all commercial activities since March 2022. Mr. Snyder has led our key programs to build brands, develop a new product roadmap, schedule product introductions, integrate all direct-to-consumer websites, develop pricing policies, and coordinate sales and marketing efforts. Mr. Snyder has held senior leadership positions at two Fortune 100 companies (PepsiCo & Citibank) with executive leadership experience in two successful start-up to Nasdaq IPOs (Go2Net & Marchex).

Sale of Non-Core Assets and Cost Cutting Initiatives

The Company continues to make significant progress on the previously implemented new strategic plan (“2022 Plan”) to accelerate the path to profitability and capitalize the business in a non-dilutive manner. The objectives and achievements thus far are:

1. Disposing of other non-core assets:
   1. On July 19^th, 2022, the Company monetized its interest in Vibes Holdings, LLC, for $5.3M in cash, or an enterprise value of approximately 1X VIBES trailing 12 months revenue.
   2. In July 2022, the Company sold its Azarius retail business in Amsterdam.
2. Discontinuing sales of lower-margin 3^rd-party brands and selling existing inventory:
   1. The Company recently completed its strategic SKU rationalization efforts, establishing a single comprehensive product catalog, which is now available at greenlane.com.
   2. In 2022, the Company successfully generated over $2M in sales and dispositions of previously reserved excess & obsolete (“E&O”) inventory.
3. Cost- cutting initiatives:
   1. Company also executed several cost-cutting initiatives resulting in expected savings of over $1.4 million annually, including terminating existing leases for facilities resulting in annual savings aggregating approximately $900K and restructuring a third-party vendor contract reducing working capital requirements and eliminating over $500K in annual costs.
   2. The Company also secured a return of $1.35 million of its U.S. Customs and Border Protection bond.

Management Commentary

“We are proud of the tremendous accomplishments we have achieved thus far, 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.”

“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. 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.”

“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. 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!”

“Earlier this year we brought on Craig Snyder as our Chief Commercial Officer, mainly because of his experience building and growing consumer businesses. We are now thrilled to promote Craig to President of the Company to lead our day-to-day business as we fully transition to a consumer model. I have been extremely impressed with Craig’s vision, leadership, and execution, and I very much look forward to this next chapter with Craig in a further elevated, pivotal position.”

Craig Snyder, President of Greenlane, commented, “I am honored to be appointed President of this fine organization. I look forward to continuing to execute on the blocking and tackling of growing revenues in our key categories, managing costs, and launching new products and platforms. When I joined the Company, I was amazed at the potential to transform this business into a leading house of brands consumer company. Now, that vision is more clearly in sight than ever before, and our team is committed to the efforts it will take for us to fully recognize that potential.”

Conference Call Information

Greenlane management will host a scheduled conference call and webcast later today, Tuesday, August 16 at 8:30 a.m. Eastern time to discuss the results for its second quarter ended June 30, 2022, followed by a question-and-answer session. The call will be webcast with an accompanying slide deck, which will be accessible by visiting the Financial Results page of Greenlane’s investor relations website.

All interested parties are invited to listen to the live conference call and presentation by dialing the number below or by clicking the webcast link available on the Financial Results page of the Company’s investor relations website.

If you have any difficulty connecting with the conference call or webcast, please contact Greenlane’s investor relations at ir@greenlane.com.