News Release

Greenlane Announces Second Quarter 2020 Financial Results

August 7, 2020 at 7:00 AM EDT

BOCA RATON, Fla., Aug. 07, 2020 (GLOBE NEWSWIRE) -- Greenlane Holdings, Inc. (“Greenlane” or "the Company”) (Nasdaq: GNLN), one of the largest global sellers of premium cannabis accessories and specialty vaporization products, today reported financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights
(Unless otherwise stated, comparisons are made between Q2 2020 and Q1 2020 results)

  • Revenue for the second quarter of 2020 was approximately $32.4 million;
  • Vapor.com, Greenlane's flagship direct to consumer e-commerce platform, has seen a 74% increase in orders, jumping to approximately 16,000 orders in the second quarter of 2020;
  • Gross profit was approximately $6.7 million, representing 21% of net sales;
  • In June 2020, Greenlane launched its VIBES branded products into Canada and Europe, expanding product availability to over 2,000 Greenlane customer retail locations worldwide;
  • Introduced Greenlane's consumer-facing product verification program, G-Verify, powered by Lucid Green's Lucid ID platform, which provides reliable product, safety, and educational information directly to consumers and retailers;
  • Opened a new retail store in partnership with Cookies, located in Barcelona, Spain in May 2020;
  • Sales of Greenlane Brands were approximately $4.9 million, representing 15.0% of total revenue;

Management Commentary

“Despite the challenging economic conditions presented by the COVID-19 pandemic, we delivered solid Q2 top line revenue of $32.4 million and have continued to make progress towards improving our gross margin profile,” said Aaron LoCascio, Greenlane’s Chairman and Chief Executive Officer. “We continue to strategically allocate resources towards higher margin revenue opportunities, including accelerating the development of our portfolio of Greenlane branded products."

LoCascio continued, "As we look ahead to the second half of 2020, I am confident that we are well positioned, both operationally and financially, to continue to execute our transformation plans and fuel our growth. I'd like to thank the Greenlane team for their ongoing commitment to driving our success."

Q2 2020 Financial Summary

Net sales were $32.4 million in the second quarter of 2020 ("Q2 2020"), compared to $53.0 million for the second quarter of 2019 ("Q2 2019"), a decrease of $20.6 million or 38.9%. The change in revenue is largely attributable to the FDA's restriction on the sale of certain products, primarily mint-flavored JUUL, and the execution of Greenlane's business transformation initiative, whereby the Company has deliberately moved away from low-margin JUUL sales, to focus on higher-margin products. JUUL sales decreased to approximately $2.3 million in Q2 2020, from approximately $25.6 million in Q2 2019. Net sales of Greenlane branded products grew to approximately $4.9 million, representing 15.0% of total revenue in the second quarter of 2020, as compared to approximately $3.2 million in the second quarter of 2019, or 6.1% of total revenue. The decrease in Q2 2020 net sales also reflects a full quarter of the impact that the COVID-19 pandemic placed on consumer purchasing behaviors and our operations. 

In connection with the Company's business transformation initiative and ongoing efforts to optimize its distribution network, Greenlane continues to transition to a more streamlined and centralized model with fewer, but larger, highly automated distribution facilities. In the second quarter of 2020, the Company completed the closings of its Schenectady, NY and Delta, Canada distribution centers.  In June 2020, the Company terminated the lease agreements for its Torrance, CA distribution center and Toronto, Canada office location, and plan to close its Jacksonville, FL and Visalia and Torrance, CA distribution centers in the third quarter of 2020.

Q2 2020, gross profit was $6.7 million, or 20.8% of net sales, compared to $9.2 million, or 17.3% of net sales in Q2 2019. The Company believes this increase in gross margin is indicative of the leverage that the Company can drive from its operating model as it continues to reduce the concentration of sales in lower-margin JUUL products and promote its higher margin Greenlane brands.

Salaries, benefits, and payroll taxes in Q2 2020 decreased approximately $0.9 million, or 12.9%, compared to Q2 2019, primarily due to a decrease in equity-based compensation expense of $0.8 million, as the Company recognized approximately $0.9 million of expense in Q2 2020, compared to approximately $1.7 million of expense in Q2 2019.

Q2 2020 general and administrative expenses increased by approximately $1.0 million to $6.4 million compared to $5.4 million in Q2 2019, primarily due to an increase of approximately $0.9 million in subcontractor fees, an increase of approximately $0.2 million for a fulfillment agreement entered into during May 2020 with Verst Group Logistics, Inc., a third party logistics provider that provides Greenlane with storage space and logistics services in their Kentucky warehouse, and an increase of approximately $0.2 million in the reserve for uncollectible accounts, offset by a decrease of approximately $0.3 million in legal fees.

Q2 2020 net loss was $6.4 million, compared to $3.2 million in the same period for the prior year. Adjusted net loss was $5.2 million in Q2 2020 compared to adjusted net loss of $1.2 million for Q2 2019. Adjusted EBITDA loss was $4.4 million in Q2 2020 compared to adjusted EBITDA loss of $1.2 million in Q2 2019.

Cash and cash equivalents were $41.8 million and total debt was $8.2 million as of June 30, 2020, compared to $47.8 million and $8.3 million, respectively, as of December 31, 2019.

Conference Call Information

Greenlane will host a conference call today, Friday, August 7, 2020, to discuss these results. Aaron LoCascio, Chief Executive Officer, will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management's presentation.

Date:Friday, August 7, 2020
Time:8:30 a.m. Eastern Time
Dial-In Number:(833) 519-1285
Conference ID:1982004
Webcast:https://edge.media-server.com/mmc/p/5buxicvm
Replay:(855) 859-2056 or (404) 537-3406
 Available until 11:30 p.m. Eastern Time Thursday, August 21, 2020

About Greenlane Holdings, Inc.

Greenlane (NASDAQ: GNLN) is the leading global platform for the development and distribution of premium cannabis accessories and lifestyle products. The company operates as a powerful house of brands, third-party brand accelerator, and omni-channel distribution platform. Greenlane serves the global markets with an expansive customer base of more than 11,000 retail locations, including licensed cannabis businesses, smoke shops, and specialty retailers. As a pioneer in the cannabis space, Greenlane is the partner of choice for many of the industry’s leading brands, including PAX Labs, Storz & Bickel (Canopy-owned), Cookies, Grenco Science, and DaVinci. Greenlane also proudly owns and operates a diverse brand portfolio including packaging innovator Pollen Gear™, the K.Haring Glass Collection by Higher Standards, Marley Natural™, and VIBES™ rolling papers. Higher Standards, Greenlane’s flagship brand, offers both a high-end product line and immersive retail experience with groundbreaking stores in both New York City’s Chelsea Market and Malibu, California. Greenlane also owns and operates both Vapor.com and VapoShop.com, two industry-leading, direct-to-consumer e-commerce platforms in North America and Europe respectively. For additional information, please visit: https://gnln.com/.

Presentation of Financial Information

This press release includes historical consolidated results for the periods presented of Greenlane Holdings, LLC, the predecessor of Greenlane Holdings, Inc., for financial reporting purposes. Accordingly, the consolidated financial statements for periods prior to the completion of the IPO on April 23, 2019 have been adjusted to combine the previously separate entities for presentation purposes.  Amounts for the period from January 1, 2019 through April 22, 2019 represent the historical operations of Greenlane Holdings, LLC. The amounts for the period from April 23, 2019 through June 30, 2019, and from January 1, 2020 through June 30, 2020 reflect the consolidated operations of Greenlane Holdings, Inc.

Use of Non-GAAP Financial Measures

Greenlane discloses Adjusted Net Loss and Adjusted EBITDA, which are non-GAAP financial measures, because management believes these metrics assist investors and analysts in assessing the Company’s overall operating performance and evaluating how well Greenlane is executing its business strategies. You should not consider Adjusted Net Loss or Adjusted EBITDA as alternatives to net loss determined in accordance with GAAP as indicators of Greenlane’s operating performance. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Accordingly, you should not view Adjusted Net Loss or Adjusted EBITDA in isolation or as a substitute, or superior to, financial information prepared and presented in accordance with GAAP. Furthermore, these non-GAAP measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

Adjusted Net Loss and Adjusted EBITDA have limitations as an analytical tool. Some of these limitations are:

  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA does not reflect capital expenditure requirements for such replacements or for new capital expenditures;
  • Adjusted EBITDA does not include interest expense, which has been a necessary element of the Company's costs;
  • Adjusted EBITDA does not reflect income tax payments we may be required to make;
  • Adjusted EBITDA and Adjusted Net Loss do not reflect equity-based compensation;
  • Adjusted EBITDA and Adjusted Net Loss do not reflect transaction and other costs which are generally incremental costs that result from an actual or planned transaction;
  • Other companies, including companies in Greenlane's industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

For more information on Greenlane's non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial measures, please see the "Reconciliation of GAAP to Non-GAAP Financial Measures" table in this press release.

Forward Looking Statements

Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statements. These forward-looking statements include, among others: comments relating to the current and future performance of the Company’s business; the impact of the ongoing COVID-19 pandemic on the Company's business; growth in demand for the Company’s products; growth in the market for cannabis and nicotine; the Company’s marketing and commercialization efforts; and the Company’s financial outlook and expectations. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company's most recent Annual Report on Form 10-K for the year ended December 31, 2019 and the Company's other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Additional information will also be set forth in Greenlane's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to Greenlane on the date hereof. Greenlane undertakes no duty to update this information unless required by law.

Media Contact
MATTIO Communications
Greenlane@mattio.com

Investor Contact:
Rob Kelly
Investor Relations, MATTIO Communications
Greenlane@mattio.com
1-416-992-4539


GREENLANE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value per share amounts)
 
 June 30,
2020
 December 31,
2019
ASSETS(Unaudited)  
Current assets   
Cash$41,831   $47,773  
Accounts receivable, net of allowance of $1,123 and $936 at June 30, 2020 and December 31, 2019, respectively6,402   8,091  
Inventories, net38,654   43,060  
Vendor deposits11,186   11,120  
Other current assets2,430   4,924  
Total current assets100,503   114,968  
    
Property and equipment, net13,765   13,165  
Intangible assets, net5,801   6,301  
Goodwill2,974   11,982  
Operating lease right-of-use assets3,714   4,695  
Other assets2,065   2,091  
Total assets$128,822   $153,202  
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities   
Accounts payable$11,554   $11,310  
Accrued expenses and other current liabilities7,236   10,600  
Customer deposits3,044   3,152  
Current portion of operating leases792   1,084  
Current portion of finance leases110   116  
Total current liabilities22,736   26,262  
    
Notes payable, less current portion and debt issuance costs, net7,926   8,018  
Operating leases, less current portion3,206   3,844  
Finance leases, less current portion126   194  
Other liabilities1,064   620  
Total long-term liabilities12,322   12,676  
Total liabilities35,058   38,938  
    
Commitments and contingencies   
    
Stockholders’ Equity   
Preferred stock, $0.0001 par value, 10,000 shares authorized, none issued and outstanding—    —   
Class A common stock, $0.01 par value per share, 125,000 shares authorized; 12,603 shares issued and outstanding as of June 30, 2020; 9,999 shares issued and 9,812 shares outstanding as of December 31, 2019126   98  
Class B common stock, $0.0001 par value per share, 10,000 shares authorized; 3,724 and 5,975 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively1   1  
Class C Common stock, $0.0001 par value per share, 100,000 shares authorized; 77,791 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively8   8  
Additional paid-in capital38,501   32,108  
Accumulated deficit(16,261)  (9,727) 
Accumulated other comprehensive loss(240)  (72) 
Total stockholders’ equity attributable to Greenlane Holdings, Inc.22,135   22,416  
Non-controlling interest71,629   91,848  
Total stockholders’ equity93,764   114,264  
Total liabilities and stockholders’ equity$128,822   $153,202  
          


GREENLANE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share amounts)
 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 2020 2019 2020 2019
Net sales$32,400   $52,986   $66,268   $102,884  
Cost of sales25,656   43,835   52,195   84,746  
Gross profit6,744   9,151   14,073   18,138  
Operating expenses:       
Salaries, benefits and payroll taxes6,121   7,029   12,735   15,111  
General and administrative6,426   5,413   15,085   10,797  
Goodwill impairment charge      8,996     
Depreciation and amortization650   645   1,360   1,330  
Total operating expenses13,197   13,087   38,176   27,238  
Loss from operations(6,453)  (3,936)  (24,103)  (9,100) 
Other income (expense), net:       
Change in fair value of convertible notes         (12,063) 
Interest expense(110)  (140)  (220)  (742) 
Other income, net186   748   1,126   924  
Total other income (expense), net76   608   906   (11,881) 
Loss before income taxes(6,377)  (3,328)  (23,197)  (20,981) 
Provision for (benefit from) income taxes8   (108)  (73)  (97) 
Net loss(6,385)  (3,220)  (23,124)  (20,884) 
   Less: Net loss attributable to non-controlling interest(4,312)  (1,453)  (16,590)  (1,453) 
Net loss attributable to Greenlane Holdings, Inc.$(2,073)  $(1,767)  $(6,534)  $(19,431) 
        
Net loss attributable to Class A common stock per share - basic and diluted$(0.18)  $(0.03)  $(0.60)  $(0.03) 
Weighted-average shares of Class A common stock outstanding - basic and diluted11,380   9,998   10,921   9,998  
        
Other comprehensive (loss) income:       
Foreign currency translation adjustments471   23   (156)  51  
Unrealized loss on derivative instrument(66)     (559)    
Comprehensive loss(5,980)  (3,197)  (23,839)  (20,833) 
   Less: Comprehensive loss attributable to non-controlling interest(4,006)  (1,429)  (17,137)  (1,429) 
Comprehensive loss attributable to Greenlane Holdings, Inc.$(1,974)  $(1,768)  $(6,702)  $(19,404) 
                    


GREENLANE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
  
 Six Months Ended
June 30,
 2020 2019
Cash flows from operating activities:   
Net loss (including amounts attributable to non-controlling interest)$(23,124)  $(20,884) 
Adjustments to reconcile net loss to net cash used in operating activities:   
Depreciation and amortization1,360   1,330  
Debt issuance costs on convertible notes   422  
Equity-based compensation expense1,161   4,575  
Goodwill impairment charge8,996     
Change in fair value of contingent consideration(644)    
Change in fair value of convertible notes   12,063  
Change in provision for doubtful accounts343   637  
Change in provision for slow moving or obsolete inventory177   (137) 
Other(15)  (98) 
Changes in operating assets and liabilities, net of the effects of acquisitions:   
Accounts receivable1,346   (3,786) 
Inventories4,228   (18,466) 
Vendor deposits131   2,410  
Deferred offering costs   2,284  
Other current assets2,442   (1,490) 
Accounts payable244   5,218  
Accrued expenses1,161   (2,358) 
Customer deposits(219)  (491) 
Net cash used in operating activities(2,413)  (18,771) 
Cash flows from investing activities:   
(Purchase consideration paid for) cash acquired from acquisitions(1,841)  91  
Purchases of property and equipment, net(1,247)  (754) 
Purchase of intangible assets   (65) 
Investment in equity securities   (500) 
Net cash used in investing activities(3,088)  (1,228) 
Cash flows from financing activities:   
Proceeds from issuance of convertible notes   8,050  
Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting costs   83,003  
Payment of debt issuance costs - convertible notes   (1,734) 
Deferred offering costs paid   (3,456) 
Redemption of Class A and Class B units of Greenlane Holdings, LLC   (3,019) 
Other(254)  (1,022) 
Net cash (used in) provided by financing activities(254)  81,822  
Effects of exchange rate changes on cash(187)  171  
Net (decrease) increase in cash(5,942)  61,994  
Cash, as of beginning of the period47,773   7,341  
Cash, as of end of the period$41,831   $69,335  
    
Supplemental disclosures of cash flow information   
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows from operating leases$824   $363  
Lease liabilities arising from obtaining operating lease right-of-use assets$331   $2,562  
Non-cash investing activities and financing activities:   
Conversion of convertible debt to Class A common stock$   $60,313  
Redeemable Class B Units issued for acquisition of a subsidiary, net of issuance costs$   $6,514  
Shares of Class A common stock issued for acquisition of Conscious Wholesale$1,988   $  
Exchanges of non-controlling interest for Class A common stock$(3,917)  $  
          

GREENLANE HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)

The reconciliation of our Net Loss to Adjusted Net Loss for each of the periods indicated is as follows:

 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2020 2019 2020 2019
Net loss$(6,385)  $(3,220)  $(23,124)  $(20,884) 
Debt placement costs for convertible notes (1)         422  
Transition to being a public company (2)   333      1,183  
Equity-based compensation891   1,724   1,161   4,575  
Initial consulting costs related to ERP system implementation (3)44      108     
Restructuring expenses (4)256      364     
Due diligence costs related to acquisition target      903     
Goodwill impairment charge      8,996     
Change in fair value of convertible notes         12,063  
Adjusted net loss$(5,194)  $(1,163)  $(11,592)  $(2,641) 
                    

(1) Debt placement costs related to the issuance of convertible notes in January 2019.
(2) Includes certain non-recurring fees and expenses primarily attributable to consulting fees and incremental audit and legal fees incurred in connection with our IPO.
(3) Includes non-recurring expenses related to the initial project design for our planned ERP system implementation.
(4) Includes primarily severance payments for employees terminated as part of our transformation plan.

The reconciliation of our Net Loss to Adjusted EBITDA for each of the periods indicated is as follows:

 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2020 2019 2020 2019
Net loss$(6,385)  $(3,220)  $(23,124)  $(20,884) 
Other income, net (1)(186)  (748)  (1,126)  (924) 
Transition to being a public company (2)   333      1,183  
Interest expense110   140   220   742  
Provision for (benefit from) income taxes8   (108)  (73)  (97) 
Depreciation and amortization650   645   1,360   1,330  
Equity-based compensation expense891   1,724   1,161   4,575  
Initial consulting costs related to ERP system implementation (3)44      108     
Restructuring expenses (4)256      364     
Due diligence costs related to acquisition target      903     
One-time early termination fee on operating lease in connection with moving to a centralized distribution center model262      262     
Goodwill impairment charge      8,996     
Change in fair value of convertible notes         12,063  
Adjusted EBITDA$(4,350)  $(1,234)  $(10,949)  $(2,012) 
                    

(1) Includes rental and interest income, changes in the fair value of contingent consideration, and other miscellaneous income.
(2) Includes certain non-recurring fees and expenses primarily attributable to consulting fees and incremental audit and legal fees incurred in connection with our IPO.
(3) Includes non-recurring expenses related to the initial project design for our planned ERP system implementation.
(4) Includes primarily severance payments for employees terminated as part of our transformation plan.