Greenlane Holdings, Inc. Q1 FY2022 earnings call

Nick thanked Bill Mote for his contributions and introduced new CFO Darsh Dahya. Q1 results included net sales growth but decline when excluding KushCo, due to shift from non-core third-party brands to Greenlane brands. Gross margins affected by obsolete inventory write-offs but adjusted margins showed improvement. 2022 plan focuses on achieving positive adjusted EBITDA by Q3, reducing cost structure, selling headquarters building, discontinuing non-core assets, and finding asset-based loan. Partnership with Universal Distribution to enter Latin America with asset-light model. ERP implementation disrupted sales but improvements are being made. Discussing New Jersey market and Canada market strategies, focusing on higher margin channels.

Net sales for the quarter grew 37% year-over-year to $46.5 million. Excluding KushCo’s post-merger sales, revenue declined 47% to $18.1 million. Consumer goods segment sales totaled $17.1 million in Q1 2022, compared to $30.5 million in Q1 2021. Industrial goods segment sales rose to $29.4 million in Q1 2022 from $3.5 million in Q1 2021. Net sales of the Greenlane brand decreased 34% to $6 million for the quarter. Gross margins were 12.8%, down from 25.2% in Q1 last year, but adjusted gross margins excluding write-offs were 25.3%.

Greenlane expects to achieve positive adjusted EBITDA by Q3 2022. Aiming to reduce adjusted SG&A to $14-16 million by Q3. Working to generate over $30 million in non-dilutive liquidity from selling headquarters, discontinuing non-core assets, and securing asset-based loan.

Macro-economic factors, geopolitical tensions, supply chain disruptions, ERP implementation disruptions, and challenges in forecasting due to business transitions.

Q: Please quantify the specific impact of the ERP implementation on branded sales and recovery in Q2?

A: ERP implementation was disruptive, affecting January sales, but improvements were made and sales expected to recover.

Q: Why now is the right time to pursue LatAm strategy?

A: Greenlane is an ancillary provider, can leverage partners' resources in LatAm without heavy investment.

Q: Update on progress in New Jersey market?

A: Greenlane products seen in New Jersey dispensaries, focusing on enterprise solutions and self-service portal.

Q: Thoughts on Canadian market?

A: Streamlining Canadian activities, focusing on consumer side but industrial side in survival mode.

Q: Color on smoke shops channel and future channels?

A: Transitioning to higher margin channels, focusing on retail stores, T stores, Amazon, etc.

Q: Revenue and margin outlook for profitability?

A: Targeting $14-16 million SG&A in Q3, needing $60 million sales at 25% margin or higher margin sales.

Q: Consumer headwinds and pricing?

A: Consumer discretionary spending challenged, working on pricing adjustments for both consumer and industrial sides.

Q: ERP impact on Q2 and headcount reductions?

A: ERP improvements reducing order entry time, headcount reductions completed with natural attrition.