Greenlane Holdings, Inc. Q3 FY2021 earnings call

• Integration progress: First few months as a combined company showed strong start with revenue and cost savings synergies, including vendor consolidation and go-to-market strategies. - House of brands strategy: Builds strategic moat, allows higher revenue and stronger margins, enables global scaling without federal legalization, and creates an ancillary house of brands. - Acquisition of DaVinci: The acquisition of DaVinci vaporizer brand, with consideration in cash and stock, and earn outs tied to performance benchmarks. Greenlane is compliant with PACT Act rules and has an advantage due to regulatory knowledge, industry relationships, etc. - Q3 highlights: Total revenue increased 16% to $41.3 million, Greenlane brands had strong growth, completed merger with KushCo, and inventory rationalization to streamline business and fund growth initiatives.

The company has two main segments: consumer goods and industrial goods. For the consumer goods side, Greenlane brands saw sales increase 26% to $8.4 million in Q3 2021, making up approximately 20.4% of total net sales for Q3 2021, up from 18.7% in Q3 2020. The industrial goods segment: United States segment net sales increased 29.4% to $37.5 million in Q3 2021 from $29.0 million in Q3 2020. Canadian segment revenues were approximately $1 million in Q3 2021 compared to approximately $4.4 million in Q3 2020. Europe sales grew 21% year-over-year to $2.8 million, primarily due to an increase in B2B and third party marketplace website sales.

• Greenlane expects Greenlane brands revenue to make up about 22% to 28% of total net sales in 2022. - With current portfolio including DaVinci, the company believes it can achieve $70 million in Greenlane brands revenue in 2022 and over $100 million in 2023 with gross margins over 45%.

• Supply chain issues: Record shipment backlogs, container shortages, and freight costs impacting revenue and margins. - PACT Act: Some products affected, but Greenlane is compliant and has an advantage due to regulatory expertise and scale. - Competition: Competitive landscape in the ancillary cannabis space.

Q: On the integration, where are we in terms of completing it and achieving full benefits of the merger?

A: Nick Kovacevich said they started integration six months before the deal closed, are in the middle of it, close to 100-day deliverables, and progressing well towards the $15 million to $20 million cost savings target in 24 months.

Q: On Storz & Bickel and other third party brands, any impact on sales?

A: Bill Mote said Storz & Bickel revenue was down, and they saw similar impacts on PAX and Grenco products due to freight and logistics challenges.

Q: On product uptake and inventory impairment, any skews with good uptake influencing future rollouts?

A: Nick Kovacevich said the company is getting more focused on company-owned brands, discontinuing some peripheral brands to free up cash for investing in strategic brands, and focusing on supply chain for company-owned brands to ensure product availability for growth.