Greenlane Holdings, Inc. Q2 FY2022 earnings call

• Raised $5.4 million through a registered direct offering in June and sold interest in VIBES for $5.3 million, using proceeds to repay debt and secure a $15M asset-based loan. - Exited 6 operating facilities in US and Europe, achieving over $900,000 annualized cost savings; restructured vendor arrangement for $500,000 annual savings. - Sold over $2M of reserved inventory, completed SKU rationalization and launched combined product catalog. - Implemented compliant B2B PACT Act shipping program. - Plan to sell packaging business for over $5M annual cost savings and focus on high margin consumer brands. - Craig Snyder promoted to President, focusing on brands, technology for sales efficiency, and scalable customer channels.

In the second quarter, Greenlane achieved just shy of $40 million in sales, up 15% year-over-year but down sequentially from $46.5 million in Q1. Gross margins for the quarter were 20.3% compared with 26.1% in Q1 2021. Adjusted EBITDA loss was $5.8 million during the quarter. The team significantly reduced third-party inventory and vendor deposits by $13.1 million in the first half of 2022 and sold $2 million of E&O inventory. Revenue contribution details: Sales were driven by various segments, with efforts to shift to higher margin owned brands and reduce exposure to lower margin third-party brands.

• Removed Q3 adjusted EBITDA positive guidance. - Modified Q3 adjusted SG&A guidance to $16M-$18M from nearly $19.5M in Q2. - Focus on reducing expenses, rationalizing costs, leveraging scalable technology, and ramping sales with stable and sound customers.

• Macro challenges: global supply chain headwinds, record inflation, cannabis marketplace pricing compression, negative capital market sentiment. - Difficulty collecting revenue from cash-starved operators in the cannabis industry. - Uncertain market conditions affecting ability to achieve expected revenue and profitability targets.

Q: Pivot away from packaging, was it liquidity driven?

A: Yes, but plan has always been to focus on high margin owned brands. EYCE, DaVinci, and others remain in portfolio. Divestment of VIBES was liquidity driven but aligned with focus on owned brands.

Q: Broader M&A landscape?

A: Packaging business has broader buyer pool; traditional packaging providers and private equity-backed players interested. Cannabis industry is capital starved, but packaging business has ample buyers with larger balance sheets.

Q: Amazon front and C-Store updates?

A: Progress on Amazon transparency program to protect brands, control pricing; focus on scalable channels like MSOs and C-Stores, with B2B portal launching soon.