Greenlane Holdings, Inc. Q4 FY2022 earnings call

• Strategic shift to profitability with a focus on higher margin, less capital-intensive business model.
• Restructuring industrial segments: Transitioning packaging business via partnership, restructuring CCELL vape business to reduce inventory. Expected $13M+ in working capital improvements.
• Received $4.8M non-dilutive capital from ERC Credits, used to pay down debt by 40% to $8.5M. Reduced structured payments from acquisitions by >50% in 2022.
• Reduced SG&A: Adjusted SG&A decreased 29% from Q4 2021 to Q4 2022 ($22M decrease to ~$15M). Aim to reduce SG&A by 40% from Q4 2022 to Q4 2023.
• Launched Groove brand in Q4 2022, with 12 new products launched in Feb 2023; 13 total products launched to date with more to come. New products from Eyce, DaVinci, and Higher Standards also in the pipeline.
• Global omni-channel strategy: Launched B2B websites in US and Europe, redesigned DTC websites, projects on Amazon in US and Europe, and strategic partnerships in 14+ international markets.

For the year ended December 31, 2022, total net sales were approximately $137.1 million, down from $166.1 million in 2021 (-$29 million or 17.4%). The Consumer Goods segment decreased by $62 million (56.3%) while the Industrial segment increased by $33 million (59%) due to the KushCo merger. Gross profit in 2022 was $24.9 million vs. $33.8 million in 2021. Gross margin was 18.2% in 2022 vs. 20.4% in 2021. SG&A expenses increased to $152.7 million in 2022 from $86.5 million in 2021. Net loss was $125.9 million in 2022 vs. $53.4 million in 2021. Adjusted EBITDA was a loss of $31.8 million in 2022 vs. $22.3 million in 2021.

• Q1 2023 revenue expected to be 5%-10% growth from Q4 ($23M-$24M range), with Consumer Goods segment growth >10% vs prior quarter.
• Aim to be EBITDA positive by 4Q 2023. Gross margin targets: Q1 24.5%, Q2 28.7%, Q3 32.9%, Q4 34.3%, annual ~30.1%.
• Continued focus on working capital improvements and SG&A reductions to achieve profitability.

Q: Talked about gross margin expectations for 2023.

A: Expect gross margins to grow throughout the year with Q1 at 24.5%, Q2 28.7%, Q3 32.9%, Q4 34.3%, aggregate for the year at about 30.1%.

Q: Which brands are driving growth in CPG?

A: Growth will occur across Groove, Eyce, DaVinci, and Higher Standards with new products from these brands throughout the year.

Q: Talked about distribution and new channels.

A: Integrated business to talk to all from small smoke shops to large MSOs. MSOs are looking at national brands, and relationships with mid-tiers (single state operators, small dispensary groups, smoke shops) are growing with positive results in Q1 already.