Greenlane Holdings, Inc., a global seller 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;
“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.