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Greenlane Holdings, Inc. (GNLN)·Q1 2023 Earnings Summary

Executive Summary

  • Sequential stabilization with early signs of execution: Q1 revenue rose 9.0% q/q to $24.0M, at the top of the prior quarter’s $23–24M guidance range, while adjusted EBITDA loss improved to $(6.8)M from $(7.6)M q/q . YoY, revenue declined 48.5% due to strategic reshaping toward higher-margin house brands and exit/rationalization of lower-margin lines .
  • Margin mixed: Gross margin of 23.0% fell from 26.7% in Q4 due to $0.6M inventory-related costs, but remained well above Q1 2022’s 12.8% (which included sizable write-offs); excluding the Q1 inventory impact, gross margin was 25.4% vs 26.7% in Q4 .
  • Opex reduction tracking: Total operating expenses fell to $15.0M (down 32% q/q, 37.8% y/y), reflecting aggressive cost actions and restructuring .
  • Strategic catalysts: Asset-light transition in packaging (partnership with A&A Global/MarijuanaPackaging.com) and CCELL expected to lift gross margin percentages as revenues move from gross to net in 2H23; product velocity continued with 16 Q1 launches across Groove, Eyce, and DaVinci .
  • Guidance: No new formal guidance issued in Q1 materials; prior outlook called for positive adjusted EBITDA by Q4 2023 and a quarterly gross margin ramp through 2023; Q1 gross margin came in below the prior 24.5% outlook (actual 23.0%) while revenue met the prior $23–24M range .

What Went Well and What Went Wrong

  • What Went Well
    • Sequential topline and EBITDA improvement: Net sales increased 9.0% q/q to $24.0M; adjusted EBITDA loss improved to $(6.8)M from $(7.6)M in Q4 .
    • Cost discipline: Total operating expenses dropped to $15.0M from $22.2M in Q4 (−32%), and down from $24.2M in Q1 2022 (−37.8%), driven by labor and G&A reductions tied to the restructuring .
    • Product pipeline and omnichannel upgrades: 16 new products launched in Q1 (12 Groove, 3 Eyce, DaVinci MIQRO‑C), plus website relaunches (EU B2B/B2C, Vapor.com) and Shopify integration to support growth and efficiency; management cited positive revenue impact from launches .
  • What Went Wrong
    • Sequential gross margin compression: Gross margin fell to 23.0% (from 26.7% in Q4) due to a $0.6M negative COGS impact (inventory/staff costs); excluding this, Q1 was 25.4% vs 26.7% in Q4 .
    • Continued net losses and lower cash: Net loss attributable to GNLN was $(10.2)M (or $(0.64) per share), with quarter-end cash at $5.9M vs $12.2M in Q4; working capital decreased to $25.7M from $41.0M .
    • YoY revenue decline: Net sales decreased 48.5% vs Q1 2022 as the company emphasized profitable revenue and exited/lowered exposure to lower-margin lines (including packaging), pressuring near-term topline .

Financial Results

MetricQ3 2022Q4 2022Q1 2023
Net Sales ($USD Millions)$28.68 $21.99 $23.96
Gross Margin (%)17.3% 26.7% 23.0%
Net Loss Attributable to GNLN ($USD Millions)$(75.11) $(13.26) $(10.19)
Diluted EPS ($)$(11.43) $(1.02) $(0.64)
Adjusted EBITDA ($USD Millions)$(11.22) $(7.56) $(6.82)
Total Operating Expenses ($USD Millions)$84.43 $22.16 $15.04

Segment and KPI highlights

MetricQ3 2022Q4 2022Q1 2023
Greenlane Brands Sales ($USD Millions)$3.26 $3.18 $3.21
Greenlane Brands as % of Net Sales11.4% 14.5% 13.4%
Cash (incl. restricted) ($USD Millions)$10.19 $12.18 $5.87
Inventories, net ($USD Millions)$47.95 $40.64 $37.04

Additional notes and YoY context:

  • Q1 2023 net sales declined from $46.53M in Q1 2022 (−48.5%) given restructuring, focus on higher-margin house brands, VIBES minority stake sale in 2022, and announced intention to sell the packaging business .
  • Q1 2023 gross profit was $5.52M vs $5.88M in Q4; gross margin decline reflects the $0.6M inventory/staff expense in COGS; excluding this, Q1 2023 gross margin would have been 25.4% .
  • Debt/cash flow: In February, loan facility reduced from $15.0M to $8.5M, aided by $4.8M ERC sale; inventory reduced to $37.0M (from $40.6M in Q4) to improve working capital .

Guidance Changes

MetricPeriodPrevious Guidance/OutlookCurrent GuidanceOutcome/CommentChange
RevenueQ1 2023$23.0–$24.0M None provided in Q1 materials Actual $24.0M at top of range Achieved prior guide
Gross Margin %Q1 202324.5% (Q4 call outlook) None provided in Q1 materials Actual 23.0% (below prior outlook) Below prior outlook
Adjusted EBITDAQ4 2023Target positive adj. EBITDA by Q4 2023 No update provided Plan reiterated previously; no new data in Q1 docs Maintained (no update)

Note: Q1 2023 press release and call did not include new quantitative guidance beyond reporting results; prior quarter’s outlook remains the reference point -.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2022)Previous Mentions (Q4 2022)Current Period (Q1 2023)Trend
Path to profitability / cost takeoutRightsizing, SKU/brand rationalization, RIF, facility exits; focus on higher-margin consumer brands - -Plan to reduce adjusted SG&A; target positive adj. EBITDA by Q4 2023 -Opex down 32% q/q to $15.0M; continued cost-saving initiatives and warehouse consolidation Improving cost base
Asset-light model (CCELL, packaging)Packaging exit and reduced inventory intensity discussed -Margin ramp framework shared Packaging partnership with A&A Global (MarijuanaPackaging.com); shift to net revenue recognition to lift margin % in 2H23 Pivot underway
Product innovationIntroduced Groove; product roadmap expanding -Groove + more launches expected in 2023 -16 Q1 launches (Groove, Eyce, DaVinci) with positive demand cited Accelerating
Omnichannel / digitalNew B2B portal, Amazon/marketplaces initiative -B2B US/EU, Vapor.com/VapoShop redesigns EU B2B/B2C relaunch, Vapor.com redesign, Shopify integration for DaVinci Strengthening
Working capital & leverageLiquidity actions (ABL, ERC, asset sales) -Paid down debt, ERC proceeds, inventory reduction -Loan cut to $8.5M; working capital $25.7M; inventory down to $37.0M Mixed (lower WC, improved structure)
Consumer demand/mixEmphasis on accretive channels; pressure in industrial -Expect consumer growth “Barbell” demand; growth in affordable/disposable & rechargeable; Groove positioned at value tier Mixed to cautious

Management Commentary

  • “We have been busy here at Greenlane executing on our aggressive transformative strategy for our path to profitability… [focus on] profitability… product innovator… global omnichannel strategy.”
  • “We are extremely pleased with our 16 first quarter product launches… Eyce, DaVinci and… Groove… We have already seen positive impact in our revenue due to our innovative product launches.”
  • “We completed migrations and relaunched our EU B2B and B2C websites… redesigned and relaunched our Vapor.com site… integrated Shopify with DaVinci… [and] launched an enhanced performance marketing platform… expanded our market penetration by 33%.”
  • “This partnership [with A&A Global/MarijuanaPackaging.com] provides working capital… and allows us to continue investing in our higher-margin consumer products… cost-saving initiatives… estimated to be over $3 million annually.”
  • “Net sales… $24 million… up 9% q/q… gross margin decreased… due to… $0.6 million [COGS impact]… Excluding… gross margin is 25.4% for Q1… [Total] operating expenses decreased… to $15 million…”

Q&A Highlights

  • Timing/impact of asset-light shift (CCELL/packaging): Inventory on the balance sheet will work down in Q1–Q2, with transition to net revenue recognition beginning mid-Q3 through Q4; expect revenue to decline with net basis but gross margin percentages to rise in 2H23 .
  • Demand/mix in consumer: Strong traction in affordable products and in disposable/rechargeable categories; Groove targets approachable price points while premium category remains for connoisseurs; consumer wallet constraints driving mix to value .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2023 EPS and revenue was unavailable in our system at the time of analysis; as a result, we cannot quantify beats/misses versus consensus this quarter. Values ordinarily retrieved from S&P Global.*

Key Takeaways for Investors

  • Sequential improvement with revenue at the top of prior guidance and better adjusted EBITDA, indicating early traction on the turnaround plan despite macro and category pressures .
  • Margin path remains central: Q1 gross margin underperformed prior 24.5% outlook due to inventory adjustments, but the 2H asset-light shift should expand gross margin percentages as mix and recognition change to net .
  • Cost structure resetting: Opex down materially q/q and y/y, with additional savings from warehouse consolidation and packaging partnership; execution here is key to the Q4 2023 adj. EBITDA-positive target .
  • Product velocity and channel upgrades are driving mix toward higher-margin house brands and DTC/omnichannel, a critical lever for sustained gross margin improvement -.
  • Liquidity and working capital require monitoring: cash declined to ~$5.9M while working capital fell to $25.7M; debt reduction and inventory normalization are constructive, but operating cash flow progression is a near-term focus .
  • Near-term modeling: Expect potential revenue step-downs in 2H as industrial revenues move from gross to net, partially offset by higher gross margin percentages; watch mix and Greenlane Brands penetration .
  • No new guidance this quarter; use the prior framework (Q1–Q4 margin ramp and Q4 2023 adj. EBITDA target) as reference points while tracking quarterly execution against these markers .

Appendix: Additional Context and Disclosures

  • Q1 2023 press release and 8‑K included non‑GAAP measures (Adjusted EBITDA, Adjusted SG&A) with reconciliations and limitations; management does not view non‑GAAP metrics as substitutes for GAAP results .
  • Balance sheet snapshots show inventories declining and debt reduced via ERC proceeds and loan paydown; see Q1 2023 and Q4 2022 balance sheets for details .
  • Strategic packaging partnership press release (April 6, 2023) corroborates the packaging transition and expected cost savings .