Greenlane Holdings Inc. (GNLN) Misses Q4 EPS by 20c, Revenues Miss

Greenlane Holdings Inc. (NASDAQ: GNLN) reported Q4 EPS of ($0.27), $0.20 worse than the analyst estimate of ($0.07). Revenue for the quarter came in at $37.2 million versus the consensus estimate of $38.36 million.

Fourth Quarter 2019 Results

• Net sales were $37.2 million as compared to $51.6 million for the fourth quarter 2018, a decrease of $14.4 million, or 27.9%; the decline is largely attributable to Greenlane's business transformation and strategy to reduce JUUL concentration and focus on higher-margin sales, offset by an incremental $2.6 million in sales contributed by the Company's acquisition of Conscious Wholesale and establishment of its European segment on September 30, 2019.
• The decrease in JUUL net sales for the period was offset by 39.5% growth in total house brands net sales, compared to the fourth quarter of 2018, with Higher Standards experiencing the largest growth of any of Greenlane's house brands, increasing by 134.8% over the same period.
• This decrease was partially offset by increases in sales related to some of the Company's other brands, primarily Storz & Bickel, and new product launches, which in the aggregate resulted in increased net sales of approximately $2.0 million for the fourth quarter.
• Gross profit was $6.8 million, resulting in gross margin of 18.3% of net sales, compared to $9.4 million or 18.2% of net sales for the fourth quarter of 2018. Gross margin during the first three quarters of 2019 was heavily affected by margin drag from JUUL products sales. During the fourth quarter of 2019 the Company implemented a gross margin floor on JUUL products, which lessened the impact on gross profit.
• Salaries, benefits, and payroll tax expenses decreased by approximately $0.9 million to $7.8 million, compared to $8.7 million for the fourth quarter of 2018. This decrease was largely due to approximately $4.1 million of equity-based compensation expense which the Company recognized in the fourth quarter of 2018, compared to equity-based compensation of approximately $1.7 million for the fourth quarter of 2019. The decrease in equity-based compensation was partially offset by increases in wages and related payroll expenses of approximately $1.4 million related to the additional workforce hired to accommodate Greenlane operations as a public company.
• General and administrative ("G&A") expenses increased by approximately $2.4 million to $8.0 million compared to $5.7 million for the same period in 2018 primarily due to additional costs incurred in connection with operations as a public company.
• Net loss was $9.4 million, compared to $8.3 million in the same period for the prior year, impacted primarily by higher cost of sales, investments in people and equipment, and higher depreciation and amortization expense.
• Adjusted net loss(1) was $7.7 million compared to adjusted net loss of $4.0 million for the fourth quarter of 2018.
• Adjusted EBITDA(1) was a loss of $7.3 million compared to a loss of $0.7 million for the fourth quarter of 2018.

Aaron LoCascio, Greenlane’s Chairman and Chief Executive Officer, said, “2019 was a historic year for us. We are proud of the progress we made in our first year as a public company – in particular, our ability to advance our business goals while navigating turbulent industry headwinds throughout the year. Over the second half of the year, we undertook a large-scale shift in our business model by beginning to successfully move away from high-volume, low-margin products and sales, in favor of high-margin sales and the promotion of our house brands and products. We’ve concentrated on identifying cost-cutting opportunities and putting in place a thoughtful plan to leverage our scale to drive sustained, long-term growth and profitability. We believe the sequential increase of our fourth quarter margins by 396 basis points demonstrates the strength of our business and our ability to adapt to changing market conditions, while continuing to deliver on our targets. We are confident these steps best position us to become cash-flow positive in the near future, as we move forward.”

For earnings history and earnings-related data on Greenlane Holdings Inc. (GNLN) click here.

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