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What You'll Want to Know About Greenlane Holdings' Great Q2 Results

By Keith Speights – Aug 13, 2019 at 6:00AM

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The premium vape products distributor posted all-time high revenue with several new products on the market helping fuel growth.

Greenlane Holdings (GNLN 0.56%) became the first cannabis-related company to conduct an initial public offering (IPO) on the Nasdaq stock exchange in April. Unfortunately, it's been pretty much downhill for the stock ever since.

But the premium vaping products distributor had an opportunity to generate some excitement for investors when it reported its second-quarter results after the market closed on Monday. Here's what you need to know about Greenlane's Q2 update.

Cannabis vaporizer next to clumps of cannabis.

Image source: Getty Images.

By the numbers

Greenlane reported revenue in the second quarter of $53 million. This reflected a 30.6% increase from the prior-year-period revenue total of $40.6 million. Wall Street analysts projected Q2 revenue of a little over $50 million.

The company reported a net loss of $3.2 million on a generally accepted accounting principles (GAAP) basis. In the second quarter of 2018, Greenlane posted positive earnings of $230,000.

On a non-GAAP adjusted basis, Greenlane's net loss in the second quarter was $1.2 million, or close to $0.03 per share. This result was weaker than the prior-year period adjusted net income of $600,000. However, it was in line with the consensus Wall Street analysts' estimate of a net loss of $0.03 per share in the quarter.

Behind the numbers

The great news for Greenlane was that its second-quarter revenue didn't just beat estimates, it also set an all-time record for the company. Greenlane attributed the strong revenue growth to increased sales in the North American cannabis, cannabidiol (CBD), and liquid nicotine markets.

Greenlane especially benefited from a $10.5 billion boost from sales of e-cigarette products, notably including those made by Juul. Greenlane CEO Aaron LoCascio said that "sales of Juul increased nearly 70% over the prior year, led by strong gains in Canada along with continued growth in the U.S."

The company also enjoyed a nice bump from the launch of several new product lines. It reported $1.8 million in sales from these launches, which included the introduction of new hemp-derived CBD products.

Greenlane's bottom line didn't look as great, however. Part of the problem was a decline in gross margin from 20.7% in the prior-year period to 17.3% in the second quarter of 2019. This lower margin resulted primarily from changes in sales mix and some promotions the company undertook with a key supplier. Also, Greenlane's operating expenses soared in the second quarter due to higher personnel expenses (the company added 65 employees) and higher general and administrative expenses.

The biggest news for Greenlane in Q2 aside from its IPO related to the company's dealmaking. Greenlane entered into a new partnership with Canopy Growth for the exclusive distribution of Storz & Bickel's vaporizers throughout the U.S. It signed exclusive distribution partnerships with Bloom Farms, Cookies, Slang Worldwide, and Pax Era. The company also entered into distribution agreements with Hanu Labs and AVD.

Looking ahead

LoCascio mentioned several things that investors can look forward to in the future. He said that Greenlane is "working closely with Juul" to help smokers switch from combustible cigarettes to e-cigarettes. LoCascio pointed to the potential for strong growth in all of its markets but especially highlighted the strong initial sales of its new hemp CBD products.

He also hinted at the possibility of future acquisitions. LoCascio noted that Greenlane ended the second quarter "in a strong financial position with $69 million of cash, providing ample capital to accelerate our growth through potential future acquisitions."

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

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