Greenlane Holdings, Inc.

Good afternoon, and welcome to today's conference call to discuss Green Lane Holdings' second quarter financial results. A press release detailing the financial results for the quarter ended June 30, 2023, was distributed today, and is available on the Investor Relations section of the Green Lane website at investor.gnln.com. As a reminder, today's conference is being recorded. A replay of this call, as well as a copy of the supplemental earnings slides, will be archived on the company's IR website at investor.gnln.com. On the call today are Craig Snyder, Chief Executive Officer, and Lana Reeve, Chief Financial and Legal Officer. Before we begin, Green Lane would like to remind listeners that today's prepared remarks may contain forward-looking statements. and management may make additional forward-looking statements in response to the questions received. These statements do not guarantee future performance and, therefore, undue reliance should not be placed upon them. These statements are based on current expectations of the company's management and involve inherent risk and uncertainties and other factors discussed in today's press release. This call also contains time-sensitive information that speaks only as of the date of this live broadcast. August 14th, 2023. Factors that could cause GreenLane's results to differ materially are set forth in today's press release and in GreenLane's quarterly report on Form 10-Q filed with the SEC. Any forward-looking statements made today on this call are based on assumptions as of today and GreenLane assumes no obligation to update these statements as a result of new information or future events. During today's call, GreenLane Management may discuss non-GAAP financial measures, including adjusted SG&A and adjusted EBITDA. GreenLane has included a reconciliation of these non-GAAP measures in today's press release, which is available in the Investor Relations section of the company's website at investor.gnln.com. I would now like to turn the call over to Mr. Craig Snyder, Chief Executive Officer of GreenLane. Please go ahead, Craig.

Hello, everyone, and thank you for attending our second quarter 2023 earnings call. During Q2, we made strides in each of the key segments to our business, including our focus on profitability and advancing our house of brands with new and innovative products. Quarterly revenue declined from Q1 to Q2 2023 by 4.3 million. The quarter-over-quarter decrease was primarily driven by a 1.8 million decrease in the consumer goods segment, and a decrease in the industrial segment of 2.5 million overall. The decline can be attributed to three factors. The expected seasonality change from Q1 to Q2, where the business has historically had a more modest quarter than Q1. A shift in parts of our business model from gross to net recognition and the restructuring of our packaging group consistent with our partnership with AA Global, marijuana packaging. As our agreement intensifies in the industrial space with significant revenue being recognized on a net basis versus gross, we do expect revenues to moderate and margins to increase related to that activity, which will accelerate in Q3. In a return to our roots, we feel very encouraged by our new products and partnerships in the e-cigarette nicotine space and expect those advances to have substantial impact on the business in the coming months. The business continues to attract new partners in the MSO space based on our continued execution, and we remain bullish by the expansion of many MSOs purchasing in our consumer segment. We have reduced our total operating expenses from $15 million in Q1 to $14.1 million in Q2, respectively a reduction of $900,000. We expect these reductions to accelerate in Q3, showing us substantial reductions as we have aggressively attacked expenses related to facilities, professional fees, and technology. We have completed consolidation of eight of our facilities, including our former third-party logistics partner, Versed. The facilities line item alone is anticipated to save the company more than $4 million annually. and we believe through our own management give customers a better experience with GreenLane. We have similar initiatives being executed in technology and professional services, and we expect to continue to realize those savings over the next two quarters. Labor-related expenses decreased from $5.4 million to $5.2 million quarter over quarter. For the six months ended June 30th, labor-related expenses decreased a significant $8.4 million from 18.9 million in 2022 to 10.5 million in 2023. Labor is another area where the business has become more efficient, and we expect continued reductions in both headcount and overall cost of labor. In Q2, we had charges related to severance of two former senior executives, which clouded the gains we have made in overall cost of labor. These two agreements represented more than 12% of the overall labor number in Q2 and are one time in nature. We expect overall cost of labor to continue to reduce aggressively and are focused on labor structure that brings the business to profitability. Overall G&A decreased from 7.7 million in Q1 to 7 million in Q2. For the six months ended June 30th, G&A decreased 34% or 7.5 million from 22.3 million in 2022 to 14.8 million in 2023. As leadership has previously stated, our goal is to bring costs in line with the gross profit to create a profitable, durable business. Expense adjustments in our portfolio are often a lagging indicator as we continue to make active and aggressive changes to the company's expense profile. This quarter, we had meaningful consolidation costs from the multiple facility closures. These costs were one time in nature, and we expect overall expenses to continue to reduce as we manage them aggressively. Gross margins improved slightly from 23% in Q1 to 23.3% in Q2 2023. We are pleased that margins are slightly improved quarter over quarter as we initiate our new asset light programs, which will provide net revenue recognition and should improve overall margin performance. Of note, for the six months ended June 30th, margins improved significantly from 16.3% in 2022 to 23.2% in 2023. Let's move to innovation next. This quarter, we launched five new products from our house brands. In addition to the ice Oriflex line with the rig, a new line of Groove glass, the Groove micro rigs, and a limited edition spoon pipe. From DaVinci, we brought a new colorway to market in the Micro-C line, along with the Arctic, the newest premium portable vaporizer offering DaVinci's clean technology in the convenience of a 510 oil-compatible vaporizers. The Arctic has garnered a lot of popularity and critical acclaim in a short period of time. We also announced our expansion of products to include disposable nicotine offerings. This is part of our strategic vision as a leader in the market to diversify our product portfolio. With the total addressable U.S. market exceeding 6 billion annually and expected to grow at a compound annual rate exceeding 11%, disposable nicotine products have a significant impact on our customer revenues. We identified industry-leading partners, manufacturers, and brands to capitalize on our expansion into the nicotine industry, including Fume, Death Row Vapes, TaxPod, and Tyson 2.0. And finally, in strategic direction, in order to make the business more scalable, leverageable, and durable, we recently announced the payoff of our previously existing facility with White Hawk Capital. The business was able to pay off this $15 million facility prior to the first anniversary date, and we believe by doing so allows us much more authority over our future. I'll now turn it over to Lana to run through our financial results in further detail.

Thanks, Craig, and hello, everyone. Thank you for joining us on the call today. As a reminder, the results I will be reviewing for you today can be found in our earnings release that is available on EDGAR and the investor relations section of our website at investor.gnln.com. For the second quarter of 2023, total net sales were $19.6 million compared to approximately $24 million for the three months ended March 31, 2023, representing a decrease of $4.3 million or 18.1%. The quarter-over-quarter decrease was primarily driven by a decrease in the consumer goods segment of 1.8 million, or a 23% decrease, and a decrease in the industrial segment of 2.5 million, or a 16% decrease. This compares to the company's reported 39.9 million in total net sales for the second quarter of 2022, representing a decrease of 20.3 million, or 51% decrease year-over-year. Year to date, total net sales were $43.6 million compared to $86.5 million, representing a decrease of $42.9 million, or 49.6%. The decrease is related to the management initiatives and change in revenue strategies mentioned previously. For the second quarter of 2023, gross profit was $4.6 million compared to $5.5 million for the prior quarter. representing a decrease of 900,000 or 17%. Gross margin was relatively flat, increasing by 0.3% to 23.3% for Q2 2023, compared to a gross margin of 23% for the prior quarter. The company reported gross profit of 4.6 million and gross margin of 23.3% for Q2 2023, compared to 8.1 million and a gross margin of 20.3%, for Q2 2022. The increase is related to Q2 2022 inventory write-offs of damaged and obsolete inventory of 2.1 million compared to no write-offs in Q2 2023. Year-to-date gross profit was 10.1 million and gross margin of 23.2% compared to 14.1 million and 16.3% for the six months ended June 30th, 2022. The 6.9% increase in gross margin is related to year-to-date 2022 inventory write-offs of damaged and obsolete inventory of $7.2 million compared to only $0.6 million for year-to-date 2023. Total operating expenses decreased $900,000 for Q2 2023 to $14.1 million compared to $15 million for the prior quarter. The decrease is a result of cost reduction throughout the quarter, which were related to our ongoing corporate initiatives to reduce operating spend as a percentage of revenue. Total operating expenses decreased by approximately $7.7 million or 35.2% to $14.1 million for the three months ended June 30, 2023, compared to $21.8 million for the same period in 2022. The decrease is related to a greater than 50% reduction in workforce and a major restructuring effort by the company to right-size the business and focus on profitability. Here to date, total operating expenses decreased by approximately $16.7 million or 36.3% to $29.3 million, comparing favorably to the $46 million in the first six months ending June 30, 2022. Net loss for Q2 2023 was $10.5 million compared to a loss of $10.2 million for the prior quarter. Net loss attributable to Green Lane Holdings Inc. was $10.5 million or $6.56 per share basic and diluted compared to a loss of $10.2 million or $6.40 per share basic and diluted for the prior quarter. This compares to the company's reported net loss of $14.5 million and a net loss attributable to Green Lane Holdings, Inc. of $12.1 million or $22.70 per basic and diluted share for the second quarter of 2022. Year-to-date net loss for the six months ended June 30th, 2023 was $20.8 million compared to a loss of $33.2 million for the six months ended June 30th, 2022. Net loss attributable to Green Lane Holdings, Inc. was $20.7 million or $12.96 per share basic and diluted compared to a loss of $27.5 million or $55.70 per share basic and diluted for the six-month ended June 30, 2022. Adjusted EBITDA loss for Q2 2023 was $5.9 million compared to a loss of $6.8 million for the prior quarter. On the balance sheet, we ended the second quarter with $4.7 million in total cash and working capital of $14.2 million, compared to $5.9 million in total cash and working capital of $25.7 million as of March 31, 2023. The company continues to reduce the working capital cycle, focused on operating more efficiently with lower inventory levels. We ended the quarter with $29.8 million in net inventories versus $37 million as of March 31, 2023. The company continues to focus on improving cash flow from operations and managing existing debt. With that, I'll now turn it back over to Craig.