Good morning, and welcome to today’s conference call to discuss Greenlane Holdings Fourth Quarter and Full Year 2021 Financial Results. A press release detailing the financial results for the quarter and full year ended December 31, 2021, was distributed yesterday afternoon and is available on the Investor Relations section of the Greenlane 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 Nick Kovacevich, Chief Executive Officer; and Bill Mote, Chief Financial Officer. Before we begin, Greenlane 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 risks 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, March 31, 2022. Factors that could cause Greenlane’s results to differ materially are set forth in yesterday’s press release and in Greenlane’s annual report on Form 10-K 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, included adjusted SG&A and adjusted EBITDA. Greenlane has included a reconciliation of these non-GAAP measures in yesterday’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. Nick Kovacevich, Chief Executive Officer of Greenlane. Please go ahead, Nick.

Thank you, operator, and good morning, everyone. I’d like to thank you all for joining us here today to hear the latest about Greenlane. It’s been an eventful last few months as we’ve been making meaningful improvements to the business, and we’re excited to share some of these updates today on our operations and strategy going forward. I’ll start first by providing a high-level overview of our results for the fourth quarter and full year of 2022. Then I’ll turn to some of our more recent developments and how we believe these will translate into a leaner, more profitable and more sustainable Greenlane. After that, I’ll turn the call over to our Chief Financial Officer, Bill Mote, for a more comprehensive review of our financial results before then opening it up for Q&A. So with that, let’s jump right into Slide 3 of the supplemental earnings slides, which you can find on our IR website if you haven’t downloaded them yet already. 2021 was one of the most pivotal years in Greenlane’s 17-year history. Not only did we complete our transformational merger with KushCo, creating the industry’s leading ancillary cannabis company and house of brands, but we also strengthened our Greenlane brands portfolio with the acquisitions of Eyce and DaVinci, which give us a strong platform heading into the year. 2022 has been off to a strong start, building on the progress we made last year, most notably through the introduction and implementation of our 2020 plan to streamline the organization, reduce our cost structure and capitalize the business in a non-dilutive manner. I’ll be going over this plan in more detail shortly. While the overall cannabis industry is facing headwinds in the form of inflation, supply chain disruptions and stock price declines, we are doing all that we can to weather this storm to accelerate our path to profitability and to ensure we have a stable and scalable business that can drive meaningful, profitable growth in the long run. To that end, Q4 represented another step in the right direction. Net sales for the quarter grew 54% year-over-year to $56 million, which included a full quarter of KushCo sales for the first time. It’s important to note that sales would have declined year-over-year if KushCo’s sales contribution was removed due to a decline in lower-margin third-party sales. However, we are pleased that we have successfully shifted away from these lower quality sales as they are no longer a part of our core strategy, and we are instead focused more on our proprietary and higher-margin Greenlane brands. Sales of our Greenlane brands was up 17% year-over-year to $7.4 million for the quarter, which was due to higher sales of VIBES and the inclusion of DaVinci and Eyce compared to the same period last year. It goes without saying that growing our brands remains a key focus of ours as it helps expand our strategic moat, our margins, our revenue and our profitability as we look to become the leading house of brands in the ancillary cannabis industry. Gross margins for the quarter were 22%, up from 17% in Q4 last year, with the increase being driven by a reduced reliance on lower-margin nicotine and third-party brands. As we continue to shift away from these lower-margin brands and focus more on our higher-margin Greenlane brands, we believe this should help offset some of the inflationary pressures we are seeing in the market and ultimately pave the way for higher gross margins going forward. Not to mention, we are slowly passing on increased freight costs to our customers while container rates in general are gradually starting to come down. With that brief overview of the quarter and year, let’s now turn to Slide 4, where I’ll be spending a lot of my time today talking about our recently announced plan to capitalize the business, focus on our Greenlane brands and accelerate our path to profitability. As we shared via press release earlier this month, our plan is essentially twofold: One, to reduce our quarterly costs to become profitable much more quickly; and two, to capitalize the business in a non-dilutive manner. Now I’ll spend time going over each of those. Starting with the first objective. We are targeting to achieve positive adjusted EBITDA by Q3 2022 driven in part by our reduced cost structure. Specifically, we will be working to lower our adjusted SG&A, which is SG&A, excluding depreciation and amortization, to between $14 million and $16 million by Q3 of this year. This is a roughly 40% reduction in quarterly costs from the $26.6 million we reported last quarter and a level that we believe is sufficient to successfully operate the business and become profitable. Supporting this lower cost structure is the reduction in force we announced earlier this month, which we expect to result in approximately $8 million in annualized cash compensation savings. We’ll also be focused on reducing our facility footprints worldwide and adjusting our go-to-market strategy to further reduce costs and operating liquidity. For those of you who have followed or are familiar with KushCo’s story, this is a similar playbook to the one KushCo employed back in 2020 at the start of the COVID-19 pandemic, helping KushCo become adjusted EBITDA profitable within three quarters of announcing their cost savings plan. Of course, until we reach profitability and are able to generate positive cash flow, it’s important to conserve and build on our current cash levels, which brings me to the second part of our plan. We understand that raising equity capital at these current depressed stock levels is not the right primary strategy. We also understand that issuing equity to acquire businesses trading at higher valuations than Greenlane is also not the right strategy. Therefore, we are putting a pause on acquisitions at this time and focusing on generating liquidity in non-dilutive ways to support the business. Like 2020 and parts of 2021, we expect 2022 to continue being a challenging year for the cannabis industry as capital has dried up, inflation continues to ramp and companies like Greenlane focus on getting their businesses profitable and cash flow positive as soon as possible. In fact, at recent investor conferences we’ve been attending, the main message from investors has been to batten down the hatches. We need to continue optimizing the business to thrive, and we will look to execute this plan quickly and effectively. We plan to sell some noncore assets too, including our headquarters. We have been and will continue to raise prices on some products that we believe have price elasticity and that we know our consumers can absorb. Not to mention, we are discontinuing sales of our non-strategic lower-margin third-party brands, and we are selling the existing inventory of those that we still have, which will further increase our liquidity and improve our working capital. Naturally, we expect a minor decline in total revenue from discontinuing some of these third-party brand relationships, but we believe the overall quality and margins of the revenue that we will generate going forward will be far more favorable and sustainable. And given that we are employing all these cost reductions, we will have a considerably lower breakeven point than before, requiring a lower overall sales level than if we continued to keep some of these brands in the portfolio. In short, if we continued down the path we were on, we may not have been in a position to achieve profitability until next year. Now with a significantly reduced cost structure, healthier margins and modest sales expectations, we are in a position to become profitable on an EBITDA basis by Q3 of this year. As I discussed on the last call, Greenlane has done a great job, even before the KushCo merger, of shifting the business away from selling purely third-party products to developing and growing its own portfolio of proprietary owned brands, which command margins much higher, often between 40% and 65%. Since we closed the merger, we have been accelerating this strategy, and now it’s time to kick it into another gear as we reinvest the proceeds of these sales back into growing our brands and growing our higher-margin products. With the introduction of this new plan, we are retracting our previously communicated 2022 and 2023 sales targets for our Greenlane brands, given the challenges of forecasting growth rates in this current climate. However, we will be shifting our focus to getting some of these brands and products into traditional consumer retail channels such as Amazon, Walmart and Google. Since we are an ancillary business that doesn’t touch the plant, we have an opportunity to get an early foothold in these large marketplaces and leveraging the expertise of our new Chief Commercial Officer, Craig Snyder, who has successfully penetrated these channels before in the ancillary cannabis space, we believe this gives us a significant competitive advantage in expanding the customer reach of our owned brands. And finally, we are currently looking to secure an asset-based loan or similar non-dilutive instrument that will support our working capital needs even further. This process is currently underway, and we hope to provide additional details in the near future. Altogether, we expect these strategic measures, if successful, to generate liquidity in excess of $30 million, which we believe is sufficient to bridge the gap into profitability. It's imperative that we act quickly and decisively, and we are wasting no time to get this business profitable and in a position to scale meaningfully once market conditions begin to improve. With that, I'll now turn it over to Bill to run through the financial results and further detail.

Thanks, Nick, and hello, everyone. Thank you for joining us on the call today. As a reminder, the results I will be reviewing for you this morning can be found in our earnings release that is available on EDGAR and in the Investor Relations section of our website at investor.gnln.com. Turning now to Slide 5, net sales grew 54% to $56 million in Q4 2021 from $36.3 million in Q4 2020. The increase in net sales, as Nick mentioned, was largely due to the inclusion of KushCo sales as a result of the merger that was completed on August 31, 2021. Looking at our two new segments, sales in our consumer goods segment totaled $24.9 million for Q4 2021 compared to $32.7 million in Q4 2020. The decrease was due to a reduction in sales of lower-margin third-party brands as part of the company's shift in strategy to focus on its higher-margin proprietary Greenlane brands. Sales in our industrial goods segment totaled $31.1 million for Q4 2021 compared to $3.6 million in Q4 2020. The increase was due to the merger with KushCo that was completed on August 31, 2021. Net sales for our Greenlane brands increased 17% to $7.4 million for the quarter. As we mentioned on the last call, we and many other importers of goods continue to experience supply chain issues for both Greenlane brands and other top selling brands due to record shipment backlogs and container shortages. These challenges have resulted in higher freight costs that we traditionally absorbed, but we have recently begun passing through to our customers a freight surcharge. Fortunately, we are starting to see a dip in container prices, as Nick mentioned, but we will continue to monitor our supply chain activities and make regular adjustments to our purchasing to meet any anticipated changes in demand and product availability. Turning now to gross profit, which was $12.5 million or 22.3% of net sales in Q4 2021 compared to $6.2 million or 17% of net sales in Q4 2020. The increase was due in large part to a reduced reliance on lower-margin nicotine and third-party brands. As we continue to prioritize scaling our Greenlane brands, we expect our overall gross margin to continue to improve. SG&A costs for Q4 2021 increased to $24 million compared to $17.3 million in Q4 2020 primarily due to an increase in M&A expenses incurred with respect to the KushCo merger and other acquisitions. On an adjusted basis, which excludes depreciation and amortization, SG&A for Q4 2021 totaled $21.7 million compared to $16.7 million in Q4 2020. Net loss for Q4 2021 was $11.2 million compared to $10.9 million in Q4 2020 and adjusted EBITDA was negative $6.6 million in Q4 2021 compared to negative $7.2 million in Q4 2020. We ended the quarter with $12.9 million in cash and working capital of $53.8 million compared to $54.2 million as of December 31, 2020. We're continuing to be judicious with our cash position and have the ability to opportunistically raise capital under our ATM program. We are being very thoughtful about how we use our balance sheet to fund our growth initiatives, and we believe the recent plan we have begun implementing will help us generate sufficient liquidity to support the business as we transition to profitability. With the introduction of this plan, we believe we are on track to achieve positive adjusted EBITDA in the third quarter of this year, giving a strong and sustainable platform for profitable growth heading into 2023. With that, I will turn the call over to the operator and open it up for Q&A.

Your first question for today is from Vivien Azer at Cowen & Company. Please state your affiliation and ask your question.

Hi, good morning. Vivien Azer from Cowen. Good morning team. So let's just start on kind of the macro backdrop and how that influences your thinking around the Greenlane brands. So obviously, prioritizing those brands with higher margin makes a lot of sense that you've acknowledged some of the macro headwinds. So as you think about the outlook for that business, through 2022. Do you think that it is more susceptible to a softening consumer environment? How do you think about that? Thanks.

Hi, Vivien. Thanks for the question. And to answer your question, I think we're still very confident on the year, obviously, some of the supply chain stuff and some of the consumer demand stuff, discretionary spending, etc. could come into play. So that's why we're hesitant to nail down the exact predictions of where we think we'll land. But we think we can manage through. We do think our products have a range, right? So on some products, they're very high end. That would obviously be impacted by some of the inflation and headwinds against consumer spending. But on the flip side, we're developing a pretty robust line of products that are geared more toward an economy spender, products that are going to be sitting in C-stores that should have pretty high velocity, additional add-on products that should be sitting on countertops and registers at cannabis dispensaries and retailers. So these products should continue to turn. Products like VIBES, papers, people are going to continue to buy these no matter what. So again, how that kind of all rolls up to total revenue, we're not in a position to predict that right now. But we are confident in the business and the strategy, and we have an innovation pipeline that has some products that are very innovative and going to be more on the expenses side, but it's also filled with a line of products that are more economy-related and will turn volumes this year regardless of the macro climate, from our perspective.

Understood, that makes good sense. And then just thinking about how your business paces relative to the MSOs. Obviously, you guys can sell your products nationally. That's not true of a multistate operator. But the commentary broadly, Nick, as I'm sure you're well aware, has been pretty cautious around 1Q, which is essentially done at this point. And heading into Q2, it seems like there could be a slowing in door growth and certainly a delay in terms of the catalysts around New Jersey. So what are you hearing from your MSO partners? Is the more challenging backdrop of them creating some caution around their ordering patterns with you? Is it changing a mix of what you're seeing from an ordering perspective? Thanks.

Yes. Look, I think there's a lot of dynamics there. And obviously, you're well in the loop along it very closely as are we. And we're hearing a lot about companies trying to consolidate and streamline their supply chain. We think it plays to our favor. We think we have the most robust in terms of breadth and depth offering. And we're seeing from the MSOs and some of these leading players that they're looking at how they can get more synergies, right? And when they have traditionally done business with Greenlane on one of our sides of our house, right, whether the consumer side or the industrial side, they're talking about how do we potentially consolidate that and get more cost savings and more synergies to our business. That's a great thing for us, right? It plays right into our cross-selling strategy. And we think we can deliver a lot of value to these clients given the current climate and the challenges that they're dealing with. So we think we're well positioned. Of course, that said, we're going to do better as the industry does better. So as the volumes grow, obviously, that's going to be good for us. So to the extent that volumes are down, that obviously means some of our sales will track that, right, especially the packaging and CCELL, vape stuff, the energy stuff. So it's a bit of a mixed bag there, but I think we're really well positioned given our diversity, given the value proposition we can offer, and given the fact that we have so many different channels of trade that we play in, right? For example, I mentioned the C-store. That's all brand new, right? C-stores weren't really taking cannabis serious several – two or three or four years ago. Now they're all taking a hard look given the consumer demographic that purchases these types of products, right? So that's all upside. We just brought on Craig Snyder, who we talked about having a background in direct-to-consumer using platforms like Amazon and Walmart and Google. And again, that's all upside for us because that's not been typically a big part of our business. So I think the way that we position ourselves and diversified ourselves really bodes well for facing the current climate, and we know that ultimately the volume will ramp in the cannabis space. And so even if pricing comes down, right, that will bring revenues down or slow the growth of revenues but not necessarily units and so if we're selling packaging and we're selling CCELL products. And we've always said this, right? I mean it's great that the MSOs can enjoy really high margins in some of these markets, but we know that these markets are going to fluctuate. And as long as consumer volumes continue to go up and there's more consumers buying cannabis that means there's going to be more sales of the types of products we sell, especially on the industrial side. So again, I think we're really well positioned and a lot of things are going to kind of play out and some will be negative and some will be positive. But I think the net result is still going to be positive for Greenlane on executing our growth strategy and getting the right products into the marketplace.

Understood. Yes. And good call out on C-store. That is certainly an untapped opportunity for you guys. Last one for me before I turn it over. On the $30 million of liquidity that you aim to generate, can you just dimensionalize like what proportion or percentage of that is on kind of non-cannabis touching assets, so look, I would think headquarters non-cannabis touching? And so the thing I'm trying to get at here is of the liquidity you're trying to generate, given the capital constrained environment in cannabis, I would think that the possibility of success would be very different on non-cannabis related assets like your headquarters versus more cannabis-related assets? Thank you.

Yes. So look, just to simplify it and these are just ballpark numbers, but if we're going to use 30, we could divide it into three buckets, right, like 10, 10, 10, 10 would be from the sale of assets. The majority of that 10 would be from selling our headquarter building. There, we expect to also be able to derive a few million dollars from the sale of some of our noncore business assets, some domains and things like that we own. So we believe that total bucket is going to be 10 or potentially a little bit more. We’re – we know we can operate this business with far less inventory. We’re discontinuing some of the third-party lower margin brands that we’ve historically carried. And so when you look at starting the year with $70 million of good inventory in our warehouse and finishing the year with our plan, somewhere below $60 million, right? It’s not a monumental task. I mean realistically, we could probably run this business with $50 million or $55 million of inventory. So all we’re saying is let’s sell through some of this inventory. Let’s free up $10 million of working capital vis-à-vis that process. So there, you got 10 from the asset sales; you got 10 from the inventory reduction. And then we’re expecting to get more than 10, but let’s just say, at least 10, on the ABL facility that we’re going to market for. We have sufficient collateral to be able to secure a facility, we believe, in the $20 million to $30 million range. We have an $8 million bridge loan that we do need to pay off. So if you take $20 million facility, minus the eight, that’s how you get your third 10. And so that’s how you get to the 30. And again, I think, given the fact that this is predicated on a building sale, on selling through inventory, which is part of our normal course of our business, and securing an ABL with sufficient collateral, we think that that’s very achievable to drum up that full $30-plus million in liquidity.

Understood. Thank you for the detail.

Thank you.

Your next question for today is coming from Aaron Grey, Alliance Global Partners. Please announce your affiliation then pose your question.

Thank you. Yes, Aaron Grey of Alliance Global Partners. So first question for me. Nick, one of the things we talked about at the start of the merger was kind of one of the top line opportunities in terms of selling some of the Greenlane accessory products in two dispensaries, which legacy KushCo had a lot of relationships with. So obviously, you guys have a lot of play right now in terms of integration as well as some of the SG&A cuts you announced. So can you just give us an update on where you stand there in that initiative? Is that kind of taking a break while you focus on these other things? Or can you give us an update in terms of both kind of counter site opportunities with more of the VIBES and papers as well as the opportunities for some of the larger priced products such as the bonds and otherwise and selling those into the dispensaries? Thank you.

Yes. Thank you for the question, Aaron. And it remains a focus. Despite everything else we have going on. I think we are very pleased to get through the bulk of the integration, be able to make the cost cuts and announce the strategic plan for 2022. I think that was a big lift kind of getting to that point we announced on March 10. And along the way, we’ve been kind of setting the stage for more aggressive cross-selling in the nature that you discussed. And we’ve seen some early results, some small wins. We’re building traction. These are bigger, more enterprise-level discussions that we’re having. We’re already selling consumer products to a vast majority of the MSOs. But we don’t want to just be a vendor that is there to provide certain products. At various times, we want to be a partner. We want to provide a comprehensive solution. And part of that is bringing in displays that can sit at the register and can sit in the cannabis retail store. We have some of those coming over via boat right now. It took a little bit longer with some of the supply chain. So we’re getting traction with the SKUs, but the more comprehensive larger programs that we intend to implement with leading MSOs, some of that stuff is coming in the near future. So everything is moving in the right direction, albeit a little slower than we like, but extremely positive signs, great upside and, again, very synergistic to the rest of our business as well. So as we land some of these opportunities, it drives more efficiencies. It drives better top line and more meaningful, I guess, stickiness, so to speak, with these clients. So we’re super excited, and again, we feel great about where we’re at, and we want to get this throughput into the market as quick as possible to the extent we can control it, right?

Great. I appreciate the color. And that makes sense. Second question for me in terms of the discontinuation of sales for some of your third-party products. So number one, Greenlane had historically had a lot of reliance on the smoke shop channel, right, so that I assume you need a pretty large sales force given it’s so fragmented. So, could you talk about some of the cuts you’re making? Are some of those within that sales force as you’re not going to have those third-party brands to sell through? And then number two, can you talk about maybe initiatives you have in terms of still selling your own products into that and how much overlap those third-party brands might have had with your own proprietary; and then just kind of your overall kind of like channel mix going forward, whether or not you’re still going to have a heavy reliance on those smoke shops or maybe shifting more into an e-commerce and C-store channel as you were just kind of mentioning before? Thank you.

Yes. Great question. And our channels are evolving, and we’re looking to skate where the puck is going, right? And you can look north of the border to Canada, and you can see a considerable amount of shift in consumers from purchasing these types of products, traditionally smoke shops, to now purchasing them at cannabis retail. Why has it accelerated so quickly in Canada versus here in the U.S.? Well, it’s simple because the margins on cannabis have come down considerably in Canada, and the competition amongst retailers has increased significantly in Canada. So when you have those dynamics, which we know will play out in every market in the U.S. over time, you have smart retailers saying how do I differentiate myself from my competition and create more value for my walk-in consumer; and simultaneously, how do I offset the cannabis margin degradation and you look at these ancillary products that typically garner significant margins, sometimes keystone type margins, right? So we’ve always had that thesis. We’re seeing it play out in Canada. We know it’s going to continue to play out in the U.S. and globally over time. And we’re really well positioned being one of the leading providers of these goods focused on that channel of trade. So yes, we’re going to be very focused on dispensaries and cannabis retail going forward. We know that there will be a shift from smoke shop to those channels over time. We’re going to continue to service the smoke shop channel. It’s still a very vibrant channel, especially in a lot of markets in the U.S., especially in markets that don’t have legal cannabis stores in the U.S. So we’re going to continue to do that. We’re also going to leverage sub distributors to do that for us, right? Traditionally, Greenlane has been more of a seller of third-party products. Well, when you’re a seller of third-party products, you’re now going to sell to another third party to then sell to the retailer. It doesn’t quite work as well. Now that we own our own brands, that’s a very vibrant channel for us, being able to use sub distributors to help build those and get them into brick-and-mortar, smoke shop, head shop and alternative retail. C-store, which we’ve already talked about, that’s a bright new horizon, and we’re making some great inroads there. We’re very pleased to have our VIBES products represented in 7-Eleven throughout the Southeast. So we’re making some traction there, and we expect to be able to sell through some of our other products that are viable for that channel. And then as I mentioned, we have Craig helping us with the Amazon, Google, Walmart, all the marketplaces and getting a set of our products. Not everything can go on those channels today. But Greenlane has proven as a pioneer in the industry that we were able to list on NASDAQ before other companies were, right? We were able to get the USPS B2B exemption before other companies in the space. So we are confident that we’ll be able to get our products – more of our products on these platforms ahead of other people in the space, given our compliance and regulatory knowledge and know-how. So we think those are kind of the channels that are going to drive this forward. We’re not going to abandon the smoke shop head shop channel, but we’re going to recognize where we see the majority of the sales shifting over time. And as a seller of our own consumer brands, any consumer brand company in the world is focused on direct-to-consumer and focused on using platforms like Amazon. So we don’t want to be any different, although we do have our unique challenges being in the sector that we are. And again, I think we’ve proven over time that we’re more capable of navigating those challenges than virtually any other company out there. So that’s the answer on your question about the channels. And then the part of your question about the brands, we are going to be rationalizing a lot of the smaller brands that we’ve typically sold and distributed. We are going to be keeping some of the larger, more notable brands that we’ve historically worked with and that represent a large portion of our business. So this would be brands like CCELL, Storz & Bickel, PAX, Grenco. And those are some of the more notable larger ones. And then there are a couple of the other smaller ones that we will keep in the portfolio. But we’re going to look to offer similar products within our own brands, right? If there’s an opportunity to launch various grinders or pipes or other accessories that we’ve maybe sold under someone else’s brand, well, let’s launch that under our brand and capture the full margin profile. So we intend – even as we consolidate down in terms of the brands, we still intend to have the majority of the offering that we had before. It just won’t necessarily be someone else’s branded product. It will be a Greenlane branded product, if that makes sense.

No, that makes a lot of sense and that’s really helpful color. I appreciate that and I am going to jump back in the queue.

Thank you, Aaron.

Your next question is coming from Owen Bennett, Jefferies. Please announce your affiliation then pose your question.

Good morning, gents. Owen here from Jefferies. I hope you all well. A couple of questions please. First one, just on the strategic measures. Hoping to get a bit more color on what the noncore assets could be. And then just how much of the business is the lower margin third-party brands currently, please?

Yes. So the noncore business assets that we’re looking to sell or exit comprised of some of our business units that are tied to e-commerce operations. There’s a drop-shipping business unit that we have. There are some domains that we have. So again, it’s stuff that kind of doesn’t fit within our core of selling across the channels that we just outlined, selling direct to consumer. And so – and these are channels that aren't efficient for us. We’re also going to be restructuring our European business as well because that market, although it represents a significant opportunity in the future as it matures, right now is not profitable for Greenlane so we're going to be restructuring that and exiting components of that business as well. So that answers your first question. And your second question on the percentage of sales, I think your question was the percentage of sales that the third-party brands make up today that we're discontinuing. And that number roughly is between $12 million and $14 million annually on the consumer side. So depending on how you look at the percentage, whether it's consumer or across the whole business, that's kind of the ballpark of the number. And again, our idea would be if we're giving up, call it $13 million in revenue that we would otherwise have achieved from these brands, now we still have inventory that we're selling through. So it's not going to be an immediate impact, right? But how much of that can we replace with products of our own brands, which are going to be double or triple the margin, right? And so the idea is you give up $13 million of sales at a 20% gross margin, but you replace it with $6.5 million of sales at a 40% gross margin, you're right back in the same place. As we've stated, our focus is no longer on top line growth. It is all about margin and profitability. And so this strategic shift fits right into that strategy that we've outlined.

Thanks Nick. And then just the second question and kind of takes on last answer. Just on the branded side, where are you seeing the strongest growth across your brands currently? And then how are you still thinking about M&A on the branded side? I mean any consumer product segments you'd like to be in that you're not right now? And or any segments where you'd like to add more brands, obviously, I mean, there's the opportunity there that you just mentioned in terms of the ones you're taking away. But I mean any of the segments that kind of jump out where you think there's a lot of growth here and you'd like to go a bit more deep?

Yes. So we are seeing good growth with our VIBES and Eyce brand. We have a pretty robust pipeline for our Grove brand, and we expect to see big growth out of that brand this year, which is going to be more of an economy brand. And we do have – all of our brands we do expect to grow this year. Q1 has been a quarter where we've been very busy completing our integration and getting the new strategy launched. We also went through an ERP migration, right? So some of this is going to affect consumer brand sales in Q1, but the growth is baked into the rest of the year, and we feel very confident about that, especially moving into April, which is 420, which is always a very big month for the company. So we think we've got most of the categories covered within the brand portfolio. We're going to be kind of expanding the range of products within a couple of the brands like Higher Standards, for example, is a very all-encompassing high-end smoke shop brand, whereas Grove is going to be more of an economy brand that can span across a lot of those product sets as well. So it gives us room to be able to launch products across a wide range of categories, so to speak. And in terms of like what we're missing, look, we have Eyce as a premium silicone brand. We have VIBES as a very high-growth, exciting paper brand. We have DaVinci for vaporizers, and again we have the Higher Standards and Grove that we mentioned with collaborations with Keith Haring and Marley and all that in between. So we've got a lot covered in our portfolio today and supposed to say, where are the areas of opportunity as we look to expand, maybe not necessarily something we need to acquire, right, maybe something that we could just launch within that portfolio. And we're very focused on organic growth this year. We've said that we were pausing acquisitions given where the capital markets are. And just given the fact that this is going to be a year where Greenlane really executes internally, right? And we don't want to necessarily complicate that by bringing more assets into the fold when we kind of feel like we have enough already that we can build upon and we can expand. That said, if there's an opportunity to joint venture or have somebody else support launching us into a new category that we feel is right, we'll consider things like that. But we do intend to be much more focused this year on kind of what's in front of us and just be able to execute on the plan, get this business profitable and prepare for very significant growth over the next five to ten years. It's hard to necessarily think about the future when we're dealing with all the stuff we have to deal with at our company and across the industry. But the reality is we're still very early days. And so we have to set ourselves up for success, build this foundation and be prepared to be the ancillary cannabis leader for the next decade or two, and that really starts this year with shoring up the foundation and executing on our get profitable strategy.

Thanks Nick. Very, very helpful. Thank you, sir.

Thank you. I appreciate the question.

Your next question for today is coming from Scott Fortune, ROTH Capital Partners. Please announce your affiliation then pose your question.

Good morning. Scott Fortune with ROTH Capital Partners. Real quick, I wanted to touch a little bit on the e-com side of things, whether it's consolidation or how you're looking at kind of the direct-to-consumer online footprint. Are there potential cost savings there? But just kind of vet out a little more of your online strategy as you look out going forward for Greenlane here?

Yes. So look, I think what's important to us is focusing on the direct-to-consumer efforts. We kind of look at that a little bit different than the e-commerce marketplace type efforts, right, that we have with some of the websites and web properties we operate. As we get more focused on our own brands, we want to be able to offer those brands directly to consumers through our website, driving organic and paid clicks to those domains and being able to transact getting these products on consumer marketplaces like Amazon and Walmart. So that's really going to be a bigger focus of ours. If you look at some of these marketplace sites, we see – obviously, there's opportunity and we're generating revenue there today, right? But longer term, a lot of that's going to be disrupted by bigger marketplaces like Amazon and Walmart, right? When they start to adopt these product sets more widely and there's going to be an opportunity for us in the near term. We want to capitalize on that, but we want to put most of our efforts on where we see the most viable strategy long-term. And building out a business right now that's going to ultimately directly compete with Amazon, in our opinion, is not probably the best use of our resources. We want to build out our business that's going to be complemented by Amazon when cannabis becomes federally legal. So that's kind of the big distinction that we want to highlight between really what we would consider more direct-to-consumer using the Internet and using e-commerce versus more of an e-commerce type marketplace offering that we have in our portfolio as well.

Again I appreciate the color. And just real quick, I know you're very involved on legalization. You were recently kept The Capital Hill discussing legalization. Any takeaways of what's being worked behind the scenes potentially with the CAOA coming out in April or shifting to the SafePlus type of opportunities from a legalization side? And then any call-outs on states within your business that are continuing to drive growth here? Obviously, as mentioned before, we have consumer headwinds in such challenging first half. Any other states that you think are moving quicker from that standpoint on the legalization time point?

Thank you for the question. Regarding our efforts in Washington, Doug Fischer, our General Counsel, and I recently visited Capitol Hill. We were part of a group of 20 companies meeting with members from both the House and Senate. These discussions were significant, and the sentiment around the issue has shifted. There's a clear recognition that this matters and needs to be addressed. The primary concern everyone is discussing in the industry is the 'how'—how to move forward. There's more support for this than we've seen before, but the challenge remains in figuring out the process. From our conversations, it seems a possible route could involve an introduction of legislation. The House is set to vote on the MORE Act this week, which is historic. However, many are awaiting another bill expected in April, potentially referred to as 420. At Greenlane, we'll be observing closely when that happens. While there's anticipation, we also understand the likely outcome—that there might not be enough support to push significant legislation through. This will prompt them to consider their next steps: whether to hit a standstill or to pivot towards alternatives like Safe Banking or SafePlus, which, as mentioned, we believe could be a productive direction. We are hopeful that rational decisions will be made. Given the circumstances following the push for the other bill, we expect that they will come back to something that can garner bipartisan support, as Safe has shown strong potential based on various metrics and discussions. Additionally, we cannot overlook the situation with Brittney Griner, who is currently detained in Russia for cannabis oil. President Biden is likely going to have to take action regarding this, especially as he’ll need to negotiate for the release of a nonviolent cannabis prisoner while we have 2,700 nonviolent prisoners in our own federal system. This presents a challenging scenario, and it may inspire Biden to advance his campaign promises related to cannabis decriminalization, expunging records, and releasing prisoners from federal custody. I'm focusing on these two dynamics as key factors. There may be an opening for progress before the upcoming election, and if you asked me my outlook, I'd lean towards optimism. However, realistically, I see a 50-50 chance at this moment. Regarding your second question, I apologize for not recalling it; could you please repeat it?

Call-out on the different states that are growing, are you seeing strength?

Yes. So look, I think with our industrial goods business, we've traditionally – well, since the last two years, as you know, been focused more on MSOs. And so our sales are tracking those markets that are doing well, so markets in the Northeast, Pennsylvania, Massachusetts, Florida and the Southeast, Illinois. So we're seeing our sales more tracking that. We're seeing more turmoil in some of the legacy markets, right? Like California, everyone has been looking at the pricing stuff there. And for us, it's not that there isn't business to be had. It's just that there's a lot of credit risk if you're going to be outlaying product to customers in those markets because you just don't know what's going to happen. So we're focused on the safer markets. That we know the operators there are very stable, that they have strong balance sheets, and we're going to invest heavily in them. I mean it's a big investment. And we want to make sure there's a longer-term ROI and so we're going to invest in the companies that we know are going to be here, they are going to be the acquirers that are going to be consolidating the space. And our sales, on the industrial side, specifically are definitely tracking along with the markets where those operators are excelling. On the consumer side, we continue to see broad distribution. I think we haven't noticed any impacts from – specifically from economic stuff within states. I think all the data we're seeing look similar to kind of what's happened historically with the exception of kind of when we win some business in some of these new channels of trade, right? I mentioned the 7-Eleven exposure that VIBES now has in the Southeast. Obviously, that's new, and so you'll see a little bit of an uptick there. So no meaningful conclusions from the consumer side. And again, on the industrial side, sales are marrying more of the MSO favorite markets that you guys all know really well.

Your next question for today is coming from Glenn Mattson, Ladenburg Thalmann. Please announce your affiliation then pose your question.

Hi, thanks for taking the call. Glenn Mattson from Ladenburg Thalmann. So can you just help me bridge the gap on the cost reductions, the – you talked about quarterly reduction from – by about million by Q3 of 2022, so $26.6 million down to $16 million, say, at the high end. And then so that's like $40 million on an annualized basis and then you have $8 million in reduced workforce – in workforce reduction cost savings and then facility footprint reduction, which is mostly, I think, depreciation expense that's not included in that number, and then the rest is from, I guess, adjustments to go to market. So it just seems like a big number that's remaining. So you could just bridge the gap on how much work there is to be done to get to that level by Q3. Thanks.

Hey, Glenn, it's Bill. Yes, that number, the $10 million came off of a $26 million number for Q3. And obviously, that number also had some one-time items in it. But the $14 to $16 per quarter is what we're feeling very strongly about. We said we'd get $15 million to $20 million simply out of the merger synergies. And we've already done that based on our press release. We said we've claimed that we've already achieved that number, plus $8 million of head count related to what we just announced, gets us very close to the numbers that you just rolled off. But what guidance-wise we're telling you is, $14 million to $16 million on adjusted SG&A, which is really everything but depreciation and amortization.

Okay. So maybe just – and the progress to get there over the first half, is it just a general sense of like how much work still needs to be done just, so we can build confidence in the ability to get there? I think the more confidence in the number than the better response you see in the market.

Yes. Hi, Glenn. This is Nick. So look, I think we were very confident in our $15 to $20. We had updated the Street on the progress we've made through four months where we achieved a meaningful amount of those synergies, right? And then that wasn't included in the cost cutting that we announced on March 10, which included another $8 million of head count reduction. So the head count reduction that we add up is already what we've said publicly over $16 million of annualized savings, and that's something that is obviously already recognized, right and going to be showing up in our P&L going forward. And then some of the facility reductions and things like that, we've already been able to exit facilities, and we're going to get them we're either getting out of leases or getting subleased. So some of that's really tangible as well. So we feel very confident. I don't think there's a lot of risk. We've always been saying, hey, we got to control what we can control. And we know that we can control costs. And so when we put out a guidance for costs, the likelihood of us hitting it is extremely high. If you put out guidance for sales growth, a lot more variables there, right? Costs, we can control, we're very confident, and we do believe that we're going to achieve the target range here in Q3, which is just three months away.

Yes. No, that's very helpful. Last one quick for me. Just on the gross margin outlook, you – when you weigh all the variables, like being able to pass through the freight surcharges and then the reduction in the lower-margin brands and things like that and you balance that against the challenges in the marketplace that are out there, can you just give us a sense of what kind of magnitude improvement you think or what general thoughts on gross margin as you move throughout the year?

Yes. Look, we're still being, I think, pretty conservative on our gross margin projections just given all of the dynamics, and we've seen margins get weighed down with supply chain issues and tariffs and freight. We've got this nice plan to pass a lot of that through, and a lot of that's going to lead to kind of incremental margin improvement. The big margin improvement is going to come when we see that mix shift to our – more of our consumer brands because they're just bringing in 45%, 55% type gross margins. So that's going to play out later in the year. And hopefully, if we get that part of our business to become larger as an overall part, we could see the margins getting into the 30s, right? But for this year, given all those dynamics and not sure what we can expect from the supply chain side, we're going to be focused more in the 24% to 25% range, right and just nailing that. And we think that aligns perfectly with our cost cutting and what it's going to take to get this business profitable, right? If you look at the sales we did last quarter, $56 million, if we could just deliver on that 25%, we're at the low end – or we're hitting the low end of our SG&A range, right? We're at $14 million in gross profit. And if we're on the low end of our SG&A guidance we're breakeven, right? And that's Q4 sales. So again, building a plan that we believe we can execute on is conservative that can get us profitable without relying on significant top line growth. We love – we want to grow top line. Don't get me wrong, but we don't want to bake on top line growth coming to save us and get us profitable. We need to control what we can control and build a plan that we're extremely confident we can achieve. And so again, conservative gross margin in the 24% to 25% range, conservative revenue growth this year, and we're going to be just fine.

Great. Thanks for the color guys.

Thank you.

Thank you.

There are no further questions in queue. I would like to turn the floor back over to Nick for any closing comments.

We're right on time here at just over an hour. So thank you all for tuning in. Very pleased to report our first quarter as a combined company between KushCo and Greenlane where the full quarter was recognized between the two companies. And so we're really well down the path now of the new Greenlane. This year, we expect to be a phenomenal year for us despite fighting against continued headwinds, which we expect in the industry. But we've gotten used to it. That's the good news. I think we have a very tangible plan, as we've outlined here, to accomplish our goals. And we think there's a lot of upside if we could start to get some tailwinds into the sector. So we're feeling really good. We appreciate everybody's support and tuning in and hearing our story. We look forward to updating everybody throughout the course of the year. We want to be able to get some more exciting news out, some of the big deals that we're working on, etc. Now that we've gotten through the bulk of the integration and we've outlaid the plan, we intend to be able to articulate wins throughout the year. We're excited to get back to winning, excited to get back to achieving our goals. And we're excited for the industry to progress and hopefully, some sort of legalization to come into play later this year. Thank you. I hope everyone continues to stay safe and healthy, and we look forward to updating you on our next call. Cheers.

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.