Cannabis consumption continues to increase in the US as more states permit use of the plant for recreational and/or medical reasons, while legalization at the federal level also appears inevitable. Other countries, too, are embracing cannabis for pain relief and as a potential treatment for certain ailments.
Greenlane Holdings (NASDAQ:GNLN), Inc, which recently merged with KushCo Holdings, has become the leading global platform for the development and distribution of premium cannabis accessories and lifestyle products. The company sells everything from papers and wraps to vaporizers and custom packaging – all of which are designed to support and optimize the cannabis consumption experience.
During Greenlane's most recently reported quarter (3Q 2021), the company generated record revenue of $41.3 million and that momentum is expected to continue. Greenlane CEO Nick Kovacevich is the co-founder and former CEO of KushCo, which grew, under his leadership, from less than $2 million in annual revenue to achieving nearly $115 million in sales during fiscal 2020, with operations in multiple states and countries.
Kovacevich talked to Proactive about the benefits of the company’s recent merger and outlined Greenlane's growth plans.
Proactive: In which ways do you think investors will benefit from the KushCo-Greenlane merger?
Nick Kovacevich: The merger has created the industry’s leading ancillary cannabis company and house of brands. We are now able to deliver more value to customers across the supply chain, serving a premier group of customers that include many of the leading MSOs, LPs, and US smoke shops, as well as millions of consumers globally.
The business combination also strengthens our best-in-class proprietary owned brands and exclusive third-party brand offerings, which will be key to cross-selling to our respective customer bases, scaling revenue and margins, and driving profitability.
As industry pioneers and with over 200 articles of IP (Intellectual Property), we’re able to cultivate a strong innovation pipeline across a broad category of product offerings, enhancing value for our customers as they grow and providing robust and innovative products that their consumers are seeking.
The merger has created a stronger financial position and scale for the combined company, with greater access to capital via Nasdaq listing. In addition, our optimized platform provides significant potential revenue and cost synergies.
Speaking of synergies, what specific synergies do you expect to achieve from the merger?
We anticipate $15 million to $20 million of annual run-rate cost synergies within 24 months from the close of the merger. In addition, we expect significant revenue synergies from cross-selling Greenlane-owned brands into legacy KushCo’s customer base and vice versa.
How does Greenlane stand out from its competition?
We are virtually the only company in the ancillary space that has our own portfolio of ancillary CPG (consumer packaged goods) brands. We have an enviable customer base, serving 22 of the top 25 MSOs (multi-state operators), many of the leading LPs (licensed producers), and over 2 million consumers via our eCommerce channels, with access to more than 8,000 retail doors.
How will the current efforts to legalize cannabis at a federal level in the US affect Greenlane’s outlook, especially seeing that it is unlikely the legalization legislation will pass anytime soon?
While we would love the social justice and greater access to capital that comes with federal legalization to materialize, we also are very well-positioned in the current environment, serving premier operators who are continuing to scale, consolidate, and dominate the marketplace, especially in supply-constrained regions with favorable economics.
With federal legalization, there is the possibility of more entrants entering the market and creating competition for our customers, which will bring the price of cannabis down. However, since we also serve consumers through our CPG products, a lower price of cannabis should result in higher sales for our CPG products, which will benefit the company.
We are hedged in either scenario to do well, but are ultimately well-positioned for the eventual switch to federal legalization, which we believe is only a matter of time.
Can you talk a bit about Greenlane’s growth plans?
A big part of it is growing our portfolio of owned brands, which will increase stickiness with customers, enhance margins, and drive higher profitability for our shareholders. We want to be in control of our destiny, and having our own portfolio of in-house brands is the key to doing so.
We will continue to grow our CPG portfolio of leading ancillary products, while strengthening our relationships with premier and award-winning third-party brands, such as PAX, Cookies, Storz & Bickel, CCELL and Grenco Science. We will also continue to integrate the two businesses and drive greater efficiencies, scale, and synergies from the merger.
Supplementing all of this will be our efforts to continue to grow inorganically, acquiring leading brands that can enhance our market share, margins, and product portfolio.
What do your shareholders have to look forward to in the next 12 months?
To start with, integrating the two businesses together and realizing the significant revenue and cost synergies we identified at the time we announced the merger in March 2021. As well, growing our portfolio of owned brands, and driving higher margins in the business. And, we will be cross-selling deeper into our customer base and securing stronger relationships and contracts with our top customers.
We believe that if we can successfully execute on all these fronts that our stock and multiple will experience considerable appreciation.
What is the company's vision for the next five years?
Our internal vision is for Greenlane to become the premier ancillary CPG powerhouse serving the top operators and millions of consumers across the globe, as we continue to ride the wave of legalization, and benefit from favorable consumer trends that demonstrate increased usage globally.
But we don’t just want to stop there. Our grander vision is to have a world where humanity is free to enjoy Mother Nature’s magic. We believe cannabis is a gift to society that has been wrongfully stigmatized and demonized, at the critical expense of consumers, companies, and governments. With the significant tax income, jobs, and opportunities it can create, it’s no surprise to see the rapid momentum of new markets legalizing medical and adult-use sales.
Further, while we continue to propel the industry forward, we all have a responsibility to rectify the atrocities committed against minorities and others affected by the War on Drugs.
Contact Sean at sean@proactiveinvestors.com