Greenlane Holdings Inc (GNLN) 2019 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to today's conference call to discuss Greenlane Holdings Second Quarter Fiscal 2019 Financial Results. (Operator Instructions) Hosting today's conference will be Scott Van Winkle with ICR. As a reminder, today's conference is being recorded.

I would now like to turn the conference over to Mr. Van Winkle. Please go ahead, sir.

Thank you. Good afternoon, and welcome to Greenlane Holdings conference call to discuss results for the second quarter of 2019. On the call today from Greenlane with prepared remarks are Aaron LoCascio, Chief Executive Officer; and Ethan Rudin, Chief Financial Officer. We're also joined by Adam Schoenfeld, Chief Strategy Officer; and Sasha Kadey, Chief Marketing Officer.

By now, everyone should have access to the earnings release, which went out this afternoon at approximately 4:20 p.m. Eastern Time. If you've not received the release, it's available on the Investor Relations section of Greenlane's website at gnln.com. This call is being webcast, and a replay will be available on the company's website for approximately 30 days.

Before we begin, we'd like to remind everyone that Greenlane's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. 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, including those identified in the risk factors included in Greenlane's IPO prospectus dated April 17, 2019.

Please note that during today's call, management will discuss non-GAAP financial measures, including adjusted net loss and adjusted EBITDA. Management believes these financial measures can facilitate a more complete analysis and greater transparency in the Greenlane's ongoing results of operations, particularly when comparing underlying operating results from period to period. Greenlane has included a reconciliation of these non-GAAP measures in its earnings release.

This call also contains time-sensitive information that speaks only as of the date of this live broadcast, August 12, 2019. Greenlane assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Now I'd like to turn the call over to the company's CEO, Aaron LoCascio.

Thanks, Scott, and good afternoon, everyone. I will briefly review our second quarter sales highlights and business development activities, and then turn the call over to Ethan to review our financial results in more detail. After that, we will open up the call for your questions.

We had a record second quarter at Greenlane generating $53 million in revenue, representing 31% revenue growth year-over-year and continued to expand our portfolio of leading brands and customer network. We experienced growth during the quarter across each of the cannabis, hemp-derived CBD and liquid nicotine categories and have an aggressive pipeline of additional partnerships in each segment.

Gains in both the U.S. and Canada drove the growth, particularly in the vaporizer category. We also advanced international development, adding key talent in Europe and Asia, while continuing to invest in the expansion of our sales team. Our goal of being the employer of choice is proving out well as we have attracted and hired top talent from leading consumer products, retail, cannabis and global tobacco organizations. We will continue to search for and hire a world-class workforce to create, grow and nurture the best cannabis brands across the globe.

We have also been reviewing strategic opportunities globally to accelerate our growth. We remain disciplined with the potential acquisition targets we are evaluating as well as in our opportunity selection process. We have significant confidence in our pipeline to continue to grow through acquisition, and M&A remains a key strategic reason we decided to go public.

In the rapidly growing CBD category, last week's Gallup survey found that 1 in 7 Americans is using some form of CBD, and we are positioning ourselves as a category captain, building a portfolio of the most respected brands in the sector through exclusive distribution agreements.

Over the past several months, we signed new distribution agreements to expand our portfolio of CBD offerings including exclusive deals with Bloom Farms, Cookies and PAX Era CBD products. These new relationships are in addition to existing exclusive relationships with Select, Mary's Nutritionals and SLANG. The pace of these particular partnerships illustrates that Greenlane continues to be the partner of choice for cannabis brands that seek to build global brands with hemp-derived CBD products.

In an effort to expand our closed system vaporizer offerings for licensed cannabis cultivators and processors, we have signed distribution agreements with Hanu Labs and AVD Pro. These particular agreements with companies that are more focused on liquid vaporization versus dry herb vaporization allow us to better capitalize on consumption trends. We also launched distribution of Futurola pre-rolled products, which also helps us expand our relationships with licensed cultivators and processors.

Finally, we extended our agreement with Canopy Growth for exclusive distribution of their iconic Storz & Bickel vaporizers, including their next-generation Volcano Hybrid. These additions, along with continued growth of our premium child-resistant packaging brand, Pollen Gear, allow us to capture to an increasing share of the opportunity in our channels of distribution.

JUUL sales were very strong this quarter, led by incredibly robust demand in Canada and continued strong growth in the U.S. We increased net sales of JUUL products nearly 70%. Additional promotions, including a large program that began in the month of June, were among drivers of the growth. We also supported a promotion of lower nicotine concentration products during the quarter.

Strong sales growth of JUUL products overall has more than offset the impact of JUUL's voluntary suspension of flavored product sales to retailers in the U.S. at the end of last year, and our growth reflects the ongoing consumer demand and brand loyalty for JUUL, despite recent media attention to the regulatory environment.

Regulatory scrutiny around e-cigarettes has been a topic of interest for investors. Specifically, recent news of the City of San Francisco has established a temporary ban on e-cigarette sales has gained significant attention. So let me note a few points. First, we are in full support of responsible legislation, such as raising the minimum age of purchase with the objective of transitioning adult smokers off of combustible cigarettes, and JUUL has demonstrated strong evidence of success toward achieving this goal.

Second, we are also in support of any efforts to limit sales of flavored products to age-gated retail locations, such as vape shops and smoke shops. Former FDA Commissioner Gottlieb issued draft guidance to this effect while at the FDA.

Third, our exposure to San Francisco is insignificant, representing approximately 0.1% of our year-to-date sales, and we would expect minimal impact from any enduring change in San Francisco. Our Greenlane house brands continue to deliver high-margin growth opportunities, which we aim to invest in heavily with incremental spend on marketing and headcount.

In the second quarter of 2019, we grew our house brands 61%, comprising 6.3% of our total net sales, up from 5.1% a year ago. In addition to diversifying our revenue stream, house brands are also accretive to boosting our overall gross margin, delivering nearly 35% gross margins on average in the second quarter, and we have plans to further improve them through higher-margin house brands like VIBES and new house brands that we either develop in-house or acquire.

While we have cultivated a strong foundation of house brands to date, we continue to focus on expanding our portfolio. We began shipping VIBES rolling papers this quarter into strong demand and expect our available inventory to build as the year progresses. We have quickly sold out of everything we get in and anything with the VIBES brand is seeing strong demand. We are also seeing growth in Aerospaced and Groove, both of which are exceeding our supply.

We have now built good supply of our Marley Natural line and are expanding our sales efforts and broadening availability. As we announced last month, Pollen Gear was awarded its second patent on its child-resistant SnapTech Bags. As the leading and often imitated packaging brand, the value of the patent portfolio cannot be underestimated.

On the higher standards front, we recently signed an LOI for a new store in Malibu, California, located next door to the landmark retailer Fred Segal.

Turning to e-commerce. Net sales increased 13.6% during the second quarter of 2019. Unique visitors increased by approximately 8% to over 380,000 and transactions are up approximately 13% to over 7,600 for the quarter.

In July of 2019, we completed the consolidation of VaporNation and vapeworld.com to vapor.com, enabling all e-commerce customers to visit a single platform. We are developing a focused advertising strategy to further build awareness and traffic to drive our e-commerce growth.

Returning to the second quarter as a whole, we delivered growth across brands and markets and are well positioned to continue to drive growth in the cannabis, hemp-derived CBD and liquid nicotine categories. Favorable regulatory changes, such as recent cannabis legalization in Illinois or the passage of the hemp-derived CBD legislation in Texas and Ohio, are examples of the favorable tailwinds we look to capitalize on.

We continue to build upon our strong customer and supplier relationships to drive organic growth, expand our world-class portfolio of proprietary brands and expand our network of more than 11,000 retail locations.

In closing, we are building a highly efficient global infrastructure that we believe will create an unrivaled supply chain to support the long-term growth of the cannabis, nicotine and CBD industries.

We are aggressively expanding our portfolio of house brands and developing new innovative brands and categories. Along with our focus on growing our B2C efforts through vapor.com, we are focused on driving a greater mix of our sales toward our highest margin proprietary brands and channels.

Now I'll turn the call over to Ethan to run you through the second quarter financial results. Ethan?

Thank you, Aaron, and good afternoon, everyone. Second quarter net sales reached a company record of $53 million, representing a 31% increase year-over-year. As Aaron noted, multiple product categories and strong growth in both the U.S. and Canada drove the increase. In terms of product categories, the net sales increase compared to the prior year period includes increases of $10.5 million from the sales of e-cigarette products, $0.8 million from the sale of child-resistant packaging and $1.8 million from the introduction of new product lines, including hemp-derived CBD products.

Gross margin was 17.3% in the second quarter of 2019 compared to 20.7% in the prior year period, reflecting changes in sales mix given the strong growth of JUUL and promotional activity to expand market share in the e-cigarette category. To provide some context on the impact of the mix and promotional activity, our gross margin, excluding the sales of e-cigarette products, would have been just over 24% during the second quarter.

Salaries, benefits and payroll tax expenses increased $3.4 million year-over-year. As a percentage of net sales, sales benefits and payroll taxes increased to 13.3% from 8.9% in the prior year. The increase is primarily due to the addition of 65 employees over the past year as we continue to expand our domestic sales and marketing efforts, and $1.7 million of equity-based compensation expense for the 3 months ended June 30, 2019.

We expect to see a further uptick in salaries and marketing in the back half of the year as we increase our investments in sales and marketing to support growth of our Greenlane house brands' supply and packaging and e-commerce initiatives. These expenses will materialize ahead of the higher margin sales we expect to generate.

General and administrative expenses increased approximately $1.3 million in the second quarter of 2019, but were relatively consistent as a percent of net sales at 10.2% compared to 10.1% in the prior year. General and administrative expenses included approximately $320,000 of incremental audit and legal fees and consulting expenses related to the company's transition to becoming a public company.

Net loss was $3.2 million and impacted by $1.7 million of equity-based compensation expense, $300,000 of costs associated with transitioning to a public company and this compares to net income for the second quarter of 2018 of $0.2 million. Adjusted net loss was $1.2 million compared to adjusted net income of $0.6 million in the prior year. Adjusted net loss for the second quarter of 2019 excludes the previously mentioned expenses and net loss.

Adjusted EBITDA was a loss of approximately $1.2 million for the second quarter of 2019 compared to a gain of $1.1 million for the comparable period in 2018. We ended the second quarter of 2019 with $69.3 million of cash and $8.3 million of debt. The debt reflects the financing for our corporate headquarters, which was purchased in 2018.

Reiterating our long-term financial targets, we continue to anticipate approximately 25% annual net revenue growth, average gross margins of 20% plus and adjusted EBITDA margin of 10% plus. I'd remind everyone that the key to driving this gross margin profile is continued investment in growing our house brands' supply and packaging business and e-commerce. Driving the stand-alone margin profile of these combined businesses is accretive to our current margin mix. Additionally, Aaron previously referred to our acquisition efforts, and I'd simply comment that since becoming a public company, the velocity of acquisition opportunities has accelerated for both bolt-on and transformational acquisitions.

We are focusing our efforts on evaluating targets that help us expand and accelerate our growth geographically as well as expand and diversify our product offerings, of which currently there are many targets. Our current M&A pipeline is robust, and we are in various stages of pursuing multiple opportunities. Now more than ever, as good stewards of shareholder capital, maintaining our strictest standards for acquisitions is crucial for future long-term success. And we are confident in our ability to execute on acquisition opportunities that meet or exceed our standards.

With that, I'll turn the call back to the operator.

(Operator Instructions) Our first question is from Vivien Azer with Cowen and Company.

So a really solid revenue quarter ahead of my expectations, and I was at the higher end of the Street. So just curious to hear how the quarter ended up relative to your internal expectations? And if it was ahead of expectations, what were the key contributing factors?

I don't think anybody can deny the fact, Vivien, that JUUL really, really outshined our expectations. The promotional activities that dropped in June, really, really accelerated matters for us above and beyond what we thought. Admittedly, a lot of it was promotional related to batteries rather than pods. But nonetheless, I mean, it really speaks to the strength of the installed base. The fact that the installed base is growing, and the mix shift obviously had an impact. But nonetheless, we're excited to get the revenue, and we're excited to see the strength of the brand in partnership with JUUL.

That makes perfect sense, and I appreciate your candor on that. It does necessarily, though, like raise the second question, which is that Ethan, you reiterated your commitment getting gross margin over 20%, but as you enumerated the growth rate of your underlying businesses, in particular, e-com, only up 14%. Sorry, in the broader context of consumer staples plus 14% is admirable, to be sure. But like how do you drive positive margin mix when JUUL is growing 70%, cannabis and stuff is growing 60%, e-comm is growing 14%, like how actually do you drive margin expansion?

So few points here to make. One I would say is that, as we indicated in our prepared commentary that we plan to step on the gas. Obviously, we're seeing some very, very early success with VIBES. We've got new store opening in higher standards. And we have a significant number of levers to pull to really drive that mix shift, I don't want to stay away from JUUL, but to actually compete with it as a piece of our portfolio. The other side of the story is for the brands that are more third-party versus house, we're really subject to the cycle of innovation. And truth be told, we're waiting for some really new and exciting things to come out from partners that everybody wants to have it dialed in right, everybody wants to have their new products placed in the right doors. And we're taking a really methodical and strategic approach to thinking about what new pipeline looks like and how that translates across the channels of trade we compete in.

Okay. And I don't mean to monopolize the call. I promise these are my last 2 follow-ups, but they're both related. So number one, you called out Pollen Gear in your prepared remarks that -- like that's obviously on the comp. And you've also called out higher standards. And I'm just a little bit confused. Is it true? Are you asserting that higher standards is higher margin than the corporate average?

Yes, higher standards. Both our retail brick-and-mortar stores as well as the higher standard portfolio of products are substantially higher margins than our corporate average.

Okay. That's great. Super helpful. And then I promise my last question. You guys just like commented on M&A and like "new opportunities" to drive your margins higher. It reminds me of the most recent announcement that was well received by the market in terms of the Storz & Bickel innovation and there was kind of a last sentence around like a new hybrid. Can you expand on that? That's my last question.

Sure. So as Ethan has mentioned before, in our environment, the pipeline that we've built, one of the things that is always exciting to see internally that drives the next level of growth is innovation. And it's been a little while since we've seen new and innovative products come to our primary portfolio of vape products because we are still predominantly vape. So the launch of the Volcano Hybrid certainly represents a very exciting opportunity for us to expand upon the distribution of the products and get the next class of customer that's been looking for a next-generation product bought into it.

Our next question is from Derek Dley with Canaccord Genuity.

Just following up on that last one around acquisitions. Can you just give us an idea of some of the things that you're looking for? I mean, is there a focus on acquiring more brands? Is it more acquiring more distribution assets potentially globally or even looking at some technology assets? I mean, just help us sort of think about the framework with your acquisition strategy?

So we look at acquisitions through 2 different lenses: One is horizontally, which is really an expansion, a fortification of our distribution pipeline, more notably through geographic expansion. And then the other lens is vertical acquisitions. Where we can really look to expand upon our margin profile and again, build upon the house of brands that we've already built and continue to build.

And on that house of brands, I mean, can you give us an update on sort of where your house of brands, your private label penetration was at during the quarter?

In the prior quarter, we had mentioned that it was 5.1% of the revenue. And I believe now, let me just double check, I think it's 6 -- spare with me for a second, 6.3% of the portfolio.

Okay. Great. That's a good progression. And you called out VIBES as being, obviously, having an exceptional sell-through with your distribution partners being sold out, so on and so forth. Can you comment on some of the other major private label brands? I get Pollen Gear is still relatively early stage, but how about the higher standards brands, for example? I mean, are you seeing good sell-through with some of the other brands?

Yes. I mean our higher standards brand, we see the growth whenever we open up a new store. So there's obviously more visibility. And so obviously, having stand-alone company retail, but then also have it be a brand within our B2B and B2C portfolio, we see a lift there as well as just general awareness helps. We're really, really excited about Keith Haring's suite of products that are coming out in smoking and vaping accessories. We're really excited about Marley Natural. We're seeing growth across all of our house brands in a fairly even keel. So super excited about them.

Great. And then last one for me, and I do appreciate if you can't disclose, but you mentioned obviously, JUUL sales were up 70% year-over-year during the quarter, Canada doing exceptionally well and the U.S. still growing. Can you give us sort of the magnitude of the difference? I mean, was the U.S. up sort of high -- was it up in the double digits or what was the magnitude difference there?

We're not breaking that out just yet. Is it actually -- we haven't split out -- I'm sorry, are you talking about the revenue mix or are you talking about the growth? It was unclear.

The growth, sorry, the growth.

So the U.S. growth for JUUL quarter-over-quarter was 48%.

And how about Canada?

I'm sorry. And in Canada, that figure -- we didn't have JUUL in Canada Q2 of last year.

Right.

Sorry. So that 48% was year-over-year. Perfect. That is very helpful. Congrats on a solid quarter.

Our next question is from Scott Fortune with ROTH Capital Partners.

Congratulations on a good quarter. Yes. I want to expand on the CBD brand offerings. Now you have, I believe, 6 or 7 different brands. Do you see strength coming in certain states where the CBD regulations are varying? And then what type of SKUs and offerings are you seeing from a restocking standpoint, whether it's the tinctures oil and such or topical going on. Where can we see strength, if you can call a call out states or the product offerings from that standpoint?

So we're seeing strong growth in our CBD brands across all geographies in the United States. Some of the top-selling products, as to be expected, are the vapables as well as the tinctures, although it's -- I don't want to take away from the topicals that we've been doing quite well with as well. And again, it's really, for us, internally, it's about building a strong portfolio that really provides a good merchandising platform for our customers because they are looking for multiple brands. So we'll continue to evaluate others as we progress.

And a note on that, have you seen new distribution partners come on board, 5 of your established 11,000 retail kind of vaping smoke shops from that standpoint. Are you in discussions with that, new distribution?

Yes. We're in early discussions with all sorts of distribution. I mean, look, at the end of the day, we're trying to figure out the best placement for these products so that consumers can try them. Obviously, we have some semblance of dominance over 11,000 doors in our chosen channels of trade. But we have a creative out-of-the-box thinking sales force that's also thinking about what everybody else is thinking about in terms of food, drug and mass and other interesting places where we could be placing our portfolio of products. So yes, we're helping everybody try and ferret out their CBD and their cannabis strategy, and we really enjoy engaging in that dialogue with potential partners.

Great. And then last thing on CBD. What is the margin profile as far as JUUL or some of the other higher margin side of things? What's the profile on that business part of it?

You know we have such a diverse SKU assortment in CBD that it would be a misnomer for me to give you an average at this juncture, given the diversity and the product we're carrying.

Okay. And last thing...

But to comment, it does have a higher margin profile than a lot of the other products that we're selling in the e-cigarette area.

Okay. And last thing higher standards, you signed up on Malibu. You've mentioned you want to open up 2 or 3 potential higher standard retail stores by the end of the year. Where are we kind of real estate located and signed for expectations kind of towards the end of this year?

We have a very fortunate problem, Scott, that a lot of folks really want a higher standard store in their lifestyle center or wherever cannabis consumers aggregate and congregate. It's also a great education center. So we're really kind of agnostic. We're just looking for the best real estate, the best foot traffic and the best place to showcase our brands.

Any guidance on the number of stores potentially by the end of this year?

No, no different than what we've already guided. I think we're trying to plan our stand-alone retail relatively conservatively.

Our next question is from Mike Grondahl with Northland Capital Markets.

Hey, with your CBD products that you're selling, roughly how many of your 11,000 retail locations that you touched, how penetrated are you into those 11,000?

I'd say right now, we're in very early innings. I mean, obviously, with Select and Mary's, we picked up a lot of doors that they've kind of given to us. And so we've been working through those to make sure that we've got the assortment correct. We've got it priced appropriately. But when we approach new product launch, we don't saturation bomb. We look for quality doors. We look at reorder rates. We look to generate excitement and sales velocity. And so we're not really commenting right now on the number of doors and the percentage penetration. But I will say there is healthy runway ahead of us.

Got it. Got it. And then with your vaporizer products, I know you've been looking at sort of big-box and mass retail. How is that progressing as sort of new opportunity?

Well, we continue to service big-box retailers in Canada with the likes of Loblaws, Shoppers Drug Mart and the OCS. We have been in discussion with the mass retailers in the United States, where there's a number of interesting mass retailers that are looking to dip a toe in the water, if you will. So it will be interesting to see how those products perform in those places, and we look forward to kind of talking more about it in the near future.

Got it. Got it. And then lastly, you gave a number, was it e-commerce growth? Or was that percent of revenue when you started talking about e-commerce? I didn't catch the number.

That was e-commerce growth.

Got it. It was 15.7%? Or can you repeat it?

13.6%.

Our next question is from Glenn Mattson with Ladenburg Thalmann.

So curious, this is the second quarter in a row that kind of JUUL promotions led to outperformance in that category. Can you speak to whether or not that cadence should remain the same. Do you expect further promotions in the second half? Or is there any chance of risk that there maybe some revenue got pulled forward by some of these promotions?

JUUL has been pretty consistent with the number and frequency and velocity of promotions. I wouldn't expect that to change. But I remind you that JUUL remains -- even in quarters where they have historically not been promotions is a very, very, very strong performer. Again, they ran the promotion on the batteries with the primary objective is increasing the installed base, having more and more additional adult smokers make the switch from traditional combustion products to the JUUL platform, and it's proved out to be working remarkably well. And there is certainly some price elasticity into bringing those customers onto the platform. But once they're on there, we've shown tremendous evidence that they're sticky. They stay.

Okay. And beyond the initial headlines on when those -- San Francisco on the regulatory front, when those issues came up. I haven't seen much news on it. Can you talk anything about kind of follow-through there? And whether or not you've seen any other cities or anything think about things similar to San Francisco? Or is it one-off?

Well, there's always going to be individual municipalities that are evaluating these products, especially ahead of the FDA actually ironing out their approach to these products. So it's unclear as to if and -- if and when any additional municipalities may take a similar stance. But I remind you that we have a very, very, very robust distribution pipeline for these products, so much in the way that San Francisco represented 0.1% of our total sales in the first half of the year, you can expect similar type of figures out of individual municipalities. So -- and Canada, which is not under the FDA, is showing very strong, robust growth. And we've mentioned that we are expanding our distribution internationally. So that also represents additional opportunities. Like in Europe, in the U.K., in particular, where they've really embraced vaporization as an alternative for adult smokers. So we expect -- we don't expect any negative -- if any additional municipalities take a similar approach, we do not expect to have any material impact on our financial statements.

Okay. And Ethan, you mentioned the salary expense running ahead of the benefit you're going to gain from higher margin sales and things like that. I guess how do we think about it, just kind of incrementally up in dollar terms sequentially over the next few quarters?

Yes. We're not really giving any guidance other than there's probably going to be a couple of million dollar variance from our initial expectations.

Do you have a number for stock comp expense for this year like what your expectation is?

Given how close we are to the IPO and the fact that we're ramping up on talent, I would expect it to be on the higher side for now, but not terribly dissimilar from the guidance and what you've seen this quarter.

And last one from me. On the financial criteria for acquisitions, can you just remind us about the framework on how you're thinking about like return on investment and accretive acquisitions or not and just that kind of stuff?

Yes. Obviously, given our public company status and being the stewards of shareholder capital now, we're thinking about all of the traditional metrics that you'd be thinking about doing public company M&A. We need to have accretion in both our growth and our margins. Obviously, it has to be accretive to our earnings per share. But also more importantly, strategically, it has to be a platform for us to jump off of to grow an entirely new country, continent, bring on a new product with margin accretion to the portfolio. And look, we're ferreting through several opportunities at any one time at various stages, and obviously want to make sure that we get it right. So we're really excited and hopefully be able to talk about some of the stuff in the near future.

(Operator Instructions) We now have a follow-up question from Vivien Azer with Cowen and Company.

Two housekeeping items and then like one more strategic question, please. Housekeeping item number one, and I apologize if I missed it, have you disclosed what CBD was as a percent of sales?

We have not. We actually characterized the growth as $1.8 million of new products of which CBD is a meaningful portion of it. And that's the growth.

Okay. So $1.8 million of incremental revenue of which CBD was $1.5 million.

A meaningful percentage, yes.

Meaningful percentage. Perfect. Okay. That's great. Second housekeeping item. It's come up a couple of times both in the prepared remarks as well as Q&A, geographic opportunities, specifically highlighting Europe, so let's be like very clear. Number one, are you in Europe?

Yes. We've established an entity and hired staff in Europe, but we're looking very closely in future quarters to aggressively accelerate on Europe as our next jumping point geographically.

So Europe is basically just like an SG&A overhang right now with revenue to come. Is that right?

Yes, but it's very, very small.

Okay. That's fair. Okay. Strategic question is on JUUL. You called out the timing of the promo in June and maybe this is more housekeeping than strategic. But my understanding was that June ran by annual promos, and you guys actually called it out on your last earnings call. And this is an offcycle promo, but the language I was hearing for me was that this is like part of like normal operating procedure, and that's just not my understanding of what JUUL does. So if you could elaborate on that, that would be helpful.

So I would suggest, I mean, historically, JUUL has actually ran their promotions quarterly. They've not necessarily provided a -- they haven't provided a calendar of promotions to expect going forward, but they very consistently have done quarterly promotions. You also -- you have to understand that JUUL has grown very expansively, very quickly as well. And some of the -- one other -- there was actually 2 promotions that took place in this last quarter; one promotion was actually geared towards SKU like full line compliance where they expand upon the number of SKUs at given customers purchasing with a focus on the lower nicotine products that they carry. So again, while I don't have a calendar, what to expect from JUUL going forward, again, I would tell you that they've been very consistent in their promotional activities. And I see no reason to believe that it will change in the near term.

That's helpful. And if you will, just a follow-up. Does any of this have to do with Altria's investment in JUUL in terms of the promotional cadence? And to like dive a little deeper on that, Altria is now doing Altria Client Services, so they're offering 3 key benefits to JUUL; number one is backfire optimization; number two is just broader like sales force; and number three, with the accompaniment of the e-com database; and number three is the impact of promos. So like do you feel or have you discussed with JUUL that they're trying to harmonize some of that activity with what they're doing in your process rate?

Vivien, you're really on top of this as we are. And I would say that we try not to second-guess what Altria is doing as a part of running our business. We have direct pipes into our partners with JUUL. And I think that while there -- it may obviously be some correlation and some overlap, it's not something we openly discuss.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

All right. Well, thank you for joining us today. We appreciate your support, and are confident in this next phase of growth for Greenlane. We look forward to speaking with you soon.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.