Q4 2020 Greenlane Holdings Inc Earnings Call And Joint Conference Call with KushCo
Good morning, all welcome to today's conference call to discuss <unk> holdings fourth quarter and year end financial results press release detailing financial results for the quarter was distributed this morning and is available on the Investor Relations section of agreement and website as well.
A reminder, today's conference is being recorded.
On the call today are animal Castillo, Chief Executive Officer, and Bill Mote, Chief Financial Officer.
Before we begin and would like to remind listeners that today's prepared remarks may contain certain forward looking statements and management may make additional forward looking statements and responses to the questions receipt day.
Statements do not guarantee future performance and therefore undue reliance should not be placed upon them each.
These statements are based on current expectations of the company's management and evolved.
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 2021.
Factors that could cause results to differ materially are set forth in today's press release, and a Green Plains, Inc.
And the form 10-K, and quarterly reports on form 10-Q filed with the SEC and.
Any forward looking statements made today on this call are based on assumptions as of today and Green and I have no obligation to update these statements as a result of new information or future events.
During today's call management may discuss non-GAAP financial measures, including adjusted net loss and loss and adjusted EBITDA.
And then has included a reconciliation of these non-GAAP measures and today's press release, which is available and the Investor Relations section of our website at G and al and dotcom.
I would like to turn the conference over to Mr. Aaron Locascio, Chief Executive Officer of Guggenheim. Please go ahead and Mr. Locascio.
Thank you everyone for joining us today I want to quickly address our exciting news from this mornings announcement regarding our merger with <unk>.
As a result of this transformational development, we will be keeping the earnings portion of today's call brief following our discussion of earnings we will be transitioning to a presentation and discussion regarding the transaction at which point, we will be joined by the Kush co team and after which we will open the call to questions.
During this portion of today's call I will review key highlights from the year before turning the call to our Chief Financial Officer, Bill Mote for a brief review of our financial results.
At the start of 2020, we outlined several major initiatives and goals for our team to address developments and challenges and the evolving market and best position our company for success in 2020 one.
Under this plan, we committed to streamlining and optimizing our distribution platform, bringing in new senior leadership and accelerating the diversification of our revenue mix to one more heavily weighted to our owned Green Lane brands.
I am thrilled with the progress we have made on every one of these deliverables all of which was accomplished during a challenging global environment with the COVID-19 pandemic.
Our core revenue is up 12, 7% to a record $125 2 million for the full year, 2020 compared with 2019 with our higher margin Green Lane brands up 46.3% to $27 2 million.
Additionally, our owned brands revenue now accounts for up to 20 per cent of total net sales for 2020 compared with only 10 per cent for 2019.
Green lanes owned brands have continued to outperform with four delivering record quarter over quarter growth with Vives Rolling papers up 53.6% Marley natural up 68, 3% Keith Haring glass collection up 73.1 per cent and aerospace up 24.5 per cent for Q4, 2020 compared.
With Q3, 2020.
Our success in 2020 started us on strong foundation for 'twenty, and 'twenty, one, allowing us to gain momentum as we execute on our strategic vision launching exciting new consumer products into the market growing green lines position as the leading provider of cannabis consumption products globally and generating strong shareholder.
Their value.
To achieve this we are focused on continuing to increase our higher margin revenue opportunities through green lanes owned brands growing our relationships with Premier Third Party brand partners further cost reductions through increased optimization and efficiencies and expanding our platform through carefully selected M&A opportunities.
<unk>.
On the M&A side, we've recently had several exciting developments.
In early March we acquired our longtime partner ice the leading manufacturer of specialty silicones smoking products there.
And there are premium products have set the brand apart as a leader and the market and we are thrilled to be working with the highly experienced and talented team.
When we look to add to our growing list of own brands. We are focused on products that elevate our customers' experiences and strengthen our position as an industry leading provider of premium cannabis accessories and with ice we can do both.
With margins of approximately 60% and year over year revenue growth of 33, 2%. Their addition to our portfolio will also further drive revenue growth and profitability.
We will continue to evaluate similar opportunities in the marketplace as we expect industry consolidation will continue to happen over the next few years.
Today, we also announced the transformative merger with Kush co and exciting development, which we will discussed and the second portion of today's call.
With the Pact Act, we have recently seen and expansion of legislation surrounding the shipment of certain vaporization products.
Early in the process of the legislation our compliance and logistics teams began leveraging our immense compliance DNA to setup a world class network that can operate independently from major shipping carriers substantially mitigating what will be a significant impact to many in our industry.
While solving for these challenges we have also identified opportunity.
We have used this capability to attract new customers and we are also beginning to market. It as a service solution to our existing customers and vendors.
As always I want to finish by sincerely thanking our team for all their dedicated hard work as they continue to successfully execute on our strategic goals amid a challenging macro environment. We look forward to updating you on our 2021 progress in may with that I'll now turn it over to bill to run through our <unk>.
Financial results and further detail.
Thanks, Sarah and Hello, everyone and as a reminder, the results I will be reviewing with you. This morning can be found in our earnings release that is available on Edgar and the Investor Relations section of our website at G and L and Dot com.
I will begin my review with a brief overview of our fourth quarter financials before turning to our year end results as.
As a reminder, before I begin our core revenue is defined as all non nicotine revenue and Green Lane brand revenue is inclusive of ice figures.
Our core revenue sales grew 11, 3% to $33 9 million compared to $30 5 million in Q4, 2019, I am and pleased to report our core revenue growth in the fourth quarter of 2020 accounted for 93 per.
4% of our total revenue.
Up from 81, 8% and the comparable quarter. Additionally, our Green Lane brands grew 55 per cent to a record $7 8 million compared with $5 2 million and Q4 2019.
Net sales for Q4, 2020 were $36 3 million compared to $37 2 million for Q4 2019, a decrease of two 6%.
Gross margin during the fourth quarter of 2020 was $6 2 million. This decrease was a result of our strategic decision to move away from higher volume lower margin revenue and focus on higher margin revenue opportunities.
I will now turn to an overview of our results for the year and December 31, 2020.
Net sales of Green Lane owned brands grew 46, 3% to $27 2 million for the year, increasing to approximately $19 seven per cent of total sales for FY 2020 from $10 one per cent for the year ended December 31 2019.
Core revenue grew 12, 7% to $125 2 million in 2020 from $111 1 million in 2019.
Total sales decreased to $138 3 million in 2020 from $185 million and 2019. However, core revenue now accounts for 95 per cent of revenue for 'twenty, and 'twenty compared to 61% and 2019.
From a reporting segment perspective, our United States segment reported a decrease in net sales of $47 7 million to 'twenty, and 2020 and 'twenty due to a reduction in non core nicotine revenue of $55 8 million, but.
But core revenue grew by $8 1 million $7 6 million of which came from our growth and Green Lane House brands are.
Our Canada segment reported a sales decrease of $6 7 million and similar to the United States. The decrease was driven by a $5 million decrease in non core revenue.
As for our European reporting segment annual sales totaled $10 3 million with Q4, 2020 sales totaling $3 1 million and representing half a million or 15, 2% growth and comparison to Q4 2019, the first quarter post acquisition.
During the year Green Lane made specific strategic decisions regarding existing inventory levels and go forward product lines. Excluding the impact of these inventory adjustments made during the third quarter, our annual gross margin would've been $27 6 million and gross profit margin would've been 20%.
Our 320 basis points higher than the FY 2019 gross margin of 16, 8%.
We expect overall gross margin to continue to expand from its current levels as we execute on our strategic vision with Green Lane brands at the core.
G&A costs were 2020 increased to $35 3 million compared to $23 6.002 million 19, primarily due to an increase of approximately $2 million and subcontractor expenses related to our ERP system implementation and distribution channel consolidation and increase of $3.
$2 million and third party logistics and facilities expense costs.
A loss of approximately $4 5 million related to and indemnification asset as well as additional auditor accounting fees due diligence costs related to the recent acquisitions and restructuring costs such as severance payments. These expenses were partially offset by a decrease of approximately 1.1 million and.
And marketing expenses, primarily driven by the decrease and trade show activity and travel and fiscal 2020 as a direct response to COVID-19, Lockdown and social distancing protocols during the period.
Net loss for 'twenty, and 'twenty was $47 7 million compared to $39 8.002 million 19, adjusted net loss was $25 9.002 million 20, compared to $18 5 million and for 2019.
Adjusted EBIT loss was $24 4 million in 2020 compared to adjusted EBIT loss of $13 4.002 million 19, the increase and adjusted EBITDA loss. This year was primarily due to a decrease and overall gross profit of $4 million due to a drop and nicotine revenue.
And additional inventory write offs of 1.4 million above the EBITDA adjustments that we've laid out along with previously mentioned increase in general and admin administrative expenses relating to the subcontractor expenses of $2 million due to our ERP project and our transition to third party logistics supply.
Yours, coupled with approximately $3 2 million and expenses from incurring both three P L and pryor facilities running costs, while we completed our DC consolidation.
As of December 31, 'twenty 'twenty cash stood at $30 4 million compared to $47 8 million and cash as of December 31 2019.
Thank you everyone for listening in to the earnings portion of today's call I'll turn the call over to the operator for the second portion of today's call.
Thank you everyone and we'll pause for a moment to allow all interested parties, who will be participating and the transaction portion of today's call to join if you wish to hear this discussion. Please remain on the line and standby.
And in a few moments.
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Alright. Thank you operator, good morning, everyone and thank you for joining us on Green Lane and Krish goes merger conference call by now everyone should have access to the business combination press release we'd.
<unk> issued this morning.
The press release and supplemental presentation are available on the Investor relations sections of Green lengths website at Investor Day, G and L and dotcom and Christos website at IR, Doug Kiszko Dot com.
A replay of this call as well as a copy of the supplemental presentation will be archived on the investor relations sections of both companies' websites.
Further information on the terms and conditions of Green Lane Kush goes definitive merger agreement. Please refer to the agreement and its entirety, which will be available on Edgar at Www Dot FCC Dot com.
Before we begin please let me remind you that during the course of this conference call management from both companies May make forward looking statements. These forward looking statements are based on current expectations that are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations.
These risks are outlined and the risk factors section of both green lanes and coach goes SEC filings as well as and Green Lane and Krish goes joint press release issued today.
Any forward looking statements should be considered in light of these factors. Please also note that any forward looking information, we make speaks as of today and <unk>.
Management of Green Lane, and Cuzco do not undertake any obligation to revise any forward looking statements and the future.
With me on the call today are Greenlight and co founder and CEO, Aaron Locascio, and CFO Bill Mote as well as <unk> co founder and CEO, Nick Kovacevich, and CFO, Stephen Kristofferson would that I would now like to hand, the call over to Nick Nick.
Thanks, Jim and welcome Aaron and Bill and Stephen and <unk>.
Special good morning, and thank you to everyone for joining us today, especially on such short notice before we begin I wanted to remind everyone that we will be referencing the supplemental presentation on today's call, which as mentioned earlier can be found on the IR website of both Greenlee and Kishke now to the news of the day. This is.
Such an exciting and transformative day for both companies, including our combined 350, plus employees, bringing together two of the largest ancillary cannabis products and services companies and the emerging industry.
The combined company is expected to have pro forma revenue in excess of $250 million for the trailing 12 months reported by each company, which would be one of the highest for any company and the global ancillary cannabis industry.
We anticipate that this transformative transaction will create considerable scale and synergies and an important inflection point and the cannabis industry as the leader and the ancillary cannabis sector. We believe the combined company will be strongly positioned to provide enhanced product offerings and expanded ancillary services to our valued customer basis.
And while growing profitability and maximizing value for all shareholders. It is our belief and ancillary cannabis companies with scale product range and innovation expertise are most likely to benefit and the long term and we believe this transformative transaction checks off all the boxes and will deliver sustainable.
Stable and attractive returns for our shareholders.
And now with that let's jump right in and turn to slide three of the supplemental presentation, where we provide an overview of the strategic rationale for this transaction.
One of the major defining points of this transaction is the fact that we are combining and robust differentiated and innovative offerings, including company owned brands and exclusive third party products to create a comprehensive best in class product portfolio. The combined company will become the leading supplier of premium.
Consumer brands and products ranging from consumption devices, and vaporizer, the child resistant packaging papers solvent and related merchandise.
And the beauty of this is that bulk green lanes and push gross product offerings and customers complement each other very well, allowing for tremendous cross selling opportunities and speaking on behalf of the crescendo team I can say that we have admired for quite some time, the product and customer profile that the Green Lane team has built.
And <unk>.
And seeing the equal respect the Green line team has shown us over the years I know the feeling is mutual.
It's worth noting that these cross selling opportunities exist across the entire value chain.
Some of the world's largest cannabis operators, the leading retailers and all the way down to and consumers.
Whereas cuzco has excelled and serving the upstream market of growers processors and brand Green Lane has done a phenomenal job building out its downstream market of retail and direct to consumer channels. Together, we are strongly positioned to be the partner of choice to a large and rapidly growing.
Global customer base.
The combined company will serve a premier group of customers, which includes many of the leading multi state operators and Canadian Lps and the majority of the top smoke shops, and the U S and millions of consumers.
We will also be well positioned for expanding our go to market channel, even further as legalization expands and additional retailers carry more of our products.
And company will not only have substantial breadth from a customer and product offering perspective, but just as importantly from a financial perspective and.
In fact on a pro forma basis combined company generated approximately 250 plus million dollars of revenue in calendar 2020.
With a pro forma market capitalization north of $350 million as of March 29.
Following completion of this transaction, we believe the combined company will have a strong platform for accelerated organic growth and should be well positioned to capitalize on attractive market opportunities as the industry. Further evolve. This platform includes both the potential revenue synergies I highlighted earlier as well as significant potential call.
Cost synergies that should enable us to improve margins and enhance profitability.
We're expecting the improved operating leverage and enhanced scale of the combined company to drive approximately $15 million to $20 million and cost savings synergies within 24 months of closing as well as providing a strong trajectory for.
For increased profitability.
These synergies are expected to be realized from economies of scale and optimize distribution network and reduced operating expenses and.
We're not planning to stop just there our goal is to create and ever expanding and robust platform that can drive business accretion for our stakeholders for many more years and decades to come as we integrate the two businesses and leverage the enhanced strategic position and financial profile of the combined company.
And as I touched on earlier the transaction comes at a pivotal time and our industry, where multiple <unk> are converging from customers rapidly gaining scale and new states legalizing cannabis and even the potential full blown federal legalization, which has never looked more likely to materialize and it does today and our joint platform positions.
The combined company to capitalize on these tailwind across multiple geographies and to accelerate the growth both companies have experienced on a standalone basis Ulta.
Ultimately, we're bringing together two of the pioneering cannabis ancillary product and service companies with a combined 25 plus years of operating history to catapult, the combined company and to significantly stronger positioning and this next stage of the industry ever.
Elution.
Now that we've discussed the rationale I'd like to turn to slide four of the supplemental presentation, where we provide a high level overview of the transaction itself.
In terms of the structure of the transaction shareholders of <unk> will receive an estimated 2546 shares of Greenway and class a common shares for every <unk> common share while the exchange ratio and subject to adjustment under the terms of our agreement former Cush-cush holders will hold approximately 49 nine.
Per cent of the combined company's common stock and holders of Green Lane shares.
Approximately 51% of the combined company's common stock the stock per stock business combination has been unanimously approved by each of the Green Lane and <unk> Board of directors.
It is also important to note that as part of the transaction Greenland class C shares will be converted to class b common stock, resulting and equal voting interest for all shareholders of the combined company.
Following the close of the transaction, which we expect to occur in mid 2021 subject to customary closing conditions and regulatory approvals I will lead the combined company and served as its Chief Executive Officer, Bill Mote Green lines current CFO will serve as the Chief financial officer of the combined company.
And Greenland cofounder and Aaron Locascio will remain with the combined company as president and the rest of the combined company's management team will have their respective officer positions entitled announced at a later date.
Both are Green Lane and co founders, Aaron Locascio, and Adam Schoenfeld will remain with the combined company as directors I've known Aaron and Adam for several years and it's been a tremendous pleasure getting to know them even more through this process I am extremely excited to work with them and the entire combined company's leadership team.
Execute on our corporate strategy and integrate these two businesses.
In terms of the board of directors. The combined company will have seven directors four of whom will be nominated by greenlee, including Aaron and Adam.
The other three directors will be nominated by <unk>.
One of whom will be me. In addition, the chairman of the combined company will be selected from Krish, COSE and green lanes and current board of directors.
The combined company will be headquartered in Boca Raton, Florida, but we'll retain a sizeable presence and footprint and southern California, and last but not least the combined company will operate under the Greenland corporate name and will retain Green Lane and current exchange listing and picker G N L and on the NASDAQ.
I'll now hand, it over to Aaron who will walk us through slide five which showcases the significant breadth and depth of products and services, we will offer as a combined company.
Thank you Nick.
As you can see on the top of the slide the combined company will have a formidable position and vape hardware and technology products.
Leveraging and expanding upon <unk> deep relationship with T cell, we will be able to not only continue servicing <unk>, leading brands and operators with premium high quality vape hardware, but also to cross sell to green lanes wide customer base of brands operators and retailers.
Similarly, we are excited to cross sell established premium third party brands to Kush coast customers, such as Pax Storz, <unk> Bickel, Graco science, and many others as well as green lines premium owned brands such as the vibes Marley natural accessories, Keith Haring glass collection and.
Specialty smoking products among others.
Together, we will offer a wide array of world class product offerings for virtually every customer need and tight.
On top of that we're combining two premier and complimentary packaging platforms led by Green Lane innovative packaging arm pollen gear and <unk> expertise and delivering highly customized solutions for leading brands Msos and Lps.
Tapping into our combined 25 years' experience robust combined knowledge deep product development expertise and solid relationships with key vendors. We believe we are best positioned to continue delivering innovative product solutions to businesses and consumer clients global.
<unk>.
And with a combined 200 plus articles of intellectual property, we already have a strong innovation pipeline across a wide array of product offerings, and we will be supported by an industry, leading and experienced product development and design team.
As the industry evolves, we intend to continue leveraging our strength and innovation to enhance value for our customers as they grow and ultimately deliver the product lines there consumers are seeking.
This includes not only our vape and packaging offerings, but also our company owned brands as mentioned previously such as Vides Rolling papers Marley natural accessories, Keith Haring glass collection Aerospace grinders.
Specialty silicon smoking products and higher standards, which offers both and upscale product line as well as an innovative retail experience.
Rounding that all out is our comprehensive suite of value added services from product development sales service and marketing support.
No matter, how you look at it we truly are assembling and unrivaled offering of brands products and services that will enable us to be the clear choice for all ancillary cannabis needs and now I'll turn it over to bill to walk us through the next few slides.
Thanks Erin.
Let's now take a look at slide six which highlights the anticipated enhanced scale and financial position of the combined company. Following the closing of the transaction.
I won't touch on all the highlights, but you can see here that the pro forma business is well positioned for attractive and accelerated growth opportunities and our industry.
With combined revenue approaching 300 million.
Combined market cap over $350 million and a presence across four continents. The combined company will reach a truly global scale, not yet achieved and the ancillary cannabis industry.
More importantly, we will have a more diversified product and revenue mix, which we believe enables us to capitalize on the significant growth opportunities ahead of us and become even stickier with our customers by offering a full service one stop shop for all of their needs.
Next I'd like to dive into slide seven which provides a snapshot of the entire value chain, we intend to serve with our differentiated product offering.
The combined company will have the wide ranging products and services scope needed to support the industry's top customers.
And as we mentioned earlier because of the highly complementary businesses as well as the high quality customer base as we each serve there is potential for rapid organic growth through extensive cross selling.
Effectively we are harnessing Kush coast upstream customer relationships and green lanes downstream focus and channels to create a true seed to sale platform that is anchored by and focused on serving some of the industry's leading customers and third party partners.
And of course, the transaction is about much more than just the revenue synergies. We believe we can achieve through the cross selling opportunities available to us. It's also the substantial cost synergies. We believe we can achieve as a result of the merger which is captured here on slide eight.
From a cost of goods and operations perspective, the merger is expected to enable us to optimize green lane supply and packaging business, while leveraging <unk> strong custom packaging platform and deep customer relationships with the top msos and Lps.
Further we expect the combination to allow us to achieve greater economies of scale to rationalize and reduce cost both from a purchasing perspective and operations perspective.
The merger will also allow us to streamline and maximize our respective platforms through the combination of our facilities footprint.
Both Green Lane and <unk> have already spent the past year rationalizing their respective footprints, which has resulted in significant cost savings. The combined company will now take this go one step further and drive additional savings by utilizing our combined facilities and potentially some of our office spaces.
Well.
Finally, there is the cost savings, we expect to realize at the corporate level, both through corporate optimization and a reduction of public company expenses.
Altogether, we estimate that these synergies will translate to approximately.
$15 million to $20 million of pre tax annual cost savings that we anticipate can be achieved within 24 months from closing the transaction.
And as a combined company and conjunction with potential synergies.
We expect to have an accelerated pathway to positive free cash flow generation as well as enhanced cash flow from our large base of net operating losses.
And with that I'll turn it back to Nick.
Thanks, Bill and.
Although we have talked about the anticipated synergies it's important to emphasize that this transaction has been done and a catalyst rich macro environment that is amplifying the strategic benefits of the merger, which we cover here on slide nine.
Building on what Bill just shared this transaction is so much more than just achieving success and the current market landscape. It's also about setting ourselves up and the best possible way for new opportunities as the market continues to grow and evolve. We all know that this industry is poised for rapid and acts.
Celebrated expansion, especially on the heels of several tailwind lifting the industry even higher.
There are of course, more and more states legalizing adult rec or medical use cannabis and expanding the total addressable market each day.
And we believe we can serve a meaningful share of this global industry with very little incremental investment because we have already created the distribution networks and develop deep relationships with the leading operators, who will leverage our platform as they expand into new geographies.
Looking ahead to the remainder of the year. We are encouraged by new Jersey's progress to start their adult use program as well as New York and pending legalization of adult recreational cannabis.
Catalysts are only further supported by the fact that there has been increasing momentum at the federal level for real and meaningful cannabis reform, including full federal legalization, which would undoubtedly opened the floodgates for our industry.
Do you see this significant appetite for change not only at the political and legislative level, but also at the investor level, where nearly all of the major operators, especially our top customers have taken advantage of the all time high investor interest to raise significant sums of capital to fund their future expansion.
It's not always going to be up into the right as we have clearly seen the past 18 months with the illicit market vape crisis, the nicotine drawdown and initially the COVID-19 pandemic, but both businesses have shown incredible resiliency to overcome these temporary headwinds and emerge even stronger as standalone entities.
Making it truly a very opportune time to join forces and become one large ancillary powerhouse.
This is especially true given the fact that we have reached a critical time and our industry. We're the leading brands and operators are increasingly looking to align with partners in the space, who can reliably support their expansion for years to come with this transaction, we are effectively positioning ourselves as one of the pre eminent partners.
To support this elite customer group and by extension supporting the industry's accelerated growth through our enhanced scale and differentiated product offering.
And to support the integration synergy.
Realization and strategy execution of this vision is a team of seasoned industry leaders with the right combination of skills expertise and experience as shown on slide 10, and the management team will have a combined several decades of proven growth strategy execution as well as significant.
CPG tenure to establish the most experienced team and the ancillary cannabis realm.
With this industry expertise, we will focus on driving shareholder value by executing on profitable growth opportunities as well as realizing meaningful cost synergies.
And to now demonstrate this all and numbers I want to flip to the last slide of our presentation Slide 11, where we will take a look at the pro forma 2021 outlook.
As you can see we estimate that the pro forma combined company is tracking to achieve approximately between $310 million and $330 million of revenue or nearly double of what either company is looking to achieve on a standalone basis.
Furthermore, gross margins are expected to be between 22, and 24% with the combined company expected to generate positive adjusted EBITDA when excluding synergies.
And when you layer and the estimated $15 million to $20 million of expected cost synergies, you're not only looking at a much larger organization, but also a financially stronger and more scalable organization that can effectively serve the rapidly expanding global cannabis industry.
And with that I'd like to now turn it over to the operator for a Q&A session.
Thank you to ask a question you will need to press star, one or and your telephone towards draw. Your question press the pound key.
Ex that you please limit yourself to three questions. Please standby, while we compile the Q&A roster.
Our first question comes from Vivien <unk> with Cowen Your line is open.
Thank you and good morning, and congratulations on the transaction.
Thank you David and good morning.
Good morning, Phil.
Two questions. Please.
Transaction related and the first one is were there any change of control provisions that that needed to be addressed or that we need to be aware of for.
For any of your brands.
I think at this point, we can only.
Let's say, what we said publicly and obviously, we've we've laid out a lot of the brands that we work with and.
We've set up the deal to obviously be able to continue to benefit from.
The.
Partners that we have on either side so.
We're confident that we can continue to support all of the brands within our ecosystem.
And sort of how that works as we kind of move contracts into the pro forma et cetera.
It's all planned to be worked out.
Understood. Okay, that's good to hear.
And then second one in terms of antitrust.
Obviously, you guys play and a lot of different subsectors, so any concerns around any of the AIA China.
No.
Okay. That's.
With FERC and I'll defer to bill if he has any other insight into that.
No not at this point, we're going to go through the process, but we don't we.
We don't currently have any.
Major concerns.
Okay noted thank you very much and congrats again.
Thank you David I appreciate it thank.
Okay.
Our next question comes from Scott Fortune with Roth Capital Partners. Your line is open.
Good morning, and.
Stephanie if you ever been and the synergy side, and then kind of the.
A little bit more on the priorities for new growth opportunities, obviously, the focus on higher margin owned brands and customization.
Thank you.
Can you provide a little bit color of kind of the priority for them from that standpoint.
And if you initiate and just regarding and go.
Okay.
Yeah.
Yeah, So I'll start and then I'll pass it over.
They are and and bill but.
At a high level.
Got it.
I'm most excited about the revenue synergies right I mean I think.
We've both done a great job.
Respective companies of building our product portfolio is as I mentioned and the scrip.
Which goes and more focus on selling upstream.
And dealing with.
Producers processors.
<unk> operators Msos Lp's, leading brands.
Whereas green line has done a tremendous job of building out the downstream and being able to sell CPG products and company owned brands.
Through.
Allison's of retailers and also millions of consumers and so I think you put the two.
And together, there's massive potential for cross selling where we can actually take.
And the CPG products and the company owned brand and position those within the <unk> retail stores.
And the broader.
Cannabis ecosystem.
And within push goes round.
And then and vice versa.
Index within our portfolio that we.
We will be applicable as well through the retail channels and consumer channels that Green line has historically done a great job of servicing so.
Those are the obvious revenue synergies cost synergies are pretty straightforward I'll pass it over to Aaron and Bill.
And there is problem.
Robert on where they see the synergy opportunities as well.
And I'll speak a little bit to the cost synergies as with any combination of two public companies. There is savings in the and the compliance side of that being a public company. So the audit fees.
Listing fees all of that.
<unk> two <unk>.
Facilities, we both have some some relatively large warehouses and offices.
And so there are some some areas where we can.
Tighten up on that.
We both both companies will incur pretty significant advisory and consulting fees as I mentioned on our.
Our earnings call, just a minute ago, and we believe Theres a great deal of consolidation that we can do there from a from an outside advisory perspective.
As we look at talent on both sides of the fence and utilize that talent effectively so from a from a cost perspective those are some of the big things we're looking.
Good stuff and just just going onto one system, we think will be the big for us and.
The future as well, so I'll turn it over to Aaron and let him finish up yeah, and I just want to really Echo Nicks comments I mean the companies despite.
And despite being so similar or actually.
And at markedly different and they are truly is an incredible amount of cross selling and upselling opportunities to drive topline and gross margin performance. So we're very excited about the opportunities.
Avail themselves by virtue of this transaction.
Okay and then.
And for my follow up on cost.
Cost synergies of 15 and $20 million you have coming over about 24 months here and can we expect most of that to occur within the first share just from a timing perspective.
Not the first share the run rate will be at as you go through the 24 month period the first.
<unk>, obviously will have some work that we do to to get the two companies together and probably incur some expenses there to do that so it will negate some of the savings, but we will and we will have some savings in that first year period, but the maximize savings won't come until the second.
12 months and the 24 month period.
Okay I appreciate the color. Thanks.
Thank you next question comes from Owen Bennett with Jefferies. Your line is open.
Good morning, guys and hope all well and congrats on the deal and two questions from me. Please.
And first one cash on the possibility of additional Green Lane transactions prior to close and get the day a lot of just wondering what sources.
And she will potentially solve Oklahoma please.
Sure Great question appreciate it so you know as we have as Greenlee and had stated.
And it previously and during the IPO and and recent earnings calls.
We really wanted to stand at the forefront of.
<unk>.
A consolidation and the industry and we're really and have been looking at.
Transformative.
As well as bolt on type acquisitions from both a virtu.
Vertical and horizontal perspective.
We announced recently that we acquired one of our long standing partners and brands ice.
Premium silicone and smoking products provider and we have a very active pipeline of similar M&A type of opportunities on both expanding the distribution as well as acquiring additional.
Brands.
Okay. Thanks.
<unk> answer the second question, which was around the day given a significant pause.
And if you said last time I spoke to.
And you guys had green Lane and just a couple of bumps you go and you were talking about possibly moving more into Europe.
Branded vaporize, and which obviously come with more attractive margins.
Just wondering if if this is still the case and and.
How this would fit into the combined company given how important distribution.
And they paid right now I mean, I guess do you think one branded weight distribution of weight and live side by side given.
Given the competitive dynamics and and ideally.
Ideally how would you see this mix evolving thanks.
Okay.
And I'm, sorry could you could you could you repeat some of the question again.
Yeah, sorry.
And last time I spoke to you guys at Green Lane and you were talking about maybe moving more into your own brown and the vaporized and its given and more attractive margins and I was just wondering if this is still the case and how you think and this would fit into the combined company, given how imports and distribution of AEP.
So right now and so do you think one brown, Nick Vape and distribution of they can live side by side, given the competitive dynamics and and and ideally how would you see that mix evolving.
Sure. So you know as we've kind of stated publicly previously you know where we play across eight kind.
Our primary product categories, and we're really trying to penetrate each and every one of those.
Vape is interesting the most interesting of all because within vape. There are many different niches different styles of APE risers that vaporize different types of medium. If you will so it is something that we continue to evaluate we are very.
And of sensitive to our third party suppliers, but anything that we do will be very thoughtful and meaningful as to make sure that we are providing the most upside to green lane shareholders as well as third party.
Vendors of ours at the same time.
Taking it a step further I mean.
<unk> has a tremendous.
Very sad and chip with one of the top vaping suppliers and the industry.
And there is an incredible opportunity to leverage that relationship and play more and some of those verticals.
That are specific to see sell and liquid vaporization and also similarly coupling that with our.
As for like hauling gear pipeline, both from a packaging perspective as well as the fact that we have and incredible design team and studio that is hard at work, making a bunch of these different products designing and coming up with the next generation. So the combination of bringing relationships to the table with experience and know how and knowledge.
And it's quite remarkable I mean against Greenland spin and business now for 15, almost 16 years Kush go 10, I mean, it's quite incredible the amount of depth and experience that we each will bring and be able to cross pollinate and many different regards including potential product development.
Our entities.
Great and thanks, very much guys I appreciate the questions and congrats again.
Thanks Alan.
Our next question comes from Aaron Grey with Alliance Global Partners. Your line is open.
Good morning, Thanks for the questions and I'll Echo my congratulations on the.
Offer to action.
So first question for me is on.
The topline synergies specifically regarding the relationship with the Msos and Chris.
Historically had more of so just as we think about you know some of the topline synergies there and they keep it.
Can you, perhaps talk about some organizations, having more centralized buyers and others and I'm just curious as to whether those buyers that you're currently speaking with now and those organizations would be the same ones, where you potentially want to have those top line synergies and you said differently like they're now seemingly going to be the green line products will be going directly into dispensaries. So would those be the same conversations.
Trains with the buyers who are having now or would they be potentially new buyers within those organizations. Thank you.
Yes.
Thanks for thanks for the question Erin and glad to have you on.
No.
It depends but I think and and a mature organizational structure, probably not which is similar to the.
And that we have today when and when you look across our portfolio typically it's the same buyer for the seasonal products as it is for the packaging products, but it's usually a different buyer for the energy products the solvents that we sell.
Given our relationships with these organizations right it's not just.
The account manager.
Our relationship with the purchasing manager and those relationships throughout the organization starting at the top.
And working all the way down with multiple folks within <unk> and multiple folks within the MSR <unk> org structure, right, so and we're going to leverage that to.
The case up to the right folks.
And we believe that.
And these products are going to be a huge value add it's going to be incremental revenue opportunities for for these msos.
And that it's perfect timing.
We think that.
A lot of Msos and cannabis retailers.
General had been more focused on Canada rate ramping up production getting product on the shelf, we know some states.
And they can't make enough product right and it's a they saw 100% of what they can produce.
So in that environment.
There's going to be less of a focus on additional merchandise high margin merchandise.
And.
Tellers and be placed within these retail stores, but as we all know overtime supply will catch up with demand.
And margins will compress and so this is a huge opportunity for for forward thinking retailers to get ahead of the curve put a lot of these high margin high value CPG products.
Within the Greenland category.
Catalog right onto their right onto their retail shell and and.
And drive incremental spend.
The consumer retail customer.
With very little.
Additional overhead right. So our job is going to be.
Not only.
Two.
And.
The relationship set up with the right person, but also be able to educate them and helped merchandise their store properly so that they can maximize.
And the very valuable square footage that they have there. So this is going to be a very comprehensive process.
We're essentially going to be.
Taking the same approach that we've done right.
Right.
Our sales as you know and they don't happen overnight right. These are consultative sales.
Strong relationships and what you've seen with <unk> as you've been following us for several years.
<unk> seen the results of the cross selling that <unk> been able to do within our portfolio.
Portfolio and so that's why we have such a high degree of confidence that we will be able to continue that success.
Especially when you look at just the <unk>.
Catalog the Green line has and how premier of the products within it actually are.
Thanks for that color that's helpful and then.
Question for me.
This is regarding the EBITDA margin profile over time, you mentioned the pro forma company will be EBITDA positive, excluding the $15 million to $20 million and synergies.
With respect in terms of where you think that EBITDA margin profile could be.
Over the next couple of years I've always thought of Costco within itself.
Be kind of a low double digit EBITDA margin profile story over time, So love to get your perspective perspective, there and then kind of tailing back and what Aaron mentioned in terms of percentage.
Acquisition targets like how you think about profitability of the acquisition targets that you think about acquiring thank you yes.
Great question and look we don't we didn't give EBITDA guidance other than.
We expect it to be positive and obviously, you've seen with Costco and what we've been able to do over the last.
12 to 18 months.
And where we've got and the business back into positive adjusted EBITDA territory, but we recognize we need a little bit more scale right and so I think so part of the idea of putting these companies together as we get that scale.
Rail.
Right out of the gate and Green Lane has been.
Making improvements toward profitability as a stand alone and so again, there's going to be a lot of work to be done.
And with the synergy opportunities, we think there's a clear path, obviously to near term positive EBITDA, but more.
More and more importantly longer term as you asked you.
You mentioned <unk>.
You believe cuzco is sort of that 10% to 12% EBITDA margin.
Which is which is something we've talked about it again as we get more scale.
As the <unk> business.
One of the driving factors exciting things for us to do this deal as well.
We see higher margin potential with the Green Lane business, we think that.
Company owned brand.
And are gaining tremendous traction those are higher margin brands and again dovetailing into your second part of your question. When we look at M&A, Yes margin expansion right, we see opportunities.
Like like Green Lane saw with ice.
Sure.
There are already distributing the product.
Net margin, which is a healthy margin.
But then being able to acquire and recognize that full margin theres significant margin enhancements. So again, we wouldn't be doing this deal.
If we thought.
That margins would go down or stay flat and we see this as a catalyst to drive margins higher over time.
Of course, we've got a lot of work to do to kind of figure out where those numbers will be but we love the potential for for driving higher margins for driving more sales of company.
Any owned brands right, which obviously have more value.
And people historically, the knock on Costco has been hey.
And it's generic and we've talked about that time.
Time and time again.
Aaron and about how we have proprietary products that we offer to these msos, how we're partnered with <unk>, who is a leading innovator.
But at the end of the day.
And when you go to CPG and you go to company owned brand.
A whole different value and in the minds of investors. So we want to be able to capitalize on that and kind of marry the best of both worlds here right take these innovative brand and are sexy, the green line and building and gaining.
Significant traction and then just accelerate that by getting it into our channel and getting these products throughout the greater cannabis ecosystem. So I don't know if my friends, Erin and Bill have anything further to comment on that because you mentioned and the acquisitions, but that's how I see is how I see this opportunity and again, we're really excited.
Yes, and from our perspective, and Green Lane, we had already been forecasting that we would be profitable and 2021.
And from an EBITDA perspective, and then you add on top of that the additional synergies that we have shown and our.
Integration slide here.
I think that all of what Nick said is backed up by what the individual companies have stated as well and then you add the synergies on top so it can be and can be a very.
Very beneficial merger to bring these companies together and execute not only on their individual plans, but the combine.
And by and synergies makes the story that much more robust and I'll make just a quick final comment as I had stated earlier.
Green Lane has historically looked at acquisitions from a vertical and a horizontal perspective.
This transformative merger really gives us a and.
And incredibly.
More broad.
Distribution platform, we already each on their own had very respectable distribution platforms and this really catapult that into a leading position. So while we digest this merger and we're going to focus more heavily on the vertical type acquisitions, which is.
Brands of which we have a number.
You know that are active and our pipeline.
Okay, Great I appreciate the high margin yes.
Okay, great appreciate the detail and congrats again on the transaction.
Thanks, and I appreciate it.
Our next question comes from Glenn <unk>.
Mattson with Ladenburg Thalmann and your line is open.
Hi, congrats on the.
On the transaction as well so just building on that a little bit a key part of the.
Our success story here is that gross margin level in particular, you guys pointed to 22% to 24%.
Target and.
More and higher than kind of both companies.
Question first Green Lane Bill.
Bill can you talk about maybe sequentially I think that gross margin was down a little bit and.
That might be the second quarter, and a row, even excluding write offs and stuff. So.
Can you talk about what the director and gross margin for Greenlight and why.
<unk>.
Not acting a little better, especially given the fact that there is.
More house brand stuff and then.
Just just a little bit.
And why you're still confident you can get potentially.
Potentially that.
Upper end of that target, maybe 23, 24% and how long you think it would take to get there as a combined company.
Yes, if you recall, we were and thanks for the questions. Great question. If you recall, our aspirational goal of Green Lane was to be at 35% and next next rates next several years.
Actually our margins if you deduct out just the inventory work that we did in Q3.
And were three.
<unk> 320 basis points up year over year. So we have made meaningful progress.
Although that's not all we can go if you really took all of the things that happened in the year that were kind of one time and I have and added them all back and EBITDA, but it's almost like $6 $8 million that will go back.
And to margin.
For the for the adjusted margin if we were to do that only added back like the inventory work that we did in Q3 for the most part along with some other things they had done earlier in the year, but.
And reality I think a reasonable range for US is we've already kind of state it would be and the low low to mid twenties.
For 2021 and.
And we think that's very realistic if you look at some of the growth rates on the cash.
<unk> branded items and the margins associated with those that can get us there in and of itself and then you take takeaway some of the noise that we had and the numbers related to all of the inventory work.
And that we did in 2020 and.
That just that just incrementally gets you a stronger feeling about being able to achieve those goals that we've already set for ourselves.
Great. Thanks, Bill and then on the <unk> side.
Curious about what kind of ROE and will you see the ancillary.
I'm, sorry, the kind of.
Yeah, I guess ancillary businesses and things like.
Vendor financing and which I believe you've got into recently and.
CBD distribution and and just kind of.
Those are big growth opportunities or.
Or what are your views on that thanks.
Yes, great question.
And so.
<unk>.
We have a small a small stake and excess financial partner that does equipment financing that partnership obviously will continue and we will be able to leverage that to offer financing to the broader customer base for equipment, they need which is a great leader and for us.
To be able to sell our solvents to be able to sell our vape pens to be able to sell our packaging and I am sure. There is various things and the Green Lane catalog that we can also leverage with.
With that partnership but of course, that's all.
And our business, we own outright and so that is more of a partnership but we will see.
Synergistic benefits from that on a go.
It does.
In terms of.
And the CBD services that we offer again, we talk on our previous earnings calls about how theres less of a focus on that right now just given the state of the CBD market, there's not a lot of retailers.
Theyre looking to onboard CVD did have a huge success.
Forward base that we announced with our partner, where we landed United Pacific chain of I believe 350 stores and <unk>.
Gas stations convenience stores, and we were able to put.
A handful of the brands that we represent the CBD brands into those channels and again, we're acting as a broker. So we're just collecting a fee.
The interesting thing is Green Lane has acted as a distributor of CBD goods. So obviously that can be complementary and we also want to expand.
The Green lane products to more and more traditional mainstream retail.
They've done well and specialty retail and they're starting to get more into mainstream retail obviously.
We've got a huge opportunity to.
To expand the presence and cannabis retailers, we've talked at length here.
Traditional retail convenience stores gas stations United Pacific for example.
Opportunistic when you look at the current.
And future Greenland catalog. So I think there is certainly.
Three opportunities.
But push goes the Standalone CBD brokerage has been less of a focus for us as we see strong demand and our core business focus around our three categories packaging paper supplies, vape hardware and energy and solvents. So.
We'll see how it plays out we're not we're not we're factoring in.
And some centers mall synergistic benefit of that in terms of our <unk>.
Published revenue synergies, but it's not a huge factor, but that could all change that the CBD market turns back on which is something we've talked about we're partner with one of the largest food brokers and the country see a fortune.
So if.
All of a sudden the FDA gives guidance that CBD.
Can be and food and beverage obviously, that's a channel that could really ramp up and again have some further synergistic benefits.
Great. Thanks for the color and congrats again.
Thank you.
Our next question comes from Derek <unk> with Canaccord Genuity. Your line is open.
Yeah, Hi, thanks, everyone.
And thanks for the color so far on the call just a couple quick ones for me just given the time.
Capex, what should we expect for Capex for the combined company going forward.
Guys, we havent put that together when you look at both sides models, you're probably looking at somewhere in the five.
Hello range for Capex.
Looking at both models and putting them together, but we haven't built those plans out for a forecast yet so.
That's in general, where I think youre, probably going to land.
Okay. That's helpful. And then just in terms of the distribution center footprint that the two companies.
And you just maybe give us some color on what pushes cash goes distribution footprint looks like.
Yeah. So we've talked at length on previous earnings calls about.
The warehouse consolidation and optimization plan that we've implemented.
Really over the last.
Almost 12 months.
And <unk>.
We've reduced from one point I think we're and seven.
Seven or eight Dcs, we've reduced now down where we're landing here is going to be and to bicoastal distribution centers one.
130000 square foot warehouse, and Moreno Valley and Southern California.
And then 166000 square foot warehouse, and Worcester, Massachusetts, and so that's where the <unk> team has gone down to we're still at the final stages of getting out of our Washington, Michigan and garden growth leases.
And fully transitioning into those two hubs, which I think we said on our last.
We expect to recognize.
Around $1 million of additional cost savings. Once this consolidation plan is complete so we're near complete.
And we've laid out the final steps to complete that plan.
As a standalone and we're not giving any guidance on further opt.
Optimization between the two companies, but like I said the good news is.
<unk> has already done a lot of the optimization work on our side and and.
And so as Greenland and I'll, let them kind of talk about where they're at and their process.
Yeah.
Right. So we've optimized our.
<unk>, obviously with the with our facility for three P. L and in the U S. We still have and optimization project coming up in Europe and late Q1 early Q2 to move to a third party logistics supplier there as well those movements were really made to give us the scale and scalability that we believe we.
We need our growth rate is going to be pretty high this year from a sales perspective, and we needed to be able to get that scale as well as the efficiency that comes with a third party logistics supplier.
So we have already closed several locations in the U S and will also be B and Canada moving too.
Three P L. A new three P. L. As well so those are all things that are in the U S. For the majority of our business have already been done and then in Europe, and Canada, just just some finishing touches there to round out the strategy.
Yeah, and one thing.
To add just and additional color.
As Aaron said.
Businesses, there is some some overlap but they are.
The bulk of the businesses are fairly differentiated and so when you just look at the.
The <unk> business were becoming more concentrated around leading msos and our average order size.
And as fairly significant we're shipping.
Large large amounts to large large amounts of product.
Typically too.
Large customers that we service whereas.
And with one part of the Green Lane business, specifically their direct to consumer business and you can imagine those are much smaller.
And our parcels so yes.
And just keep that in mind, when you think about when.
And when you think about the.
Kind of distribution footprint et cetera.
No that makes a ton of sense. Thank you very much.
Thank you.
Our next question comes from Mike Grondahl with Northland Securities.
Your line is open.
Hey, guys, congratulations and just real quick.
And in your prepared remarks.
And he said something about kind of a work around on some of the distribution issues and challenges could you just explain that and a little bit more detail.
Yeah, So I think.
I'll pass and I was going to pass it to Eric to talk about that Oh go ahead there.
Thanks, Nick and nice to connect Micah.
So we have like like I had mentioned before during the prepared remarks.
Seeing this regulation.
And coming down.
And the new regulation and the form of packed act, our compliance and operations team actually developed multiple solutions.
And we actually have selected one that we're pretty far down in line with that actually.
<unk> leverage is.
And a sophisticated network of last mile distributors, along with a robust software platform. So that we can actually still service all of our customers or the vast majority of all of our customers a nationwide again, it's only really impacts U S.
Sales.
So using this this the combination of the software along with last mile distribution platform and our scale and package volume is frankly, what makes it all possible, which is why we've also been able to reach out to customers and vendors and extend.
And this as a service.
As well, creating potential opportunity for us, but I'm also happy to ask or answer any more specific questions that you'd like to know on it.
Yes.
It sounds like it's a nice enhancement and almost you are able to leverage it then.
And my thinking about that right.
You you are I mean, obviously this is all still very new and we're and the final stages of finalizing our go forward plans, but we're pretty far down the line.
And again and we have multiple solutions.
But yes, it's this.
And it's <unk>.
Not only a solution.
Four packed act compliance and still being able to reach the vast majority of our customers, but because of that also because of the scale required to pull it off and also represents a net opportunity.
To bring in new customers and vendors on the program.
Presents and zinc.
Vic I wanted to address and you know.
We've talked about the pack.
Costco as well.
Little bit little bit different because we ship again like I mentioned very large orders. So we're shipping traditionally LPL and FTL, which is which is not going.
Good day impacted by the pandemic, but we've mentioned similar sentiments and that we believe we're better positioned with.
Larger infrastructure larger.
<unk> base to be able to navigate it where smaller competitors.
We're going to have significant challenges and we've seen the same thing here when we looked at.
B, obviously this merger pack.
<unk> was something we looked at and we've just been extremely impressed with green lanes.
Clients right.
Ultra compliant.
And considering the nuances of this industry.
I'd say there.
And I have to deal with things that.
Ever had to navigate and they've been able to do that historically and maybe.
And the compliance infrastructure in place.
For years and years and years and when you think about government regulation coming to the vape industry.
Who is going to be set up better to navigate that.
And nobody regulation.
Of course, our belief is it's going to be the larger companies that have resources and infrastructure and that have the ability or already built and compliance mechanisms to be able to.
Streamline.
And continue operating.
And with whatever regulatory.
And do fall in place and as Aaron mentioned as a bit of a.
Developing dynamic here with the fact that we don't have all the information yet but we.
We are cuzco certainly have.
I have confidence and the ability for the Green Lane team to not only navigate but really capitalize on what I see as a huge opportunity.
And we require.
Not a lot of the companies and the sector are going to be able.
Two to fare well throughout this change.
Yeah, and I'll, just I just want to make one final quick comment.
It's easy for us to forget, but Theres also a reporting.
And you hear that comes along with these changes and.
And that Green line.
To some degree just.
And more almost an afterthought because we are already used to an enormous amount of reporting requirements and we've long built and expertise, including but not limited to some of the.
Things that we had.
And maybe to comply with all the various and growing nicotine regulations.
So this is really just.
As usual from us from a reporting perspective, but I don't want to take anyone to take that for granted because other companies who are not used to dealing with those types of reporting requirements and it's quite difficult to have a challenge to overcome.
Great. Thanks for the additional color.
Great question. Thank you.
Our next question comes from Eric.
And with Craig Hallum. Your line is open.
Great. Thank you guys and the <unk>.
<unk> as well and this acquisition certainly very exciting.
Thank you. So you guys have done a great job outlining the cross selling opportunities for Green Lane brands and MSL retail stores for example, but wondering if you could elaborate just a bit more on the cash flow side of things.
How those products and offerings could be cross sold to the Green Lane platform.
And then just.
Just as a follow up to that that guidance of I think $3 10 to $3 $30 million does that include any of those cross selling opportunities. Thanks.
Yeah, Great question, So number one as we've mentioned.
And the strong relationship we have with T cell slash more smooth.
Publicly traded and Hong Kong market cap, and well north of 40 billion and they.
Have significant resources on the engineering and production side of their business and.
We are.
Key go to market partner for them here in North America within.
The product set that we currently offer now some of that.
Product set is as relevant for.
The Green line channels for example batteries.
We're seeing an uptick and batteries and we know that batteries are sold and a lot of the retail channel is that Green line has historically quite and as well as direct to consumer business channels.
We also there's also an overlap.
A little bit of and overlap with what Greenland calls, our S&P business supply and packaging, obviously costco's core business is packaging and paper supplies.
Et cetera, so there's going to be.
Media cross selling opportunities on both sides. There is customers that Green Lane has service.
And with their pollen gear packaging products that we will now have access to the crisco catalog and there's customers that Cuzco services.
And that will now have access to the pollen gear product line right. So those are a couple of ways, but when thinking out in the future.
And again, we've talked now.
And several times about leveraging that relationship was more slash T cell.
Not just necessarily because they are robust in terms of what they offer it's not just.
Cartridges and meant for men per liquid right.
They have an open system vapor riser division as well so to the extent, we can leverage that relationship.
And be able to create products that are.
And more in line with the CPG products that green loans currently offering we see that as a huge synergy and if we can create products and partnership.
And then go into those channels.
That could be a very big number.
It is not.
And currently laid out and the <unk>.
And so we gave so to answer that question.
Of course, we've done we've done a lot of work we've put out a number it's hard to.
Encompass everything we've tried to take a very conservative approach right. So I think.
There is.
And certainly more work to be done there, but we have included some of the synergies and the.
And.
And the guidance.
Great I appreciate that color.
Thank you.
Thank you and I'm currently showing no further questions at this.
This time I'd like to turn the call back over to Mr. Johnson for closing remarks.
Okay.
So it was fun and.
Thank you guys again for tuning in.
And really appreciate the thoughtful questions and comments.
And as I mentioned at the top this is an exciting new chapter not.
Not just for both companies, but for the entire legal cannabis industry as well there is significant strategic and strategic.
Strategic and shareholder value to unlock here and we know we have our work cut out for us to do that.
But the vision and strategy are clear.
Clear combined two successful pioneers.
Complementary products and services and customer bases to achieve a level of scale not yet seen in the ancillary cannabis industry.
Execute the synergies identified to drive significant growth and profitability and be one step.
And the competition by understanding where our customers are planning to go next and how we can best serve them as the industry continues to expand and and evolve.
We believe this transaction represents the winning formula for all stakeholders and we are.
<unk> excited to begin working closely together.
Step ahead of great the two businesses and achieve our strategic vision.
We will be looking to provide more updates as they materialize, but for now and on behalf of everyone at Green Lane and Kush go.
I wanted to wish everyone. A great day ahead. Thank you all for joining.
You all take care.
And day safe.
Sure.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
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