KushCo Reports 186% Revenue As Cash Is Depleted

Cannabis packaging company KushCo Holdings, Inc. (OTCQB: KSHB) reported that revenue rose 186% in the fiscal first quarter of 2019 to $25.3 million. Revenue increased by 26.5% sequentially from $20 million in the fourth fiscal quarter of 2018.

The net loss was approximately $8.2 million compared to net income of $0.1 million in the first quarter of fiscal 2018. The company reported that it had a net loss per share of -$0.10 which missed analyst estimates by $0.07. Analysts according to Yahoo Finance estimated a loss of three cents per share for the quarter.

The company said it had to weather several challenges. Cash dropped to $3 million as of November 30, 2018, versus $13.5 million as of August 31, 2018. KushCo said that rapid demand for product and timing of inventory purchases leading up to Chinese New Year resulted in a decreased cash position and overall working capital headwinds. Gross profits were equal to 12.8%, compared with 34.8% in the prior year period.

“We acknowledge the impact that our dramatic growth has had on our gross margins, in particular, the utilization of air freight and additional cost incurring quality control measures at our receiving warehouse to meet demand,” said CEO Nick Kovacevich. “We have implemented a number of strategic operational initiatives that will drive our gross margins back towards 30% as we scale the business, with improvements in margins expected in the second half of fiscal 2019. These efforts are centered on supply chain fortification including upgrading our China-based producers to support higher volumes.”

The company made quite a few changes as it navigates through its growing pains. It engaged a new Warehouse Management System provider and GoLeanSixSigma.com as consultants to build scalable and sustainable processes that maximize efficiency. KushCo initiated a second international expansion with a new office in the Jiangbei District of Ningbo, China, establishing a physical presence that it said will facilitate stronger manufacturing relationships and maintain consistent high-quality standards. The company also appointed Christopher Tedford as Chief Financial Officer, and in turn allowing Jim McCormick to focus exclusively on the Chief Operating Officer role

Kovacevich went on to say, “We are also improving operational processes through the rollout of a new Warehouse Management System, which will allow us to improve inventory accuracy, expand gross margins through a more efficient supply chain and support the overall scaling of our business.”

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


2 comments

  • Avatar
    Rob

    January 8, 2019 at 5:18 pm

    I’m new to stocks, so is this report and overall good report and I should expect the stock to go up? Sounds like they have a lot of business and are expending.

    Reply

    • Debra Borchardt
      Debra Borchardt

      January 9, 2019 at 7:45 am

      They definitely suffered growing pains and there is more packaging competition. However, their sales continue to rise and it seems like they are making efforts to fix their problems. I like their transparency.

      Reply

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