KushCo Archives - Green Market Report

Adam JacksonAugust 16, 2022


Greenlane Holdings, Inc. (NASDAQ: GNLN) slumped in trading Tuesday morning with company revenue dropping, as it moves to offload its packaging division — KushCo — in order to reinvest in its brand houses and find more profits. The smoking accessory e-commerce platform reported financial results for the first quarter ending June 30, 2022.

Greenlane delivered approximately $39.9 million in total revenue during the period, falling from $46.5 million in the previous quarter and missing the Yahoo Finance Average analyst estimate for revenues of $50.33 million.

The company also reported a second-quarter net loss of $14.5 million versus an $18.75 million loss sequentially; and a net loss of $5.84 million in the same period last year, according to SEC filings. The earnings were for a loss of $2.27 per share — missing analyst expectations of a five-cent loss per share — versus a loss of $0.17 cents per share in the previous quarter.

“We have been very vocal about our plans to build the premier ancillary house of consumer brands, and we feel we are in pole position to achieve this goal,” company management said. “As we continue to execute on our plan, we intend to run a sales process and exit our packaging business. The packaging business is a thriving business, but one that ties up a lot of our resources, space, and working capital.

We expect to achieve significant proceeds from the sale of this business unit allowing us to generate substantial non-dilutive capital that will be re-invested into growing our consumer business. For Greenlane to complete our transition to a higher-margin, higher-value consumer business, it’s imperative that we further simplify and streamline our offering and focus on the upmost valuable pieces of our business, especially in today’s current climate.”

Greenlane posted an adjusted EBITDA loss of $5.8 million, or $1.09 per share, versus a loss of $3.7 million, or $3.92 per share, in the same period last year. Adjusted EBITDA loss was $11.1 million, or $2.25 per share for the first half of 2022, versus a loss of $8.9 million, or $11.05 per share during the corresponding period in 2021.

Gross margins were 20.3% during the quarter versus 26.1% during the second quarter last year and 16.3% during the first half of 2022 compared with 25.6% in 2021.

Dumping KushCo

The company said it plans to actively explore opportunities to sell its packaging business — KushCo — and reinvest in its consumer brands business. This comes alongside a series of moves the company has made over the past year in order to cut costs and become more profitable — including issuing layoffs, selling off its headquarters, and exiting its nicotine ventures; as well as reshaping senior leadership.

Tellingly, the earnings report did not list CEO Nick Kovacevich as the voice of the company statement. The quote gave no attribution and Kovacevich had been the CEO of KushCo prior to the merger. He assumed the role as the leader of Greenlane and today’s statement brings that role into question now. In addition to the absence of the CEO being mentioned in the statement, Greenlane did say it promoted Craig Snyder, the company’s Chief Commercial Officer, to President.

“This action comports with the Company’s strategy to build a world-class house of brands and serves to unlock the significant unrecognized value of its packaging business, which we believe is not properly priced in our market capitalization today and makes up approximately 15-20% of overall Company revenue,” the release said. “If a transaction or series of transactions are consummated, the sale is also expected to significantly reduce the Company’s working capital and warehousing requirements. We can provide no assurances as to the timing of this sale and will provide further updates as they are available.”

“As we move toward the sale of this division, we have already started realigning our senior leadership team to support the future Greenlane consumer business and further reduce expenses,” company management wrote. “Rodrigo de Oliveira, our current Chief Operating Officer, will be stepping down as COO at the end of September. Rodrigo was essential to the 2020 turnaround efforts at KushCo where we went from losing over $5M of aEBIDTA per quarter to achieving positive aEBIDTA several quarters later.

Following the merger of Greenlane and KushCo, Rodrigo utilized his extensive integration and transformation experience to help Greenlane properly integrate and reduce our costs and expenses. I would like to extend my sincerest thank you to Rodrigo. We would not be where we are today without his unwavering passion, work ethic and leadership!”

Yet, the company issued a cautionary statement for forward-looking statements include, “among others,” statements regarding; the company’s plans to sell its non-core assets and to exit its packaging business, the current and future performance of the company’s business, including comments relating to the company’s beliefs regarding its public market capitalization and valuation, the company’s expectations regarding capital raising and cost savings related to the 2022 plan and the company’s financial outlook and expectations.

“We are proud of the tremendous accomplishments we have achieved thus far,” the company wrote, “however; we consider these to be lagging indicators for future success, meaning the results of many of these initiatives have yet to fully impact our P&L. We expect to gain significant efficiencies from the efforts to simplify and streamline our business, improve our systems and go-to-market offerings, and fully recognize our lower operating costs.”

Debra BorchardtJuly 30, 2021


Greenlane Holdings, Inc.  (Nasdaq: GNLN) announced preliminary financial results for its second-quarter ending June 30, 2021, but gave little detail. Greenlane said it had net sales of $34.5 million and that the gross margins were between 21% and 22%. Greenlane delivered $34 million in revenue for the first quarter of 2021 making the sequential growth to be basically flat. The total cash balance is roughly $11.5 million.

However, the company recalled its March proforma outlook for the calendar year ending in December. Greenlane blamed headwinds created by uncertainty in its supply chain and lingering impacts of Covid-19. The company said it expects to reestablish a pro forma outlook at a later date. In March, Greenlane had suggested that the combined company would have “pro forma revenue of over $250 million for the year ended December 31, 2020, and a pro forma market capitalization in excess of $350 million based on the respective share prices of Greenlane and KushCo (OTC: KSHB) as of market close on March 30, 2021. Following completion of the Transaction, the combined company is expected to generate pro forma revenue of between $310 million and $330 million for the year ended December 31, 2021.”

Greenlane also said it continues to expect the proposed merger with KushCo Holdings will close in the third quarter of 2021, subject to the satisfaction or waiver of all remaining conditions in the agreement, including the receipt of all necessary approvals.

KushCo recently reported its earnings on July 8 where the company said it had revenue of $28.3 million, or 27% year-over-year growth, in fiscal Q3 2021, driven by increased sales to the company’s top 25 customers, including leading multi-state operators (“MSOs”) and licensed producers (“LPs”). SG&A expenses were approximately $9.1 million, compared to $12.7 million in the prior-year period. The decrease was primarily driven by reductions in headcount, bad debt expense, consulting spend, and stock compensation expenses, largely as a result of the COVID-19 pandemic and the Company’s implementation of the 2020 Plan.

At the time, Nick Kovacevich, KushCo’s Co-founder, Chairman and Chief Executive Officer said, “”Our gross margins for fiscal Q3 continued to reflect the uncontrollable shipping delays we, and other importers of goods, have been experiencing for the past couple of quarters. Even though the situation has somewhat improved since the end of 2020-where there were record-breaking shipments during the holiday season, severe COVID-19-related restrictions at domestic ports and a global shortage of containers-a significant percentage of all products coming from overseas continue to experience delays, resulting in higher freight costs across the board. In addition, we experienced lower direct material margins on several of our products, as we cycle through higher-priced inventory and continue to work with our vendors to obtain more favorable pricing.”

Debra BorchardtJune 15, 2021


KushCo Holdings, Inc. (OTCQX: KSHB) reported preliminary and unaudited financial results for its fiscal third quarter ended May 31, 2021. KushCo said it expects its preliminary and unaudited fiscal third quarter 2021 revenue to be between approximately $27.5 million and $28.0 million, compared to approximately $22.3 million for its fiscal third-quarter 2020. This is a decline from the $32.9 million in revenue in the second quarter.

The 21% to 26% expected increase in revenue is being driven primarily by an increase in sales to KushCo’s top 25 customers, which consist of leading multi-state operators (MSOs), licensed producers (LPs), and brands. Revenue from these top 25 customers is expected to increase 60%+ to at least $20.5 million in revenue in fiscal third-quarter 2021 from $12.7 million in the same year-ago period. KushCo said it expects to report its complete fiscal third-quarter 2021 financial results in early July 2021.

“Our preliminary fiscal third-quarter results demonstrate once again our continued success in penetrating many of the industry’s elite customers, including the top MSOs, LPs, and leading brands,” said Nick Kovacevich, KushCo’s Co-founder, Chairman, and Chief Executive Officer. “In fact, 24 of our top 25 customers in fiscal Q2 purchased similar products again in fiscal Q3, albeit not requiring the same quantities they did in the second quarter. Although our business will continue to remain lumpy given our concentrated customer base, our focus remains on retaining our elite customers and growing them over time, not just over a single quarter. To that end, revenue to our top 25 customers is expected to increase by more than 60% year-over-year in fiscal Q3 2021. Not only are our sales to these customers continuing to grow, but the quality of the customers we are serving is also continuing to improve, as we have a much stronger book of the right customers than we did a year ago. We have spent the last three years cultivating this elite customer base, and we are even more excited by the prospect of cross-selling these customers and others with proprietary-owned products, as we move closer toward the consummation of our merger with Greenlane. As a combined company, we have the potential to realize meaningful revenue synergies across our complementary customer bases, as well as generate significant cost synergies that can drive profitable growth amidst the backdrop of a booming industry still in the early innings of expansion.”

The KushCo and Greenlane merger is expected to close in the third quarter.


Debra BorchardtMarch 31, 2021


Cannabis accessories e-commerce company Greenlane Holdings, Inc. (Nasdaq: GNLN)  reported financial results and announced a merger with KushCo sending the stock higher in early trading. Greenlane stock was up over 17% on news of the merger as the company missed revenue estimates for the fourth-quarter ending in December.

Net sales grew approximately 50.5% to $7.8 million, or 21.4% of total net sales in the fourth quarter versus $5.2 million or 13.8% of net sales in the fourth quarter of 2019. Core revenue grew 11.3% to $33.9 million in the quarter versus $30.5 million for the same time period in 2019. Greenlane missed the average analyst estimate which was for revenue of $36 million according to Yahoo Finance. Core revenue is defined as all non-nicotine revenue and Greenlane Brand revenue is inclusive of Eyce figures. The net loss for the quarter grew 8.9% to $10.8 million.

For the full year, total revenue was $138.3 million versus $185.0 million for the fiscal year 2019. The full-year 2020 core revenue (defined as non-nicotine revenue) grew 12.7% to $125.2 million versus $111.1 million in 2019. The net loss grew 19.8% to $47.7 million over last year’s net loss of $39.8 million. The decrease in sales was driven by a strategic decision to move away from sales of higher volume, lower margin merchandise to higher-margin revenue opportunities, including the Greenlane branded products.

“Though this year has been very challenging, I am incredibly proud of how the Greenlane team has aligned to accomplish all we have achieved in 2020,” said Aaron LoCascio, Greenlane’s Chairman and Chief Executive Officer. “Together, we successfully refocused our strategic efforts to grow our portfolio of owned brands, brought in new senior leaders, and took decisive steps to move away from lower-margin revenue categories that has positioned us for sustained, long term growth.”

Mr. LoCascio added, “As we enter 2021, Greenlane will continue to innovate and adapt to meet the demands of the rapidly evolving Cannabis industry by executing on our growth strategy. This includes continuing to improve our revenue mix with a focus on Greenlane branded products, further optimizing our organizational structure to reduce costs where appropriate and leveraging our best-in-class global distribution platform to launch innovative new products into the market. We have made great progress thus far, and recently announced our acquisition of the Eyce, the world leader in premium silicone smoking products and a Greenlane partner for over seven years.”

KushCo Merger

Along with the announcement of earnings, Greenlane also said it was merging with cannabis packaging company KushCo (OTC: KSHB). The exchange ratio is expected to result in KushCo stockholders owning approximately 49.9% of the combined company’s common stock and Greenlane stockholders owning approximately 50.1% of the combined company’s common stock. The company said the deal is expected to generate approximately $15 million to $20 million of annual run-rate cost synergies within 24 months from the closing.

KushCo’s Co-Founder, current Chairman, and Chief Executive Officer, Nick Kovacevich, will lead the combined company as Chief Executive Officer, and an Independent Chairman of the Board will be appointed at a later date. Greenlane’s Bill Mote will serve as Chief Financial Officer, with Greenlane Co-founder Aaron LoCascio serving as President and Greenlane Co-founder Adam Schoenfeld serving as Chief Strategy Officer. The combined company will be headquartered in Boca Raton, Florida with a significant footprint in Southern California.

“This transformative transaction is expected to create a broad and complementary platform that we expect to deliver substantial synergies at an important inflection point in the cannabis industry,” said Aaron LoCascio, Chief Executive Officer and Co-Founder of Greenlane. “As an industry leader, the combined company will be well positioned to grow profitability and maximize value for all stockholders while also providing enhanced product offerings and expanded ancillary services to our valued customer bases. We are thrilled to be working with the talented and experienced KushCo team, and together we will continue to drive innovation and excellence in the space. Since Greenlane’s founding in 2005, we have been at the forefront of the cannabis industry, and today we take the next step in our continued evolution.”

“We’re excited to create a leading, innovative supplier of cannabis ancillary products serving the most valuable segments of the supply chain,” said Nick Kovacevich, KushCo’s Co-founder, Chairman, and Chief Executive Officer. “For more than 10 years, KushCo has proudly pioneered this industry, creating substantial value for our customers, employees, partners, and stockholders. Now, we have reached a critical time in our industry where the leading operators are increasingly looking to partner with companies in the ancillary space who can reliably support their rapid expansion for years to come. We greatly admire the product portfolio that the Greenlane team has built, and we are excited to work with them to cross-sell to our complementary customer bases and execute on the attractive growth opportunities ahead.”

Debra BorchardtJanuary 12, 2021


KushCo (OTC: KSHB) stock was falling over 6% to lately sell at $1.11 after the company reported the numerous challenges affecting the company. After the market closed on Monday, KushCo announced financial results for its fiscal first-quarter ending November 30, 2020, with net revenue decreasing 23% from the prior-year period to $26.8 million. On a positive note, the net loss was trimmed to $4.5 million from $12.5 million in the prior-year period. The basic loss per share was $0.03 compared to $0.12 in the prior-year period.

Many of the company’s challenges stem from the decision to right-size the business, which resulted in tighter credit terms being extended to smaller and less creditworthy customers. In addition to that, the company faced problems at the ports, where increased shipments to the U.S. combined with fewer port workers due to COVID issues causing delays.

Nick Kovacevich, KushCo’s Co-founder, Chairman and Chief Executive Officer said on the company’s earnings call, “We were expecting more significant growth in Q1, but like many other importers of goods, we were hit with unexpected and uncontrollable shipping delays due to record-breaking shipments to U.S. ports around the holiday season, which were exacerbated by COVID-19 restrictions.”

He went on to add, “This is a problem that has affected many importers, but fortunately, we have been working diligently with our network of freight partners and suppliers to expedite shipments and provide solutions to reduce the impact to our customers, which we expect will persist for another couple of weeks or more as the ports start to clear through the backlog that has been building up.

The net result of all of this is that some of the revenue that we were expecting to realize in Q1 has now been pushed into Q2 because we could not get the products off of the boat and into our warehouses on time before the quarter ended. The good news is that the business was not lost and it actually contributed to our strongest December in company history, December being the first month of Q2 and we saw $14.7 million in revenue during that month. And we still have a nice pipeline of business that we plan to execute on throughout the remainder of this Q2.” KushCo generated 21% gross margins for the quarter, which was lower than the 26% generated in the fourth quarter and was blamed on the shipping delays.

Looking Ahead

KushCo increased its net revenue guidance for its fiscal 2021 to be between $130.0 million and $160.0 million (previously between $120.0 million and $150.0 million). In addition, the company reiterated its expectation for adjusted EBITDA for the fiscal year to be between $5.0 million and $7.0 million. The company gave three reasons for the increased estimate. Kovacevich said, “We are continuing to see outsized growth with our MSO and LP customers as evidenced by our strong December and how we see the rest of the year panning out with some of the large custom projects we have in the pipeline. Number two, we have invested significantly in our sales team, bringing on folks from traditional CPG and other relevant backgrounds to nurture deep relationships with our top customers and to further penetrate our newer prospects. And number three, we are starting to secure a more long-term supply contracts, giving us better visibility into future business and acting like a right of first refusal for all of our products and services.”

The company also noted that it currently has $19 million due at the end of April 2021. CFO Stephen Christoffersen said on the earnings call, “We’ve been evaluating some term sheets and believe we can execute on an appropriate solution before the note is due, especially given the fact that we are now a profitable business that is more aligned with MSOs and LPs than ever before.”

KushCo also noted that if New Jersey and Arizona roll out programs, then revenue could be even higher this year. The company also said that uplisting to the NASDAQ is a priority, but that the process is somewhat out of their control.


Debra BorchardtSeptember 24, 2020


KushCo Holdings, Inc. (OTCQX:KSHB) reported preliminary and unaudited financial results for its fiscal fourth quarter ended August 31, 2020 with revenue expected to be between approximately $25.5 million and $26.0 million, compared to approximately $22.3 million in its fiscal third-quarter 2020. The company noted that this would be an improvement from its previously disclosed guidance of between $24.0 million and $26.0 million.

KushCo said that the 14% to 17% expected sequential increase in revenue is being driven primarily by an increase in sales to its top 100 customers, which consists of leading multi-state operators (MSOs), licensed producers (LPs), and brands. The company had pivoted earlier this year to a focus on its larger more financially stable clients versus trying to service smaller clients who might not be in a position to pay their bills. In addition, the company also said it expects adjusted EBITDA for the fiscal fourth quarter 2020 to be between $0.25 million and $0.75 million, which represents an improvement from its previously disclosed guidance of between ($1.0) million and $1.0 million.

“Fiscal Q4 2020 was arguably the most pivotal quarter in KushCo’s entire 10-year history, as we returned to growth, executed on our strategic plan, and achieved our first quarter of positive adjusted EBITDA in more than three years,” said Nick Kovacevich, KushCo’s Co-founder, Chairman, and Chief Executive Officer. “We realize there is still a lot of work to be done, but we are encouraged with the substantial progress we have made, especially when considering the challenging, but constructive, journey we underwent in fiscal 2020, starting with the illicit market vape crisis and culminating with the ongoing COVID-19 pandemic. Looking ahead, we will continue to focus on aligning deeper with-and cross-selling more to-the large and creditworthy MSOs, LPs, and leading brands, who appear more poised than ever to reap the lion’s share of the benefits from the industry’s next stage of expansion.”

Another bit of positive news was that KushCo ended the fiscal quarter and year with approximately $10.5 million in cash, and did not draw on its revolving credit facility during the fiscal quarter. The company said its expenses will probably remain in the same range (between $6.5 million and $7.5 million) as previously forecast.

KushCo said it expects to report its complete fiscal fourth quarter and full-year 2020 financial results in late October or early November 2020.


StaffJuly 8, 2020


It’s time for your Daily Hit of cannabis financial news for July 8, 2020. 

On the Site 


KushCo Holdings, Inc. (OTCQX:KSHB) reported that its net revenue dropped 46% in its fiscal third-quarter ending May 31, 2020. The net revenue of $22 million was also lower than what the company has forecast in March when it told investors that it would be roughly $30 million. Analysts according to Yahoo Finance had estimated that revenue on the low end would be $29 million. 

The company attributed the drop to the adoption of the 2020 Plan, which meant tighter credit terms being extended to smaller customers. the company is focused on larger, more financially healthier customers. 

In addition to that, the drop in revenue was also driven by lower sales from vape and natural products, as well as order lumpiness from KushCo’s larger customers. Compounding the quarter’s decision to tighten credit, COVID-19 caused travel and regulatory restrictions in the markets that the company operates. 

Conception Nurseries 

Tissue culture technology company, Conception Nurseries has raised more than $15 million with the addition of approximately $12 million in its Series A round. The company said that the proceeds would be used to operationalize its facility in Sacramento, CA. 

The raise was announced by Viridian Capital Advisors, who through broker-dealer, Pickwick Capital Partners, led the financing round. 


Adult-use stores in Massachusetts closed for business on March 24th and reopened on the 25th of May. Sales were significantly higher than usual in the two weeks leading up to the closing of the adult-use market’s retail stores in Massachusetts. The day before closing, March 23rd, sales spiked 60% because of customers trying to stock up before the lockdown.  

A new report issued by Nucleus One, a Massachusetts-based B2B cannabis company offering a variety of services, has reviewed the COVID-19’s impact on the state’s cannabis industry. 

In Other News 

Scythian Real Estate, a full-service real estate company that specializes in working with sophisticated, well-capitalized cannabis operators, today announced the acquisition of a 3,048-square-foot facility operated by Grassroots Cannabis in Bradford, Pennsylvania. Scythian purchased the recently renovated property at 109 Main Street from Grassroots Cannabis in a sale-leaseback transaction. 

“This is our third transaction with Grassroots, and we’re thrilled to continue building a strong relationship with such a well-respected leader in the cannabis market,” said Randy Roberts, partner at Scythian. “We look forward to identifying new opportunities to further position Scythian for long-term growth in limited-license states and other strategic markets in the U.S.” 




Debra BorchardtJuly 8, 2020


KushCo Holdings, Inc. (OTCQX:KSHB) reported that its net revenue dropped 46% in its fiscal third-quarter ending May 31, 2020. The net revenue of $22 million was also lower than what the company has forecast in March when it told investors that it would be roughly $30 million. Analysts according to Yahoo Finance had estimated that revenue on the low end would be $29 million.

The company attributed the drop to the adoption of the 2020 Plan, which meant tighter credit terms being extended to smaller customers. the company is focused on larger, more financially healthier customers.

In addition to that, the drop in revenue was also driven by lower sales from vape and natural products, as well as order lumpiness from KushCo’s larger customers. Compounding the quarter’s decision to tighten credit, COVID-19 caused travel and regulatory restrictions in the markets that the company operates.

Net losses increased to $13.5 million versus last year’s $10.6 million in the same time period for last year. The basic loss per share was $0.11 compared to $0.12 in the prior-year period. This also missed analysts’ estimates, which averaged at a loss of -$0.10.

Nick Kovacevich, KushCo’s CEO said, “We substantially reduced our cost structure, consolidated our vendors and warehouses, vastly improved our inventory to align with our actual sales, ramped up our collections activity, stemmed the cash burn, and drove meaningful operating leverage. Revenue for the quarter came in lower than we anticipated due to regulatory and travel restrictions in various markets in which we operate due to the COVID-19 pandemic, as well as order lumpiness from some of our larger customers who pushed out their orders due to a general lack of visibility in their businesses.”

The company said it finished the cost-cutting initiatives as part of the 2020 plan and as such the SG&A dropped more than 50% sequentially from $27.2 million in the second quarter to $12.7 million in the fiscal third quarter. The decrease was driven by reductions in headcount, executive salaries, consulting spend, and travel and entertainment expenses, as a result of the COVID-19 pandemic.

“Despite the sequential decline in revenue, however, we have started Q4 on the front foot with a healthy level of purchase orders secured thus far, leading us to believe that Q3 will be the bottom in terms of revenue for fiscal 2020,” said Kovacevich. “More importantly, we continue to focus on the things we can better control, such as gaining more efficiencies in our business, significantly right-sizing the organization, and reducing our overall cash burn.”

Balance Sheet Moves

The company strengthened its balance sheet and liquidity by proactively converting 18.5%, or $5 million, of the total principal amount of the Company’s senior note due April 2021 into equity with limited dilution and zero warrants. Cash was approximately $11.1 million as of May 31, 2020, compared to approximately $11.4 million as of February 29, 2020, and $3.9 million as of August 31, 2019.

Looking Ahead

KushCo said it expects net revenue for the fourth quarter of its fiscal 2020 to be between $24.0 million and $26.0 million. In addition, the company said it expects cash SG&A to be between $6.5 million and $7.5 million, and adjusted EBITDA to be between ($1.0) million and $1.0 million.

“Looking ahead, we expect to realize revenue growth in Q4 not just by recognizing the customer orders that were pushed out, but also by signing additional supply agreements with our customers and focusing more on the areas that we believe we are good at, such as our core businesses of vape, packaging, and energy,” said Kovacevich. “We are also going to be focusing even more on controlling our costs and deploying a prudent capital allocation policy, so that we can continue to support the business with the cash and liquidity resources currently at our disposal. The end result of these efforts should lead to what could be a pivotal Q4 for KushCo, and one in which we can achieve our goal of positive adjusted EBITDA.”

KushCo stock moved higher by 10% on the day’s trading ahead of the earnings announcement and was lately selling at $0.82 . The average analyst price target is $2.50.


Debra BorchardtMarch 13, 2020


KushCo Holdings, Inc. (OTCQX:KSHB) rolled back its original revenue estimates due to supply chain interruptions from China and continued weakness in the California market. The cannabis package maker said that it now expects its second-quarter revenue to be closer to $30 million versus the original forecast of $35 million.

The company is taking back its net revenue guidance for fiscal 2020 of $230 million to $250 million, which was originally issued on November 7, 2019. KushCo did not give a new number. Results are expected to be formally announced in April, but a specific date was not given. KushCo also said it was taking back its forecast that net revenue from its hemp trading business would exceed $25 million for fiscal 2020.

KushCo said it has approximately $11 million in cash and a revolving line of credit with Monroe Capital that allows for borrowings up to $35 million. As of the fiscal second quarter ended, the company said it did not have any outstanding borrowings under the revolver.

Fiscal Second Quarter 2020 Preliminary Revenue Results

The company said that the 14% sequential decrease in revenue was “driven primarily by a slower-than-expected rebound in demand for the Company’s vape hardware products, continued weakness in the California market, a slower-than-anticipated rollout of its hemp trading business, the extension of the Chinese New Year holiday, and a delay in the rollout of cannabis 2.0 products in Canada, especially due to some provincial bans and taxes on vape products.”

“Our revenue for fiscal Q2 was negatively impacted by several short-term factors, but we are fortunately seeing strong fundamental trends across the business that give us confidence for a stronger second half of the fiscal year and beyond,” said Nick Kovacevich, KushCo’s Co-founder, Chairman and Chief Executive Officer. “For one, despite a challenging near-term market backdrop in California, we have been actively tightening our customer credit terms, ramping up our collection efforts, and continuing to move away from the smaller and less financially stable customers that historically comprised a core part of our business.”

He continued saying, “In fact, over the past few years, this regional customer base, especially in recent months due to their heightened liquidity challenges, is gradually comprising a smaller part of our business, whereas our business with our larger MSOs and LPs, which each spend more than $500,000 on a trailing twelve months basis, has ballooned from less than 20% of sales in fiscal 2017 to more than 60% in fiscal 2019. While it will take some time for this transition to fully scale, we are encouraged with the progress thus far in securing and entrenching ourselves even further with these larger and more financially stable customers.”

In February 2020, KushCo completed another round of layoffs, letting go, 26 employees, which the Company expects will result in approximately $3.7 million in annual savings. In total, KushCo has reduced its headcount by approximately 30% since September 2019, which it expects will result in an aggregate annual savings of approximately $8 million

Vape Stays Flat

“With respect to the broader demand for our vape products, we were disappointed to see a roughly flat quarter-over-quarter contribution from this category, but are encouraged with the underlying trends in our business that show continued robust growth in many of our key markets, such as Illinois, Michigan, Massachusetts, and Canada,” said Kovacevich. “As consumer sentiment and the regulatory environment around vape continues to improve, we expect this category to rebound and drive our revenue growth as well.” The company did say, however, that it has seen an uptick in orders for vape products from Canada.

Supply Chain Disruptions

“With the recent coronavirus outbreak, our business was briefly and minimally affected by temporary factory shutdowns, production delays and product shortages,” said Rodrigo de Oliveira, KushCo’s Chief Operating Officer. “Fortunately, we entered Chinese New Year with healthy inventory levels, whereas some of our peers who don’t have the same scale, resources, supplier relationships, or inventory quickly ran out of product. Overall, we’re pleased to see the situation slowly improving and for new shipments to make their way into our warehouses again, from which we can accelerate our sales again.”





Debra BorchardtNovember 8, 2019


KushCo Holdings, Inc. (OTCQX:KSHB)  reported that its net revenue increased 135% year-over-year to $47.0 million for its fiscal fourth-quarter ending August 31, 2019. On a GAAP basis, the net loss was approximately $11.5 million versus last year’s $3.2 million for the same time period. Basic and diluted loss per share was $0.13 compared to $0.04 in the prior-year period. On a Non-GAAP basis, the net loss for the quarter was $7.2 million and basic and diluted net loss per share was $0.08.

“Over the past couple of months, KushCo and the entire regulated cannabis industry has been dealing with a vaping crisis that increasingly appears to be connected to counterfeited, adulterated, and untested vape products being sold in the black market, which we do not service,” said Nick Kovacevich, Co-founder, Chairman and Chief Executive Officer. “While we have been seeing a slight pullback in sales for the overall vape market, it’s important to note that we service the entire regulated cannabis and CBD sector, and as a result, benefit from some consumers potentially shifting to other form factors, such as flower, edibles, and pre-rolls. That being said, we believe there will be some topline softness in the first half of fiscal 2020 related to vape, as our customers have been more cautious with their spending and have been slowing down their vape purchasing activity to limit any potential inventory or regulatory risk should there be additional temporary state bans affecting vape product sales. Looking out to the second half of fiscal 2020, we expect orders for vape products to pick up again.”

For the full year, the company said its net revenue increased 186% to $149.0 million, which met the company’s previously issued guidance of between $145.0 million and $150.0 million. net loss was approximately $39.6 million, compared to a net loss of approximately $24.3 million in the prior year. The basic and diluted loss per share were $0.47 and $0.57, respectively, compared to $0.37 in the prior year.

KushCo said its cash was at roughly $3.9 million as of August 31, 2019, compared to approximately $13.5 million as of August 31, 2018. The Company secured a revolving credit facility with Monroe Capital for up to $50.0 million on August 21, 2019, and completed a $30.1 million equity offering on September 26, 2019, with total net proceeds of $27.6 million.

Looking Ahead

Kovacevich added, “We are currently targeting between $230 million and $250 million in revenue for fiscal 2020. That includes growth from our core business and added $25 million-plus from our new hemp and CBD initiatives. This guidance incorporates a softer first half as it relates to vape sales, but these sales do ramp up significantly in the second half of the fiscal year. And with these top-line factors in mind, along with the efforts to tighten the belt with operational expenses, we believe we can achieve adjusted EBITDA profitability in the back half of fiscal 2020.”

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