Kush Bottles Inc (OTCMKTS:KSHB) is an interesting player in the universe of cannabis-related stocks. The company is part of an expanding and evolving process as the ecology of the sector builds in size and complexity through the inexorable push of greater legality in North America. As more marijuana is legally produced and consumed, many niches are created and filled along the way. KSHB has taken an emerging leadership spot in that ecosystem as a container play.
The compelling aspect of the KSHB story right now is in the financials. The company just reported financial results for its first fiscal quarter ended November 30, 2016. And once again, we are impressed. The top line continues to grow at a powerful clip, around 45% on a quarterly y/y basis. In addition, margins were up, net loss shrunk and included some one-time items, and the company’s cash position improved significantly.
Kush Bottles Inc (OTCMKTS:KSHB) bills itself as a company that markets and sells packaging products and solutions for the medical and recreational cannabis industries in the United States.
It offers pop top bottles; child resistant exit, paper exit, and foil barrier bags; tubes; and polystyrene, polypropylene, or silicone containers to urban farmers, greenhouse growers, and medical and recreational cannabis dispensaries.
KSHB sells primarily into the b2b market, which includes legally operating medical and adult-use dispensaries, growers, and MIP producers (Marijuana Infused Products) in states with marijuana programs. The company’s goal is to reach a diversified customer base through direct sales, web, and re-distribution channels. Kush Bottles Inc was founded in 2010 and is based in Santa Ana, California.
According to the company’s press messaging, “Kush Bottles, Inc. provides packaging products and solutions to producers, processors, and retailers operating in the regulated medical and recreational cannabis industry. Founded in 2010, Kush Bottles has sold more than 100 million bottles and regularly services thousands of customers across the United States and Canada. The company primarily services the business-to-business market, which includes legally operated medical and adult-use dispensaries, growers and marijuana-infused product manufacturers. Kush Bottles aims to be the gold standard for responsible branding and packaging in the cannabis industry.”
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Management voiced its enthusiasm for the progress made in the quarter, as one might expect:
“Our first fiscal quarter began on a strong note, with record revenue and the strongest cash and working capital positions in our company’s history,” said Nick Kovacevich, co-founder and CEO of Kush Bottles. “This was driven by continued growth in California and Washington. More specifically, our customer base, average order size and number of orders continue to climb, and our e-commerce revenues also continue to increase. Our custom branded packaging revenues increased nearly three times from last year and our SKU count grew by 73%.
“During the quarter, we implemented a new cloud-based accounting, CRM and ERP system which we expect will improve our ability to scale. Our new larger facility in Washington has helped to accommodate continued growth, and we also expanded our sales force to penetrate the new states that legalized cannabis in the November 2016 election.
Traders will note that the stock lagged, pulling back about-10% during the past week. That said, KSHB has evidenced sudden upward volatility on many prior occasions. What’s more, the stock has seen an influx in interest of late, with the stock’s recent average trading volume running a bit over 140% beyond what we have been seeing over the larger time frame.
Traders should note this as important due to the extremely small float size in the stock (not even 9.7M shares). This type of thing is something to watch out for: with such a tight trading float, this kind of ramping interest can force a supply-shock squeeze.
At this time, carrying a capital value in the market of $132.3M, KSHB has a reserve ($2M) of cash on the books, which must be weighed relative to virtually no total current liabilities. KSHB is pulling in trailing 12-month revenues of $9M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at 43.7%. This may be a very interesting story and we will look forward to updating it again soon. For continuing coverage on shares of $KSHB stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!