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Wednesday, January 20, 2021

Is KushCo Holdings Inc (OTCMKTS:KSHB) Trapping Bears Like a Supervillain?

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As we have contended, despite some interesting ripples and waves of construed scandal, the actual tide of results at KushCo Holdings Inc (OTCMKTS:KSHB) remains very strong. To wit: the company just announced its Q3 data, in which it reported an increase in net revenue of 221% on a year-over-year basis to $41.5 million, setting a new company record for the top line.

According to the release, net revenue increased powerfully, as noted above, and gross profit increased on a GAAP basis to 17.8% compared to 12.9% during Q2 2019, with gross profits hitting 22.8%. In addition, on a GAAP basis, net loss was approximately $10.6 million, compared to a net loss of approximately $9.2 million during the third quarter of fiscal 2018, loss per share improved from negative $0.14 during the third quarter of fiscal 2018 to negative $0.12 during the third quarter of fiscal 2019, and net loss (non-GAAP) during the third quarter was $8.6 million and net loss per share was negative $0.10. The company also reported cash, as of the end of May, at $12.2 million, compared to approximately $13.5 million as of August 31, 2018.

KushCo Holdings Inc (OTCMKTS:KSHB) is the parent company to a diverse group of business units that are transformative leaders in the cannabis, CBD and other related industries. KushCo Holdings’ subsidiaries and brands provide exceptional customer service, product quality, compliance knowledge and a local presence in serving its diverse customer base.

KushCo Holdings’ brands include Kush Bottles, a dynamic sales platform that is the nation’s largest and most respected distributor of packaging, supplies, and accessories, Kush Energy, which provides ultra-pure hydrocarbon gases and solvents to the cannabis and CBD sector, Hybrid Creative, a premier creative design agency for cannabis and non-cannabis ventures, and Koleto Packaging Solutions, the research and development arm driving intellectual property development and acquisitions.

Founded in 2010, KushCo Holdings has now sold more than 1 billion units and regularly services more than 5,000 legally operated medical and adult-use dispensaries, growers, and producers across North America, South America, and Europe. KushCo Holdings subsidiaries maintain facilities in the five largest U.S. cannabis markets as well as having a local sales presence in every major U.S. cannabis market.

According to its materials, “KushCo Holdings, strives to be the industry leader for responsible and compliant products and services in the legal cannabis and CBD industry. The Company has been featured in media nationwide, including CNBC, Los Angeles Times, TheStreet.com, Entrepreneur, and business magazine Inc.  While KushCo Holdings services all facets of the cannabis and CBD industries, it has no direct involvement with the cannabis plant or any products that contain THC or CBD.”

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As noted above, KSHB just announced its Q3 data, in which it reported an increase in net revenue of 221% on a year-over-year basis to $41.5 million, setting a new company record for the top line.

The chart shows 16% piled on for shareholders of the company during the trailing month. Furthermore, the stock has benefitted from a jump in recent trading volume to the tune of 16% above its longer-run average levels.

Nick Kovacevich, Chairman and Chief Executive Officer, commented, “Revenue for the third fiscal quarter of 2019 saw strong growth of 221% year-over-year, reaching a record $41.5 million, compared with $12.9 million in the third fiscal quarter of 2018 and $35.2 million in the second fiscal quarter of 2019. More importantly, we saw gross margins move up ~490bps on a GAAP basis quarter over quarter which is a testament to our commitment of profitable and sustainable growth over time. The Company’s organic revenue growth and overall performance were attributable to the growth of our customer base and effective cross-selling of our offerings.”

Currently trading at a market capitalization of $457.5M, KSHB has a significant war chest ($12.2M) of cash on the books, which stands against about $29.8M in total current liabilities. One should also note that debt has been growing over recent quarters. KSHB is pulling in trailing 12-month revenues of $121.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 221.5%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $KSHB stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $KSHB, either long or short, and we have not been compensated for this article.

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