Can KushCo Holdings Inc (OTCMKTS:KSHB) Scale to Meet Demand


KushCo Holdings Inc (OTCMKTS:KSHB) is starting to regain momentum – while volatile – on the strength of investors getting a chance to look at sales. This week, KSHB, who makes branding and packaging solutions for the cannabis industry, demonstrated sales of $25.3 million representing a 186% increase.

The bad news of the good news is that this rise in demand resulted in net loss of $8.2 million. Of course, this bummer was not lost on management. “While we are confident in the Company’s upward trajectory, 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,” CEO Nick Kovacevich added. “We have implemented a number of strategic operational initiatives that will drive our gross margins back toward 30% as we scale the business, with improvements in margins expected in the second half of fiscal 2019.”

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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The management team at KSHB will certainly be looking to increase profit margins. KSHB believes the passed Farm Bill will be a boon to the company.

We continue to develop our transformed business model, investing in the growth and retention of our robust customer base, continuously adding new product and service offerings, and driving effective cross-selling opportunities across the business. New opportunities continue to rapidly emerge in the industry. With the recent signing of the 2018 farm bill into law on Dec. 20 to legalize industrial hemp, we expect to see more large-scale production and sale of CBD oil, and related products, fueling demand for our packaging, supplies and labeling solutions, as well as for our solvents and marketing and branding services. We also expect to see an increase in adult vaping of CBD, which is a major component of our business and a key driver behind our expanding customer base as vape sales attract new customers onto our sales platform. We are focused on building out a scalable, sustainable business and, as 2019 unfolds and new markets and geographies open up, we will continue to expand our presence as a primary supply-chain partner to the industry. 

Earning a current market cap value of $495.68M, KSHB is going to be working hard to fix operations this year and be able to meet demand will be the make or break item for the company this year. KSHB is pulling in trailing 12-month revenues of $52.1M. 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.