KUSHCO HOLDINGS REPORTS FIRST FISCAL QUARTER 2019 RESULTS

Revenues Increased 186% Year-over-Year to approximately $25.3 million, but company loses $8.2 million vs. $100,000 profit last quarter 

GARDEN GROVE, Calif., January 8, 2019 – KushCo Holdings, Inc. (OTCQB: KSHB) (“KushCo” or the “Company”), the parent company of innovative industry leaders such as Kush Supply Co., Kush Energy, The Hybrid Creative, and Koleto Innovations, which provide a range of services and products for a variety of industries including the regulated cannabis and CBD industries, today reported financial results for its first fiscal quarter of 2019, for the period ended November 30, 2018.

First Fiscal Quarter Financial Summary                                   

  • Revenue was up 186% Year-over-Year to $25.3 million. Revenue exceeded the previous quarterly high of approximately $20 million in the fourth fiscal quarter of 2018, representing a 26.5% increase.
  • On a GAAP Basis, gross profits were equal to 12.8%, compared with 34.8% in the prior year period.
  • On a GAAP Basis, net loss was approximately $8.2 million compared to net income of $0.1 million in the first quarter of fiscal 2018. Loss per share was equal to negative $0.10, compared to $0.00 for the same year-ago period.
  • Cash was $3.0 million as of November 30, 2018 compared to $13.5 million as of August 31, 2018. Rapid demand for product and timing of inventory purchases leading up to Chinese New Year have resulted in a decreased cash position and overall working capital headwinds, through which, the Company is actively managing.       

Nick Kovacevich, Chairman and Chief Executive Officer, commented, “Coming off an exceptionally strong fiscal 2018, we continued to retain and grow our customer base, grow market share and drive sales across all our key markets in the first fiscal quarter of 2019. This drove record growth in the quarter, with revenues of $25.3 million, representing 186% growth, compared with approximately $8.8 million in the first fiscal quarter of 2018. This strong performance reflects the strength of our business model, which leverages our ecosystem of diverse business units and product categories to cross sell product classes, reinforce the sticky nature of our business and support stable revenue growth.

“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. 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. 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. Furthermore, we are shifting toward a higher-margin product mix driven by new product launches to take place over 2019. We believe our product pipeline is strong and we can expect to see new customers expand into new product buckets which will also improve our margins,” continued Mr. Kovacevich.

“Going forward, 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 December 20th 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,” concluded Mr. Kovacevich.

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