GARDEN GROVE, Calif., November 26, 2018 – 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 Packaging Solutions, 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 fiscal year 2018, for the period ended August 31, 2018.
Fiscal Year 2018 Financial Summary
- Revenue was up 177% Year-over-Year to $52.1 million.
- Gross margins were 24.2%, compared with 35.2% in the prior year period, this is primarily related to the year-end inventory adjustments of $2.8 million. Excluding this year end adjustment, gross margins for the year would have been 30%.
- Net loss, including $1.0 million in depreciation expense, $23.9 million in SG&A, and $1.6 million in provisions for income tax, was approximately $10.2 million compared to net income of $69,000 in fiscal 2017.
- Cash balance was $13.5 million as of August 31, 2018 compared to $900,000 at August 31, 2017. This increase was primarily a result of the completion of a registered direct offering for approximately $32.9 million in net proceeds in June 2018 and a $6.0 million equity investment by the Company’s strategic partner, Merida Capital Partners in February 2018.
- Working capital was $40.2 million as of August 31, 2018 compared to $3.4 million at August 31, 2017.
Fiscal Year 2018 and Recent Operational Summary
- Officially changed the Company’s name from Kush Bottles, Inc., to KushCo Holdings, Inc., reflecting a diversified business model, effective September 1, 2018.
- Appointed Christopher Tedford as Chief Financial Officer, allowing Jim McCormick to transition exclusively into the Chief Operating Officer role.
- Launched Kush Supply Co. Canada, a subsidiary based in Toronto, Ontario, with a national sales force leveraging the robust infrastructure of Kush Supply Co. distribution platform.
- Re-branded KushCo Holdings primary business unit Kush Bottles into Kush Supply Co.
- Launched Koleto, a division of KushCo led by president Steven Hwang, that is focused on building valuable proprietary intellectual property and designing unique FDA-compliant products.
- Launched Kush Energy, focused on supplying the cannabis industry with tested, high quality solvents and hydrocarbons, after the completed acquisition of Summit Innovations in May 2018, and subsequently opened two hazmat facilities in Portland, OR and Seattle, WA metro areas.
- Launched creative design capabilities for clients across several industries, following the acquisition of The Hybrid Creative in July 2018.
- Initiated the Company’s second international expansion with a new office in the Jiangbei District of Ningbo, China, establishing a physical presence that will facilitate stronger manufacturing relationships and maintain consistent high-quality standards.
- Engaged Manhattan Associates as the Company’s new Warehouse Management System provider and GoLeanSixSigma.com as consultants to build scalable and sustainable processes.
- Formed a three-member Advisory Board to provide strategic advice and expertise to help accelerate growth, manage risk and enhance operational performance.
- Opened a new warehouse facility in Worcester, Massachusetts to serve as the Company’s East Coast hub.
- Launched three new child-resistant product lines, including three proprietary packaging lines.
Nick Kovacevich, Chairman and Chief Executive Officer, commented, “We are exceptionally pleased with the financial results we achieved during the fiscal year with revenues of $52.1 million, representing 177% growth compared to approximately $18.8 million in fiscal 2017. Our strong revenue growth was the result of dramatic growth in our most critical markets, with growing customer numbers, an increasingly diversified offering and expanded facility capabilities. Our growth was further supported by an expanded global presence with recently-opened offices in Canada and China. While we are disappointed with the impact our dramatic growth has had on margins, we believe they are short-term consequences and we’re pleased to have already implemented several initiatives to improve margins on a go-forward basis.”
“As the industry continues to develop, we have transformed our business model, now operating a diverse group of business units that are transformative leaders across several categories. Our dramatic expansion of services has enabled us to enter new markets and reach a wider customer base. This drove a number of positive trends within the business in 2018, including strong growth in customer numbers, increased spending per customer, increased product consumption and the continued investment in geographic expansion and broader product offerings. To support this growth, we have implemented several initiatives designed to improve efficiencies and to establish, build and refine stronger, scalable and sustainable processes. These steps are expected to set us up to continue to effectively capitalize on the continued growth of the industry, and we hope to achieve between $110 million and $120 million in topline revenue during fiscal year 2019,” concluded Mr. Kovacevich.