The recent confirmation of the Blue Wave U.S. government thrust cannabis stocks back into the spotlight. Now with an increased chance that both medical-use and recreational cannabis could be legalized nationwide, traders are scurrying again to scoop up cannabis-related stocks…
Nowadays there are many cannabis producers and equipment companies lined up to grab a piece of the action. Then there are some more obscure fringe players like KushCo (OTCMKTS:KSHB), an emerging $152 million market cap company that plays a unique role in the legal cannabis ecosystem.
What Does KushCo Do?
Formerly called Kush Bottles, KushCo is one of the first companies to plant its seeds in the cannabis sector having been around for more than a decade. The company provides ancillary products and services to more than 100 cannabis and CBD growers, processors, distributors, and retailers globally. This includes packaging, papers, vaporizers, food-safe oils, as well as mass retail execution and merchandising for CBD stores.
With customers in North America, South America, and Europe, KushCo has formed some valuable relationships with many of the top cannabis brands. Its core vaporizer and technology division, which accounts for 60% of revenue, does business with some of the world’s leading processors and retailers selling hardware, cartridges, pod systems, and batteries. KushCo entered this business back in 2017 because customer trends suggested vaping will be fastest growing cannabis category.
KushCo is also in the equipment financing business after acquiring a 20% stake in XS Financial last year. This diversifying strategic partnership is expected to become a bigger part of the business over time as growers and processors seek cost effective means of adding equipment to keep up with demand.
How is KushCo’s Financial Performance?
Like most cannabis related companies, KushCo is operating at a net loss with spending outpacing revenue at this stage. Over time, however, this trend is likely to change.
The company’s October 2020 fiscal Q4 report marked the first time in more than three years that it had positive adjusted EBITDA and cash flow. Then, in the first quarter of the new fiscal year, the positive adjusted EBITDA repeated. KushCo’s revenue declined 23% to $26.8 million driven by a sales decline in recreational states during COVID-19, but the $0.03 per share loss was narrower than the $0.09 loss posted in the prior year period. It also marked the 7th straight quarter of 20%-plus gross margins which bodes well for the bottom-line improvement as the company achieves scale.
For the full year management is expecting revenues to be…
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