Following the success of the SMSI Research Group (now full at 256 participants) where average participants are up 200%, StoryTrading has opened the KSHB Research Group moderated by Room Leader, Brett Cavanagh. The below is an overview of the KSHB opportunity written by Brett. Visit our Groups Page to join the KSHB Research Group before it fills up!
KushCo. Holdings, Inc. (KSHB) specializes in marketing and selling packaging products, vaporizers, hydrocarbon gases, solvents, accessories and branding solutions to customers operating in the regulated medical and recreational cannabis industry. KushCo has been expanding it’s offerings and revenue streams the past few years to deliver an ecosystem where KushCo is a one-stop shop for all things a cannabis business might need. KushCo. is the parent company of four different subsidiaries:
Kush Supply Co. – The nation’s largest distributor of packaging, supplies, and accessories to the cannabis and CBD industry. Also KushCo.’s largest contributor of revenue @ approximately 50% in Q3’19.
Kush Energy – Provides ultra-pure hydrocarbon gases and solvents.
Hybrid Creative – Creative design agency for clients across several industries.
Koleto Innovations – The research and development arm driving intellectual property development and acquisitions.
Company stats for Q3 2019 (Ending May 31, 2019):
– Outstanding Shares = 88,840,000
– Market Cap = ~$400M
– Cash = $12M
– Debt = $18M
– Current Liabilities = $30M
Insider Ownership = 41%
– Two company founders (Nick Novacevich & Dallas Imbimbo) own over 20% of company. This level of insider ownership aligns management and stakeholders interests. As I’ll mention later, the company has avoided raising money through dilution and instead has recently secured private placements of funds and credit facilities.
KushCo Customers and Revenue:
KushCo owns seven distribution facilities across the United States which has helped them grow and expand their customer base. You can see in the customer breakdown chart below (Published August 5th, 2019) that total customers are increasing across all value levels, customer accounts spending over $1M are up to 13 over the last 4 quarters (Avg ~$4M/yr), coming from 0 $1M customers less than 2 years ago.
- The top table (green) shows the number of customers added since last quarter (Q2’19). Obviously $1M+ and $500K+ spending customer are of interest.
Revenue Breakdown by Location:
- YoY growth for Q3 ‘18-‘19 = 221%
- QoQ (Q2’19–Q3’19) growth = 18%
- California Revenue = 51% ($21.1M out of $41.5M Total for Q3’19)
Revenue Breakdown by Category:
- It’s all about the Vape! ‘Vape’ accounted for 69% of revenue ($28.8M)
- ‘Packaging’ and ‘Energy & Natural Products’ both grew revenue well; providing 18% and 10% of total revenue, respectively.
- ‘Paper & supplies’ was the only underperforming category, but makes up just 2% of Revenues.
Annual Net Revenue:
- Estimating $147M Revenue for FY2019, ending August 31st.
- Estimating $45.5M in Q4, from $41.5M in Q3.
- I don’t have an estimate from KushCo for Revenue in 2020; however, based on performance and growth it’s likely to be between $200M-$230M+.
News of Value:
- April 30 – Private Placement of $20M
- July 8 – Filed to list shares on the NASDAQ.
- August 22 – Closed $50M Credit facility with Monroe Capital
KushCo has attempted to limit raising money via issuing stock/dilution; as shown by raising $70M over the past four months via private placement and a credit facility.
If KushCo up-lists from OTC to NASDAQ, it could be a major catalyst as investors become more aware and comfortable with the company. Mutual Funds / ETFs will also be adding it to their holdings that track the major indices. Note: Listing on NASDAQ is not guaranteed. There are multiple examples of other Cannabis companies announcing filing to list on major exchange, but withdrew the filing
KushCo. provides an interesting opportunity to invest in the cannabis space by supporting/facilitating cannabis companies to deliver to their customers. I liken it to the California gold rush in the 1850’s; everyone traveled to CA to strike it rich mining for gold, but the consistent profit’s were made by the businesses selling the picks, shovels and equipment for all those miners. KushCo. is growing operations, revenue and customers at an impressive rate, and their management team seems to be shareholder friendly and aligned with shareholder value goals. KushCo. Investor Relations site: https://ir.kushco.com/