KSHB - KushCo Beats On Revenue Misses On Earnings Estimates
KushCo Holdings, Inc. (OTCQX:KSHB) reported financial results for its fiscal fourth quarter and full-year ended August 31, 2020. The company reported that its net revenue decreased 44% from the prior-year period to $26.5 million, primarily as a result of the company implementing its 2020 Plan, which has resulted in tighter credit terms being extended to smaller and less creditworthy customers. KushCo beat the Yahoo Finance estimates for revenues, which was $25.7 million.
On a sequential basis, KushCo ‘s net revenue increased 19%, driven by an increase in sales to the company’s top customers, which includes leading MSOs, licensed producers, and brands. On a GAAP basis, the net loss was approximately $7.3 million, compared to approximately $11.5 million in the prior-year period. Basic loss per share was $0.06 compared to $0.13 in the prior-year period. The estimate from Yahoo Finance was for a loss of four cents, so KushCo missed this by two cents.
On a Non-GAAP basis, excluding the impact of certain non-recurring charges and gains such as the company’s restructuring costs, net loss for the quarter was $1.4 million, or $0.01 per share, compared to a net loss of $7.2 million, or $0.08 per basic share, in the prior-year period.
Nick Kovacevich, KushCo’s Co-founder and Chief Executive Officer said, “After a challenging start to the fiscal year beginning with the illicit market vape crisis and, shortly thereafter, the onset of the COVID-19 pandemic- fiscal Q4 2020 was one of the most transformational quarters in KushCo’s entire 10-year history. We onboarded several new high profile customers, returned to growth, executed many of the major initiatives of our 2020 Plan, and achieved our first quarter of positive adjusted EBITDA and cash flow from operations in more than years. From a revenue perspective, we generated $26.5 million, representing a 19% increase compared to fiscal Q3. The sequential growth was largely driven by an increase in sales to our top customers with whom we have worked hard these past two years to develop deep relationships. These customers are continuing to enter new markets and solidify their positions in existing markets, demonstrating our thesis that the industry will continue to see more consolidation, and that we will be rewarded by aligning ourselves with these larger operators.”
Full-year Results
The company reported that for the full year its net revenue decreased 24% from the prior year to $113.8 million. In addition to the company’s new strategy, the decrease was also driven by lower sales from vape and natural products due to the illicit market vape crisis, as well as travel and regulatory restrictions in the markets that the Company operates in due to the COVID-19 pandemic.
On a GAAP basis, the net loss for the full year was approximately $77.7 million, compared to approximately $39.6 million in the prior year. Basic loss per share was $0.68 compared to $0.47 in the prior year. Net loss and net loss per share for fiscal 2020 were impacted by several restructuring charges and one-time expenses the company recognized as part of the 2020 Plan. These expenses include severance and asset impairment charges associated with the company’s reductions in force as well as completed and planned closures of its warehouse facilities to consolidate its warehouse footprint.
Guidance
KushCo said it expects net revenue for its fiscal 2021 to be between $120.0 million and $150.0 million. In addition, the company forecast adjusted EBITDA for the fiscal year to be between $5.0 million and $7.0 million.
“We believe that fiscal 2021 may be a major catalyst-driven year, with several states poised to legalize cannabis and the potential for more favorable legislation at the federal level, which may support the continued expansion of our industry through an increase in access to capital,” said Kovacevich. “Our base case guidance for fiscal 2021 reflects solid profitable growth in the current status quo environment with a healthy upside if new states legalize cannabis for medical and/or adult use.”