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KushCo: Trying To Package A Brighter Future

May 04, 2020 3:17 PM ETKushCo Holdings, Inc. (KSHB)5 Comments
Pacifica Yield profile picture
Pacifica Yield


  • KushCo's financial health is deteriorating.
  • The company's cash burn threatens its ability to remain a going concern.
  • Management have started to take the necessary steps to ensure survival.

KushCo entered into 2020 with financials in shambles, a sobering reality for a company that was once lauded as the perfect pick-and-shovel cannabis play. Its position as a supplier of a broad range of cannabis ancillary products and services was meant to act as a hedge against the inherent ebbs and flows of cannabis cultivation.

The protracted decline in its financial health has destroyed shareholder value and placed its future at risk. The former being reflected by a stock price down 87% from its 52-week high, and the later encapsulated by what has been a total dependency on equity raises to remain a going concern.

The company's second-quarter earnings for its fiscal 2020 point to more downside possibly ahead. Against a second quarter-over-quarter revenue decline was the continued entrenchment of negative cash from operations.

A Financials In Shambles

KushCo's earnings result for the Q2 2020 saw revenue decline by 14% QoQ to $30 million with long-term debt rising to $21 million.

Cash from operations also remained negative, increasing by 32% to $10.7 million. The cause of the revenue decline was multifaceted, with a broad decline in its largest geographical market being followed by collapsing demand across all its major product categories. California realized a YoY revenue decline of 72% and a QoQ decline of 24% while Vape product sales were down 17% YoY and 3% QoQ.

Gross profit was negative $8.9 million due to restructuring costs incurred during the quarter. Excluding this, a gross margin of 22% was achieved. This would have helped the company realize a gross profit of $6.6 million, albeit a QoQ decline of 9.6%. Gross margins were still up 200 basis points YoY.

KushCo's inability to stem its operational cash outflows had led to the extreme degradation of its financial standing. The company has historically been dependent

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Pacifica Yield profile picture
The equity market is an incredibly powerful mechanism as daily fluctuations in price get aggregated to incredible wealth creation or destruction over the long term. Pacifica Yield aims to pursue long-term wealth creation with a focus on undervalued yet high-growth companies, high-dividend tickers, and green energy firms.

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