Cannapany on July 9, 2020 No Comments
The cannabis company sees 2020 picking up, but took a hit in the most recent quarter
As announced a couple of weeks ago, KushCo Holdings, Inc. has presented its financial results for the third fiscal quarter that ended on May 31, 2020. The premier provider of ancillary products and services to the legal cannabis market showed some areas with great improvements, such as cost reduction, but some other areas didn’t have great results. One of the biggest successes is that the company was able to achieve a 50% sequential reduction in selling, general, and administrative expenses as a result of its strategy.
Besides the cost reduction, one of KushCo’s goals has been to switch its focus to larger and more trustworthy customers like multi-state operators, instead of the small businesses they mostly targeted previously. That’s the main reason the company’s expenses decreased over 50% from $27.2 million in the second quarter to $12.7 million in this latest one. In addition to that, KushCo reported a strengthened balance sheet and liquidity due to the conversion of 18.5% – $5 million – of its total principal amount of KushCo’s senior notes due April 2021 into equity with limited dilution. On top of that, the conversion comes with zero warrants.
If compared to the same period one year ago, net revenue decreased to $22.3 million, which is mainly due to the adoption of the strategic 2020 plan that includes tighter credit terms to smaller customers. Another reason for the decreased revenue is the sales of vape and natural products, which dropped during the past quarter, as well as the lumpiness coming from the larger, newer customers. “Q3 2020 was a successful transition quarter for KushCo, demonstrating the execution of our strategy to accelerate our path to positive adjusted EBITDA. We substantially reduced our cost structure, consolidated our vendors and warehouses, vastly improved our inventory to align with our actual sales, ramped up our collections activity, stemmed the cash burn, and drove meaningful operating leverage,” said Nick Kovacevich, KushCo’s co-founder, chairman and CEO.
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