KushCo Holdings' Revenue Hits an All-Time High in Q2

Not much has gone right this month for KushCo Holdings (NASDAQOTH: KSHB). The supplier of packaging for the cannabis industry announced earlier this week that it would have to restate its financial results for 2017 and 2018. But on Thursday, KushCo got some good news.

The company reported its fiscal 2019 second-quarter results after the market close. KushCo's revenue increased 240% year over year in Q2, to $35.2 million, a record high for the company. This handily beat the average analyst estimate of $25.5 million. It also reflected a strong 39.1% increase from the previous sequential quarter.

KushCo posted a net loss for the second quarter of $8.9 million, or $0.10 per share, compared to a net loss in the prior-year period of $7.6 million, or $0.12 per share. Analysts were expecting a Q2 net loss of $0.08 per share.

KushCo Holdings CEO Nick Kovacevich said that the strong improvement in revenue stemmed from "our growing customer base and increased sales across our key markets as we successfully leveraged our diverse business units to cross-sell product classes and gain market share." He added that the company now has "customers in every U.S. state where cannabis is legal and in 25 countries."

The company's wider loss in the second quarter was primarily caused by significantly higher spending levels. KushCo's selling, general, and administrative costs nearly quintupled year over year, to $18.8 million. However, the operating costs were offset somewhat by an adjustment related to the company's acquisitions activity.

Kovacevich noted that the company's strategic initiatives, including eliminating free shipping, renegotiating vendor terms, and implementing new inventory management systems, have improved operational efficiencies. These efforts have also increased cash flow and should help to improve profit margins in the future.

KushCo raised its revenue guidance for fiscal year 2019 to between $140 million and $150 million. The company previously forecast full-year revenue between $110 million and $120 million. Kovacevich attributed the more optimistic outlook in part to "the signing of a number of long-term supply arrangements-in-principle with several new large, well-known customers."

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends KushCo Holdings. The Motley Fool has a disclosure policy.