OTCQB: KSHB Investor Presentation September 2018
Important Cautions Regarding Forward Looking Statements This presentation includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of KushCo Holdings management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; KushCo Holdings undertakes no obligation to publicly update any forwardlooking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in KushCo Holdings SEC filings with the Securities and Exchange Commission (SEC) available at the SEC's Internet site (www.sec.gov). The information contained in this presentation was current as of the date presented. The Company assumes no duty to update the information to reflect subsequent developments. Consequently, the Company will not update the information contained in the presentation and investors should not rely upon the information as current or accurate after the presentation date.
Industry Overview
US Cannabis Industry Economic Impact Legal cannabis sales (including medical) are expected to reach over $20 billion by 2020 in the U.S. alone The expected rise of cannabis sales will benefit all adjacent verticals, driving an additional $146b of economic value across the entire cannabis industry in 2025 Source: Grand View Research, 2018
Key Market Drivers Increasing Legalization More than 50% of all U.S. States have some form of legalized cannabis As of July 2018, thirty states and the District of Columbia currently have laws broadly legalizing marijuana in some form Vermont legislature recently passed a legalization bill, notably marking the first shift away from a voter referendum towards a general political acceptance Federal & State Initiatives Supreme court recognizes states rights to regulate Congress bans government from interfering with state medical marijuana laws Shifting Public Opinion More favorable public opinion toward legalization Especially when combined with childresistant packaging requirements 94% of Americans support medical use 64% support total legalization Source: Quinnipiac and Gallup
Company Overview
About KushCo Holdings KushCo Holdings, Inc. (OTCQB: KSHB) is the parent company to a diverse group of business units that are transformative leaders in the cannabis, CBD and other related industries. KushCo Holdings subsidiaries provide exceptional customer service, product quality, compliancy knowledge and a local presence in serving its diverse customer base. KushCo Holdings brands include Kush Bottles, Kush Energy, Hybrid Creative, and Koleto Packaging Solutions. KushCo Holdings, Inc. strives to be the industry leader for responsible and compliant products and services in the legal cannabis and CBD industry.
Our Strategy Organic Growth Growth via Acquisitions Doubling Down with Growth Capital We leverage our unique position in the industry, by offering margin-enhancing products and growth trends not yet recognized by the industry. This highly-fragmented, cash starved industry allows us to make strategic decisions based on inelastic industry demands from its growing customers. As a dominating player in the industry, we believe our public stock and ability to access cash should allow us to build a multi-billion dollar publicly traded company.
Founded in 2010, KushCo has now sold more than 1 billion units and regularly services more than 5,000 legally operated medical and adult-use dispensaries, growers, and producers across North America, South America, and Europe. KushCo Holdings subsidiaries maintain facilities in the five largest U.S. cannabis markets as well as having a local sales presence in every major U.S. cannabis market. Kush Bottles A dynamic sales platform that is the nation s largest and most respected distributor of packaging, supplies, and accessories for the regulated cannabis industry. Kush Energy Pure, high quality solvents and hydrocarbons are now available through our distribution platform. With distribution facilities strategically located in most major cannabis markets, we re able to offer competitive pricing and fast turnaround for deliveries. KushCo Holdings acquisition and integration timeline 2016 Dank Bottles 2017 CMP Wellness 2018 Summit Innovations 2018 $36m Equity Funding 2018 Hybrid Creative Acquired Hybrid Creative Our full-spectrum digital creative agency focuses on brand development as a means of differentiating our clients products, to ensure customer loyalty and brand equity. Clients are global and include cannabis and non-cannabis sectors. Koleto Packaging Solutions We are taking advantage of a relatively untapped opportunity to build a portfolio of innovative products, valuable brands and intellectual property.
Sales & Distribution Broad & Diversified Client Base With 5,000+ business accounts (up from ~4,000 in 2017), we service the supply chain of cannabis and CBD including growers, extractors, manufacturers, retailers, dispensaries and more. Strategically Located In Key Cannabis Markets We have a growing network of distribution facilities designed to efficiently service the entire U.S. with regional hazmat facilities in California, Colorado, Maine, Massachusetts, & Nevada. We have facilities in the five largest U.S. Cannabis Markets with Distribution to 28 states and Canada. California Washington Colorado Massachusetts Nevada
Research, Development and Innovation: Koleto Packaging Solutions Koleto is our business unit established in July 2018, committed to developing proprietary products to meet the needs of the industry, building recognizable brands and protecting our investment with intellectual property. Est. 2018 Kush Canister TM Proprietary Kush N Turn TM Bud Gloves TM Glass Concentrate Container Patent Pending Kush Bottles TM Kush N Slide TM Grip N Glide TM Lift Off TM Cartridge Tube Patent Pending Snap Cap TM Patented CERTIFIED CHILD-RESISTANT
Multi-faceted Growth Strategy Stay on top of all new industry trends Be first mover in new markets Grow wallet share with existing clients Leverage strategic partnerships Make strategic acquisitions
The Hybrid Creative The Hybrid Creative is a full-spectrum premier digital creative agency servicing cannabis and non-cannabis clients within solar, technology, security and more across the U.S., Canada and Europe. This will expand Kush s branding capabilities in a space where branding has become critical. Corporate Identity Web Applications Development E-commerce Solutions Traditional and Digital Design Services Motion Graphics Digital Marketing Search Engine Optimization Photography and Videography We plan to generate additional cross-selling opportunities with our clients in need of expert branding services, and their clients in need of packaging solutions. Major Distribution Facilities In: ZDCA s client base includes many companies that are not in the cannabis industry, which offers us greater insight into marketing trends in other industries which we believe will strengthen our overall offering.
Koleto Packaging Solutions est. 2018 A new business unit under the KushCo Holdings umbrella exclusively focused on innovation and identifying market needs. This unit will develop or acquire innovative products and services and then bring them to market to be sold through our sales and distribution platform, Kush Bottles. The production of new, solutions based products is an integral part of the Company s strategy Glass Concentrate Container Patent Pending Snap Cap TM Patented This Major will support Distribution our long-term Facilities business In: model and build our reputation as producers of reliable, premium quality products and services across the entire cannabis supply chain. Cartridge Tube Patent Pending
Summit Innovations Update: Now Kush Energy A leading supplier of hydrocarbons into the cannabis sector currently operating in four states. Since the acquisition, there has been a successful integration into our platform and continue to expand the business and capture operating efficiencies. Given the significant organic growth opportunities, we have hired a vice president for this business unit, Anthony Pham. Major Distribution Facilities In: Further leverages Kush Bottles proposition as a one stop shop and provides significant cross-sales opportunities with the leading brand and manufacturing operations in the US.
Leading A Revolutionary Industry Consolidation Unique Capital Situation No traditional debt financing available Unfavorable equity financing offered in select cases KSHB is better positioned to raise capital than other players in this industry and can drive highly accretive M&A pricing Industry In Early Stages Founders don t want to cash out too early Smaller piece of a bigger pie in an attractive option KSHB can provide value added growth capital
Solid Platform For Growth KushCo Holdings has invested significantly in personnel, facilities, technology, and systems to support organic and acquisitive growth. Our new structure will allow us to leverage shared services to benefit all business units across accounting, fulfillment, IT, marketing, product development, human resources and sales & sourcing. KushCo Holdings can use its stock as currency and has done 5 acquisitions to date. As a result, we have positioned our organization as the premier acquisition destination for other businesses as they scale in their respective vertical.
Leadership Nick Kovacevich Chairman, Co-founder & CEO In his role as CEO for KushCo Holdings, Nick directs all business relations and financial strategy for the company. Nick also oversees the organization's senior management team. Nick has been integral in making critical strategic, growth, and financial decisions since the company s inception. Nick holds a Bachelor of Science from Southwest Baptist University where he studied Sports Management and earned Academic All-American honors. While at SBU, Nick played small forward for the men s basketball team, leading the Bearcats to the Sweet 16. Jim McCormick CFO & COO Jim McCormick has extensive CFO experience and has demonstrated financial and strategic leadership in his previous roles in the cannabis and tobacco industries. Mr. McCormick spent the majority of his career at British American Tobacco where he held multiple general management and CFO roles internationally over his sixteen-year tenure with the firm. Prior to this role, he was CFO at Electronic Cigarettes Group International. In his role as CFO, Jim McCormick leads all financial operations. He is also responsible for managing liquidity, balance sheet risk, and capital market transactions to ensure KushCo Holdings remains well positioned to capitalize on growth opportunities.
Leadership Jason Vegotsky President Jason Vegotsky is an entrepreneur with an extensive background in sales and business development. Jason graduated with a Bachelor of Arts in Economics at Bucknell University. His passion is associated with growth; implementing processes, improving strategy and increasing revenue. Prior to Kush Bottles, Vegotsky was the co-founder of Summit Innovations, Inc., and the driver of the company s business development. As President, leading the company's main business unit, Jason Vegotsky leads a team of over 45 sales professionals, operations, shared services, project management, and is responsible for expanding our physical presence nationwide in every major cannabis market. Rodrigo de Oliveira Vice President of Operations With over 18 years of experience in global supply chain and operations, Rodrigo has expertise in steering businesses to meet and exceed KPI s. Rodrigo earned his Bachelor s degree in Business Administration at Universidade Mackenzie in Brazil. His background comes from numerous years of multisite operations and warehouses, both domestic and international, at companies including Oakley, General Electric, Brightstar Corporation and Nike Accessories. As Vice President of Operations, Rodrigo oversees manufacturing, operations, global supply chain and logistics. He will lead our sourcing and operations teams across our five facilities in California, Washington, Colorado and Massachusetts. Rodrigo will continue to expand Kush Bottles footprint in all major markets of cannabis. Edd Pratt Executive Vice President Edd brings more than 30 years of sales, business development, and operations experience with several engineering and high-tech professional services companies. He most recently served as Chief Operating Officer at Wizard International, a provider of innovative and affordable solutions to the custom framing industry. Edd joined KushCo Holdings in February 2017. He started with KushCo Holdings as Vice President of Sales but has been recently promoted to Executive Vice President. In this role, Edd will lead domestic and international distribution, increasing KushCo Holdings footprint in all major cannabis markets as well as strategic international partnerships.
Board Members Nick Kovacevich Chairman In his role as CEO for KushCo Holdings, Nick directs all business relations and financial strategy for the company. Nick also oversees the organization's senior management team. Nick has been integral in making critical strategic, growth, and financial decisions since the company s inception. Barbara Goodstein Board Member Barbara Goodstein has previously held many senior leadership roles in operations, business and marketing development at firms including Bankers Trust, Instinet.com, Vonage and American Express. She participates in Fortune s Most Powerful Women Summits, is a member of the Women s Forum, and Fortune s Global Mentor Program. Dallas Imbimbo Board Member Dallas Imbimbo attended UC Davis and has experience in senior roles at various startup companies. Dallas is a Co-Founder of Kush Bottles and has been a part of the Board since 2010. In addition, he is also the Co-Founder at BigRentz and PackMyDorm. Eric Baum Board Member Eric Baum brings more than 15 years of experience in advising executive teams across a variety of industries. He currently serves as a managing director at Acquis Consulting Group and its affiliate, Solidea Capital. Baum serves on the Board of Directors for several companies, and participates in several investment groups. Donald Hunter Board Member Donald Hunter has more than 25 years of public company experience and has served as a member and chairman on the Board of Directors for several companies. Currently, Hunter is Principal at Donald Hunter LLC. He qualifies as a financial expert pursuant to the Sarbanes-Oxley Act and is an active member of the National Association of Corporate Directors.
Financial Overview
Key Stats (OTC: KSHB) Trading Data (@ July 11, 2018) Stock Price $5.22 52 Week High/Low $8.51/$1.81 Avg. Daily Vol. (3 Mo.) 503,310 Shares Outstanding 73.89M Q3 2018 Highlights (@ May 31, 2018) Revenues $12.90m Gross Margin 28.3% Total Assets $84.54m Working Capital $15.80m Public Float, Est. 46.98% Insider Holdings 53.02% Valuation Measures Market Cap $385.70M Source: NASDAQ historical quotes
Comparative Quarterly Revenue Q4 2017 YoY Q1 2018 YoY Q2 2018 YoY Q3 2018 YoY $14.0 $14.0 $14.0 $14.0 $12.0 $12.0 $12.0 $12.0 $12.9 $10.0 $10.0 $10.0 $10.3 $10.0 $8.0 $8.6 $8.0 $8.8 $8.0 $8.0 $6.0 $6.0 $6.0 $6.0 $4.0 $4.0 $4.0 $4.0 $4.7 $2.0 $2.4 $2.0 $2.5 $2.0 $3.0 $2.0 $- 8/31/16 8/31/17 $- 11/30/16 11/30/17 $- 2/28/17 2/28/18 $- 5/31/16 5/31/17 Fiscal year ends August 31. Revenue in millions.
P&L Review Q4 2017 Q1 2018 Q2 2018 Q3 2018 Revenue 8,647,788 8,847,115 10,361,376 12,904,609 Cost of Goods Sold 5,899,303 6,162,120 7,450,732 9,246,879 Gross Profit 2,748,485 2,684,995 2,910,644 3,657,730 Total Operating Expenses 2,243,486 2,533,552 3,790,614 5,739,827 Income (Loss) from Operations 504,999 151,443 (879,970) (2,084,378) Total Other Income (Expenses) 282,478 2,413 (33,407) (81,362) Net Income (Loss) 222,537 94,615 (920,314) (2,165,740)
Balance Sheet Summary $ in Millions May-31-2018 August-31-2017 Assets Cash 3.6 0.9 Accounts Receivable, Net 6.3 1.7 Inventory 10.1 3.8 Property & Equipment, Net 2.8 0.9 Goodwill 51.3 34.2 Total Assets 84.5 47.0 Liabilities Debt 1.3 1.5 Total Liabilities 12.2 6.0 Total Equity 72.3 41.0 Total Liabilities and Equity 84.5 47.0 Total Working Capital 15.8 3.6
Key Takeaways KushCo Holdings is the parent company to a diverse group of business units that are transformative leaders in the cannabis, CBD and other related industries. KushCo Holdings subsidiaries provide exceptional customer service, product quality, compliancy knowledge and a local presence in serving its diverse customer base. Our unique relationships with growers, dispensaries, manufacturers and ancillary companies will continue to provide us with first mover opportunities to expand into new segments within this rapidly growing industry. Over the last 12 months we ve invested extensively in our team, systems and infrastructure which allow us to continue our rapid growth both organically and through acquisitions. Due to the unique set of challenges facing the cannabis industry, KushCo Holdings will take advantage of our public company platform and superior balance sheet to be a leading consolidator within the industry.
Thank You Investor Relations ir@kushco.com