KushCo Holdings, Inc.
Q3 2021 Earnings Call Transcript

Published: 8 Jul 2021

[Operator:]

Greetings, and welcome to the KushCo Holdings Fiscal Third Quarter 2021 Earnings Conference Call. . Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Najim Mostamand, KushCo's Director of Investor Relations. Mr. Mostamand, you may begin.

[Najim Mostamand:]

All right. Thank you, operator. Good afternoon, and welcome to the KushCo Holdings Fiscal Third Quarter 2021 Earnings Conference Call. A replay of this call as well as a copy of the supplemental earnings slides will be archived on the Investor Relations section of the KushCo Holdings' website, ir.kushco.com.

[Nicholas Kovacevich:]

Thanks, Najim, and thank you all for attending our fiscal third quarter 2021 earnings call. Hope everyone had a fun and safe 4th of July weekend. I know much of the talk around KushCo these past few months has been around our proposed merger with Greenlane, and I'm excited to report that we are making great progress toward closing within our expected timeline of calendar Q3 2021. So before jumping into our results for the quarter, I want to spend some time providing an update on the merger and the important upcoming special meeting of shareholders to approve the merger. Then, we'll shift gears to our Q3 financial results before opening it up for Q&A. So with that, let's turn to Slide 4 of the supplemental earnings slides where we will go over some of the details for the upcoming special meeting. As you may have seen by now, we have set our virtual special meeting date to Thursday, August 26 at 12 p.m. Eastern Time. All shares held as of the record date of July 1 will be eligible to vote, and you do not need to attend the virtual meeting to vote. In fact, a majority of shareholders vote well in advance, which is why it's important to be on the lookout for the proxy materials that will be arriving in your mailbox either later this week or next week. These proxy materials will have a control number that is needed to submit your vote which you can do online, by phone or via mail in just a few minutes. I just want to stress how important it is to vote your shares, no matter how many or how little you own, without your support and the overall approval needed to consummate this merger, we cannot realize the expected benefits of this merger, which we believe are significant. I won't name all of them, but just to name a few of the benefits of the merger, especially to KushCo shareholders

[Stephen Christoffersen:]

Thanks, Nick. I'll now turn to Slide 11, which displays a snapshot of our income statement for the quarter. Total net revenue increased 27% year-over-year to $28.3 million. As Nick mentioned, we're continuing to experience strong growth from our MSO and LP customers, which is a part of our strategy to align with the industry's leading operators. On a GAAP basis, gross profit for the quarter was $4.4 million or 15% GAAP gross margins. As Nick mentioned, gross margins were down sequentially, primarily due to lower material margins and an increase in freight charges related to shipping delays. We expect gross margins to have these headwinds, especially to lower material margins for a couple of quarters as we cycle through the higher-priced inventory. And on the freight side, we're evaluating some options to offset these higher charges, which, along with securing more favorable pricing from our vendors, should help us return to the mid-20s gross margin levels we know this business can generate.

[Nicholas Kovacevich:]

All right. Thanks, Stephen. Looking ahead, we are excited to move closer towards consummating our merger with Greenlane and creating the industry's leading ancillary cannabis company and house of brands. As I mentioned at the onset, one of the final milestones left is the shareholder approval required to approve this merger. And we strongly encourage all shareholders to make their voices heard and to vote their shares using the proxy materials that have been provided to them. We are thrilled by the prospect of joining forces with Greenlane and generating significant value for our shareholders. But as I mentioned before, we can't create any of the expected value from the merger until we get the required shareholder approval. So pleased vote today. And with that, I'd like to turn it over to the operator for the Q&A session.

[Operator:]

. Our first question comes from Vivien Azer with Cowen.

[Vivien Azer:]

So my first question is on the top line. Fully appreciate that there's going to be some lumpiness quarter-to-quarter given the higher concentration around key customers. That makes a lot of sense. But I'm just curious, as you're having the conversations with those top MSOs and LPs, like what sense you're getting around their optimism around post-COVID recovery in terms of kind of consumer spend, the potential impact from incremental stimulus from the tax credit that kicks in next week? Are you sensing any change in tone from your key partners?

[Nicholas Kovacevich:]

Yes, great question. I think one thing is important to know, right, our forecast, a lot of our forecasts are coming from those customers. And since us being up, that means that they were up too. So I think certainly, sentiment is important, but in reality, none of us can really predict exactly where those sales are going to be especially in this climate. I mean, look, I think in general, as you know, the MSOs are standing aggressively, organically and inorganically. So we're seeing them bullish on overall growth in terms of going a little bit more granular market-by-market, same-store sales, things like that related to tax credits or other stimulus, we haven't been having too many of those conversations, at least I haven't, to be able to really comment on that. But I think the general sentiment is the industry continues to grow. These MSOs believe they're going to continue to grow long term in their existing markets and expanding into new markets. And so really if you take the year-over-year view or the lens, it's going to be very bullish across the board, and that is consistent with what we're hearing. And I don't know if Stephen has anything additional to add to that.

[Stephen Christoffersen:]

Yes. I was just going to maybe add that on the Canada front, so you can see in our revenue breakout by location, obviously, Canada down pretty substantially quarter-over-quarter, and that's as a result of the lockdowns. But the word on the street, at least from our sales directors, who are talking with the different buyers at these firms, they're feeling good, and they feel good that they're going to be able to sort of sell down the inventory between now and the end of the calendar year. So I guess the message here is there is an end in sight north of the border. So that's encouraging.

[Vivien Azer:]

No, that certainly is encouraging. Thank you both for that color. Albeit a small market, just a follow-up on the revenue line on Nevada, a little bit surprised to see that down. Again, albeit small, just my impression from the press is that Nevada is one of the markets where you've seen tourism kind of come back in a pretty encouraging way. Any specific commentary on that market?

[Nicholas Kovacevich:]

No. Specifically, I haven't dug in as deep to be able to answer that. But I know there's a couple of large MSOs that we're doing a significant amount of business with, that have decent presences in Nevada. I would say we've probably underperformed there in terms of aligning with some of the other larger players that are more single state or smaller multistate operators. So there's some opportunity for us to just align with some more significant clients in that market, but nothing specifically that we're concerned about with our MSOs that play there. And I think it could be due to some lumpiness that we saw that market kind of come in where it did in Q3, and I haven't looked at our Q4 numbers to date, but I would hope that we're seeing that -- a little bit of a recovery there for us.

[Vivien Azer:]

Terrific. Last one for me. Recognizing that shipping delays are completely outside of your control and are really a global phenomenon that are far from unique to cannabis or U.S. cannabis even. But like what kind of indicators are you watching for? Or perhaps more importantly, like what can we be looking for externally to get a sense that some of that pressure might be easing?

[Nicholas Kovacevich:]

So I mean, I think companies are adjusting to it. And I think we're going to have to figure out how we can offset some of the impact that we're experiencing and share that with our customers. And that's already in motion. We've rolled out a new program where we have very tight customer-requested time frames. And if a customer needs a product ahead of that schedule, it's going to require an air shipment, which we continue to do for vape. It's actually not terribly more expensive for vape just because it's a higher average selling price on those products, and their smaller footprint in terms of dimension, versus like a glass jar that's cheap and takes up a lot of space, it's heavy. It really never makes sense to air ship that, although we've done that in the past, as you know, Vivien. But with the air shipping for vape specifically, we're offering that, but the customer has to then pay the difference, right? So that's something we weren't necessarily doing where we were kind of like, okay, they needed a month earlier, we would sort of eat that. We're moving to a system where we're not doing that now, which will show up in Q4. So little things like that we can do to control what we can control. But on the macro front, when this is going to ease up, nothing specifically comes to mind that would be an indicator that the Street could look at to see that start to improve. I don't know if Stephen has any insight there. Go ahead, Stephen.

[Stephen Christoffersen:]

Yes. I mean we're all sort of following the headlines as it relates to the trade war. And so the tariff impact is probably here to stay. And as Nick mentioned, we have just gotten a little tighter with the customer requests and trying to pass through some of those costs that they needed earlier. But I think for us, really, what we're paying attention to and what we'd like to see here in our fiscal Q4 is ultimately that inventory tipped up. It ticked up incrementally from like 50% to 52% this quarter. We'd like to see that start to come down, which is usually the case. And so as that happens, that basically means that we're sort of -- some of the shipping delays have kind of worked themselves out and that business has become a little bit more predictable. I mean we've got shipments lined up. We're sitting here at early July. We have visibility now kind of what's going to hit between now and, call it, early September. We feel pretty good about that. So for us, it's just kind of a quarter-by-quarter basis, but definitely something that we need to start re-evaluating and potentially passing on to customers.

[Nicholas Kovacevich:]

Well, that reminds me of one of the things that I think is relevant, just to expand on this point because I think you asked a great question, Vivien. One of the things that we're kind of wrestling with is as a larger publicly traded company, we do things by the book. We have the tariffs that have been affecting us for years. We also have the shipping headwinds that are really kind of universal. And then you also have this PACT Act, which we had to move everybody over to shipping on LTL and FTL we talked about in the last call. Currently, a lot of our competition is cutting corners, right? They're underpaying on the tariffs. They're still using UPS and FedEx and USPS. USPS -- let me just be clear, you can still ship through USPS, although that is expected to close. But UPS and FedEx you can't, people are cutting corners. They're doing it, they're getting away with it. These are smaller companies, right? They have less to lose. They're taking the risk. And so we look forward to a more level playing field. And so we've been reluctant to pass more of this on to our customers because we know that the competition is in a better position, not having to pay the fair share of these expenses. So we're wrestling with that, and we're seeing actually coming down the pipe more enforcement, especially with the PACT Act, also with the customs and tariffs, we've heard whispers that there's some crackdowns coming. And so we're expecting that playing field to be leveled a little bit, which will give us more opportunity to get some of that margin back without risk that some of these smaller private companies can cut corners and undercut us if and when we do move forward with trying to recoup some of those additional expenses. So I think that's an important dynamic to understand. Long term, we'd rather do things the right way. And ultimately, we think over time, people that are cutting corners aren't going to be able to continue to build their business in this industry. But we're dealing with it in real time, and we're making decisions of how much do we look to recoup when we know there's competition that's getting away with stuff versus let's keep our customers happy. Let's keep the competition at bay and let's ride through this tumultuous time with all of these regulatory changes, hoping that there will be proper enforcement, companies will start to comply and there will eventually be a level point, which will favor us.

[Operator:]

Our next question comes from Aaron Grey with Alliance Global Partners.

[Aaron Grey:]

So first one for me. I just want to go back and -- just want to go back in terms of the competitive environment and specifically the pricing. I'm just wondering, could you give some more color in terms of your new more aggressive pricing program that you've rolled out? And whether or not you're now kind of utilizing that more so in a defensive mechanism as people try to come after your business? I know CCELL was -- specifically was kind of priced for market premium or if you're also kind of using it in a more aggressive tactic and also kind of gaining more business? Or just if any more color you could kind of provide because I know you had been talking about potentially rolling this out for the past couple of quarters? So...

[Nicholas Kovacevich:]

Yes. Great question, Aaron. And we are embarking on a three-pronged strategy to do two things right, defend and protect the market that we have, but also to expand and garner additional market share. So pricing is one of the prongs. The pricing strategy that is underway, we see it being very effective in doing both, right, defending and expanding our business. So you will see some additional expansion of our market share and CCELL's market share with that tactic, but it's complemented by 2 other prongs. The second prong being innovation. We believe, again, CCELL, the power company is more, for those who aren't familiar, it's worth almost $40 billion. They've got -- they raised $1 billion in cash in their IPO last year. They're well-funded. They've got engineers upwards of 500, 600, 700, I don't even know the latest number. They're developing a lot of intellectual property and they're bringing next-generation products to market. We see that as obviously a huge barrier to competition, right? We believe that SMOORE will continue to innovate and be the dominant leader in vapor technology for the foreseeable future. So we feel great about being aligned with them. And the third prong is a legal strategy. As there's IP developed, we intend and SMOORE intends to defend that intellectual property. And so using the three-pronged strategy, we're very optimistic that we'll be able to retain the business that we have and retain that for the foreseeable long-term future, but also go out and take new business and hopefully knock out some of the competition that has come in and undercut pricing on products that, in our opinion, may be infringing on intellectual property, right? So we'll see how it all plays out, but the three-pronged strategy we feel very good about, and we're already underway, as you know, with some of those initiatives currently in the market, including the pricing.

[Aaron Grey:]

Appreciate that. That's helpful color. Second question for me, just looking up to Canada. I certainly appreciate how you had some sales kind of come down sequentially with what we have going out there with the lockdowns are a little more prolonged than in here in the U.S., but a little more big picture question, or I guess, longer term, a couple of quarters, we had talked about the fact that there were some LPs that might have been or operators that are looking to kind of go for some of the lower pricing options in terms of devices for vapor just because of the pricing pressure in the market. But OCS came out with a report last week for Ontario that of the complaints that they're receiving, about 72% were from vapes over 9,000 just due to quality issues. So just wondering if you've seen kind of going back as you're talking to some of these LPs, if they're now looking to maybe be willing to kind of pay a greater premium for a better product, especially on the battery or CCELL side so they don't have these issues and potentially risk getting delisted? And whether or not those conversations start to evolve, and you've been able to potentially bring on more customers up there?

[Nicholas Kovacevich:]

Yes. Look, Aaron, it's almost as if what I said, I forget when I said a while ago is playing out, right? We saw it happen here in the U.S. and now you're seeing it happen in Canada, right? So you have this big boom in the market. You've got all these companies doing well, looking to lower their costs and maximize their profits. As soon as something goes wrong, that's when people decide, hey, maybe it's not all about maximizing every dollar of profit. Maybe I should be sure that I have a quality product that can scale with my business. That's where we saw in the U.S. a migration specifically for the larger MSOs back to the CCELL platform. And in Canada, we saw the initial part happen where, again, everybody wants to differentiate. Everybody wants to have the lowest cost. And so there's a proliferation into other, in our opinion, lower-quality products. And this is one of the effects that now is showing up in the market. And I do believe it is and will continue to drive more, especially the larger operators back to the CCELL platform. I know specifically, we work with one of the largest, not the largest vape player in the space using CCELL. Is that why they're leading the way in Canada? I don't know. I would argue it has something to do with it. Are people going to take note of that? Are they taking note of that? I would think so, right? So I believe the dynamic you laid out is going to happen as you laid it out. And it's one of the reasons why we feel so bullish about our relationship with CCELL and the future performance of the CCELL products in all markets because of the fact they've demonstrated they can produce the highest quality products at the largest scale in the key cannabis markets.

[Operator:]

Our next question comes from Scott Fortune with ROTH Capital Partners.

[Scott Fortune:]

As far as the MSO customers, you have secured new MSO wins from there. Can you provide a little more color on winning these new more MSOs from the competition? And how long does it take with the new MSO, you're onboarding new vape at a lower margin per se, but when does the new MSO really invert to become a more valuable customer and initiatives of the cross-sell opportunity there as you look out from a longer time frame?

[Nicholas Kovacevich:]

Yes. Great question. Some of the customers we work with are out there publicly. I mean we don't specifically look to name names. But in general, right, we're sort of working with a majority, but there's a few that we are doing a lot of products with. And specifically, as you can see in our revenue, 67% of it is vape. If we have that, if we're the main vape provider for that MSO, there's going to be big dollars attached to it. So to answer your question, it differs, right? So one scenario where we onboard -- I think it was actually in Q2, but onboarded one of the top 10 sort of revenue-wise publicly traded MSOs, specifically with vape, we're seeing immediate significant impacts, right? They're one of our top 5 overall customers because we started with vape and we're working to diversify and actually win a lot of their packaging business over time. The flip side of that is with -- we just landed a private MSO that started with child-resistant boxes, and we just expanded to providing ethanol. These are great wins, but they're not going to show up really high on the revenue line item, right? So it goes both ways. It depends on how we ultimately land that customer and then how we expand the business with that customer. We're looking at making sure that we're developing good relationships with all of the leading MSOs. We're making sure that we're providing high-quality service, right? So they have a great experience with KushCo. We're winning on both of those fronts, right? Now when that actually translates to securing the bulk of their spend and showing up big in our revenue, that we can't control as much. But if we do the first things well, like I mentioned, ultimately, that revenue will show up. We're not worried about it in terms of ultimately recognizing the value of this strategy, but we can't exactly predict when. And of course, all of us want it sooner rather than later. So hopefully, that gives you some color on how these things go.

[Scott Fortune:]

Yes. And kind of a segue on that business opportunity, have the MSOs started engaging with you more on maximizing their 4-wall retail footprint with KushCo and the potential of Greenlane coming on board here as products as add-on to purchases within the stores? And then kind of any new initiatives you're looking to potentially put in place for the business in the fall that we can look forward to potentially?

[Nicholas Kovacevich:]

Yes, great question. And this is really one of the most exciting things about the merger with Greenlane is the ability to take their CPG products, bring curated sets hopefully right into these MSO dispensary store fronts to help them maximize not only the square footage and the revenue and margin in those stores, but really, what's most important is that consumer experience, right? Give those consumers the ultimate experience where they can come in, buy their cannabis products and buy the accessories needed to consume those products in one location, right? So we're super excited about that. Unfortunately, until the merger closes, we're not able to action on that. We're planning, to answer your question, Scott, we're planning, and we're building a robust plan so that we can hit the ground running and effectuate those cross-selling opportunities. Greenlane as a stand-alone is not just sitting idle, right? They're winning some of that business. They're slowly starting to build out what they call currently their enterprise division targeting dispensaries and primarily MSO dispensary store fronts. So a little bit of that's happening with Greenlane as a stand-alone and I don't have direct insight into how much. You'd have to ask them on the next call. But we do know that when the companies merge together, that is the greatest revenue synergy opportunity. And so we are doing the planning work to be able to maximize that. And we're optimistic. Some of it's going to be ultimately driven by the market. We know that as the pricing of cannabis comes down and the margins come down, companies are going to look to offset that by offering higher-margin, higher-priced accessories. Of course, we don't want to wait for that. So we'd like to get people ahead of the curve. And then we also think that once smart retailers are merchandising properly, they're going to actually differentiate themselves with the end consumer. And if you see customers walking into someone else's dispensary because they have a better selection of cannabis and non-cannabis products, then you're probably going to want to onboard those as well. So there will be some of that ripple effect. So we're excited to get this going at scale. We believe we're set up to do it really well given Greenlane's product set and given KushCo's relationships. But we can't really launch that cross-selling program until the merger closes. So hopefully, we get the votes in and we can get this thing closed and we can start building that value that we think will be ultimately very accretive for all of our stakeholders.

[Operator:]

Our next question comes from Eric Des Lauriers with Craig-Hallum Capital Group.

[Eric Des Lauriers:]

First one, just a bit of piggyback off that last question. As it relates to that cross-selling opportunity, I understand that it is early stages here. Do you anticipate that opportunity varying either by customer type, being smaller mom-and-pop or larger top 25 type customers? Or do you see it varying by geography at all? You've made some comments on sort of a correlation to the price of cannabis. And just wondering if you see it or anticipating it varying by customer type or geography at all?

[Nicholas Kovacevich:]

Yes. Great question. Thanks for tuning in and asking. I think we're going to learn a lot more once we get in the field. But doing the planning work we're doing right now and kind of leveraging the knowledge that we have now, and we're talking to customers about theoretical examples. So I think we have a decent picture. Ultimately, some of it's going to come down to where do we want to spend our resources. So the dynamics are different in each market. You go to a market like Oregon, and yes, there, the pricing of cannabis has come down, and I think retailers are looking to offset or already offsetting that by selling accessories. But it is a much more mom-and-pop market, Not -- very little, if any of the MSOs are set up in Oregon with vertical integration into retail. And vertical integration is the other thing, right? If KushCo is currently doing business with a vertically integrated operator selling products upstream, well, that's a warm channel to open up the downstream retail channels to the Greenlane product set versus going and engaging with the retailer that KushCo is currently doing no business with because they're not vertically integrated, there's nothing to sell them upstream. And now this is a brand-new relationship that we have to cultivate to sell a product set into their retail footprint. So where is it going to be the best use of our time? What we're thinking right now is going to be leveraging the existing MSOs that are vertically integrated that KushCo currently has strong relationships with. They're in our top 25, let's just say, right, and having that warm relationship to then penetrate the downstream channel. And because they're an MSO, there's not just one downstream channel, one retail store, right? There's 40, 50, in some cases, upwards of 100 retail stores that we can get access to through one relationship. So that's going to give us the most bang for our buck. Now granted, a lot of these MSO footprints may be in markets where the price of cannabis is at its peak and the margins are great on cannabis. There may be a little bit less incentive. So there's going to be a little bit of trade-off there. And that's why I think it's a great question you asked. But how we're thinking about it now is where are we going to get the most bang for our buck. It's going to be leveraging the best relationships we have with the largest operators that have the most retail stores. So we're going to start there and then evaluate it as it goes. And obviously, we'll be opportunistic in some of the legacy markets, too. And we hope over time that some of that will be consolidated by MSOs and that there'll be a more regional MSO that garner larger footprints, and therefore, those same dynamics might be at hand for us to move that strategy into legacy markets.

[Eric Des Lauriers:]

Okay. Yes, that makes sense. That's great color there. And then just last one for me here. It might be a bit of a difficult question to answer given some of the comments you had on some of these larger customers sort of starting out with vape and then getting into more custom packaging and the like. But to the extent that you can provide me color here, could you give us a sense of sort of how much runway you have within your top 25 customer base, within those customers' supply and packaging budgets? Like obviously, those top 25 customers have lots of runway ahead of them for growth. But can you give us a sense of sort of your current wallet share and where you think that can go with these customers?

[Nicholas Kovacevich:]

Yes. I mean, look, I think it's a hard question to answer, to quantify even. But we now know that the more opportunities that we have to garner additional lines of product, ultimately, the more top line that's going to roll up into. So for example, if somebody -- if you look at the top opportunities for KushCo, vape is going to be one of them, vape packaging, but pack and flower packaging, well packaging is probably going to be the biggest one. So if we can land the packaging, we can land the vape packaging. Now we've got 3 of sort of the top 5 areas of spend. We want to complement that with the ethanol business or butane business, with the concentrate jars, with -- there are prerolled joint packs, there are prerolled joint tubes, but there are going to be certain areas and edition on the operator because some folks -- that main area for them might be their flower because they're a flower-centric brand. Others, it might be vape because they do vape only. Others, there might be opportunities with concentrates or prerolled joints because they can buy papers, they can buy joint cases. So it depends on the customer. The MSOs tend to do most of all of it, right? So it is going to be kind of those biggest selling SKUs, right, the bulk of their business, and that's typically going to be especially for Kush vape just because it's a higher average selling price. But vape and vape packaging, we know that's a popular SKU. And we know when it comes to flowers one grams. So we're seeing people go up a little bit, too. They're wanting to have larger quantities available, especially for value line. So it does depend on the customer, and it is hard to quantify, but I always kind of say within our book, and I think it's equivalent to the top 25, there's probably less opportunity with a 1/3. There's a substantial opportunity with 1/3 and then there's an even larger opportunity with the other 1/3, probably not relevant for our top 25. But our overall MSO relationships, it's probably 1/3, 1/3, 1/3, right? Where we're doing a lot with the 1/3. There's ample opportunity with 1/3 and then the bottom 1/3 is relatively untapped.

[Stephen Christoffersen:]

If I may -- I can -- go ahead, sorry.

[Nicholas Kovacevich:]

Go ahead, Stephen.

[Stephen Christoffersen:]

I was just going to take a stab. Yes, so quantifying the share of wallet, I mean we have one customer in particular that we have supply contract around and really sticky relationship, but they are not the largest cannabis company out there. But there's other cannabis companies that are of equivalent size and scale. And we're doing -- it's disclosed around $5 million a quarter with, right? So I mean that kind of gives you, and that is a relationship that, as Nick mentioned, we've been able to cross-sell a bunch of custom packaging and ethanol. So -- and that's one customer. So the goal here is with the other MSOs in our book, I think it is, we've proven that we can sell $5 million a quarter to a single customer. There's no reason to think that we can't replicate that with other equivalently sized MSOs.

[Operator:]

Our next question comes from Giorgio Delvina from Zalvione Holdings .

[Unidentified Analyst:]

My first question for you is regarding the merger and the potential opportunity with increased liquidity and investor awareness with -- going with Greenlane. Do you think that with the current path that you're on and how you've righted the ship as far as EBITDA and everything else, that you would have been able to get on NASDAQ yourself anyways in Greenlane was just a way to expedite that process?

[Nicholas Kovacevich:]

Thanks for the question, Giorgio. I don't know how much we can comment specifically because NASDAQ, our application -- we haven't talked much about our application with NASDAQ other than when we filed it. So if they are a yes, accelerating it through the merger of Greenlane, getting that size and scale, I think also because of the delay, we publicly announced we applied for NASDAQ quite some time ago. And we were held up in being able to get listed. So the fact that, that didn't happen sooner, and we weren't able to garner the liquidity that some of the companies have that have been able to uplift and do the M&A that some of the companies have that have been able to uplift and grow their revenue. Again, merging with Greenlane kind of puts us right back in that same position. So I think it's twofold, right? The speed and also the size and scale that we get to overnight by effectuating this merger, I think, is kind of the things you should be considering in the motivation around the listing and doing this with Greenlane versus organically.

[Unidentified Analyst:]

Absolutely, absolutely. I appreciate you answering that question. My next question for you would be regarding the name Greenlane Holdings, are you wanting to switch that at all or are you happy with the name?

[Nicholas Kovacevich:]

Look, we've announced that we're going to be keeping the name. I personally like the name. It is obviously something we've discussed. We can still consider making a change, but we like the Greenlane name. I mean more important, obviously, there's the public side of things and the name and the ticker. What's really the most important thing for us and always has been at KushCo, is the brand reputation in the marketplace, right? If we've got a reputation of servicing our customers well, providing high-quality products at great prices, which KushCo has and always has had, and we're very grateful for that. We want to make sure that maintains. And Greenlane has a similar reputation, right? That was one of the things that in our diligence, we wanted to make sure that their reputation was up there with ours, and it certainly is. And so from that standpoint, there's nothing not to like about the name. Could we change your mind? Could there be a scenario where we look at a different naming strategy? Yes. But for now, we're going forward with Greenlane, GNLN, and we believe that the marketplace is excited about that and will be represented very well with the most important stakeholders, which is our customers. And we also want to be cognizant of the marketplace in terms of the listing and the shareholders and that is somewhat of a factor too. But like I said, we haven't made any decisions to deviate from the plan.

[Unidentified Analyst:]

Fair enough. Fair enough. I know it's a bit of a different question. Sorry about that. My final question for you would be regarding Danny Moses. Is he still going to be an adviser to Greenlane as he is to KushCo right now?

[Nicholas Kovacevich:]

Good question. We actually disbanded our advisory board while we went through -- after we went through the restructuring, still friends with Danny, still confide in him. I mean, he's a mentor, a great guy. And we do intend to keep close with Danny and potentially re-engage them as an adviser at some point down the road. So keeping our options open, maybe even building that back, another advisory board at some point. It could be in the future for Greenlane. So haven't got that far yet, but I'm glad you brought that up because Danny has been a great adviser, mentor for the company in years past and continues to be -- to play a role unofficially at this point working with me in the company, yes.

[Unidentified Analyst:]

The main reason I brought it up is because of Michael Burry's cryptic tweets in the last couple of weeks regarding your company. So I was just curious on the angle there and if Danny Moses was maybe -- if you're having some conversations in the background. I don't know if you're familiar with it or not, but your company is blowing up all over Reddit.

[Nicholas Kovacevich:]

Look, I am familiar with information that's been put out there. I can't comment or confirm how that got out there. I honestly don't even know, right? But definitely interesting that Burry is talking about it, that Danny is -- was previously affiliated with the company. Who knows.

[Unidentified Analyst:]

Nick, you have hands? Are we going on the moon? Is that the question or what?

[Nicholas Kovacevich:]

Look, we're flattered that if it is true that Burry has taken a position to the company, we're flattered. We think this is a huge opportunity. We think we're undervalued. We think a lot of smart investors would find value in the company right now. Does that affect how we operate day to day? No. We have a plan. We're executing towards that plan. We want to deliver value to our customers, which will in turn create profits for the company, which will deliver value to the shareholders. We're going to stay focused on that. And it's fun to watch. But outside of that, there's not much that, that really does for us other than I think create some news.

[Unidentified Analyst:]

Nick, I appreciate you answering all the questions. You do me a favor, man. You keep taking those half court shots and go for it, man. You got this.

[Nicholas Kovacevich:]

Thanks, Giorgio. We got your e-mail about some Kush swag . We're going to get that out to you. We know a lot of people are asking for Kush gear. And as we get closer to closing the merger, we might have some extra Kush gear to go around for our shareholders. So please do .

[Operator:]

Our next question comes from Rob Alexander , Private Investor.

[Unidentified Analyst:]

Real quick question here. I wanted to discuss the increase in litigation and consulting costs. I see the $2 million charge there in your guys' statement this year. I want to see really just how that value adds come back to the company and how this is kind of going to your target market, the strategic outcome of this investment?

[Stephen Christoffersen:]

Yes, sure. So we wanted to -- so Stephen here, thanks. Great question. This is really tied to the merger. So we lumped it into litigation and consulting. Obviously, when you effectuate a merger, bankers' costs, legal fees, due diligence costs. So that's really driving the overall amount of that bucket. So -- is it -- how is that in value? Obviously, it's a necessary cost to sort of effectuate a merger, but that's really what that is.

[Nicholas Kovacevich:]

All right. Thank you. Najim, do we have any other questions? I am not seeing any in the queue.

[Najim Mostamand:]

No, there are no further questions at this time.

[Nicholas Kovacevich:]

Okay. Great. We're just coming up on an hour. So we'll wrap. Thank you guys for tuning in. Really appreciate you jumping on asking the questions and following the company. There's clearly a lot to be excited about as we check off these final boxes leading up to the conclusion of this transformative merger with Greenlane. But today, our industry as a whole is at a critical inflection point. Customers all over are looking to partner with companies that can support their growth for years and decades to come. We believe the combined company, KushCo and Greenlane will be well positioned to be that premier partner of choice, providing both an enhanced product offering and ancillary services to these customers while also driving profitable growth for our shareholders. In my 10-plus years in this industry, I've seen a lot, and I've enjoyed my fair share of excitement but never have I ever been more excited about where the industry is going and more importantly, where KushCo and its shareholders are going than I am right now with this merger coming down the pipe. We will not only bring together two very complementary portfolios, which sets us up nicely for the significant cross-selling that we talked about earlier. But we'll also be serving now an even more elite and diverse customer base going forward, spanning across the top MSOs and LPs and leading brands and also the majority of top smoke shops in the U.S. and millions of consumers directly globally. We hope that you guys can join us as we pioneer the next chapter in the cannabis industry and as we work to build a profitable growth engine that becomes one of the few ways for institutional investors to take advantage of the cannabis boom through our NASDAQ listing. So again, thank you all for listening. We hope you all take care, stay safe, and I look forward to providing more updates on the merger in the coming weeks. Cheers.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect. Have a wonderful evening.