Kush Bottles Inc (OTCMKTS:KSHB): Breaking Down The Numbers

Kush Bottles Inc (OTCMKTS:KSHB) just put out its most recent financials, and despite reporting record numbers across a host of key metrics, the company is trading down year to date. At January 3, Kush went for a little over $3.29 a share. At its most recent close, this had declined to $2.6 a share, a more than 20% decline in January so far. If things keep moving in the direction inferred by the financials, however, we expect this downside trend to soon find a bottom, and reverse towards some upside momentum.Here is a look at the numbers, and what we expect going forward from Kush.So, the numbers relate to first quarter 2017, fiscal, which equates to the three months to November 30, 2016. As a comparative base, Kush used the equivalent period during fiscal 2016, which reflects the three months to November 30, 2015.The headline figure was the revenue number, which came in at $2.47 million during the most recent period, compared to $1.72 million during the comparable period a year earlier. This represents more than 40% growth, but the topline number is – for us – less important than what underpins it. Specifically, the growth in revenues derives from an increase in the three most important contributing factors to revenue expansion – customer numbers, average order size, and order volume. The compound impact of these three factors suggests that the revenue increase is not just an anomaly, but rather the start of a longer-term trend.Gross margin also increased, from 33.3% to 33.8%. The company highlighted this as a key point, but we don't think it's overly important right now. Primarily because the increase is negligible. In fact, we would've liked to seen a far higher margin improvement than the 50 basis points reported. Again, however, not too much of an issue as things stand, but something will be looking at closely slightly longer-term.Operating expenses increased by around 74%, and this is expected in the wake of an expanded sales push As reported by the company, personnel expenses on the back of said sales push accounted for a large portion of the increase.Net loss came in at $0.16 million, compared to a net income of $5000 reported a year earlier. However, the former included $0.12 million in non-cash stock compensation, $30,000 in depreciation and $24,000 for a non-recurring expense. Without these elements included, the company would've generated a net income of $7000. Of course, we can't just exclude items like this, but for the purposes of comparison, it benefits to offer a snapshot of nonrecurring insight alongside the actual reported figures.We said topline was important, but here's another one that is important – cash on hand. As of November 30, Kush had $2 million cash on hand, compared to $0.3 million at November 30, 2015.The potential for dilution has been one of the key risks we have highlighted on the number of occasions that we have covered this company in the past, and the reporting of a couple of million dollars on hand eases this risk somewhat.So what is next?Well, in our previous coverage we highlighted some of the product pushes that Kush is undertaking right now in order to try and expand topline. Many of these came after the close of the above discussed reporting period, and so we expect the fruits of these pushes to display when the company reports its second-quarter fiscal 2017 numbers. That is what we are looking for next. If topline continues to increase, and just as importantly, the three elements of topline (customer numbers, order size and order volume) continue to increase parallel to the headline figure, we expect Kush to quickly gain market share, and in turn, revalue to reflect its operational strength.Even with $2 million cash on hand, dilution remains a risk, but one that we don't see as prohibitive to an exposure at current prices.We will be updating our subscribers as soon as we know more. For the latest updates on KSHB, sign up below!Disclosure: We have no position in KSHB and have not been compensated for this article.