If it weren't for bad news, KushCo Holdings (OTC:KSHB) probably wouldn't have any news at all recently. The company experienced a very rough stretch in 2019 with health concerns about vaping. And now KushCo faces headwinds as a result of the COVID-19 pandemic.

KushCo announced its fiscal 2020 second-quarter results after the market closed on Wednesday. Anyone expecting overwhelmingly positive results after the company's long period of bad news was likely disappointed. Here are the highlights from KushCo's Q2 update.

Cannabis leaf overlaying market declining with large red down button

Image source: Getty Images.

By the numbers

KushCo's net revenue fell 14% year over year to $30.14 million in the second quarter. The only silver lining in that dark cloud was that it narrowly topped the average analysts's Q2 revenue estimate of $30.13 million.

The picture looked much worse with the company's bottom line. KushCo reported a net loss of $44.4 million, or $0.40 per share, based on generally accepted accounting principles (GAAP). This reflected significant deterioration from the company's GAAP net loss of $8.9 million, or $0.10 per share, in the prior-year period. 

KushCo posted a non-GAAP adjusted net loss in the second quarter of $17.5 million, or $0.16 per share. This was much worse than the adjusted net loss of $7.8 million, or $0.09 per share, recorded in the same period in fiscal 2019. It also failed to meet the average analysts' estimate of a net loss of $0.11 per share in Q2.

Behind the numbers

The main culprit behind KushCo's revenue decline in the second quarter was the continued impact of the vaping health concerns that emerged last year. The rebound for the company's vape products has been slower than KushCo expected.

KushCo launched its hemp trading business in November 2019. Although the company stated at the time that it thought the new business would boost profitability, the initial performance for the unit has been weaker than anticipated.

Then there's California, KushCo's biggest market by far. While the state has kept recreational marijuana stores open by declaring adult-use pot as an essential business, stay-at-home orders took a toll on KushCo's sales at the end of the second quarter, which ended on Feb. 29.

On a brighter note, KushCo did manage to boost sales considerably in several regions, including Canada, Illinois, Massachusetts, and Michigan. It also expanded its core customer base of larger cannabis companies.

Looking ahead

KushCo co-founder and CEO Nick Kovacevich said that the company expects "revenues to be more stable and predictable going forward" due to its efforts to focus on core customers. However, don't look for a return to the heady growth rates of the past anytime soon.

The key thing for investors to look for is KushCo's progress toward achieving profitability. Kovacevich stated that the company should be able to achieve positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) with revenue between $35 million and $45 million thanks to its cost restructuring. 

Expect significant volatility for all marijuana stocks while the COVID-19 pandemic continues. Volatility levels will likely be especially high for shares of companies like KushCo that continue to post losses.