Akerna Corp. (Nasdaq: KERN) (or the “Company”), a leading cannabis
compliance technology provider and developer of the cannabis
industry’s first seed-to-sale enterprise resource planning (ERP)
software technology – MJ Platform®, today announced financial
results for the fiscal year ended June 30, 2019.
Fiscal Year 2019 Financial and Business
Metrics Summary
- For fiscal year 2019, reported record revenues of approximately
$11 million, the highest in our history.
- Secured an important new contract for Leaf Data Systems with
the State of Utah.
- MJ Platform monthly billings increased in the month ended June
30, 2018 to the month ended June 30, 2019 by 55%, continuing to
demonstrate high SaaS growth.
- 2019 gross profit margin remained at approximately 58%, in line
with our 2018 gross profit margin of 58%.
- At June 30, 2019, Akerna had approximately $21.9 million in
cash.
Fiscal Year 2019 and Recent
Highlights
- November 2018 through April 2019, implemented important
technological updates for MJ Platform, Akerna’s premier cannabis
compliance tracking platform.
- May 2019, added Mark D. Iwanowski, former Oracle CIO, to Board
of Directors.
- June 2019, Became the first cannabis compliance technology
company to be traded on Nasdaq as Akerna Corp. resulting from the
merger of MJ Freeway LLC and MTech Acquisition Holdings Inc.
- July 2019, expanded further into Europe by serving clients in
two additional countries, Italy and Macedonia. Opened a
Medellín, Colombia office to serve our growing footprint in South
America.
- July 2019, new partnership with Leafly to provide seamless and
real-time data updates.
- August 2019, awarded new contract from the Utah Department of
Health and Department of Agriculture to implement Leaf Data for the
state’s new medical cannabis program.
- August 2019, MJ Freeway named to the Inc. 5000 list of the
nation’s fastest-growing private companies.
- August 2019, Leaf Data and solo sciences partnered to launch
solo*TAG™, the world’s first cryptographically-secure, cannabis
product authentication system. Exclusively for governments and only
available with Leaf Data Systems, our advanced tagging technology
combined with a closed-loop platform, significantly improves and
strengthens the category of government track-and-trace
products.
- August 2019, announced strategic partnership to integrate
Isolocity’s quality management system (QMS), supporting GMP and ISO
9001 compliance, into MJ Platform.
“Our fiscal 2019 results and recent milestones
reflect the continued global adoption of both MJ Platform and Leaf
Data Systems® by cannabis enterprises and government entities,”
stated Akerna Chief Executive Officer Jessica Billingsley. “As
cannabis legalization continues to expand, we believe Akerna is
well positioned to serve the increasing compliance needs of
enterprise cannabis companies. Complementing this, our government
software solution provides unparalleled seed-to-sale tracking
capabilities. These capabilities were a key factor in our recently
being awarded the government contract in Utah. We believe
transparency is critical, as regulatory requirements will only grow
to ensure patient, public, and product safety.”
Ms. Billingsley continued, “We are also thrilled
to have completed our merger with MTech. This transaction provided
us a strong balance sheet and Nasdaq listing, which we expect will
accelerate our product development efforts to meet the growing
compliance needs of the global cannabis market. Looking ahead,
being a public company is expected to afford us liquidity to
capitalize on growing market demand and continue our organic
growth. We also intend to opportunistically execute on a
targeted, accretive acquisition strategy aimed at building scale
and enhancing our growth prospects. We are confident in the
strength of our business and believe we are well positioned to
generate long-term value for our shareholders.”
Financial Results and Business
Metrics
Total revenue for the year ended June 30, 2019
was approximately $11 million, a 4.2% increase compared to $10.5
million the previous fiscal year. Please note that our first
year of Leaf Data Systems contract with Pennsylvania commenced in
the fiscal year which ended June 30, 2018, returning to lower but
stable run rates in fiscal year ending June 30, 2019. This one-time
spike masks MJ Platform’s high growth. Revenue reflects
continued demand for Akerna’s key commercial software product, MJ
Platform. Monthly billings on MJ Platform increased in the
month ended June 30, 2018 to the month ended June 30, 2019 by
55%. Software revenue in fiscal 2019 was $8.3 million,
compared to $8.1 million the prior year. Consulting revenue was
$2.4 million, compared to $2.3 million the prior year, driven
primarily by the expanding legalized cannabis market.
Cost of revenue was approximately $4.6 million
for the fiscal year ended June 30, 2019, compared to $4.4 million
for the fiscal year ended June 30, 2018, an increase of
approximately 6%. Cost of revenue increased primarily due to an
increase in hosting and infrastructure costs incurred to support
our Software business of approximately $0.4 million. Additionally,
we incurred higher direct labor costs associated with providing the
Company’s Consulting services of approximately $0.2 million. These
increases in cost of revenue were partially offset by fewer
third-party subcontractor costs associated with servicing our Leaf
Data Systems clients. Overall, our gross profit margin remained
consistent at 58% for the fiscal years ended June 30, 2019 and June
30, 2018.
Operating expenses were $18.7 million for the
year ended June 30, 2019, compared to $8.6 million the prior fiscal
year. The increase was driven by legal, audit and other
professional expenses related to the merger in addition to
approximately $3.9 million of non-cash stock-based compensation
expenses resulting from issuances of common stock to our employees
in connection with our merger, the majority of which was a one-time
charge. Akerna generated a net loss of $12.3 million for the
twelve-months ended June 30, 2019, compared to a loss of
approximately $2.5 million the previous fiscal year.
Akerna’s weighted average number of common shares outstanding
for the year ended June 30, 2019 was 6,045,382.
As of June 30, 2019, Akerna had approximately
$21.9 million in cash, excluding restricted cash, compared to
approximately $1.6 million as of June 30, 2018. The Company had
working capital of $22.1 million as of June 30, 2019, compared to
$1.6 million as of June 30, 2018.
Conference Call Details
The Company will host a conference call on
Monday, September 23, 2019 at 4:30 pm ET / 1:30 pm PT. To
participate in the conference call, please dial 1-877-407-3982
(domestic) or 1-201-493-6780 (international). The passcode is
13694602. Please dial into the call at least five minutes before
the scheduled start time.
The conference call will also be available via a
live listen-only webcast and can be accessed through the Investor
Relations section of Akerna’s website, www.akerna.com.
For interested individuals unable to join the live conference
call, a replay of the call will be available through October 7,
2019, at (844) 512-2921 (domestic) or (412) 317-6671
(international). The passcode for the call and replay is
13694602.
Note Regarding Use of Non-GAAP Financial
Measures
In addition to our results determined in
accordance with U.S. generally accepted accounting principles, or
GAAP, we believe the below non-GAAP measure is useful in evaluating
our operating performance. We use the below non-GAAP financial
information, to evaluate our ongoing operations and for internal
planning and forecasting purposes. We believe that non-GAAP
financial information, may be helpful to investors because it
provides consistency and comparability with past financial
performance, and assists in comparisons with other companies, some
of which use similar non-GAAP financial information to supplement
their GAAP results. The non-GAAP financial information is presented
for supplemental informational purposes only and should not be
considered a substitute for financial information presented in
accordance with GAAP, and may be different from similarly-titled
non-GAAP measures used by other companies. A reconciliation is
provided below for the non-GAAP financial measure to the most
directly comparable financial measure stated in accordance with
GAAP. Investors are encouraged to review the related GAAP financial
measures and the reconciliation of these non-GAAP financial
measures to their most directly comparable GAAP financial
measures.
Monthly Billings
Monthly Billings consists of our total MJ
Platform billings plus or minus the change in our deferred revenue
in each period. The Monthly Billings metric is intended to reflect
sales to new MJ Platform customers plus renewals, recurring
subscription customers and additional sales to existing customers.
Our management uses Monthly Billings to measure and monitor our
sales growth because we generally bill our customers at the time of
sale but may recognize a portion of the related revenue ratably
over time. For subscriptions, we typically invoice our customers at
the beginning of the term, in annual, quarterly or monthly
installments. Monthly Billings should be reviewed independent of
revenue and does not represent our GAAP revenue on a monthly or
annualized basis. While we believe that Monthly Billings
provides valuable insight into the cash that will be generated from
sales of our subscriptions, this metric may vary from
period-to-period for a number of reasons, and therefore has a
number of limitations as a quarter-over-quarter or year-over-year
comparative measure. These reasons include, but are not limited to,
the following: (i) a variety of contractual terms could result in
some periods having a higher proportion of annual subscriptions
than other periods; (ii) as we focus on sales to organizations of
varying sizes, the lengthening of our sales cycle and the
variability in the timing of the execution of larger transactions;
(iii) fluctuations in payment terms affecting the billings
recognized in a particular period; and (iv) seasonality in our
billings, with a greater proportion of our billings occurring in
our fourth quarter, following typical enterprise software buying
patterns. Because of these and other limitations, you should
consider Monthly Billings along with revenue and our other GAAP
financial measures.
The following table presents a reconciliation of
revenue, the most directly comparable financial measure calculated
in accordance with GAAP, to Monthly Billings, for each of the
periods presented:
|
|
As of June 30, |
|
|
|
2019 |
|
|
2018 |
|
Monthly Billings |
|
$ |
417,163 |
|
|
$ |
268,816 |
|
Change in Deferred Revenue
during period |
|
|
(44,755 |
) |
|
|
(133,639 |
) |
Total Revenue |
|
$ |
372,408 |
|
|
$ |
135,177 |
|
Monthly Billings grew from approximately
$268,816 in June 2018 to $417,163 in June 2019, an increase of 55%.
The increase can primarily be attributed to growth in commercial
software subscriptions to MJ Platform.
We believe that demand for our MJ Platform
software continues to be strong, evidenced by new contract bookings
totaling approximately $31 thousand per month on average. This
represents the revenue that would be recognized from newly booked
clients in a month if they were all currently being billed. A newly
booked client in a particular month may include those with actively
billed recurring SaaS subscriptions, in addition to those with
temporarily suspended subscriptions. An account may be temporarily
suspended due to several factors, including:
- The client may be awaiting grant of operational license(s) from
the state in which the client operates
- The client may be awaiting completion of their subscription
implementation/setup
- Other operational factors which may result in a delay of client
operations
We believe that demand for our MJ Platform
software continues to be strong due to both the growth of the
industries and markets in which we operate in addition to the value
proposition that we provide to our customers as both a regulatory
compliance solution and a tool to manage and optimize their
business operations. Our management evaluates the value that we
deliver to our customers based on the ratio of our average customer
Lifetime Value (“LTV”) to our average customer acquisition cost
(“CAC”). Our LTV to CAC ratio reflects how many times the revenue
of a customer covers the cost to obtain that customer assuming an
average customer life of 36 months. We calculate LTV by multiplying
our average new monthly contract bookings by 36 to reflect our
assumed customer life and then divide that by the number of new
customers acquired in a month. We then divide that result by our
average monthly CAC. Our LTV is approximately four times the costs
required to obtain that customer after 36 months.
About Akerna Corp.
Akerna Corp. (NASDAQ:KERN) is a regulatory
compliance technology company in the cannabis space. The
cornerstones of Akerna’s service offerings are MJ Platform® and
Leaf Data Systems®, which are highly-versatile platforms that
provide clients and government entities with a central data
management system for tracking regulated cannabis products—from
seed to product to shelf to customer—through the complete supply
chain. Since its founding in 2010, Akerna has tracked approximately
$16 billion in cannabis sales across 14 countries and has served
clients in 29 states across the U.S. As part of its business
strategy, Akerna intends to grow through targeted, strategic
acquisitions that are complementary to its current business and
organically by accelerating its product development efforts. Akerna
is based in Denver. More information is available online at
www.akerna.com.
Forward-Looking Statements
Certain statements made in this release and in
any accompanying statements by management are “forward looking
statements” within the meaning of the “safe harbor” provisions of
the United States Private Securities Litigation Reform Act of 1995.
When used in this press release, the words “estimates,”
“projected,” “expects,” “anticipates,” “forecasts,” “plans,”
“intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,”
“propose” and variations of these words or similar expressions (or
the negative versions of such words or expressions) are intended to
identify forward-looking statements. These forward-looking
statements are not guarantees of future performance, conditions or
results, and involve a number of significant known and unknown
risks, uncertainties, assumptions and other important factors, many
of which are outside Akerna’s control, that could cause actual
results or outcomes (including, without limitation, the results of
Akerna’s contracts, strategic initiatives and business plans as
described herein) to differ materially from those discussed in the
forward-looking statements. Important factors, among others, that
may affect actual results or outcomes include (i) Akerna’s ability
to recognize the anticipated benefits of being a public company,
(ii) competition, (iii) Akerna’s ability to grow and manage growth
profitably, (iv) Akerna’s ability to maintain relationships with
customers and suppliers and retain its management and key
employees, (v) costs related to being a public company, (vi)
changes in applicable laws or regulations, (vii) Akerna’s ability
to identify and integrate acquisitions and achieve expected
synergies and operating efficiencies in connection with acquired
businesses, (viii) and other risks and uncertainties disclosed from
time to time in Akerna’s filings with the U.S. Securities and
Exchange Commission, including those under “Risk Factors”
therein. Actual results, performance or achievements may
differ materially, and potentially adversely, from any projections
and forward-looking statements and the assumptions on which those
vary from forward-looking statements are based. There can be no
assurance that the data contained herein is reflective of future
performance to any degree. You are cautioned not to place undue
reliance on forward-looking statements as a predictor of future
performance as projected financial and other information, are based
on estimates and assumptions that are inherently subject to various
significant risks, uncertainties and other factors, many of which
are beyond Akerna’s control. All information herein speaks only as
of the date hereof, in the case of information about Akerna, or the
date of such information, in the case of information from persons
other than Akerna. Akerna undertakes no duty to update or revise
the information contained herein. Forecasts and estimates regarding
Akerna’s industry and end markets are based on sources believed to
be reliable, however there can be no assurance these forecasts and
estimates will prove accurate in whole or in part.
Akerna Media ContactJeannette
HortonAkerna Public Relations press@akerna.com
404-644-0319
Investor ContactJason AssadAkerna Investor
RelationsIR@akerna.com (678) 570-6791
MJ
Freeway |
|
Balance Sheet |
|
|
|
6/30/18 |
|
6/30/19 |
|
|
|
|
as
filed |
|
|
|
|
Current
Assets |
|
|
|
|
Cash |
|
1,572,090 |
|
21,867,289 |
|
|
Restricted
Cash |
|
1,000,311 |
|
500,000 |
|
|
Accounts
receivable Net |
|
254,092 |
|
1,577,708 |
|
|
Prepaid
Expenses |
|
191,238 |
|
577,674 |
|
|
|
|
|
|
|
Total
Current Assets |
|
3,017,731 |
|
24,522,671 |
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
Accounts
Payable |
|
550,437 |
|
1,317,566 |
|
|
Accrued
Liabilities |
|
373,834 |
|
500,550 |
|
|
Deferred
Revenue |
|
469,631 |
|
624,387 |
|
|
Total
Current Liabilities |
|
1,393,902 |
|
2,442,503 |
|
|
|
|
|
|
|
Members
Equity |
|
|
|
|
Series
B |
|
12,463,594 |
|
|
|
Series
A |
|
2,000,000 |
|
|
|
Series
C |
|
|
|
|
Common
Units |
|
100,000 |
|
1,059 |
|
|
APIC |
|
|
47,325,421 |
|
|
Accumulated
Deficit |
|
(12,939,765 |
) |
(25,246,312 |
) |
|
Total
Members equiy |
|
1,623,829 |
|
22,080,168 |
|
|
|
|
|
|
|
Total
Liabilities and members equity |
|
3,017,731 |
|
24,522,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations |
|
|
|
6/30/18 |
|
6/30/19 |
|
|
Revenues |
|
as
filed |
|
|
|
|
Software |
|
8,082,424 |
|
8,256,492 |
|
|
Consulting |
|
2,281,836 |
|
2,403,797 |
|
|
Other |
|
112,523 |
|
259,496 |
|
|
Total
Revenues |
|
10,476,783 |
|
10,919,785 |
|
|
|
|
|
|
|
Cost of
Revenues |
|
4,361,963 |
|
4,633,844 |
|
|
|
|
|
|
|
Gross
profit |
|
6,114,820 |
|
6,285,941 |
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
Product
development |
|
2,645,093 |
|
5,565,097 |
|
|
Selling,
general, and administrative |
|
5,932,887 |
|
13,136,522 |
|
|
Total
Operating expenses |
|
8,577,980 |
|
18,701,619 |
|
|
|
|
|
|
|
Loss from
Operations |
|
(2,463,160 |
) |
(12,415,678 |
) |
|
|
|
|
|
|
Other income
(expenses) |
|
|
|
|
Interest |
|
5,841 |
|
91,239 |
|
|
Other |
|
(30,990 |
) |
17,892 |
|
|
Total other
expenses |
|
(25,149 |
) |
109,131 |
|
|
|
|
|
|
|
Net
Loss |
|
(2,488,309 |
) |
(12,306,547 |
) |
|
|
|
|
|
|
MJ
Freeway |
|
|
Cash
Flow Statement |
|
|
6/30/19 |
|
|
|
|
|
|
|
|
Net
loss |
(12,306,547 |
) |
|
|
|
|
Bad
debt |
345,941 |
|
|
Noncash
compensation expense |
3,884,111 |
|
|
Expenses
paid by MTech |
- |
|
|
Change in
assets and liabilities |
- |
|
|
Accounts receivable |
(1,669,557 |
) |
|
Prepaid expenses and other current assets |
(351,144 |
) |
|
Accounts payable |
767,129 |
|
|
Accrued liabilities |
126,716 |
|
|
Deferred revenue |
154,756 |
|
|
|
- |
|
|
|
|
|
Net
Operating |
(9,048,595 |
) |
|
|
|
|
|
|
|
Principal
payments on long-term debt |
- |
|
|
Issuance of
long-term debt |
- |
|
|
Distributions to members |
- |
|
|
|
- |
|
|
|
- |
|
|
Roll-up of
MTech before the merger |
- |
|
|
Cash
received from issurance of C Series units |
10,000,000 |
|
|
Proceeds from private placement of common stock, net of offering
costs |
|
Distribution
to former stockholders in connection with reverse merger |
- |
|
|
Issuance of
Series B Preferred Units for cash |
- |
|
|
|
|
|
Net
Financing Activities |
10,000,000 |
|
|
|
|
|
Cash
received in connection with reverse recapitalization |
9,643,475 |
|
|
Cash
received in connection with PIPE investments |
9,200,008 |
|
|
Net
Investing Activities |
18,843,483 |
|
|
|
|
|
Net Change
in cash and restricted cash |
19,794,888 |
|
|
|
|
|
Beginning
Balance cash and restricted cash |
2,572,401 |
|
|
|
|
|
Ending
Balance cash and restricted cash |
22,367,289 |
|
|
|
|
|
Non cash
additions: |
|
|
Common Units
no longer subject to buy-back provision |
|
|
Noncontrolling interest |
|
|
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