Akerna Announces Fourth Quarter and Full Year 2021 Financial Results

DENVER – Akerna (Nasdaq: KERN), an enterprise software company and developer of one of the most comprehensive technology infrastructures, ecosystems, and compliance engines powering the global cannabis industry, reported its unaudited financial results for the quarter and year ended December 31, 2021.

“Akerna experienced significant growth in 2021, with our enterprise business leading the way forward into 2022,” said Jessica Billingsley, CEO of Akerna. “Our platforms continued to serve our growing clients, and we continued to develop offerings that position Akerna as a differentiated provider of technology solutions to the cannabis industry. We acquired two leading enterprise solutions — 365 Cannabis and Viridian Sciences — that delivered robust increases in software revenue. We are pleased with the consistent uptake from our clients in a year of consolidation in the industry with limited new markets opening.”

“Our clients are both getting larger and individually seeing both unit and sales transactions rise. As more of the industry runs on Akerna, we are well-positioned for expected new market expansion and US federal progress. In the meantime, we continue to grow our CARR, grow the number and amount of transactions running on Akerna, and we continue to enhance our open ecosystem of solutions that can run either independently or in conjunction with our clients’ choice of our leading accounting and tax products including SAP, Microsoft, and Netsuite.”

Full Year 2021 Financial Highlights

• Software revenue was $19.0 million, up 59% year-over-year
• Total revenue was $20.7 million, up 49% year-over-year
• Gross profit was $12.6 million, up 67% year-over-year. Gross profit margin was 61% in 2021 compared to 54% in 2020
• Loss from operations was $33.4 million, up $6.6 million year-over-year
• Net loss was $33.6 million, up $6.7 million year-over-year
• Adjusted EBITDA* loss was $7.9 million compared with a loss of $11.7 million in 2020, a 32% improvement year-over-year
• Cash and Restricted Cash was $14.4 million as of December 31, 2021

*See “Explanation of Non-GAAP Financial Measures” below        

2021 Metrics and Operating Highlights

• Total SaaS ARR of $20.9 million, up 51% year-over-year
• Average new business deal size up 15% year-over-year
• Q4 New Bookings ARR of approximately $1.5 million, representing a quarterly record for Akerna
• Transaction volume up 48% year-over-year
• Retail order spend up 42% year-over-year
• Acquisition of 365 Cannabis, cannabis business management software built on Microsoft’s Dynamics Office 365 Business Central
• Acquisition of Viridian, cannabis business management software built on SAP Business One
• Launched Akerna Connect, enabling cannabis dispensaries to offer online ordering, loyalty programs, and text messaging
• Secured First Federal Cannabis Regulatory Contract with St. Vincent and the Grenadines
• Issued $20 million in convertible debt to replace existing convertible debt at more attractive terms
• Achieved SAP® Certified Integration with SAP NetWeaver® for MJ Platform

Fourth Quarter 2021

• Software revenue was $6.2 million, up 80% year-over-year
• Total revenue was $6.6 million, up 61% year-over-year
• Gross profit was $3.8 million, up 42% year-over-year. Gross profit margin was 58% in the fourth quarter compared to 66% in the fourth quarter of 2020.
• Loss from operations was $20.1 million, up $9.9 million year-over-year
• Net loss was $19.5 million, up $7.2 million year-over-year
• Adjusted EBITDA* loss was $2.9 million compared with a loss of $1.9 million in the fourth quarter 2020

*See “Explanation of Non-GAAP Financial Measures” below        

NOTE:

The foregoing financial results are preliminary in nature. Final financial results and other disclosures will be reported in Akerna’s annual report on Form 10-K and may differ materially from the results and disclosures today due to, among other things, the completion of final review procedures, the occurrence of subsequent events or the discovery of additional information. You are encouraged to review the Form 10-K in detail.

Forward Looking Statements

Certain statements made in this release 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. Such forward-looking statements include but are not limited to statements regarding our preliminary financial results which may differ from our final financial results, our position for expected new market expansion and US federal progress, our continued growth of CARR and the number and amount of transactions running on Akerna, our continued enhancement of our open ecosystem of solutions and the timing for management’s conference call in relation to our quarterly results. 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 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 maintain relationships with customers and suppliers and retain its management and key employees, (ii) changes in applicable laws or regulations, (iii) changes in the market place due to the coronavirus pandemic or other market factors, (iv) 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.  You are cautioned not to place undue reliance on forward-looking statements. 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.

Explanation of Non-GAAP Financial Measures:

In addition to our results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.  We attempt compensate for these limitations by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures.

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 and not rely on any single financial measure to evaluate our business.

Adjusted EBITDA

We believe that Adjusted EBITDA, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance and allows for comparison of our performance and credit strength to our peers. Adjusted EBITDA should not be considered alternatives to net loss as determined in accordance with GAAP as indicators of our performance or liquidity.

We define EBITDA as net loss before interest expense, provision for income taxes, depreciation and amortization. We calculate Adjusted EBITDA as EBITDA further adjusted to exclude the effects of the following items for the reasons set forth below:

• Impairment of long-lived assets, as this is a non-cash, non-recurring item, which effects the comparability of results of operations and liquidity;
• Stock-based compensation expense, because this represents a non-cash charge and our mix of cash and share-based compensation may differ from other companies, which effects the comparability of results of operations and liquidity;
• Cost incurred in connection with business combinations and mergers that are required to be expensed as incurred in accordance with GAAP, because business combination and merger related costs are specific to the complexity and size of the underlying transactions as well as the frequency of our acquisition activity these costs are not reflective of our ongoing operations;
• Costs incurred in connection with non-recurring financing, including fees incurred as a direct result of electing the fair value option to account for our debt instruments;
• Restructuring charges, which include costs to terminate a lease and the related write off of leasehold improvements and furniture, as we believe these costs are not representative of operating performance;
• Gain on forgiveness of PPP loan, as this is a one-time forgiveness of debt that is not recurring across all periods and we believe inclusion of the gain is not representative of operating performance;
• Equity in losses of investees because our share of the operations of investees is not representative of our own operating performance and may not be monetized for a number of years; and
• Changes in fair value of contingent consideration because these adjustments are not recurring across all periods and we believe these costs are not representative of operating performance.
• Other non-operating expenses which includes a one-time gain on debt extinguishment and a one-time loss on disposal of fixed assets, which effects the comparability of results of operations and liquidity.

Related Non-GAAP Expense Measure

We reference in our earnings call certain non-GAAP expense measures, including non-GAAP Operating Expenses, non-GAAP Product Development Expense, non-GAAP Sales and Marketing Expenses, and non-GAAP General and Administrative Expenses.  We believe that these non-GAAP financial measures, when considered with the financial statements determined in accordance with GAAP, are helpful to management and investors in understanding our performance quarter over quarter and to the comparable quarter in our prior fiscal year by excluding the same items we exclude from EBITDA to derive Adjusted EBITDA, as set forth above (stock-based compensation expense, costs incurred with business combinations and mergers, costs incurred in connection with non-recurring financing fees, restructuring charges, equity in earnings (losses) of investees and changes in fair value of contingent consideration) for the same reasons stated above, principally, that these expenses are not, in management’s opinion, easily comparable across reporting periods, are not reflective of ongoing operations and/or are not representative of our operating performance.

We define non-GAAP Operating Expenses, non-GAAP Product Development Expense, non-GAAP Sales and Marketing Expenses and non-GAAP General and Administrative Expenses as, in each case, the corresponding GAAP financial measure (Operating Expenses, Product Development Expense, Sales and Marketing Expenses and General and Administrative Expenses) excluding that portion of depreciation and amortization, stock-based compensation expense, business combinations and merger related costs, non-recurring financing fees, restructuring charges, impairment of long-lived assets, and equity in losses of investees and changes in fair value of contingent consideration that is attributable to that specific GAAP financial measure.

This non-GAAP expense measure should not be considered an alternative to the corresponding GAAP financial measure as determined in accordance with GAAP as an indicator of our performance or liquidity.  Please review the tables provided below, for a reconciliation of this non-GAAP expense measure to the corresponding GAAP financial measure.

The reconciliation of the above non-GAAP financial measures for the quarter ended December 31, 2021 are presented in the tables below.  For comparative purposes, the reconciliation of these non-GAAP financial measures in the prior quarter ended September 30, 2021 are contained in our press release for that quarter dated November 8, 2021 and available on our website at www.akerna.com or in our current report on Form 8-K filed with the Securities and Exchange Commission on November 8, 2021 and available here: https://www.sec.gov/Archives/edgar/data/1755953/000121390021058240/ea150400ex99-1_akernacorp.htm

(This information is primarily sourced from Akerna.  Highly Capitalized has neither approved nor disapproved the contents of this news release. Read our Disclaimer here).