Akerna Announced Financial Results for the Third Quarter 2021

10.2 min readPublished On: November 9th, 2021By

DENVER – Akerna (Nasdaq: KERN), an enterprise software company and the developer of the most comprehensive technology infrastructure, ecosystem, and compliance gateway powering the global cannabis industry, today reported its unaudited financial results for the quarter ended September 30, 2021.

“Our third-quarter results continued the momentum in 2021, with revenue growth of 37% year over year driven by a mix of organic and inorganic software revenue,” said Jessica Billingsley, CEO of Akerna. “With the acquisition of 365 Cannabis that announced during the quarter, our financial and tax planning integrations now span the majority of the mainstream systems. As consolidation and rapid scaling continue among operators, Akerna is competitively positioned with our ecosystem of the most complete portfolio of web and app-enabled tax, financials, operations, reporting, and compliance systems for the cannabis industry.”

Akerna is the technology ecosystem for cannabis. Through its family of software, which includes MJ Platform, Viridian Sciences, Ample Organics, Trellis, Leaf Data Systems, Last Call Analytics, solo sciences, 365 Cannabis, and various products and integrations, Akerna provides the only scalable cannabis ERP solution offering compliance, data, taxation, payments, seed-to-sale, track-and-trace, and consulting to operators, governments, and brands. In doing so, Akerna creates one of the world’s most transparent and accountable consumer packaged goods supply chains on a global scale.

Cannabis companies looking to scale alongside the rapidly expanding industry must leverage the right tools, and enterprise-class software is essential to do so.

Third Quarter 2021 Financial Highlights

  • Software revenue was $4.6 million, up 37% year over year
  • Total revenue was $5.1 million, up 38% year over year
  • Gross profit was $3.2 million, up 60% year over year
  • Net loss was $1.3 million, an improvement of 68% year over year
  • Adjusted EBITDA was negative $1.5 million compared to negative Adjusted EBITDA of $3.0 million for the same quarter prior year, an improvement of 49% year over year
  • Cash was $9.6 million as of September 30, 2021, compared to $11.8 million as of June 30, 2021

See “Explanation of Non-GAAP Financial Measures” below

Third Quarter 2021 Key Metrics

  • Total SaaS ARR of $16.5 million, up 25% year over year
  • Average new business deal size up 7% year over year
  • Transaction volume up 28% year over year
  • Retail order spend up 26% year over year
  • New Bookings ARR of approximately $813,816

Third Quarter 2021 Operational Highlights

  • Announced Cannabis 365 acquisition
  • Launched Akerna Connect, enabling cannabis dispensaries to offer online ordering, loyalty programs, and text messaging

Subsequent Events

  • Closed 365 Cannabis acquisition
  • Raised $20 million in convertible debt financing with existing institutional investors

The foregoing financial results are preliminary in nature. Final financial results and other disclosures will be reported in Akerna’s quarterly report on Form 10-Q 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-Q 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 belief that our industry leadership position with multi-state, international and emerging enterprises will enable us to be one of the largest cannabis technology winners in the years ahead 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 the heading “Risk Factors” in the Company’s latest annual report on Form 10-KT filed on March 31, 2021 and in its subsequent reports. 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.

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, 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 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 September 30, 2021 are presented in the tables below.  For comparative purposes, the reconciliation of these non-GAAP financial measures in the prior quarter ended June 30, 2021 are contained in our press release for that quarter dated August 9, 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 August 9, 2021 and available here: https://www.sec.gov/Archives/edgar/data/1755953/000121390021041101/ea145469ex99-1_akernacorp.htm

AKERNA CORP.

 Condensed Consolidated Statements of Cash Flows

(unaudited)

For the Nine Months Ended

September 30,

2021

2020

Cash flows from operating activities 

Net loss

$

(14,116,401)

$

(14,657,540)

Adjustment to reconcile net loss to net cash used in operating activities:

Equity in losses of investment

7,564

5,226

Bad debt

254,029

382,607

Stock-based compensation expense

1,584,751

1,524,935

Loss on write off of fixed assets

1,045,179

Gain on Forgiveness of PPP loan

(2,234,730)

Amortization of deferred contract cost

356,528

Non-cash interest expense

1,161,394

Depreciation and amortization

3,605,434

2,387,629

Debt issuance costs

1,220,557

Foreign currency loss

122,049

4,901

Change in fair value of convertible notes

2,030,904

(1,544,000)

Change in fair value of derivative liability

(151,175)

(392,605)

Change in fair value of contingent consideration

(1,387,000)

Changes in operating assets and liabilities:

       Accounts receivable

353,788

(423,850)

       Prepaid expenses and other current assets

(30,456)

(232,180)

       Accounts payable and accrued liabilities

1,802,790

1,341,117

       Deferred revenue

(946,190)

(261,760)

   Net cash used in operating activities

(5,154,542)

(12,031,963)

Cash flows from investing activities

Developed software additions

(3,277,453)

(3,124,784)

Furniture, fixtures, and equipment additions

(11,535)

(168,839)

Cash paid for business combination, net of cash acquired

(5,142,159)

   Net cash used in investing activities

(3,288,988)

(8,435,782)

Cash flows from financing activities

Value of shares withheld for related to tax withholdings

(437,554)

Proceeds from stock offering, net

1,828,116

Proceeds from issuance of long term debt

17,164,600

Payments of principal amounts of debt 

(1,164,706)

Cash paid for debt issuance costs

(1,220,557)

   Net cash provided by financing activities

225,856

15,944,043

    Effect of exchange rate changes on cash and restricted cash

(5,916)

662

Net change in cash and restricted cash

(8,223,590)

(4,523,040)

Cash and restricted cash – beginning of period

18,340,640

19,280,897

Cash and restricted cash – end of period

$

10,117,049

$

14,757,858

Cash paid for interest

158,672

1,559

Cash paid for taxes

145,415

91,990

Supplemental Disclosure of non-cash investing and financing activity:

Settlement of convertible notes in common stock

11,610,325

Conversion of exchangeable shares to common stock

17,452,497

4,798,208

Settlement of other liabilities in common stock

377,315

Acquisition of noncontrolling interest

4,695,357

Special voting preferred stock issued in business combination

25,203,490

Akerna Corp.

Earnings Before Interest, Taxes, Depreciation and Amortization, and Adjusted EBITDA

The reconciliation of net loss to EBITDA and Adjusted EBITDA is as follows:

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net loss

$   (1,553,447)

$   (3,988,045)

$ (14,116,400)

$ (14,657,540)

Adjustments:

      Interest expense (income)

238,283

3,687

1,175,788

(27,751)

      Change in fair value of convertible notes 

23,227

(778,000)

2,030,904

(1,544,000)

      Change in fair value of derivative liability

(194,046)

(762,646)

(151,175)

(392,605)

      Income tax expense

10,570

30,985

     Depreciation and amortization

1,238,420

1,171,022

3,605,435

2,387,629

EBITDA

$      (247,562)

$   (4,353,982)

$   (7,444,879)

$ (14,203,281)

Stock-based compensation expense

477,625

681,419

1,502,340

1,354,899

Business combination and merger related costs 

182,631

951,865

290,357

3,197,226

Non-recurring financing fees

280,768

43,167

410,362

1,220,557

Restructuring charges

68,190

2,453,776

68,190

Changes in fair value of contingent consideration

(389,000)

(1,387,000)

Gain on forgiveness of PPP loan

(2,234,730)

(2,234,730)

Equity in losses of investee

1,534

7,564

5,225

 Adjusted EBITDA

$   (1,541,268)

$   (2,996,808)

$   (5,015,210)

$   (9,744,184)

Akerna Corp.

The reconciliation of operating expenses to non-GAAP operating expenses is as follows:

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating Expenses

$    6,884,833

$   7,497,537

$   21,994,207

$    21,419,027

Adjustments:

Depreciation and amortization

1,238,420

1,171,022

3,605,435

2,387,629

Stock-based compensation expense

436,951

663,708

1,391,921

1,310,336

Business combination and merger related costs 

182,631

951,865

290,357

3,197,226

Non-recurring financing fees

280,768

43,167

410,362

1,220,557

Restructuring charges

68,190

2,454,019

68,190

Changes in fair value of contingent consideration

(389,000)

(1,387,000)

Non-GAAP Operating Expenses

$     4,746,063

$      4,988,586

$  13,842,113

$  14,622,089

Akerna Corp.

The reconciliation of product development expense to non-GAAP product development expense is as follows:

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Product development expense

$     1,566,478

$     1,758,826

$     4,517,836

$     3,722,551

Stock-based compensation expense

166,758

209,287

574,665

318,582

Non-GAAP product development expense

$     1,399,720

$     1,549,539

$     3,943,172

$     3,403,969

Akerna Corp.

The reconciliation of sales and marketing expense to non-GAAP sales and marketing expenses is as follows:

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Sales and marketing expense

$     2,002,461

$     2,097,502

$     5,564,519

$     6,255,371

Stock-based compensation expense

123,204

156,204

366,790

299,289

Non-GAAP sales and marketing expense

$     1,879,257

$     1,941,298

$     5,197,729

$     5,956,082

Akerna Corp.

The reconciliation of general and administrative expense to non-GAAP general and administrative expenses is as follows:

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

General and administrative expense

$     2,077,474

$     2,470,187

$         8,306,417

$         9,053,476

Adjustments:

Stock-based compensation expense

146,989

298,217

450,466

692,465

Business combination and merger related costs 

182,631

951,865

290,357

3,197,226

Non-recurring financing fees

280,768

43,167

410,362

1,220,557

Restructuring charges

68,190

2,454,019

68,190

Changes in fair value of contingent consideration

(389,000)

(1,387,000)

Non-GAAP general and administrative expense

$     1,467,087

$     1,497,749

$     4,701,213

$     5,262,039

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

About the Author: News Team

Newsteam at Highly Capitalized are some of the most experienced writers in cannabis and psychedelics business & finance. We cover capital markets, finance, branding, marketing and everything important in between. Most of all, we follow the money.

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