Akerna Announces Financial Results for the Second Quarter 2021

13.4 min readPublished On: August 9th, 2021By
DENVER–Akerna (Nasdaq: KERN), an enterprise software technology provider and developer in the cannabis industry, today reported its unaudited financial results for the quarter ended June 30, 2021.
“Our second quarter results continued the momentum in 2021, with revenue growth of 63% year over year driven by a mix of organic and inorganic software revenue and a rebound in consulting demand,” said Jessica Billingsley, CEO of Akerna.  “As consolidation within the industry continues and emerging markets begin to open, we believe our industry leadership position with multi-state, international and emerging enterprises paves the way for Akerna to be one of the largest cannabis technology winners in the years ahead.”

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, and solo sciences, 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.

Second Quarter 2021 Financial Highlights

  • Software revenue was $4.5 million, up 56% year over year
  • Total revenue was $4.9 million, up 63% year over year
  • Gross profit was $3.0 million, up 153% year over year
  • Net loss was $6.1 million, flat with the same period last year
  • Adjusted EBITDA was negative $1.6 million compared to negative Adjusted EBITDA of $3.6 million for the same quarter prior year, an improvement of 54% year over year
  • Cash was $11.8 million as of June 30, 2021, compared to $15.4 million as of March 31, 2021See “Explanation of Non-GAAP Financial Measures” below

Second Quarter 2021 Key Metrics

  • Total SaaS ARR of $17.3 million, up 53% year over year
  • Average new B2B order up 27% year over year
  • B2B transaction volume up 104% year over year
  • New Bookings ARR of approximately $900,000

Second Quarter 2021 Operational Highlights

  • Secures world’s first national government cannabis contract with St. Vincent and the Grenadines
  • Closed Viridian Acquisition
  • Added Pharmaceutical and Cannabis Industry Expert Barry Fishman to Board of Directors
  • Completed MJ Retail (POS offering) beta adoption

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.

Conference Call Details

Akerna will host a conference call tomorrow, Tuesday, August 10, 2021, at 8:30 a.m. Eastern Time to discuss its financial results and business highlights. A question-and-answer session will follow prepared remarks. Interested parties may listen to the call by dialing:

Toll-Free: 1-877-407-3982

Toll / International: +1-201-493-6780

Conference ID: 13721125

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, https://ir.akerna.com/

To be included on the Company’s email distribution list, please sign up at https://ir.akerna.com/news-events/email-alerts

 

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 “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:

  • 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 fees when we elect the fair value option to account for our debt instruments because if we had not elected the fair value option such costs would be recognized as an adjustment to the effective interest and excluded from EBITDA;
  • Restructuring charges because we believe these costs are not representative of operating performance;
  • Equity in earnings (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 recurrring across all periods and we believe these costs are not representative of operating performance.

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 June 30, 2021 are presented in the tables below.  For comparative purposes, the reconciliation of these non-GAAP financial measures in the prior quarter ended March 31, 2021 are contained in our press release for that quarter dated May 10, 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 May 11, 2021 and available here: https://www.sec.gov/Archives/edgar/data/0001755953/000121390021025543/ea140650ex99-1_akernacorp.htm

AKERNA CORP.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, December 31,
2021 2020
Assets
Current assets:
Cash $ 11,778,601 $ 17,840,640
Restricted cash 508,261 500,000
Accounts receivable, net 1,442,714 1,753,547
Prepaid expenses and other current assets 2,395,346 2,458,727
Total current assets 16,124,922 22,552,914
Fixed assets, net 53,354 1,193,433
Investment, net 226,101 233,664
Capitalized software, net 5,213,267 3,925,739
Intangible assets, net 7,772,289 7,388,795
Goodwill 46,790,018 41,874,527
Total Assets $ 76,179,951 $ 77,169,072
Liabilities and Equity
Current liabilities
Accounts payable, accrued expenses and other accrued liabilities $ 4,681,554 $ 3,188,576
Deferred revenue 825,187 843,900
Current portion of long-term debt 7,155,953 11,707,363
Derivative liability 354,247 311,376
Total current liabilities 13,016,941 16,051,215
Long-term debt, less current portion 1,200,647 3,895,237
Total liabilities 14,217,588 19,946,452
Commitments and contingencies
Equity:
Preferred stock, par value $0.0001; 5,000,000 shares authorized, 1 share special voting preferred stock issued and outstanding at June 30, 2021 and December 31, 2020
Special voting preferred stock, par value $0.0001; 1 share authorized, issued and outstanding as of June 30, 2021 and December 31, 2020, with $1 preference in liquidation; exchangeable shares, no par value, 1,039,373 and 2,667,349 shares issued and outstanding as of June 30, 2021 and December 31, 2020 respectively 7,951,203 20,405,219
Common stock, par value $0.0001; 75,000,000 shares authorized, 25,332,439 and 19,901,248 issued and outstanding at June 30, 2021 and December 31, 2020, respectively 2,533 1,990
Additional paid-in capital 123,856,649 94,086,433
Accumulated other comprehensive loss (105,544) (91,497)
Accumulated deficit (69,742,478) (57,179,525)
Total equity $ 61,962,363 $ 57,222,620
Total liabilities and equity $ 76,179,951 $ 77,169,072
AKERNA CORP.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Revenues
      Software $ 4,456,728 $ 2,849,734 $ 8,251,881 $ 5,196,043
      Consulting 410,884 131,000 583,631 823,584
      Other 39,275 22,904 85,399 54,557
     Total revenues 4,906,887 3,003,638 8,920,911 6,074,184
Cost of revenues 1,914,380 1,818,565 3,368,547 3,214,784
Gross profit 2,992,507 1,185,073 5,552,364 2,859,400
Operating expenses
      Product development 1,527,258 1,088,938 2,951,358 1,963,725
      Sales and marketing 1,826,143 2,117,118 3,562,058 4,157,869
      General and administrative 4,375,981 3,126,027 6,228,943 6,583,289
      Depreciation and amortization 1,314,132 1,036,378 2,367,015 1,216,607
     Total operating expenses 9,043,514 7,368,461 15,109,374 13,921,490
Loss from operations (6,051,007) (6,183,388) (9,557,010) (11,062,090)
Other (expense) income:
      Interest (expense) income , net (163,125) (2,084) (937,504) 31,438
      Change in fair value of convertible notes (16,405) 766,000 (2,007,667) 766,000
      Change in fair value of derivative liability 133,125 (606,958) (42,871) (370,041)
      Other expense, net 243 243 (124)
     Total other (expense) income (46,162) 156,958 (2,987,799) 427,273
Net loss before income taxes and equity in losses of investee (6,097,169) (6,026,430) (12,544,809) (10,634,817)
         Income tax expense (4,300) (30,985) (10,570) (30,985)
Equity in losses of investee (3,782) (3,692) (7,564) (3,692)
Net loss (6,105,251) (6,061,107) (12,562,943) (10,669,494)
Net loss attributable to noncontrolling interest in consolidated subsidiary 748,584 849,759
Net loss attributable to Akerna shareholders $ (6,105,251) $ (5,312,523) $ (12,562,943) $ (9,819,735)
Basic and diluted weighted average common stock outstanding 24,530,837 13,166,444 22,879,131 12,871,648
Basic and diluted net loss per common share $ (0.25) $ (0.46) $ (0.55) $ (0.83)
AKERNA CORP.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months Ended
June 30,
2021 2020
Cash flows from operating activities
Net loss $ (12,562,943) $ (10,669,494)
Adjustment to reconcile net loss to net cash used in operating activities:
Equity in losses of investment 7,564 3,692
Bad debt 150,294 370,154
Stock-based compensation expense 1,074,621 760,584
Loss on write off of fixed assets 1,045,180
Amortization of deferred contract cost 242,110
Non-cash interest expense 926,968
Depreciation and amortization 2,367,014 1,216,607
Debt issuance costs 1,177,390
Foreign currency loss (17,344)
Change in fair value of convertible notes 2,007,677 (766,000)
Change in fair value of derivative liability 42,871 370,041
Change in fair value of contingent consideration (998,000)
Changes in operating assets and liabilities:
       Accounts receivable 641,111 (400,251)
       Prepaid expenses and other current assets (115,934) (120,489)
       Other assets
       Accounts payable and accrued liabilities 1,463,669 975,121
       Deferred revenue (988,046) (507,089)
Net cash used in operating activities (3,715,198) (8,587,734)
Cash flows from investing activities
Developed software additions (2,004,609) (1,990,584)
Furniture, fixtures, and equipment additions (156,636)
Cash paid for business combination, net of cash acquired 122,675
Net cash used in investing activities (2,004,609) (2,024,545)
Cash flows from financing activities
Value of shares withheld for related to tax withholdings (333,847)
Proceeds from issuance of long term debt 17,164,600
Cash paid for debt issuance costs (1,177,390)
Net cash (used in) provided by financing activities (333,847) 15,987,210
    Effect of exchange rate changes on cash and restricted cash (124)
Net change in cash and restricted cash (6,053,778) 5,375,207
Cash and restricted cash – beginning of period 18,340,640 19,280,897
Cash and restricted cash – end of period $ 12,286,862 $ 24,655,829
Cash paid for interest 50,854
Cash paid for taxes 64,963 51,472
Supplemental Disclosure of non-cash investing and financing activity:
Settlement of convertible notes in common stock 10,196,382
Conversion of exchangeable shares to common stock 12,453,853
Settlement of other liabilities in common stock 377,325
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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net loss $   (6,105,251) $   (6,061,107) $   (12,562,943) $    (10,669,494)
Adjustments:
    Interest expense (income) 163,124 2,084 937,504 (31,438)
    Change in fair value of convertible notes 16,405 (766,000) 2,007,677 (766,000)
    Change in fair value of derivative  liability (133,125) 606,958 42,871 370,041
    Income tax expense 4,300 30,985 10,570 30,985
Depreciation and amortization 1,314,132 1,036,378 2,367,015 1,216,607
EBITDA $   (4,740,415) $   (5,150,702) $     (7,197,306) $      (9,849,299)
Stock-based compensation expense 521,335 371,532 1,024,715 673,480
Business combination and merger related  costs 63,735 1,026,929 107,726 2,245,361
Non-recurring financing fees 111,761 1,177,390 129,594 1,177,390
Restructuring charges 2,406,589 2,453,776
Changes in fair value of contingent consideration (998,000) (998,000)
Equity in losses of investee 3,782 3,692 7,564 3,692
 Adjusted EBITDA $   (1,633,213) $   (3,569,159) $     (3,473,931) $      (6,747,376)
Akerna Corp.
The reconciliation of operating expenses to non-GAAP operating expenses is as follows:
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating Expenses $    9,043,514 $    7,368,461 $     15,109,374 $      13,921,490
Adjustments:
Depreciation and amortization 1,314,132 1,036,378 2,367,015 1,216,607
Stock-based compensation expense 480,917 351,620 955,213 646,628
Business combination and merger related costs 63,735 1,026,929 107,726 2,245,361
Non-recurring financing fees 111,761 1,177,390 129,594 1,177,390
Restructuring charges 2,406,589 2,453,776
Changes in fair value of contingent consideration (998,000) (998,000)
Non-GAAP Operating Expenses $    4,666,380 $    4,774,144 $       9,096,050 $        9,633,504
Akerna Corp.
The reconciliation of product development expense to non-GAAP product development expense is as follows:
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Product development expense $    1,527,258 $    1,088,938 $       2,951,358 $        1,963,725
Stock-based compensation expense 186,013 93,520 407,907 109,295
Non-GAAP product development expense $    1,341,245 $       995,418 $       2,543,452 $        1,854,430
Akerna Corp.
The reconciliation of sales and marketing expense to non-GAAP sales and marketing expenses is as follows:
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Sales and marketing expense $    1,826,143 $    2,117,118 $       3,562,058 $        4,157,869
Stock-based compensation expense 125,387 120,033 243,587 143,085
Non-GAAP sales and marketing expense $    1,700,756 $    1,997,085 $       3,318,472 $        4,014,784
Akerna Corp.
The reconciliation of general and administrative expense to non-GAAP general and administrative expenses is as follows:
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
General and administrative expense $   4,375,981 $ 3,126,027 $    6,228,943 $        6,583,289
Adjustments:
Stock-based compensation expense 169,516 138,067 303,720 394,248
Business combination and merger related costs 63,735 1,026,929 107,726 2,245,361
Non-recurring financing fees 111,761 1,177,390 129,594 1,177,390
Restructuring charges 2,406,589 2,453,776
Changes in fair value of contingent consideration (998,000) (998,000)
Non-GAAP general and administrative expense $   1,624,379 $ 1,781,641 $     3,234,127 $        3,764,290

(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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