Akerna Corp. Issues Letter to Shareholders

DENVER, Dec. 10, 2020 /PRNewswire/ -- Akerna (Nasdaq: KERN), an enterprise software, leading compliance technology provider and developer of the cannabis industry's first seed-to-sale enterprise resource planning (ERP) software technology (MJ Platform®), today announced the following letter from its Chief Executive Officer, Jessica Billingsley, to its shareholders and the investment community.

Dear Fellow Shareholders,

In fiscal 2020, we delivered a transformational year, executing our strategy to be the only scaled technology provider to the cannabis industry in advance of U.S. federal legalization. Akerna reported another year of record revenue growth, achieved numerous industry and company firsts, expanded our portfolio of cannabis compliance and enterprise resource planning (ERP) software, and enhanced our ecosystem. Our work continues to best position Akerna in this $17 billion-dollar global industry, which we believe will open many additional volume-based revenue opportunities, creating a significant catalyst for our business.

Focusing on execution

For our fiscal year ending June 30, 2020, we increased total revenue by 16% and software revenue by 21%, compared to fiscal 2019. We continued to fuel growth in the quarter ended September 30, 2020, with total revenue up 16%, software revenue up 40%, and the total contracted SaaS annual recurring revenue (ARR) up 44%, compared to the prior-year period. This growth reflects our improving operating metrics. In fiscal 2020, our average MJ Platform® deal size increased 94%, and our number of tracked client transactions increased by 180%, year over year. We focused on improving existing client relationships and enriching their product experience to ensure we are as sticky as possible. Our retention rates have improved significantly; MJ Platform has delivered 99.99% uptime, and our average client satisfaction rating across all products continues to improve.

Achieving industry and company firsts

Our company is and will continue to lead the development and deployment of cannabis technology solutions. This year, we were first in the industry to accomplish the following by leveraging our own innovation and relationships with key partners:

  • Integrate with enterprise-class, global accounting, and tax planning systems.
  • Provide global manufacturing practice standards (GMP)-compliant cannabis export technology in partnership with Isolocity.
  • Launch the world's first cryptographically secure cannabis product authentication system, solo*TAG™ in Utah, exclusively for governments and only available with Akerna's Leaf Data Systems®.
  • Offer traditional merchant credit card processing payment solutions to hemp and CBD operators in partnership with Priority Technology Holdings.

Augmenting our platform for the entire cannabis supply chain

Our pre-eminent global technology platform addresses the entire supply chain and its regulatory bodies through accountability and transparency. To build upon our unique value proposition, amplify our stickiness with our clients, and increase our market share, we continue to develop, enhance, and expand our ecosystem with a focus on enterprise-class customers. This year, we broadened our software and services portfolio through strategic partnership agreements, significant new platform enhancements, and select acquisitions of highly targeted and synergistic technology companies, which are now operationally integrated and cash flow accretive. Examples follow:

  • Augmented our cannabis cultivation management and compliance software capabilities by acquiring Trellis in April 2020. Leveraging our infrastructure, existing compliance bus, and ecosystem, we can sell Trellis into more markets and offer their legacy client base more of our products and services.
  • Increased our ownership of high margin authentication tools by acquiring the remaining 20% of solo sciences in July 2020. By providing a unique fingerprint for every package, solo sciences technology closes the loop between the user and the manufacturer and surpasses legacy holograms and RFID tags. Accordingly, the solo marks carry high margins, which, when affixed to each package, will drive revenue as industry volume grows.
  • Captured majority seed-to-sale platform market share in Canada by acquiring Ample Organics in July 2020. We expanded our scope and now serve some of the world's largest cannabis brands, including Aphria, Aurora, Cronos Group, Organigram, and several other large Canadian enterprise businesses. 
  • Broadened MJ Analytics™ to offer a suite of enterprise-level data tools, providing users with unparalleled access and insight into the cannabis supply chain, from seed to sale made possible through a partnership with the business intelligence (BI) firm Domo in September 2020. The collaboration makes it easier for operators to run their businesses by empowering users to perform self-serve analytics on fresh data that can help drive everyday decisions.
  • Launched MJ Retail™, a first-of-its-kind proprietary software technology designed to provide merchants and consumers with a flexible and mobile-friendly experience in October 2020. MJ Retail offers an easy-to-use, clean, and lightweight point of sale (POS) solution without sacrificing critical features. It connects to our ecosystem, offering retailers an easy to use system. Further, MJ Retail enhances our positioning for when U.S. federal change occurs.
  • Enhanced our infrastructure to support expected strong growth in the coming year.

Capturing opportunity in the growing cannabis industry

During the COVID-19 pandemic, nearly every currently legal cannabis jurisdiction declared access to cannabis essential. We have been pleased to see cannabis prove its economic resilience with increased consumer demand throughout this year.

More states and countries are looking to legalize cannabis to provide tax revenue and create jobs. This trend has resulted in five states passing cannabis measures in the recent November election, creating four new adult-use cannabis markets and two new medical markets. The market is poised for additional expansion, with many other states and jurisdictions proposing legislative measures, yielding far more market opportunities for the cannabis industry and cannabis technology solutions. We expect to see differences in implementation timelines for each state; states with existing markets like Arizona, Montana, and New Jersey may open faster than states like Mississippi and South Dakota, which are still in the initial stages. In new markets, we generally lead with our consulting services, which build brand and name recognition in advance of software sales.

At a time when investment capital is scarce among many sectors, Akerna successfully closed a $17 million debt transaction and a subsequent $12 million public offering, which positions us to capitalize on the enormous market share opportunity in newly opening cannabis markets. With increased cash and a stronger balance sheet, we are well prepared to deliver top-line growth and drive toward profitability.

Our technology empowers the cannabis industry to prove outcomes that positively change lives every day. We are proud of what we have accomplished and remain focused on our North Star, to be the only scaled technology provider to the cannabis industry when the U.S. federal-state conflict ends. We are keenly aware of the work that lays ahead and remain laser-focused on execution. We plan to continue strengthening our channel relationships with traditional enterprise accounting and tax planning providers, continuing to improve our customer and product experience, increasing our wallet share among our enterprise client base, continuing to drive significant software revenue growth, and expanding our margins. We expect our efforts to develop and deliver more innovative solutions will result in more firsts and extend our industry leadership position. 

In closing, let me express my gratitude and appreciation for our partners, clients, team, and you, our shareholders. As a large shareholder myself, my goals remain directly aligned with yours. Our team's commitment to our mission enables us to stay on the leading edge, always focusing on capturing market share and creating value for us all.


Jessica Billingsley
Chief Executive Officer, Akerna

Forward Looking Statements

Certain statements made in this letter 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 belief that our recent accomplishments will open many additional volume-based revenue opportunities, creating a significant catalyst for our business, that we will lead the development and deployment of cannabis technology solutions in the industry,  that we will continue to develop, enhance, and expand our ecosystem with a focus on enterprise-class customers, our ability to sell Trellis into more markets and offer their legacy client base more of our products and services, that solo marks will drive revenue as industry volume grows, that our Domo collaboration makes it easier for operators to run their businesses, expected strong growth in the coming year, our expectation to see differences in implementation timelines for each new cannabis jurisdiction,  our plan to business plan moving forward and our expectation that our efforts to develop and deliver more innovative solutions will result in more firsts and extend our industry leadership position. 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.


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