The cannabis industry’s first seed-to-sale enterprise resource planning (ERP) software technology company Akerna Corp. (Nasdaq: KERN) (formerly known as MJ Freeway) reported total revenue of approximately $11 million for the year ending June 30, 2019, which was a 4.2% increase over last year’s $10.5.
“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. “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.”
With regards to the revenue, Akerna noted that the first year of the Leaf Data Systems contract with Pennsylvania began in fiscal year 2018, returning to lower but stable run rates in the fiscal year ending June 30, 2019. The company said that monthly billings on MJ Platform increased in the month ending June 30, 2018, to the month ending June 30, 2019, by 55%. Monthly Billings grew from approximately $268,816 in June 2018 to $417,163 in June 2019. 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”
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.
The company said that its cost of revenue was approximately $4.6 million versus last year’s $4.4 million for an increase of approximately 6%. The statement said that the 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.”
Post Quarter News
Akerna noted the following news events that occurred after the quarter closed.
- 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, a new partnership with Leafly to provide seamless and real-time data updates.
- August 2019, awarded a 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 a strategic partnership to integrate Isolocity’s quality management system (QMS), supporting GMP and ISO 9001 compliance, into MJ Platform.
Billingsley added, “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.”