Akerna Corp.

Good morning, and welcome to the Acurnis quarter-ended December 31, 2020 Financial Results Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Erica Mannion, Investor Relations for Acurnis. Thank you.

Thank you, and welcome to today's quarter-ended December 31, 2020 Conference Call. On the call today are Jessica Billingsley, CEO and Chairman of Acurnis, and John Fowle, CFO of Acurnis. Before we begin our formal remarks, I'd like to remind everyone that during this conference call, certain statements will be made that are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such words as estimate, projected, expect, anticipate, forecast, plan, intend, believes, seeks, may, will, should, future, propose, and variations of these words or similar expressions or versions of such words or expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding the future growth and prospects for a corner and statements regarding expected future revenue recognition. These forward-looking statements are not guarantees of future performance, conditions, or results and involves several known and unknown risks, uncertainties, assumptions, and other important factors which could cause actual results or outcomes to differ materially from those discussed, including risks related to changes in the cannabis market and risks related to the impact of the COVID-19 pandemic. These risk factors are more fully described in occurrence filings with the SEC. Forward-looking statements speak only as of the date they are made. Akerna undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Now, I would like to turn the call over to Akerna's CEO, Jessica Billingsley, for a discussion of the company's quarter and full year ended December 31, 2020. Jessica?

Thank you, Erica, and good morning, everyone. Thank you for joining us today. We stated on our last quarterly call our intent to change our fiscal year end to December 31st, which we have done. And therefore, any references to the quarter period during today's call are references to our fourth calendar quarter for 2020 and to December 31st, 2020. And references to the year are references to the calendar year of 2020. 2020 was an important growth year for Acarna. and I'm pleased to share in the quarter we grew our software business by 38% year-over-year. Our business as a whole grew 24% in 2020, with our strong software growth offset by a contraction in our consulting business, which was impacted by pandemic-related shutdown and delays. As businesses and governments have adapted, we're encouraged to see our quarter-over-quarter consulting revenue increase by 75%, while our software revenue also grew sequentially in the December quarter. Our total staff ARR is currently 13.8 million, a 42% increase over the same time last year. In addition to top line growth, the restructuring activities taken in 2020 are delivering results with a 36% sequential improvement in adjusted EBITDA in the December quarter. We are encouraged by the pace of demand we saw going into 2021. We look forward to continued growth in the quarters ahead. As has been a theme for much of 2020, our focus on the multi-state, international, and emerging enterprises in the $21 billion global cannabis industry continues to serve us well. This quarter, we saw continued term improvement by 41% sequentially, while consolidation continues with many of our larger clients, significantly increasing their footprints. On average, MJ Platform clients' number of transactions tracked in our system has increased by 63% year-over-year. Our average MJ platform deal size has also increased by 21% year-over-year, further illustrating the value of our technology to the important mid-market and enterprise client base. MJ platform delivered 99.97% uptime in the quarter, and our average client satisfaction rating across all products now exceeds 8 on a scale of 1 to 10. With leading market share driven by the breadth and capabilities of our platform, we believe we are well positioned to capture the opportunity in front of us as the cannabis industry expands in the years ahead. At the core of Akerna's platform differentiation is our architectural approach to solving compliance and governance requirements. Being a pioneer in the cannabis industry, we identified early on the challenges and complexity that would arise in managing regulatory requirements as the industry grew. With different compliance requirements for such things as varying documentation required at each step of the cultivation process, labeling, taxes, details captured, and even down to basic units of measurement on what constitutes a batch or lot, we understood building these unique compliance requirements one by one into our individual software products, we have scaling limitations and become overly cumbersome as new markets develop. In addition, much like sales tax compliance on the national level, the regulations themselves continually change in both established and new markets, adding to the overall complexity of the problem. To address this fundamental challenge, six years ago, Akerna invested in a strategic architectural shift to extract compliance and governance layer from our solutions. By creating a standalone gateway, with which our applications then integrate via API, we have significantly reduced the complexity of maintaining compliance within the fragmented, ever-changing market framework, while creating the ability to rapidly scale as new markets are introduced. Streamlining changes and updates into a single compliance gateway ensures rapid deployment by eliminating the typical industry practice of continually rewriting code for each individual application. Given this architectural approach and our long-standing presence in the market, the net result is an ecosystem with the most comprehensive compliance and regulatory capabilities in the industry, able to serve off-the-shelf the requirements of the entire cannabis supply chain, in more medical and recreational markets in North America and beyond than anyone else. In our view, this is critical to being an enterprise software provider in the cannabis industry because regulatory requirements are a foundational part of virtually every operational process. As we grow and strategically prepare for the enterprise evolution of the industry, our goal is to leverage our core capabilities and expands the breadth of our platform to capture the multitude of growth factors ahead. Over the last year, the infrastructure improvements we've made and the acquisitions we've closed, and the acquisition strategy we continue to pursue, position Acarna to be one of the largest cannabis technology winners as legalization expands to new states. Our platform has allowed us to create a true ecosystem with over 80 integrated products and more than a dozen strategic partners, making us stickier and helping us to maximize wallet share of our clients as they scale their operations and the industry makes a natural progression to maturity. Building on the enterprise capabilities of our platform, we have also integrated with large-scale financial and tax management solutions like Oracle's NetSuite, Sage and Tax, and SAP, with the core tenets being that as organizations grow, they will increasingly look to adopt more sophisticated financial and tax planning management tools on par with those of mid-market and enterprise companies and other industries. The importance of these integrations is the basis for our recently announced acquisition of Viridian. By way of background, Viridian is one of very few system integrators focused solely on the cannabis industry. and the only one leveraging SAP's Business One offering. While Viridian has experienced success in the cultivation and production markets, driven by their strong SAP implementation team, there were limitations on the breadth of their addressable market, given the regulatory complexities I mentioned earlier. By acquiring Viridian, the Viridian Business One product will now have direct access to our compliance gateway, while Acarna adds strong SAP system integration capabilities. At 1.7x 2020 ARR, we believe this transaction is a great value for both companies, particularly when taking into account the cash flow synergies we expect to realize in 2021. Equally important, this acquisition expands the breadth of our SAP integration, with Viridian's Business One offering serving smaller and mid-market organizations, while Acronis ECC offering continues to serve large international and enterprise players. In combination with our Sage and Oracle's NetSuite integration, we have significantly bolstered the capabilities of our platform to include enterprise-class tax planning solutions, including global financial statements and tax reporting, to help our clients more efficiently and, of course, compliantly address rapid industry growth. As a further substantiation of our approach to building enterprise capabilities into our platform, earlier this year, we partnered with Domo, to release the next generation of cannabis data analysis, MJ Analytics. As the industry continues to mature, we see analytics as the natural next step in technology spending to take advantage of the large data sets captured for regulatory requirements. Rather than simply capturing this data for the sake of submitting compliance reports, our clients can now leverage that data to make informed decisions about their own operations. thereby improving business outcomes, including sales growth and profitability. The value is being recognized by the market and has generated a six-figure increase in ARR since launch. Finally, as we expand further into the retail segment, last quarter we announced MJ Retail, a first-of-its-kind proprietary software technology designed to provide merchants and consumers with flexible and mobile-friendly experience. By providing a clean and lightweight point-of-sale solution that connects to the Akerna platform without sacrificing critical features, MJ Retail positions us for even more robust growth among cannabis retail operators. In conjunction with our retail offering earlier this year, we also signed an agreement with Priority Technology Holdings to provide CBD and hemp retailers with credit card payment processing through Akerna's point-of-sale products. With several clients now on beta versions of the product, we're encouraged by the feedback we have received thus far, and we look forward to a wider rollout in the coming quarters. In addition, combining our MGA retail point-of-sale solution with the ability to activate payment solutions through priority technology, we believe we're well-positioned to capture transactional revenue streams in the medical and adult-use cannabis markets, pending legislative action at the federal level. With the election and the subsequent Senate runoff races in our rearview mirror, the combination of the growing support for cannabis at the state level, coupled now with the Democratic administration and Senate majority, opens the door for significant movement within cannabis legislation. The first months of the new administration may include some exciting reforms at the federal level, including the long-awaited passage of the Safe Banking Act, which is back on the House floor, increased support for the hemp industry, and eventually federal decriminalization through legislation similar to the MORE Act. All of our work and achievements to date have positioned us for this inflection point of U.S. federal legalization. Now let's have John take us through the details of our financial results. John, please take it from here.