Akerna Corp.

Good morning and welcome to Akerna's first quarter 2022 financial results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone keypad. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's conference is being recorded. At this time, I would like to turn the call over to Peter Seltzberg, Investor Relations for Akerna. Please go ahead.

Thank you, and welcome to today's first quarter-ended March 31st, 2022 conference call. On the call today are Jessica Billingsley, CEO and Chairman of Akerna, and John Fowles, CFO of Akerna. Before management begins with formal remarks, I'd like to remind everyone that during this conference call, certain statements will be made that are forward-looking within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as estimates, projected, expects, anticipates, forecasts, plans, intends, 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 Akerna and statements regarding expected future revenue recognition. These forward-looking statements are not guarantees of future performance, conditions, or results and involve 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 the current filing for the Securities and Exchange Commission. Forward-looking statements speak only as of the day 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, without further ado, I'd like to turn the call over to Akerna's CEO, Jessica Billingsley. Jessica, go ahead.

Good morning, everyone. Thank you for joining us. Today, we reported our first quarter financial results for 2022. And I'm pleased to state we have posted our fourth consecutive quarter of top line growth, highlighted by software revenue growth of 71% year over year, total revenue growth of 73% year over year, and a current revenue run rate now in excess of $27 million. John will cover the specifics for our financials in his remarks shortly. On today's call, I would like to first continue our emphasis on our key performance metrics. Committed annual recurring revenue, or CARR, growth in bookings, and growth in client transactions. I'll clarify each of these metrics, explain why they are important, and how we are performing. Secondly, I'll provide an update on the three industry drivers we believe are propelling the cannabis economy forward. Operator consolidation, U.S. federal actions, and finally, international countrywide legalization. I'll clarify each of these drivers and how they have progressed since we first discussed them a year ago in our 2021 Q1 earnings call. And I'll share how they've impacted our operations and target markets. Starting with metrics, most of our revenue today is comprised of subscription revenue. As a result, the most important metric we track to measure our present success is our total CARR, or the total amount of contracted recurring revenue for which clients have signed contracts. Our CARR was $21.1 million as of March 31, 2022, which represents a 35% increase year-over-year. In regards to bookings, this equates to the dollar amount of new signed software contracts, the value of which will be recognized over the life of the contract. We consider growth in bookings to be a near-term leading indicator of our performance. Our Q1 software bookings were $2 million, another record for Akerna, which represents an increase of 100% year-over-year and 33% sequentially, indicating increasing growth. Turning to our third metric, client transaction growth, which we believe is the single most important long-term indicator of our true market share. We are pleased to report our transaction growth continued in the first quarter of this year with more of the industry running on Akerna as we posted 16% growth in volume and 49% growth in amount. Our clients continue to scale in two ways, expansion through acquisitions during the overall consolidation of the market, and same facility growth. For example, more consumers are visiting a given retailer dispensary for the first time, and they're also repeating their visits more frequently. These numbers demonstrate our footprint is growing, and more of the industry is running on Acronis. Our transaction growth provides a future revenue catalyst as regulatory changes bring opportunities to monetize transaction volume, including through retail and wholesale payment opportunities. Having highlighted our continued performance as measured by key metrics, I'll move on to our industry drivers, starting with consolidation. Consolidation is an inevitability in any emerging industry. And in the cannabis landscape, it's most directly related to operator expansion into new states and or their scaling of operations within existing states. Regardless, consolidation among operators who are also rapidly scaling drives the need for technology adoption, the need for compliance within every market in which they operate, and the need for robust accounting, tax planning, and reporting analytics across all facilities. Simply put, consolidation drives the need for Acuna's ecosystem to reduce the complexity of managing their businesses, empowering operators in an increasingly competitive market with the most efficient and compliant tech platforms to support their rapid growth and expansion. Additionally, we are often converting one or two locations at a time as operators implement across the organization, which translates into a healthy pipeline of backlog for Acuna. With 800,000 of CARR currently in backlog and understanding the existing footprint and purchasing nature of our clients, we feel confident that over time, if we did nothing else other than serve our existing market, we could grow our business by 30% on an annual basis by cross-selling and upselling existing scaling clients into our mid-market and enterprise solution. When making any forward-looking statements in the cannabis economy, we must consider our second industry driver, U.S. federal action. With public support for federal legalization continuing to grow in our country, I will highlight the latest regulatory actions and I'll reiterate how legalization impacts are current. Last month, on April 1st, the U.S. House of Representatives passed the Moore Act, a bill that would end the federal prohibition on cannabis by removing it from the list of banned controlled substances. This is the second time this bill has passed the House. And this time, it is joined by the introduction of the Republican-led Comprehensive States Reform Act in the House and Democratic-led CAOA bill drafted in the Senate. While it is an important landmark achievement to have multiple such comprehensive bills proposed, including those led in both houses and by both major political parties, I'll underscore our statements made in previous quarterly reports that legalization will most likely be passed in pieces. that will resolve specific issues within the industry instead of by sweeping legalization. These bills will likely serve as a foundation from which pieces may be pulled and passed. As of today, 38 states have legalized medical cannabis, and 18 states have legalized recreational usage. Nearly every cannabis-related ballot measure put to voters has passed, including those in conservative states Mississippi, Montana, and South Dakota. Additionally, state legislatures in New York, New Mexico, and Virginia have approved bills to legalize cannabis for recreational use. As we look at the impact to occur of legalization, either at the state or federal level, it's important to note how it positively impacts three areas of our business. In order of when these opportunities become available, each new state generally does the following. First, It provides an opportunity for our track and trace product to become the official state system chosen by the state's regulatory agency. Next, it opens the door for licensee candidates to use our professional consulting services to ready their applications and their business operations. And lastly, it opens a new market for software sales to operators. Bottom line, legalization creates regulatory complexity and a surge of operators, governments, and brands requiring leading compliance, scalable technology, and a robust ecosystem such as Akerna's that has been methodically architected to ensure all players have the tech they need to scale successfully. Looking at the international landscape as our third industry driver, as we mentioned in our recent annual shareholder letter, we believe our existing clients headquartered in North America, with their experience and access to capital, are in a position to capture a large portion of the market expansion potential. Akerna's technology systems are poised to expand with them as they extend their footprint. Innovation and a growth mindset have always driven the architecture of our ecosystem. From our inception, we have taken care to construct a robust platform solution that would not only address the needs of the small to medium-sized business segments, but also those of the growing enterprise market. This decision allows us to grow with our clients as they scale from our startup business solutions into our larger business offerings. We focus on providing the network that connects our applications with our solutions for compliance, payments, and integration. This structure enables our clients to custom select the ecosystem connected suite of products and services right for them, at this point in their growth journey. In closing, our current, near-term, and long-term leading indicators all indicate good progress heading into the second quarter and balance of 2022. And we believe we have secured and continue to secure the right strategic partnerships for the business while we have designed our systems to solve some of our clients' biggest challenges by reducing their complexity. Now, I'll hand the call over to John, who will take us through the details of our financial results. John, please take it from here.