Q4 2020 Akerna Corp Earnings Call
Good morning, welcome to occur in this fourth quarter and year end June Thirtyth 2020 financial results Conference call.
Today's call is being recorded.
Oh, that's been placed on mute if you'd like to ask a question at the end of the prepared remarks. Please press. The star key then the number one on your Touchtone phone.
At this time I'd like to turn the conference over to Chris to Norton was it fair enough for introductions and the reading of the Safe Harbor statement. Please go ahead Kristen.
Thank you and welcome to todays fourth quarter and year end June 30, 2020 conference call representing the company today are Jeff Belatedly E L Arena, and John foul CFO of the current Oh.
Both will be available for questions during the Q and a portion of today's call.
Before we begin our 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 words, such as estimate.
Rejected it.
Back and.
Anticipate four.
Poor cat.
Land in Penn <unk>.
Hi.
May.
Well should.
Yes, sure 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.
These statements include but are not limited to statements regarding the future growth and prospects for Corona and statements regarding expected future revenue recognition.
These forward looking statements are not guarantees of future performance condition or results.
And involve several known and unknown risks uncertainties.
Sumption and other important factors, which could cause actual results or outcomes to differ materially from those discussed in the forward looking statements, including risks related to changes in the Canada market and risks related to the impact of the cobot 19 crisis.
These risk factors are more fully discussed in a Curtis filings with the Securities and Exchange Commission words.
Forward looking statements speak only as of the date. They are made occur not undertakes no obligation to update or revise any forward looking statements whether as a result of new information future.
Future events or otherwise, except as required by law.
Now I would like to turn the call over to harness CEO, Jessica Billingsley for a more in depth discussion of the Companys fourth quarter and year ended June 32020, Jessica.
Thank you Christian good morning, everyone.
Thank you for joining us and welcome to our 2020 fiscal year end conference call.
As we enter the fall season I want to review, what we have accomplished this year.
Provide a recap for those of you who may not have attended our prior earnings calls.
Or maybe due to your current a story.
Throughout the first three quarters of our fiscal 2020, we maintained rowing operational traction and made several big announcements, including the acquisition of anthem organics trellis and fill those sciences cut.
Collectively these acquisitions are accelerating our revenue growth and vast market share gain across the industry and they will.
I will touch on these integrations throughout the discussion.
We implemented a multitude of new platform technology enhancements announced packs labs is our cornerstone client for our current insights product and strategically shifted our focus to client engagement.
Client product experience is at the forefront of our innovations.
Actually respond to the needs of our clients continuing to enhance our leading first market features sale to shelf technology solution.
Narrowing our focus to client experience has increased our market share among the multistate international and emerging enterprises in this 17 billion dollar global cannabis industry.
We continue to set the standard for technology supply chain transparency and accountability to consumers and government demands and.
And we are well positioned for growth how to.
Having partnered missed an integrated top tier service providers, such as ice alafi for GMP compliance and sage intact workload, not sweet and Sep for financials and tax planning.
With the acquisition of ample organics and trial, if you have consolidated.
Of our best competitors enter skill to offer more tailored product solutions that further establish cross channel sales opportunities do you.
These results will be the solidification of our global leadership position.
When the cold it 19 pandemic unexpectedly struck earlier this year.
We were pleased to see Canada's prove its economic resilience.
Nearly every state in country declared access to medical and adult use cannabis essential.
A significant shift in sentiment and we have seen increased consumer demand throughout this year.
Overall product demand increased as businesses reprioritized operational efficiencies and explored various new sales channels to continue to serve their patients in consumer communities during the statewide in country wide lockdowns.
Can't this industry adapted quickly and new technologies were employed to facilitate digital sales channels direct to consumer delivery and curbside pickup.
I would be remiss, if I did not mention there have also been challenges and significant impact in localized areas, particularly those that rely on tourism.
Well its cottage industry, a boutique operators who.
Tend to be less well capitalized and therefore less able to spend to adapt to change.
You onto cannabis industry.
We recognize when an extremely challenging time, Mrs, particularly for those on the front lines of the crisis.
Our thoughts are with all of those most affected.
They say to her team at a current every week.
To get through this together.
We are pleased to share that our year over year software revenues are up 21% walk.
Well consulting bookings increased year over year delivery delays in the fourth quarter due to covert 19 Haas consulting revenue to come in at a modest 3% increase.
We expect to recognize the delayed revenue this coming fiscal year.
As expected our operating expenses increased for the fiscal year, as we digested or acquisitions.
Our cost structure is improving and we expect it will continue to improve through this coming fiscal year as a result of our successful integrations.
Realizing efficiencies and of course economies of scale.
Pulpit 19 has accelerated the cannabis industry consolidation and therefore, its evolution into more enterprise tier businesses at the.
At the peak of the crisis canvas companies lost on average, 75% to 90% of their value with smaller companies experiencing disproportional impact yet sales are up across the industry, 78% year over year as the number of legal cannabis consumers increase.
Yes.
Governments have taken notice of this and they're now 12, new pending state ballot initiatives up for vote in November.
[laughter] the most since our last presidential election year, and 2016 win eight of nine measures passed.
More governments are looking at cannabis Legalisation just work their balance sheets, the tax revenue and to create jobs.
We built a corner for this moment.
Over the last year, the infrastructure improvements, we've made and the acquisitions Weve closed and continue to pursue position current it to be one of the biggest Canada's technology winners as legalisation expands to new states.
The operators the emerging industry leaders and enterprise businesses, whose values have now doubled or tripled off their bottom are just now beginning to establish their market dominance and will only continue to expand.
We anticipated and prepared for this emergence of enterprise level operators and it is why years ago, we strategically prioritize investing for the future by building in J. platform with its micro services based enterprise Architected infrastructure.
This infrastructure as a service.
Has allowed us to create a true ecosystem.
Over 80 integrated products and more than a dozen strategic partners that make us stickier and help us maximize wallet share.
Our enterprise infrastructure has enabled integrations with large scale ERP cloud based solutions like net suite page intact and S&P.
When we see an end to the current federal state conflict.
You could come as early as the end of this year with potential passage of the more act following the presidential election, we.
We've positioned ourselves to the large ERP players don't go around us.
Instead, they rely on a current as their channel and they become a larger akorn a client reliant on our compliance based ecosystem to rapidly penetrate the market with our kind of a specific solution.
As we've grown and strategically prepared for the enterprise evolution of the industry and progressed with these important software integrations we.
We have continued to serve many of the industries.
Mid market and small businesses.
A natural maturity of the industry.
These smallest businesses may contract.
Consolidate or be acquired to become part of the enterprise businesses, we are best positioned to serve.
We track our growth trajectory with what we consider to be the client base of the future and we are.
We are pleased to report our year over year transaction numbers are up more than 50% in both number of transactions and amount spent among this client base.
With the acquisition of ample organics now complete we have.
We have further solidified our capacity to support enterprise businesses in both the Canadian and U.S. markets. After Yeah, Aurora Kronos group organic Ram and several other large Canadian enterprises currently run their businesses using the ample c. difficile software and are continuing to expand their growth.
Into new international markets.
Oh fiscal year also marked our first contract for our.
For our next generation these data systems in Utah, combining NJ platforms close loop compliance technology with our solo Tac the world's first cryptographically secure Canada's product authentication system Ics.
Exclusively for governments and only available with these data.
This alternative to expensive RF I'd tags is cheaper more secure and more flexible for diverse packaging application.
We believe our competitive positioning and cost structure for future government track and trace contract opportunities is extremely strong.
And we're now wrapping up our first quarter of 2021.
I think so I did about our start to the new year.
With the successful integration of our acquisitions, we haven't.
We have improved our cost structure and achieved larger scale positioning us to capture even greater market share moving forward is the only scale technology provider to the industry.
With this in mind I'm excited about the new developments, we have in our pipeline and I want to share more about those with you today.
In partnership with business intelligence from Docomo, We recently announced the release of M J analytics.
Gee analytics offers a suite of enterprise level data tools, providing users with unparalleled access and insight into the cannabis supply chain from sea to sale.
Towards the end of August we announced an agreement with priority technology holdings to integrate their traditional payment processing solutions into MJ platform now.
NASDAQ listed priority is a leading provider of traditional merchant processing solution.
This integration makes it possible for the C D and have retailers that use them Jay platform to process credit card payments a C. H card not present recurring payments.
And automatically facilitates credit card information updates.
End users can enroll and use priorities payment processing, which.
Without having to leave and Jay platform transforming the future of payment transactions in a digital economy.
This positions us to activate additional payment solutions through priority for traditional Canada sales pending.
Pending legislative action at the federal level and to bring a seamless payment and revenue activation experience to the <unk> and Canada as an industry.
As part of this agreement a corner and priority will share in the transactional payment processing revenue.
We expect to become a meaningful revenue generating line item for Corning as existing and future CBD and have operator clients look for traditional payment processing solutions.
We expect even more significant revenue generated through payment processing for cannabis operators following federal legislative change.
According to bright feel group.
You S. C. D market sales are expected to reach $4.7 billion in 2020, representing a year over year growth of 14%.
As one of the few companies offering merchant processing, specifically for the CBD industry, a corona is well positioned to expand its client base and carve out a significant stake in the market.
Our data shows consumer preference for an in store shopping experience as both delivery and curbside orders have declined more than 50% from their highs in the spring in favor of in store orders as covenant team restrictions continue to ease and economies reopen.
The demand for customized point of sale retail solutions has prompted our focus on innovative improvements to our retail offerings in the coming months.
Our initiative is designed to provide merchants and consumers with a flexible.
Mobile friendly experience, we're transactions can be completed at any time throughout the retail experience on any iOS or Android device, we play.
We plan a proprietary software technology underpinned by MJ platforms backend infrastructure.
Including our compliance bus an ecosystem of integration.
Our retail solution will accelerate and streamline the checkout process, both in store and remotely providing the gateway to smooth customer experience and store conversions, while we maintain leading trace ability via the EMG platform <unk> when.
When permitted payment processing will flow seamlessly through the retail experience.
Finally, I'd like to remind everyone of our ecosystem strategy encompassing integrations strategic partnerships and acquisitions. This.
This strategy is built around solidification of our position essential technology infrastructure for the Canada supply chain.
We target acquisition in three categories competitors product tuck ins and Tam expanding technology.
Our first three acquisitions would you complete an operationally integrated are examples of each target category.
As we look ahead, our pipeline is similarly distributed and we look forward to sharing more details for progress in the near future.
Always with an eye toward expanding set of opportunities that are unlocked with the coming legislative changes.
Before I turn this conversation over to our CFO John Sal.
Who'll provide a more detailed overview of our year end financials.
I want to underscore the opportunity and growth we expect following the November U.S. presidential election.
So we can only make predictions at present, many federal and state governments are looking for options to address substantial budgetary deficits close economic gaps and create jobs.
In addition to the 12 state ballot measures already pending many.
Many states and countries are also weighing the legalization of canvas be a legislative means.
Federally President Trump has publicly endorsed States Act.
Widen Harris is favorable to legalization and currently pending in Congress are both at the safe and more acts.
These ballot and potential legislative measures present.
Transformational growth opportunities for our current <unk> in 2021.
Taking stock of where we are today rather.
Revenue was up our refi.
Our recent acquisitions have expanded our client reach our.
Our ecosystem pipeline is full.
And we are ideally positioned to capitalize on the tremendous opportunities the coming legislative changes will unlock.
Now lets have drawn to this through our financial results details.
Take it away John.
Thank you Jessica and good morning, everyone today ill provide an overview of our financial results and key business metrics for the quarter and fiscal year ended June 32020.
As a reminder, these results are discussed in further detail in our form 10-K, which will be filed next week with the FCC, but.
Financial results reported today are preliminary final financial results and other disclosures will be reported in our annual report on form 10-K for the year ended June 32020, and may differ materially from the results and disclosure today due to among other things. The completion of final review procedures. The occurrence of subsequent events or the discovery of.
Additional information we encourage you to review the filing.
As I've shared before and I'll share again. This school year 2020 can be characterized as a period of having made meaningful progress on our key initiative of building scale developing or software ecosystem, while continuing to focus on client experience. We delivered growth in total revenue of 16% and software revenue of 20.
1% for the year ended June 2020, and we continue to experience accelerating market demand.
We continue to invest in initiatives to build scale fuel long term growth and new customer acquisition.
In our Q3 earnings call, we reported new or bookings of approximately $1 million.
This past quarter. The momentum continued despite impact from covert 19, as we recorded $1.2 million of new air or bookings.
We continue to have a strong pipeline heading into this current fiscal year and the continued momentum further demonstrates the strength of our industry.
Additionally, our platform engagement continues to grow and reached new Heights. Your over your retail order volume has grown by 125% and retail order value is up by 128% Likewise, our year over year platform transaction volume has increased 70%.
Oh for our cost structure in our last earnings call. We you know the small restructuring as part of our transformation into a leaner more focused enterprise following our acquisition of Amp organics, we executed on phase two of that initiative delivering another two to 3 million of annual savings.
Let's turn to our financial results.
Our fourth quarter and fiscal year 2020 results were highlighted by solid sales execution and continued market demand.
In the fourth quarter total revenue declined 17% to 3 million a decrease driven entirely by a decline in our consulting revenue related to delays associated with Kobe team for the year. Our total revenue grew 16% to 12.6 million.
With regards to software revenue in the fourth quarter software revenue grew 36% to $2.8 million for the year. Our software revenue grew 21% to 10 million the growth in the quarter and for the year was once again driven by increased demand from both new and existing customers combined with strong sales execution across channels.
We continue to invest in a variety of client programs and initiatives together with increasing adoption help help keep our attrition rates consistent compared to prior periods.
For the year ending June 2020, our consulting revenue grew 3% to 2.4 million year over year, our consulting revenue increased despite a 91% decline in the fourth quarter to approximately 100000.
For comparison or consulting revenue for the fourth quarter of 2019 with 1.5 million.
Consulting revenue in the quarter was significantly impacted by the cobot 19, pandemic unrelated shutdown, which created delays in the delivery of our consulting services. However.
However, as Jessica mentioned, there are 12, new about initiatives to adopt medical or adult use cannabis set for the November election, we expect despite the slowing of our consulting activity experienced during the pandemic, we will see increased demand for our services following the election.
Gross profit was $1.2 million in the fourth quarter, representing a 39% gross margin. This compares with gross profit of 2.5 million and the 70% gross margin in the same period last year.
The decline in gross margin is directly tied to the loss of consulting revenue in the quarter as the cost of sales for our consulting practice is largely fixed.
For the year, our gross profit was 6.4 million, representing a 51% gross margin again, our full year gross margin impacted by revenue delays associated with Kobe team.
Moving on to operating expenses in the fourth quarter, a total operating expenses declined 12% to 7.4 million, partially a result of actions we have undertaken to become a leaner more focused organization for the year.
For the year or total operating expenses increased 26% to 23.6 million.
The increased level of operating expenses for the year ended June 2020, compared to 2019 was the result of our being a public company for the full year compared to 2019 and include investments made in personnel technology and other infrastructure as we continue to position ourselves for growth and transactional costs associated with acquisitions.
Financing activities.
In the fourth quarter, our research and development expenses declined 57% to 1.1 million for the year, Our research and development expense declined 42% to 3.2 million. It's important to note prior to the fiscal year ended June 32020, we expensed all costs associated with our development activities.
In fiscal year 2020, we began to capitalized costs associated with implementation and product enhancements when they can be distinguished from maintenance cost as of June 32020, we have capitalized approximately 2.6 million of software development costs, we continue to invest in new product content and features to drive.
Sales growth efficiency and increase our competitive moat, we expect to continue to capitalize a portion of our development cost in the future.
In the fourth quarter, our sales and marketing expense declined to 35% to 2.1 million for the year, our sales and marketing expenses increased 4% to 7.8 million.
Our sales and marketing expense was essentially flat year over year during the past quarter. We have built a more focused targeted sales organization. We're pleased with our sales and marketing efficiency as we continue to deliver a near record level of new business.
In the fourth quarter, our general and administrative expense increased 20% to 3.1 million for the year, our general and administrative expense increased 101% to 11.3 million.
The increase year over year in both the quarter and full year are result of a number of factors, including costs associated with being a public company investments made to position ourselves for growth acquisition related expenses and cost associated with capital markets transaction.
In the fourth quarter, our operating loss increased 6% to 6.2 million and for the year, our operating loss increased 38% to 17.3 million.
In the fourth quarter, our net loss per share was 36 cents, a 59% improvement year over year and for the year, our net loss per share was $1.31, a 36% improvement year over year.
With the release of our 10-K, we're now reporting non-GAAP metrics, specifically adjusted EBITDA, we define adjusted EBITDA as operating loss before depreciation and amortization non cash expenses, such as stock compensation and nonrecurring items, such as costs incurred for business combination debt issuance cost and restart.
Sure and cost.
Adjusted EBITDA as reconciled to our GAAP results in the earnings press release that was issued before this call and is available on our website.
In the fourth quarter, our adjusted EBITDA was negative 3.6 million compared with negative $1.5 million for the quarter ended June 32019, and for the year. Our adjusted EBITDA was negative 11.5 million compared with negative 7.3 million for the prior year.
As of June 32020, we had cash of approximately 24.2 million.
We had a working capital balance of approximately $16 million as of June 32020, as compared to 21.8 million as of June 32018.
Cash on hand, and access to the capital markets positions us well to execute on our strategy, which is a significant advantage over many of our key competitors. We expect continued improvement in our financial performance as we continue to scale and drive towards profitability.
In terms of the impact of Covance 19, we all realize that there are near term macroeconomic uncertainties. We are working to understand how this may impact our business long term and recognize that this is a dynamic situation that we're monitoring closely however, as Jessica commented earlier, we are pleased to see cannabis prove its economic resilience.
[music].
In closing as we reflect back on this past year, we've focused internally on developing the infrastructure of a public company and on making internal investments to drive scale and efficiency as we prepare for accelerating growth. While we have leaner operations in some respects, we've invested in others, including the capacity and security of our.
At work in content product development product marketing and product management or.
Our team is laser focused on delivering a shared services operating framework across the company, resulting in the current <unk>, becoming a lean and focused organization with the human capital and financial resources to execute our organic and inorganic growth strategy. We are keenly focused on our performance and committed to delivering efficiencies across the.
Income statement.
This concludes our prepared remarks, we will be happy to take any questions. You may have please keep in mind that the forward looking disclaimer discussed at the beginning of this call applies equally to the Q and a session. Operator, please open the phone line.
Thank you at this time, we'll be conducting a question and answer session. If you have to ask.
Would you like to ask a question today. Please press star one from your telephone keypad and the confirmation tone indicate your line is in the question queue.
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Just one sort of using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we assemble the queue.
Thank you all right.
Our first question is coming from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.
Hi, Good morning, guys. Thanks for taking my questions.
Good morning, Brian.
We enjoy Scott as it relates to price the priority partnership will you be installing the priority holdings payments technology, and all CBD in home customers for free and how long will that take and then one more question on that can you quantify a rough estimate of the retail value of CBD in Hampstead, who sold through your operators.
And your platform last year.
Oh good questions.
So in answer to the first question, whether we'll be we'll certainly make it available that traditional merchant processing you do have to actually go through a process to find out so as to we won't we won't be able to automatically turn it on for existing customers, but we'll certainly make it available to all existing customers and of course.
Offer it and as part of an initial package, but would you know I'd likely different discounts and pricing to a prospective Hampton CD customers.
As to how much we <unk>, we we did last year and I have to get back to you on that one.
We are continuing to rapidly grow in the Hamptons CBD area and I I'm, not I'm, not sure which would be the right benchmark to use I I know, we put out a flash report about as a little while ago. So I'll have to get that number and get back to you.
I guess another way to ask when you when you.
Here from your customers in the few weeks that you had this priority announcement out do you anticipate that the majority of your customers, telling you see being him are going to adopt this technology, making it easier for them.
Oh I'm, sorry can you ask that one more time, Brian I'm just wondering what your install base you know into communication you had since the announcement you nor are you feeling confident that most of them were wanting to adopt this technology.
So for most of our existing customers and clients there they're solving this in some way in order to be open and collect payments. So they are they either have a they've adopted some cannabis specific closed loop type.
Technology or system and its something that that allows the ability to take payments or they've got a debit card only solution or a cash solution. So for most of them. If they have solved this in some way we will certainly though.
I have a campaign into our existing client base regarding the value and the value proposition of having traditional merchant processing like that but I don't expect to see a massive immediate conversion I would look for that to be a little more slope going and rolling over the coming months Uh huh.
As we certainly package it with any any new clients and prospects as.
As an option right.
Great and then you talked about delays in the consulting part it's good it's in the June quarter can you talk about how consulting is it all has bounced back as we're almost through the first quarter has it been gradual hasn't happened at all have you returned back to where you know previous levels.
Sure. So we were certainly seeing eye.
We're certainly seeing delivery and states picked back up into this quarter I don't want to say too much more as we.
We haven't put out any guidance for this out there and we're certainly seeing more of a return to normalcy and and and also at quite an uptick in inbound from state and and areas that are that are looking to cannabis two as a an economic driver or something.
For creating jobs tax revenue and convert and especially in the the downturn that we've seen in the economy. So we're seeing actually quite a lot I coming through the funnel and certainly starting to see some recovery.
Great and then bookings it was great to see continued improvement in June quarter, that's quite dated so as the economy has opened up during the last few months are you.
Are you seeing bookings accelerate from there in the September quarter are you do you think that is you know there will be a tough comp this last quarter or two to be able to exceed maybe.
Maybe some sense of how current bookings run going as the economy opens.
So our current bookings for consultant, specifically or for our no further overall actually I'm sorry.
We are very consistent in our b to B software bookings and those bookings have continued through some of the downturn in.
Go ahead.
And also we've continued to see that just in a very very steady way so age that in our south engine. The bookings just continue we did see also some implementation delays I'm more minor, but we certainly saw some implementation delays effect. The some of the RAC revenue recognition of our study.
And continued software bookings.
The backlog is starting to it.
Go live and we're able to begin to recognize those revenues as well. So I don't I don't think there's more to say to that other than it's we just have a very steady pipeline that has continued through.
Yeah in the last two quarters ever reported your bookings were more than twice.
The first and the second quarter are you is this a function a winning more deals.
Average contract size is much larger I take it it may be some combination, but which is weighing more on the stronger bookings.
So.
And as I think about some of the the bookings that perhaps go have a we call. It a a trigger date go lives Weve had some larger sign ups from some larger operators that may.
Onboard part of their operation in month, one another part in months to another part in month, three and so we're certainly seeing some of that impact as I mentioned in the prepared remarks of as it continued push toward the enterprise here of businesses.
And that's reflected in our bookings and in some of the the timeline I for recognizing those.
Great and then lastly can you comment on the Canadian market and that market has become a little bit stagnant.
You know when might you expect that market will strengthen for a corner and ample organics.
So certainly we have seen a that health Canada has issued very few new licenses since the start of covered earlier this year and and provinces and territories have been equally on ice I with issuing some of their retail adult use licenses. However.
We are certainly seeing and hearing at least I had some of the province, as announcing and beginning to open up that.
Open up that final again, and we do expect as some some really nice growth opportunity north of the border there are.
There are there's cross sell opportunity and that the the historic ample organics software suite is I have a point of sale component I'm not a one of our our strongest module in M.J. platform. So there is a really nice cross sell opportunity there and also where we're getting a lot of interest in our.
Our integration to a traditional accounting and tax providers like stage Netsuite an ethic. He added net suite in particular is only open for sale in Canada.
Currently what Canada and outside of the U.S.
Great. Thank you thanks for taking my questions.
Thank you so much.
Thank you. Our next question is from the line of Marty Toner with ATP capital markets. Please proceed with your question.
Hi, Good morning, guys. Thanks, very much for taking my question.
And you can be.
Can you tell us how much revenue or how much of software revenue came from acquisition and.
In the quarter.
So John do you want to take that one.
John are you on mute.
Sorry, I was here sorry about that folks good morning, Martin Thanks for the thanks for the question.
The last either through June 30, we completed two acquisitions, so low and trellis troll. This trial. This was closed in mid April and.
And contributed probably a couple hundred thousand dollars to a to the topline numbers, though so really not a material amount to affect our overall results for software for the for the period ended June.
Okay, great and what well be a lockup consulting revenue this quarter I mean for a software revenue going forward will there be a bit of a hiccup given the delay in bringing new customers online and then when did that disruption and.
So to your first point I don't think it should ER I'm happy to take that Jessica I'm sure I don't think the consulting revenue will have too much of an impact on our software. It's certainly a nice leading indicator and becomes a funnel for software, but as Jessica commented a moment ago. We continue to have strong bookings for the core I'm Jay plot.
For him and certainly this is sort of a a unique time in the world really and the consulting blip it certainly.
A part of that you know I think.
The disruption to the to the question asked earlier you know, we're starting to see software back or sorry, our consulting practice come back it's not as strong of course as it used to be but but it is trending back in the right direction and I think we'll have some positive momentum after the election.
Right and is it pretty easy to kind of catch up with the sort of some pent up demand.
It's based on like the resources you up.
I would certainly hope so you know, we're we're certainly not banking on that as being sort of the the magic bullet, but it's certainly something we look towards as an opportunity for us to capitalize on the early part a part of 21 and and our certainly prepared for that for that are you know for that growth opportunity as Jessica said, we're starting to get.
Some nice inbound that are giving us good leading indication that that's that's sort of something to come.
Great and.
Could you give us a little update on the ample business I'm just wondering.
Can you give us any color on you know if there's the rate of growth or has there been any customer churn.
That kind of thing.
Jeff do you want to talk to that more strategically whats going on in Canada there.
Sure So <unk>.
Hey, Hi, Martin as I was mentioning to to Brian <unk>.
Health, Canada has issued very few new licenses this year really since it started a covert and the the provinces and territories have also been on a very very slow roll and focused on on the pandemic.
Rather than moving and rolling out some of their additional adult use licenses that is starting to modestly begin to increase or the degree. It is is that the the ample business has <unk> very very sticky enterprise clients that have are or how are we.
Well suited to to weather the storm and are great additions to our portfolio as large enterprise clients and so the the revenues very very stable and we do expect now that's the the the economic and risk some of the covered restrictions are starting to ease for that license.
So to add to uptick again and also for us to have that great Cross sell opportunity, which was one of the most compelling thinks about the acquisition for US was this ability to sell retail into their client base and also Ah, there's and I have a really great I pieces to the ample.
Technology, as well, particularly a very robust pharmacy module and some insurance adjudication that they constructed.
That's great. Thank you and so.
And has there been any notable.
Churn.
Well you know certainly certainly we have had a downturn I mean, that's always a part of having a a software business. There there are.
But I would say that that what we've seen has been in line with historical patterns pretty much across our businesses and and as I mentioned in my prepared marks a bit of disproportional impact in the the small smallest and and mostly capitalized.
Our client base.
Super Thank you.
[noise] couple of other questions.
When will the one of the analytics module the.
[noise] begin to be sold.
We are taking that sales for that now and getting some really great.
Feedback from our clients, who are using it and and really really excited about and our partnership with Elmo, Darren and continuing to to market that.
Great and.
Well that I'm proud to come at a boat at a similar gross margin of software.
Well all additive software revenue it does it most of that doesn't change your underlying cost structure. So any new module that we can sell into our existing client base that provides a that provides and of course good software provides more value than a cost.
All of that it is additive and begins to continue to improve your gross margin over time.
Okay did you add anything to that John.
No I would agree I mean like you said most of our costs cost of sales today are largely fixed for an enterprise of our size the real marginal cost for new business, whether it's our core platform or or the Docomo component is the marginal cost is de minimis and so there is a really nice margin for every new piece of business we had.
Okay, great. Thanks, and bad debt level went up in Ah. This year, let me comment on on the driver there if you think that'll keep.
Keep going up going forward.
Yeah, I'm I'm happy to comment on that so it's a great question excuse me.
Excuse me.
This this past year I think we've seen a real transformation in our sales work and we are focused on better clients better deals better structures et cetera, and sort of were washing through that I think today and and that's why I think we're starting to see really strong results in our bookings number these are better bookings more quality clients and so.
I think like any company there comes a point when you need to pivot and shift and then this was a big year for US no doubt and we're really excited about where we're going with sort of how we are addressing our new clients and you know our chief commercial officer has done a fantastic job sort of restructuring the sales, Oregon, and really focusing on quality clients quality markets.
Where can we succeed et cetera, and I think you know that that is something we're laser focused on as an organization is is it sort of that concept and the around retention and customers and so forth in the last three to six months, we're starting to see those metrics really change in a favorable direction and I think it's all a result of this dramatic shift in the profile.
And sort of the service level of our customers. So I would expect that and you know over the next quarters in the year that we'll see that number dramatically improved.
Super Thank you very much and I.
I know you're not giving any guidance correct just want to make sure I didn't miss it that's correct. We don't publish really any formal guidance correct. Okay Super Thank you.
<unk>.
Great. Thank you.
The next question is from the line of Alan proxy was new candidates ventures. Please proceed with your question.
Hey, Thanks for taking my questions reversals on social Sciences, you guys Whoops, Alex Oh.
How do you see to your role into social Sciences, I thought maybe that was just you all that business was picking up there but wasn't broken.
It wasn't broken out I'm just curious if you can break out approximately what solar plant was and also how much of that if any is coming from campus.
Sure Good question, Alan at AG and mining.
So.
It really solo is about gaining these large channel partners and distributor contracts and then we recognize that revenue more slowly over time.
Vast majority of solo revenue is related to cannabis either through the the solo tag governments attacking option I think we have installed and in Utah or.
Or through the solo code, which is the the product available to the brands have we do have some excellent.
A large partners the Muslim we've been now touches 14th round.
<unk>, which gives us.
Okay access to to over 40% of the California Vaporizer market through channel partners such as that.
But really it's a it's a play to get in and then too.
To see some nice revenue overtime from it.
So let me ask it another way.
Just based on that moved it seemed like he knows what side are you getting some traction and do you have a sales pipeline in terms of these channel partners will slow so weve got outside of cannabis.
We are we are very excited there are some opportunities and some some meaningful opportunities outside of Canada.
One in particular that I have spent some some time and discussion on with some prospects has the potential to <unk>.
To use the solo anti counterfeit tags on personal protective equipment, which has been a big discussion area. During the pandemic I, but it has been more Ah. We certainly have seen even more pipeline I would say in cannabis and and really expect to see some of our brand partners.
Who have said there's still a code in place began to promote that more to their consumer base as well. So they'll look for look for some more from us on that front over the next few months.
Okay. Last question is just one of the skate business. It seems like Ah, Yes, I just don't want your tall, but it's been a while since you've won in either.
Other states do you expect this to be a big part of your business is an important you'll be wall school or.
Well, we certainly like our prospects with solo tag compared to expense of our Friday tags, which are in place and in many stat states and the the tagging method of choice.
Some from our largest competitor in that arena as we went after solo and an after the silver tag technology, specifically to have a less expenses and better options for state contracts and governments and and I can tell you that that we'd have that that our conversation.
With some of these as states have been extremely positive. So we may not that there haven't been many contracts that has I've been up for bid over the past year, we're certainly going to see an uptick as we see it.
As he focuses began to shift and more passage of some ballot measures hopefully in November and additional legislative initiatives and that many of which are are up as well some of those ballot measures.
Measures have already kicked to legislative initiatives.
And all of that though results and demand for track and trace is as well as he can still tracking.
Okay. My next question is on Canada. They will impose focus really just on the Lps are obviously, you've got retail market is developing rather rapidly well and I know that you guys are <unk>. Okay. Do you have any retail business or.
Oh and cumulative.
Still appealing do we do.
We do we do.
We do we have some retail business in Canada, and we have a integrated our sales and marketing into a shared service in a corner and our AR and we're seeing some some business up tick there and for energy platform sounds could fall into Canada.
Okay, and I know you haven't filed the 10-K, yet lost when I asked about is it possible to give any sort of break down or oh, the amount of business.
Oh, the amount of business, you're drawing corporate business, you're doing with your Misos I don't know if you have that you plan, yet, but I just wanted to follow up.
Putting more request and see if you can answer at this point.
In terms of not just necessarily just breaking.
Just breaking out Kramer your software revenue by type of quiet beyond.
Beyond just Canadian mill.
Large small.
Sure John do you want to just speak generally to some of the and I know some we were able to to publishing or our press release some of the non-GAAP <unk> metrics that you've worked to publish with your team.
Yeah, I'll comment briefly I think you know I think the.
You know I think the best way to answer that is we don't have a significant concentration of revenue really with any customer with any particular customer stream. You know you asked about weve data and in M.G. I mean, I think we've got sort of a nice blended mix you know, we certainly have relationships with the big Invesco's that are certainly important partners for us.
You know, but then we've got you know your average size and certainly small so weve got clients that our 10th.
$10000 year on revenue and we have clients that are in the hundred thousand dollar of your revenue. So I would the best way I think to answer that is we don't necessarily have a strong concentration in one area. I think we have a nice sort of de risk distribution of our revenue stream.
Okay, and then lastly, you guys did provide guidance in the past and I'm sure that you don't want to provide it today, but no clearly a lot of factors result, I mean youre dialing it was provided for California you are.
2020, I assume then Oh.
And we're.
When will you feel comfortable giving guidance again, what are the factors that are well you gave it won't pass a lot given low.
Curious what it would take to get make you confident enough to be able to provide guidance.
Well I think your I've a couple pieces there Alan so so at first as a company and we have generally not provided <unk> guidance I certainly I know we have in association with some of our transactions. We've we've published the numbers.
Those can change of course dramatically not just with us, but potentially with the acquiring company and <unk> and we're really looking to we've we've made three significant acquisitions weve integrated those and we're going to continue to track our revenue and sure that we're continuing to grow and we'll evaluate items at a future date.
Okay. So is colgate when they walk away I'm, just wondering because when you bought if older wasn't duck and there were numbers that were forward locals. So.
Just wondering is it just cold or is there another factor.
Yeah, Okay, all coming here I mean, Alan I think it's a great question, we get that quite frankly, I think there's a few ways to answer a covert is really not a factor in the ability to provide guidance you know I think it comes down to a number of things certainly like Jessica said when you go through the acquisition stream and we're in that sort of emerging growth phase.
It's really difficult to provide guidance, it's not a function of we want to beat it or not he did is we really want to make sure if we're giving something to the investors.
If it's meaningful and its valuable I think really the the the the message I would share is sort of how we see our business. You know, we we think of ourselves as a traditional SaaS company and so we are going to target those traditional soft growth rate, 25% to 30% organic growth investments in growth that expands our margin you know we're certainly <unk>.
Targeting 65, 70% gross margin profile in the years ahead, and then certainly is getting to that EBITDA positive scenario and so that's how I would sort of a line at how we think about our business and developing growth strategies. You know, we're we're we're sort of in that in that I guess sphere.
Okay. Thanks, a lot good luck here what else did this quarter.
Reported a hearing in November thank you.
Thanks Alan.
The next question is from the line of Scott Fortune with Roth Capital Partners. Please proceed with your question.
Thank you and thank you for taking the questions a lot of them have been answered, but real quickly can you kind of touch base on the M&A environment through 2021 kind of what you what you're looking at I know you have the three pillars that you're looking for strategically but from a valuation standpoint are you going to see more consolidation in the space. How are you. How are you guys looking.
We're seeing the M&A environment for you guys.
Well I can tell you that our pipeline is very strong with acquisitions and and or partnerships, adding to our ecosystem strategy in each of those categories to the Tam expanding a competitor on market share and.
And and product tuck in or bolt on it.
And it's been.
It's been a time of economic challenge and then time of economic challenge for for cannabis businesses. As you know, there's still not recover to where they were a in terms of market cap market capitalization, and you're a year ago and and so there's a lot of opportunity for us capital husband more scarce and the private.
Markets and we will certainly be opportunistic in each of those categories. Oh, Although also of course very strongly focused on growing our our core organic business focusing on our infrastructure as a service with <unk>.
The acquisitions that we've acquired tying them into our ecosystem and really seeing that the network in a value effects of that.
Okay No I appreciate the color. Thanks, that's it for me.
Thank you.
So I'll turn it over back to just sort of your billing for closing comments.
Hi, Thank you operator.
We continue to do what we say, we're going to do we create trust between product creators and product consumers our ecosystem strategy and strategic investments are focused on locking up the techxtend the enterprise candidates businesses and solving with technology, the growing demand for increased supply chain transparency.
Among consumers and government you can depend on us to continue to execute we believe our greatest opportunities. They just ahead.
Thank you for your continued support we look forward to sharing our continuing progress with you in the future.
This concludes occur in this conference call. Thank you and have a great day.