Q1 2021 Akerna Corp Earnings Call
[music].
Morning, and welcome to <unk> first quarter ended September 32020, <unk> financial results Conference call.
Today's call is being recorded.
All lines have been placed on mute.
I'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.
At this time I would like to turn the conference over to Christian.
<unk> branch reductions in a reading of the Safe Harbor statement. Please go ahead, Chris. Thank you and welcome to the day quarter ended September 30, 2020 conference call.
Does that mean the companies today are just good billingsley yield occurring on a John Sal.
Yeah, so have occurred.
It will be available for questions during the Q and a portion of today's call.
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 provision.
Oh, the United States Private Securities Litigation Reform Act like pull all besides work.
Words, such as estimate projected.
Okay anticipate four cats play on the importance of being you see.
May well should.
Future propose and variations of these words or similar expressions or the negative version 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 prospects for Akorn up and statements regarding.
And expected future revenue recognition.
These forward looking statements are not guarantees of.
He kept performance condition 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.
Really from those discussed in the forward looking statements, including rest related to changes in the candidates markets and risks related to the impact of the COVID-19 crisis.
These risk factors are more fully discussed in occur in its filings with the securities and Exchange Commission.
Forward looking statements speak only as the date they are made occurring.
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 attorney CEO, just philosophically for more in depth discussion of the company's quarter ended September 32.
2020, Jessica.
Thank you Christian good morning, everyone. Thank.
Thank you for joining us and we welcome you to our conference call for the quarter ended September 32020.
A calendar year comes to a close I'd like to take a moment to reflect on all weve accomplished this quarter.
First let me begin by addressing.
[laughter] collection, we have just witness.
A total of seven ballot measures in five states, we're up for a vote this past election.
Every single state of truth, there can't as measured by wide margins and the only measure so it did not pass for those competing with other cannabis ballot initiatives.
We now have.
Before new adult use candidates markets to new medical markets and far more opportunity for the cannabis industry in Canada. This technology solution base.
Based on existing adult use and medical markets. We estimate these ballot measures passing represent approximately 18 million in new total addressable market for our software offerings.
In addition to the states that just passed a ballot measure there are many more state governments pending legislative initiatives as they look for ways to generate jobs and tax revenue.
We're delighted to see the cannabis industry, playing a role in helping these seats generate new revenue streams.
We also look for trust.
Seeing clients in these states game licensure as we Didnt know, Iowa, where 100% of the medical cannabis dispensary licenses for awarded MJ freeway consulting clients.
We are pleased to report in this quarter, our total revenue increased 16% compared to the same period last year to 3.7 million.
Just.
We are on track to deliver strong year over year suffer growth in excess of 30%.
Our software revenue increased 40% on a year over year basis.
Our total SAS air ours, currently 14.1 million a 44% increase over the same time last year.
These strong gains.
<unk> software offset declines in our consulting revenue.
As I noted several months ago, and our annual earnings call remarks, narrowing our focus to client experience has increased our market share among the multi state international and emerging enterprises in the 17 billion dollar global cannabis industry.
Further.
Illustrating the value of our technology to the important Midmarket and enterprise client base. Our average MJ platform deal size has also increased by 94% year over year.
On average M.J. platform clients number of transactions tracked in our system.
<unk> also increased.
By 180% year over year drew out 2020.
We have doubled down on our existing client partnerships and both our client and product experience, ensuring we are as sticky as possible with our rapidly consolidating and.
And client base.
Our retention rates and improved significantly.
NJ platform delivered 99.99% uptime, and our average client satisfaction rating across all products cheats seven on a scale of one to 10.
2020 has been a banner year for the candidates and.
Larry product demand continues to grow with consumer sales, increasing nearly 80% year over year nearly every state and country has declared access to cannabis essential with new technologies employed silicate digital sales channels.
Direct to consumer delivery and curbside pickup.
Just the industry's growth has enabled us to continue to pursue our strategic objectives.
In a time when investment capital is scarce among many sectors occur to successfully close to $12 million public offering which positions us to capitalize on the enormous market share opportunity in newly opened in Canada.
<unk> in New Jersey, Arizona, Montana, South Dakota in Mississippi.
The pro forma $23 million in cash and a strong balance sheet, we are well capitalized to deliver top line growth and drive towards profitability.
In addition to the public offering we also announced a series.
March dziedzic partnerships and acquisitions that will boost our revenue growth and expand our market share gains across the industry.
As Canada its industry, leading seed to sale platform, we enjoy a majority market share and serve some of the world's largest brands, including Afriad Aurora Kronos group organic Ram and seven.
No other large Canadian enterprise businesses.
After closing our ample acquisition in early July we fast tracked our efforts to fully integrate ample into our business.
Under the leadership of Tom Ritchie ample organics precedent the pace of integration has accelerated bringing the business unit.
Turning to cash flow neutral ahead of schedule.
We are now aligned and focused on revenue opportunities in.
In addition to the compelling opportunity to sell our retail offerings as provinces and territories continue to issue new licenses for adult use there is a significant opportunity to sell the qurna ecosystems G.
MP and accounting system integrations with Sage intact, net suite and Sep into our significant Canadian enterprise operator base we.
We will also be pursuing opportunities to leverage our pharmacy specific functionality in the U.S.
In August.
We signed an agreement with priority technology holdings to provide CBD and help retailers that use a current as point of sale products with credit card payment processing.
Through our agreement with priority technology hemp in CBD brands now have a traditional credit card processing solution that is both affordable and seamless.
Got it integrates with the rest of your current ecosystem.
With this agreement we are positioned to also after the payment solutions through priority for medical and adult use Canada sales pending legislative action at the federal level.
This quarter marks the launch of them Jay retail a first of its kind proprietary.
Buffer technology designed to provide merchants and consumers with a flexible and mobile friendly experience.
Cinryze businesses are often faced with the choice of using an underpowered, but easy to use system or one that is fully featured and require sufficient training.
Im Jay retail represents the best of both worlds.
By offering a clean and lightweight point of sale solution that connects via current ecosystem without sacrificing critical features m.
Jim Jaye retail positions us for even more robust growth among retail Canada's operators, where we can capture even more potential payment transaction volume post.
Federal change.
As our Midmarket and enterprise clients increasingly focus on their competitive positioning and business fundamentals, we partnered with the leading business intelligence from Docomo to release. The next generation of Canada's data analysis MJ analytics.
Averaging down those cloud based intelligent systems MJ analytics helps operators run their business by empowering users to perform self serve analytics on fresh data it can drive everyday decision.
As our existing clients upgrades MJ analytics. This represents as much as 25.
Well, that's an upsell revenue across our B to B software suite.
Before I hand things over to John.
You just once again highlight the opportunities opened by the election, despite a tight presidential election cannabis once again proves to be a bipartisan issue that unites our fellow America.
Americans five states voted on Canada's reform and all five easily passed their respective measures.
We now have four adult use cannabis States, New Jersey, Montana, South Dakota, and Arizona. We're also proud to welcome Mississippi as the newest medical cannabis states, bringing the total medical only.
The states to 35.
These new states represent as much as 18 million and new available total addressable market for our products and services.
Once again proving to be more popular than either presidential candidate cannabis reform has a clear and unambiguous national mandate one.
Out of three Americans now live in states for adult use cannabis is legal and many more live in states for medical cannabis is legal.
With the election in our rearview mirror, we now look forward to federal cannabis reform, which opens new revenue streams opportunities representing orders.
On the magnitude increase from where we are today as we can begin to monetize based on transaction volumes.
All of our work and achievements to date have positioned us.
For the inflection point of view us federal legalization.
Now lets have John take us through the details of our financial results John.
Take it from here.
Thanks, Jessica today ill provide an overview of our financial results and key business metrics for the quarter ended September 32020.
As a reminder, these results are discussed in further detail in our form 10-Q, which will be filed shortly with the SEC financial results reported today are preliminary fine.
Financial results and other disclosures will be reported in our quarterly report on form 10-Q, and may differ materially from the results and disclosures 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 in detail.
Before we dig into the financial details I'd like to highlight one administrative change in September of this year, our board of directors adopted resolutions to change our fiscal year end from June Thirtyth to December 30, Onest effective for this current year ending December 2020, we.
We will cover the transition period from June 30 to December 30, Onest 2020.
By filing an annual report on form 10-K for the transition year ending December 30, Onest 2020, we made this change to simplify and standardize our operations for enhanced comparative analysis and reporting for both internal and external benefit.
As we reflect on both the activities of this past quarter and really.
All of calendar 2020. This has been a period of rapid transformation for Akorn up throughout 2020, we have matured as a publicly traded entity. We've completed three acquisitions that have expanded our footprint and provided additional Tam we have completed two financings, giving us the capital to accelerate our growth.
We have made.
A couple of progress on internal initiatives of building scale, developing or software ecosystem, while continuing to focus on client experience.
This past quarter, we had strong sales to net new clients. Despite impacts from COVID-19, we saw momentum with both lead generation and sales recording another 1.2 million.
<unk> of new a or bookings or average booking amount is up 94% year over year, which reiterates the trust of the larger multi location and multistate operators to invest in our software platform. We continue to have a strong software and consulting pipeline heading into year end, but.
Additionally, our platform engagement continues.
To grow and reach new Heights, as Jessica touched on transaction volume is up 181% year over year retail order volume is up 68% year over year and retail order value is up 127% year over year.
As for our cost structure in the past, we have announced a series of smaller struck.
Entering as part of our transformation into a leaner more focused enterprise, we continue to execute on that initiative and we'll look to deliver additional cost savings across the business in the periods ahead.
Ill share more prospective shortly as we discuss operating expenses, but overall I'm happy with the progress we have made in just a few quarters.
Let's turn to our financial results as a reminder, our financial statements now reflect the results of operations of ample organics, which closed in July of this year.
Impact comparative results for both revenue and expenses.
For the quarter total revenue increased 16% to 3.7 million, an increase driven primarily from growth.
Achieved following the acquisition of ample offset by continued softness in our consulting practice, which I'll discuss shortly.
Software revenue grew 40% to $3.2 million year over year, excluding Apple our core software business is roughly flat year over year due to the state of Utah moving from its implementation here.
Two its go forward run and maintain state. We currently have approximately 1.5 million of our backlog pending go live we have seen a rise in backlog in delays and go live primarily due to COVID-19.
We expect to see an increase in our b to B revenue recognition over the coming months as economies continue to reopen.
We continue to see strong demand for our core platform offering as evidenced by our strong bookings and investments made in our platform, our leading to improving attrition rate.
Consulting revenue declined 60% to 300000 year over year, our consulting practice is important as it allows us to monetize our business development funnel in emerging markets.
To our software business.
Consulting revenue was significantly impacted by the COVID-19 pandemic and related shutdown, which created delays in the delivery of our services.
By comparison consulting revenue was up 200000 from the previous quarter ended June 30, demonstrating our consulting practice is beginning to return.
Manny.
State ballot initiatives were passed for new medical or adult use cannabis. We expect we will see increased demand for our services. Following this past election cycle.
Gross profit was $2 million for the quarter, representing a 53% gross margin. This compares with a gross profit of 1.8 million and a 57% gross margin.
No one in the same period last year the decline in gross margin percentage is directly tied to the loss of consulting revenue in the quarter as the cost of sales for our consulting practice is largely fixed as our consulting practice returns efficiencies in our infrastructure are realized and software revenue growth. We expect we can expand our margin profile.
The periods ahead.
Incremental software revenue comes with margins in excess of 90%.
Moving along to operating expenses non-GAAP total operating expenses are up approximately 935000 or 23% year over year non-GAAP operating expenses exclude a number of one time.
Oh, and recurring and non cash expenses of approximately $2.5 million in the current period compared to approximately 180000 in the prior year period, mainly recorded as a component of general and administrative. These expenses include depreciation amortization stock comp expense business combination expenses and other nonrecurring charges.
Non further excluding the additional impact of ample organics in our comparative results total non-GAAP operating expenses would be down approximately 385000 or 9% compared to the prior year period, and down 1.1 million or 23% from the prior quarter ended June 30 of this year the initiatives we are undertaking.
To normalize our expense base are starting to materialize in our financial statement and we expect continued progress in future periods.
Non-GAAP product development expense increased approximately 1 million or 178% as we continue to invest our platform, including functionality and content to increase retention drugs.
Sales growth efficiency and increase our competitive moat. This also includes the results from ample organics as we continue our integration initiatives, we expect to realize further cost efficiencies across our development organization.
Non-GAAP sales and marketing expense is up 10% compared to the prior year period, we have finalized.
Sales and marketing integration and expect to realize significant synergies in future periods as we refine our go to market strategy across North America, our non-GAAP sales and marketing expenses, excluding Apple are down 12% compared to the prior year period as we have built a more focused and targeted sales organization. We're pleased.
Our sales and marketing efficiency as we continue to deliver in your record level of new business with improving customer acquisition cost.
Non-GAAP general and administrative expenses declined 15% compared to the prior year period and would be down 34% compared to the prior year period, if we exclude the impact of ample it's.
I have shared previously we are laser focused on operating efficiencies across the organization, having completed a number of incremental restructurings that are starting to have favorable impacts to our financial results.
In the quarter adjusted EBITDA was negative 3 million compared with negative $2.2 million for the prior year by comparison.
Adjusted EBITDA was negative 3.6 million for last quarter ended June 2020, an improvement this quarter of 17% do.
The above referenced non-GAAP financial measures are reconciled to our GAAP financial results in the earnings press release that was issued before this call and adjusted EBITDA will also be reconciled.
Art of our 10-Q filing, which we encourage you to review in detail.
As of September 32020, we had cash of approximately 14.3 million and subsequently in October raised approximately 12 million in additional funding 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 improvements in our financial performance as we continue to scale and drive towards profitability.
In closing this past quarter as we successfully integrated ample organics, we did so under the continued framework of becoming a leaner more focused organization with the human.
Capital and financial resources to execute our 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 statement disclaimer discussed at the beginning of this call.
All applies equally to the Q and a session operator, please open the <unk>.
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One moment, please while we poll for your questions.
Our first question will come from the line of Brian Kinstlinger of Alliance Global Partners. Please proceed with your questions.
Hi, good morning, Thanks for taking my questions.
First can you get it right a little bit more.
Jessica can you give us a little bit more detail on the drop in the data revenue during the quarter.
Maybe.
Numerically where are we today versus a year ago or a quarter, though and just take us through which we've talked about in the past, Utah the end of implementation how that impacted revenue.
Sure sure.
Our government contracts with the state of Utah for our lease fleet of systems product. It began in July of the 2018 and.
And so we have concluded now our first year of these data systems revenue for Utah and generally the first year has.
Okay, a higher contract amount due to the fact that you're in instrumentation and there's a.
A lot of support and training process involved and then in subsequent years. So four years two through five it will.
Revert to a run and maintain state and.
John is how do you have any.
Alex on that the exact dollar amount there or percentages that we could share.
I don't have the percentages, but we can think about.
The first year.
The first years it could be as much as several hundred thousand dollars a quarter and certainly that.
That can make meaningful impacts on us.
The sequential basis quarter to quarter, but like Jessica said sort of getting back into a run and maintain state is sort of where we start to normalize our leave database.
Great and then we can you state regulations and the 18 million dollar.
Addressable market.
Quickly. There's this turn first of all.
Consulting opportunities.
Quickly did the state typically take until they lice issue licenses.
And then secondly, which is a little bit different talk to us how you get to the $18 million is that an annual revenue number. If you won all the government and all the commercial contracts that were $18 million represents.
And so I can talk about the the time to to see some revenue from these new states and we're excited about the catalyst to return our consulting revenue to pre cobot level.
Although some seats on this faster than others, we often start consulting in new states in advance of applications for pre EPS.
Application work and can you share that our pipeline of potential revenue in these two states is already building fast.
As to when we can expect.
From an RFP.
And Andrew or the licensing program for new B to B licenses, we really see this varies state by state I expect we'll see a rolling Thunder over the next.
18 to 24 months.
The state license and implement their program and then afterward select a track and trace vendor for the state and then some states want to have their vendor in place as the licensees began operations. So we really see that Barry and of course there's.
Going to be probably.
<unk> a difference in ramp time for a state like South Dakota that just passed both adult use in medical at the same time that we'll be implementing a program from scratch versus the state like Arizona that has a very healthy medical.
Program already that will be.
Adding adult use and leveraging existing business those already with their adult use.
And then in terms of the $18 million market.
John do you want to speak to that I know you worked on that with our VI team.
Yeah. So it's a great question, we looked at the different.
Roclatan.
Our market is really defined by how many licensees exist in any given market and so what we essentially did is looked at the states who are coming on whether medical or adult use and tried to.
Estimate how many new life to use.
That would that would mean for the particular jurisdictions medical or otherwise.
And then certainly just back and what we know our average our average.
Revenue per life and she is in sort of a in a very conservative way put out a number that we think the opportunity is for us in these new state. So it's really a hypothetical mathematical exercise, but again its you know.
Unlike maybe other industries are sort of limiting factor is how many of your licensees are actually issued and obviously various states approach it differently and so like Jessica talked about Arizona, we can sort of see what they've done on the medical you side and sort of extrapolate what that might mean for the U.S, but new states that are coming on.
For medical or like South Dakota, we we might not have an estimate until we can use sort of population data hub and how large is the state's population and sort of estimate how many licensees that could mean and then what that means for us we think 18 million.
Really over the next couple of years as a relatively conservative figure, but that's sort of how we want to start.
<unk>.
Alright, and just clarifying that I've heard just not.
Yes.
Sorry, I was just going to clarify that number does not include the least data systems or consulting revenue opportunity. It's really just a b to b number.
Right John I got it correct that is just okay give either is there.
Certainly consulting opportunities there's potential government contracts and that's also you know we don't even think about you know up sell opportunities you know with docomo or as we get into the MJ retail and you know what that could mean as we roll out that its more using a conservative historical look of what our revenue per license.
You know without getting too aggressive with some other opportunities we're rolling out.
Great and then just when you said normally on the consulting side, you're in a head of.
You know these kinds of efforts these kind of changes in regulations consulting revenue is pretty low do you have a handful of people that are driving that revenue in somewhat.
These states.
We certainly do so but as John noted, we're beginning to see our consulting revenue return and we have reported that our bookings have continued to fairly consistently.
Our consulting practice and I can share that anecdotally.
Our pipeline has exploded following passage of these ballot measures and we certainly expect to see a a real catalyst to return our consulting revenue to pre covered levels there.
Also you know.
Yes, John touched on it but I would love to just a touch one.
More time on the opera 10 opportunity I presented from NJ retail and the in new states, especially <unk>.
You had to launch that product and to have an option that is.
It gets us more of that transaction volume.
As we prepare for.
Coming change at the federal.
Resolution of the federal state conflict and the coming years.
Great and you mentioned, 100% win rate in Iowa, John using that same there.
What do you think that opportunity is you know long term on an annual basis.
Are you talking about for you know how that would turn into b to b revenue or I'm, sorry, or or additional right right well I mean, I don't know I guess I didn't dig into it how many licenses do you expect in Iowa and and.
100% win rate, what does that mean to your business in terms of revenue.
Just.
Or do you want to touch on the do you happen to know for sure how large that yeah. So so it was a limited license state.
And that that probably.
Represents in terms of our our win rate as well as.
Any existing licenses in the state, where we're probably talking about.
Good opportunity.
Maybe somewhere between a quarter of a million and a half a million.
Dollars, Okay, NFC and air Argus.
Great and then you guys touched on the small staying with that New Jersey, [laughter] right right right you guys touched on.
An OCC log in Kobin impacting implementations just touch on the bookings have been really strong for the last nine months comparative historically, where the business has been speak to the conversion cycle and how long, it's taking you know and especially with these larger deals.
Sure So of course it.
Ben touched on on our backlog pets and sitting at 1.5 million Air are currently and we do expect to see that convert add to revenue as economies continued to reopen Oh, we don't publish a specific at conversion or or or retention numbers for competitive reasons, given where the only publicly.
Traded company among our our competition at but I can't share as I touched on in my prepared remarks that we are focused on both product and customer experience and our retention numbers are improving I noted our 99.99 stability for energy platform in our customer satisfaction rating across all product lines.
At least seven on a scale of one to 10.
John is there anything that you would add to us specifically related to <unk>.
Two conversion us at from from backlog.
No I mean, I I think you touched on it yet.
We mentioned in our remarks, a couple of things I think to note that our average.
Booking size has grown pretty significantly year over year and.
I think.
What we're seeing is you know for instance, we might have had a single location go we signed a new customer. It's a single location. They go live now we're seeing more multilocation multistate deals coming in and so we might sign.
And I'll just use numbers to talk of it if we sign a deal for a thousand dollars out My go live will now we're signing deals that are four or five $6000, but they'll have multiple go lives spots and so we'll take that booking all in a particular quarter, but one location goes live today. The next locations live in 60 days that location after that is live and 120.
20 days and and so forth. So that's.
That's a positive sign for US we see is that we're signing larger deals more multi location multistate deals. It's just taking a while for them to get life certainly.
Obviously the Cove. It you know pandemic has impacted that in there and there was a lot of you know.
Delays of course related to the election people were sort of sitting tight on what to do and and then certainly cove. It not just the economic impact, but it states that shut down.
The ability to get you know people were expecting license applications to be processed sooner and so those have been delayed so you.
You know were overall happy with the types of deals we are taking it now but they are.
You know it the back the vacs the back side of that is that it's taking longer for them to go live, but we think will actually be more meaningful long term.
Okay. Thanks, so much guys.
Thank you.
Thank you. Our next question is coming from the line of Martin Telenor. Please proceed with your questions.
Good morning, guys how are you.
Good morning, Martin Wonder well how are you today.
Great.
Thanks for taking my question.
So a question about organic growth.
I think I can get the ample contribution based on your comments about flat.
Organic growth ex ample.
I guess, you kind of walk me through the impact of the Utah go live.
Dynamic and then any comments you can make about organic growth rate at M. Jay.
Hey, specifically would be helpful.
Sure. So it's the first I'll touch on the impact of our government contracts and 80.
They are certainly have had one or our revenue at that more I in the past they can't they tend to be lumpy and now that we have.
Hi, Morris and I, we do see a lesser than less of an impact from the the lumpiness or the Vera variability, Utah, our first year of that contract concluded in June of this year and we're now in a run and maintain state and we do it.
The way that the government contracts are structured they generally have a higher first year of revenue and then they convert to a run and maintain states moving to work for the next three to five years of course, there's always opportunity for <unk>.
Change requests and an additional additional services and revenue throughout the.
Life of the contract, but generally there is a change between year, one and year to asked for our our gross of course, John reported our our bookings number again I extremely strong continued bookings very consistent b to B software bookings and those have continued at a at a similar rate.
Yeah as we were just discussing with Brian of course, we do have an increase in backlog. These are committed year long contracts, where deposits and paid and we we will continue to see more of that convert into revenue I hear over time, both as economies reopen and also.
As these larger multi locations are staggering there go lives a location by location state by state.
Great. So our most recent b to b deal that going from backlog and you.
But all of our contracts.
At least annual contracts and often multiyear contracts.
And some of this is a function of of revenue recognition right. I mean, we certainly collect you know as I said, a deposit and sign a contract.
And can you comment on the growth rate of.
The health of the growth for example.
Sure so in Apple or this year I threw out at 2020, I, Canada has been a pretty locked down with Cove. It and there was a quite a delay on beginning to issue new licenses and certainly all of our our existing.
Finance I have done very well and being declared essential throughout throughout this year 2020 and have seen a nice increases.
Often across the board and their incremental sales to consumers or to patients at but we have seen we have seen a delay and the issue.
The new licenses, which is our largest driver for new incremental revenue.
Also as I touched on in my prepared remarks, we are no we're beginning to focus on our.
Mutual revenue opportunities and there's certainly opportunity as more provinces and territories.
Got you retail licenses to sell into retail energy platform into that into that those new licenses that are being issued and also there is a significant opportunity she began to to to visit with our existing clients and talk about upsell opportunities.
With GMP integration and our accounting system integration through the ecosystem to Sage two net suite Cathay peak.
[noise], and we announced a big Big net suite client actually and in Canada, not that long ago Rolling Green one of our our net.
Cornerstones there.
Okay Super Thanks.
<unk> can you give us any anecdotes or updates on the pace of adoption of analytics and or retail.
Yeah, absolutely so look for us to be issuing some you know some some updates on that moving forward I can share that anecdotally, we are in a beta with MJ retail now within existing clients and we have had.
Really great recession.
Jim Q Mg analytics and I noted in my prepared remarks based on.
What we're seeing so far that we see this representing as much as 25% upsell opportunity for Apple among our existing client base for EMG analytics and of course that amount of incremental revenue across any.
Happy new potential clients as well.
So I understand Docomo is a usage base.
Model are you guys going to.
Pass those costs, along or are you going to price it more as a true traditional subscription.
Any work.
Hi, so that that's a great question and our our pricing is not the same infrastructure is not the same as the retail at pricing and structure and so for for US we have a a different arrangement as part of our strategic partner.
Yep.
With Docomo for this product I intend to OEM and then also with our clients. We have structured it's much like our other reporting packages with levels of reporting and a cross, which which locations and add to user.
Rocks rather than usage.
Okay.
Great one one last one I'm willing to develop software additions on the cash flow statement, it's a a six.
600000, this quarter a 500000.
The quarter a year ago.
Yeah I can go ahead, John even if that but yeah. That's basically our I think what you're referring to was our capitalized software. So yeah early stage companies like us will capitalize our internally developed software and then amortize those.
<unk> expected useful life. So it's just it's just the accounting treatment for some of those activities.
Okay Super Great. Thanks, very much.
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Our next question.
From the line of Brian Kinstlinger of Alliance level Partners. Please proceed with your question.
Great. Thanks, I had one follow up can you talk about the M&A pipeline what are the size deals.
What's your improved balance sheet, you're looking at are they sample size say $5 million to $6 million.
Anyone who are they more trello size, it a million plus or minus and then can you speak to what valuations looking like in the market today.
Sure sure. Thanks, Brian. Good question, we continue to have a strong pipeline of potential technology in each of the three categories.
Okay. So we've shared where we focus on inorganic opportunities. So those are our Tam expanding technology product tuck in in market share and I can share with you that is that are we have a full pipeline in each of these categories and and therefore, we can afford to be very opportunistic with anything we pursue.
That's one of the larger shareholders of course, I'm focused on ensuring any opportunity as accretive to us and also where we are only interested in opportunities where there is positive cash flow synergy.
We are but we certainly as you look at the competitive landscape. There are there are more charlie's sized opportunity.
Then there are a larger opportunities just in terms of what is out there and available.
Great. Thank you.
Sure thing.
Thank you there are no further questions at this time I would like to turn the floor back over to Jessica Billingsley.
For any closing comments.
Thank you operator.
We continue to do what we say, we're going to do our ecosystem strategy and strategic investments are focused on locking up the tech spend of the enterprise cannabis businesses and solving with tech.
Technology, the growing demand for increased supply chain transparency among consumers and governments you.
You can depend on us to continue to execute we know our greatest opportunities lay just ahead.
Thank you for your continued support we look forward to sharing our continuing progress with you in the future.
This does conclude Akorn as conference call. Thank you for your participation and have a great day.
