Good morning, and welcome to the Akerna conference call. Today's call is being recorded. At this time, I'd like to turn the call over to Erica Mannion, investor relations for Akerna. Thank you, and welcome to today's conference call. With me today are Jessica Billingsley, CEO and Chairman of Akerna, and John Fowle, 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 statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as estimate, projected, expect, anticipate, forecast, plan, intend, believes, seeks, may, will, should, future, propose, and variations of these words or similar expressions or versions of such words or expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding the future growth and prospects for 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 Akerna's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Akerna undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Now, I would like to turn the call over to Akerna's CEO, Jessica Billingsley. Good morning, everyone. Thank you for joining us. I am pleased to announce today the signing of a definitive agreement to acquire 365 Cannabis, a comprehensive, vertically integrated cannabis business management software system built on Microsoft Dynamics 365 Business Central. The 365 Cannabis acquisition represents for Akerna the final piece of the puzzle for connecting cannabis compliance with ERP. Starting with our own integrations with SAP, Oracle's NetSuite, and Sage to integrate financial and tax planning with cannabis compliance and industry connectivity, followed by our acquisition of Viridian Sciences earlier this year to become the only cannabis-compliant SAP Business One offering. The acquisition of 365 brings Microsoft into our suite of ERP offerings. Our clients will now have a choice between all of the most popular financial and tax planning systems, making Akerna the right partner for cannabis operators today and in the future. We are acquiring 365 Cannabis for $17 million, representing an acquisition multiple of 2.1x last 12 months' revenue of $8.2 million. We view this as a great value for Akerna shareholders. Consideration for the deal includes $4 million in cash with the remainder in stock. We expect the deal to close in the fourth quarter of 2021. In addition to the initial purchase price, there's potential for an earn-out payment of up to $8 million in cash or stock at Akerna's option, subject to the achievement of certain recurring revenue targets. 365 Cannabis began as a Microsoft Dynamics system integrator serving a multitude of industries and entered the cannabis industry in 2016 with their first flagship customer. Using open APIs, they have integrated with some of the best-known strategic partners in the industry and, leveraging Business Central, developed a multi-tenant ERP solution incorporating a wide range of functionality, including cultivation, distribution, retail, financials, CRM, and payroll. The company is a Microsoft Gold Partner and serves over 85 clients, including leading U.S.-based MSOs and single-state operators and Canadian LPs, in addition to global cannabis clients outside North America. As we discussed on prior calls, over the past few years, there has been a substantial positive change in the political and social climate surrounding the cannabis industry, which has seen continued growth in revenue, new markets, and consumers. As new markets are added and the possibility of U.S. federal reform advances, cannabis operators are now looking to expand their operations both vertically and horizontally by opening locations in new states. As these businesses grow and the complexity of their operations expands, they increasingly require comprehensive enterprise software systems that can scale with them from startup to enterprise while always maintaining multi-state compliance. Delivering compliant access to the necessary comprehensive set of capabilities has been a focus of ours for the last several years as we strengthen our channel connections with existing enterprise financial and tax planning software providers and firmly solidify our strategic moat as the only true enterprise software solution and scale technology ecosystem for the cannabis industry. I mentioned earlier that this started with our integrations with SAP, Oracle's NetSuite, and Sage and continued with our acquisition of Viridian earlier this year as we take the strategic steps to broaden the scope of our offering to cater to the growing needs of our customers. With the addition of 365 Cannabis, we are further extending these capabilities to the Microsoft product suite. This is of particular importance to the cannabis industry as the Microsoft Dynamics 365 Business Central offering has been gaining wide acceptance with small to mid-size organizations, which is well-suited for the scale of many of the MSOs in existence today. As these companies look to take the next step in their IT evolution and move beyond spreadsheets and the Microsoft 365 product suite, including Word and Excel, to more robust enterprise software solutions, Microsoft becomes a natural choice. Acquiring 365 enables Akerna to deliver an even broader portfolio of solutions for our clients, covering access to a majority of the mainstream mid-market financial and tax planning market. We believe this is a crucial competitive advantage. Regardless of a cannabis business's preference for a particular accounting and tax suite or other traditional HR ERP add-ons such as payroll, we have the widest variety of solutions to meet their needs. We believe this is a strong differentiator in the industry because, while many technology solutions use the letters ERP, most lack the full suite of products to be a true ERP, and none have the breadth of our unified offering. Once we have integrated 365 Cannabis into Akerna, 365 Cannabis customers will have direct access to our Compliance Gateway and ecosystem, including Akerna's retail and analytics capabilities. Our ability to successfully acquire and integrate 365 Cannabis and, earlier this year, Viridian, and deliver the breadth of ecosystem integrations we have is structurally unique in the cannabis industry and is a direct result of our architectural approach to solving compliance and governance requirements. Through our standalone gateway, with which both our applications and those of our ecosystem partners integrate via APIs, we have significantly reduced the complexity of maintaining compliance within the fragmented, ever-changing market framework. Given this architectural approach and our long-standing presence in the market, the net result is the ability for us to build a robust software ecosystem with the most comprehensive compliance and regulatory capabilities in the industry, able to serve both the business and compliance requirements of the entire cannabis supply chain in more medical and recreational markets in North America and beyond than anyone else. In our view, this is critical to being an enterprise software provider in the cannabis industry, as regulatory requirements are a foundational part of virtually every operational process. Over the last two years, the infrastructure improvements we've made and the acquisitions we've closed and the acquisition strategy we continue to pursue position Akerna for success. As our clients continue to scale their operations and the industry makes a natural progression to maturity, we believe the leadership position we've created will allow us to capitalize on the multitude of growth vectors ahead. With that, I'll turn the call over to the operator for questions. Operator? Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Scott Buck with H.C. Wainwright. Please proceed with your question. Hi. Good morning, guys. Congratulations on the transaction. Thanks so much, Scott. Good morning. Morning, Scott. Thank you. Yeah, just a couple from me. Through your due diligence process, is the underlying infrastructure of 365 positioned to scale without any significant additional investment from you guys? Good question. The thesis of connecting 365 to our Compliance Gateway and to some of our retail and analytics capabilities does allow us to scale this very efficiently. There's always, when you're connecting to compliance, there may be some development that you need to do in the software application itself for a particular concept, potentially, but most of that work has been done, and we realize the efficiencies of scale of doing compliance in one place in our Compliance Gateway across our product line. Okay. That's very helpful color. Second, I appreciate you including some financials in the presentation with revenue, but I'm curious, is this a profitable business as a standalone? I mean, is it accretive to your EBITDA? You want to take that one, John? Yeah, I'll go ahead and take that one. I think the best way to think of that is over the next 12 months, I think we expect 365 to be at least EBITDA neutral while delivering really strong, meaningful revenue upside. We really plan to focus on technology integration and optimizing our infrastructure to ensure the platform is really well-positioned to capture the meaningful growth opportunities. That's, I think, the best way to think about 365 in terms of what at least the next 12 months will look like. Okay. That's great, John. Last one for me, just in terms of timeline for integration. If the deal closes next month, I mean, when are we kind of fully up and running on a combined basis? Sure. From an operational standpoint, we've gotten good at our 100-day integration plan. We'll have a plan where we are, of course, integrating back office, our operational pieces. We'll be integrating, of course, the financial pieces, and then some of those pieces of the tech integration will take a bit more time. There'll be some planning for how we're going to connect, which pieces we're going to do first in terms of where we think there's the most synergy and upside. Okay, great. I appreciate the time this morning, guys. Congrats again. Okay, thanks so much. Thank you. Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question. Great. Thanks. Congrats on the acquisition. First, you gave us the trailing 12 months revenue, but can you quantify the implied growth rates for both the recurring revenue and overall revenue? John, do you want to take that one? Good morning, Brian. Yes, I will. The company has experienced really steady growth, both in recurring revenue and professional services since entering the cannabis space many years ago. We certainly expect that profile to continue. They've been in that mid-20s or so the last several years, and given the size of contracts they have, we expect that to be able to continue and certainly as we expand into broader opportunities. As Jessica said, the market is more mature and looking for more robust solutions. Good. Has recurring grown faster or maybe slower than overall? Right, I mean, integration probably is a little bit lumpy in services. Integration can be a smidge lumpy. I would say they're probably on par. They've had nice, steady growth. They really haven't had lumpiness over the last several years. I think like Akerna in general and some of the growth opportunities we've experienced over the last several years, I would say their revenue profile is sort of similar to that of ours. Great. As you look at your pipeline, how does it break down between customers running on Microsoft, SAP, NetSuite, Sage? I guess what I'm curious about, is there a greater opportunity on one platform compared to another? Jessica, I thought maybe I heard you say that Microsoft represents the greatest opportunity, maybe you could expand on that. Great question. As we look at, even outside the cannabis industry, which of these mainstream accounting and tax financials are gaining the most market share. With the suite that we have today, as I mentioned in my remarks, we now have majority of the mainstream choices with Sage Intacct, with Oracle NetSuite, with SAP through the life cycle of SAP from Business One to ECC on HANA and adding Microsoft Dynamics Business Central is a huge add because the Microsoft platform has been getting some really great traction in that particular segment, and I think that we've touched on it briefly in the past. Most cannabis businesses are really maturing into a mid-market segment. We may talk about them as enterprise businesses sometimes in cannabis, but they would be considered as we look across the universe of all businesses, all industries, they would be considered more of a mid-market size. That makes them a really great fit for Microsoft. We see a ton of opportunity for Microsoft. If you remember, currently, our integration with Oracle NetSuite, we can only sell that into Canada today. In that mid-market tier, having both SAP's Business One, which has great market share, then the Microsoft 365 Dynamics Business Central, which has been gaining tremendous market share in that segment, is a huge win. We're delighted to add it. Great. Last question I have. This acquisition, does it provide cross-selling opportunities within your customer base or theirs? If so, can you just provide some examples on both sides of how there are cross-selling opportunities? Another great question. As we think about how this model fits with our overall strategy, we're planning to, of course, incorporate the 365 sales team into the broader Akerna sales org, and this will allow the sales team to focus on offering these robust ERP solutions as well as cross-sell our other solutions like Akerna Connect, data analytics, some of our retail offerings. There's some significant crossover and synergy there as well. Great. Thanks so much, guys. Thank you. Thank you. Our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets. Please proceed with your question. Mike, congrats on the transaction announcement as well. My question has to do with the install base. Wondering, I know it's early days here, but have you had a chance to talk with some of those key 365 Cannabis customers that you list on slide eight of 10 in the slide deck? Great question, Eric. We have been in the process of contacting them. We have more calls scheduled for this week, making sure that we're having those discussions with the key customers and that certainly there's no concern or fear over the transaction, that the business will not continue as usual. The folks with whom they've been working will be the folks with whom they'll be working tomorrow, and understanding the additional value adds that come from being part of the larger Akerna umbrella. Okay. Because obviously when you're picking up a recurring revs installed base, a good part of the calculus on the acquisition price is the retention. What can you tell us about the retention of customers based on your due diligence, say, in comparison to Akerna's own track record? Sure. Similar retention profile. Like Akerna, when these customers are installed and when they are using the software platform to run their entire business, it's very sticky. We tend to not see challenges with retention. Because also the price point here and the majority of these customers are going to be in the larger range, and they've made a commitment to install ERP, they're less likely to rip out. When we do see anything with retention, it's usually due to some type of consolidation or acquisition move. In the combined case of the companies, we have all of the major accounting tax financial integrations represented. As we think about what might a parent company want to use, we're able to offer that optionality. We feel really good about our retention moving forward. Certainly combined, we've got the client base that matters among the large MSOs who tend to be doing the consolidating. I could just share a little experience, share to your earlier question from our experience with our Viridian acquisition in contacting key customers and working with them post-acquisition. Very positive experience. The majority of those clients were really delighted to see Viridian become a part of Akerna, and I expect we'll see much the same with 365 as we conduct all those calls this week. Okay. Final question for me is regarding the operations, and this is for either you, Jessica, or for John. How many employees do we pick up, and then what's the kind of geographic footprint of our employee base and maybe a midterm outlook for some opportunities for consolidation? Well, how about I take the high level there and pass it to John to comment on near-term opportunities. We gain about 50 employees with 365. We've got a nexus of some employees in Las Vegas, which is a great synergistic location for us and a good location for some of the cannabis market, and also Toronto, where, of course, we have a nexus of some employees from our Ample Organics and earlier acquisition. We have some remote employees. Certainly as the pandemic has continued, we have seen remote work continue and a strong desire, especially for folks in tech, to continue to work remotely even when there is an office available, the desire to have some flexibility in coming into the office versus working remotely. We have been for a very long time well-suited to track remote work with our various tools and metrics. Are you meeting your numbers, if you will? John, do you want to comment on any near-term operational synergies? Yeah, we've certainly done a significant amount of work ahead of time given the size of 365. As with most acquisitions, there are synergies that can certainly be realized, whether through shared services functions or customer-facing functions like sales or product development. As we've demonstrated, I think, with prior acquisitions, we'll be really focused on those operating synergies across the business as we continue to improve that operating leverage, but really always keeping those customer functions first. The product and that customer experience will always be top of the stack there. There's certainly opportunities to consolidate, whether it's service providers or hosting instances. As you can imagine in a business, bringing them in, there's a lot of synergies I think over the next 12 months we'll be laser focused on and hopefully driving that EBITDA neutral to EBITDA positive scenario we talked about earlier. Got it. Thanks for taking my questions. Thank you. Thank you. Our next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question. Hi. Good morning. This is Kristen on for Colin. Thank you for taking our questions. Good morning, Kristen. Morning. Morning. We focused a lot on some of the near-term synergy opportunities and milestones you're looking to achieve. I'm wondering if you can talk about some of the longer-term business milestones and how that corresponds to both timing and cadence of those milestone payments that you talked about. Sure. Great question. We touched on the 365 Cannabis clients will gain access to Akerna's Compliance Gateway to our reporting, our MJ Retail, MJ Platform point of sale offerings, our recently launched Akerna Connect, which is a platform for allowing digital marketing through text messaging loyalty programs. That will allow them to accelerate their growth, offer more products and services, and serve more consumers in more markets. From a larger point of view, in rounding out this final piece of the puzzle with adding Microsoft to our portfolio of leading integrated financial and tax planning tools, as we think about the macro picture, Kristen, we're thinking about being able to provide cannabis businesses a solution for each stage of their growth. We grow with them, from startup to multi-state and multinational operators, while maintaining and having the confidence that we're meeting the table stakes of regulatory compliance throughout every step. From a very foundational standpoint, the message is what you get with Akerna is you get confidence that you're going to be compliant, and you get confidence that you've got the greatest access to the suite of services that you need and as you grow. That's the message for our clients from us. Okay. With respect to how we should think about those milestone payments, any additional color that you can provide there? Sure. As we think about integration and as we think about ensuring that we're not losing traction, we're focused first on ensuring that there's no channel conflict and that we don't lose any traction. We've got a great track record of doing that to date. We feel very good about our prescription for that, if you will. We'll focus on the obvious synergies, upsell, cross-sell synergies. Lastly, on combined technology offerings and how we can package those, bundle those in the best way for our clients and of course, for Akerna. Okay. You did make several references here, including in this last question, about this being the final piece of the ecosystem puzzle. Just wondering how we should think about that in the context of future M&A and where you'll be focusing those efforts. Thank you. Sure. Great question, and as we think about our inorganic growth strategy, we've talked about that strategy falling into three different target buckets, into product bolt-on or tech ins, market share acquisitions, of which this would represent similar to that, as well as TAM-expanding technology. The pipeline for our M&A is strong and will be opportunistic where we can. That does include traditional ERP like 365 and Viridian, but also market-specific solutions such as our April acquisition of Trellis, a cultivation solution primarily in California. Then we have a very robust suite of connections into our ecosystem of more than 80 integrated partners, and many of those have expressed some interest in becoming a part of the Akerna umbrella. We would look to that pipeline and be opportunistic where we can for TAM-expanding technology. I just note that John and I are particularly interested in and focused on any TAM-expanding technology that allows us to participate in the volume growth of the industry. Thank you. Our next question comes from the line of Martin Toner with ATB Capital Markets. Please proceed with your question. Hey, guys. My questions have already been answered, so I'll just pass the line. Okay. Thanks, Martin. Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question is a follow-up from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question. Great. Thanks. Just one question. You've got a sizable potential earn-out. Can you share the target for the recurring revenue triggers and/or any other targets and timeline for that piece of the transaction? John, do you want to take that? I can take that. It's pretty straightforward. The earn-out is entirely based on revenue performance. It was a creative structure to a transaction to allow the sellers of 365 to benefit from significant upside they see over the next 12 months. It is a multiple that we created based on the transaction multiple. I'm going to say a few million dollars of additional revenue over the next 12 months will trigger that. To some degree, you can think of the earn-out as being linear. As revenue achieved, that earn-out is awarded. It's really straightforward, linear on the revenue front. If I read the slide deck right, it's growth of the recurring revenue, right? I take it if they book but don't recognize yet and have a base of revenue that's going to be much higher, that would trigger it. Is that right, or is that not right? Yeah, that's correct. It is not bookings. It is actual revenue recognized under US GAAP, correct. It is just. Great Recurring, not the professional service piece. Right. Okay, thanks so much. Thank you. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Ms. Billingsley for any final comments. Thank you, operator. We thank you for your interest in Akerna, and we look forward to sharing our progress with you as we move forward. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.