Will Cutting Down Workforce, Executive Salaries Cut It For Akerna?

Akerna (Nasdaq: KERN) announced on Friday major strategic plans to cut down its operational costs. The move includes reducing its workforce size and implementing a 25% cut on the salaries of its executives.

“We can see a path to positive cash flows and profitability, and the board and the management team are committed to getting there on an accelerated timetable,” explained CEO Jessica Billingsley. “While we continue to deal with liquidity concerns, our headcount reduction and additional cost savings measures represent a material annual cost savings.”

The “savings”

The company hasn’t shared yet the exact details of the headcount reduction it plans to execute. However, it projects saving US$440,000 in salaries, payroll taxes, and benefits costs come Q2 2022.

The employee reduction itself would incur around US$690,000 in severances, legal costs, employee benefits, and related taxes, which the company expects to reflect in its financials next quarter.

In its latest financials, the firm recorded US$7.0 million in revenue in Q1 2022, up from Q1 2021’s US$4.0 million. However, it posted a US$22.0 million net loss, down from last year’s US$6.5 million net loss. This is heavily driven by a US$15.5 million impairment of long-lived assets.

Specifically, general and administrative expenses ended at US$2.6 million from last year’s US$1.9 million.

The company also manages a highly leveraged balance sheet. At the end of the quarter, cash and restricted cash balance came in at US$10.2 million from a starting balance of US$14.4 million. This puts the balance of the current assets at US$15.3 million while current liabilities ended at US$30.4 million.

“As we noted on our last earnings call, bookings have been strong and our CARR is $21.1 million, and we are looking to continue to grow our top-line through a combination of enterprise wins as well as the opportunity we see in new market expansion from the SMB side of the business,” Billingsley added.

The “restructure”

While the company did not state it, the corporate restructuring could be one of the results of the company’s strategic review announced two weeks ago. The firm tapped JMP Securities “to assist in evaluating strategic alternatives” to maximize stakeholder value.

The firm also announced then the resignation of its CFO John Fowle. He was replaced in the interim by Dean Ditto, a company consultant since April 2022.

President & COO Ray Thompson has also transitioned to a special advisor role to CEO Billingsley. The company hasn’t shared who would absorb the duties left by Thompson’s reassignment.

Aside from stakeholder value, the firm is also facing a stock price problem. Aside from the company’s shares sliding down 77% year-to-date, it now runs the risk of penalty as it continues to trade below the minimum US$1.00 since April 11, 2022–beyond the 30 days allotted for compliance with the Nasdaq rule.

Akerna last traded at US$0.42 on the Nasdaq.

Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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