Leading Cybersecurity Firm Experiences Strong
Bookings and Revenue Growth
CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in
healthcare cybersecurity and information assurance, today announced
its financial results for the third quarter that ended September
30, 2018.
Financial Highlights for the Third Quarter 2018
Include:
- Revenues for the third quarter were
$19.2 million, an increase of 7 percent from $17.9 million for the
same period of 2017.
- GAAP net income for the third quarter
was $1.2 million, or $0.12 per basic and diluted share compared to
$1.1 million, or $0.11 per basic and diluted share for the same
period of 2017.
- Non-GAAP adjusted EBITDA was $2.8
million in the third quarter of 2018, compared to $3.0 million for
the same period in 2017.
- Non-GAAP adjusted earnings per share
for the third quarter 2018 was $0.24 per basic and $0.23 per
diluted share, compared to $0.27 per basic and $0.26 per diluted
share for the same period of 2017.
Recent Operational Highlights Include:
- Signed more than 15 security managed
service contracts in Q3 while growing security bookings by more
than 35 percent year-to-date when compared to 2017.
- Doubled the number of new security
clients signed bringing the total to 40 year to date.
- Professional Services and Consulting
revenue grew by 39 percent year to date when compared to 2017.
- Managed Print Services has now extended
seven existing contracts year to date while rolling out an enhanced
toner program with Hewlett-Packard.
“I am pleased with the performance across the board,” said Mac
McMillan, President and CEO of CynergisTek. “Everyone on the
management team, Sales, and Delivery have worked tirelessly to
provide both new and current customers with superior service and
help improve their security, privacy, and compliance programs while
reducing inefficiencies and unnecessary spend.”
For the Three Months Ended September 30, 2018 Compared to the
Three Months Ended September 30, 2017
Revenue increased by approximately $1.3 million to $19.2 million
for the three months that ended September 30, 2018, as compared to
the same period in 2017.
Cost of revenue was $13.4 million for the three months ended
September 30, 2018, as compared to $11.7 million for the same
period in 2017. Equipment costs increased by approximately $1.7
million in 2018, directly as a result of the increase in equipment
revenues from copier fleet refresh activities.
Gross margin was 30 percent for the three months ended September
30, 2018 compared to 34 percent for same period in 2017. This
decrease was largely due to the higher equipment revenue this
quarter which carries lower gross margins.
Sales & marketing and general & administrative expenses
were $3.1 million for the three months ended September 30, 2018,
compared to $3.2 million for the same period in 2017.
Net income was $1.2 million for the three months ended September
30, 2018, or $0.12 per basic and diluted share, compared to net
income of $1.1 million, or $0.11 per basic and diluted share in the
same period of 2017.
Non-GAAP adjusted EBITDA, when adding back stock-based
compensation was $2.8 million for the three months ended September
30, 2018, compared to $3.0 million for the same period in 2017.
Non-GAAP adjusted earnings for the three months ended September
30, 2018 was $2.3 million, or $0.24 per basic and $0.23 diluted
share, compared to $2.6 million or $0.27 per basic and $0.26 per
diluted share for the same period of 2017.
For the Nine Months Ended September 30,
2018 Compared to the Nine Months Ended September 30,
2017
Revenue decreased by approximately $0.4 million to $52.5 million
for the nine months ended September 30, 2018, as compared to the
same period in 2017.
Cost of revenue was $38.1 million for the nine months ended
September 30, 2018, as compared to $37.8 million for the same
period in 2017. Equipment costs increased by approximately $3.0
million in 2018.
Gross margin was 27 percent for the nine months ended September
30, 2018 as compared to 29 percent for the same period in 2017.
Sales & marketing expenses were $4.3 million for the nine
months ended September 30, 2018, as compared to $4.1 million for
the same period in 2017. General & administrative expenses
increased by $0.5 million to $6.4 million for the nine months ended
September 30, 2018, as compared to $5.9 million for the nine months
ended September 30, 2017.
Net income was $0.6 million for the nine months ended September
30, 2018, or $0.06 per basic and diluted share, compared to net
income of $1.2 million, or $0.12 per basic and diluted share in the
same period of 2017.
Non-GAAP adjusted EBITDA for the nine months ended September 30,
2018, when adding back stock-based compensation, restructuring and
legal fees was $4.9 million, compared to $5.3 million for the same
period in 2017.
Non-GAAP adjusted earnings for the nine months ended September
30, 2018 was $3.6 million, or $0.37 per basic and $0.36 per diluted
share, compared to $4.0 million or $0.43 per basic and $0.41 per
diluted share for the same period of 2017.
The reconciliation of GAAP to non-GAAP information can be found
in the tables at the end of this release and provide the details of
the Company’s non-GAAP disclosures and the reconciliation of
non-GAAP information.
“We delivered strong results this quarter,” said Paul Anthony,
CFO of CynergisTek. “The team’s efforts focusing on customer
retention and sales growth allowed us to exceed our projected gross
margins and sets us up nicely for the rest of the year.”
CYNERGISTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS
September 30, 2018
(unaudited)
December 31, 2017 ASSETS Current
assets: Cash and cash equivalents $ 6,355,427 $ 4,252,060
Accounts receivable, net 9,389,407 13,264,323 Prepaid and other
current assets 1,583,463 557,426 Supplies 1,043,964
1,156,006
Total current assets
18,372,261 19,229,815
Property and equipment, net 648,895 831,784
Deposits
87,778 87,376
Deferred income taxes 2,930,051 3,120,310
Intangible assets, net 9,542,722 10,900,924
Goodwill
18,525,206 18,525,206
Total
assets $ 50,106,913 $ 52,695,415
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and accrued expenses $ 3,639,637
$ 9,631,634 Accrued compensation and benefits 3,792,516 3,711,551
Deferred revenue 1,144,555 1,425,821 Note payable 343,750 - Current
portion of long-term liabilities 3,120,504
5,494,837
Total current liabilities
12,040,962 20,263,843
Long-term liabilities: Term loan, less current portion
14,075,843 9,438,333 Promissory notes to related parties, less
current portion 5,156,250 6,000,000 Capital lease obligations, less
current portion 77,500 147,861
Total long-term liabilities 19,309,593
15,586,194
Commitments and contingencies
Stockholders’ equity: Common stock, par value at $0.001,
33,333,333 shares authorized, 9,616,133 shares issued and
outstanding at September 30, 2018 and 9,576,028 shares issued and
outstanding at December 31, 2017 9,616 9,576 Additional paid-in
capital 31,619,720 31,156,362 Accumulated deficit
(12,872,978 ) (14,320,560 )
Total stockholders’
equity 18,756,358 16,845,378
Total liabilities and stockholders’ equity $ 50,106,913
$ 52,695,415
CYNERGISTEK, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2018 2017
2018 2017 Net
revenues $ 19,216,066 $ 17,897,076 $ 52,536,317 $
52,950,678
Cost of revenues 13,428,831
11,743,838 38,131,617
37,847,138 Gross profit 5,787,235
6,153,238 14,404,700
15,103,540
Operating expenses:
Sales and marketing 1,313,388 1,329,909 4,288,893 4,070,765 General
and administrative 1,789,959 1,849,164 6,405,355 5,876,895
Depreciation 84,840 97,568 265,424 287,727 Amortization of
acquisition-related intangibles 452,734
520,030 1,358,201 1,560,716
Total operating expenses 3,640,921
3,796,671 12,317,873
11,796,103
Income from operations 2,146,314
2,356,567 2,086,827
3,307,437
Other income (expense):
Other income 17 1,862 44 1,884 Interest expense (348,480 )
(373,408 ) (1,103,592 )
(1,162,289 ) Total other income (expense) (348,463 )
(371,546 ) (1,103,548 ) (1,160,405 )
Income before provision for income taxes 1,797,851
1,985,021 983,279 2,147,032
Income tax expense
(643,725 ) (895,360 ) (415,363 )
(976,899 )
Net income $ 1,154,126 $ 1,089,661
$ 567,916 $ 1,170,133
Net
income per share: Basic $ 0.12 $ 0.11 $
0.06 $ 0.12 Diluted $ 0.12 $
0.11 $ 0.06 $ 0.12
Number of
weighted average shares outstanding: Basic 9,616,133
9,501,760 9,605,536
9,387,264 Diluted 9,762,370
9,881,236 9,813,098
9,835,428
CYNERGISTEK, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP INCOME FROM OPERATIONS
TO NON-GAAP ADJUSTED EBITDA (UNAUDITED)
Three Months Ended Sept 30, Nine Months Ended Sept
30, 2018 2017 2018
2017 GAAP income from operations $ 2,146,314 $
2,356,567 $ 2,086,827 $ 3,307,437
Adjustments:
Depreciation 84,840 97,568 265,424 287,727 Amortization 452,734
520,030 1,358,201 1,560,716 Restructuring and legal fees - -
735,183 - Stock-based compensation 161,264
69,872 463,398 173,320
Non-GAAP
adjusted EBITDA $ 2,845,152 $ 3,044,037 $
4,909,033 $ 5,329,200
Non-GAAP adjusted EBITDA per
share Basic $ 0.30 $ 0.32 $ 0.51 $ 0.57
Diluted $ 0.29 $ 0.31 $ 0.50 $ 0.54
CYNERGISTEK, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP
NET INCOME TO NON-GAAP ADJUSTED EARNINGS (UNAUDITED)
Three Months Ended Sept 30, Nine Months
Ended Sept 30, 2018 2017
2018 2017 GAAP Net income $ 1,154,126 $
1,089,661 $ 567,916 $ 1,170,133
Adjustments: Cash tax
adjustment 420,259 795,922 190,259 844,390 Restructuring and legal
fees - - 735,183 - Depreciation 84,840 97,568 265,424 287,727
Amortization 452,734 520,030 1,358,201 1,560,716 Stock-based
compensation 161,264 69,872
463,398 173,320
Non-GAAP adjusted earnings $
2,273,223 $ 2,573,053 $ 3,580,381 $ 4,036,286
Non-GAAP adjusted earnings per share Basic $ 0.24
$ 0.27 $ 0.37 $ 0.43 Diluted $ 0.23 $
0.26 $ 0.36 $ 0.41
Conference Call InformationDate: Thursday, November 8,
2018Time: 1:00 pm Eastern Time / 10:00 am Pacific TimeU.S.:
1-888-220-8474International: 1-323-794-2590Conference ID:
4074902Webcast: http://public.viavid.com/index.php?id=131821
A replay of the call will be available from 4:00 pm ET on
November 8, 2018 to 11:59 pm ET on November 15, 2018. To access the
replay, please dial 1-844-512-2921 from the U.S. and 1-412-317-6671
from outside the U.S. The replay PIN is 4074902.
About CynergisTek, Inc.
CynergisTek is a top-ranked cybersecurity firm dedicated to
serving the information assurance needs of the healthcare industry.
CynergisTek offers specialized services and solutions to help
organizations achieve privacy, security, compliance, and document
output goals. Since 2004, the company has served as a partner to
hundreds of healthcare organizations and is dedicated to supporting
and educating the industry by contributing to relevant industry
associations. The company has been recognized by KLAS in the 2016
and 2018 Cybersecurity reports as a top performing firm in
healthcare cybersecurity as well as the 2017 Best in KLAS winner
for Cybersecurity Advisory Services.
Forward-Looking Statements
This release contains certain forward-looking statements
relating to the business of CynergisTek that can be identified by
the use of forward-looking terminology such as, “believes,”
“expects,” “anticipates,” “may,” or similar expressions. Such
forward-looking statements involve known and unknown risks and
uncertainties, including uncertainties relating to product/service
development, long and uncertain sales cycles, the ability to obtain
or maintain proprietary intellectual property protection, market
acceptance, future capital requirements, competition from other
providers, the ability of our vendors to continue supplying the
company with equipment, parts, supplies and services at comparable
terms and prices and other factors that may cause actual results to
be materially different from those described herein as anticipated,
believed, estimated or expected. Some of these risks and
uncertainties are or will be described in greater detail in our
Form 10-K and Form 10-Q filings with the Securities and Exchange
Commission, which are available at http://www.sec.gov. CynergisTek
is under no obligation (and expressly disclaims any such
obligation) to update or alter its forward-looking statements
whether as a result of new information, future events or
otherwise.
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version on businesswire.com: https://www.businesswire.com/news/home/20181107005759/en/
Investor Relations Contact:Bryan FlynnCynergisTek(949)
357-3914InvestorRelations@cynergistek.comorMedia
Contact:Danielle JohnsSenior Account ExecutiveAria
Marketing(617) 332-9999 x241djohns@ariamarketing.com
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