CynergisTek, Inc. (NYSE AMERICAN: CTEK) (the “Company” or
“CynergisTek”), a leader in cybersecurity, privacy, and compliance,
today announced financial results for the three and twelve months
ended December 31, 2021.
Q4 and Full Year 2021 Operational Highlights
- 16% sequential revenue growth and 4% improvement to gross
margins from Q3 to Q4 2021.
- 23% increase in bookings in the second half of the year when
compared to the first.
- 15% increase of presold revenue to $20.0 million from Q1 to Q4
2021.
- 43 new customers added during the year.
“Our focus in the second half of the year was on sales and
operational improvements that would drive growth,” said Mac
McMillan, President and CEO of CynergisTek. “Our strong renewal
rate and bookings growth in the second half of the year added to
our presold revenue, leading to a strong finish. The company’s
second half was stronger, but we fell short of our overall goal. As
we look ahead, we now have a clear strategy focused on organic
growth, strategic partnerships, and M&A.”
For the Year End December 31, 2021, as Compared to the Year
End December 31, 2020
Revenue was $16.3 million for the year ended December 31, 2021,
as compared to $18.9 million for the same period in 2020. Managed
Services revenue decreased by $2.3 million due primarily to the
impact of the COVID-19 pandemic on our healthcare customers,
resulting in delayed renewals, reduced bookings, and new customer
contracts. Consulting and professional services revenue decreased
by $0.3 million, primarily due to the completion of two customer
contracts in the first half of 2020, combined with lower revenues
from our Backbone business unit and delays and reductions in
delivery of previously sold professional services due to the
COVID-19 pandemic.
While the COVID-19 pandemic has negatively impacted our bookings
and revenue in the current periods, it has also led to new services
and additional opportunities. In the fourth quarter of 2021, we saw
an increase in bookings, partially as a result of our investments
in sales and marketing, increased demand for our services, and the
size of our target contracts.
Gross margin was 46% of revenue for the year ended December 31,
2021, and 33% for the same period in 2020. Excluding the $1.5
million benefit from the employee retention tax credit in 2021,
gross margin was improved by 37% as a result of targeted expense
reductions.
SG&A expenses increased for the year ended December 31,
2021, to $12.6 million, as compared to the same period in 2020.
Excluding the costs related to the departure of our former CEO of
$0.6 million, SG&A expenses increased as we reinstated benefits
terminated during the height of the pandemic, such as higher
compensation related to additional headcount and other sales and
marketing-related costs as we began executing on our growth
initiatives. These increases were offset by the benefit of $0.6
million in employee retention tax credits provided under the CARES
Act.
GAAP net loss for the year ended December 31, 2021, was $2.2
million, or $(0.18) per basic and diluted share, as compared to a
net loss of $18.5 million, or $(1.75) per basic and diluted share,
for the same period of 2020.
Non-GAAP adjusted EBITDA loss was $3.2 million, or $(0.26) per
basic and diluted share, for the year ended December 31, 2021,
compared to a loss of $3.8 million, or $(0.36) per basic and
diluted share, last year. The reconciliation of GAAP to non-GAAP
information can be found in the table at the end of this release,
which provides the details of CynergisTek’s non-GAAP disclosures
and the reconciliation of non-GAAP information.
Use of Non-GAAP Measures
CynergisTek, Inc. (“CynergisTek” or the “Company”) prepares its
consolidated financial statements in accordance with generally
accepted accounting principles (“GAAP”). In addition to disclosing
financial results prepared in accordance with GAAP, the Company
discloses information regarding Adjusted EBITDA (“Adjusted
EBITDA”), which differs from the commonly-used “EBITDA.” In
addition to adjusting net income (loss) to exclude income taxes,
interest, depreciation, and amortization, Adjusted EBITDA also
excludes share-based compensation, impairment charges, fair value
adjustments, severance, and other cash and non-cash charges and
gains.
Adjusted EBITDA is not a measure of performance as defined in
accordance with GAAP. However, Adjusted EBITDA is used internally
in planning and evaluating the Company’s operating performance.
Accordingly, management believes that disclosure of this metric
offers investors, bankers, and other stakeholders an additional
view of the Company’s operations that, when coupled with the GAAP
results, provides a more complete understanding of the Company’s
financial results.
Adjusted EBITDA should not be considered as an alternative to
loss-from-continuing-operations or
net-cash-used-in-operating-activities as measures of operating
results or liquidity. The Company’s calculation of Adjusted EBITDA
may not be comparable to similarly titled measures used by other
companies, and the measures exclude financial information that some
may consider important in evaluating the Company’s performance.
Adjusted EBITDA has limitations as an analytical tool, and you
should not consider it in isolation, or as a substitute for
analysis of the Company’s results as reported under GAAP. Some of
these limitations are (i) it does not reflect the Company’s cash
expenditures, or future requirements for capital expenditures or
contractual commitments, (ii) it does not reflect changes in, or
cash requirements for, the Company’s working capital needs, (iii)
Adjusted EBITDA does not reflect interest expense, or the cash
requirements necessary to service interest or principal payments,
on the Company’s debt, (iv) although depreciation and amortization
are non-cash charges, the assets being depreciated and amortized
will often have to be replaced in the future, and Adjusted EBITDA
does not reflect any cash requirements for such replacements, (v)
it does not adjust for all non-cash income or expense items that
are reflected in the Company’s statements of cash flows, (vi) it
does not reflect the impact of earnings or charges resulting from
matters the Company considers not to be indicative of its ongoing
operations, and (vii) other companies in the same industry may
calculate this measure differently than the Company does, limiting
its usefulness as a comparative measure.
Management believes Adjusted EBITDA facilitates operating
performance comparisons from period to period by isolating the
effects of some items that vary from period to period without any
correlation to core operating performance or that vary widely among
similar companies. These potential differences may be caused by
variations in capital structures (affecting interest expense), tax
positions (such as the impact on periods or companies of changes in
effective tax rates or net operating losses) and the age and book
depreciation of facilities and equipment (affecting relative
depreciation expense). Management also presents Adjusted EBITDA
because (i) management believes this measure is frequently used by
securities analysts, investors and other interested parties to
evaluate companies in the same industry, (ii) management believes
investors will find this measure useful in assessing the Company’s
ability to service or incur indebtedness, and (iii) management uses
Adjusted EBITDA internally as a benchmark to evaluate the Company’s
operating performance or compare the Company’s performance to that
of its competitors.
Conference Call Information
Date: Thursday, March 24, 2022 Time: 4:30 pm ET / 1:30 pm PT
U.S.: 1-888-256-1007 International: 1-786-789-4783 Conference ID:
1507111
Webcast:
https://themediaframe.com/mediaframe/webcast.html?webcastid=E6g5IJjw
A replay of the call will be available from 7:30 PM ET on March
24, 2022, to 11:59 PM ET on March 31, 2022. 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 PIN is 1507111.
About CynergisTek, Inc.
CynergisTek is a top-ranked cybersecurity consulting firm
helping organizations in highly-regulated industries, including
those in healthcare, government, and finance navigate emerging
security and privacy issues. CynergisTek combines intelligence,
expertise, and a distinct methodology to validate a company's
security posture and ensure the team is rehearsed, prepared, and
resilient against threats. Since 2004, CynergisTek has been
dedicated to hiring and retaining experts who bring real-life
experience and hold advanced certifications to support and educate
the industry by contributing to relevant industry associations. For
more information, visit www.cynergistek.com or follow us on Twitter
or LinkedIn.
Cautionary Note Regarding Forward Looking Statements
This release contains certain forward-looking statements
relating to the business of CynergisTek. These forward-looking
statements are within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”) and Section 21E of
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and can be identified by the use of forward-looking
terminology such as “believes,” “expects,” “anticipates,” “would,”
“could,” “intends,” “may,” “will,” or similar expressions. Such
forward-looking statements involve known and unknown risks and
uncertainties, including but not limited to uncertainties relating
to product/services development; long and uncertain sales cycles;
the ability to obtain or maintain proprietary intellectual property
protection; future capital requirements; competition from other
providers; the ability of the Company’s vendors to continue
supplying the Company with supplies and services at comparable
terms and prices; the Company’s ability to successfully compete and
introduce enhancements and new features that achieve market
acceptance and that keep pace with technological developments; the
Company’s ability to maintain its brand and reputation and retain
or replace its significant customers; cybersecurity risks and risks
of damage and interruptions of information technology systems; the
Company’s ability to retain key members of management and
successfully integrate new executives; the Company’s ability to
complete acquisitions, strategic investments, entry into new lines
of business, divestitures, mergers or other transactions on
acceptable terms, or at all; potential risks and uncertainties
relating to the existing and ultimate impact of the COVID-19
pandemic, including actions that may be taken by governmental
authorities to contain the COVID-19 outbreak or to treat its
impact, and the potential negative impacts of COVID-19 on the
global economy and financial markets; the general economic impact
of the ongoing war in Ukraine, including the impact of related
sanctions being imposed by the U.S. Government and the governments
of other countries, and the impact of potential reprisals as a
consequence of the war in Ukraine and any related sanctions; and
other factors that may cause actual results to be materially
different from those described herein as anticipated, believed,
estimated or expected. Certain of these risks and uncertainties are
or will be described in greater detail in the Company’s Form 10-K
and Form 10-Q filings with the Securities and Exchange Commission,
which are available at http://www.sec.gov. Given the risks and
uncertainties, readers should not place undue reliance on any
forward-looking statement and should recognize that the statements
are predictions of future results which may not occur as
anticipated. Many of the risks listed above have been, and may
further be, exacerbated by the COVID-19 pandemic, including its
impact on the healthcare industry, or the ongoing war in Ukraine.
Actual results could differ materially from those anticipated in
the forward-looking statements and from historical results, due to
the risks and uncertainties described herein, as well as others not
now anticipated. 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.
CYNERGISTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
3,575,682
$
5,613,654
Accounts receivable, net of allowance for
doubtful accounts
2,007,136
2,063,136
Unbilled services
542,952
566,713
Prepaid and other current assets
1,840,178
2,032,420
Income taxes receivable
1,484,851
1,680,866
Total current assets
9,450,799
11,956,789
Property and equipment, net
243,791
541,525
Deposits
34,310
64,586
Deferred income taxes
6,060,129
4,959,125
Intangible assets, net
4,701,491
6,063,617
Goodwill
8,394,483
8,394,483
Total assets
$
28,885,003
$
31,980,125
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
1,453,454
$
1,326,919
Accrued compensation and benefits
1,189,472
814,830
Deferred revenue
1,663,719
1,265,864
Current portion of earnout liability
432,000
-
Current portion of promissory note to
related party
140,625
562,500
Current portion of operating lease
liability
45,233
252,398
Total current liabilities
4,924,503
4,222,511
Long-term liabilities:
Earnout liability, less current
portion
-
1,300,000
Promissory note to related party, less
current portion
-
140,625
Paycheck Protection Program loan
-
2,825,500
Operating lease liability, less current
portion
-
40,031
Total long-term liabilities
-
4,306,156
Commitments and contingencies
Stockholders’ equity:
Common stock, par value at $0.001,
33,333,333 shares authorized, 13,248,024 shares issued and
outstanding at December 31, 2021 and 12,024,967 shares issued and
outstanding at December 31, 2020
13,248
12,024
Additional paid-in capital
41,318,917
38,564,520
Accumulated deficit
(17,371,665
)
(15,125,086
)
Total stockholders’ equity
23,960,500
23,451,458
Total liabilities and stockholders’
equity
$
28,885,003
$
31,980,125
CYNERGISTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Year Ended December
31,
2021
2020
Net revenues
$
16,301,905
$
18,872,235
Cost of revenues
8,807,429
12,624,389
Gross profit
7,494,476
6,247,846
Operating expenses:
Sales and marketing expenses
4,866,881
5,567,360
General and administrative expenses
7,796,136
6,512,607
Change in valuation of contingent
earnout
(606,923
)
(1,100,000
)
Depreciation
194,081
189,638
Amortization of acquisition-related
intangibles
1,362,126
1,664,765
Impairment of intangible assets and
goodwill
-
16,446,500
Finance cost for equity commitment
-
390,000
Total operating expenses
13,612,301
29,670,870
Loss from operations
(6,117,825
)
(23,423,024
)
Other income (expense):
Gain on forgiveness of PPP loan and other
income and expense
2,825,500
11
Interest income
-
9,990
Interest expense
(34,259
)
(100,714
)
Total other income (expense)
2,791,241
(90,713
)
Loss before income tax benefit
(3,326,584
)
(23,513,737
)
Income tax benefit
1,080,005
5,045,249
Net loss
$
(2,246,579
)
$
(18,468,488
)
Net loss per share
Basic
$
(0.18
)
$
(1.75
)
Diluted
$
(0.18
)
$
(1.75
)
Number of weighted average shares
outstanding:
Basic
12,362,078
10,573,123
Diluted
12,362,078
10,573,123
CYNERGISTEK, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP LOSS
FROM OPERATIONS TO NON-GAAP ADJUSTED EBITDA
(UNAUDITED)
Twelve Months Ended December
31,
2021
2020
GAAP loss from continuing
operations
$
(6,117,825
)
$
(23,423,024
)
Adjustments:
Depreciation
194,081
189,638
Amortization of acquisition-related
intangibles
1,362,126
1,664,765
Impairment of intangible assets
16,446,500
Adjustment in contingent consideration
from acquisition
(606,923
)
(1,100,000
)
Finance cost from equity commitment
390,000
Non-recurring severance, restructuring and
legal costs
587,000
472,000
Stock-based compensation
1,403,794
1,510,931
Non-GAAP adjusted EBITDA
$
(3,177,747
)
$
(3,849,190
)
Non-GAAP adjusted EBITDA per
share
Basic
$
(0.26
)
$
(0.36
)
Diluted
$
(0.26
)
$
(0.36
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220324005283/en/
Investor Relations Contact: Bryan Flynn (512) 402-8550 x7
InvestorRelations@cynergistek.com
Media Contact: Trinity McPherson (443) 853-8468
trinity.mcpherson@cynergistek.com
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