CynergisTek, Inc. (NYSE AMERICAN: CTEK) (the “Company” or
“CynergisTek”), a leader in cybersecurity, privacy, and compliance,
today announced financial results for the three months ended March
31, 2022.
First Quarter Summary of Financial Results for Q1 2022
compared to Q1 2021:
- Revenue increases 12% to $4.7 million compared to $4.2
million.
- Gross margin improves to 40% compared to 38%, after adjusting
Q1 2021 for the employee retention credits.
- Net loss was unchanged at $0.9 million.
- Adjusted EBITDA loss was unchanged at $0.6 million.
First Quarter 2022 Operational Highlights
- 22% increase in sequential revenue growth since Q3 2021 through
Q1 2022.
- 32% increase in professional services and consulting revenue
from Q1 2022 compared to Q1 2021.
- Strong renewal activity in Q1 2022.
- 15 new customers added year to date.
“We continue to execute on our plan to drive growth and margin
improvement in our business,” said Mac McMillan, President and CEO
of CynergisTek. “We saw our second quarter of sequential growth
since Q3 2021 driven by our sales team’s efforts with 15 new
clients added year to date and strong renewals in the quarter. We
are expecting that our technology enabled managed services and
strategic partnerships will continue to drive us forward and
differentiate us from our competition.”
For the Three Months Ended March 31, 2022, compared to the
Three Months Ended March 31, 2021
Revenue increased $0.5 million, or 12%, to $4.7 million for the
three months ended March 31, 2022, as compared to the same period
in 2021. Managed Services revenue decreased slightly by $0.1
million. Consulting and professional services increased $0.6
million due to customers increasing spend as they start to get back
to normal buying patterns after a period of reduced spending in
response to the COVID-19 pandemic.
Gross margin was up 2% to 40% of revenue for the three months
ended March 31, 2022. After adjusting for the prior year benefit
from the employee retention tax credit, gross margin was 38% for
the same period in 2021. Margins improved as a result of higher
revenue allowing us to better leverage our operational overhead
support.
SG&A expenses decreased $0.2 million for the three months
ended March 31, 2022, to $2.7 million, as compared to the same
period in 2021. The decrease is due to $0.1 million less in
professional fees due to 2021 being higher and lower stock-based
compensation.
GAAP net loss for the three months ended March 31, 2022, was
$0.9 million, or $(0.07) per basic and diluted share, as compared
to a net loss of $0.9 million, or $(0.08) per basic and diluted
share, for the same period of 2021.
Non-GAAP adjusted EBITDA loss was $0.6 million, or $(0.05) per
basic and diluted share, for both the three months ended March 31,
2022 and March 31, 2021. 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: Monday, May 16, 2022 Time: 4:30 pm ET / 1:30 pm PT U.S.:
1-888-394-8218 International: 1-786-789-4776 Conference ID: 8001259
Webcast:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=W6CXE7Cj
A replay of the call will be available from 7:30 PM ET on May
16, 2022, to 11:59 PM ET on May 23, 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 8001259.
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
March 31, 2022
(unaudited)
December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
1,208,574
$
3,575,682
Accounts receivable, net of allowance for
doubtful accounts
1,683,654
2,007,136
Unbilled services
796,363
542,952
Prepaid and other current assets
1,728,707
1,840,178
Income taxes receivable
1,470,248
1,484,851
Total current assets
6,887,546
9,450,799
Property and equipment, net
218,077
243,791
Deposits
34,310
34,310
Deferred income taxes
6,351,130
6,060,129
Intangible assets, net
4,438,461
4,701,491
Goodwill
8,394,483
8,394,483
Total assets
$
26,324,006
$
28,885,003
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
1,172,005
$
1,453,454
Accrued compensation and benefits
372,773
1,189,472
Deferred revenue
1,086,631
1,663,719
Earnout liability
395,165
432,000
Promissory note to related parties
-
140,625
Operating lease liability
16,250
45,233
Total current liabilities
3,042,824
4,924,503
Commitments and contingencies
Stockholders’ equity:
Common stock, par value at $0.001,
33,333,333 shares authorized, 13,256,570 shares issued and
outstanding at March 31, 2022, and 13,248,024 shares issued and
outstanding at December 31, 2021
13,256
13,248
Additional paid-in capital
41,510,070
41,318,917
Accumulated deficit
(18,242,144
)
(17,371,665
)
Total stockholders’ equity
23,281,182
23,960,500
Total liabilities and stockholders’
equity
$
26,324,006
$
28,885,003
CYNERGISTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March
31,
2022
2021
Net revenues
$
4,660,568
$
4,173,520
Cost of revenues
2,792,565
2,090,834
Gross profit
1,868,003
2,082,686
Operating expenses:
Sales and marketing expenses
1,177,332
1,212,379
General and administrative expenses
1,524,079
1,676,658
Depreciation
48,222
47,696
Amortization of acquisition-related
intangibles
263,030
340,528
Total operating expenses
3,012,663
3,277,261
Loss from operations
(1,144,660
)
(1,194,575
)
Other (expense) income:
Interest expense
(1,819
)
(20,001
)
Total other expense
(1,819
)
(20,001
)
Loss before income tax benefit
(1,146,479
)
(1,214,576
)
Income tax benefit
276,000
300,099
Net loss
(870,479
)
(914,477
)
Net loss per share:
Basic
$
(0.07
)
$
(0.08
)
Diluted
$
(0.07
)
$
(0.08
)
Number of weighted average shares
outstanding:
Basic
13,250,464
12,041,074
Diluted
13,250,464
12,041,074
CYNERGISTEK, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP LOSS
FROM OPERATIONS TO NON-GAAP ADJUSTED EBITDA
(UNAUDITED)
Three Months Ended
March 31,
2022
2021
GAAP loss from continuing
operations
$
(1,144,661
)
$
(1,194,575
)
Adjustments:
Depreciation
48,222
47,696
Amortization of acquisition-related
intangibles
263,030
340,528
Stock-based compensation
191,161
228,437
Non-GAAP adjusted EBITDA
$
(642,248
)
$
(577,914
)
Non-GAAP adjusted EBITDA per
share
Basic
$
(0.05
)
$
(0.05
)
Diluted
$
(0.05
)
$
(0.05
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220516005673/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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