VirtualArmour International Inc. (CSE:VAI) (3V3:F)
(OTCQB:VTLR), a premier cybersecurity managed services
provider, reported results for the first quarter ended March 31,
2019. Financial results are in U.S. dollars, with comparisons made
to the same year-ago quarter unless otherwise noted.
Q1 2019 Financial Highlights
- Revenue increased to $3.5 million, supported by growth in the
number of customers served as well as the size of orders from new
and existing customers.
- Managed and professional services revenue increased 17% to a
record $1.3 million, due primarily to the addition of 14 new
clients signed under multi-year contracts over the last 12
months.
- Gross profit as a percentage of revenue increased to 30.5% from
28.1% due to a favorable shift in revenue mix to higher margin
managed and professional services revenue.
- Adjusted EBITDA was a negative $233,000. Net of a one-time
extraordinary event Adjusted EBITDA was a positive $24,000 (see
Extraordinary Event below).
- Annual recurring revenue (ARR) totaled $4.3 million at March
31, 2019, up from $3.7 million at March 31, 2018. The company
defines ARR as the value of its service contracts normalized to a
one-year period.
- Total contract value (TCV) was $9 million at March 31, 2019, up
from $6.1 million at March 31, 2018. The company defines TCV as the
total value of its service contracts including one time and
recurring charges.
Q1 2019 Operational Highlights
- Engaged subsidiary of major pharmaceutical company in a new
two-year, $300,000 managed service contract, which also represented
VirtualArmour’s first entry into the pharmaceutical industry.
- Expanded engagement over next 12 months with a $400,000 managed
and professional services contract with an existing global
non-profit specializing in research and education customer.
- Hired Partner Account Manager to focus and expand on the
partner program.
- Received ISO-27001:2014 Certification for Information Security
Management System.
- Registered trademark for CloudCastr approved by United States
Patent and Trademark Office.
Q1 2019 Financial Summary
Revenue totaled $3.5 million in the first quarter
of 2019, as compared to $3.3 million in the same year ago quarter.
Managed and professional services revenue increased by $0.2 million
and product sales (hardware and software) increased by $0.1
million.
Cost of sales were $2.5 million in the first
quarter of 2019 as compared to $2.3 million in the same year ago
quarter. The increase in cost of sales was due primarily to an
increase in managed and professional services cost of sales
($113,000) with the balance attributable to product cost of
sales.
Net and comprehensive loss was $403,000 or $(0.01)
per share in the first quarter of 2019, as compared to a loss of
$127,000 or $(0.00) per share in the same year-ago quarter.
Adjusted EBITDA was a negative $233,000 in the
first quarter of 2019, changed from a positive $15,000 in same
period in 2018 (see definition of adjusted EBITDA, a non-GAAP term,
below). Net of a one-time extraordinary event, the recent quarter’s
Adjusted EBITDA would be a positive $24,000.
Cash totaled $60,000 at March 31, 2019, compared to
$114,000 as of December 31, 2018. The decrease was primarily due to
the expense of the Investor Awareness Campaign partially offset by
financing activities.
Management Commentary
“Our first quarter top line and Gross Profit
results are in line with expectations while the bottom line and
adjusted EBITDA, net of a notable extraordinary expense, compare
favorably with recent results,” remarked Michael Panec,
VirtualArmour’s CFO. “As always, we are managing a careful balance
between cash flow and taking advantage of the tremendous growth
opportunities available in the current market.”
Panec added: “Looking ahead in 2019, with the
ongoing growth in customer acquisition and the addition of
customers on a monthly recurring revenue model, coupled with its
high customer retention, VirtualArmour expects to maintain
appreciable growth into 2019.”
“In Q1 2019, our top-line growth was driven by an
expanding revenue stream from global managed services and
professional services,” said Russ Armbrust, CEO of VirtualArmour.
“This was achieved by signing four new recurring revenue contracts
for managed and professional services.
During this quarter, VirtualArmour started to
deliver strategy-driven engagements that drive action, value, and
accountability by providing consistent, positive customer
experiences, communications, and service transparency to each
client. Altogether, this progress has enhanced our ability to
secure new clients and gain additional business from current
clients, as well as helped us maintain an industry-leading customer
retention rate.”
About VirtualArmour
VirtualArmour International is a global
cybersecurity and managed services provider that delivers
customized solutions to help businesses build, monitor, maintain
and secure their networks.
The company maintains 24/7 client monitoring and
service management with specialist teams located in its U.S. and
UK-based security operation centers. Through partnerships with
best-in-class technology providers, VirtualArmour delivers leading
hardware and software solutions for customers that are both
sophisticated and scalable, and backed by industry-leading customer
service and experience. VirtualArmour’s proprietary CloudCastr
client portal and prevention platform provides clients with
unparalleled access to real-time reporting on threat levels, breach
prevention and overall network security.
VirtualArmour services a wide range of clients,
which include Fortune 500 companies and several industry sectors in
over 30 countries across five continents. For further information,
visit www.virtualarmour.com.
Supplemental Non-GAAP Financial
Measures
In addition to GAAP financial measures, management
uses non-GAAP financial measures to assess the company's
operational performance. It is likely that the non-GAAP financial
measures used by the company will not be comparable to similar
measures reported by other issuers or those used by financial
analysts as their measures may have different definitions.
Generally, a non-GAAP financial measure is a
numerical measure of an entity's historical or future financial
performance, financial position or cash flows that is neither
calculated nor recognized under IFRS. Management believes that such
non-GAAP financial measures can be important as they provide users
of the financial statements with a better understanding of the
results of the company's recurring operations and their related
trends, while increasing transparency and clarity into its
operating results. Management also believes these measures can be
useful in assessing the company's capacity to discharge its
financial obligations.
In Q1 2018, management began assessing its
operational performance using supplemental non-GAAP statement of
income, adjusted GAAP, which is defined as loss for the period as
reported excluding depreciation and amortization, change in fair
value of warrant derivative liabilities, share-based compensation
and interest expense.
Adjusted EBITDA is not a term recognized under GAAP
and non-GAAP measures do not have standardized meaning.
Accordingly, non-GAAP measures should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with GAAP.
As disclosed in its press release of January 24,
2019, VirtualArmour engaged in an Investor Awareness Campaign In
the first quarter 2019. The purpose of the campaign was to raise
awareness of the company, its services and the growth potential of
its industry. The cost of this campaign totaled $257,000. There is
no expectation that this type of activity will be undertaken again
in the foreseeable future.
|
The table below provides a reconciliation of net (loss) for the
period as reported to non-GAAP adjusted EBITDA for the three months
ended March 31, 2019 and 2018: |
|
|
Q1 2019 |
Q1 2018 |
Loss for the period as
reported |
$(402,926) |
$(127,212) |
Add (deduct): |
|
|
Depreciation and amortization |
100,555 |
32,740 |
Change in fair value of warrant derivative liabilities |
- |
(2,589) |
Share-based compensation |
17,655 |
72,971 |
Interest Expense |
51,730 |
39,001 |
Adjusted EBITDA |
$(232,986) |
$14,911 |
One-time Extraordinary Expense |
257,000 |
- |
Adjusted EBITDA net of Extraordinary Expense |
$24,014 |
$14,911 |
|
|
|
Important Cautions
Regarding Forward Looking Statements
This press release may include forward-looking
information within the meaning of Canadian securities legislation
and U.S. securities laws. This press release includes certain
forward-looking statements concerning the future performance of our
business, its operations and its financial performance and
condition, as well as management’s objectives, strategies, beliefs
and intentions. The forward-looking information is based on certain
key expectations and assumptions made by the management of
VirtualArmour. Although, VirtualArmour believes that the
expectations and assumptions on which such forward-looking
information is based are reasonable, undue reliance should not be
placed on the forward-looking information as VirtualArmour cannot
provide any assurance that it will prove to be correct.
Forward-looking statements are frequently
identified by such words as “may”, “will”, “plan”, “expect”,
“anticipate”, “estimate”, “intend” and similar words referring to
future events and results. Forward-looking statements are based on
the current opinions and expectations of management. All
forward-looking information is inherently uncertain and subject to
a variety of assumptions, risks and uncertainties, including the
success of the Academies, the future employee potential from the
Academies, future interest in such programs, competitive risks and
the availability of financing. These forward-looking statements are
made as of the date of this press release and VirtualArmour
disclaims any intent or obligation to update publicly any
forward-looking information, whether as a result of new
information, future events or results or otherwise, other than as
required by applicable securities laws.
|
VirtualArmour International Inc. |
Condensed Interim Consolidated Statements of Comprehensive
Loss |
For the three months ended March 31, 2019 and
2018 |
(Unaudited - Expressed in U.S. Dollars) |
|
|
March 31, |
March 31, |
|
2019 |
2018 |
|
$ |
$ |
|
|
|
Revenue |
3,548,186 |
3,267,653 |
Cost of
sales |
(2,466,080) |
(2,348,985) |
|
|
|
Gross Profit |
1,082,106 |
918,668 |
|
|
|
Expenses |
|
|
|
|
|
General and administrative |
778,203 |
425,783 |
Research and development |
49,433 |
35,679 |
Sales and marketing |
605,666 |
548,006 |
|
|
|
Total Expenses |
1,433,302 |
1,009,468 |
|
|
|
Loss from
Operations |
(351,196) |
(90,800) |
|
|
|
Other Income
(Expense) |
|
|
|
|
|
Change in fair value of warrant derivative liabilities |
– |
2,589 |
Interest expense |
(51,730) |
(39,001) |
|
|
|
Net Loss and Comprehensive Loss |
(402,926) |
(127,212) |
|
|
|
Loss per share – basic and diluted |
(0.01) |
(0.00) |
|
|
|
Weighted average number of shares outstanding – basic and
diluted |
63,599,447 |
57,936,114 |
VirtualArmour International Inc. |
Interim
Consolidated Balance Sheets |
As at
March 31, 2019 and December 31, 2018 |
(Unaudited -
Expressed in U.S. Dollars) |
|
|
March 31, |
December 31, |
|
2019 |
2018 |
|
$ |
$ |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current
Assets |
|
|
|
|
|
Cash |
60,130 |
114,281 |
Accounts receivable |
2,202,634 |
2,491,233 |
Other receivables |
– |
43,750 |
Prepaid expenses |
207,427 |
390,968 |
Contract assets |
722,683 |
722,683 |
|
|
|
Total Current
Assets |
3,192,874 |
3,762,915 |
|
|
|
Property and equipment |
613,228 |
513,984 |
Intangible assets |
57,390 |
61,347 |
Contract assets |
1,084,024 |
1,264,695 |
|
|
|
Total Assets |
4,947,516 |
5,602,941 |
|
|
|
LIABILITIES |
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
Accounts payable and accrued liabilities |
3,152,188 |
3,728,051 |
Deferred revenue |
947,290 |
888,593 |
Debt |
336,500 |
– |
Current portion of lease obligations |
546,416 |
679,647 |
Due to related parties |
170,570 |
– |
|
|
|
Total Current
Liabilities |
5,152,964 |
5,296,291 |
|
|
|
Deferred revenue |
1,141,077 |
1,331,256 |
Lease obligations |
213,984 |
150,632 |
|
|
|
Total Liabilities |
6,508,025 |
6,778,179 |
|
|
|
STOCKHOLDERS’
DEFICIT |
|
|
|
|
|
Common stock, no par value, 300,000,000 shares authorized Issued
and outstanding: 63,599,447 (2018 – 63,599,447) shares |
7,670,975 |
7,670,975 |
Additional paid-in capital |
1,972,877 |
1,955,222 |
Deficit |
(11,204,361) |
(10,801,435) |
|
|
|
Total Stockholders’ Deficit |
(1,560,509) |
(1,175,238) |
|
|
|
Total Liabilities and Stockholders’ Deficit |
4,947,516 |
5,602,941 |
|
|
|
Company ContactRuss
ArmbrustCEOVirtualArmour International Inc.Tel (720) 644-0913Email
Contact
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