Company Assists Leading Healthcare
Organizations in Building Cybersecurity and Privacy Programs
CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in
healthcare cybersecurity and information management, today
announced financial results for the first quarter that ended March
31, 2018.
Financial highlights for the first quarter 2018
include:
- Revenues for the first quarter were
$16.4 million, a decrease of 10 percent from $18.3 million in the
first quarter of 2017.
- Gross margins for the first quarter
2018 were 25 percent compared to 25 percent for the same period in
2017.
- GAAP net loss for the first quarter was
$(0.7) million, or $(0.07) per basic and diluted share compared to
net income of $0.01 million, or $0.00 per basic and diluted share
in the same period of 2017.
- Non-GAAP adjusted EBITDA and Non-GAAP
adjusted earnings exclude non-recurring charges related to our
recent debt refinancing and the departure of a senior executive,
totaling $0.7 million.
- Non-GAAP adjusted EBITDA was $0.9
million in the first quarter of 2018, compared to $1.1 million for
the same period in 2017.
- Non-GAAP adjusted earnings per share
for the first quarter 2018 was $0.06 per basic and $0.05 per
diluted share, compared to $0.07 per basic and diluted share for
the same period of 2017.
Recent operational highlights include:
- Announced the first full-service
managed print service contract that includes an integrated print
security assessment component.
- Expanded managed services cross-selling
efforts by successfully adding a three-year CAPP contract to our
newest managed print service client.
- Maintained a 95 percent client renewal
rate for the quarter.
- Grew the pipeline for both new and
existing managed services, particularly Patient Privacy Monitoring,
Incident Response, and Biomedical Device Security.
“In Q1, our focus was to strengthen relationships with our
clients, grow the managed services pipeline, and develop and
improve our services offerings to better meet existing and emergent
client needs,” said Mac McMillan, President and CEO of CynergisTek.
“I am pleased with the progression we made in all three of those
areas. This focus reiterates that we are here to help our clients
build cybersecurity and privacy programs during a time where
healthcare continues to experience an increase of cyber
attacks.”
Financial results for the three months ended March 31,
2018
Revenue decreased by approximately $1.9 million to $16.4 million
for the three months ended March 31, 2018, as compared to the same
period in 2017. This decrease is a result of approximately $2.5
million less in managed service revenues due to approximately $3.8
million in non-renewals of long-term contracts, partially offset by
approximately $1.3 million in additional revenues from the
expansion of existing customers and contracts from new customers;
approximately $0.8 million in additional revenues from consulting
and professional services provided to new and existing customers;
and approximately $0.2 million less in equipment revenues in
2018.
Cost of revenue was $12.2 million for the three months ended
March 31, 2018, as compared to $13.7 million for the same period in
2017. We incurred approximately $0.2 million less in staffing
costs, and approximately $1.0 million less in supplies and
third-party services, largely as a result of the net reduction in
managed services contracts. Equipment costs decreased by
approximately $0.2 million in 2018.
Gross margin remained at 25 percent of revenue for the three
months ended March 31, 2018 as compared to 2017. We were successful
in adjusting our staffing to be reflective of our current service
activity. Over the second half of 2018 and into next year, we
expect gross margins to improve as we look to increase growth in
our cybersecurity services.
Sales and marketing expenses were $1.5 million for the three
months ended March 31, 2018, as compared to $1.4 million for the
same period in 2017. Our tradeshow and forum related marketing
expenses were approximately $0.1 million more in 2018 as we
actively pursue new business.
General and administrative expenses increased to $2.6 million
for the three months ended March 31, 2018, as compared to $2.2
million for the three months ended March 31, 2017. The increase is
attributed to approximately $0.6 million in severance paid to a
departed executive offset by a decrease in professional fees and
travel costs in 2018, where 2017 included higher costs in
connection with the acquisition and integration of CTEK
Security.
Income tax benefit for the three months ended March 31, 2018 was
$0.2 million compared to income tax expense of $0.01 million for
the same period in 2017. The 2018 benefit is based on an estimated
annual income tax expense rate we anticipate for the year as we
expect to be in a tax expense position by year-end. The 2017
expense was based on similar terms and was influenced by state
minimum tax charges.
Net loss was $(0.7) million for the three months ended March 31,
2018, or $(0.07) per basic and diluted share, compared to net
income of $0.01 million, or $0.00 per basic and diluted share in
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.
Non-GAAP adjusted EBITDA, when adding back stock-based
compensation, non-recurring charges related to our recent debt
refinancing and the departure of a senior executive was $0.9
million in the first quarter of 2018, compared to $1.1 million for
the same period in 2017.
Non-GAAP adjusted earnings for the first quarter of 2018 was
$0.5 million, or $0.06 per basic and $0.05 per diluted share after
adjusting for non-cash income tax benefit, non-recurring charges
related to our recent debt refinancing and the departure of a
senior executive, amortization of intangibles, stock-based
compensation and depreciation, with all adjustments totaling $1.2
million, compared to $0.6 million or $0.07 per basic and diluted
share after adjusting for non-cash income tax expense, amortization
of intangibles, stock-based compensation and depreciation, with all
adjustments totaling $0.6 million, for the same period of 2017.
CYNERGISTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31,
2018(unaudited)
December 31, 2017 ASSETS Current
assets: Cash and cash equivalents $ 3,409,293 $ 4,252,060
Accounts receivable, net 10,577,287 13,264,323 Prepaid and other
current assets 1,590,277 557,426 Supplies 1,085,762
1,156,006
Total current assets
16,662,619 19,229,815
Property and equipment, net 766,476 831,784
Deposits 87,778 87,376
Deferred income taxes
3,350,310 3,120,310
Intangible assets, net 10,448,190
10,900,924
Goodwill 18,525,206
18,525,206
Total assets $ 49,840,579
$ 52,695,415
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Accounts payable and accrued
expenses $ 5,171,719 $ 9,631,634 Accrued compensation and benefits
2,715,474 3,711,551 Deferred revenue 1,035,470 1,425,821 Note
payable 343,750 - Current portion of long-term liabilities
3,130,230 5,494,837
Total
current liabilities 12,396,643
20,263,843
Long-term liabilities: Term
loan, less current portion 14,676,081 9,438,333 Promissory notes to
related parties, less current portion 5,437,500 6,000,000 Capital
lease obligations, less current portion 124,392
147,861
Total long-term
liabilities 20,237,973
15,586,194
Commitments and contingencies
Stockholders’ equity: Common stock, par value at $0.001,
33,333,333 shares authorized, 9,592,547 shares issued and
outstanding at March 31, 2018 and 9,576,028 shares issued and
outstanding at December 31, 2017 9,593 9,576 Additional paid-in
capital 31,344,607 31,156,362 Accumulated deficit
(14,148,237 ) (14,320,560 )
Total
stockholders’ equity 17,205,963
16,845,378
Total liabilities and stockholders’
equity $ 49,840,579 $ 52,695,415
CYNERGISTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended March 31, 2018
2017 Net revenues $ 16,383,317
$ 18,254,689
Cost of revenues 12,237,865
13,667,541 Gross profit
4,145,452 4,587,148
Operating expenses:
Sales and marketing 1,499,047 1,369,008 General and administrative
expenses 2,635,547 2,174,435 Depreciation 91,583 91,224
Amortization of acquisition-related intangibles 452,734
520,343 Total operating expenses
4,678,911 4,155,010
(Loss) income from operations (533,459 )
432,138
Other income (expense):
Other income 19 19 Interest expense (403,461 )
(412,334 ) Total other income (expense) (403,442 )
(412,315 )
(Loss) Income before
provision for income taxes (936,901 ) 19,823
Income tax
benefit (expense) 229,558
(13,539 )
Net (loss) income $ (707,343 ) $
6,284
Net (loss) income per share: Basic $
(0.07 ) $ 0.00 Diluted $ (0.07 )
$ 0.00
Number of weighted average shares
outstanding: Basic 9,586,608
9,216,719 Diluted 9,586,608
9,615,285
CYNERGISTEK, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP
(LOSS) INCOME FROM OPERATIONS TO NON-GAAP ADJUSTED EBITDA
(UNAUDITED) Three Months Ended March 31,
2018 2017 GAAP (loss) income
from operations $ (533,459 ) $ 432,138
Adjustments:
Depreciation 91,583 91,224 Amortization 452,734 520,343 Onetime
restructuring and legal fees 735,183 - Stock-based compensation
188,262 24,659
Non-GAAP adjusted EBITDA $ 934,303 $
1,068,364
Non-GAAP adjusted EBITDA per share
Basic $ 0.10 $ 0.12 Diluted $ 0.09
$ 0.11
CYNERGISTEK, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP NET (LOSS) INCOME TO
NON-GAAP ADJUSTED EARNINGS (UNAUDITED) Three
Months Ended March 31, 2018
2017 GAAP Net (loss) income $ (707,343 ) $ 6,284
Adjustments: Cash tax adjustment (229,558 ) 1,908 Other
expense (19 ) (19 ) Onetime restructuring and legal fees 735,183 -
Depreciation 91,583 91,224 Amortization 452,734 520,343 Stock-based
compensation 188,262 24,659
Non-GAAP adjusted earnings $ 530,842
$ 644,399
Non-GAAP adjusted earnings per
share Basic $ 0.06 $ 0.07 Diluted $
0.05 $ 0.07
Conference Call InformationDate: Monday, May 14Time: 12
pm Eastern Time / 9 am Pacific TimeU.S.:
1-888-394-8218International: 1-323-701-0225Conference ID:
8561147
Webcast: http://public.viavid.com/index.php?id=129443
A replay of the call will be available from 3 pm ET on May 14,
to 11:59 pm ET on May 21. 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 8561147.
About CynergisTek, Inc.
CynergisTek is a top-ranked cybersecurity and information
management consulting firm dedicated to serving the healthcare
industry. CynergisTek offers specialized services and solutions to
help organizations achieve privacy, security, compliance, and
document output management 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 named in
numerous research reports as one of the top firms that provider
organizations turn to for privacy and security, and won the 2017
Best in KLAS award for Cyber Security 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/20180514005206/en/
Investor Relations Contact:CynergisTek, Inc.Bryan Flynn,
(949) 357-3914InvestorRelations@cynergistek.comorMedia
Contact:Aria MarketingDanielle Johns, (617) 332-9999 x241Senior
Account Executivedjohns@ariamarketing.com
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