CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in
cybersecurity, privacy, and compliance, today announced financial
results for the three months ended March 31, 2021.
Recent Operational Highlights
- Recently announced a $1.4 million renewal and expansion of
services at a large regional hospital system.
- Recently announced the first CMMC project with Pacific Medical
Centers.
- Gross margin improved to 39% from cost reduction initiatives,
excluding the benefit of the Employee Retention Credit.
- Net loss improved year over year to $0.9 million ($0.08 per
share) from $1.9 million ($0.18 per share).
- Adjusted EBITDA improved to a loss of $0.6 million from $1.4
million.
“Budgets are returning, pricing is improving, and pre-sold
revenue continues to grow coming off the momentum started in Q4,”
said Caleb Barlow, President and CEO of CynergisTek, Inc. Mr.
Barlow goes on to note, “On-going, high-profile ransomware attacks
on U.S. Critical infrastructure including the incident at Scripps
Health and the shutdown at the Colonial Pipeline are resulting in
increased awareness in the c-suite that investment in prevention
and preparation is far less costly than remediating an attack.”
For the Three Months Ended March 31, 2021, as Compared to the
Three Months Ended March 31, 2020
Revenue was $4.2 million for the three months ended March 31,
2021, as compared to $5.1 million for the same period in 2020.
Managed Services revenue decreased for the three months ended March
31, 2021, by $0.6 million to $2.4 million, due to the impact of
some customers canceling or delaying renewals largely due to the
impact from COVID-19. Consulting and professional services revenue
was $1.7 million for the three months ended March 31, 2021, as
compared to $2.1 million for the same period in 2020, due to
reduced business as a direct result of COVID-19 and customers
budgetary concerns.
Gross margin was 50% of revenue due in part to the positive
impact of the employee retention tax credit. Excluding the employee
retention tax credit, gross margin was 39% for the three months
ended March 31, 2021, as compared to 33% for the same period in
2020. This increase was a direct result of the expense reductions
and operational efficiencies.
SG&A expenses decreased for the three months ended March 31,
2021, by $0.6 million to $2.9 million, as compared to the same
period in 2020, primarily due to decreases in payroll and benefit
costs because of headcount reductions, decreases in travel because
of COVID-19, and a $0.2 million benefit from the employee retention
tax credits provided under the CARES Act. These decreases were
partially offset by recruiting costs related to the hiring of a new
sales leader and additional direct sales leads.
GAAP net loss for the three months ended March 31, 2021, was
$0.9 million, or $0.08 per basic and diluted share, as compared to
a net loss of $1.9 million, or $0.18 per basic and diluted share,
for the same period of 2020.
Non-GAAP adjusted EBITDA loss was $0.6 million for the three
months ended March 31, 2021, compared to a loss of $1.4 million for
the same period in 2020.
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, Inc.’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, May 13th, 2021 Time: 4:30 pm ET / 1:30 pm PT
U.S.: 1-866-269-4261 International: 1-786-204-3977 Conference ID:
9395065 Webcast: http://public.viavid.com/index.php?id=144870
A replay of the call will be available from 7:30 pm ET on
Thursday May 13, 2021, to 11:59 pm ET on Thursday May 20, 2021. To
access the replay, please dial 1-844-512-2921 if calling from the
U.S. or 1-412-317-6671 if calling from outside the U.S. The PIN is
9395065.
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 COVID-19, including
the geographic spread, the severity of the virus, the duration of
the COVID-19 outbreak, 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, 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.
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, 2021
(unaudited)
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents
$
4,443,140
$
5,613,654
Accounts receivable, net of allowance for
doubtful accounts
1,949,858
2,063,136
Unbilled services
557,487
566,713
Prepaid and other current assets
1,806,340
2,032,420
Income taxes receivable
1,952,532
1,680,866
Total current assets
10,709,357
11,956,789
Property and equipment, net
380,843
541,525
Deposits
64,586
64,586
Deferred income taxes
4,995,830
4,959,125
Intangible assets, net
5,723,089
6,063,617
Goodwill
8,394,483
8,394,483
Total assets
$
30,268,188
$
31,980,125
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
930,937
$
1,326,919
Accrued compensation and benefits
531,524
814,830
Deferred revenue
1,208,074
1,265,864
Current portion of promissory note to
related parties
562,500
562,500
Current portion of operating lease
liability
129,233
252,398
Total current liabilities
3,362,268
4,222,511
Long-term liabilities:
Earnout liability
1,300,000
1,300,000
Promissory note to related party, less
current portion
-
140,625
Paycheck Protection Program loan
2,825,500
2,825,500
Operating lease liability, less current
portion
15,002
40,031
Total long-term liabilities
4,140,502
4,306,156
Commitments and contingencies
Stockholders’ equity:
Common stock, par value at $0.001,
33,333,333 shares authorized, 12,120,698 shares issued and
outstanding at March 31, 2021, and 12,024,967 shares issued and
outstanding at December 31, 2020
12,024
12,024
Additional paid-in capital
38,792,861
38,564,520
Accumulated deficit
(16,039,563
)
(15,125,086
)
Total stockholders’ equity
22,765,418
23,451,458
Total liabilities and stockholders’
equity
$
30,268,188
$
31,980,125
CYNERGISTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March
31,
2021
2020
Net revenues
$
4,173,520
$
5,115,827
Cost of revenues
2,090,834
3,423,532
Gross profit
2,082,686
1,692,295
Operating expenses:
Sales and marketing expenses
1,212,379
1,487,347
General and administrative expenses
1,676,658
2,104,844
Depreciation
47,696
47,600
Amortization of acquisition-related
intangibles
340,528
416,191
Total operating expenses
3,277,261
4,055,982
Loss from operations
(1,194,575
)
(2,363,687
)
Other expense income:
Interest income
-
6,068
Interest expense
(20,001
)
(24,288
)
Total other expense
(20,001
)
(18,220
)
Loss before income tax benefit
(1,214,576
)
(2,381,907
)
Income tax benefit
300,099
531,284
Net loss
(914,477
)
(1,850,623
)
Deemed dividends from warrant
anti-dilution provisions
(5,834
)
-
Net loss attributable to common
shareholders
$
(920,311
)
$
(1,850,623
)
Net loss per share:
Basic
$
(0.08
)
$
(0.18
)
Diluted
$
(0.08
)
$
(0.18
)
Number of weighted average shares
outstanding:
Basic
12,041,074
10,374,497
Diluted
12,041,074
10,374,497
CYNERGISTEK, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP LOSS
FROM OPERATIONS TO NON-GAAP ADJUSTED EBITDA
(UNAUDITED)
Three Months Ended March
31,
2021
2020
GAAP loss from operations
$
(1,194,575
)
$
(2,363,687
)
Adjustments:
Stock based compensation
228,437
411,007
Non-recurring restructuring and legal
costs
-
43,000
Depreciation
47,696
47,600
Amortization of acquisition-related
intangibles
340,528
416,191
Non-GAAP adjusted EBITDA
$
(577,914
)
$
(1,445,889
)
Non-GAAP adjusted EBITDA per
share:
Basic
$
(0.05
)
$
(0.14
)
Diluted
$
(0.05
)
$
(0.14
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210513005195/en/
Investor Relations Contact: Paul Anthony (949) 382-1419
InvestorRelations@CynergisTek.com
Media Contact: Allison + Partners Jaime Tero (415)
755-8639 jaime.tero@allisonpr.com
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