Cynergistek, Inc. (NYSE:CTEK)

AUSTIN, Texas--(BUSINESS WIRE)--CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in healthcare cybersecurity, privacy, and compliance, today announced financial results for the fourth quarter and twelve months ended December 31, 2019.

Recent Operational Highlights Include:

Expanded partnership with a multi-year engagement for Managed Security Services (MSS) as well as remediation services totaling over $1 million in additional business.
Bolstered sales team by adding six experts in cybersecurity, healthcare IT, and privacy.
Expanded relationship with one of the world’s leading public research university systems with a six-figure contract with the firm’s Compliance Assist Partnership Program and Medical Device Security Assessment.
Strengthened board expertise in IT security, healthcare, public company, business development, and C-suite leadership with the addition of three new members.

Recent Financial Results (Compared to Prior Periods):

Revenues for the full-year 2019 increased by $0.1 million to $21.4 million.

Managed services, including equipment and software, revenue was $11.9 million, an increase of 10%, compared to $10.8 million for the same period of 2018. This increase was due to new multi-year managed services contracts.
Professional and consulting services revenues were down by $1.0 million to $9.5 million, compared to $10.5 million for the same period of 2018. This decrease was due to $0.6 million from the addition of the Backbone Consultants business offset by $1.6 million in lower revenues from consulting and professional services, primarily due to the completion of a large, non-recurring remediation contract for one of its largest customers.

Gross margin was 39% for 2019, and 48% for the same period in 2018. The reduction in gross margin is reflective of our investment in attracting talented cybersecurity employees, costs associated with ramping up our new managed services offerings, and the lower than expected consulting and professional services revenue from new and existing customers.
GAAP net loss from continuing operations for the twelve months ended December 31, 2019 was $(5.4) million, or $(0.55) per basic and diluted share compared to a net loss of $(4.0) million, or $(0.41) per basic and diluted share for the same period of 2018.
Non-GAAP adjusted EBITDA, was $(1.4) million for the twelve months of 2019, compared to breakeven for the same period in 2018.
Received a $2.5 million commitment from a current investor for equity financing to support current operations

“Over the last eight months I have been focused on the fundamentals of the business,” said Caleb Barlow, president and CEO of CynergisTek. “Strengthening the sales team, improving operational efficiencies, and positioning the company for growth. The hard work and dedication by our employees has started to pay off as you can see with our recent large contract announcements. We will work to continue this momentum into 2020.”

For the 12 Months Ended December 31, 2019, Compared to the 12 Months Ended December 31, 2018

Financial results are from the company’s continuing operations related to security services unless specifically noted that it includes discontinued operations related to the sale of the managed print services (MPS) business.

Revenue was $21.4 million for the year ended December 31, 2019, as compared to $21.3 million for the same period in 2018. Managed services revenue was $11.9 million an increase of 10%, compared to $10.8 million for the same period of 2018. Professional and consulting services revenues were $9.5 million, a decrease of $1.0 million, compared to $10.5 million for the same period of 2018.

Gross margin was 39% of revenue for the year ended December 31, 2019, and 48% for the same period in 2018.

Sales and marketing expenses were $5.3 million for the year ended December 31, 2019, as compared to $5.2 million for the same period in 2018. General and administrative expenses increased by $0.5 million to $6.9 million for the year ended December 31, 2019, as compared to $6.4 million for the same period in 2018. The increase in general and administrative expenses is attributed to 1) $0.9 million in non-recurring expenses related to the onboarding of our new CEO while our outgoing CEO remained as part of the transition, severance related costs associated with targeted cost reductions and transaction fees associated with the Backbone acquisition; and 2) $0.3 million in software subscriptions and support costs for streamlining operations and business tracking. These additional costs were primarily offset by lower costs of $0.6 million in severance paid to a departed executive in 2018. The company is continuing to look at additional areas where it might be able to further reduce costs.

GAAP net loss from continuing operations for the year ended December 31, 2019 was $(5.4) million, or $(0.55) per basic and diluted share compared to a net loss of $(4.0) million, or $(0.41) per basic and diluted share for the same period of 2018. GAAP net income for the year ended December 31, 2019, after adjustment for income from discontinued operations, was $14.9 million, or $1.51 per basic and $1.49 per diluted share compared to $1.9 million, or $0.20 per basic and $0.19 per diluted share for the same period of 2018.

Non-GAAP adjusted EBITDA loss from continuing operations, after adding back stock-based compensation, CEO transition related costs, restructuring costs related to a reduction in workforce at the end of the year, and transaction expenses related to the Backbone Consultants acquisition, was $(1.4) million for the year ended December 31, 2019, compared to breakeven after adding back stock-based compensation, change in valuation of earnout, non-recurring charges related to debt refinancing, and the departure of a senior executive for the same period in 2018.

The Company recently received a $2.5 million commitment from a current investor for equity financing to support current operations. The deal has a one-year term. The company is not obligated to sell any shares pursuant to the Equity Commitment. The purchase price of the shares will be at a discount to the market price and will include an initial warrant along with additional warrants if and when the company sells shares to the investor. The company is still finalizing the specific terms related to share purchases.

CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in cybersecurity, privacy, and compliance, today announced that one of its clients has expanded its partnership with a multi-year engagement for Managed Security Services (MSS), as well as Cybersecurity Remediation Services. The new, multi-year agreement totals over $1 million in additional business and is the direct result of the client proactively following the company’s guidance to pursue remediation efforts after the analysis of risk assessments conducted by CynergisTek.

The new MSS engagement includes 24/7 security event monitoring to reduce the potential impact of a cyberattack by thoroughly and accurately classifying security threats within the client’s network, endpoint devices, and cloud and SaaS applications. With CynergisTek’s security expertise, the company can focus on its core business, and trust CynergisTek to manage and support its security function.

"Adversarial activity typically increases during dynamic and uncertain times like these, and we are pleased to see our clients bolstering their defensive posture," said Caleb Barlow, CEO and president of CynergisTek. "As the healthcare sector prepares, it is critical to take proactive steps to address increasing security and privacy risks that threaten their operations. With our deep expertise, CynergisTek can work closely with our customers as an extension of their team to shore up their security programs, allowing them to focus on their core competencies. This expanded engagement for our Managed Security Services and Cybersecurity Remediation Services serves as testament to the domain expertise CynergisTek delivers."

Third Quarter 2019 Financial Results

• Revenue decreased by approximately $0.9 million to $4.8 million for the three months ended September 30, 2019, as compared to the same period in 2018.
  
• Non-GAAP adjusted loss from continuing operations per share for the third quarter 2019 was $(0.04) per basic and diluted share, compared to breakeven or $0.00 per basic and diluted share for the same period of 2018.
  

Second Quarter 2019 Financial Results

• Revenues from continuing operations for the second quarter were $5.1 million, an increase of 17%, compared to $4.3 million for the same period of 2018.
• Non-GAAP adjusted loss from continuing operations per share for the second quarter 2019 was ($0.05) per basic and diluted share, compared to ($0.11) per basic and diluted share for the same period of 2018.

“CynergisTek has just marked its tenth consecutive quarter of year-over-year revenue growth in security,” said Mac McMillan, CEO Emeritus of CynergisTek. “The evolving security threat landscape and several new privacy regulations at the state level have been key factors contributing to the increased demand for our managed services. Like this quarter, we will continue to focus on expanding our newer managed services into our growing client base.”

“CynergisTek has seen continued success in the highly regulated healthcare industry,” said Caleb Barlow, President and CEO of CynergisTek. “CynergisTek has all the components in place to take advantage of the evolving threat landscape and I see tremendous opportunity to expand on what they have built by adding another layer to the assessments and managed services that help clients be more resilient in a cybersecurity incident.”

First Quarter 2019 Financial Results

• Revenues from continuing operations for the first quarter were $5.8 million an increase of 32%, compared to $4.4 million for the same period of 2018.
• Non-GAAP adjusted loss from continuing operations per share for the first quarter 2019 was ($0.09) per basic and diluted share, compared to ($0.11) per basic and ($0.10) diluted share for the same period of 2018.

“The first quarter of 2019 was very successful in terms of our strategy for the future,” said Mac McMillan, President and CEO of CynergisTek. “We reduced debt by selling the Managed Print Services business, allowing us to increase focus on our core cybersecurity, privacy, and compliance services. We expanded our service offerings by launching Managed Security Services to provide proactive and comprehensive security monitoring of network devices, endpoints, and cloud- and SaaS- based environments. Many of our customers have expressed interest in wanting more focused monitoring to keep up with the increased threat landscape healthcare is experiencing.”

Fourth Quarter 2018 Financial Results

• Revenues for the fourth quarter were $18.6 million, compared to $18.7 million for the same period of 2017. Revenues for the full year were $71.1 million compared to $71.6 million for the same period of 2017.
• Non-GAAP adjusted earnings per share for the fourth quarter 2018 was $0.34 per basic and $0.33 per diluted share, compared to $0.21 per basic and $0.20 per diluted share for the same period of 2017. Non-GAAP adjusted earnings per share for the full year 2018 was $0.72 per basic and $0.70 per diluted share, compared to $0.64 per basic and $0.60 per diluted share for the same period of 2017.

“2018 was another successful year for CynergisTek where we strived to be the trusted partner in healthcare security, privacy, and compliance,” said Mac McMillan, President and CEO of CynergisTek. “We attribute the growth in cybersecurity services to the increasing security threat landscape and incidents occurring in healthcare. The significant growth in professional services is due to the cybersecurity workforce shortage that exists across all industries but even more so in healthcare. 2019 we will continue to see the market demand increase for these types of services, as healthcare cannot find and retain the necessary resources to keep up with increased security threats. Our growth was only possible because of the dedication of our staff from the back of the house to the front of the house.”

Second Quarter 2018 Financial Results

• Revenues for the second quarter were $16.9 million, an increase of 1 percent from $16.8 million in the second quarter of 2017.
• Non-GAAP adjusted earnings per share for the second quarter 2018 was $0.08 per basic and diluted share, compared to $0.09 per basic and $0.08 per diluted share for the same period of 2017.

“In Q2, we experienced some significant achievements,” said Mac McMillan, President and CEO of CynergisTek. “It was an honor to receive such high ratings from KLAS and experience milestones with contract renewals and expansions on both security and managed print service lines. Managed security services and professional services continues to be a need for healthcare IT.”

First Quarter 2018 Financial Results

• Revenues for the first quarter were $16.4 million, a decrease of 10 percent from $18.3 million in the first quarter of 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.

“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.”

MISSION VIEJO, Calif.--(BUSINESS WIRE)--

CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in healthcare cybersecurity and information management, today announced the expansion of its Incident Response (IR) Services. The comprehensive suite of services is designed to help organizations meet the growing challenges of cyber-attacks with expertise, best practices, and guidance enabling them to be fully prepared to respond to a wide range of threats.

According to the Protenus Breach Barometer Report: Year in Review, there were more than 450 healthcare breaches reported last year affecting approximately 5.6 million patients, and reported ransomware and malware incidents more than doubled, all creating at least some adverse impact for the healthcare organization attacked. Cybersecurity incidents can disrupt clinical and business operations, preventing healthcare organizations from delivering critical services safely and efficiently. CynergisTek’s IR Services help organizations take a proactive approach to assessing, defining and preparing for a range of potential incidents such as a breach or ransomware attack. The new services are fully customizable, allowing organizations to choose one or bundle multiple services to best meet their specific needs, and ensure the right technologies, people and processes are in place when they need to respond to an incident.

"We know that incident response preparation is a key component of effectively coping with adverse security events, but assembling the required resources can be extremely time and resource intensive,” said Dan Morreale, CIO of Hunterdon Medical Center. “As the industry continues to face evolving threats, it has become imperative for healthcare providers to rely on trusted partners like CynergisTek to ensure we're prepared."

CynergisTek’s offering is immediately available and includes a range of incident response functions, such as program assessments, readiness exercises, program development, event response services, recovery services, and compliance services. To ensure maximum readiness these services are also combined and offered as a managed service to give organizations greater confidence they will have the support they need when they need it.

“Incident response is much more than an IT issue — it is an enterprise-wide operation, requiring constant and routine attention to safeguard against and survive the impact of attacks,” said David Finn, EVP of Strategic Innovation at CynergisTek. “With our IR Services, we can provide the tools and expertise healthcare organizations need to determine the severity of an event, and prioritize the optimal steps to minimize downtime and associated implications of the incident.”