Managed Services and Professional Services
Continue to be in High Demand for Healthcare
CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in
healthcare cybersecurity and information management, today
announced its financial results for the second quarter that ended
June 30, 2018.
Financial Highlights for the Second Quarter 2018
Include:
- Revenues for the second quarter were
$16.9 million, an increase of 1 percent from $16.8 million in the
second quarter of 2017.
- Gross margins were comparable at 26
percent for the second quarter 2018 compared to the same period in
2017.
- GAAP net income for the second quarter
was $0.1 million, or $0.01 per basic and diluted share compared to
net income of $0.07 million, or $0.01 per basic and diluted share
in the same period of 2017.
- Non-GAAP adjusted EBITDA was $1.1
million in the second quarter of 2018, compared to $1.2 million for
the same period in 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.
Recent Operational Highlights Include:
- Experienced an increase in demand for
new professional services while increasing the number of new
managed security services clients.
- Continued to maintain a 95 percent
client renewal rate for the quarter and, 20 percent of renewals
expanded contracts with additional services.
- Announced MPS early renewal of contract
for large academic medical center.
- Rated as the top comprehensive
cybersecurity firm by KLAS and named to “20 Most Promising Managed
Print Solution Providers 2018” List by CIOReview.
“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.”
For the Three Months Ended June 30, 2018 Compared to the
Three Months Ended June 30, 2017
Revenue increased by approximately $0.1 million to $16.9 million
for the three months ended June 30, 2018, as compared to the same
period in 2017.
Cost of revenue was flat at $12.5 million for the three months
ended June 30, 2018 compared to the same period in 2017. Equipment
costs increased by approximately $1.4 million to $1.9 million in
2018, directly as a result of the increase in equipment revenues
from copier fleet refresh activities.
Gross margin remained flat at 26 percent of revenue for the
three months ended June 30, 2018 compared to the same period in
2017.
Sales and marketing expenses were $1.5 million for the three
months ended June 30, 2018, as compared to $1.4 million for the
same period in 2017. General and administrative expenses increased
by $0.2 million to $2.0 million for the three months ended June 30,
2018, as compared to the three months ended June 30, 2017.
Net income was $0.1 million for the three months ended June 30,
2018, or $0.01 per basic and diluted share, compared to net income
of $0.1 million, or $0.01 per basic and diluted share in the same
period of 2017.
Non-GAAP adjusted EBITDA, when adding back stock-based
compensation was $1.1 million in the second quarter of 2018,
compared to $1.2 million for the same period in 2017.
Non-GAAP adjusted earnings for the second quarter of 2018 was
$0.8 million, or $0.08 per basic and diluted share, compared $0.8
million or $0.09 per basic and $0.08 per diluted share for the same
period of 2017.
For the Six Months Ended June 30, 2018 Compared to the Six
Months Ended June 30, 2017
Revenue decreased by approximately $1.7 million to $33.3 million
for the six months ended June 30, 2018, as compared to the same
period in 2017.
Cost of revenue was $24.7 million for the six months ended June
30, 2018, as compared to $26.1 million for the same period in 2017.
Equipment costs increased by approximately $1.3 million to $2.9
million in 2018, directly as a result of the increase in equipment
revenues from copier fleet refresh activities.
Gross margin was 26 percent of revenue for the six months ended
June 30, 2018 as compared to 25 percent for the same period in
2017.
Sales and marketing expenses were $3.0 million for the six
months ended June 30, 2018, as compared to $2.7 million for the
same period in 2017. General and administrative expenses increased
to $4.6 million for the six months ended June 30, 2018, as compared
to $4.0 million for the six months ended June 30, 2017.
Net loss was $(0.6) million for the six months ended June 30,
2018, or $(0.06) per basic and diluted share, compared to net
income of $0.1 million, or $0.01 per basic and diluted share in the
same period of 2017.
Non-GAAP adjusted EBITDA for the six months ended June 30, 2018,
when adding back stock-based compensation, onetime restructuring
and legal fees was $2.1 million, compared to $2.3 million for the
same period in 2017.
Non-GAAP adjusted earnings for the six months ended June 30,
2018 was $1.3 million, or $0.14 per basic and $0.13 per diluted
share, compared to $1.5 million or $0.16 per basic and $0.15 per
diluted share for 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.
CYNERGISTEK, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS
June 30, 2018
(unaudited) December 31, 2017
ASSETS Current assets: Cash and cash equivalents $
5,001,649 $ 4,252,060 Accounts receivable, net 9,940,312 13,264,323
Prepaid and other current assets 1,569,870 557,426 Supplies
970,926 1,156,006
Total current assets 17,482,757
19,229,815
Property and equipment,
net 732,178 831,784
Deposits 87,778 87,376
Deferred
income taxes 3,350,310 3,120,310
Intangible assets, net
9,995,456 10,900,924
Goodwill 18,525,206
18,525,206
Total assets $
50,173,685 $ 52,695,415
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and accrued expenses $ 3,944,546
$ 9,631,634 Accrued compensation and benefits 2,874,392 3,711,551
Deferred revenue 2,366,975 1,425,821 Note payable 343,750 - Current
portion of long-term liabilities 3,121,773
5,494,837
Total current
liabilities 12,651,436
20,263,843
Long-term liabilities: Term
loan, less current portion 14,683,998 9,438,333 Promissory notes to
related parties, less current portion 5,296,875 6,000,000 Capital
lease obligations, less current portion 100,408
147,861
Total long-term
liabilities 20,081,281
15,586,194
Commitments and contingencies
Stockholders’ equity: Common stock, par value at $0.001,
33,333,333 shares authorized, 9,616,133 shares issued and
outstanding at June 30, 2018 and 9,576,028 shares issued and
outstanding at December 31, 2017 9,616 9,576 Additional paid-in
capital 31,458,456 31,156,362 Accumulated deficit
(14,027,104 ) (14,320,560 )
Total
stockholders’ equity 17,440,968
16,845,378
Total liabilities and
stockholders’ equity $ 50,173,685 $
52,695,415
CYNERGISTEK, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
Three Months Ended June 30, Six
Months Ended June 30, 2018
2017 2018
2017 Net revenues $ 16,936,934 $
16,798,912 $ 33,320,251 $ 35,053,601
Cost of revenues
12,458,301 12,458,921
24,702,786 26,126,127 Gross profit
4,478,633 4,339,991
8,617,465 8,927,474
Operating expenses:
Sales and marketing 1,476,458 1,369,401 2,975,505 2,737,383 General
and administrative expenses 1,986,467 1,832,581 4,615,396 4,008,377
Depreciation 89,002 98,935 180,584 190,159 Amortization of
acquisition-related intangibles 452,734
520,343 905,467 1,040,686
Total operating expenses 4,004,661
3,821,260 8,676,952 7,976,605
Income (loss) from operations 473,972
518,731 (59,487 ) 950,869
Other income (expense):
Other income 8 3 27 22 Interest expense (351,651 )
(376,547 ) (755,112 ) (788,881 ) Total
other income (expense) (351,643 ) (376,544 )
(755,085 ) (788,859 )
Income (loss)
before provision for income taxes 122,329 142,187 (814,572 )
162,010
Income tax benefit (expense) (1,196 )
(68,000 ) 228,362 (81,539 )
Net income (loss) $ 121,133 $ 74,187 $
(586,210 ) $ 80,471
Net income (loss)
income per share: Basic $ 0.01 $ 0.01 $
(0.06 ) $ 0.01 Diluted $ 0.01 $ 0.01
$ (0.06 ) $ 0.01
Number of weighted
average shares outstanding: Basic 9,613,566
9,438,990 9,600,120
9,328,759 Diluted 9,827,686
10,281,042 9,600,120
10,038,271
CYNERGISTEK, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP INCOME (LOSS) FROM
OPERATIONS TO NON-GAAP ADJUSTED EBITDA (UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30, 2018
2017 2018
2017 GAAP income (loss) from operations $ 473,972 $
518,731 $ (59,487 ) $ 950,869
Adjustments: Depreciation
89,002 98,935 180,584 190,159 Amortization 452,734 520,343 905,467
1,040,686 Restructuring and legal fees - - 735,183 - Stock-based
compensation 113,873 78,789
302,134
103,448
Non-GAAP adjusted EBITDA $ 1,129,581
$ 1,216,798 $ 2,063,881
$ 2,285,162
Non-GAAP adjusted EBITDA
per share Basic $ 0.12 $ 0.13
$ 0.21 $ 0.24 Diluted $
0.11 $ 0.12 $ 0.21
$ 0.23
CYNERGISTEK, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME (LOSS) TO
NON-GAAP ADJUSTED EARNINGS (UNAUDITED) Three
Months Ended June 30, Six Months Ended
June 30, 2018 2017
2018 2017 GAAP
Net income (loss) $ 121,133 $ 74,187 $ (586,210 ) $ 80,471
Adjustments: Cash tax adjustment 1,196 46,561 (228,362 )
48,469 Restructuring and legal fees - - 735,183 - Depreciation
89,002 98,935 180,584 190,159 Amortization 452,734 520,343 905,467
1,040,686 Stock-based compensation 113,873
78,789 302,134
103,448
Non-GAAP adjusted
earnings $ 777,938 $ 818,815
$ 1,308,796 $ 1,463,233
Non-GAAP adjusted earnings per share Basic $ 0.08
$ 0.09 $ 0.14
$ 0.16 Diluted $ 0.08 $ 0.08
$ 0.13 $ 0.15
Conference Call InformationDate: Thursday, August 9,
2018Time: 2:00 pm Eastern Time / 11:00 am Pacific TimeU.S.:
1-888-224-1005International: 1-323-794-2551Conference ID:
3874636Webcast: http://public.viavid.com/index.php?id=130693
A replay of the call will be available from 5:00 pm ET on August
9, 2018 to 11:59 pm ET on August 16, 2018. 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 replay PIN is 3874636.
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/20180809005163/en/
Investor Relations Contact:Bryan FlynnCynergisTek,
Inc.(949) 357-3914InvestorRelations@cynergistek.comorMedia
Contact:Danielle JohnsSenior Account ExecutiveAria
Marketing(617) 332-9999 x241djohns@ariamarketing.com
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