CynergisTek (CTEK)

Bryan Flynn Investor Relations
Mac McMillan President and Chief Executive Officer
Paul Anthony Chief Financial Officer
J.D. Abouchar Chairman of the Board
Matt Hewitt Craig-Hallum Capital
Andrew D’Silva B. Riley FBR
Bill Sutherland Benchmark Company
William Gibson ROTH Capital Partners
Charlie Eidson Craig-Hallum
Jeff Bash General Pacific Partners
Call transcript
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Good day and welcome to the CynergisTek’s Fourth Quarter and Full Year 2017 Earnings Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Bryan Flynn, CynergisTek Investor Relations. Please go ahead.

Bryan Flynn

Thank you, operator. everyone call. fourth welcome year and to earnings XXXX want to quarter CynergisTek’s full I

today the Anthony, us the Chief and Joining from J.D. Board. Executive President Mac Mr. Officer; and McMillan, Mr. Chairman Paul Abouchar, Chief Officer; company Financial of includes Mr.

SEC statements subject including disclaims prospects, Before are some of be those obligation Abouchar. from call and will a financial and At greater formal conference and industry of regarding the our others, risks that everyone filings. the this time, whether call such are and described any events may the uncertainties call. the begin is would described risks information, those actual to these could to result I'd like a otherwise. under statements, to future on we remind the its J.D. number and of cause forward-looking and or Certain new among in forward-looking Chairman, turn alter over no future materially to results like update to presentation, that the made the as webcast, uncertainties differ or expressly be in to CynergisTek results obligations company's detail I in or the

J.D. Abouchar

new CEO, as Shortly, AMEX did cybersecurity the XXXX a many But banks. single States. leading from performance, Not company. United completed four transformation integrated a dedicated and these our unnoticed as from efforts financial the by call several prospects attracted Early transformative more as made few turn institutional leading the management go Delaware we investors thereafter, I would like information top reincorporated the financial Mac we we time, about our to to encountered to XXXX, we’ve was an company with dynamic corporation. coverage uplifted healthcare analyst our the operating NYSE’s us community Combined desperate a into and year team not employees. and be excited we to At in the the exciting along into way future entities McMillan. the bumps couldn’t management company. we in acquisition the transforming January, our unexpectedly investment and for and entered this our I into of over serving CynergisTek dedicated

Mac McMillan

Thank you, J.D. a in not Setting two trivial was XXXX. We task. accomplished as out much companies integrated

trained to proud to service business However, say and our as that exactly cross-sell have We existing expanded and development I service to we meet legacy accomplished offerings that. strengthened as managed our force account. our our teams, sales into demand and well customer am industry our management offerings new

and always services, paid been have While might new -- off the work our release streamlined energized hard focused results, team. and workforce, had of and not it a new several and with smooth sailing, had financial strong management efforts been

As healthcare one and five at health patients IoT information. more over we be will and By cyber poised to patient’s the threat. fastest the attack look cyber top financial market connected industry their is patients. That of to periodical three The networks be it will over Internet number recently than cumulatively third-parties a record that there be cybersecurity. always more risk. is that connected is billion XX% still the employees, still number reports XXX a years and growing confidentiality healthcare One in reconfirmed the information is devices Internet is Even forward and HIT now information that devastating XXXX, this estimated personal black advantage than to leading to be to XXXX, for deployed. variety concern. more billion placing are times combating next attacks rapidly the the spend estimated of population devices These and XX growing of or criminals of healthcare the systems, both connected the will on IoT, XX healthcare of newer valuable is surfaces their Consultant hospitals’ take target

to in integrity have Cyber and provider’s Throughout that attacks to and need of healthcare their organizations for only concerns. end-users will organizations Cyber came and sizes information and across patient. disruptive of the most executives had that investment XXXX the organizations to jeopardize starting operate, more security most of place senior breach. boards emerged or have and to security this to suffered incident, past, as up-to-date -- revenue, attacks provide do how we be entering to ensure risk. measures all to either disruption care proper, ability a importantly, training have resources However, Healthcare the bigger respond for including they continue security the change. with staffing to executives In they for the collect contingency the not planning manage terms and and can adequate in drive costly costly seen discussion needed security enterprise. is more cybersecurity public a and beginning after XXXX, healthcare properly

response, designed result we privacy endpoint industry services and solve help security and printers for our Security demand of seen need, increase this challenges. and specifically solutions of Management, the expanded look the All patient service devices. offerings, to to existing managed for As have our Vendor these growth monitoring medical incident forward a

organizations include services skilled long-term emerging Key and response, areas are and support in trust cap services. their web We renewal concern for in support incident new core upholding of for they to chain, renewals clients continue are partners programs XX% of saw while cybersecurity service, are increases a many and Many healthcare they of existing short the to turning see all looking expanding to security projects. XXXX, healthcare sustained these they adding to with medical provide of and risk filling supply threats account. new cybersecurity gaps managed in our Healthcare growth fulfill. critical and device critical addition the

identify response to organization’s an processes recently security Services current in Our effectively the improve and health respond defenses, incident that -- brings in systems, security ability healthcare analyzing their to expanded to Incident exposure to Response by gaps aims These services of and allow they ongoing part what service modular the incident way developed were capabilities detection need acquire program in a enhance to clients or service. going compliance as to managed to an beyond their requires.

access Our the another to sensitive Vendor with our RiskSonar their through maintain Security some risk losses data. vendors of organizations of Healthcare Management and now exposure incidents XX% between aware attack this becoming of Supply that fully providers service for more the patient the chain automated for allows manage their accounting growing of incorporation sensitive breaches program healthcare SaaS associated risk. have solution create, is experienced of or third-parties are third-party largest data. involved criminals to cyber by XX% the organizations. with understand and These

tools. Additionally, user we of analytics the entity all behavioral include the total expanded of with partner patient number leading to monitoring privacy solutions we

We are new the healthcare devices. providers a to specific manage to and and control managed help privacy with only are associated multiple provide also risks cybersecurity service piloting across solutions services company we monitoring endpoint

assessment older those managed have looks We for a security creating way. developed at separate how the printer from devices are that fleet comprehensive

help our basic clients clients. well for Both security opportunities managed to print have as services cross-selling incorporated into services initiatives devices. security We as those risk understand provide from those practices their ongoing offering MPS

vulnerabilities inventory device fleet, the ability risk-based review. develop their solutions our clients' us several that piloting medical Lastly, security device medical understand we to a and are give

demand companies are provide are is and seeing we privacy and strategic cybersecurity assist of who security services establishing, involved that to monitor seeing improve effective in managing All that enhance and are workforce trusted shortage consultants harder and we sophisticated staffing in retaining that the enhance CSO designed demand employees positive million will us shortage allow they challenged our detection organizations for cybersecurity being and their when of to and several to These by comes healthcare believe maturing reach and in program support. the on organizations position will professionals focused are predicts this these cybersecurity up X advisor applied remarks development principles Because sign. Healthcare events. existed more they economics programs. reaction in talent. to experienced here. includes supply with with worsen of in severely capabilities, I making and which executive partner it in that years, over services XXXX staff XXXX. programs, clients an at we because services against for sizeable professional organizations very least source as continue this, that a new my working our certified and XXXX, discussions in and Magazine mentioned from remediation, their the recruiting and response Simple next million competing security earlier for a need. it and high-paying X.X that improve cybersecurity increased The and are level boards,

XX risk by Security address. threat As industry. services we Standards of Cybersecurity of specific reaction is this is business Institute and addresses of interest is said, the activity from Homeland broadened our developed guidance level the of SEC’s lot a In the we’ve a of for Review impacting should to include areas and that of the related reporting to Resilience the with response the boards issues SEC the But in events. cybersecurity that issuance response, review directly cybersecurity National and Department This some to Technology.

generating cross-selling. going in XX To six services to addition dedicated now has to their continue support about tied our better and Each managed concentrated increasing existing efforts, sales cross-selling, new over In five last achievement in months, permit accounts launching account management, penetration goals upselling our our we business we and on more person to regions. the from cost focus sales sales region. approach to restructured new

the the our new integration had working tough existing to on Looking of to and services team, together a year, offerings. launch management business, make several some we've two while had improve the back new decisions: over past of and companies, bring new lines margins Complete

we activity fourth both now I to with and Paul. the year. the it new pleased Paul with in the all interest We to-date. cross-selling and made we've full highlights are and progress over seeing am are I financial quarter encouraged the the go to Please will ahead, hand very review services the for

Paul Anthony

newly the pleased and after to through revenue highlights And fourth be can non-cash Thanks, compared just the XX% adjusting fourth found and per achieved the and depreciation of to some million in same will our to of benefit contingent accounts. for to acquired The a adding to quarter increase expense $X.X the for same intangibles, for XXXX of our for EBITDA comp impairment the of same earnings year-over-year in to per quarter in Adjusted EBITDA. synergistic compared share strong review earnings managed diluted million stock-based or growth record release. as quarter comp, fourth Mac. revenues increased revenue Revenues fourth $X the filing from financial ‘XX $X.XX and year our adjustment or the basic, of services in of quarter with results. $XX.X fourth and in effort maturity period in for the quarter increased the information in rendered ‘XX. of both year-end, $XX.X streamline detailed $X.XX margin million ‘XX of million Gross ‘XX. and XX% after XXXX’s amortization increased margin period consideration year-over-year higher from and or for the I full section, revenues $X.XX XX-K I’m of compared margin and We $X.X financial diluted the back XX% ‘XX. million was print to the for Non-GAAP XX% from quarter is in of $X.X from of business ‘XX. income services quarter large per XX% couple same XXXX for the fourth share period in basic adjusted the tax attributable million XXXX or acquisition, stock-based

year. highlights, revenues equivalents were services in compared increase compared of $X.XX per or $XX acquisition of cybersecurity to adjusted increased ‘XX. result and deferred year for $XX million is per million $X.X $X.XX X% for as in the attributable Looking year-over-year $X.X share $X.XX $X.X the at earnings diluted Again, year million XXXX. the same of to growth in basic ‘XX. in basic period our at the the At to million cash XX% and XX, or share for ‘XX improved year for million to year XX% compared same of million end full the $X.XX a $X.X the full period the the or this Adjusted at full January. to per of of up ‘XX. reason, margin for increasing revenues was to the Non-GAAP of for million, in XXXX, or EBITDA the revenue XX% per period in ‘XX. Gross million December same as and $X.X XX% diluted million $X.X Company for December cash same to revenues compared $X.X full XX, had the to increased revenues

you additional in the would our by brief revolving under debt BMO our press agreement term for terms consolidating of As of off this credit on Notes new $X the and March a a provide we loan X.XX like the an the business promissory to agreement of XX% and our off of out of may Sellers entering loan on for seen recent agreement paying the the focused with Sellers year to entered goals better of Avidbank been This loan of have to overview our into into support in Harris million. a the of from synergistic and release, I pay synergistic acquisition. have X.X short growing Bank, term terms extending of our the Notes. up line million BMO million $XX.X allows an and year with XXXX Avidbank long-term

with COO earout under X.XX balance this the to relief to principal. payback Mac additional $X.X until also related approximately of liability. million flow and do Sellers costs departure with part separate of a to million in and material of will This completion in associated timing terms QX to also four McMillan former year charge the this have provide in $X.X non-recurring resulting Hernandez on our of restructuring included the term. the of We the the refinancing extended deliver new expect the services. of we short-term charges million the related statement the of anticipate major of cash ‘XX executive We income Mac but a of print additional managed the refinancing the don’t with our along Mike We the impact how the will restructuring Dr. extended to earnouts of Notes

and details be X-K in found be Additional the our restructuring regarding soon filed XX-K. to can recently our filed

file the X, company’s January for As Act, XXXX. from dropped tax to Tax Cuts XX% blended of effective US federal a XX% tax statutory change of as discrete related this our result enacted income charges XX.X% XXXX. to Jobs The rate million. federal US year from is recently tax statutory due the income rate & income the will company the Cash million resulting tax for as approximately in taxes expense $X.X law. current comprised of of deferred the taxable well charge $X.X expense tax revaluation to Income year is

closing Mac print more forward we accounts building revenue a revenues portion. remarks. grow the over taking call traction as to slightly seasonality financial managed Looking are and legacy concludes to services a these due gain the managed we with for XXXX, continue back QX now non-renewals into of services to the lower expect some turn market. I for new the This we will to with see pivotal services security throughout few XXXX year with to

Mac McMillan

cybersecurity we see growth is spend to plan will trillion Thanks, global to high focusing overall our on Paul. XXXX. XXXX market are execution healthcare In market prime from the and expected X feel as in services. our exceed for XXXX, of The

customers. our place services exceptional existing have the team focus provide on high margin in and and to We management our to platform we'll leveraging right continue

value-based in relevant to revenues protecting Our goals market is clear, services. And mission trusted providing assists partner solutions and their business and increase simple assets. to are that share and our that be and clear, information by also clients critical

excited see build to Operator, floor prepared shareholders We brings. open vision clients This and in to commitment opportunities growth and our questions. with are to profitability please the company XXXX what remarks. the aligned concludes long-term are and employees, our our the for and


Craig-Hallum Thank you. from Capital. will And with we question our [Operator first take Instructions]. Matt Hewitt

Charlie Eidson

Hi, Matt. for execution. guys. the is This Congrats QX on Charlie on

Mac McMillan

you. Thank

Charlie Eidson

from Alright. me. A handful

benefits should continuation and you Are in First, in of gross related about step like a number MPS of the you maturation QX XX% QX entering margin, sounds thinking the couple how we the XXXX? of it is posted the a QX back in margin gross the take expecting same that be mentioned to customers. in you

Paul Anthony

all see a expecting for the year of ‘XX, pullback the comparable some in little -- the the short-term at the looking services being on grow changes full of XXXX We pretty are base. revenue But with with to to margins the MPS. bit we're as start we numbers security overall

Mac McMillan

Charlie, It were you that? sounds able to … hear

Charlie Eidson

get in Maybe here. I I'm and queue. call I'll back cutting off back

that. about Sorry

Mac McMillan

can clear. we you Now hear

Paul Anthony

clear are now. You

Mac McMillan



And we our Riley question B. will take from FBR. Andrew next from D’Silva

Andrew D’Silva

questions. that the start start. And operations quarter? were morning. into million Thanks let explain the I'll to to had CapEx change of earnout what in I year me you’re taking the earnout Can you finding loss quick his benefit Hey, that Mac reduced to the maybe flow and terms ones million. good you a thought contingent there? financial looking changed could that, $X.X me with from the for to you few $X.X the was as my that for then cash while back know value a recognized

a be useful Just there well? as would color

Paul Anthony

of Yes, provided $XXX,XXX. $XXX,XXX just activities for will and first and on to cash [property about around million purchase by Andrew, the year the net be your question, and $X.X be it'll equipment] operating

the relates acquisition we the when $X.X number valuation, came the earnout that were did million. to we when models number to we options. did And it will earnout of specifically, about value that As the to using required are

million capitalized guaranteed. and got was to it a the at million to liability Hernandez on Mike earnout, from contingent So put a balance the to liability sheet $X.X then the Dr. went guaranteed to $X.X opportunity increased Once earnout earnout million since was million. the we $X.X $X.X

be and a it’s as traditional separate three then under the covering a now it’s three agreement next years, treated years it to bonus just expensed the going it as As program be will earnout, it’s to over next relates Mac’s earned.

in again future a to and non-cash this note tied for then So, Mike. adjustment period a

So it was we estimate put on the really that a revaluation books the of earnout. the for original

Andrew D’Silva

MPS one color are that down clients that that highlighted last you mentioned right that. following quarter, more your And customer sense. seeing security you customers first something Okay, for Thanks quarter you’ve makes going a security with the then on you contract. or path that a up now? that completed on for that assessment last and adopt MDS paid on of call Did

Mac McMillan

So that assortment a phase secret customer from moved to phase. contracting the

the them of how actually terms of in going process going with they forward. are that in working now to do We’re

go the So which they the phase We here begin assessments scheduled from now do did in were are were they would assessment do discussions other have around we to next right hoping shortly. contract. pipeline the several to that which

we seeing are And that. on us so, up folks take

seeing new assessment on around us also their we’re deal new interest devices folks their our the assessment We’re print great a security devices. take biomedical and seeing around of around, up

So that customers great the indeed something interest a we’re of endpoint solutions security in. seeing have are deal

Andrew D’Silva

And you what targeting side, doing you in there you the are exactly assessment? just kind could and devices the devices are of what elaborate biomedical on

Mac McMillan

when connected the to are that to patients monitoring communicate network. are have in full infusion that are connected the infants, the et blood heart et cetera. home or that pumps gamut there, cetera they hospital moms full to when people surgeries is are for a out These in procedures, the a pumps multiple in it, this to there see to they So, connected devices that devices room it’s for biomedical monitors devices or to range name that are from hospital’s back you of that you everything to the are go devices there

fixed, category actually three the then that those We last build are to on that technical in where be or security a in tell built a have the reviewing network a the customer it a segregated firewall you we that strategy, baseline isolated things systems real or a medical able -- tested just devices put putting categories, have various identify you into to have be devices more passed issues ability maybe be and other related that segment for have kept months will, real like of them be are the network MDISS actually time to them back to the those link are of the devices to a on way to actually protection system one that that can -- operating management devices the new that the through network. current and for conduct the allows the actual various all help able strategy network cycles and devices, in then inventory operating several take to the other be rest to that those on gone categories built for devices on they passed periodically if able meaning then putting building the and are normal behind organizations that are on that device where market what of the like to is databases obsolete secure build those a an technologies to process on away and to only build allows vulnerability and up-to-date an from replacement and unsupported us it and those

the that in client their inventory, first and and managed managing is current identify inventories with well of their is go are status where we those we So in actually an we road make manufacturers very performed that the reviews invest and -- this of of devices clients for providing terms to of test up-to-date. and periodically run attention that procedures the better. keeping attracted hospital assessment What’s service -- down that expressed which devices are their about helping the to with are and a current of these process helping having those go secure And to process to are in interesting as first where doing securing to clients in which only what that recommendations the is them essentially working large devices their actually that an talking then assist their the institutions, also of our we in now as that they improve the our devices towards several several fully not how of together their then us those device assessment in, are can services create those them on the that the the interest what status them respect allows about put together us put clients. right -- few devices to in they who but biomedical we now, devices

So that we opportunity. really about are excited

Andrew D’Silva

sorry of I doing. monitoring Spacelabs Mac patient sense? and I have best nuance sense look I that makes am Just are you’re to a you systems -- sort biomedical I’m because extent patient that not to think partnership of fully educated that think partner devices they it on Philips, perhaps in monitoring would a systems, to make with exactly But Would those talking plug or out there, about. lot anything GE,

Mac McMillan

there And So, anybody respect second there to. are moment without the you moment not at naming with are that talked ago to that’s because the referring really Those underway. category we a quite discussions already that about that I are relationship.

Andrew D’Silva

are Okay, far existing of importantly, seeing you that of into great. the integrating this competitive security more MDS update any could if are And the competitors also, new features are on my question, to give you at the And point? Fantastic. are competitors maybe looking the business? sort of coming last landscape, as, there any side then perhaps as

Mac McMillan

the to landscape, on it competitive question, mature. continues on think the I first So

I’d that visible coming seeing across really the are entire not healthcare. entering, say spectrum some in, they’re companies We are of new

some we're of the space companies we are portfolio folks But like of we’ve seeing most terms in to other broaden part acquired being other cybersecurity services and add part consolidation where and are out industries certain if to that maybe of play looking the seeing cybersecurity in terms solutions-based themselves today. their parts We next large just companies the both for solutions-based. for and the same just are that by competitors in day-to-day, cybersecurity services in are are are there trying seen there to our have that who you create of the past most competitors the to will seeing from in other

around side knowledge, cetera, at offering like to that has or a And perspective. side Ricoh the space I But that come et although, category company an the we my manufacturers is some are if you offer their environment not relates six of in managed MDS it As that their know hospitals of different HP for still devices typically and include have anywhere all in and security difference somebody could obviously just things, from services cetera is what their them print devices across families will things the device. device. to and typically the of they that our thermals to look looking they're from print dedicated or only of endpoint et of XX printer security cybersecurity of fax to one in help manage

now, my player this at space to still at knowledge the least, for that. does only that So -- least in so we're we’re

Andrew D’Silva

it. luck you XXXX. Okay. insight Got good Thank the for going forward and throughout so much

Mac McMillan

you. Thank


Please next And Bill question Sutherland will from Company. take our go we ahead. Benchmark with

Mac McMillan

Hi, Bill.

Bill Sutherland

doing margin I little fourth you that a Hi. it the the in Hey, did to at a math Because if I'm it was look gross longer quarter. pretty big quarter the like for looks wanted everybody. a bit equipment just right, sales.

so, have the a offset be on I -- managed the by -- negative the large understand of a think obviously a could which I And down had of margin would maturation ones. document, that couple impact would of

off? to want I right get just that for feel a So

Paul Anthony

both better MPS from the I traditionally businesses for have quarter Yes, side. margins fourth mean

they're projects some And and getting higher completed been on higher. got traditionally quarter. consulting other things that entering You've when then volumes based are the traditionally has security timing in on addition

in seasonality revenue some not have did a some kind in had some deals of number off got into the the of tied of we've We MPS So renew. kicked the still and some has QX. still then QX that revenue that tailing of you to -- also

So quarter. overall good it was a

We expect we things in about and other little some due some bit of it we these to know talked of return so. QX seasonality a

Bill Sutherland

and things volume the hopefully talked terms contract, in that just And renewals, of were that signed ‘XX? so about business? you’ve think the contract new future the some speak the to I pipeline of And in sort could for you MPS getting

Mac McMillan

At on have we in in at any we point, at side, Yes. renewal least this full least count. XXXX have the pressed don't material that major account

‘XX. good right the go always that seeing we the So change existing are we feel volume obviously not to Volumes activity, but should business that's into customers' as materially tied now indicating so. anything we're about

Paul Anthony

now we’ve working those as meetings the so very today, and a all relationships as them with right held level much have -- we’re better very very -- and with existing collaboratively we with of clients and executive have Yes, feedback, are to large we better effort MDS level much so accounts and multiple conservative those show much -- communication. managerial the account well up

to accounts over actually a MDS a new in We’re and the add-ons new beginning kind lot of this here. those by of there, service hospital in of a here growth legacy new terms

do and we’re we’re the actually things add program renewal, not how talking organization we’re do future here the do kinds by about encouraged make do we’re of and So the with about too not not to have they those now fact we building even we so those in it. -- that and talking better new talking we’re that about actually sales very a we accounts. occur expect -- pipeline our -- accounts near some And around to

healthier it much than ago. months it’s today where -- six was it’s So

Bill Sutherland

of, the mentioned sales you enhanced can give cross-selling that What you’ve more a potential people may getting and Mac, regions us … focused. doubling the by be sense you

Mac McMillan

Yes, one.

Bill Sutherland

go Yes, ahead.

Mac McMillan

was we could of one at and obviously And as to doing doing to more that to in had selling of created. say, going space touch in effective size we net to account things sales achieved perspective and brought in the more working terms look managing things both region they and become were that everything several other seem the of and we one part I management. the accounts research more clients did most our them we by with that that when a of Rivera same effective we from on relationships studies that that well one had up, growing that to at as be more how opportunity responsible was of dedicated as that or and model the were basically go companies in took try that Ms. the were there and through at said effective that responsible was points reducing the out for did having area we the that there and the had was generally that the accounts clients their person what review be go new was out

our the sales the they larger fewer and we was did into times region in person issue found further states. research from the where things an into both actually because in the actually and out looking away we region, one of after the states accounts five we and other manager those and executive regions made that split had that XX an So got the those the we this account we previously, we those had regions XX account smaller took regions or was the their and organizations

with the And move their that activity that then more people are sales of we go door in dedicated sales existing the region. -- seen those accounts. the have level we year, as in and the at touch already because many model. of actually in and more size regions end first dedicated of the each quarter, customers customers last only much pipeline and already not And region with folks implemented the having those a a to in to executive their many but in so, opportunities to proposals who out more have enterprise points that now a new in We dedicated -- new couple smaller in in are first one XX of quarter those decided we result

how that we’re what pretty activity, about So to in and we’re support our seeing seems excited seems good a told -- what us. research least at

So that’s difference. going make to a hopefully

Bill Sutherland

some Mac. what of you? if feel side And then that you your give us trajectory if that’s curious, I’m then guess double-edged the kind for shortages, of doing, last opportunities I limited other the sword, one it’s growth on the a from for and you are me balance can guys

Mac McMillan

could Sure, as to it be so trajectory that -- it do that limited something be will challenge. grow, some yet, will I potentially it hasn’t we point at get really a growth our continue expect

talent try get folks in to organizations organization, service we of companies things had our the partner is service who growing to where new provided recruiting experience and actually who ahead we that partnerships the internally that One into hired done some in solution. of the have have growing in where they to component the

is perspective, we’re to speed improve just and going continues focus identify candidates hopeful are of positions. terms opportunity very the you that one able in things fill so, And it if external that be the to those seems which recruiting of From having will, grow. new to an we to that that

is Virtual security by just healthcare seeing be enough much have that fill around slowing in We’re for continues person seeing run they all actually need. to people than provide salaries competing that any clients those see other positions. we’re they service actually number their we down the with to services. to that with more or don't solutions-based manage people other our still This they respect and/or program. because at more that, for more in [FTEs] addition past willing that to grow information But need more to that of as the go higher to to the also opportunities more ability those to And and ask with are challenged industries moment. they’re CISO their aren’t And and those

but more data So example, customers not need saying, support prevention I I as are can solution get it. -- and to I'm unless going loss buy I for to an have know the more

to thing difficult and pay marketable -- they privacy this for other even folks them once thing program. They for hire do Same other that to some there and somebody guys out they very you them very some gets to more who it’s resources are they me? And things. their get with their get be can aspects important, and to certifications retain and thing it’s next monitoring, able So with know more support them for training the person on solution to of more. difficult and manage these them are same of willing


from Partners. we ROTH Capital Gibson William take from question our next And will

William Gibson

Hi, Mac.

a what good of is in services, But would being pretty on doing for increase color terms your they're if X% customer gave what who of device say the they that full pilots. this, medical You range adopted of the mean built annually?

Mac McMillan

the So, depending it can I guess on significantly change service. pretty

So actually then sometimes service. be privacy our the security managed larger managed if at service look that solution, security you for instance adopt privacy our offering can than the have customers and

increase, So times the at it other smaller select. depends on actually can they that it model

add service If add of management, a you vendor of their about they to a security vendor look managed at fourth that will management typically offering if the portfolio. size

at have If piece. least of don't at just you the piece for security yet, the biomedical we managed look assessment it now,

just they So you it's more revenue actually But doing additional be a services assessment. when it can literally managed increase add from multiple a pretty our the guess more acquiring model in of start and significant I will. if

William Gibson

Thank then like follow-up. the on What's one pipeline just response? you. And incident

Mac McMillan

offering know first that you offering, started, parts of that started right we the New So, Year. as we just after

that have several who of currently of clients acquired have or those assessments an expressed or We module one one service. have interest

obviously and hopeful with quarter the are the start that. to talking grow we're after and is more will about in team and that And customers more beyond. second that the sales -- We

William Gibson

Thank you.


will take question from our from Charlie And next Eidson we Craig-Hallum.

Charlie Eidson

for got connection Hey, you. I guys, earlier. a couple issues more sorry about the

thinking the side and of Now of perspective? the synergistic kind the the long-term long-term that of rates growth you're about from acquisition, the side into just for cybersecurity MDS one are year each how you

Mac McMillan

profit a together So together, was at were that parody, plan on we if revenues on equal, at side but on than security of the you came to higher the to side. the put grow more much look much of are both past goal first where side sides still margins we the least business point MDS obviously a higher the over or five-year MDS hopefully as in is the the or when are today revenues the more the of which the

is goal able by the the to EBITDA therefore, revenues raise the side get to of So the do company security up, on that. margin of virtue being overall and those and

Charlie Eidson

that reception the how on current this service earlier It Okay. you both a and addition, in managed multiple offering sounded you like And little can to early is release with then that had multiple you services added had potential clients year, bit? -- related current elaborate band the year then the customers in add press customers? you

Mac McMillan

in the they customers those their additional only around had Many renewals to of last when on relationships. client So, services of added side managed the security sense security year good those we year a contracts but renewed really renewed. service not

very well. on started print have and and even as begin side, get to there. that’s those with positive services that in we the worked them them, we’ve add -- I to so, think more involved clients But agreements referring was improve And and that’s actually relationships those with as managed see you’re to to those additional what

do things and we that we things goal base the to that’s acquire of and do it’s one upselling that here, a our not the to do go just customers So but existing each clients. cross-selling client to part our that’s all and -- all new those into actually better of job of


Bash will Jeff General our take We Pacific next Partners. question from from

Jeff Bash

for I one were Paul. Most but of my questions have asked

X.X the suggest Is in of As were million the plus I or equipment traditional revenues non-equipment see gross sales fourth zero fair XX% to at that sales range. the the was X% and the quarter margin margins would XX% it, to the that statement? that in

Paul Anthony

Yes, it is.

Jeff Bash

your in I is with little on cybersecurity comment, there me bit That respect a mentioned to last really talking about, seem would comment? certainly XX% suggest years. similar reasonable, goal for Mac the it’s considerably from Okay. five up to of had than growth think five-year segments I want about business the initiative revenue bring you like seems you're the what And but the to inconsistency your to only the for conference growth, higher plan call, a rate your recent of just three that

Mac McMillan

with new managed growth been as goals the the instance those of seeing And we even and So we hopefully do again, that get to something that do adding a could something have offerings obviously is penetration XX% that services help is set the additional it’s we is we we’re those growth that five-year hoped. to mean past. that same the traditionally achieve. in what plan the better that have prior The able additional today we to level security XXXX, will us to by our managed on and I for hope year-over-year hope to services, the didn't we of than had that if that associated side, revenues have

happened. really that’s hopefully kind So or plan what and -- that’s what’s of the


further at back to call additional like no this for closing there would And are any to remarks. questions the Mac McMillan or time. I turn

Mac McMillan

we’re out would their just thank call anybody the to on today. taking And with us work for of has I here day everybody certainly like spend time for So, anytime, busy to them. questions

to So to thank look you coming talking you the forward very much and we again in future. today for


your concludes today’s participation. conference. disconnect. you now this you for Thank And may And