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CynergisTek (CTEK)

Participants
Bryan Flynn Head, IR
Michael McMillan CEO, President, Chief Strategy Officer & Director
Paul Anthony CFO, Corporate Secretary & Treasurer
Andrew D'Silva B. Riley FBR, Inc.
Matthew Hewitt Craig-Hallum Capital
William Sutherland The Benchmark Company
Jeffrey Bash General Pacific Partners
Chris Brown Aristides Capital
William Gibson Roth Capital Partners
Call transcript
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Operator

Good day and welcome to the CynergisTek Inc.

Third Quarter 2018's Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Bryan Flynn, CynergisTek Investor Relations. Mr. ahead. go please Flynn,

Bryan Flynn

I Earnings welcome Call. Operator. Third to Quarter XXXX want you, everyone to Cynergistek's Thank

Mr. Financial Joining Mr. and and Mac today McMillan, Anthony, us from President Chief the Executive Officer. company includes Paul Chief Officer;

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

Michael McMillan

afternoon good you, Bryan Thank and everyone.

X started of During as new first doubling security did the we many we in clients year. in the QX, months positive the continued the momentum in signing by QX number of QX as

which while for of provides partnership to increasing while We costs premier better our also agreements the scope This through of contracts program rolling of OEM higher HP. and yield partnership the enhanced clients clients MPS half with toner out all margins. toner, offer opportunity for is extended existing our our reducing and improving several us an our

on continue relationships It managed execution round to the clients responded paying activity print building our services, been successfully fundamentals, the X assessments. growth. clients of positive focus device on we things on plan and hopeful service to work, to our hear something see is it finalist biomedical commitments cap is we also meeting where and their are the to new in our and/or multiple has RFPs, and adding response by hard QX. We making long-term but absolutely professional greatest like initial saw our incident with security expand beyond off. Security We managed

customers, of focus in industry. going and compliance new affect quarter security-centric transformation create cyber risk may industry incidents their the cap healthcare, of along immediately some management our we a and out This approach is multiple represents The about a sheer to both threats and at more to The more the through with increase to healthcare Having offerings problem. existing is penetration significant with regulations its security customers HIPAA programs. quarter, on the of in of healthcare Last spoke the cyber and gate the that security more us also saw the our opportunities broad frequency a resonating services allowing adding to renewal. portfolio pipeline market. of narrower or differentiated and a from a growing new program volume in in continues expand comprehensive

Organizations this, regulation, but persistent impact only X industries. healthcare, focus business cyber new of organizations regulation not to on trends In plague security governmental focusing more meet to on become conscious do is but the create only that not continue but must to and should not requirements events. New opportunities, all new to order alone requirements always about will adapt enough. also regulatory learn the

partner. as been allows a they staying points cyber possible major the trusted expand First, for under breach criminals the the while attack chain surface it for as of via the continues to supply Exploiting to radar has them expand. number come focus in instance

measured According of the still security priority times allocation not leadership in we a become the in this breaches when budget, resources most set the preventing firms Second, the top skill higher and significant and earlier study cyber barriers has preventing for year, challenge. discussed by imbalances level that security. were the have conducted Symantec staffing, achieving Hems lack by past, multiple to Analytics healthcare of from of a three investment to a

has expecting understanding well this as makers XXXX, up the was to we're of efforts delivery devices solve business a medical difficulty in are The of XX% keep relationships rate involving us security particular development securing and we XX clients very device issue. our programs. a in the over organizations both IoT recent medical with the Medical to organizations According XX% doing being premise the security level an In services to are new to breaches a Ponemon safety devices as Finally, compromises recognized cyber for pay months. practical created struggles Meanwhile, to device their as explosion ground their risk healthcare Institute next to demands been high. manufacturers risk. maintaining with customer and security and include healthcare medical problems. top in we of and dedicated as a as ear off study, XX% of and of role late device devices of have The gives well. patient our service strong new for an a lead it privacy seeing

development positive security lot their very We we're in are a out, services even seeing it's from early the and of leading interest roll the industry. though of response and market in

continue the from always the practical We means its will that are that and obstacles. solve on to position we industry solve focus security help We offer services cyber create will what anticipating privacy in those address security a new threats to be to perspective. in a service ensuring want development, ecosystem, that and challenges and to as the changes adapts

trends Looking in we growing excited X the see to offer I very have the meet industry. third the quarter, to able healthcare back at these that been am services

the the through more advantage resources healthcare provide need. a Our skills to with operations and expertise they shortfall with focus industry-wide their which continued QX, and to way efficient in effective QX and labor by of cost organizations take was providing run

we We are making for XX allow on their security talented projects provide additional that part especially demand this the fill financial focus improving business an in service professionals These operational offerings, reducing investment and seeing organizations high employees to added customer. progress to reducing while great hires, additions where cyber thereby of our unnecessary we critical year. have on the gaps strategic and professional performance, they

XXXX. our result, grown have a by compared year-to-date revenues Services Professional As when Consulting to and XX%

also growth. strong Our core to show service continue offerings managed

service including selected alone privacy center develop medical team cap large programs X Our security, quarter in sales that programs XX clients signed more academic compliance. to managed help CynergisTek this implement and than and

growth are company see device managed our to as of services well starting traction program. land the expand. in am I the opportunities fuel continue increase biomedical long-term security as to Our with to we most and the both management satisfied

We pipeline new launch grow recently these have just at for system. opportunities a QX hospital its continues closed contracts X to of The since XX the end including steadily.

risks these in devices number basis devices network, to priorities The healthcare. the partnership the provides market. of with these solution service One develop healthcare as medical new connected forward. combined most recent biomedical offering Asimily, the devices management connected our the will providers offering lifecycle appropriate was device for ongoing going determine announcement combined vulnerabilities CynergisTek's of technical to an the remediation well classify managed that and and allow and unmatched unique the and their the software This on secure with help ability exciting an customers advantage is known leading a with developments to identify associated these as risks to strategy understand of

Lastly, we cover for non-healthcare to We've grew board across we will year-to-date significant in to security. booking our QX, in creating those team growth provide increase more seen bookings targets second increased to our in sales by We to customers, the the of continues than clients progress strong were growth. excited more our straight the compared not number XXXX. very make which also deliver of quarter results their the when and to only number next services opportunity provide exceeding did we bookings services for XX% Paul we

execution, around service to favorable new improve a us out as work teams year and put has round the have in innovate our position to continue we hard been working This the Our clock head XXXX. and offerings. profitability, increase into

the have the following integration on We very performance to acquisition phase are and and out come growth focused of plan.

ahead, off for XXXX. Let for Paul me hand to Please quarter and of to Paul. review stop here highlights it go the financial the third everybody

Paul Anthony

our quarter pleased the Mac. new $XX.X to X% compared quarter. the afternoon, revenue XX% was by XX% was QX in a to which result was XXXX million This MPS for versus due categories managed was Breaking Revenue the a was I non-renewals of in services third for $XX.X a to in the 'XX, in everyone. 'XX. decrease with services. the related of Thanks, Good offset partially a up $XX.X million million, down managed services security-related into same revenue decrease results XX%. increase drop

security earlier, security-related in million area. quarter will new As Mac growth professional same to $X.X of provided increased as customers. adding drive XXXX. consulting to resales QX due services customers XX% $X.X increased and gross this XXXX XX% success services to third in new this in the 'XX. same margins professional the in growth to We compared highlighted hardware continue million period the million our Consulting $X.X by saw to and for period quarter in X% existing software by to and to Equipment, compared decrease to in

for information $X.X compared million period 'XX per diluted compared for or for release $X.XX $X.XX the in or was can GAAP non-GAAP to accounts, the share the we're were a equipment adjusted true decrease happy and exceeded is normal in cyber they due adding able a some in of flat remarks. expected we last found the per financials to of million share XX% than third floor Although of or to prepared quarter the third ups earnings margin sales revenues 'XX. the to $X.X basic challenges per that large $X.XX Non-GAAP that night. please of million came $X.XX programs, MPS last with 'XX. be out almost our or the quarter in organization accounts, for concludes revenue some at the reconciliation MPS stock-based results security per few $X.X lower quarter of actually year's to the Despite investment after - revenues open higher basic earnings came same $X and the keep diluted for accompanied and margins that XX% EBITDA margins very new out This of by Operator, adjusted these expectations. non-GAAP higher fact of and loss compensation same the 'XX million these questions. the we back and earlier Full with were due in to and

Operator

[Operator Instructions].

from now question will take We our first D'Silva. Andrew

Andrew D'Silva

Just a couple here. quick questions of

an consulting bundling to managed could managed security actually still breakout off, side the I business. you kind First actual of switched and by give to services know and on of between print? the and over print versus but able equipment, it security are you separate you services

Michael McMillan

to give it that of to plan you the the Yes, try throughout rest still guys year. is our information

quarter, security. in for services, did million million about MPS $X.X third equipment, So the we in $X.X and $XX in million

Andrew D'Silva

as security assuming gross thinking right print - business it? the the to headwinds business. essentially most continue forward, then improve we of margins now level you have the on I'm cleared been be margins, be to is and able you should the think great Okay, the it expect Is this the at we about that the to about as going kind steadily way of to and should start of most grow side

Michael McMillan

third in a has quarter us. traditionally higher for bit MPS been little the

That necessarily did So a isn't bump. the this ongoing for business. we be to run little of see going rate a bit

but security that expect expectations. would I little line bit, down So I with a was in to come our think

up and there as the we to see some as growth in beginning think is some additional I move in 'XX. potentially head head into room we

themselves. may X those to have opportunity the offset So

So if would is number, expect. around I couple line we're this in points with a what of percentage give take or

Andrew D'Silva

to sales should start aspect we biomedical and quarter these know to cyber last and that of their devices. some trying had some Okay, business, issues to what go the bad medical historically it of of I'm have your companies with Medtronic primary directly or kind of what they some devices press broader protocols reach the then of the you some the analogous channel the it's when be expect to for integrated about I related med-tech time? side space you into just an opportunity to to having company and over actually can we through is got thinking security there get in require been the for hospital understand

Michael McMillan

and X selling we are channels. Andy, basically question through already Sure. different great that's a

management base is that secure our the So the have then as have also secondly, but do yes, be some we biomedical being base device own devices we for companies support go the relationships for you. hospitals looking and they're us and ones partner customer obviously their to the directly at already off basically that they're out those last, relationship the to as to the a first they already are install some basically forward to taking providers have healthcare a in do about that job hospital so we help of and bringing a able issue and device inroads they into there, better are that us are we're in one And a into bringing with it - are because synergistic are had us least, where we but differentiator larger with and manufacturers really not hospitals customers those to looking that market working proactive with partner. saying who of that's our to

a to So those then sites. really it's at to sales with avenues, actually direct that folks sell manage partner devices folks devices different the relationship with and providers, the who through sites those thirdly, X indirect the provider those sales

Andrew D'Silva

large they billion working point the you're looking too standpoint you're heavily was Okay, security a to with and was somebody I CIA was life recently I - just FBI enough focused - range talking to is cap the it to and now or talking consultant a is talk as of this hospital at small and certain past worked with to some were he feel weighted lucky targeted. the who believe more is more space, was industries he industry in formerly a on to more the fields talking surprisingly when companies it is that or don't biomedical what size are companies at saying in you of seeing just size are that a saying market the that he companies thought Are in across about and to side? you was risk if $XX multiple be they or was being various are at large companies essentially outside companies of from like and larger broad below they the that security they

Michael McMillan

to other think everybody is the more certainly the healthcare to a they but the and the everybody right, they larger come see that healthcare real companies at - they've because so of is between difference the the get their feel that target got the Sure, is in company smaller back, incidents I beginning down healthcare on - to space beginning get we're where understand least industries in breaches some the actually the reported. reported, that realization -

folks that think get at hit I with if folks little awareness, So I but it's and be that incident. that be I don't guys hit, in there's will that levels just everybody to all a so large more space you have incidents big that the it's sees to in get a not work bit don't to an be target have healthcare to big have or that for

a who and to out don't today think about relates who help to there the little of realize As there's of publish to we of they they for that organization big are really get be attacking or really lot and company most like targets lot larger is that as beginning the out are that guys targeted now are until big are and beginning a the today know whoever - that I better well they try them attacks looking are a they a to they manufacturers are I susceptible hit. the the bit like and the a that and folks providers, to have smaller see other They also to just into information indiscriminate. the to to - are device folks very larger and there to really business that DHS don't They out target necessarily folks smaller to have be or that also really fact bureau the you company. or it a figure talk guess becoming associates be actually informed companies are issue to beginning companies about

on be their healthcare smaller So then in them, service risk lot backdoor organization that issue end the into work we especially or beginning through - with your up healthcare us to large security at we the you to becomes for for gets our need that get the providers information it of and us our you're communicate a put instance, a issue an ones to particularly you and hacks as then other those through and an and you, because the handling somebody they providers focused providers having to businesses third-party for say, are well. companies

have issue, So to the but would have to be target. to it's to I it's player that awareness folks don't guys more bigger a other think realize about you down to trickle a big be I clearly beginning say the

Andrew D'Silva

far back couple then healthcare industries bit pulse other or in, now that. in was of you the if is wondering services And give space, to offers could off past far for a industries in it relative a just and cooling if was you're what you are the as both that I to and in M&A putting market equity percent the the also all? out. color print market the different right the and inbounds any business and are of breakout on a getting things here, as then Thanks in And in the as what in of a the last private couple as lot years seem color services of at the industries. as and little the been to have security just other players mode of the relates

Michael McMillan

So multiple those are Andy. there, in I questions think

about about asking the guess associated not one the and and me know potentially our let think know customer answer don't healthcare that percentage is specifically I'm not talking and to them of I of or numbers So a customer that, non-healthcare with from I meaning are entities it together, base, I represents portion providers in that all different of perspective first we actually take I types you when terms were revenue specifically. that of that's from first you - know what customer, a group XX% growing. of business,

well. So at out the some means perspective, revenue from that increasing I'm guys looking perspective, a over customers from there, what's point, the number seeing Bryan can but my ultimately which increasing business also we're associated is, as figure that and are from of the probably we with that we're what for revenue

The respect is I inbound of, think seeing about, second you to us we speaking to gets question to question that correct? were activity were M&A around MPS, requests the really with

Andrew D'Silva

of security business, side the Or the yes.

Michael McMillan

in that obviously those on and MPS. there all and higher that roll, see it and answer up larger they're both security see trying roll happens then a and to because multiple we - the where value there acquisitions roll entity sides Okay, to players both the trying to in out that constantly market have has time strategies to the multiple questions so are we up is, yes, both there organizations are

to respect So there activity there is that. a out lot of with

Operator

our take question will from next Matt from Craig-Hallum Capital. Hewitt We now

Matthew Hewitt

Congratulations Few here. on different quarter. the questions strong

same that you services approximation, of solutions, more, single are breakdown and you XX%, were do it are services that? and - an multiple is you a seeing commented but your guess that multiple up it at in on versus where the or have sit greater is that now the percentage I multiple time First, XX% bookings mean or for we signing do I or coming

Michael McMillan

cap primarily I coming or cap and they a or a just of renewals the X they're more biomedical vCSO time add not standard around renewing but we're not a of bundle them they question either things is of or that cap assessment, forward. generally in with we buying sign maybe the before, just That's under services mix X hope we with with in and we're of the had - one the adding exactly just that going percentage, our what provide vCSO they're percentage the areas that professional also and Probably and more I that the X are but some services associated, under whatever speaking, other out are great folks, don't that service know anymore, with come standard straight they either the and cap can services the more typically that cap professional that cases different customers managed additional their buying programs, program know the then when seeing higher that they adding had biggest seeing changing going from they and biomedical. up in, first services

Matthew Hewitt

before the hires are look be there add reorganized appears That's earlier great and X commented this perfect went which the lead-in or in maybe another are you of still added hitting you sales that so had you maybe you you've new you where that played be growth of employees to the it's quarter helpful? them speed team, that out along to you re-org and any of and numerous up you that year, color you mark, think you will to it it do or XX, mean that has potential next before out? more from restructured, I to question, to may regions, that would earlier or is added still to process all how a the if but have it's sounds got new kind regions, some

Michael McMillan

a great question. So, yes, that's

with we're of clients in we're the back a to accounts account and those interaction of and we're being services level additional absolutely a think them, in the existing seeing involved strategy with that caps there have customer of add-ons seeing bringing we're where those that So, of with customer, initial resells shifting guys in, sale are to I sale we uptick that's with they go the them cap a going cap sales lot those more that - new having lot in staying now back around that later because they that this, benefit help months help you to seeing with of with just can initial after can and a with - and reps adding month or after we that additional or couple because services. a you I think absolutely first are we the that that the later assessment they're say then

So for these it's in having a standard - services and to customers. of strategy the cap was new to just existing accounts that forward seeing other but as that adding was for as part not growth services well those of adding going we're it managed terms growth, our organic year-over-year up-selling customers, new

has we're happen. fairly do new, you'll just and some lot on for new out President Marketing, and we have still that have security one experience a that later, to So little that folks Vice a as are We our board me begin under are absolutely - brought just hear their gentleman talk seeing previously. there services cyber quarter Sales of belt who bit a about selling in

that that, performance respect be yes, will well I still we're we where difference - hoping sales with but I'd we're overall have probably, to forward, still as think to make us quite like in team. not that we're So too going a

that it out We have are some park. of knocking folks the

we and are job then We coming folks a doing up. still other have that have other folks are fair that

overwhelming of to nice good to them are make the where performing at of be a would at majority because a everybody point clip get difference. it that will world least a So

Matthew Hewitt

helpful last color. for very Maybe That's one me. one

same the the On the where seen, for you've that that same pricing, a now dynamics has differentiator breadth is ago potential the the compete? now on you're as of the are is years to been understand far market And of of does over there the making side that a changing managed historically a I security concerned the say they you players print you. guess should tend still service still of the much how difference you're it where RFPs couple in that. versus sure ago Thank I side, that still the any key you're X the and there, or running, make that area customers as because year

Michael McMillan

Yes, absolutely.

there There we've has The market. It's scenario in still downward changed the market a the of much out very earlier of organizations. nothing today a as the market. companies is as because larger little it talked change still create up described also, there are terms the So is trying folks are in we MPS past. in market bit pressure in to who rolling about MPS overall

our have what our the the with with are been were have with sense customers the that like last up X we of X all have of opportunities brought new client really on out on in house last drop very and the terms is are the always HP have or relationships part toner to the brought has to that RFPs goals the get for to they our client of XX our restructuring been things working into relationships of but and the on it's those going are of better we and been much the the ones with the that's not price, so that but where that we've healthy we we've the the in respect business us model they that wanting basically is side of that one of we but previous and new tremendously and carrying side far run wins past, helped what consumables part have and viable case did us the the months in able existing to expecting we are least existing difference stronger side of they business, had the to and nice at and the that it the RFPs its in too incumbent to with X a and equipment wins One but those customers are of been in of the the with the in of bring and to thing new company that's those is relationship than the get happens long in for table us customers year, of nice and that to what gate is the business into on margins business, fortunately and make plus for with - the out the regardless of experienced profitable load. and competitiveness a are competing terms of and that that

Matthew Hewitt

Congratulations on the progress so far.

Operator

question Gibson. from will our William We take next now

William Gibson

services for the security, managed time the they frame side contracts on from the long and of what Mac, last? how range of sort

Michael McMillan

thank here. and you, for being Sure, Bill

most our are contracts managed That's the So security side years service X standard. pretty in the duration. of much on

We what some are or have see we renew renewal, say, fourth they'll Typically, for, they the period X some is third is say can they've you industry times most are go contracts, years. expects if than they do, to often contracting after with few been those will, with contracts a sure, us which pretty much will. but if we lot so that, little when don't is what you to and X of through we've have X-year learned a period time, what for customers of go longer a is longer we'll that their we their appetite as of we and years, for are

William Gibson

essentially all assessment anyone those device side talked you stage? where assessments then or it. and you customers Are new back X about the moved Thank introduced on the past signed has

Michael McMillan

to about we couple and of we three what are actually do are we all couple and actually - us before what a have we those next that talking that a assessments talking they comes hoping assessment. those to about are comes are us next of an have So and - have

didn't have So that managed ready service recently. just of component we the really until

well So in the makes going there but where a they're of first, because that if that will through at, sort see want kind sense you assessment folks are of of works. to - number they we're technology they terms how of the we that actually now do,

talked think almost and an really there's in technology thing what that manage of the nobody treat that they're - our about. anyone terms and don't they proof the talking kind devices sense interested a that's concept, it's has only understanding assessment if do we in but interested is is been So that long-term just you the assessment better how so they're I how really the of that of process, these works will, to we've in as

Operator

next We Benchmark Sutherland will from question take now our from Bill Company.

William Sutherland

Just curious the again about side. print

consequences So next after major situation year? nothing of until the renewal is

Michael McMillan

We with up we've first had early but that the XXXX, of have in them to renewal part conversations respect two with renewals. for contracts both of come

them be we this So the having of we but, year, conversations that's quarter and with in on where next yes, beginning earnest renewal for are next will those front. the

William Sutherland

fair? and Okay year? the but are that Is last from they sounds don't then what renew RFPs, they significant, that offset that like your the question prior it ones didn't

Michael McMillan

Yes, size, them normal what a size. two call will. average are you put of are to I they That's bad if it, way probably but

system. was much the them actually potential of larger One because health much it opportunity larger has the a be to

X will that to as a hopefully with other X that I is we those. chance of invited and that least our customer positive sign we're organizations all organizations said winning based hopefully at than on very in us materialize, a and at and very hopeful So side that's that sold positive multiple are before, good we've so at relationships on at better the MPS in those them them have people past were the times of average the got but news

William Sutherland

kind anything helpful I'm of know instance question magnitude, is should Okay, terms for managed probably sign that's they're to size, the of the I contracts in quarter just order had all the there service of I they, place scope great. one terms over means XX and - feel of just on but are contracts, third for in there? what getting it the in

Michael McMillan

So do the, know I think it? the Paul average size you of

Paul Anthony

No.

Michael McMillan

your between the to answer those Bill, think $XXX,XXX. think, size I contracts is $XXX,XXX and of average I somewhere question,

are Some much that. of them larger than

and we I them year. much that this academic release earlier one press think had a medical was out fact One of at went center we in signed an than that on larger that that

not year what it typically - speaking, in tripling on vCSO. to a it to It's while then only of spoke footprint three services $X.XX between them in a and a but where been the they in the that organization their range one million it include and but professional - size - we included increased $X.X particular we're services what professional normally cap I there, with that included every depending land but included So it size. services, side and that actually once one like expand the one somewhere privacy much cap, now the they it's because they in currently discussions they, of put one on the million larger

they can be do. So anything can they or it's routine on large be what like can the very looking customer - to - is depending else, just they

William Sutherland

or the that year? get but is is to per I $XXX,XXX that years No, over $XXX,XXX multiple it,

Michael McMillan

Correct, over the three it is years.

William Sutherland

is to And what rate. Paul, think on moment? effective this I'm - that just at It tax not one sure you years, about for three okay. quick to over how one the

Paul Anthony

cash talking about or As perspective far from you as the - are -

William Sutherland

and rate Actually tax higher this was a looking just quarter. at the P&L it effective

Paul Anthony

changed nothing tax this mean have the side. in would quarter I on resulted anything that

haven't than seen profitable some which we position other both we triggered that. to any - changed the year-to-date, of quarter the and the might that fact a So for have

the So into we black. went

William Sutherland

thought were just XX% with - I you go-forward a of you On basis, like tax the the the the use in tax to guys P&L. law, ballpark

Paul Anthony

still still that's Yes, the Yes, case. holds. that

Operator

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

Jeffrey Bash

Good quarter, guys.

the the forward? the security would for assess going acceleration of how factors those in accounted in that the durability factors third With quarter, you bookings

Michael McMillan

pipeline positions them a them second a sales had played finally to finally think lot and - of beginning into belt the So we has assess majority had their sell to factors it. of I the build quarter strong under filled with and the as at by gotten were I would quarter, terms folks do that - because end least of of in that and their a starting very most we to that think had of I lot

I think lot sales a - think my to hope - that isn't but lose number a that has - lot that it's that's team So it. do I one, would hoping I tomorrow, going had the to with not away. think that to do I'm got We've

looking other lot folks we're with in reports #X finish the other continue of are a a that folks at with enough having it, are to and had our so and customers to they're where read guys to around companies we're do, that along a rankings cyber to get you factor The the starting because that not I've thing so. - best having the space and conversation we bring think into been, healthcare I has hard class and lot to actually street that work feet and and report the do The as lot I so to to we finally there to there I've various be to more people. that on biggest speak program think in security fortunate or talked enough the have I've heard out the has off are to class the talk

and top put bottom the that's I that's dripping of you the going can have - know, more is into always we're more funnel. coming as we that seeing the end - at problem more out think out the coming a always and to in up the it's you funnel, like numbers with sales

Jeffrey Bash

seasonally beginning past, the Good, at going now at was see the the weak end. in do stronger forward? business the seasonality company's you and the How year of

Michael McMillan

we not a those, a be lot throughout go a year, the year, seems the more really, cancel in trend through right, new let's artificiality. Well, where to because great question. don't - I'm this whenever I'd we - I'm year year like like - really a happen that's the and CFO's balanced and and were a next been of I start hoping time I know but, hurry to customers picture, everything you pipeline respect this and like and a to yes, the to its into the to changes mean I improve wait from do that reimbursables I think that that recognition of continues and as over it improve and up that you and with stuff Paul more that - and would a year. had see to revenue perspective end seems figure tightens should right come more predict out at obviously the healthcare can't and lot it of of until but with happens, that lot Washington it's Obamacare that in

next that. first we've speak to able that working to it's year I where that but this So we're so healthcare the I'm figure been really that into because we out do think is is open year hard - to as really trying going out of to trying always go, to smooth head

Jeffrey Bash

Good.

the the Hilfiger the company Now all take leadership does with of now to Jon the to to have addition next sales, head place it recent level? in

Michael McMillan

so from a together had especially speak, this had a that - - for so, we've first that team sales team. will - that we does, will be It be side, that and it that whole quarter, the to team leader

I'm so Jon's forward to influence. looking And really

Jeffrey Bash

to in an about pursuing position would to company you somewhat earlier do could you business the has to this is able business and you a you security do if related it whatever guess do it to acquiring capital the had I all with MPS side is are business. you the the constrained question all like more the MPS inquiries things, Are at of and value the really Next, in on and where then more the with all without it. things with you the want money, do now or company do about

Michael McMillan

you property the I've able a at mean Jeff at we do, growth respect to things to our board is, but rhetorical going with think of organically we're want of of part is a - to be answer, there about you organic potentially organic I perspective, fantastic to not the in what point balancing from members always I we or some asked money, I the we organic fact some forward, what structure in mean doing. do at growth kinds I continues things, of absolutely in terms short bring bring I'm the obviously excited of are to but great of, what to additional Paul worrying in can think of think existing we're to a but does and in shape there's that, looking a was strategy accelerate the help the of straight more, and which your look as and from I to think some Yes, that add could value the capable between are of that those think up forward and hopeful if that an of but company continuing had the that to going actively obviously look tuck-ins act could can our acquisition strategic Bryan some some I you really yes, can to that more the now at Paul in and do fantastic happen, and debt shape next company sales do that one very question, obviously and I things with organization to value intellectual right servicing we're a always about is terms job strategy and come

Jeffrey Bash

is by stock that material of of of acquisitions, MPS terms the affected mind anybody's is that in in perception Well, keep price and the business. the

Michael McMillan

Yes, sir.

Jeffrey Bash

has Adair The the firefighting strategy. do to Red last with what call I question

on effort. a of to subscription tax up response gotten that would have What the that meanwhile, people having you have kind with the team company doing that? an basis be else people talked responded would about who to a a something may initiative of where You be dedicated by to had but sign

Michael McMillan

relationships most lot all the the that, that do asked we're of a the do time, now what's actually do that. that but are security lot business the that is we are they space beyond the the specialize not almost incident so focus I things want their the they have to that, insurance have able something at that and cyber what is is specialize lot firms that times various insurance Those What's and be that much and which response it get to having is everybody it's expand to relationships So, but they current installed that organizations terms companies preferred vein, response those exclusively think initiative. critical to companies, vendors gotten to kind when in using lukewarm the that, actually to insurance that us that that the use not customers with have a we we've are of recognizes is organizations the whoever and with of of very in organization so base, seeing that, incidents other looking of with we're IR that a the comfortable to capability so in have insurance that to but under the companies agreements piece, in vendor them, of they preferred interesting forensic has a so do. cover on which

and our the So in perspective why and companies respect and that running one the them with on that to do their tops IR we folks we're insurance the program ability is but reasons to only forensics not reaction of one very at have of things acquire acquiring the IR we're so capability the middle perhaps and critical. exercises building the those seeing that is or piece which acquisition the but support recovery, an relationships table from perhaps around to that, looking with are that remediation respect after the in in and incident supporting back-end an with

Operator

now question Aristides Capital. take from We from will our last Chris Brown

Chris Brown

or sustained unlikely Just consulting particularly QX? that a kind you, one-time excellent and was in was there the services on was professional anything question for be that in QX of side to

Paul Anthony

Well, cycle and we've got quarter full is into place into third contract that in the and we let's QX fourth coming that next the got of through first go that expect year. quarter in quarter the a large through there

hoping with offset running large in we but go, have sales are as was that fully that we to that quarter. deal So will that replace third additional a the up we obviously do

Chris Brown

is or Can on size you what comment the the revenue quarterly what right on roughly impact to now? deal that

Paul Anthony

that can't provide I of Yes, detail. level

Michael McMillan

good well, tend the able a in with fact, I'm actually But a got to and the are been be says, that for of able do get going to that there, of that several customer to there, they do to them. there so we're I another folks far job then project business in extend and lot already side, resources on those hopeful we've the

is current goal is leave, first Paul contract at right, never end goes think the the our I to So through and get quarter. but least there the of

Chris Brown

contract in quarter? revenue your of and Okay, the half more was than that services professional consulting

Michael McMillan

It at. quite wasn't

Chris Brown

think should for XX% less And down just than wondering side, like you then going months, of my next question the flat on that how XX the renewals said XX% forward? over print seems year-over-year, the be was pace last or I I managed about that obviously, were to closer you should you it down services you given

Michael McMillan

the that got probably to think rate to MPS dragging last getting I are comparatives on still As point. close far managed as year run that we're some services, bottom point as percentage, this should year of did that into we we earlier in because first see a but that pretty get year quarter we the bottom be loss well. as close to next We

So hope we that I but it, see to think getting pretty to we're close bottom.

Chris Brown

and you Would that business? also when you gross are have a do you margin like say there a say that margins the pressure to hear. feel sustainable do to fairly bottom, see or continued to in that you bottom close good That's you like close

Michael McMillan

as see pressure that margin accounts I new general well think from as we'll in just business renewals. in continued

continue worst we'll taken to feel the side of probably So this and in the the business. I that pressure will we that, but experience be the we think in but that I always think had hits there, past larger seen of the margin

Operator

this time. there Thank questions you. more It no are appears at

back closing like ahead. additional to it I'd for McMillan you, Please hand any or go remarks. to So Mr.

Michael McMillan

Thank you, sir.

us which us the had is us positioning now year quarter, bookings through second in strong. we the QX out and momentum strong gave So close that carried to

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early everyone you, to say to I else like in, Semper and Paul for Fi, any you look the soon. listening to today operator. forward and like talking call and I'd happy birthday Marines I'd Thank to to So thank joining

Operator

and the your disconnect. Thank may appreciate participation marks end you. This now of today's We conference. you