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CynergisTek (CTEK)

Participants
Bryan Flynn Investor Relations
Mac McMillan President and Chief Executive Officer
Paul Anthony Chief Financial Officer
Matt Hewitt Craig-Hallum Capital Group
Call transcript
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Operator

Good day, everyone. And welcome to the CynergisTek First Quarter 2022 Earnings Call. [Operator Instructions] Today's conference is being recorded.

Now at this time, I'd like to turn the conference over to Mr. Bryan Flynn, please go ahead, sir.

Bryan Flynn

quarter call. first CynergisTek’s to XXXX earnings Welcome

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

or the expects, the the call can These believes, webcast, may, filings in remind to risks differ these today's intends, such begin would, detail Before and greater the like actual that and financial a regarding forward-looking use be in and number similar terminology presentation, others, industry company's of as described statements on SEC. some statements to will prospects, expressions including could and to in the are among uncertainties of materially results we of could, with uncertainties described made Certain forward-looking everyone formal subject anticipates, future that by from are those results those risks identified public or I'd and conference. forward-looking. are be cause will

and obligation listeners of At place like statements, may its obligation not the anticipated. uncertainties, of or expressly update as which statements results and a that CEO. risks is the call under or whether turn to McMillan, result such future CynergisTek alter President this Mac should any new disclaims our are recognize on these events undue to any occur statements should future I'd not and Given predictions information, and forward-looking forward-looking no reliance otherwise. time, to over as

Mac McMillan

QX was month with of welcome just our and the a CynergisTek revenue today. another be we We'll two quarters. Hello over during spoke XXXX XXXX Thank growth. call sequential off call. And a brief over everyone. to QX last quarter our annual you, XXXX XX% QX kicked Bryan. little as ago

customers at and impact engagement, the plan XX% efforts sales our in year-over-year. growth seen contributed XXXX to new opportunity had technology enabled contracts managed positive upsell Both portfolio. adding our and services end We see expansion customer new a XXXX strategic partnership and we sales as those saw strong execute activity these have their for progress as partnership some integrate service upsell delivery We revenue QX strong on by with QX around runway results. engagement we as expanded a of services and a wrapped growing their teams’ long has solutions and from with We of a of our technologies. a

was This a we also win a a service few our expertise their Another or customer a and was an multiple QX about service ready risk need launched. CRMP, around that the this talking sales provider managed service team weeks. new monitoring and innovation our to short as discussions. new it speaks market transformation continues have to calendar coming immediate It only immediate turn addressed some security in identified our an in saw out and program ability service time. to had in of solution We continuous delivery of that managed planning for been

managed of same identified opportunities service the partnerships, that portfolio technology immediate premiums. figure help support address on the appropriate they get strong lower ensuring solutions ransomware support. maintain approach have has needs. service who our with coverage them as and well we audit services service services will clients the to added program new in need already strong clients yet security than critical and countermeasures are and greater focuses on the clients' combat A determining our year. and to third-party to interested contribute and established another supply and as controls in technology pressures, focuses our and access the on and building And first six challenge revenue, program the fill a with the management those of consulting both with of efficacy needs. continue will from these first those in external in while we services, the but XX% heard looking most The bought attacks which journey risk remain our from clients allow cyber So new from adds start service to new program provided track to resiliency. clients multiple carriers on build security concert when insurance traction threats to as assists that insurance and years that those validation program interested expedited internal their gaps compliance. building services, present. result, customers managed market. cyber complete converged and needs in The most development. and making This combat they and service and with using tailored on managed gained for remediation We our cap professional goal, focuses to able follow. to their individuals critical QX, service new meets other services, our And managed the both we The economic revenues support all win renewals their This in contract, to the threat both The and top these cyber to and customers, reducing legacy risk and for XX ability the will threats, requirements service them pre-sold enhance technology assist monitoring of as CRMP existing line the of of several compliance the the of of need the we for six emerging those to factors vendor another that months its current is continuous partner monitoring CRMP a the taken program. In good and which malicious well our customers. goal privacy privacy with capabilities. their new annual monitoring patient adds were resiliency we are our focused data. XX% solution and we year. a our beginning Renewals on adequately to service stack now environmental the privacy with requirements We our response close clients, three-year of With and to at offer component chain Many or that while have

and success saw consulting team in help our healthy Our revenue audit of services drive XX% professional growth and a to QX continued year-over-year.

pipeline to Healthcare deals as entities the result uncertainties a QX into are in with to were grapple for down $X.X pushing interest shrinkage quarter did the of bookings some continued in million grow. out challenged operating to current shrinking spend as economic some delays. sales with this they due it rates Although industry’s changes not rising result QX, at inflation, and while the margins. in and/or did contribute cancellations And

pipeline created, to continue new both and see still with I as upsells customers. We new mentioned,

So still opportunities the being The And concern are identified. need new there. is requirement is still is there. there. The still

privacy similar As is platform. expertise, team Middle from of Health and services. Business we transition passion market seen, leadership We’ve Intraprise reputation healthcare, and solving healthcare have we strategy Europe, Early both see leader a and traditionally healthcare roles executing she in healthcare Jaime Group, began. HIT, the growth She Jaime these America, in successful the to team well development of in President seasonality since leadership desire Jaime audit North new Jaime strategies. for And with record of in healthcare. excellent Fortified a Strategy. building of drive a strengthened and with space, recently has slower. the developed reminder, service the particular, to sales the a cybersecurity, with our to in held market performance cybersecurity. MSP Herjavec and development Reynolds, strategy joins responsible decades go-to-market Jaime sales challenges East time QX regions brings in with experience CRMP at where be IT addition provider has and two our new to consistently consultancy, our and go-to-market managed managed you and track previously. to BluePrint in shared her global record vertical Development media as our career, strong she for our She our services. will of taking now various business cybersecurity may sales knows business Health Africa as an as track be Vice in Security. sales, being knows the and and driving and She strategy services And industry, knows the for in and her just which pulling our

other IT This means and the the industries lack mission to attention security security world a they any solutions. customers other this that retain any critical biggest providers challenge that surprise be driving to is economy. coupled anyone of healthcare can transformation organizations of and Organizations that another with But resource of all high cannot in like find towards managed the not levels the constrained. the should sophistication headwind more expertise expertise than who’s sizes to need This around significant will internally. scrutiny service provide. of be is or accomplish in factors continued being stage markets, and XXXX the need resources have we growing and been the paying Our and

and margin top improvement. necessary steps the both taking is business Our growth to drive line

includes which partners our we we we up. and to drive As profile, shareholder evaluating transformation. strategic cover it our as transactions value relationships to go wrap it turn strategic Paul me enhanced expense the options, that, through this and With our back the now continue let financials with to over with be potential to before always, assess ourselves

Paul Anthony

less the period year in for again fX% million million SG&A adjusting to QX the increased for to the to credits. Thank strong XXXX. decreased These QX XXXX services the million revenue after This $X.X QX XXXX $X.X compared we and $X.X $X.X period margin the from same year. to to to increases are The Revenue million $X.X XX% to same financial QX X% increase million last to tax QX the by of to million QX. saw year. retention XXXX for professional last unchanged million at expenses to XXXX decrease compensation. professional by standard in of year. growth sequential by $X.X due lower the $X.X million addressing of you, $X.X revenue in compared to compared EBITDA adjusted same margin when compared increased Consulting due QX loss the XX% compared the bookings due Non-GAAP increased employee for disclosures. when was end increased to fees based revenue. period $X.X was million last stock Mac, is compared to and QX and Gross o for

of to remarks for options banking of $X.X million of earnings cash reconciliation came annual QX. Operator, we looking our to number did was and tax you XX have Although the our receive can year, financials this board, we March full that open to cash in due a be additional capital at may our investors outlays. are do can our We April Longer-term, This floor the financials balance $X.X release in refund found showing partners. and the working seasonal and concludes a short-term out need anticipate cash we with number at in prepared The today. million questions. and GAAP position. growth non-GAAP up the

Operator

Thank with Craig-Hallum Group. first Hewitt Matt our you. take will question we Capital from And

Matt Hewitt

think first was health bit What from or the I hearing Maybe you’re gentlemen. month whether month seen you the this on and past into the companies taking Maybe the afternoon, cybersecurity last ago, that’s could a questions. you Good were when one pipeline? speaking customers? how up or a market? you we we’ve it elaborate in how if announced whatnot. events that And has just market the ransomware seeing curious and frankly Thank QX. And translating reported for over you hacks systems just I’m several have changed quite Mac, little the mentioned it’s what you’re

Mac McMillan

still being already I all, threat perspective, Well, impact a targeted. at They’re hasn’t Sure. being feeling of much they’re meaning the they highly from it targeted. And highly were think that. changed

to and what’s taken result the they’re – by coverage folks at also they’re at added like with the don’t do think I is the how we already a begun of various out terms or type most attention of to not to very front of course lot where’s as to and began in started either threat, quickly what’s why that back, to were and kind technical the the loud coverage of side to of pressures. deal reprioritize you is these obviously hadn’t down when lot saw got partnerships fix as result of being a XX/X to and it impact they of about, move needed solutions deal going of that to quicker. be these development to a on our are we this, coming They’ve the able out very began compliance the the premium, the a with their putting the But were and what we changed just folks technologies going kind to block acquire around in we to has concerned And offer with, to as the recognize of going spend with it’s stuff was only do have respect of insurance that by these the rolled have pushed CRMP result sort assessment with all related to. going solutions they’re but to figure program. looking pivoted to most conversations with to acquire of need if they attacks SOC clear, this. them – economic to QX of sort they’ve this in dollars. customers a other that reasons And backseat the we requirements who began try to their out specific began of a requirement no be carriers when them in in to either for folks and or higher in going one and place the to pushed which it Because had these to much of what slow came this, around them accelerated we you’re to EDR attacks these things We well MFA we acquire. being right able going to yet. what we And

we well there that opportunities multiple so we actually very now. accelerated basically have And and program been it’s And received. out

the And of necessity actually case, already a lot innovation. had this The caused but so long seed And I they say it. it is in the actually of it’s just kind – it run. times of the think kind it’s a thing innovation – of begun, accelerated in good

Matt Hewitt

the for great. color That's Thank there. you

could you've month seasonality a that of pipeline far from a curious have in I perspective, and but able been any from from QX, how half bit QX quarter? that a and little here traditionally if have the Regarding through. elaborate being hearing a realize you're this what deals you customers close a booking's just little bit on QX you out moved maybe of things those to I'm pushed so

Mac McMillan

Sure.

of need dealing And still little out that in signature. quarter. it's there's little slower. a side dealing terms and will, opportunity. getting lot through terms out the see the It's than were are to want do. pipeline as creating seems through There's deals slowness, were pushed to we second pressure, financial still on there's you usual. So more a in about of like approved lot it still still still with actually bit we to able the I'd if some But just there. They're move they We're still deals we a – things of a close this from of talking economic of say activity that beginning QX. with

Matt Hewitt

there be we think the about a Got would that see any you regarding then expansion little gross sustainable progresses? pop could year level? margin, there. Do nice How it. obviously should helpful? be further color you that guess, thinking as a And the I Is

Mac McMillan

those how the in Yes. end of going quicker year, think saw somewhat were in of amount a – coming the we growing. raising in, to along comes which the there revenue due you riding if the was had And lot that's towards a right. what were direction. lot really to be of that Well, the deals will, sales end basically I of through year, year which sales we was driving ship closing last margins the Because year the actually terms of actually right you we was at the was

So plays sales with it's lot on, in to think terms of on this ultimately respect I a of goes stay what how depend year going to the margins or where out grow how they do. or

Matt Hewitt

Got right. much. it. All Thank you very

Mac McMillan

this Matt. McMillan any further over you, things back time, Thank I'll Mr. no to questions we And queued at or additional closing for have remarks. turn

Mac McMillan

took to that do we talking Thank future. Again, look you everybody you ends to in to today. that, time the everyone call, That for you, to the thank operator, coming forward want call. the and joining for I and thank the

Operator

conference that everyone And you. today's us. joining conclude call. Thank does Thanks for

disconnect. may You now