Investor Presentation. March 2018 NYSE AMERICAN: CTEK

Transcription

1 Investor Presentation March 2018 NYSE AMERICAN: CTEK

2 Safe Harbor Statements This presentation contains, and our officers and representatives may from time to time make, forwardlooking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of Forward-looking statements can be identified by words such as: anticipate, intend, plan, goal, seek, believe, project, estimate, expect, strategy, future, likely, may, should, will and similar references to future periods. Examples of forward-looking statements include, among others, statements we make (herein or otherwise) regarding the size of the potential market for our services; the number of potential customers/clients for our services; plans and strategies of CynergisTek and its subsidiaries for future growth and performance; market acceptance of our business model; our ability to integrate acquisitions and merged companies; and timelines relating to growth, milestones, and strategic focus. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management s current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the risk factors discussed throughout Part II, Item 7. Management s Discussion and Analysis of Financial Condition and Results of Operations, and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2016; and throughout Part I, Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations of our Quarterly Reports on Form 10-Q for the quarters ending March 31, June 30 and September 30, Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We expressly disclaim any obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise. 2

3 Introduction 3

4 CynergisTek Cybersecurity and Information Management for Healthcare Nationwide Presence Consultants average 15 years of experience in their domain expertise with 100+ individual industry recognized certifications Covered Entities* 1,000 healthcare provider locations and business associates 2016 Revenue $60M Adjusted EBITDA $3.8M Contracts 70% of clients in 3-5 year managed services contracts *Covered entities are defined in the Health Insurance Portability and Accountability Act (HIPAA) rules as (1) health plans, (2) health care clearinghouses, and (3) health care providers who electronically transmit any health information in connection with transactions for which the department of Health and Human Services (HHS) has adopted standards. 4

5 Market Opportunity 5

6 Healthcare IT Industry Dynamics 3.5 Million Covered Entities and 35 Million Business Associates Cost of a Breach Breaches cost the healthcare industry $6.2B/yr 1, 90% of all hospitals had a breach in the past two years. 2 Print Has Increased 11% Significant risk to PHI and cost savings opportunity for hospital. IT Spend on Security 3 Healthcare 4-6% Financial 10-12% Government 7-9% Lack of Resources Cybersecurity labor crunch to hit 1.5 million unfilled jobs by with 84% of hospitals lacking a dedicated security leader 5 Internet of Things (IoT) Estimated 27 billion devices by Biomedical device risk. Increased Regulation OCR enforcement of HIPAA among covered entities and business associates. References on slide 24. 6

7 $11B Domestic Market Opportunity EHR produces 60% of print volume 6 -Paper represents 30% of all breaches $65B - estimated cumulative healthcare cybersecurity spend on products and services over the next five years 7 Healthcare $11B 9 Market 37% of data breaches in 2017 were tied to insider error or wrongdoing, which compromised nearly 1.7 million patient records 8 Hacking incidents involving ransomware and malware doubled from 2016 to The fundamental difference between healthcare and other industries is that it s not just about money and information, it s about the quality of care and patient safety. 7

8 In the News Healthcare Organizations will be the most targeted sector with new sophisticated attacks emerging 1 Ransomware 64% of victims in the U.S. pay ransom 4 Disruptive Attacks Shutting down hospitals 2 Threats Trend of 1 breach a day continues into 2018 (Healthcare specific) 8 5 Identity Theft Every two seconds someone is a victim of identity theft 3 Weaponized IoT devices Take down critical cloud services 6 Global Nearly 1 billion people globally were victims of cybercrime in 2017 up 45% from Victims of cybercrime globally lost $172 billion 10 8

9 Solutions 9

10 The Services We Provide Security/Privacy/Compliance/Cost Avoidance Consulting Services Risk Assessment Technical Security Assessment Print Security Assessment Architecture Assessment Social Engineering and Phishing Privacy Program Assessment Policy and Procedure Development Compliance Program Effectiveness Assessment HIPAA Research Program Assessment Meaningful Use Audits Managed Services Compliance Assist Partner Program Vendor Security Management Privacy Monitoring Vulnerability Management Managed Print Service Incident Response Management Professional Services Remediation Program Development Strategic Staffing Virtual CISO 10

11 Competitive Advantage Unmatched Healthcare Cybersecurity Experts Strong Relationships and Track Record Tailored Solutions Thought Leaders CynergisTek won the 2017 Best in KLAS Award for Cyber Security Advisory Services Market Driven Trusted Advisor Well Known Industry Player 11

12 Financial Performance 12

13 Snapshot NYSE AMERICAN 2/27/2018 Share price $5.31 Market cap $50M FD Shares Outstanding Shares Owned by Mgmt. and Board 10M 25% Income Statement 2016 YTD Q Revenue $60M $53M Adjusted EBITDA 1 $3.4M $5.3M Adjusted Earnings 1 $3.3M $3.9M Cash $6.1M $2.7M 2 Debt $1.3M $21.4M 1 Please see our annual and quarterly earnings releases for complete details. 2 Company maintains a $5M receivable based line of credit with $0 balance outstanding. 13

14 Revenue Financial Highlights $61 $60 $44 Q3 YTD $53 $ IN MILLIONS $44 19% 17% 20% 29% YTD 3Q17 Revenue Gross Margin YTD 14

15 Adjusted EBITDA Financial Highlights $5.3 $ IN MILLIONS $2.1 $1.8 $3.4 $3.3 $3.9 $1.8 $ YTD 3Q17 Adjusted EBITDA Adjusted Earnings 1 Adjusted EBITDA: adjusting EBITDA for stock based compensation. 2 Adjusted Earnings: adjusting net income for estimated cash tax adjustment, amortization of intangibles, stock based compensation and depreciation. 15

16 About Us 16

17 Snapshot of Clients Sample representation of more than 1,000 healthcare provider locations and business associates. 17

18 Management Team Mac McMillan Paul Anthony Mac has nearly 40 years of both government and private sector experience. He served as Director of Security for two Defense Agencies and as an Intelligence Officer in the U.S. Marines. He has worked in the healthcare industry since his retirement from the federal government and contributes regularly to industry thought leadership. Paul is a Certified Public Accountant and an expert in financial management, investor relations, tax, treasury and risk management with over 25 years of professional services experience with worldwide enterprises, publicly traded companies and start-ups. His career has included time with KPMG, Peat Marwick LLP and IBM. Angela Rivera David Finn Angela Rivera is a passionate executive with 25 years of experience in the healthcare industry with significant focus serving the healthcare provider industry. Ms. Rivera served the last 17 years in various roles at Computer Task Group. In her most recent role as Vice President, Health Solutions for Computer Task Group, she held executive responsibility for solutions and growth strategy, quality service delivery, and management of the professional consulting base that delivered information technology services and solutions to CTG s healthcare provider, payer, and life sciences clients in North America. David, comes from Symantec and has been involved in leading the planning, management, and control of enterprise-wide, mission-critical information technology and business processes for more than 30 years. His unique experience in risk management and control objectives of technology (including audit, security, and privacy) allows him a distinctive perspective in the design and implementation of business applications and the processes that the technology must support. Chief Executive Officer EVP Operations Chief Financial Officer EVP Strategy 18

19 Growth Initiatives Create $150M Recurring Revenue Healthcare IT Services Business 5 year goal with >15% adjusted EBITDA. Cybersecurity Focus Continue growing service offerings to meet market demand. Be the #1 trusted source in the market. Employee Investment Continue to strengthen and build on the teams depth of knowledge in cybersecurity. Increase Shareholder Value 19

20 Board of Directors J.D. Abouchar Chairman of the Board Mac McMillan Director CEO OF CynergisTek Transition of Board in 2016 and 2017 bringing in healthcare IT and capital markets expertise Drex DeFord Director Principal at Drexio Digital Health, former Healthcare CIO Dr. Michael Mathews Director COO of CynergisTek Mark Roberson Chairman of the Audit Committee COO of Chanticleer Holding, Inc. Judy Krandel Director Snap Interactive CFO Theresa Meadows Director SVP/CIO Cooks Children s Health Care System 20

21 Investment Thesis for the New CTEK FY17: Transformation FY18: Execution FY19 & FY20: Opportunity Grow and deploy professional and privacy services offerings that help healthcare organizations remediate, develop and implement programs and technology to fulfill short and long-term security and privacy roles Well positioned for sustainable mid to high organic revenue growth Fundamental operational improvements expected to result in industry-leading operating margin Experienced management team with proven operational success and deep healthcare cybersecurity knowledge 21

22 Questions? Questions? Mac McMillan 22

23 References Healthcare IT Industry Dynamics: 1 Beckers Healthcare IT and CIO Review, HIMSS Analytics Healthcare IT Security and Risk Management Study, SANS IT Security Spending Report, Cybersecurity Ventures Healthcare Cybersecurity Report 2017 Edition 5 Black Book Research Q survey of US Healthcare Industry $11B Domestic Market Opportunity: 6 Nuance 7 Cybersecurity Ventures Healthcare Cybersecurity Report 2017 Edition 8 Protenus, Inc. and DataBreaches.Net 2017 Annual Breach Barometer 9 Grandview Research Inc Healthcare Cybersecurity Market Analysis and Segment Forecast to 2022 In the News: Norton Cybersecurity Insights Reports Global Results 23