VirtualArmour Reports Q2 2018 Results; Managed and Professional Services Revenue up 78%
Q2 2018 Financial Highlights
- Revenue increased 50% to a record
$4.0 million, driven by growth in the number of customers served as well as the size of orders from new and existing customers.
- Managed and professional services revenue increased 78% to a record
$1.2 million, due primarily to the addition of 17 new clients signed under contracts over the last 12 months.
- Gross profit as a percentage of revenue increased to 27.1% from 17.6% due to a favorable shift in revenue mix to higher margin managed and professional services revenue.
- Adjusted EBITDA was a positive
- Annual recurring revenue (ARR) totaled
$498,000at June 30, 2018, up from $157,000at June 30, 2017. The company defines ARR as the value of its service contracts normalized to a one-year period.
- Total contract value (TCV) was
$10.7 millionat June 30, 2018, up 282% from $2.8 millionat June 30, 2017. The company defines TCV as the total value of its service contracts including one time and recurring charges.
Q2 2018 Operational Highlights
- Expanded growth into hospitality and manufacturing sectors with
$1.1 millionin new contracts.
- Received a three-year managed security services and hardware contract, valued at
$250,000, from a large retail wellness brand. The customer was introduced to VirtualArmourthrough its new reseller partnership with Alacrinet, a leading IT solutions consultancy, which was announced in January.
- Established the
VirtualArmour Academy, a new institution for cybersecurity education and training, with the grand opening of the academy at its security operations centers in Salt Lake City, Utahand Middlesbrough, England.
- Maintained a customer retention rate of 100% in Q2, following the 100% retention rate in the full year of 2017 and Q1 2018.
- Named to
Cybersecurity Ventures'Cybersecurity 500 list as one of the world’s “hottest and most innovative” cybersecurity companies to watch in 2018, as well as named to Branham300 2018 Edition as one of the top 250 public and private technology companies in Canada.
Russ Armbrustto CEO and Andrew Douthwaiteto CTO.
Q2 2018 Financial Summary
Revenue totaled a record
Cost of sales were
Gross profit was
Total expenses were
Net and comprehensive loss improved to
Adjusted EBITDA was a positive
“In Q2, our record top-line growth, expanding margins and positive adjusted EBITDA were driven by a growing revenue stream from managed and professional services,” said
“Our expansion into the hospitality and manufacturing sectors resulted in $1.1 million in new contracts for managed and professional services combined with hardware and software. We were also engaged by a prominent wellness brand customer for managed security services in partnership with Alacrinet. The company maintained a 100% customer retention rate, which has now continued over the last six quarters.
“Throughout the first half of 2018, our channel partner program has proven to be effective way to grow our customer base and managed services contracts, with this leading to increased monthly recurring revenue.
“Looking ahead, we are very optimistic for the second half of 2018 because we see the growing threat of targeted breaches across all industries and business sizes driving increased cybersecurity budgets as companies prepare for 2019 and beyond.
“We also see our growing sales, marketing, and service organization driving a continued ramp up in our managed services sales and margin growth as we expand into new markets. We anticipate a continued favorable shift to higher margin managed and professional services in the second half of 2018. Combined with ongoing growth in customer acquisition and an increasing number of customers on our recurring revenue model, we are firmly on track for another record year of operational and financial performance.”
Opportunities for specialist service providers in the cybersecurity sector have grown in line with the increased volume of cyber-attacks being encountered by businesses, non-profits, and government institutions and covered by global media. This shift has not only led to increasing enterprise budgets being allocated to cyber protection but also increased interest in investment opportunities in what is a high growth sector.
According to Cybersecurity Ventures’ recent quarterly report, global cybersecurity spending is predicted to exceed
The company maintains 24/7 client monitoring and service management with specialist teams located in its
Supplemental Non-IFRS Financial Measures
In addition to IFRS financial measures, management uses non-IFRS financial measures to assess the company's operational performance. It is likely that the non-IFRS financial measures used by the company will not be comparable to similar measures reported by other issuers or those used by financial analysts as their measures may have different definitions.
Generally, a non-IFRS financial measure is a numerical measure of an entity's historical or future financial performance, financial position or cash flows that is neither calculated nor recognized under IFRS. Management believes that such non-IFRS financial measures can be important as they provide users of the financial statements with a better understanding of the results of the company's recurring operations and their related trends, while increasing transparency and clarity into its operating results. Management also believes these measures can be useful in assessing the company's capacity to discharge its financial obligations.
In Q1 2018, management began assessing its operational performance using supplemental non-IFRS statement of income, adjusted EBITDA, which is defined as loss for the period as reported excluding depreciation and amortization, change in fair value of warrant derivative liabilities, share-based compensation and interest expense.
Adjusted EBITDA is not a term recognized under IFRS and non-IFRS measures do not have standardized meaning. Accordingly, non-IFRS measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
The table below provides a reconciliation of net (loss) for the period as reported to non-IFRS adjusted EBITDA for the three months and six months ended
|Three Months Ended
|| Six Months Ended
|Depreciation and amortization||116,894||35,059||149,634||68,469|
|Change in value of warrant derivatives||0||11,045||(2,589||)||(17,626||)|
Important Cautions Regarding Forward Looking Statements
This press release may include forward-looking information within the meaning of Canadian securities legislation and
Forward-looking statements are frequently identified by such words as “may”, “will”, “plan”, “expect”, “anticipate”, “estimate”, “intend” and similar words referring to future events and results. Forward-looking statements are based on the current opinions and expectations of management. All forward-looking information is inherently uncertain and subject to a variety of assumptions, risks and uncertainties, including the success of the Company in performing the IT implementation and migration, performance under the contract by all parties, the ability of
Condensed Interim Consolidated Statements of Comprehensive Loss
For the three and six months ended
(Unaudited - Expressed in
|Three months ended
||Six months ended
|Cost of sales||(2,918,624||)||(2,202,249||)||(5,267,609||)||(4,821,402||)|
|General and administrative||522,415||253,968||948,198||682,769|
|Research and development||52,701||26,316||88,380||58,336|
|Sales and marketing||571,153||547,169||1,119,159||1,131,812|
|Loss from Operations||(61,803||)||(356,392||)||(152,603||)||(863,027||)|
|Other Income (Expenses)|
|Change in fair value of warrant derivative liabilities||-||(11,045||)||2,589||17,626|
|Net and Comprehensive Loss for the period||(119,199||)||(410,694||)||(246,411||)||(900,524||)|
|Loss per share – basic and diluted||(0.00||)||(0.01||)||(0.00||)||(0.02||)|
|Weighted average number of shares outstanding – basic||63,501,535||55,769,447||60,734,198||55,769,447|
Condensed Interim Consolidated Statements of Financial Position
|Total Current Assets||2,857,754||1,015,651|
|Office facilities and equipment||623,795||520,062|
|Accounts payable and accrued liabilities||3,249,885||2,821,038|
|Warrant derivative liabilities||-||2,589|
|Due to related parties||248,861||455,162|
|Total Current Liabilities||3,996,130||3,513,474|
|Total Shareholders’ Deficit||(683,678||)||(2,125,231||)|
|Total Liabilities and Shareholders’ Deficit||3,550,810||1,612,888|
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Source: VirtualArmour International Inc.