VirtualArmour Reports Q3 2018 Results; Managed and Professional Services Revenue up 68%
Q3 2018 Financial Highlights
- Revenue increased 41% to
$3.9 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 68% to a record
$1.3 million, due primarily to the addition of 12 new clients signed under contracts over the last year.
- Gross profit as a percentage of revenue increased to 26.4% from 26.0% due to a favorable shift in revenue mix to higher margin managed and professional services revenue.
- Adjusted EBITDA totaled
- Annual recurring revenue (ARR) totaled
$4.2 millionat September 30, 2018, up 79% from $2.3 millionat September 30, 2017(see definition of ARR below).
- Total contract value (TCV) was
$11.2 millionat September 30, 2018, up 144% from $4.6 millionat September 30, 2017. TCV is defined as the total value of its service contracts including one time and recurring charges.
Q3 2018 Operational Highlights
- Won a
$3.7 millioncontract with a leading medical equipment company to modernize its IT infrastructure across six global locations. The engagement is comprised of $500,000in professional services, and $3.2 millionin hardware and software.
- Won a new Managed Threat Intelligence services contract with a global chemical manufacturing company and a long-time
VirtualArmourcustomer. The engagement includes managed services along with software valued at $2.8 millionover three years.
- Maintained a customer retention rate of 100% in Q3, following the 100% retention rate in the full year of 2017 and first half of 2018.
Michael Panecas the company’s new chief financial officer.
- Signed a reseller and services partnership with Snare Solutions, a trusted log management platform and subsidiary of Prophecy International (ASX:PRO). VirtualArmour is now the professional services provider for all of Snares post-sales deployments in North America, as well as resells Snare’s suite of CA Veracode Verified security products.
Q3 2018 Financial Summary
Cost of sales totaled
Gross profit was
Total expenses were
Net and comprehensive loss improved to
Adjusted EBITDA was a positive
“In Q3, our strong revenue growth, expanding margins and positive adjusted EBITDA were primarily driven by a growing revenue stream from managed and professional services,” said
“Our services partnership signed with Snare during the quarter allows us to deliver what we believe is the most comprehensive, state-of-the-art cybersecurity solutions for both the private and public sector. Snare’s leading enterprise log management solution strongly complements our managed services by providing substantial savings and a highly-scalable technology, with combined benefits for our current and future customers.
“Subsequent to the quarter, we expanded upon our professional service engagement with an international airport to now include managed security services. This valued client has followed the path of an increasing number of our existing professional services clients who have discovered it makes perfect sense to engage
“Due to the continued growing threat of targeted breaches across all industries and business sizes, our outlook for the rest of 2018 and into 2019 remains very positive. We are seeing larger budgets being allocated to cyber protection as companies prepare for 2019 and beyond. We anticipate further revenue growth and margin expansion from our continued ramp up in sales of managed services, along with further penetration of new markets led by our growing sales, marketing, and service organization.”
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
The company defines the term “annual recurring revenue” or ARR as the value of its service contracts normalized to a one-year period. The company restates its earlier reported ARR at
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 nine months ended
|Three Months Ended
|| Nine Months Ended
|Depreciation and Amortization||$||77,985||$||38,537||$||227,619||$||107,006|
|Change in Value of Warrant Derivatives||$||-||$||(9,547)||$||(2,589)||$||(27,173)|
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 nine months ended
(Unaudited - Expressed in
|Three months ended
||Nine months ended
|Cost of sales||(2,894,256)||(2,070,571)||(8,161,866)||(6,891,973)|
|General and administrative||478,108||445,294||1,426,305||1,128,063|
|Research and development||56,189||45,268||144,569||103,604|
|Sales and marketing||591,730||538,682||1,710,889||1,670,494|
|Loss from Operations||(87,611)||(303,506)||(240,214)||(1,166,533)|
|Other Income (Expenses)|
|Change in fair value of warrant derivative liabilities||-||9,547||2,589||27,173|
|Net and Comprehensive Loss for the period||(165,415)||(342,545)||(411,826)||(1,243,069)|
|Loss per share – basic and diluted||(0.00)||(0.01)||(0.01)||(0.02)|
|Weighted average number of shares outstanding – basic||63,599,447||55,769,447||61,678,669||55,769,447|
Condensed Interim Consolidated Statements of Financial Position
|Total Current Assets||5,099,316||1,015,651|
|Office facilities and equipment||570,233||520,062|
|Accounts payable and accrued liabilities||4,151,371||2,821,038|
|Warrant derivative liabilities||-||2,589|
|Due to related parties||252,218||455,162|
|Total Current Liabilities||6,357,214||3,513,474|
|Long term deferred revenue||1,521,435||-|
|Total Shareholders’ Deficit||(815,834)||(2,125,231)|
|Total Liabilities and Shareholders’ Deficit||7,259,851||1,612,888|
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Source: VirtualArmour International Inc.