CynergisTek Reports First Quarter 2019 Financial Results

Firm Achieved 32% Year Over Year Revenue Growth and Expanded Managed
Security Service Offerings

AUSTIN, Texas–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24CTEK&src=ctag” target=”_blank”gt;$CTEKlt;/agt; lt;a href=”https://twitter.com/hashtag/DavidFinn?src=hash” target=”_blank”gt;#DavidFinnlt;/agt;–CynergisTek,
Inc. (NYSE AMERICAN: CTEK), a leader in healthcare cybersecurity,
privacy, and compliance, today announced financial results for the first
quarter ended March 31, 2019.

Financial Highlights for the First Quarter 2019 Include:

Financials represent business from continuing operations. Discontinued
operations have been isolated.

• Revenues from continuing operations for the first quarter were $5.8
  million an increase of 32%, compared to $4.4 million for the same
  period of 2018.
• Non-GAAP adjusted EBITDA loss from continuing operations, after adding
  back stock-based compensation, was $(0.6) million in the first quarter
  of 2019, compared to $(0.7) million after adding back stock based
  compensation and non-recurring charges related to our debt refinancing
  and the departure of a senior executive for the same period in 2018.
• Non-GAAP adjusted loss from continuing operations per share for the
  first quarter 2019 was ($0.09) per basic and diluted share, compared
  to ($0.11) per basic and ($0.10) diluted share for the same period of
  2018.

Recent Operational Highlights Include:

• Expanded managed service offering to include Managed Security Services
  to have the full breadth of offerings for the healthcare market.
• Drove 45% plus year over year growth in professional and consulting
  services revenue.

“The first quarter of 2019 was very successful in terms of our strategy
for the future,” said Mac McMillan, President and CEO of CynergisTek.
“We reduced debt by selling the Managed Print Services business,
allowing us to increase focus on our core cybersecurity, privacy, and
compliance services. We expanded our service offerings by launching
Managed Security Services to provide proactive and comprehensive
security monitoring of network devices, endpoints, and cloud- and SaaS-
based environments. Many of our customers have expressed interest in
wanting more focused monitoring to keep up with the increased threat
landscape healthcare is experiencing.”

For the Three Months Ended March 31, 2019 Compared to the Three
Months Ended March 31, 2018

Financial results are from our continuing operations related to our
Security services unless specifically noted that it includes our
discontinued operations related to the sale of our managed print
services (MPS) business. Revenue increased by approximately $1.4 million
to $5.8 million for the three months ended March 31, 2019, as compared
to the same period in 2018, as we have intensified our sales efforts,
expanded our service offerings and benefitted from our customers’ need
for additional professional services.

Cost of revenue was $3.5 million for the three months ended March 31,
2019, as compared to $2.4 million for the same period in 2018. This
increase was due to increased headcount in order to provide services to
a larger customer base, support new services, and our efforts to augment
the employee salary and benefit offerings to attract and retain talent.

Gross margin was 40% of revenue for the three months ended March 31,
2019 and 45% for the same period in 2018. The reduction in gross margin
is reflective of our investment in attracting and retaining talented
cyber security employees and costs associated with ramping up new
services. We expect gross margins to improve in the second half of the
year as we grow our cybersecurity consulting services and our new
services start to gain traction in the marketplace.

Sales and marketing expenses were $1.5 million for the three months
ended March 31, 2019, as compared to $1.4 million for the same period in
2018. General and administrative expenses decreased to $1.7 million for
the three months ended March 31, 2019, as compared to $2.2 million for
the same period in 2018. This reduction was due to the non-recurring
charges related to our debt refinancing and the departure of a senior
executive back in the first quarter of 2018.

On March 20, 2019, we sold the Managed Print Services (MPS) business.
The gain on the sale of this business, together with the earnings from
these discontinued operations, net of taxes totaled $19.0 million for
the three months ended March 31, 2019 compared to income from
discontinued operations, net of tax, of $1.1 million in the 2018 period.

GAAP net loss from continuing operations for the first quarter was
$(1.5) million, or $(0.15) per basic and diluted share compared to a net
loss of $(1.9) million, or $(0.19) per basic and diluted share for the
same period of 2018. GAAP net income for the first quarter, after
adjustment from income from discontinued operations, including gain on
sale, net of tax, was $17.5 million, or $1.81 per basic and $1.77 per
diluted share compared to a net loss after adjustment from income from
discontinued operations, net of tax of $(0.7) million, or $(0.19) per
basic and diluted share for the same period of 2018.

The reconciliation of GAAP to non-GAAP information can be found in the
tables at the end of this release and provide the details of the
Company’s non-GAAP disclosures and the reconciliation of non-GAAP
information.

Conference Call Information
Date: Tuesday May 14, 2019
Time:
12:00 PM EDT
U.S.: 1-888-220-8474; International: 1-323-794-2590
Conference
ID: 1751236
Webcast: http://public.viavid.com/index.php?id=134475

A replay of the call will be available from 3:00 pm ET on May 14, 2019
to Tuesday May 21, 2019, 11:59 pm ET. To access the replay, please dial
1-844-512-2921 from the U.S. and 1-412-317-6671 from outside the U.S.
The PIN is 1751236.

About CynergisTek, Inc.

CynergisTek is a top-ranked cybersecurity and information management
consulting firm dedicated to serving the healthcare industry.
CynergisTek offers specialized services and solutions to help
organizations achieve privacy, security, and compliance goals. Since
2004, the company has served as a partner to hundreds of healthcare
organizations and is dedicated to supporting and educating the industry
by contributing to relevant industry associations. The company has been
named in numerous research reports as one of the top firms that provider
organizations turn to for privacy and security, and won the 2017 Best in
KLAS award for Cyber Security Advisory Services.

Forward Looking Statements

This release contains certain forward-looking statements relating to the
business of CynergisTek that can be identified by the use of
forward-looking terminology such as “believes,” “expects,”
“anticipates,” “may” or similar expressions. Such forward-looking
statements involve known and unknown risks and uncertainties, including
uncertainties relating to product/services development, long and
uncertain sales cycles, the ability to obtain or maintain proprietary
intellectual property protection, market acceptance, future capital
requirements, competition from other providers, the ability of our
vendors to continue supplying the company with equipment, parts,
supplies and services at comparable terms and prices and other factors
that may cause actual results to be materially different from those
described herein as anticipated, believed, estimated or expected.
Certain of these risks and uncertainties are or will be described in
greater detail in our Form 10-K and Form 10-Q filings with the
Securities and Exchange Commission, which are available at http://www.sec.gov.
CynergisTek is under no obligation (and expressly disclaims any such
obligation) to update or alter its forward-looking statements whether as
a result of new information, future events or otherwise.

Contacts

Investor Relations Contact:
Bryan Flynn
(512) 402-8550
ext. 8
InvestorRelations@CynergisTek.com

Media Contact:
Danielle Johns
Senior Account Executive
Aria
Marketing
(617) 332-9999 x241
djohns@ariamarketing.com