CynergisTek, Inc.

Good day, everyone, and welcome to the Synergistic First Quarter 2022 Earnings Call. To ask a question today, you can press star 1. Today's conference is being recorded. Now, at this time, I'd like to turn the conference over to Mr. Brian Flynn. Please go ahead, sir.

Welcome to Synergistic's First Quarter 2022 Earnings Call. Joining me today from the company are Mr. Mac McMillan, President and Chief Executive Officer, and Mr. Paul Anthony, Chief Financial Officer. Before we begin the formal presentation, I'd like to remind everyone that some statements made in the call and webcast, including those regarding future financial results and industry prospects, among others, are forward-looking. These forward-looking statements can be identified by the use of forward-looking terminology, such as believes, expects, anticipates, would, could, intends, may, will, or similar expressions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in today's conference. Certain of these risks and uncertainties are or will be described in greater detail in the company's public filings with the SEC. Given these risks and uncertainties, listeners should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Synergistic 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. At this time, I'd like to turn the call over to Matt McMillan, our president and CEO.

Thank you, Brian. Hello, everyone, and welcome to our Q1-22 call today. We'll be brief, as we just spoke a little over a month ago during our Q4 and annual 2021 call. Synergistic kicked off 2022 with another quarter of sequential revenue growth. Q1 was 22% over the last two quarters. We have seen progress as we execute our plan and sales activity in Q3 and Q4 of 2021 has had a positive impact on revenue with a 12% growth year over year. Both sales and delivery teams efforts at the end of 2021 contributed to those results. We saw a strong upsell engagement as managed service customers expanded their contracts by adding some of our new technology enabled services from a strong and growing strategic partnership portfolio. We see a long runway for customer expansion and upsell opportunity as we integrate these new partnership solutions with our services wrapped around their technologies. Another innovation coming out of Q1 was our new continuous risk monitoring program, or CRMP, a new managed service that saw an immediate win as it launched. This service continues our transformation to a managed service provider and addressed an immediate need that was identified in multiple customer sales discussions. It also speaks to the caliber of security expertise we have in our delivery team and their ability to turn around a market-ready solution in only a few short weeks. We had been planning and talking about this service for some time, so when the environmental factors of both the current economic pressures as well as the emerging compliance requirements from insurance carriers converged to challenge our customers, we expedited its development. The result, a new service and our first win for that new program. A three-year contract which provided continuous threat monitoring services, established countermeasures to combat ransomware and malicious attacks, and adequately addressed the cyber insurance requirements that will allow them to get and maintain coverage while ensuring lower premiums. We heard from our clients they need the technology solutions that will help them combat cyber threats, but with appropriate support. With our strong technology partnerships, we were able to build the CRMP program using the same approach we have taken with other managed services and fill yet another need in the market. This service has gained immediate traction, and we have already identified several multiple six-figure managed service opportunities with both new and existing customers. This service adds another critical component to our managed service portfolio and our ability to support our clients' needs. The Legacy CAP service is focused on program building and meets the needs of those clients at the beginning of their journey or who are most interested in compliance. The Resiliency Partner Program focuses on validation of controls and assists those clients most interested in determining the efficacy of their program while reducing risk and in building resilience. The vendor security management service focuses on third party supply chain and the risk that they present. And the patient privacy monitoring service focuses on internal and external privacy threats from individuals with access to critical data. And now the CRMP adds a tailored solution for those looking to complete gaps in their cyber technology stack and enhance monitoring and response capabilities. In concert with these services, we continue to offer consulting, professional services, and remediation support to assist our clients with all their privacy, security, and audit needs. Renewals remain strong, and we are on track to close greater than 90% of those renewals in the first six months of the year. We added 15 new clients in Q1, 37% of our annual goal, making a good start on that goal for the year. Many of these new customers bought managed services, which will contribute to both our top-line revenue as well as pre-sold revenues in years to follow. Our audit team saw continued success in Q1 and helped drive our professional and consulting services revenue to a healthy growth of 32% year over year. Although bookings for the quarter were down at $2.4 million due to some deals pushing out into Q2 as a result of the current economic uncertainties, sales pipeline continued to grow. Healthcare entities are challenged as they grapple with inflation, rising interest rates, and shrinking operating margins. And while this did not result in cancellations in Q1, it did contribute to changes in the industry's spend with some shrinkage and or delays. We continue to still see new pipeline created, as I mentioned, with both upsells and new customers. So the requirement is still there, the need is still there, The concern is still there, and new opportunities are being identified. As a reminder, we traditionally see seasonality in sales with Q1 being slower. We've consistently shared our strategy to be a market leader in healthcare cybersecurity privacy and audit, and our desire to transition to a managed service provider platform. And as you may have seen, we recently strengthened our leadership team with the addition of Jamie Reynolds, our new Vice President of Business Development and Strategies. She brings two decades of healthcare and cybersecurity sales and business development expertise, as well as a successful track record of building and executing go-to-market sales strategies. Early in her career, Jamie developed the Healthcare Vertical in both North America, Europe, Middle East, and Africa regions for a global IT media consultancy, which is where her passion for solving challenges in healthcare began. Jamie has since held various leadership roles in sales, business development, and strategy at the Herzgevik Group, Blueprint HIT, now Enterprise Health, and Fortified Health Security. Jamie will be responsible for driving growth with our managed services, and in particular, the new CRMP, pulling from experience and taking similar services to market previously. Jamie knows healthcare, she knows cybersecurity, she knows the MSP space, and she has an excellent reputation in the industry, strong track record of performance, and she joins our team just in time to drive our go-to-market strategy with these services. Our biggest challenge in 2022 should not be any surprise to anyone who's been paying attention to the markets, the world stage, or the economy. But healthcare organizations, like other industries, have another significant headwind, and that is being resource-constrained. This, coupled with the continued high scrutiny around security and a growing lack of IT resources means that customers of all sizes and levels of sophistication will be in need of the security expertise that we can provide. This factor, more than any other, is driving the transformation towards managed service providers and solutions. Organizations cannot find and retain the expertise they need to accomplish this critical mission internally. Our business is taking the steps necessary to drive both top-line growth and margin improvement. As always, we continue to assess our strategic options, which includes evaluating our expense profile, relationships with our strategic partners, and transactions, with the potential to drive enhanced shareholder value as we ourselves go through this transformation. With that, let me turn it over to Paul now to cover the financials and be back before we wrap it up.