21% Growth in Managed & Professional Services
CENTENNIAL, Colorado, – (April 30, 2021) – VirtualArmour International Inc. (CSE:VAI) (OTCQB:VTLR), a premier cybersecurity managed services provider, reported results for the fourth quarter and full year ended December 31, 2020. Financial results are in U.S. dollars, with comparisons made to the same year-ago quarter unless otherwise noted. For complete details, please refer to our financial statements and discussion found here: https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00037617
2020 Financial Highlights
- Managed and professional services revenue for the year increased to $6.5 million, increasing by 21% year-over-year.
- Overall revenue for the year decreased to $10.25 million, decreasing by 25% year-over-year due to a 54% reduction in product sales.
- Gross profit margins for managed and professional services came in at 50.5% with overall gross profit margin, including lower margin resale revenue, of 38.2%.
- The company lost $189,000 from operations in the year ending December 31, 2020 compared to an operating loss of $1.53 million for the year in 2019.
- Adjusted EBITDA was $264,000 for the year ending December 31, 2020. See Supplemental Non-GAAP Financial Measures below.
- Annual recurring revenue (ARR) totaled $5.3 million at December 31, 2020, representing an increase of 15.2% from $4.6 million at December 31, 2019. ARR is defined as the value of VirtualArmour’s service contracts normalized to a one-year period.
2020 Operational Highlights
- Expanded offerings in Essential Core Services to include Managed SIEM, Managed Infrastructure and Firewall, and SOCaaS.
- Launched Premium level service offering for SOCaaS.
- Completed Phase 2 of the VirtualArmour Automation initiative, which will result in an expected savings of approximately 100 hours per month in engineering man-hours.
- Engaged with lead generation company, investment into Google Ads, and increased webinar events.
- Revamped regular customer reporting and interaction with Technical Business Reviews that will continuously improve awareness and guide customers to strengthen their security practice.
2020 Financial Summary
- Revenue totaled $2.35 million for the three months ending December 31, 2020 and $10.25 million for the year 2020. Managed and professional services revenue totaled $1.7 million in the fourth quarter reflecting a 34% increase in managed and professional services revenue year-over-year and Product revenue for the fourth quarter decreased from $3.67 million in 2019 to $618,000 in 2020.
- 2020 Cost of sales totaled $6.3 million, down from $10.4 million in 2019.
- Gross profit was $3.9 million for the year 2020 as compared to $3.2 million in 2019. The change in gross profit was due to higher margin revenues from managed services and higher utilization of professional services resources in 2020.
- Total operating expenses were $4.1 million in the year 2020 as compared to $4.76 million in the prior year.
- Operating loss was $189,000 for the year 2020 compared to an operating loss of $1.53 million in 2019. Net loss was $1.4 million or $(0.01) per share in the year 2020 as compared to a net loss of $2.23 million or $(0.04) per share in the prior year.
- Cash totaled $179,355 at December 31, 2020, compared to $145,268 at December 31, 2019.
“In the year 2020 we saw great results from the continued expansion of our Essential Core Service offerings, which now include entry to mid-level offerings around Managed SIEM, Managed Infrastructure & Firewall, and SOCaaS. These tiered service offerings are intended for businesses that have a low number of devices, require less IPMs, or EPS, but still need managed cybersecurity services.” Tianyi Lu, VirtualArmour VP Product Strategy.
“With so many businesses that have shifted their infrastructure online, we continue to see an increased need for protection in this new online environment. It’s almost like the wild west out there, and our clients look to us for one-time consultation or to manage their cybersecurity needs through our service offerings.” VirtualArmour CEO, Russ Armbrust.
VirtualArmour Outlook 2021
As the COVID-19 pandemic continued to grip the globe throughout 2020 and many businesses went completely online, the uptick for cybersecurity services continued to increase. Our focus from hardware/software resale to offering primarily managed cybersecurity services in 2020 lead to the safeguarding of our margins from the widespread freezes on capital spending in all industries. Tapping into a new section of the market that was previously overlooked by competitors, the VirtualArmour addition of new Essential Core Services offering has opened up entry and mid-level markets for the company. As we continue to experience growth in all areas of our business, the company formed an internal dedicated product team leading to increased efficiencies, quality and more value add to the customer.
As the world slowly emerges from the pandemic in 2021, VirtualArmour predicts we will continue to see interest and expansion in our new service offerings. With the growth of our company, we have experienced a need for process that has lead to increased internal efficiencies and automation. Shifting our focus in 2020 has benefited the company greatly, and enabled us to finish the year with strong performance.
VirtualArmour International is a global cybersecurity and managed services provider that delivers customized solutions to help businesses build, monitor, maintain and secure their networks.
The company maintains 24/7 client monitoring and service management with specialist teams located in its U.S. and UK-based security operation centers. Through partnerships with best-in-class technology providers, VirtualArmour delivers leading hardware and software solutions for customers that are both sophisticated and scalable, and backed by industry-leading customer service and experience. The company’s proprietary CloudCastr client portal and prevention platform provides clients with unparalleled access to real-time reporting on threat levels, breach prevention and overall network security. VirtualArmour services a wide range of clients, which include Fortune 500 companies and several industry sectors in over 30 countries across five continents. For further information, visit www.virtualarmour.com.
Supplemental Non-GAAP Financial Measures
In addition to GAAP financial measures, management uses non-GAAP financial measures to assess the company’s operational performance. It is likely that the non- GAAP 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-GAAP 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 GAAP. Management believes that such non-GAAP 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.
Management assesses adjusted EBITDA as the net gain (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 GAAP and non-GAAP measures do not have standardized meaning. Accordingly, non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
The table below provides a reconciliation of net gain (loss) for the period as reported to non-GAAP adjusted EBITDA for the years ended December 31, 2020 and 2019:
Important Cautions Regarding Forward Looking Statements
This press release may include forward-looking information within the meaning of Canadian securities legislation and U.S. securities laws. This press release includes certain forward-looking statements concerning a service contract VirtualArmour has entered into with a current client, VirtualArmour’s continued relationship with various suppliers, the future performance of our business, its operations and its financial performance and condition, as well as management’s objectives, strategies, beliefs and intentions. The forward-looking information is based on certain key expectations and assumptions made by the management of VirtualArmour. Although VirtualArmour believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information as VirtualArmour cannot provide any assurance that it will prove to be correct.
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 VirtualArmour to meet timelines, the continued availability of necessary hardware, the absence of any trade war or tariffs affecting VirtualArmour’s ability to perform, competitive risks and the availability of financing. These forward-looking statements are made as of the date of this press release and VirtualArmour disclaims any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
|December 31 December 31|
|Cost of sales||(6,331,143)||(10,411,459)|
|General and administrative||2,065,640||2,229,753|
|Research and development||397,757||222,668|
|Sales and marketing||1,641,292||2,310,727|
|Gain (Loss) from Operations||(188,950)||(1,529,705)|
|Other Income (Expenses)|
|Change in fair value of warrant derivative liabilities||(854,268)||–|
|Gain on forgiveness of PPP loan||594,100||–|
|Net and Comprehensive Gain (Loss) for the year||(1,380,637)||(2,231,008)|
|Gain (Loss) per share – basic and diluted||(0.01)||(0.04)|
|Weighted average number of shares outstanding – basic and diluted||98,302,111||61,678,669|
|December 31, 2020
|December 31, 2019
|Total Current Assets||2,490,577||5,512,999|
|Operating lease right-of-use assets||62,880||88,242|
|Property and equipment||256,310||555,860|
|Accounts payable and accrued liabilities||819,905||5,305,786|
|Current portion of operating lease liabilities||61,671||100,772|
|Current portion of finance lease liabilities||61,840||138,441|
|Due to related parties||–||401,699|
|Total Current Liabilities||3,590,086||8,630,293|
|Finance lease liabilities||–||12,188|
|Warrant derivative liabilities||1,463,485||–|
|Common stock, no par value, 300,000,000 shares authorized Issued and outstanding: 106,508,822 (2019 – 63,599,447) shares||8,561,758||7,670,975|
|Additional paid-in capital||2,130,237||2,013,445|
|Total Stockholders’ Deficit||(3,721,085)||(3,348,023)|
|Total Liabilities and Stockholders’ Deficit||2,839,475||6,202,620|
Russ Armbrust, CEO
VirtualArmour International Inc.
Tel (720) 644-0913