Investor Presentation November 2017 NYSE AMERICAN: CTEK
Safe Harbor Statements This presentation contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make (herein or otherwise) regarding the size of the potential market for our services; the number of potential customers/clients for our services; plans and strategies of CynergisTek and its subsidiaries for future growth and performance; market acceptance of our business model; our ability to integrate acquisitions and merged companies; and timelines relating to growth, milestones, and strategic focus. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management’s current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the risk factors discussed throughout Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2016; and throughout Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Quarterly Reports on Form 10-Q for the quarters ending March 31, June 30 and September 30, 2017, Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We expressly disclaim any obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise. 2
Introduction 3
CynergisTek Cybersecurity & Information Management for Healthcare Nationwide Presence Covered Entities Consultants average 1,000 healthcare 15 years of experience provider locations and in their domain business associates Auxilio acquires CynergisTek in 2017 expertise Contracts Revenue 3-5 year service $60M in 2016 contracts 4
Market Opportunity 5
Healthcare IT Dynamics 3.5 Million Covered Entities and 35 Million Business Associates Cost of a Breach Print Has Increased 11% Breaches cost the healthcare industry $6.2B/yr 1 , 90% of all Significant risk to PHI and cost hospitals had a breach in the past savings opportunity for hospital. two years. 2 Lack of Resources IT Spend on Security 3 Shortage of estimated 1.5M Healthcare 4-6% cybersecurity resources. Leading to Financial 10-12% managed services and program Government 7-9% delivery. Internet of Things (IoT) Increased Regulation Estimated 30 billion devices by OCR enforcement of HIPAA among 2020. Covered Entities and Business Associates. Biomedical device risk. References on slide 25 6
$12B+ Domestic Market Opportunity EHR produces 60% 40% of 2016 breaches of print volume 1 were unauthorized -Paper represents disclosure 2 30% of all breaches Healthcare $12B Market 41% of data breaches in 2017 64% increase in were tied to insider breaches related to error or wrongdoing, hacking in 2016 vs. which compromised 2015 3 nearly 1.2 million patient records. Market Cap combined Healthcare Cybersecurity and MDS business 7
In the News Enterprise Attacks are Growing and Impacting Consumers Ransomware Disruptive Attacks 1 4 64% of victims in the U.S. pay Shutting down hospitals ransom Identity Theft Threats 2 5 Every two seconds someone is a 1 in 131 emails are malicious victim of identity theft Global Weaponized IoT devices 3 6 689 million people globally were Take down critical cloud services victims of cybercrime in 2016 Cybersecurity labor crunch to hit 3.5 million unfilled jobs by 2021 8
Solutions 9
The Services We Provide Security/Privacy/Compliance/Cost Consulting Services Managed Services Professional Services • Risk Assessment • Compliance Assist Partner • Remediation Program • Technical Security • Program Development Assessment • Vendor Security • Strategic Staffing Management • Print Security Assessment • Virtual CISO • Privacy Monitoring • Architecture Assessment • Vulnerability • Social Engineering and Management Phishing • Managed Print Service • Privacy Program Assessment • Incident Response Management • Policy and Procedure Development • Compliance Program Effectiveness Assessment • HIPAA Research Program Assessment • Meaningful Use Audits 10
Go-to-Market Strategy Unique lead generation efforts of Thought educational events and PR to gain share of Leader voice in the market. Our depth and breadth in the industry make Market us a trusted partner to healthcare Approach leadership, providing the services they need. Account Managers embedded into client to Upsell upsell services across the organization. Building long-term partnerships and Longevity becoming the trusted advisor with our clients. 11
Competitive Advantage Unmatched Healthcare Cybersecurity Experts Strong Relationships and Track Record Tailored Solutions Effective Leadership CynergisTek won the 2017 Best in KLAS Award for Cyber Security Advisory Services Actionable Insight Customer Driven Well Known Industry Player 12
Financial Performance 13
Snapshot NYSE AMERICAN 11/28/2017 Share price $4.06 Market cap $41M FD Shares Outstanding 10M Shares Owned by Mgmt. 25% and Board Income Statement 2016 YTD Q3 2017 Revenue 1 $60M $53M Adjusted EBITDA 1 $3.4M $5.3M Adjusted Earnings $3.3M $3.9M Cash $6.1M $2.7M 2 Debt $1.3M $21.4M 1 Please see our annual and quarterly financial results for complete details. 2 Company maintains a $5M receivable based line of credit with $0 balance outstanding. 14
Revenue Financial Highlights $61 $60 $53 $44 Q3 YTD $44 $ IN MILLIONS 29% 20% 19% 17% 2014 2015 2016 YTD 3Q17 Revenue Gross Margin YTD 15
Adjusted EBITDA Financial Highlights $5.3 $ IN MILLIONS $3.4 $3.9 $3.3 $2.1 $1.8 $1.8 $1.7 2014 2015 2016 YTD 3Q17 Adjusted EBITDA Adjusted Earnings 1 Adjusted Earnings: adjusting for estimated cash tax adjustment, interest expense, amortization of intangibles, stock based compensation and depreciation 16
About Us 17
Snapshot of Clients Sample representation more than 1,000 healthcare provider locations and business associates. 18
Growth Initiatives Create $150M Recurring Cybersecurity Focus Revenue Healthcare IT 1 2 Continue growing service offerings to Services Business meet market demand. Be the #1 trusted source in the market. 5 year goal with >15% adjusted EBITDA. Employee Investment Continue to strengthen and build on the 3 4 Increase Shareholder Value teams depth of knowledge in cybersecurity. 19
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