Investor Presentation March 2018 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 and Information Management for Healthcare Nationwide Presence Covered Entities* Consultants average 15 1,000 healthcare years of experience in provider locations and their domain expertise business associates with 100+ individual industry recognized certifications 2016 Contracts Revenue 70% of clients in 3-5 $60M year managed services Adjusted EBITDA contracts $3.8M *Covered entities are defined in the Health Insurance Portability and Accountability Act (HIPAA) rules as (1) health plans, (2) health care clearinghouses, and (3) health care providers who electronically transmit any health information in connection with transactions for which the department of Health and Human Services (HHS) has adopted standards. 4
Market Opportunity 5
Healthcare IT Industry 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 Cybersecurity labor crunch to hit 1.5 Healthcare 4-6% million unfilled jobs by 2019 4 with Financial 10-12% 84% of hospitals lacking a dedicated Government 7-9% security leader 5 Internet of Things (IoT) Increased Regulation Estimated 27 billion devices by OCR enforcement of HIPAA among 2019. covered entities and business associates. Biomedical device risk. References on slide 24. 6
$11B Domestic Market Opportunity $65B - estimated EHR produces 60% of cumulative healthcare print volume 6 cybersecurity spend on -Paper represents 30% of products and services all breaches over the next five years 7 Healthcare 9 Market $11B 37% of data breaches in Hacking incidents 2017 were tied to insider involving ransomware error or wrongdoing, and which compromised malware doubled from nearly 1.7 million patient 2016 to 2017 8 records 8 The fundamental difference between healthcare and other industries is that it’s not just about money and information, it’s about the quality of care and patient safety. 7
In the News Healthcare Organizations will be the most targeted sector with new sophisticated attacks emerging Ransomware Disruptive Attacks 1 4 64% of victims in the U.S. pay Shutting down hospitals ransom Threats Identity Theft 2 5 Trend of 1 breach a day continues Every two seconds someone is a into 2018 (Healthcare specific) 8 victim of identity theft Global Nearly 1 billion people globally Weaponized IoT devices 3 6 Take down critical cloud services were victims of cybercrime in 2017 up 45% from 2016 10 Victims of cybercrime globally lost $172 billion 10 8
Solutions 9
The Services We Provide Security/Privacy/Compliance/Cost Avoidance 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
Competitive Advantage Unmatched Healthcare Cybersecurity Experts Strong Relationships and Track Record Tailored Solutions Thought Leaders CynergisTek won the 2017 Best in KLAS Award for Cyber Security Advisory Services Market Driven Trusted Advisor Well Known Industry Player 11
Financial Performance 12
Snapshot NYSE AMERICAN 2/27/2018 Share price $5.31 Market cap $50M FD Shares Outstanding 10M Shares Owned by Mgmt. 25% and Board Income Statement 2016 YTD Q3 2017 Revenue $60M $53M Adjusted EBITDA 1 $3.4M $5.3M Adjusted Earnings 1 $3.3M $3.9M Cash $6.1M $2.7M 2 Debt $1.3M $21.4M 1 Please see our annual and quarterly earnings releases for complete details. 2 Company maintains a $5M receivable based line of credit with $0 balance outstanding. 13
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 14
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 EBITDA: adjusting EBITDA for stock based compensation. 2 Adjusted Earnings: adjusting net income for estimated cash tax adjustment, amortization of intangibles, stock based compensation and depreciation. 15
About Us 16
Snapshot of Clients Sample representation of more than 1,000 healthcare provider locations and business associates. 17
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