root9B Technologies Announces 2015 First Quarter Financial Results

NEW YORK, May 14, 2015 /PRNewswire/ --

First Quarter 2015 Summary

• Q1 2015 net revenue rose 97.8% to $9.5 million from $4.8 million in Q1 2014, due to the contribution of IPSA International, which was acquired in February 2015.
• Loss from operations of $2.7 million, as compared to loss from operations of $1.6 million in Q1 2014. The Q1 2015 loss included IPSA acquisition costs of $0.6 million.
• Net income available to common stockholders of $0.3 million, or $0.00 per diluted share, compared to a net loss of $2.1 million, or ($0.08) per diluted share, in Q1 2014. Net income in Q1 2015 included a one-time $2.3 million income tax benefit, with no such benefit recorded in Q1 2014; excluding the one-time income tax benefit, the net loss available to common stockholders for Q1 2015 was approximately $2.0 million, or ($0.02) per diluted share.

Business Overview and Outlook

• Company continues to develop innovative capabilities of its wholly-owned cybersecurity subsidiary, root9B, while narrowing its operating focus on cybersecurity and regulatory risk mitigation.
• Adversary Pursuit Center anticipated to commence operations in Q3 2015; facility will operate 24/7, allowing root9B to remotely surveil clients' proprietary network space with trained operators.
• Company completed $11.3 million in aggregate financings in Q1 2015 to strengthen financial position, support growth initiatives and complete its acquisition of IPSA.

root9B Technologies, Inc. (OTCBB: RTNB) today announced financial results for the first quarter ("Q1") ended March 31, 2015.

"Our Q1 2015 results reflect the impact of the February 2015 acquisition of IPSA International (IPSA), as well as a one-time income tax benefit associated with this transaction that produced a profitable quarter despite a loss before income taxes of $1.5 million," said Joseph J. Grano, Jr., Chairman and Chief Executive Officer of root 9B Technologies, Inc.  "Our Q1 2015 results were also negatively impacted by lower revenues and increased costs at our root9B Cyber Solutions segment.  These higher costs reflect ongoing investments designed to drive the expansion of root9B's proprietary cybersecurity platform and, with it, segment revenue.  While our pre-tax loss did narrow slightly from Q1 2014, our results are not acceptable and we have yet to turn the corner on an operating basis.  I continue to believe, however, that we can achieve profitable operations by year-end as the current results do not accurately reflect the exciting potential inherent in our cybersecurity business and the integration progress we have realized since the acquisition of IPSA." 

Mr. Grano concluded, "Cybersecurity and regulatory risk mitigation services remain high areas of demand for companies, government entities and regulators worldwide. We believe that these trends align quite well with our business objectives and will help differentiate our operating model.  We have assembled some of the most respected professionals from each of these industries, and are close to commencing operations at our new, state-of-the-art Adversary Pursuit Center in Colorado Springs.   Although challenges remain, we believe we are better positioned, both operationally and financially, to address the business opportunities that lie ahead."          

Consolidated Q1 2015 Overview

Total revenue for Q1 2015 increased 97.8% to $9.5 million from $4.8 million in Q1 2014, due to $5.9 million in revenue generated from the IPSA acquisition (part of the Business Advisory Solutions segment), offset by respective revenue declines of $0.3 million at our Cyber Solutions and Energy Solutions segments, and a $0.5 million decline at the legacy operations of Business Advisory Solutions.   Lower revenues at Cyber Solutions reflect lower revenue from cyber tools reported in Q1 2014 but not repeated in Q1 2015, as well as a longer than expected sales cycle.  The longer sales cycle has been caused by root9B's paradigm changing approach to the market and potential clients requesting a proof of concept as part of the sales process.  Additionally, our new Adversary Pursuit Center is not expected to be completed until the end of Q2 2015, which is a critical component in selling our proprietary platform in the commercial sector.   As part of its shift in strategy, the Company is de-emphasizing the Energy Solutions business to focus on providing cybersecurity and regulatory risk mitigation services.  Lower revenue at the legacy operations of Business Advisory Solutions reflect lower revenue from existing customers and the completion of projects that were active in Q1 2014 and completed during 2014, which revenue was not replaced by new customers or new project work from existing customers during Q1 2015.             

Q1 2015 gross profit rose to $2.2 million, or 23.3% of total revenue, from $1.1 million, or 22.1% of total revenue, in Q1 2014.  This improvement was mainly due to better profit margin from risk mitigation services offered by IPSA, offset by lower margin at our Cyber Solutions segment as a result of high ramp up costs associated with significant investments designed to increase future revenue.

Selling, general and administrative ('SG&A') expenses rose 57% to $4.0 million in Q1 2015 from $2.6 million in Q1 2014.  As a percentage of revenue, SG&A declined to 42.1% in Q1 2015 from 53.0% in Q1 2014, due to incremental revenue from the acquisition of IPSA. 

The loss from operations in Q1 2015 rose to $2.7 million from a loss of $1.6 million in Q1 2014, due primarily to substantial increased comparative losses at the Cyber Solutions segment (for the reasons cited above), and increased SG&A expenses. The loss in Q1 2015 also included IPSA acquisition costs of $0.6 million as compared to $0 costs in Q1 2014.

The Company realized a one-time income tax benefit of $2.3 million in Q1 2015 compared to $0 benefit in Q1 2014.  The Q1 2015 benefit was associated with the acquisition of IPSA in February 2015.   

Net income available to common stockholders for Q1 2015 was $0.3 million, or $0.00 per diluted share, compared to a net loss of $2.1 million, or ($0.08) per diluted share, in Q1 2014.   Excluding the above-referenced $2.3 million income tax benefit, net loss available to common stockholders for Q1 2015 was approximately $2.0 million, or ($0.02) per diluted share.  

About root9B Technologies

root9B Technologies is a leading provider of Cybersecurity and Regulatory Risk Mitigation. Through its wholly owned subsidiaries root9B and IPSA International, root9B Technologies delivers results that improve productivity, mitigate risk and maximize profits. Our clients range in size from Fortune 100 companies to mid-sized and owner-managed businesses across a broad range of industries including local, state, and government agencies. For more information, visit www.root9BTechnologies.com   

Forward Looking Statements

Certain information contained in this press release may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on root9B Technologies' current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors, and other risks and uncertainties affecting the operation of root9B Technologies business. These risks, uncertainties and contingencies are indicated from time to time in root9B Technologies filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Further, investors should keep in mind that root9B Technologies financial results in any particular period may not be indicative of future results.  root9B Technologies is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

SOURCE root9B Technologies, Inc.

Related Links

http://www.root9BTechnologies.com