root9B Technologies Announces 2016 Second Quarter Financial Results and Revised 2016 Financial Outlook

NEW YORK, Aug. 18, 2016 /PRNewswire/ -- root9B Technologies (OTCQB: RTNB), announced today its results from operations for the second quarter and revised outlook for certain financial operating metrics for the year ended December 31, 2016.

Second Quarter 2016 Summary

• Q2 2016 net revenue rose 28.3% to $10.2 million from $7.9 million in Q2 2015.
• Loss from operations of $3.9 million as compared to $3.1 million in Q2 2015.
• Net loss available to common stockholders of $4.8 million or ($0.06) per diluted share, compared to a net loss of $1.1 million or ($0.02) per diluted share in Q2 2015. Net income in Q2 2016 included $437,000 of derivative expense, while Q2 2015 included a one-time $2.4 million of derivative income. Excluding the derivative effects, the net loss available to common stockholders for Q2 2016 was approximately $4.4 million or ($0.05) per diluted share and for Q2 2015 was approximately $3.6 million or ($0.05) per diluted share.

Other Business Highlights

• Company continues to focus on commercialization, development and growth of our proprietary capabilities within its wholly-owned cybersecurity subsidiary, root9B. We focus our core competencies on cybersecurity and regulatory risk mitigation.
• Company completed $7.0 million in aggregate financings in the first six months of 2016.

"Our Q2 2016 results are disappointing despite new client engagements, which while resulting in increased revenues did not scale to levels sufficient to offset the ramp up of our cybersecurity footings," said Joseph J. Grano, Jr., Chairman and Chief Executive Officer of root9B Technologies. "Our Q2 2016 results were negatively impacted by lower margins in our IPSA/BAS segment, higher costs associated with the expansion of root9B's employee base and expenses related to the continued development and commercialization efforts of our proprietary cybersecurity platforms." 

"Cybersecurity and regulatory risk mitigation services remain high areas of demand for companies, government entities and regulators worldwide," Mr. Grano added. "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 our new state-of-the-art Adversary Pursuit Center in Colorado Springs has commenced operations. Although challenges remain, we believe we are positioned to address the business opportunities that lie ahead."

Consolidated Q2 2016 Overview

Total revenue for Q2 2016 increased 28.3% to $10.2 million from $7.9 million in Q2 2015, due to a revenue increase of 64.2% to $1.1 million in the cyber segment, a revenue increase of 28% to $8.6 million in the IPSA/Business Advisory Solutions segment, offset by a revenue decline of 21.7% to $0.4 million in other operations. As part of its shift in strategy, the Company has de-emphasized its focus on the Energy Solutions business to concentrate on providing cybersecurity and regulatory risk mitigation services.

Q2 2016 gross profit fell to $1.5 million from $1.9 million in Q2 in 2015. As a percentage of total revenue, cost of revenue increased in Q2 2016 to 85.3%, up from 76.5% in Q2 2015.

Selling, general and administrative ('SG&A') expenses rose 6% to $4.8 million in Q2 2016 from $4.6 million in Q2 2015. As a percentage of revenue, SG&A declined to 47.1% in Q2 2016 from 57.3% in Q2 2015. 

The loss from operations in Q2 2016 rose to $3.9 million from a loss of $3.1 million in Q2 2015.

Revised 2016 Financial Outlook

The Company revised its previous forecast for the full year, expecting to report net revenue of approximately $34.7 million, an increase of 18.1% from net revenue of $29.4 million in 2015. Revenue generated by root9B, the Company's cybersecurity solutions business, is expected to grow to more than $7.9 million and comprise 22.8% of total projected 2016 revenue, up from $3.0 million and 10% of revenue in 2015.  Revenue at the IPSA/Business Advisory Solutions segment, which focuses on regulatory risk mitigation, is expected to increase to approximately $25.1 million, up from revenue of $24.6 million in 2015. Revenue generated by the Company's other operations is expected to approximate $1.6 million in 2016.  

Operating loss for 2016 is expected to narrow to approximately $11.9 million from an operating loss of $13.2 million in 2015, a 9.2% improvement. The improvement will be driven primarily by a combination of higher revenue, a higher proportion of cybersecurity revenue, the impact of previously enacted cost cutting initiatives, and the absence of certain expenses that were incurred in 2015.    

"Our revised forecast for 2016 reflects the realization that new client engagements in the first six months of 2016, while resulting in increased revenues, have not yet scaled to levels that the Company expected when it issued its original forecasts," said Mr. Grano. "That fact, coupled with continued delays in obtaining new clients, necessitated reducing our forecast for the remainder of the year."

"We remain optimistic about the outlook of our wholly-owned subsidiaries, root9B and IPSA International," said Mr. Grano. "Over the last year, root9B in particular, has elevated its industry profile and brand identity in the growing cybersecurity market. Revenue at root9B in 2016 is expected to increase to more than $7.9 million, up approximately 166% from revenue of $3.0 million in 2015. In January of this year, root9B ascended to the #1 position on the Cybersecurity 500 ranking of the world's hottest and most innovative cybersecurity companies for 2016, and as announced earlier this month, we retained that ranking for the third consecutive quarter. This recognition has helped drive interest in root9B's unique real-time 24/7 HUNT, assessment, and analytic capabilities, and allowed the company to bolster the pipeline of potential projects. We believe root9B is uniquely positioned to further expand its presence in this industry, which, according to Cybersecurity Ventures, is estimated to see worldwide spending grow from $75 billion in 2015 to more than $1 trillion over the next five years."

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.

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

SOURCE root9B Technologies

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