Colorado Springs, CO (Jul. 11, 2017) - root9B Holdings, Inc. (Nasdaq: RTNB) ("RTNB") today announced financial results for the first quarter ended March 31, 2017 ("Q1 2017").
As previously announced, in connection with its shift to a pure-play cybersecurity company, RTNB sold its Control Engineering, Inc. ("CEI") subsidiary on December 31, 2016 and the Investigative Due Diligence Practice of its wholly-owned subsidiary IPSA International Services, Inc. ("IPSA") on April 30, 2017. Accordingly, the financial results of CEI and IPSA have been presented as discontinued operations for all periods presented. The following highlights our financial results from continuing operations for Q1 2017 and 2016, except where noted.
"Q1 2017 cybersecurity revenue nearly tripled from the same period last year, the result of the industry's understanding that a shift to active cybersecurity tools from passive cyber software is mandatory," said Eric Hipkins, Chief Executive Officer of RTNB. "Given our ongoing business development activities, new product introductions, and the rising threat of cybercrime in the government and commercial space, we continue to expect improved operating results in 2017."
"We spent the last several quarters taking steps to sharpen our business focus to pure play cybersecurity, streamline our operations, strengthen our capital base, and create a solid foundation for growth. Although there is still much work to be done, we are confident in our outlook, our ability to advance root9B's pioneering approach of manned information security, and support the continuing roll-out of HUNT and cybersecurity-as-a-service business model," said Dan Wachtler, RTNB's President.
RTNB filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission on July 6, 2017. Investors are encouraged to read this document which provides further details related to our operations and financial condition including that the Company continues to have a "going concern" designation. In addition, please refer to information provided in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 in Part 1, Item 1A labeled "Risk Factors."
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."
Ranked as the #1 Cybersecurity Company by Cybersecurity Ventures, root9B stands in defiance of the unwanted human presence within our clients' networks by attacking the root of the problem—the adversary's ability to gain entry and remain undetected. root9B's application of advanced technology developed through cutting-edge R&D and engineering and refined through relevant, hands-on training is revolutionary. root9B combines next generation technology, tactics development, specialty tools, and deep mission experience. root9B personnel leverage their extensive backgrounds in the U.S. Intelligence Community to conduct advanced vulnerability analysis, penetration testing, digital forensics, incident response, Industrial Control System (ICS) security, and HUNT (Active Adversary Pursuit) engagements on networks worldwide. For more information, visit www.root9B.com.
root9B Holdings is a leading provider of Cybersecurity Services for clients ranging from Fortune 100 companies to mid-sized and owner-managed businesses across industries, as well as local, state and federal government agencies. For more information, visit www.root9bholdings.com.
Certain statements contained in this press release may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company's 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 the Company's business. These risks, uncertainties and contingencies are indicated from time to time in the Company's 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 the Company's financial results in any particular period may not be indicative of future results. The Company 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.
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