10 Aug 2019, 02:43 GMT+10
DALLAS, TX / ACCESSWIRE / August 9, 2019 / nDivision Inc. (OTCQB:NDVN), the experts in increasing IT's value and reducing IT costs up to 50% by replacing human labor with "digital labor," today announced its financial and business results for the second quarter ended June 30, 2019.
'Year over year, nDivision grew its customer base and financial metrics because the technology world - particularly enterprise IT departments - are at a transition point. Leading CIOs are identifying and deploying game-changing technologies to advance the business objectives of their enterprises. Technology departments failing to make the transition can find their companies losing market share to more technology proficient competitors," said Alan Hixon, CEO of nDivision, Inc. "nDivision offerings help them reallocate their most valuable resources - particularly capital and critical expertise - from their expensive and time-consuming 'keeping-the-lights-on' (KTLO) activities to strategic initiatives with demonstrable ROIs. Our digital engineers keep their systems up and running, cut costs by as much as 50%, and better enable them to deploy technologies that can disrupt their competition - if not their entire industry.
"The momentum that propelled our growth during 2018 continued throughout the first half of 2019, and in the second quarter, resulted in nDivision being awarded an additional $720,000 per year contract by an existing Fortune 500 client. Additionally, our organic business development pipeline of qualified Managed Services prospects expanded during the period by the largest single-quarter jump we have experienced since our founding," continued Hixon. "Business development efforts with one of our two Fortune 50 Global Technology Partners also advanced significantly during the quarter, and we are now being engaged even more strategically in one of their 10 national regions/verticals to introduce nDivision offerings to their enterprise customers. This alliance slashes weeks or months off the typical nDivision Managed Services sales process and should dramatically improve our close rate with these prospective customers."
First Quarter 2019 Financial Results
Three Months Ending
Net Cash (used in) Provided by Operating Activities
Adjusted Run Rate EBITDA*
* Non-GAAP financial measure - See Use of Non-GAAP Financial Measures for more information about Adjusted EBITDA and Adjusted Run Rate EBITDA
The company uses the above-mentioned non-GAAP financial measure, Adjusted Run Rate EBITDA, as its primary indicator of financial performance and intrinsic financial health. Adjusted Run Rate EBITDA is calculated using contracted recurring revenues less Cost of Goods Sold (COGS) and known customer attrition. The metric excludes professional services, other income, and sales and marketing costs, other than long-term customer acquisition referral fees. The metric does not include sales forecasts or anticipated new business wins. The reconciliations of non-GAAP Adjusted EBITDA and Adjusted Run Rate EBITDA to GAAP net income (net loss) are provided in schedules that are a part of this press release in the section titled Use of Non-GAAP Financial Measures.
Financial Highlights and Outlook
Growth of nDivision's revenue during the second quarter of 2019 compared to the same period in 2018 was primarily due to revenue from new customer contracts won by the company's direct sales team, new customers acquired through its relationships with the company's Global Technology Provider partners, and revenue from a portfolio of 58 Managed Services Contracts acquired by the company in January 2018, which began contributing revenue during the 2018 second quarter.
Year-over-year Contracted Recurring Revenue growth also includes new customer wins through the company's strategic relationships with two Fortune 50 Global Technology Providers and revenue from the acquisition of 58 Managed Services Contracts completed during the first quarter of the prior year.
The company expects that the Fortune 500 customer contracts will begin billing at their agreed upon levels, during the fourth quarter of 2019, at which time it is expected that the company will be able to cover all monthly operating costs solely with recurring revenue, and become cash flow positive.
Adjusted EBITDA and Adjusted Run Rate EBITDA were lower sequentially due to receipt during the 2019 first quarter of a substantial onboarding charge related to the Managed Services Contract for the Fortune 500 customer. This charge was not realized again in the second quarter of 2019.
The company's actual results for the second quarter did not achieve the benchmark projected in the first quarter 2019 quarterly financial announcement due to delays in fully transferring the systems of the company's Fortune 500 customer onto the nDivision's platform. It was anticipated that the balance of the onboarding fees and a portion of the monthly recurring revenue for the associated Managed Services Contract would be realized during the second quarter of 2019. It is now anticipated that the balance of the onboarding fees will be realized during the 2019 third and the fourth quarters. nDivision also expects to receive a portion of the contracted monthly Managed Services revenue during the fourth quarter and that the contract will begin billing fully at contracted levels during the fourth quarter of 2019.
The business development teams continued to grow the company's two primary sales channels during the quarter.
Addition of Keith Morrow to Board of Directors
nDivision added to the Board of Directors Keith Morrow who is the EVP, Technology Advisor for Epsilon, a global marketing innovator acquired by Publicis Groupe for $4.4 billion during the first half of 2019. In this role, Mr. Morrow advises the executive team on business-growth and technology strategies. Prior to the acquisition, Mr. Morrow was the CIO of Epsilon and was responsible for all Information Technology (IT), Cyber Security, and Technology Compliance, as well as the integration of game-changing technology. In his board role for nDivision, Mr. Morrow will advise the executive, sales, and operational teams, leveraging his extensive experience as CIO for multiple companies. Mr. Morrow also assumes the Chairman role of the Nomination & Governance Committee.
Mr. Morrow previously founded an effectiveness consultancy, K. Morrow Associates, and prior to that was the EVP/CIO at Blockbuster Inc. and 7-Eleven, Inc. While in those roles, he was named to CIO Magazine's CIO 100 for three consecutive years and was inducted into the CIO Hall of Fame by the CIO Magazine in 2008. From 2004-2016 he was a Texas governor-appointed member of the Board of Directors for the State of Texas Department of Information Resources, and served on the board of directors for Copper Mobile from 2012-2015. He currently serves on the advisory board of Technology Spa, an early stage technology company focused on Cloud Strategy, Governance, and DevOps as a Service.
H. William Gordon and Dennis Cagan have stepped down from the Board of Directors. The executive team and remaining board members thank both gentlemen for their contributions to the development of nDivision.
About nDivision Inc.
nDivision Inc. provides Autonomic Managed Services and End User Help Desk services to private and public entities, ranging from small businesses to global enterprises. nDivision's services are valuable for any industry and are being provided to customers in multiple segments. The company supports over 100 customers across 45 countries, 24 hours a day, 365 days a year. nDivision leverages advanced automation technologies to replace human labor with digital labor. By the end of the first year of the service, nDivision typically automates between 60% and 80% of all incidents, across the datacenter and network. More information can be found at www.ndivision.com.
Use of Non-GAAP Financial Measures
The Company uses the above-mentioned non-GAAP financial measures internally to evaluate its operating performance and for planning purposes and believes that these are useful financial measures also used by investors. These non-GAAP financial measures are not a substitute for nor superior to financial measures provided by GAAP and all measures and disclosures of financial information pursuant to GAAP, as reflected in the Form 10Q filed with the SEC for the respective periods, should be read to obtain a comprehensive and thorough understanding of the Company's financial results. The reconciliations of non-GAAP adjusted EBITDA to GAAP net income (net loss) are provided in schedules that are a part of this press release.
The aforementioned 2019 Fiscal First Quarter Highlights should be read in conjunction with all of the financial and other information included in the Company's Quarterly Reports filed with the SEC on Form 10Q for the respective periods, Current Reports on Forms 8K & 8K/A and Information Statements on Schedules 14A & 14C filed with the SEC, and Annual Reports on Form 10K filed with the SEC; and, the discussion of financial results in this press release and the use of non-GAAP financial measures and the related schedules attached hereto which reconcile non-GAAP financial measures and financial information to that prescribed by GAAP. These non-GAAP financial measures and metrics of financial results or financial performance are not a substitute for the financial measures provided by GAAP and should not be considered as alternatives, substitutes or superior to financial measures presented in accordance with GAAP. Financial information provided in this press release may consist of estimates, projections and certain assumptions that are considered forward looking statements and that are predictive in nature, depend on future events and the projected financial results may not be realized nor are they guarantees of future performance.
The reconciliations of non-GAAP adjusted EBITDA to GAAP net income (net loss) is provided in schedules below:
Reconciliation of Non-GAAP Adjusted EBITDA to GAAP Net Income (Net Loss)
First Quarter Ended June 30, 2019
|June 30,||March 31,||Dec. 31,||Sept. 30,||June 30,|
Net Cash (used in) provided by operating activities
Depreciation and amortization
Other non-cash expenses or gains
Change in Contingent Liability
Non Recurring Revenue
Customer Acquisition Costs
Net contracted; recurring revenue not yet billed
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