Q1 2020 Earnings Call Transcript

Published: 15 May 2020

[Operator:]

Good day, and welcome to the CynergisTek First Quarter 2020 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Bryan Flynn, CynergisTek, Investor Relations. Please go ahead, sir.

[Bryan Flynn:]

Thank you, operator. I want to welcome everyone to CynergisTek’s First Quarter 2020 Earnings Call. Joining us today from the company includes Mr. Caleb Barlow, President and Chief Executive Officer; and Mr. Paul Anthony, Chief Financial Officer.Before we begin the formal presentation, I’d like to remind everyone that some statements made on the call and webcast including those regarding future financial results and industry prospects, among others, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the conference call.Certain of these risks and uncertainties are or will be described in greater detail in the company’s SEC filings. CynergisTek is under no obligation and expressly disclaims any such obligations to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. At this time, I’d like to turn the call over to our CEO, Caleb Barlow.

[Caleb Barlow:]

Thank you, Bryan, and good afternoon, everyone. It’s only been a month since we talked. So let me start by giving you some more insights around the COVID-19 pandemic and the impact it’s having on our business. For our clients, on the front lines of this crisis, this is well a perfect storm, and we’re doing everything we can to help them navigate further. I’m sure you’re all well versed in the public health crisis and the impact that it’s having on America’s hospitals. But the public health crisis is directly contributing to a financial crisis at many of our clients as elective procedures have been put on hold, revenues are down and cash reserves at many institutions are well running low.To add to this, the information and security community, along with multiple government agencies, including Interpol, the NSA, the Department of Homeland Security, cybersecurity and infrastructure security agency, the FBI and the UK’s national cybersecurity center are all warning of the likelihood of increased security threats to hospitals, both cyber and physical as look to take advantage of increased vulnerabilities and public sentiment.The telehealth adoption curve has accelerated dramatically, forcing many of our clients to play catch-up from a security perspective. New personnel and commercial-grade devices are being added to the network each day, both streamlining care but also introducing new potential vulnerabilities at exactly the same time.The health care landscape continues to change as many of our clients only began to feel the impact of the pandemic mid-March. Our clients' first focus, of course, was operational. Early planning and preparations involved preparing the supply chain and added inventory levels for personal protective equipment the core ventilators. It included building approaches to add capacity for potential surge in patient volumes. Well a month later in our is the impact, both operationally and financially. This impact is manifesting customers coming to us for support with extensive payment terms, contract of its modifications and even pushing out start dates for services.Now as we evaluate the increasing risk to our operations, we have a threefold strategy to address the business risk across the short, the mid and the long-term aspects of this recovery. So in the short term, we are absolutely here to support our clients. Our team will continue to act as the trusted advisers for their security and privacy needs. We’ve reduced expenses where possible, with a focus on maintaining sales and deliver headcount were practical. Given the nature of our work and the skills required, keeping our team intact is incredibly important to supporting our customers.Now I am proud of our team and the speed at which they deploy the necessary tools, procedures and, frankly, even a culture shift to 100% remote work environment. Even though we’re remote, we’re still learning and innovating. And many of the steps we’ve taken to work remotely are, frankly, also make it more efficient. Now those learnings will continue even when this crisis passes. I’m also focused on ensuring the safety and well-being of the team once we can travel again.Now as you remember, we rebuilt our sales team, and enablement with our new sales team is going well. They’ve been able to focus on learning our expanded service offerings and new ways to expand the footprint within our clients by working closely with the delivery teams after an assessment to correlate the identified security risk into pipeline opportunities.We have a solid base of reoccurring managed services revenue as evidenced by the two large contracts we announced during the quarter, and we will continue to focus on growing this revenue base with our new sales team. However, we have seen a slight decline in delivery utilization as our clients have started to request moving engagements out into Q2 and even the second half of the year.Our goal, again, in the short-term is to continue to deliver exceptional expertise and guidance to our clients during the crisis. Our delivery and sales teams are in constant communication with them working to understand their needs. Where necessary, we’re making adjustments to our services and delivery time lines in an effort to balance both their security and product needs as well as their financial concerns.So in the midterm, like all businesses right now, we have no idea how long this pandemic will last, and our clients have both the responsibility of public health as well as their own financial well-being. We know they’re losing money, and they’re starting to make financial decisions that are impacting spend. Yes, the government has set aside aid for hospitals, however, the distribution and utilization of the funds is not clear. Clients have started to scrutinize their own budgets, and we’ve already seen deals slip into Q2 and Q3, including approximately 10% of managed services clients, requesting to change contract terms or delay payments. We will remain there for our clients and are constantly looking for opportunities to gain share within our market, but of course, in a disciplined way.We’ve also recently reorganized the business to improve performance. The reorganization includes a reduction of the company’s workforce, primarily the back office, support and executive ranks. These are a mix of both temporary and permanent reductions, and our organization will be leaner, more efficient and more flexible to adapt coming out of this.In the long term, the fundamentals of the business are strong. And we will continue to focus resources on our sales and delivery teams as they are driving the business and supporting our clients. Now we’re still managing towards the five key imperatives that we laid out in our 100-day CEO webcast. Those are still the impairments of business. And we continue to move towards those goals, only recognizing this period of uncertainty, while it may change the timing of when we can get there. But rest assured, health care continues to be security and privacy as a priority. We’re still getting leads, our pipeline is still strong, and we continue to close deals. We’re just much more focused on scrubbing the pipeline, working the fundamentals and taking out any unnecessary costs or inefficiencies so that we are well positioned once we get on the other side of the quarantine.I will now hand the call over to Paul to give a summary of the Q1 financials. Paul, go ahead.

[Paul Anthony:]

Thanks, Caleb. I’d like to start with the standard financial disclosures and then get into more specifics around the COVID-19 financial impact and our initial responses. The financial information, if it includes Q1 2019 is for the security business only. Security revenue was in line with expectations for the quarter and decreased by approximately $0.7 million to $5.1 million, mainly due to lower revenue from professional and consulting services customers who had large non-recurring remediation contracts that completed most of the work in Q1 of last year.Breaking down the revenue for Q1 2020 versus 2019, managed services revenue was $3 million, an increase of 7%. Professional and consulting services decreased 29% to $2.1 million. Backbone Consultants, which was acquired in Q4 2019, contributed $1.1 million in the quarter, a 30% year over increase for them.Gross margin was 33% for Q1 2020 compared to 40% in 2019. Although we saw a reduction in total labor costs due to the reduction in consulting and professional services, we did see an increase in labor costs as a percent of revenue due to additional costs and investment in attracting and retaining cyber security employees and the costs associated with ramping up some of the new services. We recently enacted some staff reductions at the end of the quarter, though, that will improve margins on a go-forward basis. Sales and marketing expenses were flat at $1.5 million for Q1 2020 compared to the same period in 2019.G&A expense increased $0.4 million to $2.1 million for Q1 2020 compared to the same period in 2019. This increase was primarily due to $0.1 million in additional stock-based comp, $0.1 million in additional costs for backbone and then $0.2 million in additional costs related to the professional fees and recruiting costs.Both at year-end and into Q2, we have taken steps to reduce G&A expenses, which I’ll discuss shortly. Non-GAAP adjusted EBITDA loss was $1.4 million or 28% of revenues for Q1 2020 compared to $0.2 million for 2019. The full financials and reconciliation of the GAAP to non-GAAP information can be found in the earnings release that came out.As we’ve discussed in the past, our business has a concentration in health care provider space. The short and long-term impact to this side of the health care industry is still uncertain and developing on a daily basis. As Caleb mentioned, there’s a lot of uncertainty right now, and we are seeing some pullback from existing and prospective customers. To respond to these developments, we’ve taken a number of steps that we think positions us well to react when opportunities present themselves as these clients face many new challenges.The first critical step we took was to secure the necessary funds needed to support the business through these uncertain times and maintain critical resources. As this crisis developed, the credit market started to significantly tighten. Fortunately, we were able to work with an existing investor to obtain an equity commitment, which we announced last month. Additionally, as we started to appreciate how our customers were being impacted, we also secured funds through the Paycheck Protection Program.Second, we have partnered with our employees and made some temporary adjustments to compensation, travel, and discretionary spending that will provide an opportunity to save between $150,000 and $250,000 each month depending on how the year develops. Next, we made permanent and targeted expense reductions that addresses the reduced utilization that we saw in Q1 that negatively impacted gross margins as well as the go-forward reaction to this pandemic. This expense reductions will save us approximately $170,000 per month and has and will result in onetime charges of approximately $40,000 in Q1 and a projected $280,000 Q2.Finally, we have also built out contingency plans to reduce expenses further to better position the company if we continue to see negative signs from the industry and our customers. This concludes the financials and the prepared remarks for Q1 2020. Operator, please open the floor for questions.

[Operator:]

[Operator Instructions] Our first question will come from Matt Hewitt with Craig-Hallum Capital Group.

[Matt Hewitt:]

Just a few for me. First off, regarding – so you’ve got some puts and takes. Backbone, obviously, a strong quarter, up 30% year-over-year, but you do or you did comment on seeing some push-outs on new contracts. Is it your expectation or should we anticipate revenues growing in the second quarter? Or would that be more Q3, Q4 where you’d start to see that increase again?

[Paul Anthony:]

Yes, that’s going to be Q3 and Q4 definitely is our anticipation right now.

[Matt Hewitt:]

Okay. And then as far as gross margin, you’ve taken some steps there, 33% and in Q1, will that – given the steps that you’ve taken, should gross margins expand in the second quarter?

[Paul Anthony:]

We would expect gross margins to improve even in the second quarter. But again, we’re targeting Q3 and Q4 to really start driving back towards that mid-to high 40s range.

[Matt Hewitt:]

Mid-to high 40s, okay. And then maybe a couple housekeeping items. What is your current cash balance? So you exited the quarter, that number is in the key. But since then, the $2.5 million direct investment as well as the PPP loan. What is the current cash position?

[Paul Anthony:]

So we didn’t – we didn’t initially tap the equity commitment. So there was no cash taken in. We did bring in, as we mentioned, $2.8 million from the PPP program. And currently, as of the latest month, we’re in excess of $6 million in cash right now.

[Matt Hewitt:]

Okay. Great. And then maybe one last question, a more high-level item for you, Caleb. So yesterday, there were several articles talking about how there’s been an increased interest or there’s an increased cybersecurity risk, where foreign companies, countries, whatever, have been trying to hack into some of our pharma companies either with the intent of stealing information for vaccines or treatments or to potentially alter that data, whatever the reason, does that create an opportunity for you? Obviously, it’s outside of the hospital setting, but health care in general, have you seen any increased interest from those types of companies? And what type of an opportunity does that represent for you? Thank you.

[Caleb Barlow:]

Well, I think the best way to describe this, and we kind of used this term in the comments is this is truly a perfect storm, right? So at the same time, you have a health care crisis, which has led – public health crisis, which has led to a financial crisis in many industries. You also have a looming cybersecurity crisis that particularly manifest in health care. And there’s a couple of reasons for that, right?One, certainly, there’s interest level around COVID-19 research from nation-state actors. You also have the fact that people are reading more news reports, they are at home, the entire threat landscape has completely changed. And don’t forget, bad guys are dealing with this, too, right? You talk about human adversary, it’s also likely quarantine, no matter where in the world they are, and that’s causing some interesting dynamics. Their business, whether that’s the business of a nation-state or that’s the business of an organized criminal, their business has changed too.The places they were making money in the past or were interested in pursuing in the past are different, right? If you are an actor than in the past has been focused, let’s say, on travel and tourism, going after hotels or people when they’re traveling, whether that’s even physical or kinetic, I mean physical or cyber, well, those targets aren’t there anymore because people aren’t traveling, right?So it’s natural to see a shift. I think a lot like many businesses are looking for where are they going to make revenue next, so were the bad guys. But of course, the other thing is there’s new opportunities here. There’s new information, people want to get their hands on, but they are also new vulnerabilities. I mean, no one ever anticipated that everybody would be working from home. And here’s a base fast analogy I can give you. And I’ll do what security folks should never do and give you a medeval castle metaphor, right? But imagine you’ve got a medeval castle, you’ve got the archers on the wall, the princess and the crown jewel is locked up in the tower and you just evacuated the castle.You told everyone to run off from the forest, get outside of those defenses and defend yourself. That’s literally what just happened, not only at hospitals, but frankly, in most of the industry. Everybody is operating outside those traditional firewalls and defenses, and that’s absolutely what we needed to do to get people operational during this crisis, but it creates an enormous risk that we’re only now beginning to understand.So could it create opportunity? Sure. Because anytime there’s risks or changes in the marketplace, it creates opportunity. It’s just a matter of us executing well to navigate that particularly when you’ve got customers that are also going through a financial crisis, and that’s what we’re laser-focused on.

[Matt Hewitt:]

Understand great. Thank you very much.

[Operator:]

Moving on, we’ll go to Jeff Bash with Fintech.

[Jeff Bash:]

Let me just add a comment to what you just said, Caleb. I came across some information on a major telecom service provider yesterday that basically said that what’s happening now with the work at home is that many enterprise size companies are in effect setting up enterprise access points in people’s homes all over the place, where they’ll have access to main databases and so forth and so on at the company. And therefore, if you think about that, that really, it does increases cyber security risk immensely.

[Caleb Barlow:]

You’re absolutely right. Look, even in my house, I mean, right now, there’s probably four Zoom meetings going on in my house. People are on shared computers, and I mean, I’ve obviously taken a lot of protections to isolate myself from my children and everything else going on in my own house. But I don’t – I think that’s unusual, right? I think in a lot of cases, these corporate networks have been connected to by what could even be a shared workstation within home because people just needed to do it as quickly as possible. And now in a lot of ways, we’re all in a race to go shore up those defences.

[Jeff Bash:]

Yes. Okay. Another of my questions. Paul, absent the $1.1 million in Backbone revenue in Q1, it really seems like the non Backbone revenue fell off a cliff from a year ago. Now roughly what percentage of that is due to the two contracts that ended up completing versus pandemic related drops.

[Paul Anthony:]

I mean it was almost entirely a function of those two clients. Those two clients were over $1.5 million in reduction quarter-over-quarter. So at least at this point, we’re not seeing a specific drop in revenue related to COVID. We’re just not seeing an increase or add to those buckets at this point until we get more clarity on what’s going on in the marketplace.

[Jeff Bash:]

The next question I was a little startled here the reference high 40s gross margin in your answer to Matt Hewitt. In the past, I’ve been thinking in terms of 45%. And then the last quarter or so that because of having to pay more to hire good quality folks. Are you actually now at a structure of your expenses and so forth, that when you get going again on the other side of all this, you could see high 40s gross margins?

[Paul Anthony:]

With the growth that we would hope to receive, I do believe that’s possible. I think that given the number of the changes that we’ve made recently as we get back to growth levels and we start to push into higher monthly revenue numbers that I think we have the opportunity to get into the mid to high, so.

[Jeff Bash:]

That’s excellent. And my last question, I guess, is for Caleb to be a little judicious in answering this. But how do you escape the conclusion that given the enormous publicity about hospitals closing, laying off people and everything, and then you step back a moment and say, hey, what’s is going on. We’ve had increased demand for medical services because of this pandemic that have been grossly mismanaged at all levels of government, the people who have elective surgery can’t get it. And that, by the way, I know from a friend include people who have cancer diagnosis, can’t get the surgery either. I mean, I’m having a hard time escaping the conclusion that this has been horribly mismanaged, and I’d be curious on the more professional comment.

[Caleb Barlow:]

Well, look, I think probably not the time or place to judge government, but here’s what I can say for you. There is absolutely a different gear that I think any leader, including myself, have to shift into right now, which is really crisis decision making, which is very different than normal decision making, right? You’ve got to make decisions and limited data with the information you have on the ground. You’ve got to be willing and able to pivot and jog and go back on even your own decisions a day later because what you’re trying to do is migrate through a landscape that there is no playbook for, nobody’s ever been in before.And honestly, Jeff, I think a lot of people struggle with that. What – and there is a reality here, and I think a lot of what we’re articulate today is we don’t know how long it’s going to last. We don’t necessarily know what the bottom is going to look like. But what we do know is how to execute through that and make those make judgment calls not only to try to maintain the types of resources that we need on the other side, but constantly evaluating every decision to ask ourselves how do we derisk this as much as possible. And I think, and you can ask the most of my team, the word derisked comes out of my mile more tons a day now than I can count because that’s really part of what you better look at, I think, during this navigating through this.

[Jeff Bash:]

Well, I got to say I am frustrated because I am living in the second worse state. And the whole idea at the beginning was to do this with the hospitals so that the hospitals wouldn’t be overwhelmed. And I don’t think that’s a case anywhere. Even in New York, the hospital ship with the Fed up there. And it seems to me that the hospitals should be back in full gear now, and they aren’t. It’s disappointing in the fact we have to suffer because of it.

[Caleb Barlow:]

No, yes. I mean, think about it this way, right? I mean, we don’t know what the end of that story is yet. There’s a lot of dialogue about giving aid to the health care sector. And also, at some point here, probably not as soon as a restaurant will turn itself back on, but at some point, these hospitals are going to turn back on, and there’s going to be some sort of a backlog of elective procedures and those things will pick back up. I think the big question for our business it really comes down to what are we going to see as their – when they get to the extra $10 in their bank account, what are they going to spend it on?And how important is cybersecurity going to be in that dialogue. The two things that I remind people of constantly is, one, the threat landscape has totally changed, meaning, whether you’re a hospital or a bank, what you need to worry about today is totally different than what you needed to worry about two months ago.And the second thing is your attack surface. The places you’re going to likely be attacked has also completely changed. And the faster people realize that and move out around it, the better chance they have of protecting themselves from something worse happening. And if not, well, then we’ll see what happens. All right. Thanks, Jeff. Anything else?

[Jeff Bash:]

No. Thank you.

[Operator:]

And next, we’ll go to Michael Potter with Monarch Capital Group.

[Michael Potter:]

Not to beat the dead horse, but I guess on the same theme, can you give us – everybody recognizes that the risks have changed, it had expanded. Obviously, there’s more potential areas that need to be covered that they weren’t before. I’m assuming the hospitals do as well. I know a lot of these hospitals, you cannot get to their Chief Technology Officer or the appropriate person to have a dialogue. But many of these health networks I have to assume are. Is there a plan in place, once funding does become available? Have our quotes increased as our pipeline expanding?

[Caleb Barlow:]

Yes. So let me give you a little color into some of the things we’re doing. I mean, so as you can imagine, sales has completely changed in that the physical things that a salesperson would do, especially someone face to face, you go out and meet with clients, you can’t take them on to launch. You can’t do all the normal things you would do. However, I will say I’ve been pretty impressed with both our creativity of how we can get in front of that as well as the willingness of clients to continue having the dialogue because the one thing that hasn’t changed is whether it’s a sales dialogue or a subject matter expertise dialogue, people need information more than ever.And that’s just more likely going to happen now in a video conference versus face-to-face. So that has been going actually fairly well. I mean, is at the same level in cadence you normally see no, but I’m actually pretty encouraged by it. And frankly, it’s a lot more cost-effective and efficient than always getting people on airplanes, and some of that’s going to probably stick. So I think that’s the first piece of it. I think the second piece is looking at what is this going to look like coming out the other side. And one of the dialogues that I’ve really been having a lot with our clients, including a few today, is that these changes that are occurring, remember, one of the big parts of our business is we go in and we will evaluate the cybersecurity posture of the company.And that manifests not only in advice and guidance and integral assessment, but also an executive workshop where we talk them through what we’ve learned. One of the biggest things I find myself talking about now is really explaining guidance. What we did six months ago, you have to completely relook at it because everything has changed. You’ve got all these vendors that weren’t normally connected to your network, connected because they have to work from home. You’re taking your whole administrative staff, you put them at home.You’re doing work with health care records on consumer-grade products like Zoom meetings, not – you’re not using the normal tools that you would use in health care because that’s what you had to do. But you’ve got to go shore those things up. Now I think you’ve – the challenge in this is twofold. One, we’ve got to figure out what people really need on the other side. I think we’ve got – I’d be confident we’ve got a really good idea of that because we know where the risks are.But then the second question is there’s got be a willingness to lead in show of these problems. And that’s somewhat delayed, but those conversion because I think people realize that they have – they’ve got to shore this up once their budgets open back up and they get out of kind of financial crisis mode. The other interesting in this, and there’s no telling how this unfolds, but it’s all kinds of dialogue that, hey, some large percentage of restaurants out there aren’t going to go is after this crisis. There’s also a reasonable chance we will see changes in the health care landscape.And a lot of the predictions are that we’ll see lots of consolidation, right? The companies that are solvent, the health systems that are solvent will likely buy up the ones that aren’t. So a lot of what we’re thinking about right now is as that consolidation, which is likely to occur or happens, what are the differences in the services, the delivery for the mechanisms that we do think are required if we’re dealing with larger systems. So look, in a strange way, having a little extra time in where we’re not 100% utilized gives us an opportunity to really think through these issues and do our homework. And that’s exactly what we’re doing right now.

[Michael Potter:]

Okay. So I guess back to the question though a lot of the technical officers at these hospitals and health networks are very knowledgeable, right? And they know that the landscape has changed. Has – and many of which we’ve worked with over the years, have we started having a dialogue for when things do begin to open up, this is an area that they’re going to tackle quickly and aggressively?

[Caleb Barlow:]

Yes. Not only are we having that dialogue, but we’re actually engaging with some of the industry groups we work with as well to help to have the dialogue on an even broader scale, right? I think it’s not only incumbent on us to have the dialogue one-on-one individually. And frankly, I’ve also been calling clients directly to have that dialogue. But we’re also trying to have that as a broader community as well. It is – remember, there’s a third actor in this play, right? It’s not just us as the vendor and our clients, it’s also the bad guys. And not that I want to say they have any control over what people are going to buy per se, but they certainly have a whole lot of control over what they’re going to attack, what their timing is.And that could have a very big impact on this. We – in 2019, you saw massive increases in ransomware, as an example, particularly in health care. That has largely stopped. It’s starting to creep back in and all of these things can really change what’s happening. If you look right now, just at the news, for the most part, with few exceptions, there hasn’t been a whole lot of attacks on hospitals, most of it right now seems to have pivoted to laboratories. So that can drive how people think about things. And even in a hospital, we’re getting a lot of questions around, hey, how do I deal with my research arm? And what do I need to do there because it just draws more attention to it.

[Michael Potter:]

Okay, thanks guys.

[Operator:]

And next, we’ll hear from William Bremer with Vanquish Capital Partners.

[William Bremer:]

The first question. Looking over your team, what is needed in terms of our potential service offerings, not just personnel, but you had your wish, what else would you like to add to our service offerings at this time? And I’ll stop there right now.

[Caleb Barlow:]

Well, I mean, I’ll talk about competitors on the call, so I’m not going to give you every intimate detail on an open call. But let me just say, one of the things we’ve talked about in the past is the pivot from kind of penetration testing to red teaming, that is well underway. We also think that there are a variety of ways that we can continue to be a little more sophisticated in what we deliver to our more sophisticated clients.But also recognizing that the needs of a larger system are very different than the needs of the small regional hospital, not only in the technical capabilities of what we might bring to bear, but even, frankly, in the reporting and the dialogue. So those are all areas that we’re keenly focused. And now we’ve got the time to do a little bit of that research, a whole lot of training and make sure that we only come out the other side as the team is ready to go.

[William Bremer:]

Got you. And secondly, I’m just curious, have any of our clients been attacked as would say, let’s say, year-to-date, so to speak? And how do we act and how do we handle that situation?

[Caleb Barlow:]

Yes. I mean, as a function of policy, I would never talk about what clients have been attacked or have in or what happens. But yes, we have clients that are attacked all the time. We absolutely engage, and that can be everything from helping them deal with regulators to help with them in their response. A good day for us what we really feel we’ve done our job is you have to recognize it anyone even with the most robust security posture can get attacked.But a good day for us is when we sit down with a regulator to help a client, and the regulator looks at what we did, looks at the recommendations, looks at how our clients respond to those recommendations and says, okay, bad things happen to good people. I’m good here. That’s a big win for us. Obviously another win preventing something from happening in the first place. And those things happen every day, but I obviously can’t talk about specific incidents or quantities or anything like that just because I would never do that to our clients.

[William Bremer:]

Now completely understanding. And I thank you for the color.

[Operator:]

And next, we’ll go to Ben Goodman with Be Good Holdings.

[Unidentified Analyst:]

Thanks. Good afternoon. I have two questions. One, so one thing that the federal government has done in this situation is they’ve eased up on some regulations to reduce the restrictions around things like telemedicine. And I’m wondering if you are seeing any interest in that in services, if you have positioned any services for that? And kind of along the same lines, your medical device management service. I’m curious if you can give us any insight into whether that’s changing for better or worse? Or where do you see that going?

[Caleb Barlow:]

Sure. So let’s – let’s start with the medical device piece. Medical devices, you’ve probably heard of IoT and the challenges with shadow IT and people just bring things into companies and plug them into the network. Medical devices are kind of the combination of both and they’re a gigantic problem because you might have 5,000, 6,000 devices touching a network in a hospital, many of which are connected to things. It’s very difficult to get the inventory of those devices, figure out where they are. Traditional tools you would use to scan for them you really can’t use in these environments because of the, and they’re connected to patients.And you can’t win topline you can go over. So we got really good at finding these devices, helping companies deal with patching them. I mean, it’s not uncommon to find a 20-year-old MRI which one of the XP. And we’ve got to figure out how to isolate that so they can continue running it because the upgrade requires bringing in a crane literally. I mean these are not uncommon scenarios. So that whole business is one of our newer services. It has really start to pick up in terms of interest level. And I think as we get outside of this that will be one of the key areas we’re looking. It’s a – let’s put it this way. It’s a very big mass for your typical CIO. And we’ll just take that problem off their hands and manage it for them for a flat rate for three years. Now what would – remind me, sorry, what was your first question again?

[Unidentified Analyst:]

Well, telemedicine. So a number one, the federal government has eased restrictions on that. Number two, in all likelihood, just like you were saying earlier, some of the changes that you’re making to deal with the pandemic are probably going to stick and telemedicine was already taking off before this happens. So I’m just wondering if you see that as significant growth opportunity, if you’ve got any traction in that area and securing telemedicine and so forth, what your take is on that.

[Caleb Barlow:]

It’s a huge opportunity. And here’s the way to think about, right? Telemedicine was going to happen, but it was probably going to happen very slowly and very deliberately. And there were two reasons for this, right? One was the technology constraints of finding ways to do it, doing it securely, getting those devices and methodologies approved, and that’s a slow roll. But in addition to that, and I think this is the piece that a lot of people don’t completely understand. The clinicians didn’t get paid in the same way for doing telemedicine, right?So you also had constraints around could you get reimbursed by do a patient over the phone or a Webex meeting or what have you. And that wasn’t handled in the same way. So when regulators come in and say two things, absolutely we get paid just like somebody showed up in your office. And two, don’t worry about the security of privacy constraints temporarily, all of a sudden, you get an acceleration of innovation in my estimation by 5 to 10 years, and it happened in the four weeks. Now absolutely and I’ll say this as a security professional. This absolutely needed to happen, right?It was the right decision-making to accelerate this and make things safer. Now what comes with that, and I think there’s been very clear about this, is this is temporary. We now need to shore up all of those systems that are going to be used, get full likely off of kind of consumer-grade systems and on the systems that clearly protect and have the appropriate security provisions. So yes, there’s certainly an opportunity there. It’s an area where we’re having a lot of discussions. And of course, part of what has to come out of this as well as indications from the regulators to be acceptable in this new world, both in terms of their reimbursements as well as from a security and privacy perspective.

[Unidentified Analyst:]

Thank you.

[Operator:]

That does conclude today’s conference. We’d like to thank everyone for their participation. You may now disconnect.