Q4 2019 Earnings Call Transcript

Published: 31 Mar 2020

[Operator:]

Good day, and welcome to the CynergisTek Fourth Quarter and Full Year 2019 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 fourth quarter and full year 2019 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 would 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 maybe 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 obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.At this time, I would like to turn the call over to our CEO, Caleb Barlow.

[Caleb Barlow:]

Thank you, Bryan. Good morning, everyone. Before I start my remarks today, I appreciate and want to thank all of our investors, employees, customers and partners, for the support I've received over the last eight months at the helm as CynergisTek. We continue to transform our business into a comprehensive security and privacy services company.Let me start by discussing the coronavirus pandemic, and how we are responding to its impact. The first thing to understand is that our clients are very much on the frontlines of this crisis. And from a business perspective, that means they are still at work, and we are interacting with them daily. I personally made it a point to call nearly all of our customers over the past few days to check in, and discuss the impact of this crisis on their operations, and their security and privacy posture.As you know, CynergisTek has been supporting the healthcare market as the trusted advisors for security and privacy services for almost two decades. Our team is fully operational, albeit remotely, during the difficult times. Although the primary concern right now in our client base is access to personal protective equipment, ventilators and the flattening of the curve.Security professionals, including myself, are increasingly concerned about the likelihood of a destructive attack on hospitals in the middle of this crisis. After all, we saw 118% increase in ransomware last year. And in most cases, when a hospital is hit with ransomware, they have no choice but to divert patients. It is our job working with our clients to do everything we can to keep our clinicians at work, and seeing patients with full access to their systems and infrastructure. This is a responsibility we take incredibly seriously. And the dialogue we're having with our Chief Information Security Officers right now, is really one around not on my watch, as we help them shore up their defenses and prevent privacy breaches during this crisis.Now, operationally, 86% of our workforce was actually remote prior to the pandemic outbreak, and with rare exception we are now fully remote. Our teams are traveling, only when absolutely required, as critical infrastructure workers as outlined in the guidance from the U.S. Department of Homeland Security, Cybersecurity and Infrastructure Security Agency. We're continuing to monitor and close contracts, as you recently saw with the announcement of $1 million managed security and professional services contract.We also just announced the second notable six-figure deal, which is an expansion of a leading public research university system into additional managed services. The second contract includes our newer medical device assessment offering.Since I started in this job, many of you've been asking me, when would we see a change or event occur, which is the health care market. We would start to take security seriously. I believe that moment may just have arrived. In a similar environment to post 9/11, we are recognizing that this is now a new normal. This disruption is accelerated telemedicine, remote work, temporary facilities, and increased vendor access to systems. Things will do happen over the next number of years have now been accelerated over the last few days and weeks.Like any disruptive activity, this comes with increased security and privacy concerns. The industry is only beginning to grapple with. The threat landscape has completely changed, and the attack surface has grown exponentially in just the last two weeks.Our clients are already reaching out for help. A great example of which is a large patient privacy monitoring deal, we closed last year, where our client, concerned about medical record snooping related to COVID-19, has asked us to accelerate their deployment. Like everyone else, we are monitoring the situation daily, and long-term, I believe we may see benefits to the business. However, short-term we may see a temporary impact to our sales and marketing, as our sales team is not able to meet with clients face to face.The sales approach has changed, and even though, we're not able to physically meet new clients. Communication lines remain open as everyone is at their home office, and willing to take a phone call as most of the nation is indeed grounded from travel. COVID-19 will impact our business.However, I believe we're in a strong position. As we continue to see demand for our services, while our compliance combat is virus. We're very active on social media, including a regular set of video cast, where I've been conducting for our customers to help them prepare for COVID-19, and any cyber adversary that might look to take advantage of the crisis, or increased threat landscape with more and more Americans working from home.So now, let's look back at 2019. We made the first transformative move by divesting the managed print services business, and therefore, eliminating the majority of our debt, which allowed our operations and sales teams to streamline their focus on security and privacy services. We continue to expand our managed services revenue and strengthen our offering. We saw approximately a 90% renewal rate from our reoccurring revenue service customers, and continue to expand services within our existing client base, with approximately 24% of a managed service client having two or more managed services.Our investments in new managed services started to pay off. The most notable of which, being a multimillion dollar offering with one of the nation's largest health systems who expanded its rollout across the entire enterprise, after completing a successful pilot at five hospital. That contract and the associated rollout, as I noted earlier, could be accelerated as our clients deal with COVID-19, and associated concerns on the insider snooping. As part of the service CynergisTek will proactively identify inherent behavior and activity within the medical record, leveraging artificial intelligence, user behavior analytic and a team of highly skilled investigators.Overall, we saw a 10% year-over-year growth in our managed services offerings in 2019, which now constitute 56% of our overall revenue for the year. And this is an important point as we enter this period of uncertainty, again 56% of our revenue is tied up in the long-term, multiyear contracts, many of which are required by regulators and all of which can absolutely be delivered remotely.Finally, we made a successful acquisition of Backbone Consultants, which brought a team of 18 security professionals into the company, as well as additional services to our portfolio, such as electronic prescription of controlled substance and IT Audit. We are excited about the acquisition and look to continue to support their team, as we work together to expand their business.I joined CynergisTek in the second-half of 2019, and after my 100 day strategy call in November, we anticipated that while we had some challenges. Since then, we've made substantial progress on improving the fundamentals of the business, by focusing on the five strategic imperatives that I had outlined. The first challenge was the company's go-to-market strategy. Our focus was to rebuild the sales team, with individuals who not only have the experience in the security industry, but also the contacts, network, reputation, and most importantly, speak the language of healthcare.As you may recall in November, we were down to four representatives. Well, I'm happy to report today, that we now are able to recruit and onboard a highly covering all seven regions in the country. We're now operating with a team of 10 sales professional with decades of experience in healthcare, information technology and security.These additions have made an immediate impact, as we've seen a 10% growth in our pipeline to a level we would expect to see, as we drive this turnaround. Now, many of these people are brand new, and it will indeed be sometime likely the second-half of 2020, before they're fully productive, as we continue onboard and enable our new sales team.Our second challenge focused on strengthening the skills of our team. Over the last few months, we've recruited individuals that will enable us to scale our current offerings and deliver higher value services, such as red teaming. These consultants can provide much more comprehensive security analysis, through exhaustive penetration testing techniques that mimic real world attack scenarios.As we improve our skill, we improve on the quality of our work front. With the deeper testing and controls, integration of run books and the back end of risk assessment, and the favorable reactions I've received from our clients, we ultimately should be able to also increase our pricing.We've also strengthened the Board, adding three new members with extensive backgrounds in the healthcare and security market, as well as experience leading both public and private companies. These new members will be invaluable in supporting me in my role as a CEO and opening the doors for client expansion.Dana Sellers has an impressive track record, leading in growing healthcare IT firms, and she is an experienced operator. Mike Loria is well known security professional, with extensive knowledge of the key players, products and services in the cybersecurity market. And Bob McCashin, well, he brings decades of experience as a public company CEO and Board member, which will be critical to our ability to manage through these tumultuous times.Next, we needed to focus on the operations of the business, make process improvement and reduction within our delivery team, and eliminate the backlog of work across the Board. This is a crucial step for the business, as it ties directly to client satisfaction and our ability to deliver our services. What was taking us three to four months, now takes us two to three weeks.By reducing the backlog, we can maintain client satisfaction, and focus the security and privacy teams on delivering our new services. Additionally, it allows us to maintain a more efficient and fully utilized workforce, particularly now, during this crisis.Finally, we had to reduce our operational headcount, which when combined with the efficiencies, should start to show improved gross margins. It is always difficult to let employees go, especially in this kind of environment. And as we move forward, in this time of uncertainty, know that Paul and I will remain focused on becoming cash flow positive, as rapidly as possible in the current environment.Over the last six months, I've focused on the challenges we've faced in the business. Our team was able to make considerable improvements on the imperatives. We made adjustments and we're going to continue to balance infrastructure and overhead requirements. We've begun to strengthen our team both internally and on the Board. We've reduced 100% of the backlog.Finally, we started to rebuild our go-to market strategy, by building a sales organization that is ready to execute. Now we still need to reboot our digital presence and our brand, and continue to execute on the sales and operational improvements. However, by addressing the above challenges, and focusing on improving the fundamentals of the business, we're positioned to either return to growth, or if we see a temporary pullback in the market, we are fully prepared and well-positioned to ride out a storm.So what does this mean for 2020? At the moment, with COVID-19 we're flat out busy, and we have the team and structure in place to adapt and pivot quickly. Our sales team is eager to engage and elevate the conversation with our clients and the C-suite, as they work to expand our managed services offering, an area of success in 2019. With the Backbone acquisition, we will focus on adjacent markets, such as with medical device manufacturers and some of the top EHR companies, who are already clients.Additionally, with a strengthening of the delivery team, and the ability to conduct more robust retaining services, we see an opportunity to increase pricing across our suite of services, and give more ammunition to our sales team, compete and focus on large scale enterprise clients. Fixing the imperatives is absolutely essential for the business. And our recent commitment of $2.5 million from a current investor, gives us the capital support we need to pursue opportunities from a position of strength. We will continue to prioritize capital efficiency in these uncertain times, while balancing investments prudently in other areas where we see opportunity.I'll now hand the call over to Paul Anthony, to give a summary of Q4 and the full year financials. Paul, go ahead.

[Paul Anthony:]

Thank you, Caleb. The financial information I'm about to provide is for the continuing security business only. Security revenue for the full year increased $0.1 million to $21.4 million, breaking down the revenue for 2019 versus '18. Managed Services revenue was $11.9 million, an increase of 10%.Professional and consulting services decreased 10% to $9.5 million. This decrease in consulting and professional services is consistent with what we've discussed over the last couple of quarters. Pro serve revenue was down to the decrease from one of our largest customers, who completed a number of the remediation efforts which required our support and has since reduced the number of resources.Going into 2020, with the recent COVID-19, we are still evaluating what impact we might see. We do expect some revenue growth due to the benefit from our recent acquisition of Backbone, and growth from our new managed services offering.Gross margin was 39% for the full year '19, compared to 48% in '18. As we mentioned, in prior quarters, the reduction in gross margin, which reflective of our investment in attracting talented cybersecurity employees, costs associated with ramping up the new managed services offerings, and a lower than expected consulting and professional services revenue from new and existing customers. Over the next few quarters, we expect gross margins to improve for the back-half of 2020, and as we look to grow our revenue and target cost reductions and better utilize our workforce.Sales and marketing expense increased slightly to $5.3 million for the full year '19, compared to $5.2 million for the same period in '18. This was in line with our expectations as a result of additional marketing expenses incurred, in an effort to increased sales including tradeshow and program related marketing expenses.G&A expense increased by $0.5 million to $6.9 million for the full year '19, compared to $6.4 million for the same period in '18. The increase is attributable to a net increase of $400,000 in nonrecurring expenses, related to the onboarding and offboarding of our CEO, severance related costs, transaction fees associated with the Backbone acquisition, along with approximately $300,000 in software subscriptions and support costs, for streamlining operations and business tracking.Non-GAAP adjusted EBITDA loss was $1.4 million, or 6% of revenues for the full year '19 compared to breakeven for '18. Financial results for Q4, 2019 compared to Q4, 2018 were impacted for the same reasons noted for the annual results, but we do want to lay out some of the quarterly specific numbers.Revenue was $5.8 million for Q4 '19, compared to $7 million in '18. Managed services revenue was $3.1 million compared to $3.2 million for the same period of '18. This drop was directly tied to the issues we were experiencing on the sales side. We've already started to make progress in growing this line again, as you've seen from some of our recent announcements. Professional consulting services revenues were $2.7 million, compared to $3.8 million for the same period of '18. Gross margin was 41% of revenue for Q4 '19, 52% for the same period in '18.Sales and marketing expenses were $1.4 million for Q4 '19, compared to $1.3 million for the same period in '18. G&A expenses were $2.1 million for Q4 '19, as compared to $1.5 million for the same period in '18. This increase in G&A is attributable to the $0.4 million in nonrecurring expenses we discussed previously. The full financials and reconciliation of GAAP to non-GAAP can be found in the earnings release that came out today.The company had $5.3 million of cash and cash equivalents and just received the commitment from an existing investor to provide up to $2.5 million in equity financing. Caleb and I continue to work together daily, albeit by video conference now to manage and monitor the daily operational expenses for the business. We're excited to continue working towards re-establishing predictable growth.However, our operational focus will not limited will be on four key drivers that impact cash flow. One, monitoring any negative trends and collections; two, controlling costs by constantly reviewing ways to reduce or rightsize or overhead and support organization; three, improving margins through a laser focus on utilization; and four, ensuring that our investment in sales is generating the results we expect both in terms of bookings and revenue. We've already taken steps to address each one of these areas and are currently enacting additional measures, and have contingency plans developed if the need arises.Returning to our efforts around monitoring the COVID-19 situation, we're also looking at all the options that will be available to us from the recent signing by President Trump of the Coronavirus Aid Relief and Economic Security Act.This concludes the financials and the prepared remarks for Q4 and the full year '19. Operator, please open the floor for questions.

[Operator:]

Thank you. [Operator Instructions] We’ll now take our first question from Matt Hewitt from Craig-Hallum Capital Group. Please go ahead, sir.

[Matt Hewitt:]

Thank you for taking the questions. I guess, a handful for you. First off, we're in a situation right now, with COVID-19 hospitals on the frontline, how do you manage the access? In the past, I think you've been able to call, get an answer, we can work with them more as a partner. But given the focus on COVID, does this make it a little bit more challenging on the sales side of the equation?

[Caleb Barlow:]

Well, first of all, thanks for the question, Matt. The short answer to your question is yes and no. And it's been interesting, I mean, one of the things that I've noticed is, I think this is something everybody's going to ground themselves in. As you go around, you talk with friends and family and other people in industry, I mean, there's just a lot of industry right now that shut down. All of our customers are at work, and it's a very different kind of environment than what we're seeing everywhere else. And they're also kind of amped up a little bit in that most of these hospitals have executed their emergency plans.But also, you got to remember our primary interest is the Chief Information Security Officer. And generally speaking, they are not clinicians, occasionally they are. So they're often working from home. They're really working hard right now to do everything they can to make sure that they properly enabled and secure telework, and they're getting ready.So, that actually presents an opportunity for us where they're at home, they're interacting with us, they're not travelling, they're actually answering the phone. So, so far so good on that, I think it's always challenging, not being able to see and meet you face to face. But I think the reality is this probably regardless of whatever industry you're in, is we're all going to have to get used to doing sales and working remotely. I personally have done a lot of social media work in the past. I hadn't done a lot here at CynergisTek, just because I was kind of busy with other things. But I'll tell you what dusted off those muscles, and we're out there every day or two, because it's a great way to engage with people, keep the process moving but requires a slightly different set of tools.

[Matt Hewitt:]

Okay, understood. And then, you were able to add some sales people during the quarter, and you mentioned that that’s more of a second-half of the ramp. But I'm curious, given the environment, that was one of the challenges for the company, historically, you have been finding talent at all levels of the organization. What's the current environment? How does that create some opportunities for you, maybe people that have been laid off in other firm, right now are now looking for work? Is that an opportunity for you? And how quickly do you think you can capitalize on that?

[Caleb Barlow:]

Well, this is -- you're inside my brain right now, Matt. I mean, you have to understand, security talent, there's a 2 million person gap right now. And this only gets exacerbated when I'm talking about, let's say, a small regional hospital. They can't get the people to come work there, even if they're willing to pay them.Now historically, we've really benefited from the fact that IR talented people, and we operate in a remote structure today. So a lot of times, if somebody lives outside of a major metropolitan area, we had a better chance of recruiting them than, let's say, a larger security company. I'm very curious to see what happens as people end up on the streets here over, and it's a terrible thing to have happened, but it's going to happen over the next couple of months.It's an ideal opportunity to recruit. On the other hand, one of the things Paul and I are very consciously monitoring, is we want to make sure we don't get over our skis and any capital pullback we may see. So, if you think about it, we've got a couple of variables in the equation. One is the net pipeline is talent, right, and always staying close to that. The second variable is kind of a short-term tactical variable, where any number of [indiscernible] any industry, including hospitals and healthcare. You're going to see a short-term kind of knee-jerk reaction to pull back expenditures, especially as they're going through kind of COVID-19, and they don't know what those costs are. And of course, they've also, let's say, deferred elective procedures.But, longer-term outlook is what gets really interesting, because honestly, this probably would have taken five or more years to see the telemedicine and remote work and more access to vendors to the EHR, rollout at the speed of -- I mean, we've basically got two, three weeks, what would have taken four or five years. And my gut tells me that you're never need back on the bottle.Right now that, there's more remote access to healthcare data. Now that more clinicians who have been self from home, I can't imagine how that genie ever goes back in the bottle. But we're going to need to figure out how to secure it, and it opens up a whole new realm of challenges from a privacy perspective.

[Matt Hewitt:]

Understood, okay. That's really helpful. And then maybe two more, first off, you've mentioned telemedicine a few times. There's a couple different models for telemedicine. One, teladoc for example, the doctors are working for them through them, versus somewhere it's more of a white label, the hospital themselves own the platform. Are you currently working with any of these telemedicine providers? And if so, how does that model a little bit different from working with a hospital per se?

[Caleb Barlow:]

Our primary clients today are the actual providers to the hospitals. And we've started to diversify that through the acquisition of Backbone into the EHRs, as well as, one of the nation's largest medical device manufacturers. What you're hitting on is clearly an opportunity area that if you would ask me three or four weeks ago, I would have said, if and the outcome -- the outlook on that is yes, it's interesting, we're going to watch it closely. But, we've really got to wait for something to happen and that be four or five, well, fast forward two or three weeks, and it's here. So I think there's a absolutely an opportunity there.And I think, we like you, are asking the same question of does this evolve. I think the other question we're looking at with all of this is, how do the economics change, who's on first to deliver these types of services, right? Does it come from the physician's practice, where you have the skills and the talent? Does it come from the hospital and the hospital system, where it's usually where the EHR sits? And where they have the bigger IT teams, or does it potentially come from a third party that's contracted just to do that?So, I guess to answer your question other way, we have the same questions, and I think it is a new unforeseen market opportunity that's emerged out of nowhere. And we're going to start looking at it very closely.

[Matt Hewitt:]

Got it, and then, last one from me. You also mentioned maybe the opportunity to increase prices for some of your services. How should we be thinking about that over the course of the year? And maybe, I guess that's twofold. One, how and when would you implement that? And what type there, what magnitude of price increases? I would imagine in this environment, may it's a little bit more challenging, but as we get through the coronavirus push here over the hopefully, near-term, then it might make -- be more simple to implement something like that, but maybe just the timing and the magnitude would be helpful. Thank you.

[Caleb Barlow:]

Yes. I think that's a great point here. And look, no one's looking to do anything here in the short-term that's going to send anybody sideways. That being said, and this is something we did not have the opportunity to discuss in my 100 day webcast, because honestly, I hadn't really gotten underneath it yet. But one of the things that I found after really the digging in deeply to our pricing, our resourcing model, we found a couple of things.First of all, we found that there were new opportunities for efficiency in how we deliver our services. And, that was simply just a byproduct of the fact that no one had gone back in and refreshed some of the approaches, some of the reporting methods of how we delivered our work product to our client. So we found some real opportunities for efficiency there. We've got a couple of rock stars on the team that are just really good at driving that kind of service efficiency.The second thing I looked at was when was the last time have we updated pricing. And remember, we're a labor-based business in a market where -- and this is a rough quote, don't put this in your financial models. But, you're talking about a cybersecurity market where if you're going to go out and get new talent tomorrow, it's probably going to cost you 5% to 7% more than what it cost you the year before right? So, when we've got multiyear contracts, it's absolutely realistic, that when you get to the end of that contract, your pricing might be go up by 20% or 30%, just because of the increase in labor rates.What I found was two things. One, our ability to deliver our services was not as efficient as it could have been, and we've made those changes. And then the second thing was that, the actual pricing increases we generally speaking, had not been increasing prices, when we would renew those multiyear contracts. That is obviously a delicate process of working with our clients, because we've got to make sure they've got things in budget.But generally speaking, we've been having those conversations that I think they've been well received. And I think in many cases, we should be able to update our prices in a pretty significant way. And, I would say, ask me that question again next quarter, and I know you will, and I'll tell you how successful we've been at and maybe what kind of range we've been able to get into.

[Matt Hewitt:]

Understood. Thank you very much.

[Operator:]

[Operator Instructions] We'll now take our next question from Jeff Bash at Fintek [ph]. Please go ahead.

[Unidentified Analyst:]

Hi Caleb, how are you?

[Caleb Barlow:]

Hey, Jeff. How are you doing?

[Unidentified Analyst:]

Okay. I have a couple of, few questions mostly for Paul. On the cybersecurity business side, one of the, I think, persisting changes we're going to see is the teleworking, remote working is going to be something that persists forever. It's never going to go back to same. And I guess, there's two aspects to my question. Number one, doesn't that make everybody's computer on their desk in their home, now a vulnerable security point that massively expands the amount of risk everywhere in the system, not just health care, and therefore, creates a huge amount of additional opportunity for you?

[Caleb Barlow:]

You're absolutely right, Jeff. And, the thing you have to keep in mind is-- and some of this is historical. But, if you look at most industries, what you really thought about securing was everything from the firewall in. So, the best analog I could use here, and I always hate it when security guys use Medieval castles, but I'm going to here. If you think about what you historically did was you had your big castle wall, you had everybody inside the castle, the jewels are locked up in a safe and that's how you secured your environment. And what you really paid attention to is what's coming across the drawbridge.The difference now is we've told everybody to get out of the castle, go live out in the forest. And whatever you need, we're just going to drop down the castle wall, let everybody coming in and out. And what this means from a security perspective is two key things that happened. One is the attack surface has grown exponentially, because now the attack surface is as big as everybody working from home on the same network as their kids playing Xbox, their wife who's working in another company, and whatever else is going on in that home network, because that home network is largely insecure.In addition, a lot of our clients does not have robust VPNs in place, or the types of encryption and multifactor authentication they needed. They're now scrambling to get those types of things in place. And I think it's the case in most companies. But metaphorically, this is also really key because what it means is, not just in health care but in IT in general, everyone is operating outside the castle wall. And it means the way in which we think about security has totally changed.And I think you're spot on Jeff, never going to get the genie back in the bottle. So this presents an opportunity or piece of this, which you didn't ask about, but goes equally well all this is our bad guys looking at this. And one of the things we've been watching on the intelligence perspective, is how various ransomware gangs, malware authors, and IT state actors are now looking at this new attack surface. And they're pivoting back to forms of attack that they normally care less about right? They're looking at how they penetrate whole Wi-Fi routers, massive increases in phishing, to get people to try to click on things. That allows them to get a beachhead on companies, and we'll see those attacks unfold in the next few weeks to months.But, this is something every industry is concerned about, but I'm particularly worried about health care, as well as state and local governments, because those are the two industries that just really got beat up last year with ransomware. And that is the last thing we need to happen right now in the middle of this crisis.

[Unidentified Analyst:]

And the ancillary question would be that, in the past, you've talked about health care, and I've asked about expanding outside of healthcare, and you've talked about highly regulated industries and possibly something you can expand through. Would the fact that the nature of the attack service has totally changed, changed your perspective on that. But if you saw an opportunity, the fact that you can provide these kinds of services in more need than ever, increase your interest in general security, rather than just the heavily regulated aspect of it? See what I'm getting at.

[Caleb Barlow:]

Yes, I do. And I think it's a really good question and you're inside my brain here, Jeff kind of looking at different opportunities. And one of the things I'm really wondering about is how does this play out in health care if we play this forward six months. So let's say we're past the point at which COVID-19 infections have started to decrease, that emergency rooms have calmed back down and things are getting more back to normal.How does this change how people want to invest? And in some ways, it may actually bolster new opportunities in health care, in that we're going to have to secure telework. There are undoubtedly going to be breaches and issues that occur because of this increase in the attack surface, that are probably happening right now, we just don't realize it.And then the third thing is, and this is kind of a big one in all of this is, how does this $2 trillion in stimulus rollout? What hits health care? And what are they able to invest in with that? Depending on how that rolls out, there could be a really interesting opportunity here back in core health care, because of this additional funding. And where that goes? And of course, no one knows the answer to that yet. But, we want to pay a lot of attention to that, as well as what's happening in the rest of the market and be ready to pivot and jog. And the great thing about this is, we're a company of 137 people. So for us to be opportunistic and to pivot and to jog where we think those short-term opportunities will be is pretty easy for us.

[Unidentified Analyst:]

Good. And I have some questions for Paul. I've looked at the stimulus score quite closely in connection with my other businesses. And the best I can see is that you stand to get 2.5 months of payroll plus occupancy costs and cash plus some other benefits such as deferred payment of full security taxes, payroll taxes. And my suspicion is that, that might be worth perhaps $1.5 million bucks in cash to the company plus the deferral benefit. If I'm right, in the ballpark at least, do you see this as possibly reducing the need for equity financing at poor prices?

[Paul Anthony:]

We do. That's exactly we're doing the same analysis that you're doing, Jeff. We're pulling all the information together that we need, working with our existing banking partner to be prepared as soon as they finalize what's necessary to put in. And absolutely, if we think that the timing associated with the receipts is such that that it allows us to ensure that we have the cash we need to support the business, then absolutely, we would look at that as being a offset to any potential equity financing that we might have to do.

[Unidentified Analyst:]

Terrific. Next, my understanding of GAAP accounting that it requires review of goodwill. If you have either a large sustained or a large sudden drop in the stock price, we've had both 30% stock drop in price last year. And you have taken an impairment charge of $0.5 million against intangible assets for 2019, but apparently nothing against the goodwill. And I'm just curious how you see the situation in respect to goodwill now?

[Paul Anthony:]

I mean, we definitely are going to have to revisit it if we don't see a rebound. We obviously are taking into consideration when we did our analysis of what was going on, on the macro environment and so that obviously played into our analysis. So once we get out of or at least see some stability coming out of the coronavirus situation, we will obviously re-evaluate them based on where the stock goes from there. But at least at the timing in which we did our analysis, we felt that in the adjustments to the share price below really the $3 range, as was where we felt we needed to revisit the analysis. We felt that it was subject to the coronavirus issue, and therefore, we didn't feel as necessary to make an adjustment at the end of the year, but to revisit it, again.

[Unidentified Analyst:]

Is another way of looking at this, the analysis as you made that, because you didn't make an adjustment last year, whether you might have to make one now because of the depressed stock price. There is an inference that you felt that the goodwill worth what it was carried for on the balance sheet, absent any adjustment because of a depressed stock price?

[Paul Anthony:]

We did, and that was the initial, that was the adjustment that we made in this period was specifically related to what we saw in the projections associated with the core synergistic business, and that was the primary reason for the adjustment was down back those estimates from the original turnout and projections.

[Unidentified Analyst:]

And my last question has to do with tax carryback of losses, if we continue to have the taxable income losses for a while. Does that create any opportunity to get cash back from the government in taxes that are possibly paid in respect the acquisition where we've already achieved all those benefits are possible?

[Paul Anthony:]

Right now, we believe we've achieved those. If you remember, if you recall from our last conference call, last couple conference calls, we had anticipated a large tax liability as a result of these recent losses, as well as finalizing the current year provision in the apportionment schedules. We were able to allocate the NOLs in such a way that allowed us the ability to avoid paying them in the first place, Jeff. But, we'll definitely go back and look at whether or not there's an opportunity to actually claim a refund. And we've already started that process and has, at least initially, indications are that there may be some opportunity.

[Operator:]

We'll now take our next question from Jerome Thomas [ph]. Please go ahead, sir.

[Unidentified Analyst:]

My question was answered. Thank you.

[Operator:]

[Operator Instructions]. Perfect. There appears to be no further questions. I'll turn it back to Caleb. Please go ahead.

[Caleb Barlow:]

Alright. Thank you very much, operator. And again, I want to thank all of our investors, employees, customers and partners for their support throughout 2019. I look forward to talking with all of you in the coming months. And most importantly stay safe. Thank you.

[Operator:]

This concludes today's call. Thank you for your participation. You may now disconnect.