Market Overview

GlobalSCAPE Reports Second Quarter 2018 Financial Results

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GlobalSCAPE,
Inc.
(NYSE American: GSB),
a worldwide leader in the secure movement and integration of data, has
reported financial results for the second quarter ended June 30, 2018.

Second Quarter 2018 Operational Highlights

  • Concluded its previously announced Audit Committee investigation and
    completion of financial statement review
  • Regained compliance with the NYSE American Continued Listing Standards
  • Appointed Robert Alpert, co-Founder and Principal of 210 Capital LLC,
    and Clark Webb, co-Founder and Principal of 210 Capital, LLC to the
    Board of Directors, building on the collective guidance and insights
    of the Board
  • Maintained quarterly cash dividend of $0.015 per share of common stock

Second Quarter 2018 Financial Overview

  • Total revenue for the second quarter of 2018 was $8.5 million, which
    was consistent with the amount reported for the second quarter of 2017.
  • Revenue from the Company's core EFT platform increased 1% to $8.1
    million. License revenue from the platform increased 3% to $2.6
    million, primarily due to an increase in the number of large
    transactions, including transactions that were originally expected to
    close in the previous quarter, and a change in the Company's lead
    generation strategy toward the end of 2017 which led to an increase in
    sales opportunities. Maintenance and support (M&S) revenue from the
    platform increased 2% to $5.1 million, primarily due to ongoing
    license sales and sustained high M&S renewal rates.
  • Gross profit for the second quarter of 2018 was $6.9 million (81.5% of
    total revenue), which was consistent with the $6.9 million (81.9% of
    total revenue) reported for the second quarter of 2017.
  • Net income totaled $593,000 or $0.03 per diluted share, an increase of
    30% from $457,000 or $0.02 per diluted share in the second quarter of
    2017.
  • Adjusted EBITDA(1) increased 5% to $1.1 million from the
    amount reported for the second quarter of 2017.
  • As of June 30, 2018, the Company had cash, cash equivalents and short
    and long-term investments of approximately $27.8 million.

1) Adjusted EBITDA is not a measure of financial performance under GAAP.
It should not be considered as a substitute for net income presented on
our consolidated statement of operations and comprehensive income.
Adjusted EBITDA has limitations as an analytical tool and when assessing
our operating performance. Adjusted EBITDA should not be considered in
isolation or without a simultaneous reading and consideration of our
consolidated financial statements prepared in accordance with GAAP. See
note regarding "Use of Non-GAAP Measures," below for further discussion
of this non-GAAP measure and the reconciliation of this non-GAAP measure
below.

Management Commentary from Matt Goulet, President and CEO of
GlobalSCAPE

"Our results for the second quarter of 2018 came in largely as we
expected. Our total revenue of $8.5 million remained consistent with the
amount reported last year, as we worked through the final stages of the
internal investigation and the sales distractions that came with it.
Nevertheless, we were still able to grow license and M&S revenue by 3%
and 2% year-over-year, respectively, giving us a platform for more
robust growth as we complete the realignment of our sales force to
better address the increasing needs and requirements of our customers.
Perhaps most importantly, we continued to drive improvements to our
bottom line with net income for the quarter up 30% year-over-year. We
also maintained our strong cash position, which ended the quarter at
$27.8 million, enabling us to continue investing in our business to
drive growth and market share expansion while also returning capital to
our shareholders.

"Over the past few weeks, we have made significant enhancements to our
business, which we believe will allow us to build on our operational
momentum and better execute on our strategy of becoming a cloud-based
software and services provider of MFT technology. As part of our
continued efforts to realign and reduce costs, we recently reduced our
staff by approximately 40 employees. We believe that, as a result, our
operating expenses will decrease going forward without significantly
impacting our revenue or growth opportunities, as we enhance our focus
on our flagship EFT offering.

"Additionally, we also strengthened our leadership team with the
promotion of our interim CFO, Karen Young, to CFO, as well as expanded
our Board of Directors with the appointment of Robert Alpert and Clark
Webb. We believe these additions enhance our bench strength and give us
the right guidance and tools to reaccelerate the business. Overall, it's
been a productive and meaningful last couple of months for GlobalSCAPE.
We honed in on our core EFT offering, right-sized the business, and
added significant experience and insights to the Board. Collectively,
these actions have set the stage for what we expect to be a stronger
second half of 2018 and beyond."

About GlobalSCAPE

GlobalSCAPE, Inc. (NYSE American: GSB)
is a pioneer in securing and automating the movement and integration of
data seamlessly in, around and outside your business, between people and
places, in and out of the cloud. GlobalSCAPE provides technology that
automates your work and secures your data, while giving visibility to
those who need it. GlobalSCAPE makes business flow brilliantly. For more
information, visit http://www.globalscape.com
or follow the blog
and Twitter
updates.

Safe Harbor Statement

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. The words "would," "exceed,"
"should," "anticipates," "believe," "expect," and variations of such
words and similar expressions identify forward-looking statements, but
their absence does not mean that a statement is not a forward-looking
statement. These forward-looking statements are based upon the Company's
current expectations and are subject to a number of risks, uncertainties
and assumptions. The Company undertakes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise. Among the important factors that could cause
actual results to differ significantly from those expressed or implied
by such forward-looking statements are risks that are detailed in the
Company's Annual Report on Form 10-K for the year ended December 31,
2017 filed with the SEC on June 14, 2018; the discovery of additional
information relevant to the internal investigation; the conclusions of
the Company's Audit Committee (and the timing of the conclusions)
concerning matters relating to the internal investigation; the
possibility that additional errors relevant to the recently completed
restatement may be identified; pending litigation and other proceedings
and the possibility of further legal proceedings adverse to GlobalSCAPE
resulting from the restatement or related matters; and the costs
associated with the restatement and the investigation.

Use of Non-GAAP Measures

The Company uses Adjusted EBITDA (Earnings Before Interest, Taxes, Total
Other Income/Expense, Depreciation, Amortization, other than
amortization of capitalized software development costs, and Share-Based
Compensation Expense) to provide a view of income and expenses that is
supplemental and secondary to the primary assessment of net income as
presented in the consolidated statement of operations and comprehensive
income.

Adjusted EBITDA is not a measure of financial performance under GAAP. It
should not be considered as a substitute for net income presented on our
condensed consolidated statement of operations and comprehensive income.
Adjusted EBITDA has limitations as an analytical tool and when assessing
our operating performance. Adjusted EBITDA should not be considered in
isolation or without a simultaneous reading and consideration of our
financial statements prepared in accordance with GAAP. A reconciliation
of net income (loss) to Adjusted EBITDA is provided at the end of this
release.

 
GlobalSCAPE, Inc.
Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA
         
Three Months Ended Six Months Ended
June 30, June 30,
2018     2017 2018     2017
Net Income (loss) $ 593 $ 457 $ (342 ) $ 1,288
Add (subtract) items to determine Adjusted EBITDA:
Income tax expense 336 265 105 676
Interest (income) expense, net (80 ) (77 ) (156 ) (146 )
Depreciation and amortization:
Total depreciation and amortization 525 516 1,120 1,056
Amortization of capitalized software development costs (464 ) (446 ) (999 ) (920 )
Share-based compensation expense   191     335     862     671  
Adjusted EBITDA $ 1,101   $ 1,050   $ 590   $ 2,625  

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