VirtualArmour CEO Russ Armbrust outlines his company’s high-margin business model and 100-percent customer retention rate.
In the interview below, Armbrust also addressed how VirtualArmour’s Cloud Caster cybersecurity platform contributes to the company’s impressive 100 percent client retention rate. To him, it is the company’s engineers that have helped propel VirtualArmour and their partners towards success.
Below is a transcript of our interview with VirtualArmour CEO Russ Armbrust. It has been edited for clarity and brevity.
Investing News Network: Please tell us about VirtualArmour cybersecurity offerings and how they are differentiator in the marketplace.
VirtualArmour CEO Russ Armbrust: There is a lot I could cover, but the key thing is that over the last 12-18 months we have built upon our success in delivering cybersecurity hardware and software for global enterprises, and have transformed into a leading, high-growth managed services provider.
More and more of our customers are now using our proprietary cybersecurity monitoring platform along with our best-in-class engineering services on an ongoing basis. They have lowered their risk profile with our 24/7 one-on-one client engagement, which is delivered from our two global security operation centers in Salt Lake City, Utah and Middlesbrough, UK.
INN: What’s so important about this transition to managed services?
RA: It means we’re now increasingly engaged to manage our customer’s IT network post-sale, and provide the software tools and hand-on support they need for ongoing protection of their network and data.
For us, this creates an ongoing revenue stream from multi-year contracts, and at much higher gross margins compared to hardware sales. We have also become their virtual in-house source for upgrades and future network expansion. We first design and engineer their network, install and configure devices and software with our professional services, then ‘land and expand’ with our ongoing managed services.
INN: You boast a 100 percent client retention rate. What has been the key to your success?
RA: We are winning business and keeping it because we take a comprehensive, customer-centric approach with each of our clients. We also hire the best engineers from some of the most respected and innovative hardware and software makers in the industry. Our highly-experienced engineers hold top certifications and make up about 80 percent of our personnel. This allows us to provide unmatched customer support and super-fast response times — something increasingly essential in the current cybersecurity threat environment.
INN: You recently expanded your customer base with companies from the hospitality and manufacturing sectors. What about other industries?
RA: Our customer base now includes several high-profile Fortune 500 companies and leading brands. They’re represented in over 30 countries and multiple markets, including healthcare, energy, hospitality, resale, finance and transportation. These days, everyone is at risk by cybersecurity threats, and this is reflected in our diverse global customer base.
INN: We continue to see a steady stream of global cybersecurity breaches. How do VirtualArmour’s offerings help mitigate these risks?
RA: Over the past two years, we have maintained that 100-percent client retention rate due to our fantastic customer service and unfailing execution of our cybersecurity defense capabilities. We believe this is why we are growing at a rate far above the industry norm.
Our proprietary CloudCastr cybersecurity dashboard is designed to provide round-the-clock customer support through advanced threat intelligence and a detailed overview of an organization’s security posture. This allows our customers to mitigate and understand threats as they happen in real-time. It provides them and our security operation centers immediate and in-depth insight into what is happening at any given moment, right down to a specific device or user on their network, which could be one of thousands.
INN: How has this all translated into financial performance?
RA: Our most recent quarterly results were frankly phenomenal. Revenue was up 50 percent year-over-year to a record $4 million, thanks mostly to the tremendous growth in our customer base as well as in the size of orders from new and existing customers.
Our managed and professional services revenue was up 78 percent to a record $1.2 million, driven by 17 new clients that we brought on over the last year.
Gross profit as a percentage of revenue increased from 17.6 percent to 27.1 percent, reflecting the shift in revenue mix to higher-margin managed and professional services.
We also generated a positive adjusted EBITDA of $104,000, demonstrating strengthening cash flow. Our annualized recurring revenue, or ARR, which is the value of our service contracts normalized to a one-year period, totaled $498,000 at the end of the quarter. This was up more than 3x from $157,000 last year.
Meanwhile, another key metric, Total Contract Value, or TCV, hit $10.7 million, up 282 percent over last year. The dramatic growth in these numbers are a clear sign of our success in the transformation I’ve been talking about.
INN: What’s next for VirtualArmour? Do you see these positives trends continuing?
RA: Given this momentum, we’re naturally very optimistic about the future. Because of the increasing intensity and sophistication of cybersecurity threats from all corners of the world, we’re seeing IT budgets cybersecurity growing as companies prepare for 2019 and beyond.
Enterprises are also discovering that its more economical, if not more effective, to outsource their cybersecurity monitoring and management to professional organizations like VirtualArmour who can be diligent around the clock.
Given the combination of our strengthening capabilities and these macro drivers, we expect to see a continued acceleration in our transition to higher margin-managed and professional services in the second half of 2018.
Combined with ongoing growth in customer acquisition and an increasing number of customers on our recurring revenue model, we are well on track for another year of record results. We see this translating into increased shareholder value as leading investor media organizations like INN continue to elevate our profile in the financial community.
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