VirtualArmour CEO: We’re Growing at a Rate Far Above Cybersecurity Industry Standards

VirtualArmour CEO Russ Armbrust outlines his company’s high-margin business model and 100-percent customer retention rate.

VirtualArmour International (CSE:VAI,OTCQB:VTLR) CEO Russ Armbrust discussed the company’s diversification into the hospitality and manufacturing industries and its record breaking year.

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.

CEO interviews are part of investor education campaigns for clients advertising on the Investing News Network. Important news is contextualized by CEOs, and the resulting interviews are disseminated to the Investing News Network audience because they have value to market watchers.

The Investing News Network interviews a CEO for an understanding of their perspective on the company, the investment potential of the company and market news related to the company. The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities.

Featured

Worldwide increases in violence and civil unrest demonstrate the need for less-lethal security solutions and governing safety measures that are not isolated to one part of the world or one nation.

2020 saw an unprecedented level of civil unrest and mass demonstrations in the name of social justice and political corruption. Despite some attributing this year of tumultuous public protest to the increased stress and uncertainty brought on by the COVID-19 pandemic, a spike in violent demonstrations around the world is not a random occurrence.

According to the Global Peace Index, peacefulness has declined by 2.5 percent since 2008, with 81 GPI countries recording a deterioration. Likewise, while 43 countries reported lower levels of terrorism in 2020, a staggering 97 countries stated an increase. In an attempt to tackle growing violence and the need for crowd control, government bodies, military organizations and public institutions are calling for non-lethal security solutions for public safety.

This increase in violence worldwide means that security solutions for public safety are a growing market that continues to attract increasing amounts of investment in less-lethal security. With the global less-lethal weapons market expected to reach US11.9 billion by 2027, investing in this line of security and public safety suggests significant upside potential for investors.

Defining less-lethal devices

Less-lethal devices or security solutions refer to technology devices that are designed to be less likely to cause death when deployed against people. These less-lethal alternatives to more conventional weapons like firearms have two primary applications: crowd control and one-on-one-suspect apprehension.

For each of these situations, technology subcategories exist based on the technology modalities, such as chemical, kinetic and conducted energy. Again, these technologies can be separated into two dominant types, direct contact weapons, like batons or chemical agents and directed energy weapons like handheld Tasers or weaponized sound waves.

These technologies are designed to have impacts that are generally temporary in nature or reversible effects. When law enforcement or military forces need to quickly disperse large crowds or disable precision targets, less-lethal weaponry is often effectively deployed.

Tactical defense and security companies like Axon Enterprise (NASDAQ:AXON), KWESST Micro Systems (TSXV:KWE,OTCQB:KWEMF) and Byrna Technologies (NASDAQ:BYRN) demonstrate versatility in less-lethal weaponry and technology devices. The KWESST Micro System is bringing to market the world’s first cartridge-based non-lethal firing system (named the Low Energy Cartridge “LEC” system ) with universal application across four market segments that currently use a variety of dated “less-lethal” solutions. Meanwhile, Wrap Technologies (NASDAQ:WRAP), created the less-lethal BolaWrap, an innovative new form of remote handcuffs that allow police officers to restrain individuals from a distance.

For police and military applications, employing these tools not only have real-life micro implications on the ground but more macroeconomic relevance as well.

Worldwide investment in less-lethal weapons is growing

Violence continues to have a significant impact on economic performance around the globe. Rises in civil unrest and organizational infighting pose significant risks to political stability and industries at every level. Investing in the technologies to combat this violence is no longer investing in a small niche market.

Market research for the U.S. estimates the nation’s less-lethal weapons market was over US$2.2 billion in 2020 alone. After years of highly publicized police shootings lining popular news headlines domestically and internationally, the political powerhouse continues to see rising levels in explosions of intense protest.

The high-profile deaths of George Floyd and Breonna Taylor in 2020 sparked unprecedented global strife and angry outcries for justice and police reform. Violent clashes between law enforcement and protesters for months demonstrated that despite significant investment into military spending, these less-lethal weapon projections come at no surprise.

Governments want to avoid unnecessary deaths. Public entities and activist organizations are pushing for less lethal tactics with the additional mounting pressure from onlookers from those in the international community.

These political protests have not been isolated to the U.S. Police shootings have become catalysts for heated demonstrations and escalated public violence worldwide. News media have depicted how violence at these levels can devastate entire cities and economic infrastructures. Applying less-lethal alternatives can be effective crowd control when force is necessary.

Following the U.S., China is forecasted to reach an estimated less-lethal weapon market size of US$2.1 billion in the year 2027, trailing a CAGR of 6.4 percent through 2027. Likewise, market research expects European markets, excluding Germany, will reach US$2.1 billion in the same time frame.

Shifts in less-lethal technology adoption

Independent task forces and legislative initiatives are making significant strides in legitimizing the use of less-lethal weapons and technology devices. Recommendations to administration according to the Council on Foreign Relations outline research and development on clear guidelines for weapon employment and leadership and coordination of this process among military services.

In violent situations, providing law enforcement and military personnel with the tools to protect not only the public but themselves is vital for any governing body. Competitors in the less-lethal weapons and defense space like AMTEC Less-Lethal Systems Inc. and KWESST Micro Systems Inc. are innovating new devices and effective security solutions for proactive public safety efforts.

The market for less-lethal products is a recurring multi-billion-dollar opportunity. Customers continue to seek better solutions as many legacy systems can be lethal, and frequently are unreliable. Thousands of fatalities have been recorded from existing cartridge-bases systems, including conducted energy devices such as Taser. Other legacy products that are “less” lethal typically fire from air guns, which are inherently unreliable as they are affected by ambient temperature and involve high-maintenance including as a result of air seals and “O” rings drying out and bursting, causing catastrophic failures. Air-based systems also entail a long logistics tail of compressors, air tanks and spare parts.

KWESST’s LEC system solves these problems with the proven reliability of a cartridge-based system in a low-cost firing platform that fires only LEC cartridges. The firing platforms are offered in various patterns that replicate the look of a real firearm, or avoid the appearance of a firearm altogether, at the user’s choice. The proprietary LEC cartridge automatically stabilizes the projectile for accuracy and distance, with an energetic actuator that controls velocity and muzzle energy well below lethal levels, and with no need for gunpowder or conventional propellant. The system’s soft frangible projectiles come with various payloads, including coloured marking agent, inert powder or a safe but powerful irritant powder that temporarily incapacitates subjects.

These less-lethal security solutions bring law enforcement into the modern age. With a growing militarization of police forces, investing in these high-tech devices and tools can present a notable economic advantage and serve a great purpose for preventing and organizing the de-escalation of violence.

Takeaway

2020 has shown that there is a rising demand for crowd control and other security solutions to ensure public safety. Worldwide increases in violence and civil unrest demonstrate this need for less-lethal weaponry and governing safety measures is not isolated to one part of the world or one nation. The growing less-lethal tactical weapons market presents investors with significant exposure to this expanding market and presents an upside potential that stands unprecedented in the coming years.

read more Show less
In connection with its previously announced public offering of common shares in the United States and Canada Absolute Software Corporation a leader in Endpoint Resilience™ solutions, today announced that it has entered into an underwriting agreement with a syndicate of underwriters, comprising Needham & Company and Canaccord Genuity as joint book-running managers and Raymond James as passive book-running manager . ...

In connection with its previously announced public offering of common shares in the United States and Canada (the "Offering"), Absolute Software Corporation ("Absolute"), a leader in Endpoint Resilience™ solutions, today announced that it has entered into an underwriting agreement with a syndicate of underwriters, comprising Needham & Company and Canaccord Genuity as joint book-running managers and Raymond James as passive book-running manager (collectively, the "Underwriters"). The Underwriters have agreed to purchase 5,454,546 common shares of Absolute ("Common Shares") at a price of US$11.00 per Common Share (C$14.48 per Common Share) for aggregate gross proceeds to Absolute of approximately US$60 million. Closing of the Offering is expected to occur on October 30, 2020, subject to the satisfaction of customary closing conditions. In addition, the Underwriters have been granted a 30-day over-allotment option to purchase up to an additional 818,181 Common Shares from Absolute.

The Offering is being made in Canada pursuant to a prospectus supplement (the "Supplement") to Absolute's short form base shelf prospectus dated August 27, 2020 (the "Base Prospectus") and in the United States pursuant to a registration statement on Form F-10, as it may be amended from time to time, containing the Supplement and Base Prospectus filed with the U.S. Securities and Exchange Commission (the "SEC") in accordance with the Multijurisdictional Disclosure System established between Canada and the United States.

read more Show less
Absolute Software Corporation a leader in Endpoint Resilience™ solutions, today announced the filing of a preliminary prospectus supplement to its short form base shelf prospectus dated August 27, 2020 in connection with a proposed public offering of its common shares and the filing of an application to list its Common Shares on the Nasdaq Global Select Market under the ticker “ABST”. In connection with ...

Absolute Software Corporation ("Absolute"; ABT.TO), a leader in Endpoint Resilience™ solutions, today announced the filing of a preliminary prospectus supplement (the "Supplement") to its short form base shelf prospectus dated August 27, 2020 (the "Base Prospectus") in connection with a proposed public offering (the "Offering") of its common shares ("Common Shares"), and the filing of an application to list its Common Shares on the Nasdaq Global Select Market ("Nasdaq") under the ticker "ABST".

In connection with Absolute's application to list on Nasdaq, Absolute will apply to change its trading symbol on the Toronto Stock Exchange (the "TSX") to "ABST" to align with its symbol on Nasdaq. Trading of the Common Shares on Nasdaq is expected to commence following the pricing of the Offering. The Supplement and Base Shelf Prospectus were filed with each of the securities regulatory authorities in the provinces and territories of Canada, except Quebec. The Supplement and Base Prospectus were also filed with the United States Securities and Exchange Commission (the "SEC") as part of a registration statement on Form F-10, as it may be amended from time to time (the "Registration Statement"), in accordance with the Multijurisdictional Disclosure System established between Canada and the United States. Absolute intends to use the net proceeds of the Offering for general corporate purposes, including to fund ongoing operations, to fund growth initiatives, and/or for working capital requirements, as set out in the Supplement.

read more Show less

MARKETS

Markets
TSX20659.99-489.01
TSXV939.44-14.82
DOW34483.72-652.22
S&P 5004567.00-88.27
NASD15537.69-245.14
ASX7256.00+16.20

COMMODITIES

Commodities
Gold1787.63+14.26
Silver22.91+0.10
Copper4.32+0.04
Palladium1772.60+27.09
Platinum958.60+20.09
Oil69.19+3.01
Heating Oil2.15+0.09
Natural Gas4.45-0.12