As Internet technology progresses and modernizes countries across the world, so too does the pervasive threat of malicious software that can steal or corrupt sensitive information, and it's not just about seemingly harmless spyware recording search habits to deliver annoying pop-up ad's anymore; those threats are dismal in comparison to what we're seeing today. In January 2010, even Google China was attacked by sophisticated hackers who caused industry experts, government officials and personal computer users worldwide to reconsider the whole threat model that's been developed up to now: will the hackers constantly be one step ahead of their targets?
Such reasoning concludes there is an immediate need and demand among small, mid, and large corporations and government agencies for data and file transfer security, the exact solution GlobalSCAPE has been working for 14 years to distribute. Trusted by their extensive list of clientele that is included in the Fortune 100, the San Antonio based company develops market-leading information security products and services to help consumers and enterprises execute a comprehensive strategy for protecting critical privacy and business information. The company's flagship product, CuteFTP (or File Transfer Protocol, is used to exchange or manipulate files over a computer network such as the Internet and networks) is used and distributed into two main channels, individual and enterprise, the latter of which accounts for 90% of revenues. Both channels have competitive advantages in that they are scalable and easy to use, straight out-of-the-box products to begin using immediately by the customer to secure file transfers. Of course the products also come with add-ons and customizability to supplement top-line revenue. GlobalSCAPE competes in a space with about 200 other companies, most of whom are overshadowed by about 2 large-cap players that include Sterling Commerce, soon to be now part of IBM, and Axway.
The company's size really doesn't matter when it comes to generating revenue and growth. The management agrees with industry expert estimates there are up to 36 million virus signatures circulating with around 16 million written in 2009 alone. GlobalSCAPE has been capitalizing on these threats with strategic partnerships and constant development and re-releases and upgrades of their products. With 20% of revenues coming from Government Sponsored Agencies, or GSE's, the need for cyber security and encryption products will grow, not decline in the future. Some interesting surveys of government and information technology professionals revealed that 94% believe federal agencies and networks get attacked every day and 60% listed remote/mobile computing; 49% listed malware, viruses, worms and spyware; and 40% listed bots, key loggers and data miners as top challenges and concerns. (Sources: survey of FOSE attendees Government Computer News Nov 09; Clarus Research Group "Federal Cyber Security Outlook for 2010")
When asked about the future of the threats online cyber attacks pose to individuals, government, and enterprise's across the world, Mr. Morris had this say, "pervasive threats are advancing, but in the last ten years we've seen unprecedented collaboration between governments and industry to overcome these challenges", while emphasizing that file sizes are only going to get larger and more vulnerable. Mr. Morris went on to explain that most Chief Information Officers have no clear understanding of how information is exchanged, and GlobalSCAPE is setting out to change that.
Mr. Morris went into detail on his expectations for GlobalSCAPE's $2.3M tactical investment in CoreTrace, a company whose application whitelist product BOUNCE offers 100% protection from unwanted applications without interrupting business for the users. Mr. Morris personally knows the management team at CoreTrace as being successful serial entrepreneurs, and is confident in a return on the investment. GlobalSCAPE is also a reseller of BOUNCER, adding revenue generating capabilities to the investment. First quarter financial highlights released earlier this month includes an initial agreement has been signed with Rackspace Hosting, Inc. to resell cloud computing services to GlobalSCAPE's diverse customer base that includes big names like Advanced Micro Devices, John Hopkins' University and the United States Army.
First Quarter 2010 Financial Highlights Include:
- Revenue was $4.4M for the first quarter of fiscal year 2010, an increase of 37% when compared with revenue of $3.2M in the same quarter last year. Net income for the first quarter was $364K, or $0.02 per diluted share, compared with a net loss of ($244K), or ($0.01) per diluted share, in the same quarter last year.
- Cash and short term investments grew to $9.1M, representing a 46% increase from the first quarter of 2009 and a 10% improvement since the end of fiscal 2009, due to the company's $2.3M cash investment in CoreTrace during the fourth quarter of fiscal 2009. Cash flow from operating activities for the first quarter of fiscal year 2010 was $896K compared with $123K for the same quarter last year, an increase of 628%.
- The Adjusted EBITDA margin for the first quarter of 2010 was 23.1%, compared with 6.6% in the first quarter of 2009, and 15.2% in the fourth quarter of 2009.
Disclosure: no positions