Mr. Ian Paterson reports

PLURILOCK SECURITY INC. REPORTS RECORD SECOND QUARTER FISCAL 2023 FINANCIAL RESULTS

Plurilock Security Inc. and related subsidiaries have released their financial results for the three and six months ended June 30, 2023. All dollar figures are stated in Canadian dollars, unless otherwise indicated.

"During the second quarter of 2023, Plurilock saw significant growth in the business with respect to its revenue and gross margin, highlighted by our record total revenue of $28.0-million for the six-month period, increasing by 74 per cent year over year," said Ian L. Paterson, chief executive officer of Plurilock. "Throughout this quarter, our software sales continued to trend upwards, as we look to continue improving our overall gross margins while generating substantial revenues. Our priority remains to execute on our strategy to achieve cost savings and reach profitability through unlocking operational efficiencies and securing more high-margin contracts."

Second quarter fiscal 2023 earnings call details

Time:  11:30 a.m. EDT (8:30 a.m. PDT)

Date:  Tuesday, Aug. 29, 2023

Topic:  Plurilock second quarter fiscal 2023 financial results and growth outlook for 2023

Register on-line.

Key business milestones:

• Revenue increased to $28.0-million for the six months ending June 30, 2023, as compared with $16.1-million over the same period in the prior year, directly attributable to the strategic acquisitions of Integra and Atrion in 2022.
• Gross margins increased to 12.5 per cent for the six months ending June 30, 2023, as compared with 8.6 per cent over the same period in the prior year, driven primarily by the company's 2022 acquisitions, pricing strategy and its focus on securing high-margin software sales.
• High-margin software sales for the six months ending June 30, 2023, increased by approximately 445 per cent year over year.
• A total of 26 sale orders and contract renewals were announced as of June 30, 2023, since Jan. 1, 2023, including a cross-sale purchase order with a Fortune 500 customer for the company's Plurilock AI (artificial intelligence) platform.

Second quarter fiscal 2023 financial highlights:

• Total revenue for the three and six months ended June 30, 2023, was $12,251,143 and $28,018,471, respectively, as compared with $9,106,547 and $16,059,599 for the same periods in the prior fiscal year ended June 30, 2022. Revenue for the three months ended June 30, 2023, is higher than the prior-year period ended June 30, 2022, as a result of the acquisitions of the INC, as well as the asset acquisitions of Atrion (ATR) and CloudCodes (CC), along with the increase in organic sales volume and cross-selling among the solutions and technology division.
• Hardware and systems sales revenue for the three and six months ended June 30, 2023, totalled $10,368,483 and $22,812,612, respectively, compared with $8,359,715 and $14,855,611 in the prior year for the same periods. Software, licence and maintenance sales revenue for the three and six months ended June 30, 2023, was $1,150,767 and $3,864,345, respectively, compared with $610,523 and $1,039,979, respectively, in the prior year for the same periods. Professional services revenue was $731,893 and $1,341,514, respectively, for the three and six months ended June 30, 2023, compared with $136,309 and $164,009, respectively, in the prior year for the same periods.
• Hardware and systems sales revenues for the three and six months ended June 30, 2023, accounted for 84.6 per cent and 81.4 per cent, respectively, of total revenues, compared with 91.8 per cent and 92.5 per cent for the three and six months ended June 30, 2022. Software, licence and maintenance sales revenues for the three and six months ended June 30, 2023, accounted for 9.4 per cent and 13.8 per cent, respectively, compared with 6.7 per cent and 6.5 per cent for the three and six months ended June 30, 2022. Professional services revenue for the three and six months ended June 30, 2023, accounted for 6.0 per cent and 4.8 per cent, respectively, of total revenues, compared with 1.5 per cent and 1.0 per cent for the three and six months ended June 30, 2022.
• Gross margin for the three and six months ended June 30, 2023, was 11.2 per cent and 12.5 per cent, respectively, compared with 10.0 per cent and 8.6 per cent in the prior year for the same periods.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the three and six months ended June 30, 2023, was negative $1,879,034 and negative $2,854,339, respectively, compared with negative $1,791,408 and negative $3,677,423 in the prior year for the same periods.
• Cash and cash equivalents and restricted cash on June 30, 2023, were $3,174,797, compared with $2,853,107 on Dec. 31, 2022.
• During the three and six months ended June 30, 2023, the company used $870,734 and generated $829,226, respectively, of cash from operating activities, compared with $1,628,613 and $6,130,212 of cash used, respectively, in the prior year for the same periods.
• During the three and six months ended June 30, 2023, the company used $2,260 and $2,984 of cash, respectively, on investing activities, compared with $11,225 and $857,846 use of cash, respectively, in the prior year for the same periods.

Second quarter fiscal 2023 operational highlights:

• On April 4, 2023, the company announced the appointment of Jord Tanner as the chief information officer.
• On June 5, 2023, the company announced the appointment of Scott Meyers as the chief financial officer.
• On June 21, 2023, the company closed the first tranche of non-brokered private placement of 4,857,588 units at a price of 14.5 cents per unit for aggregate gross proceeds of $704,350.
• On June 28, 2023, the company closed the second and final tranche of its non-brokered private placement of 6,499,688 units at a price of 14.5 cents per unit for aggregate gross proceeds of $942,455.
• On June 28, 2023, the company announced the repricing of 12,536,538 non-brokered private placement warrants and 765,000 convertible debenture warrants ranging from original exercise price of 25 cents to 40 cents to 20 cents per warrant subject to TSX Venture Exchange approval.

Growth outlook for 2023

With a sizable active customer pipeline and client network of over 400 and the launch of the Plurilock AI platform, Plurilock intends to increase high-margin software sales by securing contracts with new and existing customers for its technology offerings. The company also intends to streamline operations by unlocking operational synergies between Plurilock and its previous acquisitions, as well as reducing head count to achieve substantial cost savings. At the end of August, 2023, Plurilock enacted a plan in accordance with this strategy and expects to realize approximately $2.0-million in savings on an annualized basis.

Furthermore, Plurilock looks to expand its AI-focused product suite and release additional products that are tailored to protect the work force of organizations across various industry verticals against the threats of using generative AI tools. As a result, the company aims to file new patent applications to strengthen its technology portfolio.

Subsequent to second quarter fiscal 2023

On July 12, 2023, the company announced and accepted one additional subscription for 100,000 units at a subscription price of 14.5 cents per unit, for aggregate gross proceeds to the company of $14,500. Share issuance costs of $1,015 related to this non-broker private placement were incurred. An additional amount of broker warrants of $810 was issued as compensation for completing the financing.

On July 11, 2023, the TSX-V approved the repricing of 12,536,538 non-brokered private placement warrants and 765,000 convertible debenture warrants ranging from original exercise price of 25 cents to 40 cents to 20 cents.

On July 17, 2023, the company announced its strategic focus to address growing AI cybersecurity threats. The company aims to leverage its stable of industry-leading cybersecurity products and services to provide organizations with tools to make employee AI use safe and effective as they roll out Plurilock's cyberdefence and emerging threat protection solutions.

On July 18, 2023, the company announced that it filed a provisional patent application with the United States Patent and Trademark Office (USPTO) for an omnibus system of AI-driven cloud access security broker (CASB) technology features that protect against the inadvertent or intentional release of sensitive data while generative AI is being used.

On July 20, 2023, the company announced the launch of beta access to a new AI safety SaaS (software as a service) product for business and government, PromptGuard, which will be offered to customers as part of the Plurilock AI platform. The product was developed as part of the company's focus on generative AI safety and was built using Plurilock's new CASB technology for AI, which is the subject of a U.S. provisional patent filing previously announced on July 18, 2023. PromptGuard is available under Plurilock's early access program (EAP) as a closed, by-invitation beta experience. Interested businesses and government organizations can request an invitation to the beta experience on the company's website.

On July 27, 2023, the company announced that it has expanded its early access program to include North American channel partners, enabling the company to address the demand for its Plurilock AI PromptGuard product, which enables AI safety for businesses.

On Aug. 8, 2023, the company announced today that it has certified its first cohort of 10 early access program (EAP) partners to provide access to PromptGuard and launched a global EAP to certify international partners due to significant channel interest in distributing the company's latest Plurilock AI product.

On Aug. 28, 2023, the company enacted a plan to reduce head count and other costs as part of its continuing strategy to realize acquisition synergies. The company expects to realize approximately $2.0-million in savings on an annualized basis as a result of these actions. As part of the plan, the company intends to reduce 18 per cent of head count costs. In addition, the company has cut overhead in general and administrative expenses.

Non-IFRS (international financial reporting standards) measures

This news release presents information about EBITDA and adjusted EBITDA, both of which are non-IFRS financial measures, to provide supplementary information about operating performance. Plurilock defines EBITDA as net income or loss before interest, income taxes, depreciation and amortization. Adjusted EBITDA removes non-cash share-based compensation, financing and acquisition-related expenses from EBITDA. The company believes that EBITDA and adjusted EBITDA are meaningful financial metrics for investors as they adjust income to reflect amounts which the company can use to finance working capital requirements, service future interest and principal debt repayments, and finance future growth initiatives. EBITDA and adjusted EBITDA are not intended as a substitute for IFRS measures. A limitation of utilizing these non-IFRS measures is that the IFRS accounting effects of the adjustments do in fact reflect the underlying financial results of Plurilock's business and these effects should not be ignored in evaluating and analyzing Plurilock's financial results. Therefore, management believes that Plurilock's IFRS measures of net loss and the same respective non-IFRS measure should be considered together. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable with similar measures presented by other companies. Readers should refer to the company's most recently filed management's discussion and analysis for a more detailed discussion of these measures and their calculations.

Quarterly filings

Management's discussion and analysis and interim condensed consolidated financial statements and the notes thereto for the fiscal period ended June 30, 2023, can be obtained from Plurilock's corporate website and under Plurilock's SEDAR profile.

About Plurilock Security Inc.

Plurilock provides identity-centric cybersecurity for today's work forces. Plurilock offers world-class cybersecurity solutions paired with AI-driven, cloud-friendly security technologies that deliver persistent identity assurance with unmatched ease of use. The Plurilock family of companies enables organizations to operate safely and securely while reducing cybersecurity friction.

We seek Safe Harbor.