Data443 Risk Mitigation, Inc. (ATDS)·Q1 2020 Earnings Summary

Executive Summary

• Q1 2020 delivered strong top-line momentum with revenue of $0.478M, up 234% YoY, alongside net billings of $0.603M and a deferred revenue build to $1.032M; however, results were dominated by a non-cash $8.506M derivative liability revaluation tied to convertible notes, yielding a net loss of $10.181M .
• Operating loss was $1.103M as G&A rose with integration, data center build-out, and product investments; sales and marketing decreased YoY after reclassification of certain costs to G&A .
• Management highlighted regulatory catalysts (CCPA enforcement in July 2020) and product launches (Global Privacy Manager and WordPress GDPR Framework CCPA version), positioning offerings to monetize emerging privacy demand .
• No formal guidance or earnings call transcript was filed; estimates coverage via S&P Global was unavailable, limiting beat/miss analysis versus consensus .

What Went Well and What Went Wrong

What Went Well

• Revenue growth accelerated: $0.478M in Q1 2020, up 234% YoY; net billings reached $0.603M and deferred revenues increased to $1.032M (+$0.303M vs. 12/31/19) .
• Strategic execution: data center launch near HQ to reduce public cloud spend and support ultra-high-density orders; second version of Global Privacy Manager entered private beta; expanded product ordering and SMB/B2C marketing initiatives .
• Regulatory tailwinds: CEO emphasized “CCPA will be enforced with rigor starting July 2020,” expecting aggressive state action over the next 6–18 months—supportive for privacy compliance software demand .

What Went Wrong

• Material non-cash hit: $8.506M loss from change in fair value of derivative liability linked to convertible notes overshadowed operational progress, driving net loss to $10.181M .
• Operating loss widened: $1.103M operating loss, with G&A of $1.425M reflecting integration, audit/filing, and development costs, while S&M fell to $0.121M after reclassifications—raising questions on cost discipline vs. growth .
• No formal guidance or earnings call transcript; limited external validation and visibility for investors on near-term trajectory and drivers .

Financial Results

Multi-period comparison

Revenue vs Prior Year

EPS and Margins

• EPS and detailed margin metrics were not disclosed in the Q1 2020 press release; Q3 2019 reported basic/diluted EPS of $(0.32) and $(0.32), respectively, but Q1 2020 EPS was not provided .

Segment breakdown

• The company operates as a single segment; no segment revenue disclosure is applicable .

KPIs

Drivers and notes:

• Deferred revenue increased by $303K vs. 12/31/19 ($1.032M vs. $0.729M) indicating bookings and customer prepayments; net billings exceeded recognized revenue in both periods, supporting future revenue recognition .
• Net loss in Q1 2020 primarily reflects derivative liability mark-to-market ($8.506M) and operating loss ($1.103M) .

Guidance Changes

Earnings Call Themes & Trends

No earnings call transcript was filed for Q1 2020; themes synthesized from management commentary in the press release.

Management Commentary

• “The first quarter of 2020 reflects the combined business operations of all 5 reporting product lines… launch of our new Data Center… to reduce our spend on the public cloud and provide our customers more options… particularly for the ultra-high density orders we are seeing now.” — Jason Remillard, CEO .
• “CCPA will be enforced with rigor starting July 2020… additional frequent and aggressive actions for different states in the next 6–18 months… COVID-19 continues to highlight the privacy risks… data sharing and processing parties.” — Jason Remillard .
• “We continue to refine our product lines… Global Privacy Manager… Classification, Governance, Secure Document Delivery… eDiscovery… massive file transfer services… enabling medium-size businesses to deploy capabilities in just a few mouse clicks… pay monthly or yearly.” — Jason Remillard .

Q&A Highlights

• No earnings call transcript was filed; therefore no Q&A highlights or guidance clarifications are available .

Estimates Context

• Wall Street consensus via S&P Global for Q1 2020 revenue/EPS was unavailable; beat/miss analysis versus consensus cannot be determined. Values retrieved from S&P Global were unavailable due to data access limits.

Key Takeaways for Investors

• Strong YoY growth with bookings momentum: revenue +234% YoY to $0.478M; net billings $0.603M; deferred revenue $1.032M—supportive for near-term revenue conversion .
• Reported loss is largely non-cash: $8.506M derivative liability swing tied to convertible notes drove the $10.181M net loss; focus on operating trajectory and cash KPIs to assess core momentum .
• Cost architecture evolving: data center deployment aims to reduce external cloud costs and support high-density workloads; near-term G&A elevated from integration and development .
• Product and channel expansion: Global Privacy Manager v2, WordPress CCPA framework, and SMB/B2C campaigns broaden TAM amid rising regulatory enforcement—potential revenue catalysts in 2H20 .
• Visibility remains limited: no formal guidance or earnings call transcript; monitor filings for updates on bookings, deferred revenue, and derivative liability management .
• Risk factors: continued reliance on financing, derivative liability volatility, and going concern considerations per prior filings—diligence on capital structure essential .

Document Sources Reviewed

• Q1 2020 8-K with Exhibit 99.1 earnings press release (complete): Revenue, billings, deferred revenue; G&A and S&M; net loss drivers; management commentary .
• Prior quarter filing: Q3 2019 10-Q (complete): Revenue, net billings, deferred revenue, OpEx; derivative liability context; liquidity and capital structure .
• No Q1 2020 earnings call transcript or other press releases were located via the document search .