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CYREN Reports Third Quarter 2014 Results

November 18, 2014 at 6:10 AM EST

MCLEAN, Va., Nov. 18, 2014 /PRNewswire/ -- CYREN Ltd. (NASDAQ: CYRN), a global provider of cloud-based cybersecurity solutions, today announced its third quarter 2014 financial results for the period ending September 30, 2014.

CYREN Logo.

Third Quarter 2014 Financial Highlights:

  • Revenues in accordance with U.S. Generally Accepted Accounting Principles (US GAAP) totaled $7.7 million for the third quarter of 2014 compared to $8.0 million in the third quarter of 2013.
  • Non-GAAP revenues totaled $7.8 million for the third quarter of 2014 compared to $8.1 million in the third quarter of 2013. The difference between non-GAAP and GAAP revenue is derived from the fact that deferred revenues consolidated from acquired companies are accounted under GAAP based on fair value.
  • GAAP net loss for the third quarter of 2014 was $0.7 million compared to a net loss of $0.9 million in the third quarter of 2013.
  • GAAP loss per basic and diluted share for the third quarter of 2014 was $0.02, compared to a loss of $0.03 in the third quarter of 2013.
  • Non-GAAP net loss for the third quarter 2014 was $0.7 million compared to non-GAAP net income of $0.3 million in the third quarter of 2013. 
  • Non-GAAP loss per basic and diluted share for the third quarter 2014 was $0.02, compared to non-GAAP earnings per diluted share of $0.01 in the third quarter of 2013.
  • Cash used by operating activities during the quarter was $0.1 million. Net cash provided by financing activities during the quarter was $10.2 million.
  • Cash as of September 30, 2014 was $13.1 million, compared to $3.1 million as of June 30, 2014. In addition, the company had drawn $5.3 million under its $7.5 million credit facility. The increase in cash primarily reflects the $10.2 million in net proceeds CYREN raised in a registered direct offering that closed on July 30, 2014.

"CYREN remains in a strong financial position with the revenue generated from our embedded business and the capital raised in July. We see particularly strong demand from enterprise customers for our embedded solutions and strong interest in our cloud-based CYREN WebSecurity offering," said Lior Samuelson, CEO and Chairman of the Board at CYREN. "We continue work with our increasing number of channel partners to accelerate the onboarding process and revenue growth. We are also focusing resources on enterprises who are actively seeking to replace or augment their existing security appliances with a next generation SaaS-based solution."

For information regarding the non-GAAP financial measures discussed in this release, please see "Use of Non-GAAP Financial Information" and "Reconciliation of Selected GAAP Measures to Non GAAP Measures."

Business Highlights:

  • CYREN completed a registered direct offering, which was oversubscribed and brought in $11.5 million in gross proceeds, strengthening the company's balance sheet and giving it the ability to further execute its growth strategy.
  • Tesco, a leading retailer in the United Kingdom, will use the company's Embedded URL Filtering product in a new version of an Android tablet being released ahead of the holiday season. This is one of the first times CYREN's URL filtering solutions will be embedded in an Android device.
  • CYREN extended its contract with ATOS Germany to provide the company's EmailSecurity solution to large enterprise customers. The renewed contract will run through mid-2018. CYREN is also working with ATOS Germany to expand their partnership to include reselling the WebSecurity and EmailSecurity SaaS solutions.
  • CYREN signed a three-year deal to provide embedded AntiSpam and Outbound AntiSpam solutions to one of the largest security technology companies in the world. This supplements two other CYREN contracts with this company that utilize CYREN's embedded Antivirus solutions.
  • During the third quarter, the company increased the number of CYREN WebSecurity partners to 24 (up from 18 at the end of the second quarter), including distributors and resellers in 18 countries.

Business Outlook        

The company expects fourth quarter revenues to be at similar levels as the third quarter, and full year 2014 revenue to be flat to slightly down compared with 2013. The above outlook is as of the date of this release, and the company undertakes no obligation to update its estimates in the future.

Use of Non-GAAP Measures
Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: stock-based compensation expenses, amortization and impairment of acquired intangible assets, executive termination costs, deferred taxes and deferred revenues related to acquisitions, acquisition related costs, onetime settlement agreements, reorganization expenses and adjustments to earn-out obligations. The purpose of such adjustments is to give an indication of the company's performance exclusive of non-cash charges and other items that are considered by management to be outside of the company's core operating results. The company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. Company management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate the business and make operating decisions.

These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. The company believes this adjustment is useful to investors as a measure of the ongoing performance of the business. The company believes these non-GAAP financial measures provide consistent and comparable measures to help investors understand the company's current and future operating cash flow performance. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statements of Income. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses both GAAP and non-GAAP measures when evaluating the business internally and therefore felt it important to make these non-GAAP adjustments available to investors.

Financial Results Conference Call
The company has scheduled a conference call later today, November 18, 2014, at 10 a.m. Eastern Time (5 p.m. Israel Time) to discuss its third quarter 2014 results.

To participate, please call one of the following teleconferencing numbers by dialing in at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1-877-675-4753
Israel Dial-in Number: 1-80-925-8243
International Dial-in Number: 1-719-325-4751

The call will be simultaneously webcast live on the investor relations section of CYREN's website at http://www.cyren.com/ir.html.

For those unable to listen to the live call, a webcast replay of the call will be available from the day after the call in the investor relations section of CYREN's corporate website.

About CYREN
CYREN is a leading provider of cloud-based security solutions that deliver powerful protection through global data intelligence. Regardless of the device or its location, CYREN's easily deployed web, email, and anti-malware products deliver uncompromising protection in both embedded and Security as a Service (SecaaS) deployments. Organizations rely on CYREN's cloud-based threat detection and proactive security analytics to provide up-to-date spam classifications, URL categorization and malware detection services. The CYREN GlobalView™ Cloud Platform leverages Recurrent Pattern Detection™ technologies to protect more than 550 million users in 190 countries. CYREN is traded on the NASDAQ Capital Market and the Tel Aviv Stock Exchange (TASE) under the trading symbol "CYRN." Visit the CYREN GlobalView Security Center or go to www.CYREN.com.

Blog: blog.cyren.com 
Facebook: www.facebook.com/CyrenWeb 
LinkedIn: www.linkedin.com/company/cyren 
Twitter: www.twitter.com/CyrenInc

This press release contains forward-looking statements, including projections about the company's business, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements in the future tense, and statements including words such as "expect," "plan," "estimate," "anticipate," or "believe" are forward-looking statements. These statements are based on information available at the time of the press release and the company assumes no obligation to update any of them. The statements in this press release are not guarantees of future performance and actual results could differ materially from current expectations as a result of numerous factors, including business conditions and growth or deterioration in the internet security market, technological developments, products offered by competitors, availability of qualified staff, and technological difficulties and resource constraints encountered in developing new products, as well as those risks described in the company's Annual Reports on Form 20-F, reports on Form 6-K and prospectus supplement dated July 24, 2014 and prospectus dated July 3, 2014 filed pursuant to Rule 424(b)(2, which are available through www.sec.gov.  

U.S. Investor Contact              
Garth Russell                                                          
KCSA Strategic Communications                                                            
+1 212 896 1250                                                     
grussell@kcsa.com

Israel Investor Contact
Iris Lubitch                     
EffectiveIR
+972 54 2528007
iris@FinCom.co.il

Company Contact:
Mike Myshrall, CFO
CYREN
+1 703 760 3320 
mike.myshrall@CYREN.com

Media Contact
Matthew Zintel       
Zintel Public Relations
+1 281 444 1590     
matthew.zintel@zintelpr.com

 









CYREN LTD.









 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS









(in  thousands of U.S. dollars, except per share amounts)


















Three months ended 


Nine months ended 

September 30


September 30


2014


2013


2014


2013


Unaudited


Unaudited


Unaudited


Unaudited









 Revenues 

$             7,731


$          8,019


$           24,083


$           23,999









 Cost of revenues 

2,037


1,722


6,124


5,256









Gross profit 

5,694


6,297


17,959


18,743

















Operating expenses:
















 Research and development, net

2,417


2,079


8,398


6,525









 Sales and marketing 

2,821


2,559


8,950


7,861









 General and administrative 

1,624


2,112


5,773


6,590









 Adjustment of earnout obligation

(701)


-


(701)


-









 Total operating expenses 

6,161


6,750


22,420


20,976









Operating loss

(467)


(453)


(4,461)


(2,233)









Other income

-


-


200


-









Financial  expense, net 

(249)


(323)


(712)


(866)









Net loss before taxes

(716)


(776)


(4,973)


(3,099)









Tax benefit (expense) 

(7)


(138)


113


181









Net loss








$               (723)


$            (914)


$            (4,860)


$            (2,918)

























Loss per share - basic

$              (0.02)


$           (0.03)


$              (0.18)


$              (0.11)









Loss per share - diluted 

$              (0.02)


$           (0.03)


$              (0.18)


$              (0.11)









Weighted average number of shares outstanding: 








Basic 

29,806


26,384


27,646


26,150









Diluted  

29,806


26,384


27,646


26,150










 









CYREN LTD.









RECONCILIATION OF SELECTED GAAP MEASURES TO NON GAAP MEASURES









(in  thousands of U.S.dollars, except per share amounts)










Three months ended 


Nine months ended 

September 30


September 30


2014


2013


2014


2013


Unaudited


Unaudited


Unaudited


Unaudited









GAAP operating loss

$                           (467)


$                        (453)


$              (4,461)


$              (2,233)

Stock-based compensation (1)

294


329


955


1,003

Other acquisition related costs (2)

-


-


-


142

Amortization of intangible assets (3)

436


542


1,327


1,307

Adjustment to earn-out liabilities (4)

(701)


-


(701)


(3)

Executive terminations (6)

-


-


208


165

Adjustment to deferred revenues (7)

50


74


154


412

Settlement agreements (8)

-


16


-


91

Re organization expenses (9)

-


96


75


96









Non-GAAP operating profit (loss)

$                           (388)


$                          604


$              (2,443)


$                  980









GAAP net loss

$                           (723)


$                        (914)


$              (4,860)


$              (2,918)

Stock-based compensation (1)

294


329


955


1,003

Other acquisition related costs (2)

-


-


-


142

Amortization of intangible assets (3)

436


542


1,327


1,307

Adjustment to earn-out liabilities (4)

(638)


271


(449)


703

Income taxes (5)

(103)


(92)


(317)


(464)

Executive terminations (6)

-


-


208


165

Adjustment to deferred revenues (7)

50


74


154


412

Settlement agreements (8)

-


16


(200)


91

Reorganization expenses (9)

-


96


75


96









Non-GAAP net income (loss)

$                           (684)


$                          322


$              (3,107)


$                  537









GAAP loss per share (dilluted)

(0.02)


(0.03)


(0.17)


(0.11)

Stock-based compensation (1)

0.01


0.01


0.03


0.04

Other acquisition related costs (2)

0.00


0.00


0.00


0.01

Amortization of intangible assets (3)

0.01


0.02


0.05


0.05

Adjustment to earn-out liabilities (4)

(0.02)


0.01


(0.02)


0.03

Income taxes (5)

(0.00)


(0.00)


(0.01)


(0.02)

Executive terminations (6)

0.00


0.00


0.01


0.01

Adjustment to deferred revenues (7)

0.00


0.00


0.01


0.02

Settlement agreements (8)

0.00


0.00


(0.01)


0.00

Reorganization expenses (9)

0.00


0.00


0.00


0.00









Non-GAAP earnings (loss) per share (diluted)

(0.02)


0.01


(0.11)


0.03









Numbers of shares used in computing non-GAAP earnings per share (diluted)

29,806


26,445


27,646


26,277









(1) Stock-based compensation 








 Cost of revenues 

$                              15


$                            12


$                     40


$                     38

 Research and development 

82


64


229


185

 Sales and marketing 

72


51


216


186

 General and administrative 

125


202


470


594










$                            294


$                          329


$                  955


$               1,003

(2) Other acquisition related costs 








General and administrative 

$                                  -


$                               -


$                        -


$                  142










$                                  -


$                               -


$                        -


$                  142

(3) Amortization of intangible assets 








 Cost of revenues 

$                            211


$                          235


$                  644


$                  564

 Sales and marketing 

225


307


683


743










$                            436


$                          542


$               1,327


$               1,307

(4) Adjustment to earn-out liabilities








 General and administrative 

$                           (701)


$                               -


$                 (701)


$                     (3)

Financial expenses, net 

63


271


252


706










$                           (638)


$                          271


$                 (449)


$                  703

(5) Income taxes








Deferred tax asset - tax benefit

$                           (103)


$                           (92)


$                 (317)


$                 (464)










$                           (103)


$                           (92)


$                 (317)


$                 (464)

(6) Executive terminations 








General and administrative 

$                                  -


$                               -


$                  208


$                  165










$                                  -


$                               -


$                  208


$                  165

(7) Adjustment to deferred revenues 








Revenues

$                              50


$                            74


$                  154


$                  412










$                              50


$                            74


$                  154


$                  412

(8) Settlement agreements








General and administrative 

$                                  -


$                            16


$                        -


$                     91

Other income

-


-


(200)


-










$                                  -


$                            16


$                 (200)


$                     91









(9) Reorganization expenses








General and administrative 

$                                  -


$                            96


$                     75


$                     96










$                                  -


$                            96


$                     75


$                     96

 





CYREN LTD.





CONDENSED CONSOLIDATED BALANCE SHEETS





(in thousands of U.S. dollars)










September 30


December  31


2014


2013


Unaudited


Audited





                 Assets




    Current Assets:




Cash and cash equivalents 

$         13,094


$           3,757

Trade receivables, net

4,085


5,178

Deferred tax assets

-


48

Prepaid expenses and other receivables

1,417


1,988

 Total current assets 

18,596


10,971





Lease deposits 

75


74

Severance pay fund 

635


819

Property and equipment, net 

2,546


2,674

Goodwill and intangible assets, net

33,009


36,395

 Total long-term assets 

36,265


39,962





Total assets

$         54,861


$         50,933

















                 Liabilities and Shareholders' Equity




    Current Liabilities:




Credit line

$           5,347


$           3,245

Trade payables

638


859

Employees and payroll accruals 

2,366


3,102

Deferred tax liability

149


-

Accrued expenses and other liabilities 

1,233


1,366

Earn-out consideration

2,294


1,428

Deferred revenues

4,407


4,499

 Total current liabilities 

16,434


14,499





Deferred revenues

1,238


1,646

Deferred tax liability

2,150


2,749

Earn-out consideration

903


2,857

Accrued severance pay 

706


873

Total long-term liabilities

4,997


8,125





Shareholders' equity 

33,430


28,309

Total liabilities and shareholders' equity

$         54,861


$         50,933

 









CYREN LTD.









 CONDENSED CONSOLIDATED CASH FLOW DATA









(in thousands of U.S. dollars)


















Three months ended 


Nine months ended 


September 30


September 30


2014


2013


2014


2013

Cash flows from operating activities:

Unaudited


Unaudited


Unaudited


Unaudited









Net loss

$                 (723)


$                      (914)


$              (4,860)


$               (2,918)









Adjustments to reconcile net loss to net cash provided by (used in) operating activities:








Loss on disposal of property and equipment

(1)


-


(1)


-

Depreciation 

313


361


955


858

Stock based compensation

294


329


955


1,003

Amortization of intangible assets

436


542


1,327


1,307

Accrued interest, accretion of discount and exchange rate differences on credit line

46


110


102


108

Accretion and change in fair value of earn-out consideration, net

(638)


271


(449)


702









Changes in assets and liabilities:








Trade receivables

823


(611)


1,181


201

Deferred taxes

(65)


(92)


(184)


(464)

Prepaid expenses and other receivables

(59)


67


476


(935)

Trade payables

(134)


(406)


(392)


(318)

Employees and payroll accruals, accrued expenses and other liabilities

(211)


37


(709)


(479)

Deferred revenues

(121)


(624)


(531)


1,334

Accrued severance pay, net

(10)


(50)


17


(59)

Net cash provided by (used in) operating activities

(50)


(980)


(2,113)


340









Cash flows from investing activities:
















Change in long-term lease deposits

2


(20)


(3)


(26)

Proceeds from sale of fixed assets

-


4


-


4

Investment in affiliate

-


-


-


(80)

Purchase of property and equipment

(145)


(320)


(703)


(1,656)

Net cash used in investing activities

(143)


(336)


(706)


(1,758)









Cash flows from financing activities:
















Proceeds from capital issuance, net

10,238


-


10,238


-

Proceeds from credit line

-


-


2,000


3,005

Payment of earn-out consideration

-


-


(351)


(3,994)

Proceeds from options exercised

3


297


331


1,216

Net cash provided by financing activities

10,241


297


12,218


227

Effect of exchange rate changes on cash and cash equivalents

(58)


40


(62)


26

Increase (decrease) in cash and cash equivalents

10,048


(1,019)


9,399


(1,191)

Cash and cash equivalents at the beginning of the period

3,104


4,951


3,757


5,137

Cash and cash equivalents at the end of the period

$             13,094


$                    3,972


$             13,094


$                3,972

 

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SOURCE CYREN Ltd.

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