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CYREN Reports Second Quarter 2014 Results

Signs First End Users and Recognizes Initial CYREN WebSecurity Revenue

MCLEAN, Va., Aug. 19, 2014 /PRNewswire/ -- CYREN Ltd. (NASDAQ: CYRN), a global provider of cloud-based security solutions, today announced its second quarter 2014 financial results for the period ending June 30, 2014.

CYREN Logo

Second Quarter 2014 Financial Highlights:

  • Revenues in accordance with U.S. Generally Accepted Accounting Principles (US GAAP) totaled $8.3 million for the second quarter of 2014 compared to $8.1 million for the sequential first quarter of 2014 and $8.1 million in the second quarter of 2013.
  • Non-GAAP revenues totaled $8.3 million for the second quarter of 2014 compared to $8.1 million for the sequential first quarter of 2014 and $8.2 million in the second 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 second quarter of 2014 was $2.0 million compared to net loss of $2.1 million for the sequential first quarter of 2014 and a net loss of $0.7 million in the second quarter of 2013.
  • GAAP loss per basic and diluted share for the second quarter of 2014 was $0.08, compared to a loss of $0.08 for the sequential first quarter of 2014 and a loss of $0.03 in the second quarter of 2013.
  • Non-GAAP net loss for the second quarter 2014 was $1.1 million compared to non-GAAP net loss of $1.4 million for the sequential first quarter of 2014 and non-GAAP net income of $0.1 million in the second quarter of 2013. 
  • Non-GAAP loss per basic and diluted share for the second quarter 2014 was $0.04, compared to non-GAAP loss of $0.05 for the sequential first quarter of 2014 and non-GAAP earnings per diluted share of $0.00 in the second quarter of 2013.
  • Cash provided by operating activities during the quarter was $0.3 million.
  • Cash as of June 30, 2014 was $3.1 million, compared to $2.3 million as of March 31, 2014. In addition, the company had drawn $5.3 million under its $7.5 million credit facility.  
  • Subsequent to quarter end, CYREN completed a registered direct offering of ordinary shares and warrants. The offering resulted in gross proceeds of $11.5 million, excluding placement agent fees and offering fees and excluding any proceeds to be received upon exercise of the warrants.

"We are very pleased with our continued progress in ramping our recently introduced cloud-based CYREN WebSecurity offering. During the second quarter we expanded our global distribution partners, signed our first end users and began to recognize initial revenue," said Lior Samuelson, CEO and Chairman of the Board at CYREN.

"More recently, we strengthened our balance sheet with the successful completion of our registered direct offering," Samuelson added. "Proceeds from the offering combined with healthy demand trends in our profitable core detection business provide a solid foundation to support our growth strategy."

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:

  • The company launched its CYREN Zero-Hour URL Phishing Feed, a powerful new service that allows its web and email security partners to block phishing sites before they reach unsuspecting end users. The CYREN Zero-Hour URL Phishing Feed identifies thousands of unique phishing URLs each day using a robust combination of Recurrent Pattern Detection™ technologies, phishing URL logic, automated crawling, and human analysis by CYREN GlobalView™ Security Lab researchers.
  • CYREN was awarded the TRUSTe Cloud Data Privacy Certification as well as EU and Swiss Safe Harbor Certifications recognized by the U.S. Department of Commerce. The TRUSTe Privacy Seal is recognized by millions of consumers as a sign of trust and demonstrates privacy best practices for personal data protection.
  • Beijing-based Byzoro Networks Ltd, a leading supplier of next-generation information security products, integrated CYREN Embedded Antivirus, Anti-Spam and URL Filtering technologies in its family of PatrolFlow security appliances.
  • The New Saints Football Club (TNS), a member of the Corbett Sports Welsh Premier League and the Union of European Football Associations (UEFA), became one of the first UK organizations to adopt the cloud-based CYREN WebSecurity solution. CYREN WebSecurity was chosen through VCW Security, a leading UK distributor of IT security solutions and new CYREN partner. 
  • During the second quarter, the company has increased its base of CYREN WebSecurity partners to 18, including distributors and resellers in 15 countries.
    • imatrix, a Tokyo-based corporation, is the latest partner to offer the cloud-based CYREN WebSecurity and CYREN EmailSecurity solutions. imatrix will offer these services to its channel partners, telecom service providers as well as enterprises throughout the Japanese market.
    • AvailaSoft, a leading security vendor with a large network of customers mostly located throughout the Asia-Pacific region, signed a distribution agreement in July 2014. AvailaSoft will initially begin offering bundled CYREN WebSecurity services through its long-time partners in Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
    • IMPROVES B.V., a value added ICT security solution provider based near Rotterdam, will begin offering its Benelux customers a cloud-based IMPROVES WebSecurity service to addresses its customers' ever-increasing security needs for mobile employees.  
    • Hermitage Solutions SARL, a distributor of IT security solutions based in Lyon, France, signed a distribution agreement in June 2014. With a network of more than 200 qualified and active resellers throughout France as well as Belgium, Estonia, Latvia, Lithuania and Luxemburg, Hermitage Solutions is one of CYREN's largest European distributors to date for its new Security as a Service (SecaaS) solutions.
    • Komtera, a value added IT distributor based in Istanbul, Turkey, signed a distribution agreement in June 2014. Serving more than 300 resellers with more than 7,000 end-user organizations countrywide, Komtera is an exciting partner for CYREN WebSecurity and its entry into Turkey. Komtera is also set to offer the cloud-based CYREN EmailSecurity solution later this year.
    • NexTek, an IT services and solutions company based in Mumbai, India announced a multi-year national distribution agreement in May. More than 30 NexTek reseller partners are expected to offer CYREN solutions to their end users. To assist in servicing the NexTek partnership and CYREN's continuing embedded business in the region, CYREN opened its first data center in India in June 2014.

Business Outlook        

Based on current expectations, the company is reiterating its financial outlook for the full year 2014.  CYREN anticipates that its core embedded business will be maintained, with flat to low single digit revenue growth during 2014 and that its recently launched CYREN WebSecurity offering will be incremental to this growth. The company plans to continue to invest the cash flow from its core business to accelerate the development and rollout of its cloud strategy.

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, August 19, 2014, at 10 a.m. Eastern Time to discuss its second 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: 1-877-407-8289
Israel Dial-in Number: 1-80-940-6247
International Dial-in Number: 1-201-689-8341
at:

10 a.m. Eastern Time, 5 p.m. Israel Time

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 and reports on Form 6-K, which are available through www.sec.gov.  

U.S. Investor Contact 
Monica Gould 
The Blueshirt Group
+1 212 871 3927 
[email protected]

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

Company Contact:
Mike Myshrall, CFO
CYREN
+1 703 760 3320
[email protected]

Media Contact
Matthew Zintel      
Zintel Public Relations
+1 281 444 1590    
[email protected]              

 









CYREN LTD.









 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS









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


















Three months ended 


Six months ended 

June 30


June 30


2014


2013


2014


2013


Unaudited


Unaudited


Unaudited


Unaudited









 Revenues 

$     8,262


$     8,055


$   16,352


$   15,980









 Cost of revenues 

2,065


1,756


4,087


3,534









Gross profit 

6,197


6,299


12,265


12,446

















Operating expenses:
















 Research and development, net

3,081


2,182


5,981


4,446









 Sales and marketing 

3,137


2,537


6,129


5,302









 General and administrative 

1,882


2,263


4,149


4,478









 Total operating expenses 

8,100


6,982


16,259


14,226









Operating loss

(1,903)


(683)


(3,994)


(1,780)









Other income

-


-


200


-









Financial  expense, net 

(167)


(358)


(463)


(543)









Net loss before taxes

(2,070)


(1,041)


(4,257)


(2,323)









Tax  benefit 

75


296


120


319









Net loss








$   (1,995)


$       (745)


$   (4,137)


$   (2,004)

























Loss per share - basic

$      (0.08)


$      (0.03)


$      (0.16)


$      (0.08)









Loss per share - diluted 

$      (0.08)


$      (0.03)


$      (0.16)


$      (0.08)









Weighted average number of shares outstanding: 








Basic 

26,577


26,128


26,548


26,032









Diluted  

26,577


26,128


26,548


26,032

 

CYREN LTD.









RECONCILIATION OF SELECTED GAAP MEASURES TO NON GAAP MEASURES









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










Three months ended 


Six months ended 

June 30


June 30


2014


2013


2014


2013


Unaudited


Unaudited


Unaudited


Unaudited









GAAP operating loss

$  (1,903)


$      (683)


$  (3,994)


$  (1,780)

Stock-based compensation (1)

357


344


661


674

Other acquisition related costs (2)

-


-


-


142

Amortization of intangible assets (3)

467


329


891


765

Adjustment to earn-out liabilities (4)

-


-


-


(3)

Executive terminations (6)

69


-


208


165

Adjustment to deferred revenues (7)

52


141


104


337

Settlement agreements (8)

-


75


-


75

Re organization expenses (9)

-


-


75


-









Non-GAAP operating profit (loss)

$      (958)


$       206


$  (2,055)


$       375









GAAP net loss

$  (1,995)


$      (745)


$  (4,137)


$  (2,004)

Stock-based compensation (1)

357


344


661


674

Other acquisition related costs (2)

-


-


-


142

Amortization of intangible assets (3)

467


329


891


765

Adjustment to earn-out liabilities (4)

96


261


189


431

Income taxes (5)

(113)


(279)


(214)


(371)

Executive terminations (6)

69


-


208


165

Adjustment to deferred revenues (7)

52


141


104


337

Settlement agreements (8)

-


75


(200)


75

Reorganization expenses (9)

-


-


75


-









Non-GAAP net income (loss)

$  (1,067)


$       126


$  (2,423)


$       214









GAAP loss per share (dilluted)

(0.08)


(0.03)


(0.16)


(0.08)

Stock-based compensation (1)

0.01


0.01


0.02


0.03

Other acquisition related costs (2)

0.00


0.00


0.00


0.01

Amortization of intangible assets (3)

0.02


0.01


0.04


0.03

Adjustment to earn-out liabilities (4)

0.00


0.01


0.01


0.02

Income taxes (5)

(0.00)


(0.01)


(0.01)


(0.01)

Executive terminations (6)

0.00


0.00


0.01


0.01

Adjustment to deferred revenues (7)

0.00


0.01


0.00


0.01

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 (basic and diluted)

$     (0.04)


0.00


$     (0.09)


0.01









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

26,577


26,132


26,548


26,191









(1) Stock-based compensation 








 Cost of revenues 

$         13


$         14


$         25


$         26

 Research and development 

74


63


147


121

 Sales and marketing 

72


76


144


135

 General and administrative 

198


191


345


392










$       357


$       344


$       661


$       674

(2) Other acquisition related costs 








General and administrative 

$             -


$             -


$             -


$       142










$             -


$             -


$             -


$       142

(3) Amortization of intangible assets 








 Cost of revenues 

$       235


$       142


$       432


$       330

 Sales and marketing 

232


187


459


435










$       467


$       329


$       891


$       765

(4) Adjustment to earn-out liabilities








General and administrative 

$             -


$             -


$             -


$          (3)

Financial expenses, net 

96


261


189


434










$         96


$       261


$       189


$       431

(5) Income taxes








Deferred tax asset - tax benefit

$      (113)


$      (279)


$      (214)


$      (371)










$      (113)


$      (279)


$      (214)


$      (371)

(6) Executive terminations 








General and administrative 

$         69


$             -


$       208


$       165










$         69


$             -


$       208


$       165

(7) Adjustment to deferred revenues 








Revenues

$         52


$       141


$       104


$       337










$         52


$       141


$       104


$       337

(8) Settlement agreements








General and administrative 

$             -


$         75


$             -


$         75

Other income

-


-


(200)


-










$             -


$         75


$      (200)


$         75









(9) Reorganization expenses








General and administrative 

$             -


$             -


$         75


$             -










$             -


$             -


$         75


$             -

 

CYREN LTD.





CONDENSED CONSOLIDATED BALANCE SHEETS





(in thousands of U.S. dollars)










June 30


December  31


2014


2013


Unaudited


Audited





                 Assets




    Current Assets:




Cash and cash equivalents 

$    3,104


$            3,757

Trade receivables, net

4,831


5,178

Deferred tax assets

16


48

Prepaid expenses and other receivables

1,446


1,988

 Total current assets 

9,397


10,971





Lease deposits 

80


74

Severance pay fund 

706


819

Property and equipment, net 

2,622


2,674

Goodwill and intangible assets, net

35,287


36,395

 Total long-term assets 

38,695


39,962

Total assets

$ 48,092


$          50,933

















                 Liabilities and Shareholders' Equity




    Current Liabilities:




Credit line

$    5,301


$            3,245

Trade payables

661


859

Employees and payroll accruals 

2,772


3,102

Deferred tax liability

56


-

Accrued expenses and other liabilities 

1,180


1,366

Earn-out consideration

2,704


1,428

Deferred revenues

4,319


4,499

 Total current liabilities 

16,993


14,499





Deferred revenues

1,420


1,646

Deferred tax liability

2,517


2,749

Earn-out consideration

1,387


2,857

Accrued severance pay 

787


873

Total long-term liabilities

6,111


8,125





Shareholders' equity 

24,988


28,309

Total liabilities and shareholders' equity

$ 48,092


$          50,933

 

CYREN LTD.









 CONDENSED CONSOLIDATED CASH FLOW DATA









(in thousands of U.S. dollars)


















Three months ended 


Six months ended 


June 30


June 30


2014


2013


2014


2013

Cash flows from operating activities:

Unaudited


Unaudited


Unaudited


Unaudited









Net loss

$   (1,995)


$       (745)


$   (4,137)


$   (2,004)









Adjustments to reconcile net loss to net cash used in operating activities:








Depreciation 

321


278


642


497

Stock based compensation

357


344


661


674

Amortization of intangible assets

467


329


891


765

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

4


(2)


56


(2)

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

96


261


189


431









Changes in assets and liabilities:








Trade receivables

1,099


1,195


358


812

Deferred taxes

(18)


(279)


(119)


(372)

Prepaid expenses and other receivables

310


(102)


535


(1,002)

Trade payables

(426)


474


(258)


88

Employees and payroll accruals, accrued expenses and other liabilities

718


61


(498)


(516)

Deferred revenues

(612)


(321)


(410)


1,958

Accrued severance pay, net

3


(22)


27


(9)

Net cash provided by (used in) operating activities

324


1,471


(2,063)


1,320









Cash flows from investing activities:
















Change in long-term lease deposits

(7)


(8)


(5)


(6)

Investment in affiliate

-


(80)


-


(80)

Purchase of property and equipment

(212)


(755)


(558)


(1,336)

Net cash used in investing activities

(219)


(843)


(563)


(1,422)









Cash flows from financing activities:
















Proceeds from credit line

1,000


3,005


2,000


3,005

Payment of earn-out consideration

(351)


(3,994)


(351)


(3,994)

Proceeds from options exercised

33


433


328


919

Net cash provided by (used in) financing activities

682


(556)


1,977


(70)

Effect of exchange rate changes on cash and cash equivalents

(10)


6


(4)


(14)

Increase (decrease) in cash and cash equivalents

787


72


(649)


(172)

Cash and cash equivalents at the beginning of the period

2,327


4,873


3,757


5,137

Cash and cash equivalents at the end of the period

$     3,104


$     4,951


$     3,104


$     4,951

 

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