Cyren Announces Third Quarter 2017 Financial Results

MCLEAN, Va., Nov. 13, 2017 /PRNewswire/ -- Cyren (NASDAQ: CYRN) today announced its third quarter 2017 financial results for the period ending September 30, 2017.

In the third quarter, Cyren continued its penetration of enterprise accounts purchasing the Cyren Cloud Security platform for email, web, and DNS security. During the quarter, Cyren signed over 60 new enterprise customers and increased its average new order size by over 250% compared to the second quarter. Cyren also renewed and expanded a number of existing large enterprise accounts.

During the third quarter, Cyren also added several Threat Intelligence Services contracts, including a multi-million dollar expansion with one of its largest customers who is using Cyren's Phishing Intelligence solution to protect millions of users globally. The contract expansion offsets some smaller customer contracts that were not renewed over the past two quarters.

Last week Warburg Pincus, one of the world's most successful growth-focused private equity firms, announced a $19.6 million private placement in the company, as well as its intention to acquire up to 75% of Cyren's partially diluted outstanding shares through a tender offer.

"We are pleased with the progress we made during the third quarter to expand our Enterprise business," said Lior Samuelson, CEO and Chairman of the Board at Cyren. "It's great to see that the Cyren Cloud Security platform is proving its ability to scale up to larger enterprise accounts with tens of thousands of users. We were also thrilled to receive the investment by Warburg Pincus, which will help Cyren accelerate its growth plans and further establish the company as a leading provider of cloud-based cybersecurity solutions."

Third Quarter 2017 Financial Highlights:

    --  Revenues for the third quarter of 2017 were $7.6 million, compared to
        $7.9 million during the third quarter of 2016.
    --  GAAP net loss for the third quarter of 2017 was $3.6 million, compared
        to a net loss of $1.0 million in the third quarter of 2016.
    --  GAAP loss per basic and diluted share for the third quarter of 2017 was
        $0.09, compared to a loss of $0.02 per basic and diluted share for the
        third quarter of 2016.
    --  Non-GAAP net loss for the third quarter of 2017 was $3.3 million,
        compared to a Non-GAAP net loss of $0.8 million for the third quarter of
        2016.
    --  Non-GAAP loss per basic and diluted share was $0.09 for the third
        quarter of 2017, compared to a Non-GAAP loss of $0.02 per share in third
        quarter of 2016.
    --  Operating cash usage during the third quarter was $0.3 million, compared
        to operating cash usage of $0.3 million in the third quarter of 2016.
    --  Net cash usage during the third quarter was $1.6 million, compared to
        net cash usage of $1.2 million during the third quarter of 2016.
    --  Cash balance as of September 30, 2017 was $9.9 million, compared to
        $11.6 million as of June 30, 2017. The company carries convertible notes
        with a principal balance of $6.3 million, which were issued at the end
        of Q1 2017.

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

Recent Business Highlights:

    --  In the third quarter, Cyren increased its penetration of large
        enterprise accounts with several notable new customers using the CCS
        platform, ranging from 3,000 to 30,000 seats.  Cyren now services large
        enterprises in both North America and Europe with accounts in excess of
        100,000 enterprise seats.
    --  Cyren recently released version 4.2 of its CCS platform, which adds
        email archiving to the portfolio of email security, web security, DNS
        security, and cloud sandboxing.  Cyren's archiving service delivers fast
        search and eDiscovery, tamper-proof storage, and provides regulatory
        compliance with email management, protection and retention in the cloud.
    --  On November 6, Warburg Pincus, a global private equity firm focused on
        growth investing, purchased approximately 10.6 million shares in a
        private placement at $1.85 per share, representing approximately 21.3%
        of Cyren's outstanding shares, which yielded gross proceeds of
        approximately $19.6 million to Cyren.  Warburg Pincus also announced its
        intention to commence a "Special Tender Offer" pursuant to Israeli law
        to increase its ownership in Cyren, up to a maximum of 75% of Cyren's
        partially diluted outstanding shares. The complete terms and conditions
        of the offer, including important U.S. and Israeli income and
        withholding tax considerations relating to the offer, will be contained
        in the Offer to Purchase to be included as an exhibit to the Tender
        Offer Statement on Schedule TO which will be filed with the U.S.
        Securities and Exchange Commission (SEC) and with the Israeli Securities
        Authority (ISA) when the offer is commenced.

Financial Results Conference Call:

The company will host a conference call at 10 a.m. Eastern Time (5 p.m. Israel Time) on Monday, November 13, 2017 to discuss third quarter results as well as the strategic investment by Warburg Pincus.


    U.S. Dial-in Number:                  1-800-441-0022

    Israel Dial-in Number:                1-80-924-6042

    International Dial-in Number:         1-719-457-2603

The call will be simultaneously webcast live on the investor relations section of Cyren's website at www.cyren.com/ir.html, or by using the following link: http://public.viavid.com/index.php?id=127117.

For those unable to participate in the live conference call, a replay will be available until November 27, 2017. To access the replay, the U.S. dial in number is 1-844-512-2921 and the non-U.S. dial in number is 1-412-317-6671. Callers will be prompted for replay conference ID number 5102623. An archived version of the webcast will also be available on the investor relations section of the company's website.

About Cyren:

More than 1.3 billion users around the world rely on Cyren's 100% cloud internet security solutions to protect them against cyber attacks and data loss every day. Powered by the world's largest security cloud, Cyren (NASDAQ and TASE: CYRN) delivers fast time to protection from cyber threats with award-winning security as a service for web, email, sandboxing, and DNS for enterprises, and embedded threat intelligence solutions for security vendors and service providers. Customers like Google, Microsoft and Check Point are just a few of the businesses that depend on Cyren every day to power their security. Learn more at www.cyren.com.

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

Use of Non-GAAP Financial Measures:

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: stock-based compensation expenses, amortization of acquired intangible assets, executive termination costs, deferred taxes and deferred revenues related to acquisitions, one-time gain from sale of investment in affiliate, adjustments to earn-out obligations, capitalization of technology, accretion of discount on convertible note and change in fair value of the embedded conversion feature. 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.

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.

Important Information about the Tender Offer:

The description contained in this press release is neither an offer to purchase nor a solicitation of an offer to sell securities. The planned tender offer described in this press release has not commenced. At the time the planned tender offer is commenced, a tender offer statement on Schedule TO will be filed by Warburg Pincus with the SEC, and Cyren will file a solicitation/recommendation statement on Schedule 14D-9, with respect to the planned tender offer. The tender offer statement (including an offer to purchase, a related letter of transmittal and other tender offer documents) and the solicitation/recommendation statement will contain important information that should be read carefully before making any decision to tender securities in the planned tender offer. Those materials will be made available to Cyren's stockholders at no expense to them. In addition, all of those materials (and all other tender offer documents filed with the SEC) will be made available at no charge on the SEC's website at www.sec.gov.

Company Contact
Mike Myshrall, CFO
Cyren

+1.703.760.3320
mike.myshrall@cyren.com

Israel Investor Contact
Iris Lubitch
SmarTeam
+972.54.2528007
iris@smartteam.co.il

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
                                       ------------                                          ------------

                                                             2017                       2016                      2017           2016
                                                             ----                       ----                      ----           ----

                                                      Unaudited                 Unaudited                Unaudited     Unaudited


     Revenues                                              $7,561                     $7,902                   $23,277        $22,872


     Cost of revenues                                       3,094                      2,747                     9,123          7,360
                                                            -----                      -----                     -----          -----


    Gross profit                                            4,467                      5,155                    14,154         15,512
                                                            -----                      -----                    ------         ------



    Operating expenses:


     Research and
      development, net                                      2,286                      2,072                     6,929          6,453


     Sales and marketing                                    4,071                      2,532                    11,395          7,302


     General and
      administrative                                        1,731                      1,475                     4,973          4,863
                                                            -----                      -----                     -----          -----


     Total operating
      expenses                                              8,088                      6,079                    23,297         18,618


    Operating loss                                        (3,621)                     (924)                  (9,143)       (3,106)


    Other income                                                -                       (2)                      451              5


    Financial expense,
     net                                                     (58)                      (68)                    (263)         (201)
                                                              ---                        ---                      ----           ----


    Loss before taxes                                     (3,679)                     (994)                  (8,955)       (3,302)


    Tax benefit (expense)                                      51                         19                       148            (7)
                                                              ---                        ---                       ---            ---



    Net loss                                             $(3,628)                    $(975)                 $(8,807)      $(3,309)
                                                          =======                      =====                   =======        =======



    Loss per share -
     basic                                                $(0.09)                   $(0.02)                  $(0.22)       $(0.08)
                                                           ======                     ======                    ======         ======


    Loss per share -
     diluted                                              $(0.09)                   $(0.02)                  $(0.22)       $(0.08)
                                                           ======                     ======                    ======         ======


    Weighted average number of shares outstanding:

    Basic                                                  39,229                     39,132                    39,205         39,125
                                                           ======                     ======                    ======         ======


    Diluted                                                39,229                     39,132                    39,205         39,125
                                                           ======                     ======                    ======         ======




                                                                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
                                                                 ------------                              ------------

                                                                     2017                           2016                       2017                 2016
                                                                     ----                           ----                       ----                 ----

                                                             Unaudited                     Unaudited                 Unaudited           Unaudited


    GAAP operating loss                                          $(3,621)                        $(924)                  $(9,143)            $(3,106)

    Stock-based
     compensation (1)                                                 248                            250                        809                  747

    Amortization of
     intangible assets (2)                                          1,135                            797                      3,292                2,046

    Executive terminations
     (5)                                                               -                            30                          -                  87

    Adjustment to deferred
     revenues (6)                                                       -                             -                         -                  66

    Capitalization of
     technology (8)                                                 (995)                         (839)                   (2,716)             (2,245)
                                                                     ----                           ----                     ------               ------

                                                                                    -                                               -

    Non-GAAP operating loss                                      $(3,233)                        $(686)                  $(7,758)            $(2,405)
                                                                  =======                          =====                    =======              =======


    GAAP net loss                                                $(3,628)                        $(975)                  $(8,807)            $(3,309)

    Stock-based
     compensation (1)                                                 248                            250                        809                  747

    Amortization of
     intangible assets (2)                                          1,135                            797                      3,292                2,046

    Adjustment to earn-out
     liabilities and related
     expenses (3)                                                      27                              -                        91                    -

    Amortization of deferred
     tax assets (4)                                                  (65)                          (66)                     (186)               (216)

    Executive terminations
     (5)                                                               -                            30                          -                  87

    Adjustment to deferred
     revenues (6)                                                       -                             -                         -                  66

    Gain from sale of
     investment in affiliate
     (7)                                                               -                             -                     (450)                   -

    Capitalization of
     technology (8)                                               (1,026)                         (839)                   (2,765)             (2,276)

    Accretion of discount on
     convertible note (9)                                             159                              -                       330                    -

    Change in fair value of
     embedded conversion
     feature on convertible
     note (10)                                                      (198)                             -                     (465)                   -
                                                                     ----                            ---                      ----                  ---


    Non-GAAP net loss                                            $(3,348)                        $(803)                  $(8,151)            $(2,855)
                                                                  =======                          =====                    =======              =======


    GAAP loss per share
     (diluted)                                                    $(0.09)                       $(0.02)                   $(0.22)             $(0.08)

    Stock-based
     compensation (1)                                                0.01                           0.00                       0.02                 0.02

    Amortization of
     intangible assets (2)                                           0.03                           0.02                       0.09                 0.05

    Adjustment to earn-out
     liabilities and related
     expenses (3)                                                    0.00                           0.00                       0.00                 0.00

    Amortization of deferred
     tax assets (4)                                                (0.00)                        (0.00)                    (0.00)                0.00

    Executive terminations
     (5)                                                            0.00                           0.00                       0.00                 0.00

    Adjustment to deferred
     revenues (6)                                                    0.00                           0.00                       0.00                 0.00

    Gain from sale of
     investment in affiliate
     (7)                                                            0.00                           0.00                     (0.01)                0.00

    Capitalization of
     technology (8)                                                (0.03)                        (0.02)                    (0.08)              (0.06)

    Accretion of discount on
     convertible note (9)                                            0.00                           0.00                       0.00                 0.00

    Change in fair value of
     embedded conversion
     feature on convertible
     note (10)                                                     (0.01)                          0.00                     (0.01)                0.00
                                                                    -----                           ----                      -----                 ----


    Non-GAAP loss per share
     (diluted)                                                    $(0.09)                       $(0.02)                   $(0.21)             $(0.07)
                                                                   ======                         ======                     ======               ======


    Numbers of shares used
     in computing non-GAAP
     loss per share
     (diluted)                                                     39,229                         39,132                     39,205               39,125
                                                                   ======                         ======                     ======               ======


    (1) Stock-based compensation
    ----------------------------

    Cost of revenues                                                  $17                            $24                        $76                  $51

    Research and development                                           61                             77                        228                  243

    Sales and marketing                                                67                             47                        180                  153

    General and
     administrative                                                   103                            102                        325                  300
                                                                      ---                            ---                        ---                  ---


                                                                     $248                           $250                       $809                 $747
                                                                     ====                           ====                       ====                 ====


    (2) Amortization of
     intangible assets                                                962                            609                      2,785                1,480
    -------------------

    Cost of revenues                                                 $173                           $188                       $507                 $566

    Sales and marketing                                                 -                             0                          -                   0
                                                                      ---                           ---                        ---                 ---


                                                                   $1,135                           $797                     $3,292               $2,046
                                                                   ======                           ====                     ======               ======


    (3) Adjustment to earn-out liabilities and related
     expenses
    --------------------------------------------------

    Financial expenses, net                                           $27                $             -                       $91      $             -
                                                                      ===                ===============                       ===      ===============


    (4) Amortization of deferred tax assets
    ---------------------------------------

    Tax benefit (expense)                                           $(65)                         $(66)                    $(186)              $(216)
                                                                     ====                           ====                      =====                =====


    (5) Executive terminations
    --------------------------

    Sales and marketing                                   $             -                           $30            $             -                 $87
                                                          ===============                           ===            ===============                 ===


    (6) Adjustment to deferred revenues
    -----------------------------------

    Revenues                                              $             -               $             -           $             -                 $66
                                                          ===============               ===============           ===============                 ===


    (7) Gain from sale of investment in affiliate
    ---------------------------------------

    Other Income                                          $             -               $             -                    $(450)     $             -
                                                          ===============               ===============                     =====      ===============


    (8) Capitalization of technology
    --------------------------------

    Research and development                                       $(995)                        $(839)                  $(2,716)            $(2,245)

    Financial expenses, net                                          (31)                             -                      (49)                (31)
                                                                      ---                            ---                       ---                  ---


                                                                 $(1,026)                        $(459)                  $(2,765)            $(2,276)
                                                                  =======                          =====                    =======              =======


    (9) Accretion of discount on convertible note
    ---------------------------------------

    Financial expenses, net                                          $159                $             -                      $330      $             -
                                                                     ====                ===============                      ====      ===============


    (10) Change in fair value of embedded conversion
     feature on convertible note
    ------------------------------------------------

    Financial expenses, net                                        $(198)               $             -                    $(465)     $             -
                                                                    =====                ===============                     =====      ===============





                                                             CYREN LTD.


                                               CONDENSED CONSOLIDATED BALANCE SHEETS


                                                   (in thousands of U.S. dollars)


                                                         September 30                December 31
                                                         ------------                -----------

                                                                             2017                   2016
                                                                             ----                   ----

                                                           Unaudited                   Audited


                     Assets

        Current Assets:

    Cash
     and
     cash
     equivalents                                                           $9,919                $10,621

    Trade
     receivables,
     net                                                                    2,576                  3,061

     Prepaid
     expenses
     and
     other
     receivables                                                            1,607                    918
                                                                            -----                    ---

                     Total
                    current
                     assets                                                14,102                 14,600
                                                                           ------                 ------


     Property
     and
     equipment,
     net                                                                    2,861                  2,081

     Goodwill
     and
     intangible
     assets,
     net                                                                   31,251                 29,867

     Severance
     pay
     fund                                                                     616                    604

    Lease
     deposits                                                                 498                    380

                     Total
                     long-
                      term
                     assets                                                35,226                 32,932
                                                                           ------                 ------

                    Total
                    assets                                                $49,328                $47,532
                                                                          =======                =======



                     Liabilities and Shareholders' Equity

        Current Liabilities:

    Trade
     payables                                                              $1,658                   $764

     Employees
     and
     payroll
     accruals                                                               2,857                  2,528

     Accrued
     expenses
     and
     other
     liabilities                                                              878                    755

    Earn-
     out
     consideration                                                          3,503                  3,041

     Deferred
     revenues                                                               5,767                  4,609


                     Total
                    current
                  liabilities                                              14,663                 11,697
                                                                           ------                 ------


    Long
     term
     Convertible
     Note                                                                   4,617                      -

     Embedded
     conversion
     feature
     on
     Convertible
     Note                                                                   1,549                      -

     Deferred
     revenues                                                                 874                  1,788

     Deferred
     tax
     liability                                                              1,367                  1,374

     Accrued
     severance
     pay                                                                      894                    816

    Other
     liabilities                                                              133                    119

                    Total
                     long-
                     term
                  liabilities                                               9,434                  4,097
                                                                            -----                  -----


     Shareholders'
     equity                                                                25,231                 31,738
                                                                           ------                 ------

                    Total
                  liabilities
                      and
                 shareholders'
                    equity                                                $49,328                $47,532
                                                                          =======                =======




                                                       CYREN LTD.


                                          CONDENSED CONSOLIDATED CASH FLOW DATA


                                             (in thousands of U.S. dollars)



                                                      Three months ended                    Nine months ended

                                                         September 30                         September 30
                                                         ------------                         ------------

                                                            2017                       2016                      2017          2016
                                                            ----                       ----                      ----          ----

    Cash flows from
     operating
     activities:                                      Unaudited                 Unaudited                Unaudited    Unaudited


    Net loss                                            $(3,628)                    $(975)                 $(8,807)     $(3,309)


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

    Loss on disposal of
     property and
     equipment                                                 -                         1                         1             3

    Depreciation                                             311                        320                       866           643

    Stock-based
     compensation                                            248                        250                       809           497

    Amortization of
     intangible assets                                     1,135                        855                     3,292         1,249

    Accrued interest and
     accretion of
     discount on credit
     line                                                      -                         -                        -         (19)

    Accretion of
     discount on
     convertible note                                        159                          -                      330             -

    Change in fair value
     of embedded
     conversion feature
     on convertible note                                   (198)                         -                    (465)            -

    Other income related
     to investment in
     affiliate                                                 -                         -                    (450)            -

    Other expenses
     related to the
     earn-out
     consideration                                            27                          -                       91             -

    Deferred taxes                                          (51)                      (47)                    (146)        (120)


    Changes in assets and liabilities:
    ----------------------------------

    Trade receivables                                        757                       (31)                      368            98

    Prepaid expenses and
     other receivables                                       203                      (171)                    (646)        (363)

    Change in long-term
     lease deposits                                         (85)                     (214)                    (112)        (228)

    Trade payables                                            72                        155                        81          (54)

    Employees and
     payroll accruals,
     accrued expenses
     and other
     liabilities                                            (28)                       154                       457           114

    Deferred revenues                                        790                      (580)                      244         3,247

    Accrued severance
     pay, net                                                 13                       (18)                       66            42

    Other long-term
     liabilities                                               -                       (2)                        -          (3)

    Net cash used in
     operating
     activities                                            (275)                     (303)                  (4,021)        1,797


    Cash flows from investing activities:


    Proceeds from sale
     of investment in
     affiliate                                                 -                         -                      450             -

    Capitalization of
     technology, net of
     grants received                                     (1,026)                     (459)                  (2,765)      (1,437)

    Purchase of property
     and equipment                                         (345)                     (386)                    (818)        (649)

    Net cash used in
     investing
     activities                                          (1,371)                     (845)                  (3,133)      (2,086)


    Cash flows from financing activities:


    Proceeds from
     convertible note                                          -                         -                    6,300             -

    Payment of credit
     line                                                      -                         -                        -      (4,150)

    Proceeds from
     options exercised                                         8                          -                       75             -
                                                             ---                                                 ---

    Net cash provided by
     (used in) financing
     activities                                                8                          -                    6,375       (4,150)

    Effect of exchange
     rate changes on
     cash                                                   (11)                      (46)                       77            53

    Decrease in cash and
     cash equivalents                                    (1,649)                   (1,194)                    (702)      (4,386)

    Cash and cash
     equivalents at the
     beginning of the
     period                                               11,568                     14,026                    10,621        16,379
                                                          ------                     ------                    ------        ------

    Cash and cash
     equivalents at the
     end of the period                                    $9,919                    $12,832                    $9,919       $11,993
                                                          ======                    =======                    ======       =======

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