CYRN - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to Cyren Fourth Quarter and Full Year 2018 Earnings Call. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host Eric Spindel, Cyren's General Counsel and Corporate Secretary. Thank you Mr. Spindel, you may begin.

Eric Spindel

you. Thank Cyren's full to conference financial quarter call. fourth welcome XXXX and results And being can live the call broadcast This is and section the Investor of be Cyren website. Relations on accessed

of, is revise when this the undertake we comparable and the as course directly of discuss management on press website. be conference we statements the today, considered performance. Reconciliations Also release Company's from are that materially filings, the section Factors about our most uncertainties GAAP not future. please XXXX. subject number XXF, Relations measures of safe non-GAAP risks risk me should differ are forward-looking measures. should expectations. conference and of begin, annual section the results to are Cyren's Please make addition any benefit are may a these April of financial forward-looking does may statements that on the of of GAAP actual factors. statements. management Form course during present to a talking investors Risk financial measures to expectations based harbor, These be and also included call, available we obligation in provided the and measures any to in Before outlined on call, remind light any tables as considered you current our may of in in the These on during cause let our this These outlook statements issued in XX, and forward-looking earnings including instead not Investor today SEC risks forward-looking of filed for the to, in that Any report note, the are

would Chief Joining Officer; I Mr. me Officer. the to and Myshrall, Executive and Samuelson, are Chairman With the Chief that, like call Lior over now to Lior. Financial on Mike Mr. Cyren's hand today call

Lior Samuelson

to on the everyone revenue $X.X to $XX.X for quarter and core as year finished reported thank note Cyren's and Eric, positive fourth full good and you and the year discuss today a in revenue. joining in ended million Cyren year with you, Thank morning million we us results. XXXX

revenues XXXX. when XX% fourth year-over-year were up to QX, quarter, compared the For

innovation of quarter forward ongoing is platform. Also over level an Threat on that delivered the this to Cyren's they We're into date company the the in ever Protection launch result of service the e-mail future. who Windows the over be we e-mail which directly contract and enterprise who on technology platform. problem phishing with customer huge in remove competitive finished initially company Advanced XXXX a cloud And annual Cyren of regardless using who XX,XXX large able launched seat number primary workforce. selected phishing think provide have to e-mail milestones will of Cyren QX, industry protect Cloud in the Cyren. to XXX,XXX be unique to capability Security its security anti-phishing service solutions sandboxing a our revenue The A call but process up For Cyren's million security achievements. since Cyren revenue existing available is year expanded demand Inbox a international solution, to year, of announced has Web and of with contract over provide was leading global second and XXXX been struggling to attacks. to a e-mails the new and will with phishing full and through partnership XXXX RFP This the the attacks. replicate to represented solutions this leap In also other the been XXXX. with largest $XX leveraging in and to significant have XXXX, employee over and enterprise the and expanded hub reported to a the a customer a e-mail as ability Microsoft proactively offer account. the we mailbox we to we of result win may significant three extend example XXXX, during Cyren against good detection believe business protection. market, the a Microsoft to security class success as on Security. look second-half are platform, Inbox after that deal scalability win for and expected industry and quality Security XX% integrate user's announced enterprises Earlier win ever largest security like we gateway year remediate next serves largest and will Cyren in during enterprise it was the with large generation Cyren's the Cloud Security a worth for accounts. phishing was We relationship the by We of e-mail significant develop in the years. This for our impact this generate of signed forward be think Defender our launched Cyren will further The

In and either security, customers security, customers DNS e-mail X,XXX of worth security the a fourth indication in variety contract the solutions improving another customers and few a that quarter the annual seats from of of threats e-mail quarter the In and or using platform security of The customer Cyren to these over malware over customers. The over million of customers use during Both fourth enterprise a instantly X Cyren $X e-mail year in the two marked our base that advanced over our CCS largest of Texas a platform installed educationalist security fourth are XXX,XXX seats. process for won over Overall XX,XXX cloud million accounts, annual seats is Cyren This of cloud new scalability. were added competitive phishing the renewal a [indiscernible]. and renewed XXX enterprise is Intelligence well good deal over and our the deployment Cyren enterprise wide RFP Colorado. client working over an is SMB now during well in at in a further indication Threat for tenured and e-mail $XX size revenue customers web business renewal both ability XXX to the to service into protect QX large lifetime using for the sandboxing. security. contract including longest Cyren XX,XXX their follows contributed dozens during For contract. on selected was figure detect we added of ranging our and accounts quarter together new CCS

impact of will of operating customers premium positive years XXXX. have three a a three first service for contract cash deferred during value One of all revenues XX% the over the prepay and which at flow and years renewed on previous will quarter the

experience in that majority we contracts during continue Although remain beyond. of their XXXX XXXX, we did our business the confident this throughout and churn some will to customers renew

we Microsoft Windows free antimalware platform. Security is aware with into the its Threat Cyren new alternative to announced directly security bundles mentioned Also Defender above Protection partnership Defender that integrate I within a Windows Solution solutions. Endpoint Advanced to technology other Microsoft may Windows As a you web be XX

add working is Microsoft targeted platform with all as security of enterprise ecosystem the The deliver that security availability technology available ATP Defender web first Windows is customer web and with a have developing the customers customers solution. goal later to large vendors in be enhanced select selected of a set data premium ATP of jointly Cyren's Defender enterprise is reaching to premier during honored Microsoft security partner offering directly the year. we’re the preview technology initially Defender integrate paid of ATP Microsoft to generally to into Defender will and security the has new private as available Windows service an into Windows the platform However, half with for Cyren made XXXX ATP. a been integrated

existing to also solution to on and we Cyren which in are announced security full or Exchange. release cost January. we delisting will that very complement solution I released Aviv Cyren a Cyren a excited We partnership Stock wanted which either voluntarily about proxy are comment only issued DNS offering press this from recent Tel deliberate this security. web once includes the

make I as that, shareholder effective to turn expected regulatory but onto on concentrate stock want our operate our to the remain Exchange my move Aviv an headquarters its in will Stock will Cyren volume However, clear an Israeli-registered NASDAQ committed that and and shareholders. it to Tel Mike? is The liquidity continue effort the of become additional maintain call the to trading benefit I The exchange. simplify And to Mike. base, April. to filings Herzliya, believe We NASDAQ the Israel with delisting Cyren is Israeli majority company. over we will in

Mike Myshrall

Thank you, our call and I to full on quarter morning Lior everyone present today. results. good fourth to XXXX pleased am year financial the and

GAAP our to reconciliation over table in GAAP XXXX. please then we and the U.S. Investor Accounting for non-GAAP posted revenue expenses XX% will which the of earlier million items. release to fourth a for of including which a I under was during metrics the quarter adjusted results. press the those or on Section $X.X earnings state Standards certain refer release fourth is excludes XXXX non-operating Please For issued that more basis $X.X the website. Please financials of of non-GAAP GAAP note morning increase Relations refer full year-over-year discuss earnings and million, details, on reported we our of financial quarter to the today's this our non-operating

million, XXXX. would million XX% revenues been revenue currency constant reported we the third $XX.X declined year from basis. $X.X in million $XX.X have the flat reported the on quarter fiscal sequential and of a XXXX slightly of a For an year over increase during quarterly at On basis, finished

comparing part growth enterprise revenue the and threat of to XXXX. decline business the normal the with QX along in of our some due to higher third business, the than euro when we marginal the churn quarter weakness during Although pound experienced in intelligence our QX in was

business upsell XXXX. XX% year in were the and for over our year-over-year business XXX% enterprise bookings quarter our New and full up were up enterprise in bookings XXXX at fourth the

revenues the million XX% recurring up total is enterprises annual now represents in of and from $X.X XX% the roughly of under beginning XXXX. from excess at Our revenue of business

we quarter approximately over $X new added During net GAAP size to in at our million million XXX loss or a XXXX. per basic of seats. loss net fourth share. $X.XX Fourth diluted during the decrease reported GAAP and $X.X quarter $X.X of to new loss account XXX,XXX was customers for A we enterprise XXX seats million compared few a full ranging and from logos which the the enterprise quarter stands enterprise XX now year added largest the

primarily finished million year, For year is during the finished quarter million represented compared XXX decrease during $X.X and at with non-GAAP ago a the quarter diluted $X.XX finished the share period. in year operating We $X.X The $X.X $X.X expense $XX.X million $X.X an compared in million $X.X in million at the XXXX. share quarter or million QX R&D million XXXX of GAAP an at $X.X for was QX, On which marketing to $X.X million XXXX $XX and during to share year to and which per up million share last to $X.XX a GAAP R&D net net expenses related Cyren’s $X.XX employees loss compared fourth loss expense $X.X QX also $X.XX ago. XXXX. $X.XX GAAP quarter per year $XX.X finished the of in a operating million in compared employees increase million of This to derived and quarter. expense increase in million per the basic end from down net non-GAAP a or totaled and a from million the from lower a $XX.X per per and employees XXXX. G&A last is R&D our quarter. million Sales of XXXX basis, expenses loss from totaled XXX a compared and loss during to same and mainly quarter ago increase capitalization the $X.X technology increase share

results. net net a of or a compared non-GAAP reconciliation million Cyren’s share. number year the XXXX to loss a the during $X.XX non-GAAP release is basic share million full the the per in $X.XX of capitalization excludes non-GAAP per basic and effective the of net technology refer GAAP loss diluted $XX.X or our was of and to items more diluted results. including Cyren’s which loss GAAP loss to in of for included the on non-cash Please loss our non-GAAP of $XX.X details For table press

QX, negative and we invested the and million quarter, had flow funding Also in for of technology capital quarter, balance quarter flow a have which of notes and mature million The with notes million XXXX semi-annually XXXX. during $XX.X an $X.X approximately began shares. $X convertible notes price to million the We compared with year cash to of operating million interest the million $X.X in cash our approximately share. quarter carry received flow three quarter ended of at of capitalize the expenditures X.XX% per conversion cash. During in proceeds at $X.XX and to in $XX of This XXXX. brought cash development in and The were term in end net period form compares negative rate of and the the cash of $XX.X November the operating fourth a million set of $X.X in convertible the $XX we cash positive cash payable cash or the million. in

mentioned customer. intelligence Lior our during we largest fourth renewed the quarter two threat As of

quarter multi-year Q&A. receive remarks. in multimillion up Doug the That concludes operating and positive during on deferred ask will impact have to a a now prepared our expect will revenues prepayment flow open quarter. for which We cash dollar first to the lines I the current

Operator

the question with [indiscernible]. first proceed your Please Our questions. from comes of line

Unidentified Analyst

that new from yet? Arrow, What you update coming next North into should on in with any can seeing channel the of year? in you're sales So pipeline that expect incremental customers distributor we terms us arrangement America potential if

Lior Samuelson

have know a we you with So, good them. relationship

you to year forecast of what expect nice to the We don't able be kind data get. things this as tractional know revenue we our have we'll

time with positive takes you all them working channel distributors. with be as think I own them for been a know that as and own little sort will of the it but relation we've of it people the very bit their the

So with we're with them the and onboarding distributor. working amongst ones the with

year will think it's as the I increasingly progress, So I going result. and well a better think

Mike Myshrall

I'd timing several did the table end during in quarter. middle around relationship Arrow quarter the and early also and of but and they terms resellers revenue that recognize we most onboarding announce customers quarter quarter to to the And their that the the ramping of the fourth third program with of of did spent like third positively up brought some fourth we first onto the from of the the

we have already we to XXXX add able customers first So our in the will that. and expect door to be

Unidentified Analyst

question. I If one can other

intelligence for and Just great directionally moving mean don't XX%. new pieces also where I little I the of thinking be all up Microsoft for know distributors between it's expansion XXXX together customers, the we directionally add bit a between guidance, large churn and and revenues. enterprise directionally threat directionally, year, give we should Generally you

Lior Samuelson

Yes, they work well.

the which mean is to sense you product is solve and depends and to market positive problem. I slope Microsoft we're there superior no relatively our which we get solutions a phishing, that factors. of industry what the I when what exactly I variety will that a directionally We also relatively the that that come in think mentioned think I the the huge currently. out good problem is phishing a enhanced yield that can in feel saying and be Microsoft as know believe currently on shortly of earlier, direction the I solution in that continue obviously will we anything are - to. relationship the you're about curve

attacks as be definitely we'll - very people the automatically of the or if something remove in only to attacks ability - be mailbox and revolutionary phishing miss not incoming the attacks. We in protect the have unknown that now say do want we'll but that misses landscape we evolutionary we've against today we the we that to phishing don't but will how think case blocking developed and protect to willing change and quite - somebody I definitely We your phishing. they're something very, well will else phishing what have able

together me, other - some it' So we putting all development that you areas things opportunity that look things pretty look are - in and the to positive. of any I know think

Operator

the with Chad with of Our from comes Please your next Bennett question proceed line Craig-Hallum. question.

Chad Bennett

year, on the the Nice quarter and guys. job

just Mike, you of kind the So, I the enterprise making numbers the on sure side especially understand of went through business.

that So exit rate? the for year the is or $X.X was side million enterprise

Mike Myshrall

Yes, that's the rate. exit

period for but as annual the XXXX. revenue contract recognition wasn't value the it we the of it's enterprise the exit So customers

Chad Bennett

right, of $X.X last XX% right? under And million, is been that my little revenue is a would have year math

Mike Myshrall

I that. think below No, it was

at look year it a probably value ago $X below in you if $X.X $X range the the million, in of million. So was contract annual was It SEC, about the XXXX, million.

million grew that $X.X the year. about during So $X.X to million

Chad Bennett

terms I I probably And, nicely down of pretty what in few that. and this or with in the the think logic the a revs for and quarter, were know Mike, from sequentially front. September But than just quarter of bucks million deferred up was deferred Kind less Microsoft that? revs, they'll little pop

Mike Myshrall

So of intelligence companies driven our chunky a size larger to and deferred primarily revenue customers. same is by compared threat some our little it's

So coming then in XXXX. the the second and QX large another and of XXXX annual another And in third Microsoft revenues deferred the pre-payment quarter we from the in there's increase a that before then recognized throughout by for prepayment you revenue instance, of quarter what then being saw in received Microsoft. is third is quarter

actually are going three of a year at the they'll the those In fourth in time. the on mentioned time. prepay to contract we that a call renewal customers at years case So typically quarter, a the prepay

revenue then on revenues, to an time. have bump but will recognize bigger that deferred we that's that going over So even

as continue decline recognize deferred you'll that to quarter-over-quarter revenues see So revenue. we the

Chad Bennett

it's the So off prepays. run just from

Mike Myshrall

Yes.

Chad Bennett

And last maybe one one Lior. for

and you based that Just web your sense dominated or on is kind functionality that this the just of Give we've e-mail announcements side me things there the you still heading the a with and on heading else this heard traction gateway emerging? guys enterprise on seeing sandboxing, seems product. at by it are into between business of into look like something material as it is e-mail year e-mail pipeline of pipeline year side about the

Lior Samuelson

Well.

okay. that's think that answer, I I long a kind apologize, - of

seeing a people of you that think you're of of other to see vector, on some e-mail, you're or XXX, serious I lot against of and trial security companies a - struggling protect a and edition as well. kind is seeing threat what protection very be continues riding e-mail from be people to lot and that think that's I XXX

So I us well. think as impacting that's

that we not and are beginning we position solutions we and are today, We mail think say a simple solved. develop leapfrog we'll is to gateway or solution that or phishing because - be sufficient, increasingly of be the in the will sort obviously and market solving standard the let's where believe to is

I a together in emerge - to made an all enable now. short with relatively already our inside do and this putting think engines time the us I investment Company infrastructure we and think cloud and it's I So will our working mean period we of

own significant us. what is Microsoft that, things Also there on reacting - contemplated think see them. on channel and from people I we're challenges but we obviously that marketplace. of scale on is to solution now have or continue Microsoft so of some and its forward significant that to And where us doing we agreement only then you the Windows we using that's that on as that also been see Microsoft obviously part where enterprises other the can part So bigger be helping what's Microsoft a as we for - important directly will and think ATP that fortunately is doing even with into an sell that and we not Microsoft, their going for a we’ll be have

things the enterprise so that's in that's as happening And of see that - very worked based way that call issues. see DNS a where with have provide a the web their which web bit of we on are security through where the market. basically the the significant proxy a quite and - web occurred. are coming, sort look the those than fact solution have we demand side you is way I see we the a of is Microsoft on in that of kind - of what Yes, different kind happening what we So different result that's to on where what's of sort endpoint to the what sort based of in our see provide security we big normal sort

us - new emphasize also because think just So another a web implications an potentially. but it's I venue light with endpoint a way. for a a it’s it's for in we just venue with better security a another providing touch of and venue it’s huge of way in word potentially not lack the market for through sort very

Chad Bennett

maybe starts And see Microsoft from quick one they think relationship to that I Lior, really you do don't when with But or you early think fully are obviously in that it's selling? any trained start something follow idea. and kick have and up channel to you when

Lior Samuelson

obviously Microsoft see what or just period way and customer once customers get use through go speak system then whole it. the of windows is a we with are And going most so we’ll they bunch Microsoft I defender is large a preview open of what of to test you defender, tell on be through get hopefully all not for customers the just - are basically that could enormous. absolutely what you I'm - number whatever a their which period, Microsoft There then that not you we're a that Microsoft call to - a, kind were

work it if to really So well. really, going works it's

Operator

Wallace the comes question with your Pine from White Please Capital. proceed next question. line Mike with of Our

Mike Wallace

about momentum thinking revenues give the of here of versus end can up just we questions non-SaaS/recurring and SaaS/recurring us think of couple out some of towards business you sense the picking revenues. as percentage look Yes, seems How some XXXX really that? about to you be

Mike Myshrall

Yes, differentiation service so typically where spud not threat of in for paid first intelligence which prepayment in of revenues. recurring business versus SaaS are we our year enterprise our revenues The service our between all a are the is time. revenues business traditional SaaS it typically of

the XX% is So recurring anticipate breakdown there of coming revenue we and roughly to is, bigger that XXXX. business as will that's I end grow at to our that significant base mentioned beginning portion of we going from more current on the the is chunk and the our comes be under enterprise Whether continue that the a don't a know from XX% of And it XXXX. the call yet, overall XX%, revenue above revenue. XX% of be by of that’s but today

Mike Wallace

multiples a of I'm more just that SaaS that? to XX%-ish it on trying quite traditional recurring of we range people think rest revenues? the SaaS confused at versus the as put but As on how of about get you should - and enterprise I'm we should traditional those know different being business the sense a non. revenues what there are just are think if little

Mike Myshrall

they'll up quarterly pay upfront they a a that then on slightly they But which fixed duration Typically of for model and a where contract, annually subscription recurring Most based they SaaS a the customer minimum in a is revenues. been where amount amount all usage duration all a revenues. for sign they pays pay an we being customer It's extra or us. fixed for for they business a than enterprise XXX% Yes, it's for difference with prepay either different have of time. up use of that true-up a Average year we the only at duration their of service approaching commitment minimum. call revenues many customer in with many, X for of It's intelligence years our now threat is years. The our as tenure consider subscription intelligence model threat how recurring us terms sell. customers services us.

maybe only e-mail based you market threat may are Web security consider to SaaS in difference it's the them The And completely so eyes of and revenues because model based SaaS those that should OEM or not recurring our comparable more the in another be an subscription security that business. intelligence revenues. of it

Mike Wallace

Probably differences to expense we the that XX playing think runs through - the months? expense do in XX of P&L, the R&D item, about you and Mike, out how over some capitalize cost goods that next as versus see

Mike Myshrall

a cost would the fourth is in would fourth anticipate in in did or see in R&D the to We sold that would a over that of once are once quarter capitalize technology you higher year will ago. as the we that run capitalized XX% expense to XX% - R&D in relative So of to launched being probably the related amount targeting was be continue project is XXXX throughout R&D R&D smaller the technology did the to of we sold XXXX. roughly and overall the technologies result customers. rate we quarter quarter We're current the than and QX goods of a our that efforts then that time directly that be amortized had

it So still our component will to but be a of years decreasing expenses. always answer it's a is amount R&D overall prior compared short

Mike Wallace

you have the to you account for that's account Okay way? just way for to or guys it want that

Mike Myshrall

Yes, looked of and the - accounting with in the it's of we're we've with some peers in other of an sector well. line technology we're to some requirement in capitalize becoming the at some as line this peers and

Operator

comments. to call There for further in like closing to are I'd back queue. the hand the questions Management no

Eric Spindel

call for Company. much. participation your very your our interest in the and Thank Lior, on thank you you today

near we very in forward offerings the We are XXXX you in obviously our and future. excited our product about look much. to will the opportunities to successes bring that reporting Thank you new

Operator

today's and teleconference. you Thank participation. for Ladies does your gentlemen, conclude this

You a lines time at this may wonderful and disconnect day. have your

Cyren (CYRNQ) 13 Feb 192018 Q4 Earnings call transcript