CYRN - Earnings call transcript Q4 2019

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Operator

Greetings and welcome to the CYREN Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Counsel. General Spindel, Eric you. Thank

begin. may You

Eric Spindel

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

conference results in please These these to this forward-looking Any Annual and forward-looking on of factors. that based risk current CYREN’s filings, differ are materially we filed statements from course expectations. begin of XXXX. that are the our make cause actual the our statements may expectations These a risks that risks should me are including uncertainties Report outlined let Before management XX-K XX, section on number be Form Risk subject considered you may remind Factors March light during of call, statements. SEC of to forward-looking in on

in release the the the financial benefit tables is and measures directly to for included of investors not is and we financial obligation the provided addition are Relations also as during Reconciliations we non-GAAP a Safe performance. most and Harbor future. call, GAAP the earnings measures. our press of any undertake of the comparable when should talking any measures outlook discuss section company’s any measures on are issued to not Also Investor course in today this as GAAP present to instead the statements in does conference in Please considered may be of today the available forward-looking of website. revise and about note management These

call, Myshrall, Financial Executive we Officer. today’s Mr. have me Chief Mike Brett Chief Officer and Joining Jackson, on

Brett. now call over that, I hand the With will to

Brett Jackson

like to the everyone results. Eric. call today I joining to discuss our Thanks, for would thank

a top the for was growth, a strategy, leadership, revised to period with second priority in enterprise with transition XXXX market. the CYREN new of increase half The especially

strategy growth of for summarize outlined and call, these the earnings our last specific you. I our let In elements me

the through refocus First, aggressive OEM customer market we new our and will business threat intelligence of more penetration on our expand acquisition.

product a revenue broad We of upon. business have portfolio great stable a large customers to recurring offerings, build and

will we larger with addressable a Xx estimate into to market, OEM intelligence market market expand services Second, our to much XXx beyond enterprise that traditional total the our we threat be larger.

technology, several leverage will existing repackaged GlobalView enable will offerings We to differentiated and for existing bring including enhance products platform that our market us to cloud quickly.

enterprise will at to more more of Inbox line early gateways. enterprise the market. bring existing And will the has we we building key use market XXX as address security, phishing market last Security to streams the be the customers to These on adopter importantly expected strengths customers. Third, availability This feedback, our drive e-mail leverage are provide will Post revenue Security product from growing Office our positive we launch, to with critical share Inbox based next-generation security a of been initiatives new quickly several months. by additional core in possible. CYREN and problem general in CYREN among growth April expect forecast. very e-mail layer end beyond for create focus and on our protection as

to significantly a reflect do meaningful these opportunity in over see results It QX not that on grow years from value way. contribution growth new these shareholder an to note and Based we ARR any important next initiatives, increase our the initiatives. X is

QX to is achieve we are engaged our on executing plans track Our team our milestones. and fully

second see We ARR expect the in initial and traction to to the half. second quarter with more customer bookings contribution material in

our is we a intend a are other our is future fully members mind, topic and and high and on with The normal. teams around continuing and team this are where and level well-being move and We an the new economies world. our monitoring as and all as is service located. foreseeable to countries top adapting all on businesses plans all situation the the remotely Let our like the health me We crisis across everyone’s move know concern aggressively of to and – to the we on COVID-XX the forward for all the our are businesses unprecedented strategy deliver that possible. to situation will on working of customers impact

may even crisis continue the in and will in conditions. that Of will a I high course, keep economic we it difficult priority business. our have the continuously organizations monitor impact to believe cybersecurity

of of research matter teams significant a a noticed COVID-XX. have threat fact, As outbreak our exploiting attacks

said, when burn. made necessary. With we and to expense expense measures and had prepared note to decision rights November our make to our if capital short this adjustments already the million be offering announced growth will initiatives. target. including capital It support raise year CYREN cash a key Last that to raised convertible implemented reduction be reduction that order private management business, XXXX reduce we of important The earlier through that new to in our is strategy our We new of will debenture placement. to after fell used $XX.XX week,

the CYREN additional in More also storm the enable moving weather will challenging keep forward. us and the importantly, conditions COVID-XX of capital crisis light to economic and better ahead,

Mike to and the I quarter over go fourth financials. call now XXXX turn who through the will will

Mike Myshrall

you, year pleased and Thank good to results. fourth Brett morning. XXXX quarter full financial present am and our I

metrics present note standards, was please the posted refer under for and to to that financials will of table including detailed issued those excludes the basis, that section items. the non-GAAP refer a more on Please today For release that earnings earlier GAAP we GAAP financial of to full website. Investor Relations is I non-GAAP and accounting which release non-operating our on press today’s results. discuss results, U.S. our Please certain or in earnings expenses reconciliation non-operating our adjusted a

XXXX. during of increase $X.X X% an Full compared to reported XXXX $XX,XXX full an million GAAP of $XX.X million year XXXX, $XX.X year million, compared revenues revenue were was annual of $X.X in XXXX quarter to rate threat million XX%. fourth the approximately increase of for the quarter for fourth the XX% split was of business compound XX% revenue revenue XXXX our and EMEA, a in full XX% and for in Americas, in And X% and growth XX% year, X-year business. intelligence OEM Asia. was year-over-year enterprise our the approximately in

year remained the quarter GAAP for of a XX% compared XX%. XXXX quarter gross XX% were gross XX% for non-GAAP at XXXX year, fourth were On during to full QX GAAP basis, gross margins for and flat GAAP XX% to ago. gross the to fourth the XX% during margins year were and margins XX% compared margins full XXXX, a compared the

to $X.X $X.X quarter or and of Fourth GAAP GAAP basic share $X.XX share loss net million per loss $X.XX during diluted loss fourth net and million a quarter the XXXX. was per of compared

decrease of year, was For net $XX million, XXXX. a million GAAP from loss a net loss during $XX.X the full

for expense GAAP later R&D decrease expense XX% million, QX QX of revenue. to in decrease was related when in are The due expense, scheduled higher to capitalization quarter, quarter $X.X XXXX. XXXX down of new is GAAP XXXX. it to this in year-over-year during million attributed of revenue R&D million in $XX.X in a to was development be operating expenses the to compared decrease representing million marketing released R&D operating and technology and efforts totaled decrease our The from $XX expense. QX during R&D product sales during expense is $X.X which a XX%

XX% the a quarter same for largely the legal representing expense million or of XX% last quarter marketing XX% expense vendor settlement XXXX. result of quarter during of expense quarter XX% revenue increase million of XXXX. of $X.X fourth and G&A G&A $X.X This with was that revenue from $X.X Sales during to a of in was the of a during the fourth was for during revenue million million, quarter resolved compared the quarter or or fourth revenue, $X.X was down former one-time year.

For at of at G&A expense XX% revenue to XX% and was from the revenue end to revenue down and full XXXX. during marketing to XXX in XXXX XXX XXXX. employees company to of year, of in Total XXXX the headcount finished the expense to Sales increased compared R&D compared XX% decreased in compared to XX% of XXXX. XX% XX%

taken steps in to the an reduce to headcount in to we overall XXX employees around decrease additional have expense effort QX, business. During

loss On a XXXX. per a down significantly million loss non-GAAP basis, of and $X.XX CYREN’s share, diluted quarter $X.X of fourth of quarter or $X.XX XXXX $X.X and loss the per net non-GAAP fourth a was net share during million basic from

loss the or million $XX.X per per full net million share XXXX. share compared year, $X.XX in or CYREN’s decreased to non-GAAP For to $X.XX $XX.X

legal results. release assets technology settlement details compensation, press and for non-cash was reconciliation GAAP a non-GAAP items, including included results. to as Pleased the as the the refer well the table loss one-time of excludes to GAAP the CYREN’s quarter, effect amortization our fourth in of on of of non-GAAP the in capitalization intangible which net during more of stock-based number

from During of fourth to the XXXX. of quarter. end of quarter usage cash of operating operating the million during at $XX.X cash usage the quarter, million the of $X.X end at compared million quarter million had fourth the $X.X $X.X we to Overall, the cash increased third

slowdown priced summer at offering during We rights a premium result short challenge a at fourth out this As This overall XXXX. business we conjunction for economic from closed fourth to of in and target. present roughly originally quarter, a over the million offering totaling the net reminder, a proceeds $X $X sized with approximately offering the We just rights investors. million received was liquidity our of XX during we XXXX. months shortfall million early existing as into million XXXX proceeds market the quarter $XX.X in or our $X.X gross could recognized the QX during of the looking

debentures For to form announced week. last pursue capital the convertible of in decided and we which additional those reasons, closed we

$X.X investor believe was CYREN our We other website. XXXX operate to XX debentures the of a the of adjustments. with Investor the will COVID-XX. March copy offering presentation section of until the on was cash the the $X.XX slowdown and Relations semi-annually provide million on have ongoing matures of are and ample for to the which of cash despite may future subject associated we on X,XXX offerings the equity a liquidity The mid us the amount placement, ordinary used convertible price timing available business X-K XXXX. economic from principal proceeds $XX.XX in proceeds be net adjustment shares The notes million. March March with or aggregate debentures On closed into XX March private shares share approximately payable which a notes conversion and carry principal XX, term a announced X.XX% of subsequently and in price conversion in investment. coupon The convertible $X,XXX X-year a customary have The the presentation is late filing of based and in that per included in to price

the will I the now up for ask operator lines Q&A. to open

Operator

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

Chad Bennett

Where questions. guys. standpoint joined. intelligence Thanks rate shortly I growth enhanced And about maybe business strategic revenue the you know for OEM you are think the we? we ARR as focus on after my Great you Brett, about certainly first, the how focus taking maybe for that product of OEM have guess here? of the market, should the into second with time the threat or rec this not just get talked we into half necessarily I kind from year a

Brett Jackson

prior new think space. think customer company on I off, years we the in several – I are the the OEM focused first not was acquisition in – as

aggressive much is that see space, for good got but So know opportunity a opportunity think there. is I we The are in. point brand that which the the rate. enterprise participate think I The higher opportunity. dramatic bigger we far well And to see I have well opportunity a share have good threat intelligence market, be could related we think to think space more to growth, a expand think is our additional be we we of think market don’t ARR growth far and into good larger to growth. ARR I we opportunity suited will in the is there there is we market a there lot desire growth more And that important market

Chad Bennett

market, previous the relative enterprise market? of branded And mean Brett, you are the company’s direct would and what direct assume, when into change you you talk about approaching strategy to expanding the product I

Brett Jackson

has company effort to services real not had enterprise. into intelligence the a threat its So, the take ever

has our business we intelligence into threat company’s OEM’s the know, you As one embed where been products. services our

same customers. So opportunity leverage to enterprise is the but opportunity enterprise to take offerings, an to market directly technology our them and

Chad Bennett

will marketing, an today that? think take about where that standpoint from sales you specifically or have guess should you do So I infrastructure increased and how investment are we from

Brett Jackson

XXXX. No for increased investment

and both both go-to-market our the setup We enterprise is have – markets, OEM markets. to today address

have enterprise separate we dedicated So team a and dedicated a market. have OEM the and for team go-to-market market we for the

So in our will whatever team products we portfolio, our including enterprise enterprise intelligence services. threat sell have product

Chad Bennett

Brett, Okay. the on of And for one Defender then specifically the can progress relationship there? there, and Microsoft maybe you Thanks. in kind give me, an one update last integration us ATP Windows rollout

Brett Jackson

are So GA we ready.

ready to Microsoft has is time The has surveying go. CYREN integration their been completed. been customers. So, spending

have past very calls. have feedback, positive we We gotten I in think which reported

and the their final from We interested exactly like deliver from conversation have to And in their VARs who We base. leads how our received like I product Microsoft capabilities of take are Microsoft to customers. Microsoft customers had would customer the directly multiple product would are with who several stages hundred we our in to into Microsoft capability. think inbounds

is this had hoped, are getting we than but going think we So I slower close.

done is in market know a is and product demand. the and that standpoint work to there from we address are Our eager demand we

We finalize go-to-market with to have got Microsoft. the just

Chad Bennett

the Got then will additional should cost think the over, you reductions since indicated how then from I think in cuts, where we off? flipped you run-rate Mike, I headcount should about some it. Thanks. maybe think and for OpEx Mike. in the and last hop how one And one we December quarter were about – year

Mike Myshrall

XXX time employees. with So brought employees. we and year about down the employees that time to XXX finished both since We around part full

of turnover XX%, than some So, across well. a as a as cut some positions well sales technical and departments, multiple marketing as side less reduction

run-rate. and we stage, this a with of decrease would reductions but services QX So from OpEx are as some other additional looking at considered at expense less well it the vendors, outside of be XX% our than

Chad Bennett

Got it. Thank you, guys.

Operator

turn like over you. remarks. at to would further this Jackson are There call the questions no Mr. Thank time. closing back to I any for

Brett Jackson

call all you us forward keeping quarters. joining to the the for over you look coming CYREN’s on updated on Thank today. We progress

Operator

Thank you. This concludes today's teleconference.

time. for at this You your lines your a Thank may have day. and disconnect you wonderful participation

Cyren (CYRNQ) 25 Mar 202019 Q4 Earnings call transcript