Cyren Ltd. (CYRN) 10-Q Quarterly Report November 2020

McLean, Va. – November 16, 2020 – Cyren (NASDAQ: CYRN), a provider of email security and threat intelligence solutions, today announced its third quarter 2020 financial results for the period ending September 30, 2020.

“The third quarter was our first full quarter in the market with our next generation email security product, Cyren Inbox Security, and we are very pleased with product-market fit and customer wins within the quarter,” said Brett Jackson, Chief Executive Officer of Cyren. “With most employees working from home, there has been an uptick in compromised email and phishing attempts, and increased demand for innovative solutions to combat these attacks. During the third quarter, we closed a number of new enterprise customers in the US and Europe, ranging from 3,000 to 20,000 users. It is clear to us that the phishing problem is widespread, the addressable market is large and Cyren Inbox Security has the potential to be a significant new enterprise revenue stream for our company.”

Third Quarter 2020 Financial Highlights:

●

Revenues for the third quarter of 2020 were $9.1 million, compared to $9.5 million during the third quarter of 2019. Revenue declined year-over-year as a result of the wind-down of retired legacy products, while recognition from new enterprise offerings introduced during Q2 have not yet had a material impact on quarterly results.

●

GAAP net loss for the third quarter of 2020 was $4.9 million, compared to a net loss of $3.5 million in the third quarter of 2019. GAAP net loss includes lower R&D capitalization from prior quarters and a one-time adjustment for previously capitalized technology development totaling $0.7 million.

●

GAAP loss per basic and diluted share for the third quarter of 2020 was $0.08, compared to a loss of $0.06 per basic and diluted share for the third quarter of 2019.

●

Non-GAAP net loss for the third quarter of 2020 was $2.9 million, compared to a Non-GAAP net loss of $3.5 million for the third quarter of 2019.

●

Non-GAAP loss per basic and diluted share was $0.05 for the third quarter, compared to a Non-GAAP loss of $0.06 per share in Q3 2019.

●

Cash and cash equivalents balance as of September 30, 2020, was $12.9 million, compared to $11.6 million as of December 31, 2019.

●

Operating cash usage during the third quarter of 2020 was $3.6 million, compared to operating cash flow of usage $1.7 million during the third quarter of 2019.

●

Net cash flow for the third quarter of 2020 was negative $3.2 million, compared to negative $2.9 million during the third quarter of 2019.

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:

●

During the third quarter, Cyren continued to experience strong market reaction to its next generation email security product focused on the phishing problem for enterprise users of Microsoft 365. At the end of the third quarter, Cyren Inbox Security was protecting over 60,000 mailboxes and analyzing over 15 million suspicious emails on a weekly basis.

●

Also in the quarter, Cyren launched its incident response service which provides 24x7 expert support for phishing investigation and remediation. Cyren Incident Response Service is a complementary add-on service to Cyren Inbox Security that relieves the burden on IT and security teams from complicated and time consuming threat investigation and response.

●

Cyren’s CIS and email security offerings attracted the attention of industry analysts and were highlighted as innovative cloud-based phishing solutions in Gartner’s 2020 Market Guide for Email Security as well as Forrester’s ‘Now Tech’ Report on enterprise email security providers.

Financial Results Conference Call:

The company will host a conference call at 4:30 p.m. Eastern Time on Monday, November 16, 2020 to discuss third quarter results.

U.S. Dial-in Number:	1-877-407-0312
Israel Dial-in Number:	1-80-940-6247
International Dial-in Number:	1-201-389-0899

The call will be simultaneously webcast live on the investor relations section of Cyren’s website at https://ir.cyren.com, or by using the following link: https://www.webcast-eqs.com/cyren20201116/en.

For those unable to participate in the live conference call, a replay will be available until November 30, 2020. To access the replay, the U.S. dial in number is 1-877-660-6853 and the non-U.S. dial in number is 1-201-612-7415. Callers will be prompted for replay conference ID number 13713213. An archived version of the call will also be available on the investor relations section of the company’s website at https://ir.cyren.com/events.

About Cyren:

More than 1.3 billion users around the world rely on Cyren’s cloud security solutions to protect them against cyber attacks and data loss every day. Powered by GlobalView, Cyren’s global security cloud that identifies emerging threats on a global basis in real-time, Cyren (NASDAQ: CYRN) delivers fast time-to-protection with embedded threat detection services, threat intelligence and enterprise email security products for leading email providers, cybersecurity vendors, service providers and enterprises. 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

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, and deferred taxes related to acquisitions, adjustments to earn-out obligations, and capitalization of technology. 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 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 publicly filed reports, which are available through www.sec.gov.

Company Contact

Mike Myshrall, CFO
Cyren
+1.703.760.3320
mike.myshrall@cyren.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
	2020			2019			2020			2019
	Unaudited			Unaudited			Unaudited			Unaudited

Revenues	$	9,114		$	9,496		$	27,944		$	28,862

Cost of revenues		3,792			3,712			11,168			11,501

Gross profit		5,322			5,784			16,776			17,361

Operating expenses:

Research and development, net		4,769			3,516			12,264			11,990

Sales and marketing		2,942			3,027			9,123			10,473

General and administrative		2,302			2,484			6,992			7,314

Total operating expenses		10,013			9,027			28,379			29,777

Operating loss		(4,691	)		(3,243	)		(11,603	)		(12,416	)

Other income, net		1			(3	)		9			262

Financial expenses, net		(235	)		(321	)		(757	)		(642	)

Loss before taxes		(4,925	)		(3,567	)		(12,351	)		(12,796	)

Tax benefit		33			37			94			117

Net loss	$	(4,892	)	$	(3,530	)	$	(12,257	)	$	(12,679	)

Loss per share - basic and diluted	$	(0.08	)	$	(0.06	)	$	(0.20	)	$	(0.23	)

Weighted average number of shares outstanding:
Basic and Diluted		60,580			54,554			60,103			54,389

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
	2020			2019			2020			2019
	Unaudited			Unaudited			Unaudited			Unaudited

GAAP gross profit	$	5,322		$	5,784		$	16,776		$	17,361
GAAP gross margin		58	%		61	%		60	%		60	%
Plus:
Stock-based compensation expense		21			36			85			98
Amortization of intangible assets		673			758			1,698			2,364
Non-GAAP gross profit		6,016			6,578			18,559			19,823
Non-GAAP gross margin		66	%		69	%		66	%		69	%

GAAP operating loss		(4,690	)		(3,243	)		(11,603	)		(12,416	)
Plus:
Stock-based compensation expense		724			419			1,876			1,002
Amortization of intangible assets		788			885			2,071			2,736
Expense (Capitalization) of technology		536			(1,118	)		(1,067	)		(2,510	)
Settlement of litigation, net		-			-			-			-
Non-GAAP operating loss		(2,643	)		(3,057	)		(8,723	)		(11,188	)

GAAP net loss		(4,892	)		(3,530	)		(12,257	)		(12,679	)
Plus:
Stock-based compensation expense		724			419			1,876			1,002
Amortization of intangible assets		788			885			2,071			2,736
Adjustment to earn-out liabilities		-			-			-			-
Amortization of deferred tax assets		(48	)		(55	)		(144	)		(170	)
Gain from an earn-out liability settlement		-			-			-			(256	)
Settlement of litigation, net		-			-			-			-
Expense (Capitalization) of technology		531			(1,169	)		(1,126	)		(2,627	)
Non-GAAP net loss	$	(2,896	)	$	(3,450	)	$	(9,580	)	$	(11,994	)

Numerator for non-GAAP EPS calculation	$	(2,896	)	$	(3,450	)	$	(9,580	)	$	(11,994	)
Non-GAAP net loss per share	$	(0.05	)	$	(0.06	)	$	(0.16	)	$	(0.22	)

GAAP weighted-average shares used to compute net loss per share		60,580			54,554			60,103			54,389

CYREN LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars)

	September 30		December 31
	2020		2019
	Unaudited
Assets
Current Assets:
Cash and cash equivalents		12,894	$	11,551
Trade receivables, net		2,348		2,187
Deferred commissions		1,004		948
Prepaid expenses and other receivables		1,284		819
Total current assets		17,530		15,505

Long-term deferred commissions		1,243		1,580
Long-term lease deposits		863		767
Operating lease right-of-use assets		11,191		8,695
Severance pay fund		646		659
Property and equipment, net		4,410		4,410
Intangible assets, net		8,093		8,966
Goodwill		20,818		20,246
Total long-term assets		47,264		45,323
Total assets	$	64,794	$	60,828

Liabilities and Shareholders’ Equity
Current Liabilities:
Trade payables	$	1,103	$	1,184
Employees and payroll accruals		3,676		3,427
Accrued expenses and other liabilities		1,160		1,145
Operating lease liabilities		1,889		1,946
Deferred revenues		9,272		7,208
Total current liabilities		17,100		14,910

Deferred revenues		1,064		1,956
Convertible notes		10,000		10,000
Convertible debentures		9,344		-
Long-term operating lease liabilities		9,678		7,174
Deferred tax liability		646		796
Accrued severance pay		762		811
Other liabilities		653		470
Total long-term liabilities		32,147		21,207

Shareholders’ equity		15,547		24,711
Total liabilities and shareholders’ equity	$	64,974	$	60,828

CYREN LTD.

CONDENSED CONSOLIDATED CASH FLOW DATA

(in thousands of U.S. dollars)

	Three months ended						Nine months ended
	September 30						September 30
	2020			2019			2020			2019
	Unaudited			Unaudited			Unaudited			Unaudited
Cash flows from operating activities:

Loss	$	(4,892	)	$	(3,530	)		(12,257	)	$	(12,679	)

Adjustments to reconcile loss to net cash provided by (used in) operating activities:
Loss on disposal of property and equipment		(1	)		-			12			1
Depreciation		594			484			1,809			1,420
Stock-based compensation		724			419			1,876			1,002
Amortization of intangible assets		788			885			2,071			2,736
Amortization of deferred commissions		378			(297	)		1,181			(909	)
Amortization of operating lease right-of-use assets		586			338			1,508			1,051
Interest on convertible notes		153			142			436			424
Interest and amortization of debt issuance costs on Convertible Debentures		188			-			400			-
Other income related to the earn-out consideration		-			-			-			(257	)
Deferred taxes, net		(53	)		(55	)		(171	)		(182	)

Changes in assets and liabilities:
Trade receivables		36			(509	)		(126	)		196
Prepaid expenses and other receivables		(73	)		168			(456	)		(607	)
Deferred commissions		(236	)		353			(900	)		1,101
Change in long-term lease deposits		(3	)		2			(89	)		25
Trade payables		(175	)		559			(289	)		(264	)
Employees and payroll accruals, accrued expenses and other liabilities		(43	)		39			(90	)		(185	)
Deferred revenues		(955	)		(357	)		1,034			5,997
Accrued severance pay, net		(37	)		5			(36	)		73
Operating lease liabilities		(591	)		(342	)		(1,545	)		(1,075	)
Other long-term liabilities		21			(15	)		184			(126	)
Net cash (used in) operating activities		(3,590	)		(1,711	)		(5,448	)		(2,258	)

Cash flows from investing activities:

Proceeds from sale of property and equipment		2			1			6			1
Capitalization of technology		489			(1,027	)		(1,100	)		(2,462	)
Purchase of property and equipment		(105	)		(309	)		(1,543	)		(1,259	)
Net cash provided by (used in) investing activities		386			(1,335	)		(2,637	)		(3,720	)

Cash flows from financing activities:

Proceeds from convertible debenture, net of debt issuance costs		-			-			9,442			-
Payment of earn-out consideration		-			-			-			(2,680	)
Proceeds from options exercised		-			231			-			743
Net cash provided (used) by financing activities		-			231			9,442			(1,937	)
Effect of exchange rate changes on cash		(1	)		(76	)		(14	)		(124	)
Increase (decrease) in cash, cash equivalents and restricted cash		(3,205	)		(2,891	)		1,343			(8,039	)
Cash, cash equivalents and restricted cash at the beginning of the period		16,675			13,008			12,127			18,156
Cash, cash equivalents and restricted cash at the end of the period	$	13,470		$	10,117		$	13,470		$	10,117

Reconciliation of cash, cash equivalents and restricted cash as shown in the consolidated statements of cash flow:
Cash and cash equivalents	$	12,894		$	9,546		$	12,894		$	9,546
Restricted cash included in long-term restricted lease deposits		576			571			576			571

Total cash, cash equivalents and restricted cash	$	13,470		$	10,117		$	13,470		$	10,117

The following information was filed by Cyren Ltd. (CYRN) on Monday, November 16, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside Cyren Ltd.'s 10-Q Quarterly Report:

Financial - Expense Highlight
Other compensation costs decreased by $0.1 million primarily due to lower bonus and severance related expenses.

Legal - Other Highlight
Pursuant to the judgement, the earn-out consideration balance was increased to reflect additional legal expenses and interest expenses covering the period up to December 31, 2016.
Revenue - Product Highlight
The decrease in sales and marketing expense was due to a reduction of overall sales and marketing headcount to 41 employees at the end of the third quarter of 2020 compared to 51 at the end of the third quarter 2019, as well as a reduction in overall marketing spend primarily related to travel, advertising and industry trade shows.
Financial - Expense Highlight
We expect research and development expenses may increase as we release new products during 2020, due to a reduction in capitalized costs which reduces R&D expenses.
Legal - Other Highlight
Legal expenses decreased by $0.8 million related to the resolution of litigation in December 2019 and travel-related costs decreased by $0.1 million.
Financial - Expense
The decrease in Cost of...Read more
Financial - Earnings
Over time, we expect that...Read more
Financial - Expense
Costs associated with the use...Read more
Other - Other
However, the Company has incurred...Read more
Financial - Expense
The increase in R&D expense...Read more
Financial - Expense
Our SaaS solutions are easy...Read more
Financial - Expense
Development costs related to internal...Read more
Revenue - Product
The return on our sales...Read more
Other - Other
For most of our recent...Read more
Revenue - Product
Our future capital requirements will...Read more
Financial - Expense
We expect operating expenses to...Read more
Other - Other
For example, during the first...Read more
Financial - Expense
Financial expense, net is primarily...Read more
Financial - Debt
This registration statement enables us...Read more
Financial - Income
Other income (expense), net consists...Read more
Revenue - Product
After the end of the...Read more
Financial - Expense
Research and development expenses, net...Read more
Financial - Expense
We expect our general and...Read more
Revenue - Product
As this enterprise business grows...Read more
Legal - Other
These increases were offset by...Read more
Financial - Expense
The decrease in operating expenses...Read more
Other - Other
If we are unable to...Read more
Other - Other
Cyren's cloud security products and...Read more
Other - Other
We believe these investments are...Read more
Revenue - Product
Over the past several years,...Read more
Financial - Expense
-23- Personnel costs, which consist...Read more
Financial - Expense
For the three months ended...Read more
Financial - Expense
For the nine months ended...Read more
Revenue - Product
Revenues for the three and...Read more
Financial - Expense
The decrease of $1.1 million...Read more
Financial - Cash Flow
The Company generated a loss...Read more
Other - Other
The customer response to these...Read more
Financial - Expense
Other costs include third-party contractors,...Read more
Financial - Debt
The change of $11.3 million...Read more

Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Material Contracts, Statements, Certifications & more

Cyren Ltd. provided additional information to their SEC Filing as exhibits

Exhibit 31.1: Certification

Exhibit 31.2: Certification

Exhibit 32.1: Certification

Ticker: CYRN
CIK: 1084577
Form Type: 10-Q Quarterly Report
Accession Number: 0001213900-20-037418
Submitted to the SEC: Mon Nov 16 2020 4:56:57 PM EST
Accepted by the SEC: Mon Nov 16 2020
Period: Wednesday, September 30, 2020
Industry: Prepackaged Software