Q4 2020 Cyren Ltd Earnings Call
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Okay.
Greetings and welcome to Sirens Q3 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad and please note. This conference is being recorded and will now turn the conference over to your host Eric Spindel. Thank you you may begin.
Thank you and welcome to Xyrem and its fourth quarter and full year of 'twenty and 'twenty financial results Conference call. This call is being broadcast live and can be accessed on the Investor Relations section of the cyber and website before we begin. Please let me remind you that during the course of this conference call Sirens management may make forward looking statements.
Forward looking statements are based on current expectations that are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations.
These risks are outlined in the risk factors section of our SEC filings, including our annual report on form 10-K filed on March 32020.
Any forward looking statements should be considered in light of these risk factors. Please also note as a safe harbor any outlook. We present is as of today and management does not undertake any obligation to revise any forward looking statements and the future.
So during the course of this conference call, we may discuss non-GAAP measures and talking about the company's performance.
Performance reconciliations to the most directly comparable GAAP financial measures are provided in the tables and the earnings press release issued today and available on the Investor Relations section of our website.
These financial measures are included for the benefit of investors. It should be considered and addition to and are instead of GAAP measures.
Joining me on today's call, we have Brett Jackson, Chief Executive Officer, Ken Tarpey, Sirens, New Chief Financial Officer, and Mike Maestro Sirens, and former Chief Financial Officer, who is moving on from Siren and at the end of the week. After 10 years with the company with that I will now hand, the call over to Brett.
Thanks, Eric I'd like to thank everyone for joining the call today to discuss our Q4 and 2020 results too.
2020 was a year of transition for siren as we executed a new strategy to enable growth, we brought new products to market targeting the enterprise wound down and legacy SMB offerings revitalized.
Our core threat detection services business and streamlined our organization.
And we exited the year, having achieved our primary operational goals and gain valuable mentum and the second half that will serve us well and 2021.
The key highlight of our fourth quarter was the continued progress with Sunrun Inbox security and our next generation cloud.
<unk> based E Mail security solution.
As we have mentioned in past calls we see this new product assignments top growth engine based on the size of the market opportunity and the capabilities of our product.
Microsoft 365 is the dominant email platform used by enterprises globally and evasive phishing continues.
Problem for it and security organizations, bypassing existing security measures like secure email gateways.
And our opinion this is a market opportunity with an estimated $1 billion total addressable market. Given this we plan to continue focusing the majority of our sales and marketing investment.
Use to be penetrating this market ramping revenues and building market share.
Q4 was our second full quarter and the market, what's the I guess, new customer transactions and the quarter increased 30% from Q3, while revenues grew 140%.
A few weeks ago, we announced that Sika group purchased Simon.
And security to help mitigate phishing rolling out our product to more than 20000 users across its global operations.
<unk> Global Security operations Center wanted visibility of phishing attacks across the enterprise automated detection response, and remediation of incidents as well as the ability for users to scan and report.
And baucus emails and we believe this transaction is representative of the opportunities that lie ahead of us.
We also announced that siren inbox security is available and the Microsoft Azure marketplace, which we believe will raise awareness and provide a convenient way for Microsoft customers to review and evaluate our product.
And while it is still early days and the product lifecycle and we continue to be very encouraged by customer reaction to our value proposition, our competitive differentiation and our win rate.
While we are focused on growing our enterprise business with cyber and Inbox security and the majority of our revenues come from our core threat detection and intelligence business.
We provide our <unk> threat detection services and threat intelligence data to the world's largest email providers and a leading cyber security vendors to help protect against E mail borne threats.
During the quarter, we closed several new expansion and renewal transactions, including a seven figure multi year contract with one of our existing.
And large OEM customers for an additional product.
Our team is focused on continuing to deliver value to our large customers and we have strong we had strong gross retention in the quarter of approximately 95%.
Additionally, we are pleased to announce a partnership with Palo Alto networks, one of the industry leaders and cloud security.
We've recently integrated our enterprise threat intelligence solution threat and depth with Palo Alto cortex, XOR platform, which is a leading security orchestration automation and response platform.
Cortex or is used by security teams and 34% of the global 2065% of the fortune one.
100 enterprises to simplify and harmonize security operations across an enterprise.
<unk> will also join the Palo Alto network cortex, XOR marketplace. The industry's most comprehensive security orchestration ecosystem, which will enable enterprise customers to discover and consume sirens threat and depth.
<unk> intelligence.
As we look forward and 2021, we will prioritize identifying and pursuing additional opportunities to streamline operations and reduce costs to improve our financial profile.
Finally, as previously announced Mike Michelle will be moving on from <unk> and at the end of February Mike has been with Xyrem.
Fred and years and served as our CFO for seven and.
He has been a major contributor during his tenure here and we wish him the best and the next step of his career.
Ken Tarpey joined us as our new CFO effective February one.
Ken is a very experienced proven and public company CFO and we look forward to and leveraging his knowledge as we.
We work to improve Simons financial profile and scale revenues and I'll now turn the call over to Mike, who will review fourth quarter and full year 2020 financials.
Thank you Brett and good afternoon, I am pleased to present <unk> fourth quarter and full year 2020 financial results for more detailed results. Please refer to the earnings.
And for <unk>, there was issued shortly after market closed today and is posted on the Investor Relations section of our website.
And the results released today are in line with our preliminary results, which were filed on form 8-K on February 11th.
Please note that we present, our financials under U S GAAP accounting standards, including non operating expenses.
<unk>, principally and then I will discuss certain financial metrics on a non-GAAP or adjusted basis, which excludes those non operating items. Please refer to the table in today's earnings release for a reconciliation of our GAAP to non-GAAP results.
GAAP revenue for the fourth quarter of 2020 was $8 4 million compared to $9 5 million reported.
During the fourth quarter of 2019 full.
Full year 2020 revenues were $36 4 million compared to $38 4 million for the full year 2019 as.
As we discussed on prior calls 2020 was a transition year for siren and as we retired a number of legacy SMB products in order to focus on new enterprise.
Products introduced mid year, and as such revenues were expected to decline until the impact from new products offset the loss revenue from discontinued products and.
As Brent mentioned previously we saw good traction in the fourth quarter as revenue recognition from Cif increased 140% quarter over quarter.
Revenue per.
Quarter also included a one time nonrecurring reduction of <unk> 7 million for a multi year customer contract that was restructured.
This was related to a single customer who entered into a five year agreement and 2016, who could not fulfill their contractual obligations to.
And the contract was amended and the company.
For the for millions of loyalty and customer. So we do not expect that this contract will be an issue and future quarters.
Yes.
GAAP gross margins for the fourth quarter were 57% compared to 57% during Q4 2019 and for the full year GAAP gross margins remained unchanged at 59% on a.
A non-GAAP basis fourth quarter gross margins were 65% compared to 68% during the fourth quarter of 2019 and for the full year 2020, GAAP gross margins were 66% compared to 69% a year ago.
Fourth quarter GAAP net loss was $5 million or a loss of <unk> <unk> per basic and diluted share.
Company prepared to $5 $3 million GAAP net loss and <unk> <unk> per share during the fourth quarter of 2019.
For the full year GAAP net loss was $17 $3 million a decrease from net loss of $18 million during 2019.
This translated to <unk> 29 per basic and diluted share in 2020.
<unk> 'twenty versus <unk> 33 per share and 2019.
GAAP operating expenses for the quarter totaled $9 million.
Down from $10 7 million during Q4 2019, the year over year decrease and GAAP operating expenses is due to a decrease in R&D expense and a decrease in sales and marketing expense.
R&D expense was $3 $8 million this quarter, representing 45% of revenue compared to $3 8 million. During Q4 2019, when it was 40% of revenue.
Overall operating expenses for the fourth quarter declined to $9 million from $10 $7 million a decrease of 16%.
Sales and marketing expense for the quarter was $2 6 million or 30% of revenue down from $3 4 million, representing 35% of revenue during the same quarter last year.
G&A expense for the quarter was $2 6 million or 31% of revenue compared to $3 6 million or <unk>, 37% of revenue during the fourth quarter.
2019.
For the full year R&D expense increased to 44% of revenue from 41% and 2019 sales and marketing was down to 32% of revenue compared to 36, and 2019 and G&A expense decreased from 26% of revenue compared to 28% during 2019.
Total net head count and the quarter, sorry, total head count and the company at the end of Q4 was 220 employees compared to 248 at the end of 2019.
On a non-GAAP basis, <unk> fourth quarter 2020, net loss was $4 2 million or a loss of seven cents.
<unk> per basic and diluted share compared to a non-GAAP net loss of $3 3 million and <unk> <unk> per share during the fourth quarter of 2019.
For the full year <unk> non-GAAP net loss decreased 10% to $13 8 million or 23 per share compared to $15 3 million or 28 per share and 2000.
And in 19.
<unk> non-GAAP net loss excludes a number of noncash items, including the effect of stock based compensation and amortization of intangible assets and capitalization of technology. Please.
Please refer to the table in our press release for more details on the reconciliation of GAAP to non-GAAP results.
Per quarter, we experienced operating cash usage of $3 million.
Compared to operating cash usage of $4 6 million during the fourth quarter of 2019 net.
Net cash flow, excluding financing activities for the quarter was negative $3 6 million versus negative $6 million a year ago and improved.
And a 40% year over year we.
We finished the year with $9 3 million and cash compared to $11 6 million and cash at the end of 2019.
Subsequent to quarter and on February 16th we closed an equity offering of 12 million shares price at $1 15 per share for gross proceeds of $13 $8 million per.
During ventures.
This translates into an additional $12 5 million of cash after offering expenses.
The proceeds will be used for working capital and general corporate purposes, with a primary focus on accelerating the growth and our new product offerings, such as <unk> Inbox security.
As Brad mentioned, we have efforts.
Before its way for additional expense reduction in order to bring our costs more in line with our revenues for example, during 2020, we transitioned operations two and almost entirely virtual operating environment with most employees working from home.
And as part of our overall cost reduction strategy, we anticipate reducing opex expenses.
Underpinning the non renewal of two of our U S office leases, which expire in 2021.
On a personal note. This is my last quarterly earnings call with the company as I plan to leave sire and at the end of this month. It has been my pleasure, serving and siren and CFO over the past seven years.
We were very fortunate to find a seasoned tech company CFO.
And could Ken Tarpey, who can further improve sirens financial operations to help siren and scale into its next phase of growth I have enjoyed working with Brad and can over the transition period and believe the company is and very good hands moving forward.
With that I'll now ask the operator to open up the lines for Q&A.
Yes.
Yes.
At this time.
At this time, we will.
And conducting a question and answer session.
Like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question queue.
<unk> and trust.
And later on this question from the queue and.
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One moment, please while we poll for questions.
You may have.
Yes.
My first question is from Nick Mariachi Craig.
Craig Hallum. Please state your question.
Hi, this is Nick value.
And for each had Ben and thanks for taking my questions guys.
I'll start with kind of a semantic question, we've heard throughout the security space.
And as a result, and a pretty dramatic increase.
Particularly email phishing.
You guys spoke about this a little bit but are you seeing customers recognize this.
Shoe and to what extent and driving.
Yes.
And thanks for the question I think prior to the pandemic, we knew based on research and a lot of analysis of.
The Microsoft 365 market debt fishing was a a major threat.
And certainly in most cases, if not an annoyance and the pandemic with.
And with virtual working environments has certainly made debt worse. So there was a existing demand prior to the pandemic.
And that demand has only increased because of the pandemic driven virtual work environments.
So.
And we we still feel strongly about the opportunity.
And whether theres pandemic or not we've got.
Got good data that customers are looking for help with with the day sufficient across their enterprises.
And then I.
I think last quarter, we beat guidance.
So the target of 100000 active users on <unk>.
And then ended the year could you give us an update on where you ended the year in terms of seats and maybe an idea.
Seat growth yes.
Yes, we will have.
And we don't have.
We're not at this point.
Ready to share a projection.
On seat growth, but we.
And we feel good about the <unk>.
Keeping our objective and.
And that we laid out in previous and our previous call.
And as we mentioned, we saw 30% increase and transactions from Q3 to Q4, we've got a strong pipeline in.
Q1, with some good sized transactions as well.
So.
And we're on the right path in terms of.
See growth and meeting our internal expectations.
And then maybe on that same note could.
Could you stand at the.
On the opportunity.
Yes.
No.
Sure.
Palo Alto marketplaces and kind of.
Yes.
Well I think the marketplace.
And opportunities that we have both with with Azure and Palo Alto.
Marketplace give.
Our product and visibility into the enterprise.
As you as you remember maybe remember from past calls.
We are refocused on growing the enterprise business away from the SMB.
That was sirens sort of traditional target market.
And it's all.
All about getting visibility inside large enterprises, and we will do that through our sales force through channel partners, but also relationships and these two marketplaces are great examples of ways for us to get our product exposed to enterprise customers and make it easier for enterprise customers.
<unk> two to.
<unk>, our offering and purchase our offering and frankly.
Okay and then.
Help me with kind of a.
On a framework for thinking about Q1 revenue I don't see us is growing.
Rapid rate quarter over quarter.
And that becomes a big enough yet to kind of push the overall sequential revenue growth.
And anything.
Other key.
Key items that I should think about when thinking about Q on revenue.
So as we mentioned our Q4 revenues were.
Impacted by a a one time nonrecurring adjustment to revenue. So we do anticipate that Q1 revenue will rebound over Q4.
Revenue number.
We see.
<unk> is still a growing component of overall revenue and and so we don't.
Anticipate that it's going to have.
A significant.
Uh huh.
Overall impact on on Q1 quarterly revenues, but it will be a rebound over Q4, yes.
Yeah. It's still is just to echo what Mike mentioned, it's we're.
Our inbox security has been and the market now.
And two.
Two quarters Q3, Q4 last year were into its third quarter. So we're still very much and and the ramping phase of this new product. So it will not be its revenue contribution.
<unk> will not be material and Q1.
We are encouraged by the growth opportunity there and.
And.
And we believe there will come a time.
On.
And where its revenue contribution will be material as we've mentioned, it's we see it as our biggest growth opportunity.
And again it plays into the enterprise space. So we're still excited about that opportunity and it's a new product. So it's a it's a journey over the over the course of multiple quarters.
And.
So.
And then maybe one last one per ton if he's on the call and.
His take on kind of.
And the joins higher Ed.
Yes.
And most exciting.
Okay.
And your first year with the company.
Okay sure Hi, this is cash.
And nice to meet you look forward to catching up further from my standpoint, I've known about the company for a little bit.
And had the opportunity in my last company to deal with a financial loss due to the fishing.
And understand the monetary value of what the comps.
And Bakken with CMS and that will take place.
Very intriguing, obviously, a great set of investors and the company and our long term per track record for the company with a great customer base. So for me with all the various types of companies that dealt with before and just.
Had the right ingredients.
Where the puck.
<unk> with a public company.
Dealt with a number of time and try to help the breadth and the collective team to capture that opportunity.
Alright.
Okay.
Yeah.
Okay, Thank you and Eric.
Yes.
Yes.
And.
At this time it appears and do not have any further questions.
Okay, and we'd like to.
Yes.
We'd like to thank everyone for joining us on the call today.
And I look forward to keeping.
And David on <unk> progress over the coming quarters.
<unk>.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Can you update.
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