EX-99.1 2 earningsreleaseq4142015021.htm EXHIBIT 99.1 EarningsReleaseQ41420150218


Cyan Reports Fourth Quarter and Year 2014 Financial Results

PETALUMA, Calif., February 18, 2015, Cyan (NYSE: CYNI), a leading provider of SDN, NFV, and packet-optical solutions for network operators, today announced financial results for its fourth quarter and year ended December 31, 2014.

Revenue for the fourth quarter of 2014 was $30.5 million, up 14% when compared with $26.6 million for the third quarter of 2014 and up 46% when compared with $20.9 million for the fourth quarter of 2013. GAAP net loss for the fourth quarter was $15.0 million, or $0.32 per share, compared to a net loss of $11.7 million, or $0.25 per share, in the third quarter of 2014 and a net loss of $13.7 million, or $0.29 per share, in the same period last year.

On a non-GAAP basis, Cyan's net loss for the fourth quarter was $7.1 million, or $0.15 per share. This compares to a non-GAAP net loss of $9.1 million, or $0.19 per share, in the third quarter of 2014 and a non-GAAP net loss of $11.5 million, or $0.25 per share, in the same period last year. Both GAAP and non-GAAP net loss per share figures for the fourth quarter of 2014 are based on 47.2 million basic weighted average shares outstanding.

"We are very pleased with our fourth quarter results as revenue in the fourth quarter well exceeded our expectations and led to a solid close to the year," said Mark Floyd, Cyan’s chairman and chief executive officer. "Our strong fourth quarter bookings were driven by demand across our customer base and our expanding footprint within our largest customer. We are seeing good momentum with our Z-Series Packet Optical Platform fostered by 100G metro and regional carrier deployments. Furthermore, commercial interest for our Blue Planet SDN and NFV software platform has accelerated and we are excited about our role as the supplier of choice for critical network transformation technology.” 

Revenue for fiscal year 2014 totaled $100.5 million, compared with $116.6 million in 2013. GAAP net loss for 2014 was $59.2 million, or $1.26 per share, compared with a net loss of $40.7 million, or $1.32 per share in 2013. Non-GAAP net loss for 2014 was $43.3 million, or $0.92 per share, compared with a non-GAAP net loss of $30.9 million, or $1.00 per share in 2013.

Non-GAAP results for the year ended both December 31, 2014 and 2013 exclude the effect of stock-based compensation. Non-GAAP results for the year ended December 31, 2013 also exclude the effects of preferred stock warrants that were converted in connection with our initial public offering. In connection with its IPO in May 2013, the company issued 8.9 million shares of common stock and 34.7 million shares of preferred stock converted into common stock. Non-GAAP results for the year ended December 31, 2014 also exclude charges related to certain restructuring activities undertaken during the fourth quarter and non-cash charges relating to the company’s convertible debt obligation.

Please refer to the attached financial statements for additional non-GAAP information and a reconciliation of GAAP to non-GAAP results as well as information regarding weighted average shares outstanding in each period.

Recent Highlights


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•
Announced the N-Series Open Hyperscale Transport Platform, a new family of high-density, high-capacity transport products designed for cloud, content, and data center interconnect networks
•
Broadened Cyan’s distribution network with the addition of Kordia New Zealand to provide additional coverage in the South Pacific, Australia and New Zealand
•
Selected by Windstream to help upgrade its regional and metro networks across major markets to 100G
•
Completed a convertible note offering in December generating gross proceeds of $50 million

Conference Call

Cyan will host a conference call for analysts and investors to discuss its fourth quarter and year 2014 results as well as guidance for its first quarter of 2015 today at 2:00 p.m. Pacific time. To access the live call, please dial 1-888-417-8516 (US or Canada) or 1-719-785-1753 (international) and use the password: Cyan. A telephonic replay of the call will be available from approximately 5:00 p.m. Pacific time on February 18, 2015 until 5:00 p.m. Pacific time on March 4, 2015, and can be accessed by dialing 1-888-203-1112 or 1-719-457-0820 and entering passcode 2379692#. A live audio webcast of the conference call also will be available from the Investors section of the company's website, www.cyaninc.com. Following the webcast, an archived version will be available on the website for 90 days.

Use of Non-GAAP Financial Information

To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures, including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net loss and non-GAAP net loss per share. We use this information in managing our business and believe the non-GAAP data are helpful in understanding our past financial performance and future results. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, "GAAP to Non-GAAP Reconciliation." Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. As noted in the accompanying reconciliation, non-GAAP results exclude the effects of stock-based compensation. We use stock-based compensation to attract and retain employees and executives with the goals of aligning their interests with those of our stockholders and long-term employee retention. We exclude stock-based compensation expense from our non-GAAP metrics because it varies for reasons that are generally unrelated to operational decisions and performance in any particular period. Additionally, we exclude the restructuring charges incurred in the fourth quarter of 2014 as our restructuring efforts were an isolated event and not indicative on on-going activities. Finally, we exclude the non-cash charges associated with our pre-IPO preferred stock warrants and our 2014 convertible debt as these charges also have no bearing on our operational decisions or our understanding of our underlying business.

Forward-Looking Statements

This press release contains forward-looking statements, including but not limited to statements relating to industry momentum for SDN and NFV solutions and Cyan’s positioning to take

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advantage of the industry momentum and statements about our recently announced N-Series Open Hyperscale Transport Platform. Forward-looking statements made are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and involve a number of risks and uncertainties. Actual results and timing of events could differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include: the rate of market adoption of SDN and NFV solutions in general and the adoption rate of our products, particularly our Blue Planet platform; our ability to capitalize on our technological leadership in SDN and NFV; the timing of availability of our first N-Series products; and other risks and uncertainties related to our business. Further information on these risks and other factors that could affect our financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that we filed for the year ended December 31, 2013 and our Form 10-Q filed for the quarter ended September 30, 2014. These documents are available on the SEC Filings section of the Investor section of our website at investor.cyaninc.com. All forward-looking statements in this press release are based on information available to us as of the date hereof. We undertake no obligation to revise or update these forward-looking statements in light of new information or future events, other than as required by law. Results reported herein should not be considered as an indication of future performance.

About Cyan
Cyan (NYSE: CYNI) enables network transformation. The company's software-defined network (SDN) solutions deliver orchestration, agility, and scale to networks, that until now, have been static and hardware driven. Serving carriers, enterprises, governments, and data centers globally, Cyan's open platforms provide multi-vendor control and visibility to network operators, making service delivery more efficient and profitable. Cyan solutions include Blue Planet SDN software, Z-Series packet-optical transport platforms. For more information, please visit www.cyaninc.com or follow Cyan on Twitter at http://twitter.com/CyanNews.

Source: Cyan, Inc.

Investor Relations Contact
The Blueshirt Group
Maria Riley
+ 1 707.283.2850
ir@cyaninc.com


3


Cyan, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited) 

 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
2014
 
 
2013
 
 
2014
 
 
2013
 
Revenue
$
30,454
 
 
$
20,883

 
 
$
100,483
 
 
$
116,582

 
Cost of revenue
17,084
 
 
12,433
 
 
 
58,651
 
 
68,376
 
 
Gross profit
13,370
 
 
8,450
 
 
 
41,832
 
 
48,206
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Research and development
8,167
 
 
7,992
 
 
 
36,115
 
 
32,609
 
 
Sales and marketing
10,690
 
 
10,746
 
 
 
43,565
 
 
40,102
 
 
General and administrative
3,436
 
 
3,229
 
 
 
15,241
 
 
13,082
 
 
Restructuring charge
627
 
 
—
 
 
 
627
 
 
—
 
 
Total operating expenses
22,920
 
 
21,967
 
 
 
95,548
 
 
85,793
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations
(9,550)
 
 
(13,517)
 
 
 
(53,716)
 
 
(37,587)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense), net :
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of derivative and warrant liabilities
(4,710)
 
 
—
 
 
 
(4,710)
 
 
—
 
 
Interest expense
(352)
 
 
(50)
 
 
 
(486)
 
 
(367)
 
 
Other income (expense), net
(329)
 
 
(40)
 
 
 
(32)
 
 
(2,635)
 
 
Total other income (expense), net
(5,391)
 
 
(90)
 
 
 
(5,228)
 
 
(3,002)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss before provision for income taxes
(14,941)
 
 
(13,607)
 
 
 
(58,944)
 
 
(40,589)
 
 
Provision for income taxes
99
 
 
76
 
 
 
280
 
 
143
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
$
(15,040)
 
 
$
(13,683)

 
 
$
(59,224)
 
 
$
(40,732)

 
Basic and diluted net loss per share
$
(0.32)
 
 
$
(0.29)

 
 
$
(1.26)
 
 
$
(1.32)

 
Weighted-average number of shares used in computing basic and diluted net loss per share
47,220
 
 
46,412
 
 
 
46,956
 
 
30,836
 
 



4


Cyan, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited) 

 
December 31, 2014
 
December 31, 2013
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
47,740

 
 
$
32,509

 
Restricted cash
4,165
 
 
 
—
 
 
Marketable securities
—
 
 
 
31,639
 
 
Accounts receivable
23,511
 
 
 
14,558
 
 
Short-term lease receivable
—
 
 
 
201
 
 
Inventories
12,362
 
 
 
20,746
 
 
Deferred costs
1,317
 
 
 
8,286
 
 
Prepaid expenses and other
3,079
 
 
 
1,378
 
 
Total current assets
92,174
 
 
 
109,317
 
 
Long-term restricted cash
7,868
 
 
 
—
 
 
Long-term lease receivable
—
 
 
 
403
 
 
Property and equipment, net
11,896
 
 
 
11,155
 
 
Other assets
3,737
 
 
 
645
 
 
Total assets
$
115,675

 
 
$
121,520

 
Liabilities and stockholders’ equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
12,058

 
 
$
8,474

 
Accrued liabilities
6,775
 
 
 
3,786
 
 
Accrued compensation
4,146
 
 
 
4,895
 
 
Term loan, current portion
—
 
 
 
1,604
 
 
Deferred revenue
5,646
 
 
 
17,516
 
 
Deferred rent
181
 
 
 
115
 
 
Other liabilities
—
 
 
 
734
 
 
Total current liabilities
28,806
 
 
 
37,124
 
 
Convertible debt, net of discount
18,498
 
 
 
—
 
 
Derivative and warrant liabilities
36,280
 
 
 
—
 
 
Term loan, non-current portion
—
 
 
 
3,396
 
 
Deferred revenue
1,845
 
 
 
1,577
 
 
Deferred rent
302
 
 
 
486
 
 
Total liabilities
85,731
 
 
 
42,583
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
Preferred stock
—
 
 
 
—
 
 
Common stock
5
 
 
 
5
 
 
Additional paid in-capital
216,607
 
 
 
206,300
 
 
Accumulated other comprehensive loss
(162)
 
 
 
(86)
 
 
Accumulated deficit
(186,506)
 
 
 
(127,282)
 
 
Total stockholders’ equity
29,944
 
 
 
78,937
 
 
Total liabilities and stockholders’ equity
$
115,675

 
 
$
121,520

 

5


Cyan, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Twelve Months Ended December 31,
 
 
2014
 
 
2013
 
Operating activities
 
 
 
 
 
 
Net loss
 
$
(59,224)

 
 
$
(40,732)

 
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
3,589
 
 
 
2,721
 
 
Provision for doubtful accounts
 
80
 
 
 
643
 
 
Stock-based compensation
 
10,553
 
 
 
7,249
 
 
Change in fair value of derivative and warrant liabilities
 
4,710
 
 
 
2,602
 
 
Non-cash interest expense
 
313
 
 
 
—
 
 
Loss on extinguishment of debt
 
10
 
 
 
—
 
 
Loss on disposal of assets
 
195
 
 
 
—
 
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
Accounts receivable
 
(9,033)
 
 
 
3,999
 
 
Lease receivable
 
604
 
 
 
(604)
 
 
Inventories
 
8,384
 
 
 
(7,733)
 
 
Deferred costs
 
6,969
 
 
 
(58)
 
 
Prepaid expenses and other assets
 
(1,355)
 
 
 
(448)
 
 
Accounts payable
 
3,109
 
 
 
(2,846)
 
 
Accrued and other liabilities
 
1,605
 
 
 
1,478
 
 
Accrued compensation
 
(739)
 
 
 
1,152
 
 
Deferred revenue
 
(11,602)
 
 
 
1,676
 
 
Deferred rent
 
(118)
 
 
 
344
 
 
Net cash used in operating activities
 
(41,950)
 
 
 
(30,557)
 
 
Investing activities
 
 
 
 
 
 
Purchases of property and equipment
 
(4,496)
 
 
 
(6,111)
 
 
Purchase of available for sale securities
 
(14,256)
 
 
 
(31,639)
 
 
Purchase of other investment
 
—
 
 
 
(500)
 
 
Maturity of available for sale securities
 
45,895
 
 
 
—
 
 
Change in restricted cash
 
(12,033)
 
 
 
—
 
 
Net cash provided by (used in) investing activities
 
15,110
 
 
 
(38,250)
 
 
Financing activities
 
 
 
 
 
 
Proceeds from initial public offering (IPO), net of issuance costs

 
—
 
 
 
88,369
 
 
Proceeds from convertible debt offering
 
50,000
 
 
 
—
 
 
Issuance costs related to convertible debt offering
 
(2,558)
 
 
 
—
 
 
Repayments of borrowings under term loan
 
(5,000)
 
 
 
—
 
 
Proceeds from stock-based compensation programs
 
495
 
 
 
412
 
 
Repayments of borrowings under notes payable

 
—
 
 
 
(7,563)
 
 
Taxes paid related to net-share settlements of restricted stock units
 
(742)
 
 
 
—
 
 
Payments on capital leases
 
(39)
 
 
 
(58)
 
 
Net cash provided by financing activities
 
42,156
 
 
 
81,160
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(85)
 
 
 
(65)
 
 
Net increase in cash and cash equivalents
 
15,231
 
 
 
12,288
 
 
Cash and cash equivalents at beginning of period
 
32,509
 
 
 
20,221
 
 
Cash and cash equivalents at end of period
 
$
47,740

 
 
$
32,509

 

6


Cyan, Inc.
GAAP to Non-GAAP Reconciliations
(In thousands, except per share amounts)
(Unaudited)

7

 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31, 2014
 
September 30, 2014
 
December 31, 2013
 
December 31, 2014
December 31, 2013
Reconciliation of Gross profit:
 
 
 
 
 
 
 
 
US GAAP as reported

$13,370

 

$10,915

 

$8,450

 

$41,832


$48,206

Adjustments:
 
 
 
 
 
 
 
 
Stock-Based Compensation
109

 
96

 
39

 
378

160

Non-GAAP Gross profit

$13,479

 

$11,011

 

$8,489

 

$42,210


$48,366

 
 
 
 
 
 
 
 
 
 
Reconciliation of Gross margin:
 
 
 
 
 
 
 
 
US GAAP as reported
43.9
%
 
41.0
%
 
40.5
%
 
41.6
%
41.3
%
Adjustments:
 
 
 
 
 
 
 
 
Stock-Based Compensation
0.4
%
 
0.4
%
 
0.2
%
 
0.4
%
0.2
%
Non-GAAP Gross margin
44.3
%
 
41.4
%
 
40.7
%
 
42.0
%
41.5
%
 
 
 
 
 
 
 
 
 
 
Reconciliation of Research and development expenses:
 
 
 
 
 
 
 
 
US GAAP as reported

$8,167

 

$8,856

 

$7,992

 

$36,115


$32,609

Adjustments:
 
 
 
 
 
 
 
 
Stock-Based Compensation
909

 
955

 
663

 
3,800

2,348

Non-GAAP Research and development expense

$7,258

 

$7,901

 

$7,329

 

$32,315


$30,261

 
 
 
 
 
 
 
 
 
 
Reconciliation of Sales and marketing expenses:
 
 
 
 
 
 
 
 
US GAAP as reported

$10,690

 

$10,515

 

$10,746

 

$43,565


$40,102

Adjustments:
 
 
 
 
 
 
 
 
Stock-Based Compensation
938

 
1,008

 
721

 
3,701

2,165

Non-GAAP Sales and marketing expense

$9,752

 

$9,507

 

$10,025

 

$39,864


$37,937

 
 
 
 
 
 
 
 
 
 
Reconciliation of General and Administrative expenses:
 
 
 
 
 
 
 
 
US GAAP as reported

$3,436

 

$3,531

 

$3,229

 

$15,241


$13,082

Adjustments:
 
 
 
 
 
 
 
 
Stock-Based Compensation
656

 
600

 
726

 
2,674

2,576

Non-GAAP General and Administrative expense

$2,780

 

$2,931

 

$2,503

 

$12,567


$10,506

 
 
 
 
 
 
 
 
 
 
Reconciliation of Operating expenses:
 
 
 
 
 
 
 
 
US GAAP as reported

$22,920

 

$22,902

 

$21,967

 

$95,548


$85,793

Adjustments:
 
 
 
 
 
 
 
 
Stock-Based Compensation
2,503

 
2,563

 
2,110

 
10,175

7,089

Restructuring Charge
627

 
-

 
-

 
627

-

Non-GAAP Operating expenses

$19,790

 

$20,339

 

$19,857

 

$84,746


$78,704

 
 
 
 
 
 
 
 
 
 
Reconciliation of Net loss:
 
 
 
 
 
 
 
 
US GAAP as reported

($15,040
)
 

($11,712
)
 

($13,683
)
 

($59,224
)

($40,732
)
Adjustments:
 
 
 
 
 
 
 
 
Change in fair value of derivative and warrant liabilities
4,710

 
-

 
-

 
4,710

2,602

Stock-Based Compensation
2,612

 
2,659

 
2,149

 
10,553

7,249

Restructuring Charge
627

 
-

 
-

 
627

-

Non-GAAP Net loss

($7,091
)
 

($9,053
)
 

($11,534
)
 

($43,334
)

($30,881
)
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net loss per share, basic and diluted:
 
 
 
 
 
 
 
 
US GAAP as reported

($0.32
)
 

($0.25
)
 

($0.29
)
 

($1.26
)

($1.32
)
Adjustments:
 
 
 
 
 
 
 
 
Change in fair value of derivatives and warrant liabilities
0.10

 
-

 
-

 
0.10

0.08

Stock-Based Compensation
0.06

 
0.06

 
0.04

 
0.22

0.24

Restructuring Charge
0.01

 
-

 
-

 
0.02

-

Non-GAAP Net loss per share, basic and diluted

($0.15
)
 

($0.19
)
 

($0.25
)
 

($0.92
)

($1.00
)


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