CYAN INC - FORM 8-K - EX-99.1 - EXHIBIT - November 5, 2014

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Cyan Reports Third Quarter 2014 Financial Results

PETALUMA, Calif., November 6, 2014, Cyan (NYSE: CYNI), a leading provider of SDN, NFV, and packet-optical solutions for network operators, today announced financial results for its third quarter ended September 30, 2014.

Revenue for the third quarter of 2014 was at $26.6 million, at the upper end of the guidance range of $25 million to $27 million. This compares to $24.4 million for the second quarter of 2014 and $37.7 million in the third quarter of 2013. GAAP net loss for the third quarter was $11.7 million, or $0.25 per share, compared to a net loss of $14.7 million, or $0.31 per share, in the second quarter of 2014 and a net loss of $8.6 million, or $0.19 per share, in the same period last year.

On a non-GAAP basis, Cyan's net loss for the third quarter was $9.1 million, or $0.19 per share. This compares to a non-GAAP net loss of $11.9 million, or $0.25 per share, in the second quarter of 2014 and a non-GAAP net loss of $6.4 million, or $0.14 per share, in the same period last year. Both GAAP and non-GAAP net loss per share figures for the third quarter of 2014 are based on 47.1 million basic weighted average shares outstanding. 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.

“In the third quarter, we continued to execute on our business plan growing revenue 9 percent sequentially. This was driven primarily by strong international traction for our Z-Series packet-optical platform,” said Mark Floyd, Cyan’s chairman and chief executive officer. 

“On the SDN and NFV front, we further expanded the reach of our award-winning Blue Planet platform with the addition of element adaptors that allow our software to automate, manage, and provision Ethernet services across Cisco ASR and Juniper MX product families. We believe Cyan’s Blue Planet SDN and NFV platform, in use by customers in networks for over two years, is the only open, carrier-grade, multi-vendor solution available and shipping on the market today,” continued Floyd.

Recent Highlights

•
Introduced Blue Planet SDN platform functionality for Cisco ASR and Juniper MX product families, significantly increasing the number and types of networks Blue Planet can now automate and orchestrate.
•
Enriched Cyan’s Z-Series and Blue Planet SDN platform capabilities through a series of product enhancements, including new APIs and support for MPLS-TP, allowing service providers to achieve greater scale, flexibility and control.

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•
Planet Orchestrate was voted the winner of the Intel Network Builders Innovation Award in the SDN/NFV category based on three main judging categories - impact, implementation, and generalization.

Conference Call

Cyan will host a conference call for analysts and investors to discuss its third quarter 2014 results as well as guidance for its fourth quarter of 2014 today at 5:30 a.m. Pacific time/8:30 a.m. Eastern time. To access the live call, please dial 1-888-461-2011 (US or Canada) or 1-719-457-2659 (international) and use the password: Cyan. A telephonic replay of the call will be available from approximately 8:30 a.m. Pacific time on November 6, 2014 until 8:30 a.m. Pacific time on November 20, 2014, and can be accessed by dialing 1-888-203-1112 or 1-719-457-0820 and entering passcode 3872352#. 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.

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 advantage of the industry momentum. 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; and other risks and uncertainties related to our

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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-Q that will be filed for the quarter ended September 30, 2014 and our Form 10-K that we filed for the year ended December 31, 2013. 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






















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

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Revenue
$
26,599
 
 
$
37,694
 
 
$
70,029
 
 
$
95,699
 
Cost of revenue
15,684
 
 
22,605
 
 
41,567
 
 
55,943
 
Gross profit
10,915
 
 
15,089
 
 
28,462
 
 
39,756
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
8,856
 
 
9,220
 
 
27,948
 
 
24,617
 
Sales and marketing
10,515
 
 
10,518
 
 
32,875
 
 
29,356
 
General and administrative
3,531
 
 
3,895
 
 
11,805
 
 
9,853
 
Total operating expenses
22,902
 

23,633
 
 
72,628
 
 
63,826
 
Loss from operations
(11,987
)
 
(8,544
)
 
(44,166
)
 
(24,070
)
Interest expense
(45
)
 
(55
)
 
(134
)
 
(317
)
Other income (expense), net
408
 
 
13
 
 
297
 
 
(2,595
)
Total other expense, net
363
 
 
(42
)
 
163
 
 
(2,912
)
Loss before provision for income taxes
(11,624
)
 
(8,586
)
 
(44,003
)
 
(26,982
)
Provision for income taxes
88
 
 
25
 
 
181
 
 
67
 
Net loss
$
(11,712
)
 
$
(8,611
)
 
$
(44,184
)
 
$
(27,049
)
Basic and diluted net loss per share
$
(0.25
)
 
$
(0.19
)
 
$
(0.94
)
 
$
(1.06
)
Weighted-average number of shares used in computing basic and diluted net loss per share
47,076
 
 
46,262
 
 
46,866
 
 
25,587
 



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

 
September 30, 2014
 
December 31, 2013
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
12,982
 
 
$
32,509
 
Marketable securities
15,941
 
 
31,639
 
Accounts receivable
15,870
 
 
14,558
 
Short-term lease receivable
—
 
 
201
 
Inventories
12,172
 
 
20,746
 
Deferred costs
873
 
 
8,286
 
Prepaid expenses and other
3,698
 
 
1,378
 
Total current assets
61,536
 

109,317
 
Long-term lease receivable
—
 
 
403
 
Property and equipment, net
10,930
 
 
11,155
 
Other assets
600
 
 
645
 
Total assets
$
73,066
 
 
$
121,520
 
Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
8,783
 
 
$
8,474
 
Accrued liabilities
6,233
 
 
3,786
 
Accrued compensation
4,055
 
 
4,895
 
Term loan, current portion
1,650
 
 
1,604
 
Deferred revenue
5,641
 
 
17,516
 
Deferred rent
198
 
 
115
 
Other liabilities
—
 
 
734
 
Total current liabilities
26,560
 
 
37,124
 
Term loan, non-current portion
2,153
 
 
3,396
 
Deferred revenue
1,811
 
 
1,577
 
Deferred rent
317
 
 
486
 
Total liabilities
30,841
 
 
42,583
 
Stockholders’ equity:
 
 
 
Preferred stock
—
 
 
—
 
Common stock
5
 
 
5
 
Additional paid in-capital
214,131
 
 
206,300
 
Accumulated other comprehensive loss
(445
)
 
(86
)
Accumulated deficit
(171,466
)
 
(127,282
)
Total stockholders’ equity
42,225
 

78,937
 
Total liabilities and stockholders’ equity
$
73,066
 
 
$
121,520
 


5

Cyan, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited) 

 
Nine Months Ended September 30,
 
 
2014
 
2013
 
Operating activities
 
 
 
 
Net loss
$
(44,184
)
 
$
(27,049
)
 
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
2,713
 
 
1,956
 
 
Stock-based compensation
7,941
 
 
5,100
 
 
Change in fair value for warrants
—
 
 
2,602
 
 
Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
(1,312
)
 
82
 
 
Lease receivable
604
 
 
(9,780
)
 
Inventories
8,324
 
 
(1,684
)
 
Deferred costs
7,413
 
 
(965
)
 
Prepaid expenses and other assets
(2,274
)
 
(589
)
 
Accounts payable
1,209
 
 
4,031
 
 
Accrued and other liabilities
1,764
 
 
1,554
 
 
Accrued compensation
(840
)
 
2,011
 
 
Deferred revenue
(11,641
)
 
3,399
 
 
Deferred rent
(86
)
 
67
 
 
Net cash used in operating activities
(30,369
)
 
(19,265
)
 
Investing activities
 
 
 
 
Purchases of property and equipment
(3,138
)
 
(4,437
)
 
Purchase of available for sale securities
(14,259
)
 
(23,653
)
 
Purchase of other investment
—
 
 
(500
)
 
Maturity of available for sale securities
25,911
 
 
—
 
 
Sale of available for sale securities
4,050
 
 
—
 
 
Net cash provided by (used in) investing activities
12,564
 
 
(28,590
)
 
Financing activities
 
 
 
 
Proceeds from initial public offering (IPO), net of issuance costs

—
 
 
87,348
 
 
Proceeds from stock-based compensation programs
457
 
 
1,209
 
 
Repayments of borrowings under notes payable

—
 
 
(7,563
)
 
Taxes paid related to net-share settlements of restricted stock units
(580
)
 
—
 
 
Repayments of borrowings under term loan
(1,197
)
 
—
 
 
Payments on capital leases
(39
)
 
—
 
 
Net cash provided by (used in) financing activities
(1,359
)
 
80,994
 
 
Effect of exchange rate changes on cash and cash equivalents
(363
)
 
8
 
 
Net increase (decrease) in cash and cash equivalents
(19,527
)
 
33,147
 
 
Cash and cash equivalents at beginning of period
32,509
 
 
20,221
 
 
Cash and cash equivalents at end of period
$
12,982
 
 
$
53,368
 
 




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Cyan, Inc.
GAAP to Non-GAAP Reconciliation
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
 
 
September 30, 2014
 
June 30, 2014
 
September 30, 2013
Reconciliation of Gross profit:
 
 
 
 
 
US GAAP as reported
$
10,915

 
$
10,124

 
$
15,089

Adjustments:
 
 
 
 
 
Stock-Based Compensation
96

 
113

 
61

Non-GAAP Gross profit
$
11,011

 
$
10,237

 
$
15,150

 
 
 
 
 
 
 
Reconciliation of Gross margin:
 
 
 
 
 
US GAAP as reported
41.0
%
 
41.5
%
 
40.0
%
Adjustments:
 
 
 
 
 
Stock-Based Compensation
0.4
%
 
0.5
%
 
0.2
%
Non-GAAP Gross margin
41.4
%
 
42.0
%
 
40.2
%
 
 
 
 
 
 
 
Reconciliation of Research and development expenses:
 
 
 
 
 
US GAAP as reported
$
8,856

 
$
9,620

 
$
9,220

Adjustments:
 
 
 
 
 
Stock-Based Compensation
955

 
1,021

 
773

Non-GAAP Research and development expense
$
7,901

 
$
8,599

 
$
8,447

 
 
 
 
 
 
 
Reconciliation of Sales and marketing expenses:
 
 
 
 
 
US GAAP as reported
$
10,515

 
$
11,331

 
$
10,518

Adjustments:
 
 
 
 
 
Stock-Based Compensation
1,008

 
957

 
571

Non-GAAP Sales and marketing expense
$
9,507

 
$
10,374

 
$
9,947

 
 
 
 
 
 
 
Reconciliation of General and administrative expenses:
 
 
 
 
 
US GAAP as reported
$
3,531

 
$
3,711

 
$
3,895

Adjustments:
 
 
 
 
 
Stock-Based Compensation
600

 
676

 
793

Non-GAAP General and administrative expense
$
2,931

 
$
3,035

 
$
3,102

 
 
 
 
 
 
 
Reconciliation of Operating expenses:
 
 
 
 
 
US GAAP as reported
$
22,902

 
$
24,662

 
$
23,633

Adjustments:
 
 
 
 
 
Stock-Based Compensation
2,563

 
2,654

 
2,137

Non-GAAP Operating expenses
$
20,339

 
$
22,008

 
$
21,496

 
 
 
 
 
 
 
Reconciliation of Net loss:
 
 
 
 
 
US GAAP as reported
$
(11,712
)
 
$
(14,672
)
 
$
(8,611
)
Adjustments:
 
 
 
 
 
Stock-Based Compensation
2,659

 
2,767

 
2,198

Non-GAAP Net loss
$
(9,053
)
 
$
(11,905
)
 
$
(6,413
)
 
 
 
 
 
 
 
Reconciliation of Net loss per share, basic and diluted:
 
 
 
 
 
US GAAP as reported
$
(0.25
)
 
$
(0.31
)
 
$
(0.19
)
Adjustments:
 
 
 
 
 
Stock-Based Compensation
0.06

 
0.06

 
0.05

Non-GAAP Net loss per share, basic and diluted
$
(0.19
)
 
$
(0.25
)
 
$
(0.14
)

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