CYREN Ltd. :CYRN-US: Earnings Analysis: Q3, 2016 By the Numbers : November 29, 2016

CYREN Ltd. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of CYREN Ltd. – Alphabet Inc. Class A, Check Point Software Technologies Ltd., Proofpoint, Inc., Microsoft Corporation, Intel Corporation, Qualys, Inc., Symantec Corporation, International Business Machines Corporation, Top Image Systems Ltd. and Guidance Software, Inc. (GOOGL-US, CHKP-US, PFPT-US, MSFT-US, INTC-US, QLYS-US, SYMC-US, IBM-US, TISA-US and GUID-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 7.90 million, Net Earnings of USD -0.98 million.
  • Gross margins narrowed from 69.20% to 67.07% compared to the same period last year, operating (EBITDA) margins now 2.34% from -8.98%.
  • Year-on-year change in operating cash flow of -24.11% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 7.9 7.56 7.41 7.11 6.93
Revenue Growth (%YOY) 13.96 12.38 5.98 -9.35 -10.31
Earnings (mil) -0.98 -0.84 -1.5 -1.15 -1.33
Earnings Growth (%YOY) 26.69 -29.48 10.48 46.61 -83.96
Net Margin (%) -12.34 -11.1 -20.17 -16.19 -19.18
EPS -0.02 -0.02 -0.04 -0.03 -0.04
Return on Equity (%) -10.97 -9.25 -16.14 -12.1 -15.88
Return on Assets (%) -7.56 -6.37 -11.03 -8.24 -10.3

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Market Share Versus Profits

Revenues History
Earnings History

CYRN-US‘s change in revenue this period compared to the same period last year of 13.96% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that CYRN-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.54% and earnings by -16.21% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from -8.98% to 2.34%. For comparison, gross margins were 68.02% and EBITDA margins were 4.64% in the last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

CYRN-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 74.69 days, compared to last year’s level of 58.39 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

CYRN-US‘s change in operating cash flow of -24.11% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -19.57% to -11.69% and (2) one-time items. The company’s pretax margins are now -12.58% compared to -20.98% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

CYREN Ltd. engages in the provision of cloud-based security solutions. Its products include web and electronic mail security, cyber intelligence suite, malware attack detection, mobile security, uniform resource locator filtering, phishing intelligence feed, and anti-spam. The company was founded by Amir Lev, Gideon Mantel, and Nahum Sharfman on February 10, 1991 and is headquartered in Herzliya, Israel.

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