Cyan, Inc. (CYNI)

CYNI 
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Cyan, Inc. (CYNI)

Q3 2013 Results Earnings Call

October 29, 2013, 05:00 PM ET

Executives

Bonnie McBride - Vice President, Investor Relations

Mark Floyd - Chairman and Chief Executive Officer

Michael Hatfield - President

Mike Zellner - Chief Financial Officer and Vice President

Analysts

Ashwin Kesireddy – JPMorgan

George Notter - Jefferies & Company

Simona Jankowski - Goldman Sachs

Brent Bracelin - Pacific Crest Securities

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by for the Cyan 2013 Third Quarter Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference is also being recorded today, October 29, 2013.

I would now like to turn the conference over to our host, Bonnie McBride.

Bonnie McBride

Thank you and thank you everyone for joining us today for Cyan’s Third Quarter 2013 Earnings Call. By now you should have received a copy of yesterday's earnings release. If you have not please visit our website at cyaninc.com where you’ll find our release as well as my contact information in case you need anything following this call.

Joining us today from management are Mark Floyd, our Chief Executive Officer, Mike Zellner, Cyan's Chief Financial Officer and Mike Hatfield, our President and Founder.

During the course of today's conference call we will make forward-looking statements regarding a number of topics. These include forecasts of future financial results and business performance, the market and prospective customers for the company's products, product plans and future capital expenditures, trends affecting gross margins, operating expenses and operating results for future periods and other matters.

Forward-looking statements include those in which use the terms believe, anticipate, expect and target. These statements are just predictions and actual results or events may differ materially. We refer you to the documents the company files from time-to-time with the SEC. These documents contain important factors that could cause company’s actual results to differ materially from those contained in our forward-looking statements.

Please also note that we will be discussing certain non-GAAP financial results. Our GAAP results and reconciliations of non-GAAP to the most comparable GAAP measures can be found in our earnings release and in the IR section of our website.

Before we begin I would also want to let you that the information we are providing represents our views of the matters discussed as of today October 29, 2013. Except to the extent that we have a legal duty to update, we do not expect to update our disclosure even if circumstances change.

I would now turn the call over to you, Mark.

Mark A. Floyd

Thank you, Bonnie and thank you all for joining us today. We appreciate having the opportunity to share our perspective on our business, to update you on how we are progressing for the long term business model and to give you an understanding of our future expectations. Before I review the third quarter I would like to make a few comments on the guidance we provide today in our press release.

First, I want to reiterate that the fundamental soundness of Cyan’s strategy to capitalize on transition away from hardware-defined networks to networks leveraging SDN and NFV remain unchanged. Further as you will hear in my comments on the quarter and specifically with regard to the progress we’ve made toward penetrating the Tier 1 market we believe we are executing on this strategy and we’ll emerge a leader in the space.

That said and as you know telecom space is historically lumpy. This can be particularly true towards the end of the year as capital budgets are largely exhausted with spending earlier in the year. The economic uncertainty being driven by the debt ceiling crisis and the lack of federal budget has exacerbated the situation, driving increasingly cautious order patterns among our customers.

Finally revenue from our largest customer, Windstream which reached a new record in the third quarter will be substantially down compared to prior quarters. Collectively these factors are causing a near term impact on our outlook.

Turning now to the results for the third quarter, we are pleased to report record revenue of $37.7 million, reflecting a 31% increase over the third quarter of 2012 and 19% growth over the second quarter of this year. During the quarter we continued to see early progress with the transformation, hardware driven networks to software driven networks. The first example of our partnership with Colt a leading pan-European carrier which operates 20 datacenters and connects to 19,000 buildings in 39 major European cities. Colt is launching the next generation based on Cyan's Blue Planet SDN software and Z-series platforms.

Our Blue Planet SDN software allows Colt to automate processes that were manual, reduce provisioning times and time to revenue and manage Ethernet transport and carrier Ethernet services end to end across an MPLS core in a multi-vendor network. Combination of Cyan's Blue Planet software and Z-series platforms will allow Colt to scale its metro network resources and provides a foundation for future SDN and NFV-based applications and services. This evolution to a software defined network along with a packet optical infrastructure allows Colt to deliver critical managed IT services, cloud services and communication solutions that provide a superior customer experience.

The second example is our progress of Blue Planet deployments. We have now deployed our Blue Planet SDN platform in over 1,000 networks, up from 85 at the end of the last quarter. We believe that Blue Planet is the leading SDN platform for carrier and network operators and is the foundation for future sales of new Cyan and third party software applications. Additionally our Blue Planet SDN platform was named the Best New Telecom Product by Light Reading at its annual Leading Light's event in October. The Leading Light's program recognizes innovative companies and products that signal the direction of technology advances and have demonstrated significant traction in the market.

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