Cyren Ltd.
Q3 2014 Earnings Call Transcript

Published: 18 Nov 2014

[Operator:]

Good day everyone and welcome to the CYREN Ltd. Third Quarter 2014 Earnings Call. Today's call is being recorded. At this time, I would like to turn the conference over to Garth Russell, KCSA. Please go ahead.

[Garth Russell:]

Thank you and welcome to our conference call to discuss CYREN's third quarter 2014 financial results. This call is being broadcast live and can be accessed on the Investor Relations section of the CYREN website. Before we begin, please let me remind you that during the course of this conference call, CYREN's management may make forward-looking statements. These 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 prospectus filed on July 3, 2014 and our prospectus supplement filed on July 25, 2014. Any forward looking statements should be considered in light of these 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 in the future. Also during the course of this conference call we may discuss non-GAAP measures when talking about the company's performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the earnings press release issued today and available on the Investor Relations section of our web site. With me on today's call are Mr. Lior Samuelson, CYREN's Chairman and Chief Executive Officer; and Mr. Mike Myshrall, Chief Financial Officer. With that, I would now like to hand the call over to Lior. Lior, the call's yours.

[Lior Samuelson:]

Thank you, Garth, and thank you for joining us today, as we discuss our third quarter results and provide an operational update. Our embedded business remains relatively stable, and generate strong operating profits. Our new CYREN cloud WebSecurity platform continues to make great strides, both in engineering and market acceptance. Total revenues for the quarter were down slightly year-over-year, reflecting the expiration of two customer agreements. These agreements were largely offset by both new and expanded agreements. We will talk about our embedded business first, and then discuss our CYREN cloud WebSecurity platform. We have acquired significant relationships in the third quarter, they include a three-year deal with McAfee. McAfee now embeds our anti-spam and outbound anti-spam products into cloud-based software and appliance solutions. This is a clear demonstration of our technology power, to protect against current threats, and strengthens our relationship with McAfee, which already uses our embedded antivirus solution. We also entered into a new segment of the market by embedding our URL Filtering SDK in an Android tablet for the use in parental control and security applications. This is one of the first instances that a real-time URL filter like ours has been deployed in Android device. This agreement is with Tesco for their branded Android tablet. We extended our contract with ATOS Germany until mid-2018. Under the agreement, we will continue to provide EmailSecurity services to large enterprise customers. We are also working with ATOS to sell web security and EmailSecurity SaaS solutions to enterprise customers. I will now turn and discuss CYREN cloud WebSecurity platform. In order to provide some context, I will describe our market environment. As you know, cyber security is a major concern for all sectors and industries. Traditional security boundaries are becoming blurred, with the rapid adoption of mobility and cloud. These dynamic changes are replacing security demands of businesses across various sectors, including IT, finance, telecom, retail, health and education. These verticals are searching for technology to provide, to protect their corporate assets, such as intellectual property, customer information, and even authentication credentials from cyber attacks. As we have gained field experience with our CYREN WebSecurity service, we have identified and mapped the evolution of threatenings [ph]. As cyber threats become more advanced using sophisticated methods of spreading through multiple vectors, advanced measures are required. Relevant security solutions might be agile and provide real-time [indiscernible] relations between the various aspects of an attack, whether it is through email, web or other media. CYREN GlobalView security intelligence and Live Data Analytics identifies advanced threats which bypass traditional signature in heuristic based tools and identifies outbreaks at the moment they happen. Our threat intelligence technology is based on outliers [ph] in more than 12 billion transactions, well over 560 million endpoints, each and every day in real time. CYREN WebSecurity is designed to leverage our layered detection engines with the power of the cloud. We continue to receive third party accolades that supply to the quality of our solution. In 2013, we received a number of certifications, including The TRUSTe Cloud Data Privacy certification for our WebSecurity and EmailSecurity platforms, as well as the EU and Swiss Safe Harbor certifications. I would like to discuss two issues, to shed more light and clarify the status of our WebSecurity business. First, we have got a good job in generating awareness in demand for our solution through our marketing and partnership efforts. Our products satisfy declared demand for cloud-based enterprise product, with a strong detection engine to guarding organizational infrastructure from other suspects. Everything we are seeing in the marketplace suggests that IT professionals, at both the SMBs and enterprise are hungering for these type of SaaS-based solutions. The second point is our distribution and sales. During the third quarter, we added six channel partners, increased the total to 24. Five of these partners are being completely -- and they have completed the onboarding process, which includes access to our partner vision portal, as well as sales in technical certifications. While we have additional five during the final stage of onboarding, the process of translating channel partner growth into WebSecurity sales have been slower than planned. There is a longer learning curve in educating and onboarding our channel partners. We are making progress in better understanding help accelerate the learning curve, and speed-up the monetization of our reseller relationships. Once we get past these initial hurdles, we expect that our channel partners will drive significant revenue for our business. To counterbalance this delay, we have accelerated our plans to focus on direct sales, specifically targeting enterprises. This initiative addresses the increased demand from enterprise customers we are actively seeking, to replace first generation appliances with best in class SaaS-based cyber security solutions. Looking ahead, we remain on track to begin generating material revenues from WebSecurity offering in 2015, from both our channel partners and direct enterprise sales initiatives. I would like to conclude my remarks by reiterating, that we are continuing our investments in cloud-based advanced threat solutions that will enhance our enterprise offerings, and increase the addressable market of our products. With that I will hand over the call to Mike to further elaborate on the quality results. Mike?

[Michael Myshrall:]

Thank you, Lior, and good morning everyone. I will now provide you with a summary of our third quarter 2014 results. For the more detailed results, please refer to the press release we issued earlier today, which is posted on our web site. In addition, please note that we compile our financials under U.S. GAAP, includes non-operating expenses. In order to better analyze our business performance, I will also discuss certain financial metrics on a non-GAAP basis, which excludes those non-operating items. You can refer to today's press release for a full reconciliation of our GAAP and non-GAAP results. GAAP revenue for the third quarter of 2014 was $7.7 million, down 4% from $8 million for the same period last year. Non-GAAP revenues for the quarter totaled $7.8 million compared with $8.1 million in the third quarter of 2013. The decrease in revenue was driven in part by currency exchange rate fluctuations, particularly the decline of euro during the third quarter. Our GAAP gross margin for the quarter was 74% compared with 79% for the third quarter of 2013. Non-GAAP gross margin for the quarter was 77%, compared with 82% a year ago. GAAP operating expenses for the third quarter were $6.2 million, compared with $6.8 million in the third quarter of 2013, a reduction of 9%. The reduction in GAAP operating expenses was primarily driven by a $0.7 million adjustment to the fair value of the earn-out obligations related to our previous acquisitions, along with exchange rate fluctuations for the Euro and the Shekel. Non-GAAP operating expenses for the quarter were $6.4 million, compared with $6 million for the third quarter of the prior year. Third quarter GAAP net loss was $0.7 million or a loss of $0.02 per basic and diluted share, compared to a loss of $0.9 million or a loss of $0.03 per basic and diluted share in the third quarter of 2013. Our third quarter non-GAAP net loss was also $0.7 million or a loss of $0.02 per basic and diluted share, compared to a non-GAAP net income of $0.3 million or $0.01 per diluted share in the third quarter of 2013. The reconciliation between GAAP and non-GAAP net income is included in our press release. Now turning to the balance sheet, our cash balance at the end of the quarter stood at $13.1 million, compared with only $3.1 million as of June 30, 2014. The increase in cash is primarily the result of the $10.2 million in net proceeds we raised from a registered direct offer in July. Operating cash used in the third quarter was $0.1 million, compared to operating cash usage of $1 million during the third quarter of 2013. During the quarter, we did not drive down any additional funds from our $7.5 million credit facility and the balance as of September 30 remained at $5.3 million. Total deferred revenues as of September 30, 2014, were $5.6 million, compared to $5.7 million at the end of the second quarter, and $6.3 million at the end of the third quarter 2013. Deferred revenue declined at a slower than normal rate during the quarter, primarily due to a large customer prepayment that was received in July from one of our marquee customers. Moving now to our financial outlook for the remainder of 2014; we expect fourth quarter revenues to be at similar revenues as the third quarter, and full year 2014 GAAP revenue be flat to slightly down compared to 2013. Nevertheless, our core embedded business remains profitable, and we plan to continue to invest the cash flow from this business into our growth initiatives. Going forward, we are continuing to drive efficiencies through a rationalization of resources. This includes streamlining our development and operations workforce, as well as more efficient use of our operational infrastructure. At this point, I would like to turn the call back to Lior for closing remarks.

[Lior Samuelson:]

Thank you, Mike. We continue to be very excited about the future of CYREN, the cyclic growth trends for the cyber security industry remains strong. Our product development team continues to work on enhancing our cloud offerings, to best meet the needs of customers, while our sales and marketing teams continue to hone their strategy, to broaden awareness and adoption of our WebSecurity service. And with that, we will open the call up for questions.

[Operator:]

[Operator Instructions]. And we will take our first question from Marcel Herbst with Herbst Capital Management. Your line is open.

[Marcel Herbst-Herbst Capital Management:]

Good morning and thank you very much for taking the question. Can you give us a little bit more color on the current state of your embedded business, as it relates to renewal rates, potential changes in the competitive landscape? And any higher probability risk you currently perceive out there?

[Michael Myshrall:]

Sure. Our embedded business had a strong quarter for renewals. We continue to renew customers at approximately 90% on a renewal rate basis. Generally speaking, our customers renew for -- anywhere from one year to a three year period, and we had a number of large renewals during the quarter, which were translated into multimillion dollar deals over the next three years. In terms of competitive pressures, every time we revenue, we obviously face pricing pressure. Generally speaking, when customers renew their services there, looking for price discounts, or an opportunity to lock-in the rates for a longer period of time, but we continue to renew our services and we had a good quarter.

[Lior Samuelson:]

If I may, let me answer that. I think that we have actually experienced some significant wins this quarter, and as Mike said while there is downward pressure, we feel relatively comfortable with our competitive position in the market. I mean, if at all, despite the fact there is downward pressure on prices, we feel that we may even get more competitive, in the future.

[Marcel Herbst-Herbst Capital Management:]

Okay. And in the press release, you also mentioned that you'd see particularly strong demands for your embedded solution. Do you see potential bookings here in near term that would bring you back to revenue growth in the first quarter?

[Lior Samuelson:]

I can't go that far, but I will say that I think bookings so far this year and our forecast for the remainder of the year on the embedded business are -- look pretty good. I don't think that we have the -- we know yet what the first quarter of 2015 is going to look like.

[Marcel Herbst-Herbst Capital Management:]

Maybe one more follow-up, Mike, regarding the SG&A and R&D, are you planning to increase or decrease in the near term, or is this pretty much the level we should be expecting going forward?

[Michael Myshrall:]

I think you will see an increase in the R&D levels in Q4 and the first half of 2015. Part of the goal through the capital raise process was to be able to invest more heavily in the R&D associated with both CYREN WebSecurity and our advanced threat capabilities. And so we are hiring a number of R&D resources to execute on those. From a G&A perspective, I would expect that they will remain about the same levels.

[Marcel Herbst-Herbst Capital Management:]

And the R&D spending on the ATP product if I can follow-up on that, I understand that product launch is an important milestone for you. When do we anticipate that launch to happen, and is the resulting WebSecurity product strong enough at that point to appeal to large enterprises and compete with the likes of WebSense and the enterprise base?

[Lior Samuelson:]

So I think that -- let me start with the latter part of your question first. So I think that, we clearly are targeting -- we would like to and I believe we will be in a position to compete with all the players in the WebSecurity space, including WebSense and Zscaler and some of the big player. I mean Zscaler is perhaps more of a target, so that will happen, and I think that on the advanced threat side, we will -- in our product planning, we will have two releases; one, we will have a version of our advanced threat, we will have a module which sits on the top of our CYREN Web, which I think will enhance both its effectiveness and its appeal to our clients. And the second release will be sort of a standalone advanced threat product that you can buy with or without WebSecurity; and we anticipate that both of these modules will be released, one in probably sometime before the end of the first year of next year, and the other before the end of the year, next year.

[Marcel Herbst-Herbst Capital Management:]

Okay. And on the last call, you mentioned that the adoption rate of CYREN WebSecurity might be different than historical adoption rates of other security products, because of the uniqueness of the product. Now with another quarter of observation, can you talk a bit about what adoption rates you're seeing and what kind of feedback you're getting from end-users and partners?

[Lior Samuelson:]

Let me kind of separate my answer into two parts. So I think that in testing evaluations that we have had and people have tested our product, I think we -- I mean, we always come out looking very-very good. I think people are very impressed, and obviously so am I, with the -- how stable and how good the product is. I think that so the -- I think that the technical quality of the product is really not an issue for us. I do think that, as we go forward, we are going -- we are adding new features to the product, to make it -- to have more appeal, and just like any software product, as we develop, we develop with new features. In fact, our engineering here, we come out with a new release every two weeks. So I do think that, our experience, I mentioned in my prepared comments is that, it is taking our channel partners a little bit longer than we originally planned to -- actually to get revenues, primarily because of the length of the onboarding process, training certification and so on.

[Marcel Herbst-Herbst Capital Management:]

And after the onboarding process is complete, what kind of a leadtime to sales do you see there?

[Lior Samuelson:]

I would say at the revenue, somewhere between probably two to six months depending on the partner.

[Marcel Herbst-Herbst Capital Management:]

Okay, thanks. I go back in the queue for now.

[Operator:]

And we will take our next question from Lisa Thompson with Zacks Investment Research. Your line is open.

[Lisa Thompson-Zacks Investment Research:]

Good morning or afternoon, wherever you are.

[Lior Samuelson:]

Thank you.

[Lisa Thompson-Zacks Investment Research:]

Okay. Can I ask a question first on the McAfee deal, has that ticked in already, or is that future revenues?

[Michael Myshrall:]

So the deal was signed at the end of the third quarter. So technically, there was no revenue recognition in the third quarter, but there will be recognized revenue in the fourth quarter.

[Lisa Thompson-Zacks Investment Research:]

Okay, good.

[Michael Myshrall:]

And it’s a three year deal, so we would anticipate that revenues will ramp during the period.

[Lisa Thompson-Zacks Investment Research:]

Okay. So what do they do, they just -- do they have to rewrite their product to add you in, and then as people roll-off or they upgrade, how does that work?

[Michael Myshrall:]

Generally speaking, they substitute our technology from an existing technology that they are using. So in our case -- in the case of the McAfee, they are adopting our anti-spam SDK engine, and so it would be substituted in to their current cloud and appliance offerings, and then as they sell products, they utilize those services, then they would pay us on a revenue share basis.

[Lisa Thompson-Zacks Investment Research:]

Okay. And I was hoping that you could talk a little bit more about your comment about adding a direct salesforce? What you have now, is it all channeled, and where do you plan to go with that?

[Lior Samuelson:]

That's a good question, thank you. We are not planning on adding anything, so two comments. One is that, we have anticipated going direct for quite a while. So we actually built a salesforce that is designed to go direct, that's one. The second is that, if you look at our customer base, a lot of our biggest customers are direct, while we are a traditionally owned [ph] company. But McAfee is one, but there is many of our major customers, and so all our premier customers are all direct. I mean, they utilize our solutions to maybe sell to their customer, but many of them use it internally. So we have a lot of experience in going direct, and in anticipation of going direct, as we design and plan the new platform, we build a direct salesforce. I mean, our salesforce today is quite significant for company our size.

[Lisa Thompson-Zacks Investment Research:]

So how many sales reps at [ph]?

[Lior Samuelson:]

So we -- between sales and marketing today, we are somewhere in the high 30s, we have about 30 some people in sales and marketing today. I think the total salesforce is somewhere in the order -- the sales team is somewhere in the order of say 27, 28 people.

[Lisa Thompson-Zacks Investment Research:]

And do you have plans to add to that, or is that the number you are going to keep?

[Lior Samuelson:]

I think for now, I think we are good. I think right, I think we are good. I mean, we don't have any immediate plans to add. I mean, obviously, our plans could change, but I think we have a very high quality in our salesforce.

[Lisa Thompson-Zacks Investment Research:]

So are they just going to behave differently in reaching out to end users, is that the idea?

[Lior Samuelson:]

Yeah I think we are also -- I think it’s the way we are addressing. So we have people that are now in charge of channel, so they will be working to channel, and people that have and then people that will work to sell on the direct side, as many of them have in the past as well.

[Lisa Thompson-Zacks Investment Research:]

Okay. Now that you've looked at things and seen that, it takes longer than you thought to get these deals going. What is your current thinking about when we are going to start seeing some noticeable revenues in the new product sales?

[Michael Myshrall:]

Our plan is for 2015 and a major ramp-up obviously. I mean the way that we are looking at probably, on 2016, I think it will be very significant. But we are -- our feeling is that we will see some significant revenues next year.

[Lisa Thompson-Zacks Investment Research:]

So are you going to see anything in the first/second quarter, its just like middle deals, any sort of deals, something that shows -- that is starting to happen?

[Michael Myshrall:]

That's our plan, but I don't have -- I have no predictions, because I don't know. So there is a lot of things that are in the hopper, a lot of things in the pipeline, we are working on a lot of things. But how many of them materialize into how much revenue, it’s a little bit too early for us to tell.

[Lisa Thompson-Zacks Investment Research:]

Okay. All right. A small question about the share count, what is that going to be? How many shares you think you will have in the fourth quarter?

[Michael Myshrall:]

So I think the current share count is around 31.3 million outstanding. The number that's included in the calculation is the weighted average of the quarter, but at the end of the quarter, we were at 31.3 million.

[Lisa Thompson-Zacks Investment Research:]

So that's a good number for Q4?

[Michael Myshrall:]

Yes it is.

[Lisa Thompson-Zacks Investment Research:]

Okay. And do you have a number for the fully diluted shares right now?

[Michael Myshrall:]

Fully diluted including options and warrants would be approximately 37 million to 38 million.

[Lisa Thompson-Zacks Investment Research:]

Okay, good. All right, great. Thanks. That helps a lot.

[Operator:]

[Operator Instructions]. We will go next to Mike Vermut with Newland Capital. Your line is open.

[Mike Vermut-Newland Capital:]

Hey guys, how're you doing? Just trying to follow-up on that, its difficult for us to understand. I know its tough for you to say we know what the revenues are going to look like next year, but is there any -- what's a successful year ramp up on the web site, and what is the disappointment for you, when we are looking at it?

[Lior Samuelson:]

I was afraid you were going to ask me that kind of question.

[Mike Vermut-Newland Capital:]

Yeah, its hard to know. You keep on saying, we don't know what its going to be, but is it $5 million to disappointment and $15 million as a success, or is there some range large or not that we can start thinking about?

[Lior Samuelson:]

To be honest with you, I am not so sure. I mean, I would -- I mean, $15 million would be an unbelievable success I think, to say the least. I am not [indiscernible], just because of the timing of how we recognize revenues as well. But I am not so sure. Our hope is that, once the channel kicks in, that the hockey stick actually takes shape, that's our hope. But I don't have -- I don't want to -- I'd rather say that I am not sure, than say a number of them [ph] will be wrong.

[Mike Vermut-Newland Capital:]

Great. What would be the real disappointment?

[Lior Samuelson:]

I don't know. No revenues. I am not so sure, if we don't start, if we don't get, what I'd say, some real revenues some real revenues and some real serious clients and some serious adoption, and we will be very disappointed. We are not, look, I think that -- we believe that we have a very-very good product. It is very competitive, it is very robust, as I tell people, look, all the security features on the pod is ours, we don't buy any security from anybody. We have huge data. Our product is a very good product and very competitive. So its just really the adoption rate and how fast we can sell it. I mean definitely, the market is going in that direction, and how fast the movement of the cloud will be, we are not so sure. But definitely, we see it everyday. People are excited to hook up to the cloud, as opposed to another appliance. So I think all the information, everything we see is relatively positive. But I just don't -- we really aren't sure yet, as to what the adoption rate. But from a technical perspective, from an engineering perspective, I think from our perspective, things look very promising.

[Mike Vermut-Newland Capital:]

I know. I remember last quarter you were talking about working on agreements with some big appliance manufacturer. Has anything happened there?

[Lior Samuelson:]

We are still working on them. We haven't gotten any -- so let's look at it this way. So there has been clearly, I think the revenue recognition has been slower than we planned, but there hasn't been any instances, where we have gotten some feedback from the market that what we are doing isn't spot on, or that our product is -- misses the mark.

[Mike Vermut-Newland Capital:]

Okay. And then one more, it’s a tough question to go after, but you are doing 30 million-ish revenue with the whole upside on the web to come, and you're trading at a $42 million market cap. Is there a point where it becomes difficult, where you get approaches out there from strategic partners or is there a point where you say wow, it would be really great to have the deep pockets behind us? Again some of the large guys out there, and I know it would make things easier having a larger channel and deeper pockets behind you?

[Lior Samuelson:]

So I will answer this one. One, I think that, based on our plans, we have got enough capital to execute on our current set of plans. And two, I mean, I am one of seven board members, and I can tell that we have no plans to sell this company. I think the potential here is quite large. But again, we are a public company, if somebody calls us, we will talk to them.

[Mike Vermut-Newland Capital:]

Excellent. Okay, appreciate it, and good luck on 2015.

[Lior Samuelson:]

Thank you.

[Operator:]

And we will go to our next question with George Melas with MKH Management. Your line is open.

[George Melas-MKH Management:]

Thank you. Good morning Lior and Mike. The onboarding is slower than expected, is the number of customers, or the number of distributors involved that's more than expected, or that they can significantly learn, once you sign them up?

[Lior Samuelson:]

The latter. Actually I am not disappointed in the number of distributors that we have signed, I think that's actually a very good number, and as we said before, some of them are very large. I mean if they -- when they kick in, the potential is there, I just think that it has taken us longer to get them ready to sell the product to their -- to sell the product. I mean, some of them -- one of them -- one of the larger ones that we signed back in April, we are still working with them day-to-day. In fact our team is with them, one of the large meetings, as we speak right now. So we have a team of people working with them, a very-very large number from their channel. So its just taking longer.

[George Melas-MKH Management:]

And is it taking longer because you feel like they are less focused than you expected on the solution, or is it because of your resources and what you can devote to them?

[Lior Samuelson:]

No I think its just that -- I think the amount of training that has to go on; because remember we are -- some of them will sell under our brand, and some of them will sell a white label, which means they will have a, what we'd call, the part of portal that we will have, and it requires a little bit more training, so they can actually manage their customers. So I think the onboarding process, the training, the certification takes a little bit longer, and we view this -- WebSecurity is almost like a consumer product in a sense. It has to be perfect, it has to work, it has to be like a dialphone. So it has taken just a little bit longer.

[George Melas-MKH Management:]

And have you modified some of your training of your resources to try to accelerate that, or is it just the wait is taking longer?

[Lior Samuelson:]

I think there is a -- I think that the product of this nature just takes a little bit longer. But I do think that we have learned quite a bit and I think our sales and marketing teams have done a really-really nice job. The collateral material and the educational material that we put out are -- I mean quite amazing. I mean, they are just amazing, amazing set of products that we put together. But you're right. I mean, we learn as we go on, but I think I feel relatively comfortable that we are doing the right things and responding to their needs and demands.

[George Melas-MKH Management:]

Okay, great. And then maybe just a couple of follow-up questions. I think you mentioned on the embedded product that there were a couple of customers that I think their contract expired. Is it that they didn't renew, or did they go with competitors or did they -- can you provide some explanation of where that revenue went?

[Michael Myshrall:]

Sure. So it varies, whenever our customer needs -- the reasons sometimes vary. But in the case of these particular entities, there was one of the customers who basically discontinued the service, and they no longer had the need for our technology, and another customer, they decided to develop the technology in-house. Part of the challenge we always face is a [indiscernible] to build, and so sometimes when customers decide to build the technology in-house versus buy it from us, that's who we lose against.

[George Melas-MKH Management:]

Okay, great. And then my final question, on the ability to have direct sales for the WebSecurity product, have you already started contacting customers, have you already sort of started that process or that's something to start in this coming quarter in 2015?

[Lior Samuelson:]

We started. We started the process.

[George Melas-MKH Management:]

Okay. But can you give us sort of a little color on the reception? Its just having one product, rather than a suite of products. What are the hurdles and what makes it -- will be a little difficult to sell?

[Lior Samuelson:]

So far, we haven't really -- our current view is look, so there is a few types of customers out there. There are other customers that currently have no protection. There are other customers who are now employing web appliances, and they would like to basically move out of appliances, and hook up to the web for the right reasons, primarily most of the appliances only protect you when you're in your own premises, and we provide -- our product provides a protection, even when you're not on-premise. Also I think that, our product, the way it was designed, provides you with a lot of flexibility as to what you control and how you control and so on and so forth. So I think that -- so for every customer that we have to see where they are, study where they are, learn where they are, and then tailor a solution for them. But also I think that, these products go through a product lifecycle, and I think that so far, we haven't won, because we just started the process. We haven't run into sort of major obstacles, I am sure we will. But we haven't yet into major obstacles.

[Operator:]

And we will take George Merriman, and he is a private investor.

[Unidentified Analyst:]

Hello Lior. On the enterprise web SaaS, what architecturally has to happen to launch that product?

[Lior Samuelson:]

So its mostly I think a feature set issue, as opposed to -- so for some enterprises, what we have today, works really-really well. I mean, it is if we need to make major modifications in a sense in the basic architecture of the product, in order to sell the product. So there are some features that we are building, that I think we need to enhance. That we have the module, the module has to be enhanced, in order to be able to appeal to very large enterprises. But its not an architectural issue. I mean we just went through a major effort to, for example in Europe and nowadays privacy is very important, where you keep the data and so on; so we just basically completed putting privacy -- completing our privacy, we went through an authentication phase, where we built authentication and we completed that, and for very-very large enterprises, we have to enhance probably the sort of reporting function of our product. So its really not an architectural issue, it’s a feature set issue. I think also, to add to what you have, I think that when we put on our cyber module on top of the WebSecurity product, I think we will further, I think, enhance the desirability and the demand for the product.

[Unidentified Analyst:]

And when will the enterprise product be available for sale?

[Lior Samuelson:]

Well, so its available right now. Its available and its available now, we can sell it now. But again, not all enterprises require the same set of features, and so we meet many mother requirements, and we don't meet some yet. But we are -- while our roadmap basically includes all the features that we want to have, so we can basically have a product that has appealed to everybody, anywhere from 100 person group to a 400,000 person group.

[Unidentified Analyst:]

And about when do you think will the product be ready -- when you will have your --

[Lior Samuelson:]

So fundamentally, based on -- since I have been around for a long time, you never have what you want, it’s a continuous process. I think that we -- our development for methodology is such now that we put out a new version every two weeks. So every two weeks we enhance the project, the product, we put new features. As I said earlier, we will have a cyber module on it, I think sometime total again at the second quarter.

[Unidentified Analyst:]

Okay, got second quarter okay; [indiscernible] because when will you be proud to go up against the Zscalers of the world, and all these big boys, so around second quarter 2015, is it?

[Lior Samuelson:]

Well I think that we can go up against Zscaler now and some instances. I think that some of the things that we have in the product are superb, and I think also, our detection and protection technology that we have on our product is also very-very good. So I am already proud, to be honest with you, and I think every two weeks, I will be even prouder.

[Unidentified Analyst:]

Okay. One clarification earlier in the call, you mentioned about your ATP, about the two releases, module and the standalone, and I didn't catch the dates on that, I got confused on that. So --

[Lior Samuelson:]

So right now, I might be a little bit conservative. Right now, I think that the one that will fit on our web SaaS will be some time in the second quarter of 2015 and the standalone will be some time during the end of the third quarter, early fourth quarter of 2015.

[Unidentified Analyst:]

Okay. And is there anything else on the product roadmap that you haven't mentioned thus far?

[Lior Samuelson:]

I will say something in general, because I -- one of the things we tell everyone is that, we have very-very good detection technology here, and we have a lot of data, and there is a lot of things that we are looking at, testing, that can turn into products. I think one of them, one small solution that we have, that may be significant is being tested right now with one of our very large clients. So I mean, this is not something that is -- but one thing for those of you who would follow us and those of you who invest in us, we have a lot of things here that we are working on.

[Operator:]

And we will take our next follow-up question from Marcel Herbst with Herbst Capital Management. Your line is open.

[Marcel Herbst-Herbst Capital Management:]

Quick follow-up for Mike, what was the currency impact on the topline in Q3?

[Michael Myshrall:]

So year-to-date, it was approximately $200,000 on the top line. During Q3, it was the majority of that, but probably around $150,000 to $170,000.

[Marcel Herbst-Herbst Capital Management:]

So you expect something similar for Q4, on the currency?

[Michael Myshrall:]

Well obviously its difficult to predict where the exchange rates are going to go. Certainly, during the first part of Q4, the trend has continued. But we do anticipate some impact in Q4, whether that -- whether the euro turns around during the second half of Q4, I am not sure. But it will have a similar impact to Q3, and therefore we are -- part of the reason we are saying that the Q4 revenue numbers will be similar to Q3 numbers.

[Marcel Herbst-Herbst Capital Management:]

Okay. That's great, thank you.

[Operator:]

And our next follow-up question is from Lisa Thompson with Zacks Investment Research.

[Lisa Thompson-Zacks Investment Research:]

Yes. You touched a little bit about what I was thinking about, but I was wondering if you could elaborate a little bit more on your competitive advantage, by having all those customers and all that data, and talk a little bit about that zero threat capability you could have, where you can protect one customer just based on what happened at a different customer?

[Lior Samuelson:]

That's a really long lecture, but without kind of -- I will answer with an example, if I may. So we are, and without naming any names, we have a product here that is -- will [indiscernible] for a while, that is based on a lot of the data that we see, that is basically designed to detect basically zero day attacks. And one of our customers -- we have been working with one of our customers to -- we obtained some of their data, and we put the machine on their premises, and what I can tell you is that, we discovered more attacks in one week than a very big name in the industry had discovered in -- I mean, let's look at this way, we discovered in one day more than the other thing discovered in six months. So I am not going to make a big [indiscernible] of it, but fundamentally, its all about big data and all about correlation of where these attacks come from, as you may or may not know, we see through our anti-spam, all the billions of emails that we see and all the malware that we see everyday, we see a lot of the attacks, and we may be one of the first to see a lot of these attacks, and because we get so much data every day, we can correlate a lot of this data into figuring out what these attacks look like. So in our view, I think the algorithms and the approaches and the engines are very important, but you've got to get the data, in order to allow these engines to detect and prevent.

[Lisa Thompson-Zacks Investment Research:]

But it seems to me that, when you go to pitch a client or go to somebody, can you actually show the difference between a product you are using and their products?

[Lior Samuelson:]

That's the idea. Yes.

[Lisa Thompson-Zacks Investment Research:]

Okay. That sounds wonderful. Great. Thank you.

[Operator:]

That concludes our question-and-answer session. I'd like to turn it back to management for any closing remarks. End of Q&A

[Lior Samuelson:]

Okay. Well I'd like to thank you for joining the call, and again, for all those who are interested in investing in the company or investors, you can -- we will be happy to talk to you any time. So again, thank you very much for joining us.

[Operator:]

That concludes our call for today. Thank you for your participation.