This week I review the results of Cyan Optics for Q4 of 2014. The quarter was significantly better than those of the recent past with Revenue coming in at $30.5M and a Net Loss of $9.5M. Given recent quarters, it looks like Cyan make have taken a jump in performance.
Additionally, Cyan projected Revenue for 2015 of around $135M. This would lead to a loss for the year of what might be a good estimate of $32M. Given the cash raise in Q4, it would seem that Cyan should survive 2015 on its way to its projected break even in Q2 of 2016. These numbers make the assumption that Gross Margin expands to 45% in 2015 and that 2015 OPEX is flat with Q4 OPEX. These numbers are all approximate because they make assumptions based on linear extrapolation of Q4.
Anyway, the stock had already taken this news into account given Cyan’s pre-announcement of its Revenue Growth. So, the price has remained relatively flat. The question is where does this leave Cyan and what should you be listening for as an investor.
First and most important is one other very important piece of news that came out of the conference call. That is that Cyan has won 2 RFPs for Blue Planet. This software helps carriers manage its network assets with some modern technologies called SDN and NFV. On the call, the value of these wins were listed as 7 digits. This means somewhere between $1M and $9M. Without any more detail, it is hard to provide any more color. The one thing is that this should help Gross Margins as it is a software product.
Second, is the introduction of a new class of products in the Data Center Interconnect (DCI) space. The thing I found most encouraging about this was the note about the way the products were managed. They are designed to be operated as an IT environment is not the way a telco product is. This is a relatively new space and real revenue is not expected in any quantity till late 2015 at the earliest. Investors should be listening for win announcements for this product.
Third, is the customer concentration. Windstream was over 50% of revenue in Q4. Now, if you want to look at Windstream you will find a company that itself is in transition. I think this raises some concern about Windstream’s long term ability to buy product at its current rate (which would be $15M+ in Q4). There was an announcement of a $28M order that will last through 2015.
Where does this leave everything. As an investor, you need to watch Cyan’s plan unfold and make sure that they are sticking to the idea of a 2Q16 Break Even. There is risk involved here and the upside is muted by the money raise. But we can watch another Sonoma County Technology Company find its path!
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