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Zix Reports Third Quarter 2020 Financial Results

Secure Cloud Adoption Drives 15% Revenue Growth to $54.8 Million and 19% Cloud ARR Growth Along with Strong Cash From Operations of $15.1 Million

DALLAS–(BUSINESS WIRE)–Zix Corporation (Zix) (NASDAQ: ZIXI), a leading provider of cloud email security, productivity and compliance solutions, today announced financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights (results compared to the same year-ago quarter)

  • Revenue increased 15% to $54.8 million.
  • Annual recurring revenue (ARR) increased 11% to $222.3 million. Cloud ARR increased 19% to $190.3 million or 86% of total ARR.
  • GAAP net loss totaled ($0.7) million compared to a year ago net loss of ($1.6) million.
  • GAAP net loss attributable to common stockholders totaled ($3.0) million compared to a year ago net loss attributable to common stockholders of ($3.7) million. The company’s Q3 2020 net loss attributable to common shareholders includes the effect of a deemed dividend to preferred shareholders of $2.3 million and acquisition-related expenses of $1.1 million.
  • GAAP fully diluted earnings (loss) per share attributable to common stockholders totaled ($0.05) compared to ($0.07).
  • Non-GAAP adjusted net income before deemed dividends and acquisition related expenses and excluding deferred tax (benefit) expense totaled $9.2 million compared to $6.7 million.
  • Non-GAAP adjusted net income per share before deemed dividends and excluding deferred tax (benefit) expense increased 34% to $0.17.
  • Adjusted EBITDA increased 20% or $2.3 million to $13.8 million, representing an adjusted EBITDA margin of 25%.
  • The company ended the quarter with $23.7 million in cash, an increase of 68% or $9.6 million from $14.1 million at the end of the prior sequential quarter. Cash flow from operations was $15.1 million, an increase of 78% or $8.5 million compared to the same year-ago quarter.

Recent Operational Highlights

  • 95% of all new customers in Q3 2020 were brought onto the new Zix Secure Cloud platform.
  • Zix added 50,276 cloud mailboxes in Q3 2020, bringing the total number of productivity mailboxes to over 1.1 million.
  • AppRiver direct customers and Managed Service Provider partners (MSPs) started 3,038 trials of SecureTide, ZixEncrypt and ZixArchive in Q3 2020.
  • Appointed former McAfee technology veteran Ryan Allphin to the new position of Chief Product Officer (CPO) in November, further strengthening the leadership team to drive growth.

Management Commentary

“Our solid third quarter results demonstrate both our team’s continued commitment to driving profitable growth as well as our partners’ and customers’ adoption of our Secure Cloud platform,” said David Wagner, Zix’s Chief Executive Officer. “With 15% revenue growth and 25% adjusted EBITDA margins in the quarter, we are seeing clear feedback for the growing value Zix is providing our partners with our Secure Cloud platform by delivering comprehensive digital productivity, security and compliance solutions for businesses globally. Additionally, through our recently announced acquisition of CloudAlly, we’re now able to offer cloud-based data backup, enabling us to further expand our product suite and also address a clear demand from our partners for an integrated cloud backup offering. Cloud data back-up is a critical component of a secure modern workplace, and we believe it will further improve our standing with current and potential partners as we enable them to navigate and thrive in an increasingly work-from-anywhere world. Our continued, efficient rate of new customer acquisition and the rapid adoption of our Secure Cloud platform both underscore our early success on this long-term secular market trend.”

Zix’s Chief Financial Officer Dave Rockvam commented: “In the third quarter we delivered on our commitment to drive revenue growth as well as adjusted gross margin and adjusted EBITDA increases on an absolute basis, the latter two of which were up $0.3 million and $1.1 million from Q2 2020, respectively. We also produced strong cash flow from operations, generating $15.1 million in the third quarter and $24.2 million on a year-to-date basis. During the quarter we also added $9.6 million of cash and ended the quarter with $23.7 million. Our strengthening balance sheet, coupled with our unlevered free cash flow generation capabilities, will reliably allow us to service our debt obligations and execute our growth strategy.”

 

Third Quarter 2020 Corporate Financial Summary and Other Operational Metrics

 

$ in Millions, except per share data

Q3 2020

Q3 2019

Change (1)

Revenue

$54.8

$47.8

14.6%

GAAP Net Income (Loss)

($0.7)

($1.6)

54.6%

GAAP Net Income (Loss) Per Share Attributable to Common Stockholders – Diluted

($0.05)

($0.07)

21.6%

Non-GAAP Adjusted Net Income Attributable to Common Stockholders (3)

$6.9

$4.6

52.1%

Non-GAAP Adjusted Net Income Per Share Attributable to Common Stockholders – Diluted (3)

$0.13

$0.09

43.6%

Non-GAAP Adjusted Net Income Before Deemed Dividends(3)

$8.1

$6.8

19.7%

Non-GAAP Adjusted Net Income Per Share Before Deemed Dividends and Acquisition-Related Expenses – Diluted(3)

$0.15

$0.13

15.6%

Non-GAAP Adjusted Net Income Before Deemed Dividends and Acquisition-Related Expenses but Excluding Deferred Tax (Benefit) Expense(3)

$9.2

$6.7

38.4%

Non-GAAP Adjusted Net Income Per Share Before Deemed Dividends Excluding Deferred Tax (Benefit) Expense(3)

$0.17

$0.13

33.7%

EBITDA (2)(3)

$10.6

$7.9

33.8%

EBITDA Margin

19.3%

16.6%

2.8 pts

Adjusted EBITDA (3)

$13.8

$11.5

19.9%

Adjusted EBITDA Margin (3)

25.1%

24.0%

1.1 pts

Total Billings

$54.6

$46.2

18.3%

 

(1) Changes are based on actual numbers versus numbers shown in the columns, which may reflect rounding

(2) Earnings before interest, taxes, depreciation and amortization

(3) A reconciliation of GAAP to non-GAAP results is included in this press release and available on the Zix investor relations website at http://investor.zixcorp.com

Financial Outlook

Zix provides guidance based on current market conditions and expectations. The company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled “Forward-Looking Statements” below, including risks and uncertainties associated with the COVID-19 pandemic.

For the fourth quarter of 2020, the company forecasts revenue to range between $56.4 million and $57.4 million, which includes approximately $1.0 million of contribution from the company’s acquisition of CloudAlly on November 5, 2020 and takes into account the GAAP-required deferred revenue discount. Zix’s revenue forecast for the fourth quarter of 2020 implies a 12% to 14% growth rate compared to the same year-ago quarter. The company forecasts fully diluted GAAP earnings (loss) per share (attributable to common stockholders) to be in the range of ($0.09) and ($0.08), and fully diluted non-GAAP adjusted earnings per share (attributable to common stockholders) before deemed dividends and excluding deferred tax (benefit) expense to be in the range of $0.16 and $0.17 for the fourth quarter of 2020. The company forecasts adjusted EBITDA to be approximately 25% of forecast revenue for Q4 2020. The per share guidance figures are based on an approximate basic share count of 55.5 million for Q4 2020.

Based on management’s current visibility, the company has updated its revenue range for the full fiscal year of 2020 to reflect the currently anticipated impact of the COVID-19 pandemic and related factors on its operations. The company now forecasts revenue to range between $217 million and $218 million, representing an increase of between 25% and 26% compared to fiscal year 2019. The company also expects fully diluted GAAP earnings (loss) per share (attributable to common stockholders) to range between ($0.28) and ($0.27) and fully diluted non-GAAP adjusted earnings per share (attributable to common stockholders) before deemed dividends and excluding deferred tax (benefit) expense to range between $0.60 to $0.61 for fiscal year 2020. The company forecasts adjusted EBITDA to be in the range of $51.2 million and $51.8 million (or approximately 24% of forecast revenue) for 2020, representing a year-over-year increase of between 30% and 31% compared to fiscal year 2019. The per share figures are based on an approximate basic average share count of 54.0 million for 2020.

Conference Call Information

Management will discuss these financial results and outlook on a conference call today (November 9, 2020) at 5:00 p.m. ET (2:00 p.m. PT).

A live webcast of the conference call will be available in the investor relations section of Zix’s website here. Alternatively, participants can access the conference call by dialing 1-855-853-6940 (U.S. toll-free) or 1-720-634-2906 (international) at least 15 minutes before the call and entering access code 9573805. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.

An audio replay of the conference will be available for seven days by dialing 1-855-859-2056 (U.S. toll-free) or 1-404-537-3406 (international) and entering the access code 9573805. An archive of the webcast will also be available on the Zix investor relations website.

About Zix Corporation

Zix Corporation (Zix) is a leader in email security. Trusted by the nation’s most influential institutions in healthcare, finance and government, Zix delivers a superior experience and easy-to-use solutions for email encryption and data loss prevention, advanced threat protection, unified information archiving and bring your own device (BYOD) mobile security. Focusing on the protection of business communication, Zix enables its customers to better secure data and meet compliance needs. Zix is publicly traded on the Nasdaq Global Market under the symbol ZIXI. For more information, visit www.zixcorp.com.

Forward-Looking Statements

As more fully described in Zix’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which is expected to be filed with the SEC by November 9, 2020, the company has been actively monitoring the COVID-19 situation and its impact on both the company and the world in which we operate. The impact of COVID-19 and unprecedented measures to prevent its spread are affecting our business in various ways such as causing volatility in demand for our products, changes in customer behavior, including their spending and payment patterns, disruptions in the operations of our third party suppliers and business partners, and limitations on our employees’ ability to work and travel. We expect the ultimate significance of the impact on our financial and operational results will be dictated by the length of time that these circumstances continue, which will depend on the currently unknowable extent and duration of the COVID-19 pandemic and governmental and public actions taken in response. These factors also make it more challenging for management to estimate the future performance of our business, particularly over the near term.

Statements in this release that are not purely historical facts or that necessarily depend upon future events, including statements about forecasts of sales, revenue, annual recurring revenue, EBITDA, EBITDA margin, earnings or earnings per share, potential benefits of acquisitions and strategic relationships, or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements are based upon information available to Zix on the date this release was issued. Zix undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including but not limited to, risks or uncertainties related to the completion and integration of acquisitions, the effects of our debt and equity financing transactions, year-end adjustments to previously reported preliminary unaudited financial information, market acceptance of both existing and new Zix solutions, changing market dynamics resulting from technological change, innovation and continuing customer migration to the cloud, changes in the competitive ecosystem, how privacy and data security laws may affect demand for Zix data protection solutions, and business disruptions, uncertainty and market instability stemming from the COVID-19 pandemic and governmental actions related thereto. Zix may not succeed in addressing these and other risks. Further information regarding factors that could affect Zix’s business and its financial and other results can be found in the risk factors section of Zix’s most recent annual report on Form 10-K and quarterly report on Form 10-Q, each as filed with the Securities and Exchange Commission, as those risk factors may be supplemented in subsequent filings.

We monitor ARR as an operating metric, which we define as the aggregate annualized contract value attributable to recurring revenue contracts as of the end of the applicable reporting period. We calculate ARR by determining the annual or monthly revenue of subscription agreements that are active as of the end of the applicable period and multiplying by 1 or 12. We monitor this metric to aid in determining to what extent individual customer relationships, considered in the aggregate, are growing or declining in financial magnitude. ARR is an operating metric derived as of the date of determination, and should be viewed independently of revenue, unearned revenue and any other GAAP financial measure over any period.

 

ZIX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 
 

September 30,

 

2020

December 31,

 

(unaudited)

2019

ASSETS

Current assets:

Cash and cash equivalents

$

23,662,000

$

13,349,000

Receivables, net

 

15,328,000

 

10,081,000

Prepaid and other current assets

 

3,966,000

 

4,984,000

Total current assets

 

42,956,000

 

28,414,000

Property and equipment, net

 

7,852,000

 

8,591,000

Operating lease assets

 

8,332,000

 

10,128,000

Other assets and deferred costs

 

12,461,000

 

11,968,000

Intangible Assets, Net

 

137,367,000

 

145,876,000

Goodwill

 

170,930,000

 

171,209,000

Deferred tax assets

 

36,689,000

 

36,535,000

Total assets

$

416,587,000

$

412,721,000

 
 

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

29,190,000

$

28,132,000

Deferred revenue

 

41,095,000

 

40,757,000

Other current liabilities

 

4,825,000

 

6,135,000

Total current liabilities

 

75,110,000

 

75,024,000

Long-term liabilities:

Deferred revenue

 

1,263,000

 

2,524,000

Operating and finance lease liabilities

 

7,301,000

 

9,105,000

Debt

 

183,830,000

 

178,250,000

Total long-term liabilities

 

192,394,000

 

189,879,000

Total liabilities

 

267,504,000

 

264,903,000

Total preferred stock

 

113,241,000

 

106,527,000

Total stockholders’ equity

 

35,842,000

 

41,291,000

Total liabilities, preferred stock and stockholders’ equity

$

416,587,000

$

412,721,000

 

ZIX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

`

 
 

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2020

2019

2020

2019

Revenue

$

54,840,000

 

$

47,833,000

 

$

160,611,000

 

$

123,049,000

 

 

Cost of revenue

 

27,928,000

 

 

21,422,000

 

 

82,265,000

 

 

52,865,000

 

Gross profit

 

26,912,000

 

 

26,411,000

 

 

78,346,000

 

 

70,184,000

 

Operating expenses:

Research and development

 

5,720,000

 

 

5,590,000

 

 

16,926,000

 

 

15,048,000

 

Selling, general and administrative

 

18,813,000

 

 

19,592,000

 

 

58,058,000

 

 

61,729,000

 

Total operating expenses

 

24,533,000

 

 

25,182,000

 

 

74,984,000

 

 

76,777,000

 

 

Operating income

 

2,379,000

 

 

1,229,000

 

 

3,362,000

 

 

(6,593,000

)

Operating margin

 

4

%

 

3

%

 

2

%

 

-5

%

 

Other income (expense)

Investment and other income (expense)

 

127,000

 

 

14,000

 

 

104,000

 

 

115,000

 

Interest expense and other expense

 

(2,035,000

)

 

(2,973,000

)

 

(7,190,000

)

 

(7,398,000

)

Total other income (expense)

 

(1,908,000

)

 

(2,959,000

)

 

(7,086,000

)

 

(7,283,000

)

 

Income before income taxes

 

471,000

 

 

(1,730,000

)

 

(3,724,000

)

 

(13,876,000

)

Income tax benefit (expense)

 

(1,196,000

)

 

133,000

 

 

244,000

 

 

2,308,000

 

 

Net (loss) income

$

(725,000

)

$

(1,597,000

)

$

(3,480,000

)

$

(11,568,000

)

 

Deemed and accrued dividends on preferred stock

 

(2,267,000

)

 

(2,090,000

)

 

(6,714,000

)

 

(7,894,000

)

 

Net (loss) income attributable to common shareholders

$

(2,992,000

)

$

(3,687,000

)

$

(10,194,000

)

$

(19,462,000

)

 

Basic (loss) income per share attributable to common shareholders:

$

(0.05

)

$

(0.07

)

$

(0.19

)

$

(0.37

)

 

Diluted (loss) income per share attributable to common shareholders:

$

(0.05

)

$

(0.07

)

$

(0.19

)

$

(0.37

)

 

Shares used in per share calculation – basic

 

54,999,114

 

 

53,148,078

 

 

53,933,721

 

 

52,965,163

 

 

Shares used in per share calculation – diluted

 

54,999,114

 

 

53,148,078

 

 

53,933,721

 

 

52,965,163

 

 

Other Comprehensive income, net of tax:

Foreign currency translation adjustments

 

493,000

 

 

35,000

 

 

(118,000

)

 

(52,000

)

Comprehensive (loss) income

$

(232,000

)

$

(1,562,000

)

$

(3,598,000

)

$

(11,620,000

)

 

ZIX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
 

Nine Months Ended September 30,

 

2020

 

2019

Operating activities:

Net (loss) income

$

(3,480,000

)

$

(11,568,000

)

Non-cash items in net income

 

33,958,000

 

 

19,170,000

 

Changes in operating assets and liabilities

 

(6,233,000

)

 

349,000

 

Net cash provided by operating activities

 

24,245,000

 

 

7,951,000

 

 

Investing activities:

Purchases of property and equipment and capitalized software

 

(13,992,000

)

 

(7,860,000

)

Acquisition of business, net of cash acquired

 

 

 

(284,590,000

)

Net cash used in investing activities

 

(13,992,000

)

 

(292,450,000

)

 

Financing activities:

Proceeds from issuance of series A preferred stock, net of offering costs

 

 

 

96,588,000

 

Proceeds from exercise of stock options

 

334,000

 

 

251,000

 

Proceeds from long term debt

 

6,000,000

 

 

185,000,000

 

Debt issuance costs

 

 

 

(6,443,000

)

Repayment of long term debt

 

(1,388,000

)

 

(900,000

)

Repayment of finance lease obligations

 

(1,086,000

)

 

(1,277,000

)

Payment of acquisition-related contingent consideration

 

(1,125,000

)

 

(3,843,000

)

Purchase of treasury stock

 

(2,717,000

)

 

(1,881,000

)

Net cash provided used in financing activities

 

18,000

 

 

267,495,000

 

 

Effect of exchange rate changes on cash

 

42,000

 

 

(39,000

)

 

(Decrease) Increase in cash and cash equivalents

 

10,313,000

 

 

(17,043,000

)

Cash and cash equivalents, beginning of period

 

13,349,000

 

 

27,109,000

 

Cash and cash equivalents, end of period

$

23,662,000

 

$

10,066,000

 

 

ZIX CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)

 

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenue:

GAAP revenue

$

54,840,000

 

$

47,833,000

 

$

160,611,000

 

$

123,049,000

 

 

Cost of revenue

GAAP cost of revenue

$

27,928,000

 

$

21,422,000

 

$

82,265,000

 

$

52,865,000

 

Stock-based compensation charges (1)

(A)

 

(97,000

)

 

(154,000

)

 

(1,105,000

)

 

(422,000

)

Strategic consulting and litigation costs (2)

(B)

 

 

 

(21,000

)

 

(115,000

)

 

(293,000

)

Intangible Amortization (3)

(C)

 

(2,486,000

)

 

(1,943,000

)

 

(7,432,000

)

 

(4,472,000

)

Corporate separation payment (4)

(D)

 

 

 

 

 

(867,000

)

 

(52,000

)

Non-GAAP adjusted cost of revenue

$

25,345,000

 

$

19,304,000

 

$

72,746,000

 

$

47,626,000

 

 

Gross profit:

GAAP gross profit

$

26,912,000

 

$

26,411,000

 

$

78,346,000

 

$

70,184,000

 

Stock-based compensation charges (1)

(A)

 

97,000

 

 

154,000

 

 

1,105,000

 

 

422,000

 

Strategic consulting and litigation costs (2)

(B)

 

 

 

21,000

 

 

115,000

 

 

293,000

 

Intangible Amortization (3)

(C)

 

2,486,000

 

 

1,943,000

 

 

7,432,000

 

 

4,472,000

 

Corporate separation payment (4)

(D)

 

 

 

 

 

867,000

 

 

52,000

 

Non-GAAP adjusted gross profit

$

29,495,000

 

$

28,529,000

 

$

87,865,000

 

$

75,423,000

 

 

Research and development expense

GAAP research and development expense

$

5,720,000

 

$

5,590,000

 

$

16,926,000

 

$

15,048,000

 

Stock-based compensation charges (1)

(A)

 

(433,000

)

 

(295,000

)

 

(1,184,000

)

 

(765,000

)

Strategic consulting and litigation costs (2)

(B)

 

 

 

(459,000

)

 

(132,000

)

 

(795,000

)

Intangible Amortization (3)

(C)

 

(76,000

)

 

(76,000

)

 

(227,000

)

 

(227,000

)

Non-GAAP adjusted research and development expense

$

5,211,000

 

$

4,760,000

 

$

15,255,000

 

$

13,025,000

 

 

Selling and marketing expense

GAAP selling and marketing expense

$

13,489,000

 

$

13,312,000

 

$

42,288,000

 

$

37,323,000

 

Stock-based compensation charges (1)

(A)

 

(565,000

)

 

(473,000

)

 

(1,877,000

)

 

(1,590,000

)

Strategic consulting and litigation costs (2)

(B)

 

(160,000

)

 

(511,000

)

 

(212,000

)

 

(1,253,000

)

Intangible Amortization (3)

(C)

 

(3,106,000

)

 

(2,794,000

)

 

(9,333,000

)

 

(7,045,000

)

Non-GAAP adjusted selling and marketing expense

$

9,658,000

 

$

9,534,000

 

$

30,427,000

 

$

26,796,000

 

 

General and administrative expense

GAAP general and administrative expense

$

5,324,000

 

$

6,280,000

 

$

15,770,000

 

$

24,406,000

 

Stock-based compensation charges (1)

(A)

 

(1,013,000

)

 

(711,000

)

 

(3,183,000

)

 

(2,049,000

)

Strategic consulting and litigation costs (2)

(B)

 

(923,000

)

 

(958,000

)

 

(1,125,000

)

 

(9,427,000

)

Corporate separation payment (4)

(D)

 

 

 

 

 

(109,000

)

 

(689,000

)

Non-GAAP adjusted general and administrative expense

$

3,388,000

 

$

4,611,000

 

$

11,353,000

 

$

12,241,000

 

 

Operating income:

GAAP operating income

$

2,379,000

 

$

1,229,000

 

$

3,362,000

 

$

(6,593,000

)

Stock-based compensation charges (1)

(A)

 

2,108,000

 

 

1,633,000

 

 

7,349,000

 

 

4,826,000

 

Strategic consulting and litigation costs (2)

(B)

 

1,083,000

 

 

1,949,000

 

 

1,584,000

 

 

11,768,000

 

Intangible Amortization (3)

(C)

 

5,668,000

 

 

4,813,000

 

 

16,992,000

 

 

11,744,000

 

Corporate separation payment (4)

(D)

 

 

 

 

 

1,543,000

 

 

1,616,000

 

Non-GAAP adjusted operating income

$

11,238,000

 

$

9,624,000

 

$

30,830,000

 

$

23,361,000

 

$

 

Adjusted Operating Margin

 

20.5

%

 

20.1

%

 

19.2

%

 

19.0

%

 
 

Net income:

GAAP net (loss) income

$

(725,000

)

$

(1,597,000

)

$

(3,480,000

)

$

(11,568,000

)

Stock-based compensation charges (1)

(A)

 

2,108,000

 

 

1,633,000

 

 

7,349,000

 

 

4,826,000

 

Strategic consulting and litigation costs (2)

(B)

 

1,083,000

 

 

1,949,000

 

 

1,584,000

 

 

11,768,000

 

Intangible Amortization (3)

(C)

 

5,668,000

 

 

4,813,000

 

 

16,992,000

 

 

11,744,000

 

Corporate separation payment (4)

(D)

 

 

 

 

 

1,543,000

 

 

1,616,000

 

Non-GAAP adjusted net income

$

8,134,000

 

$

6,798,000

 

$

23,988,000

 

$

18,386,000

 

 
 

Deferred tax (benefit) expense

 

1,077,000

 

 

(142,000

)

 

(129,000

)

 

(2,151,000

)

Non-GAAP adjusted net income excluding deferred tax (benefit) expense

$

9,211,000

 

$

6,656,000

 

$

23,859,000

 

$

16,235,000

 

 
 

Deemed and accrued dividends on preferred stock

 

(2,267,000

)

 

(2,090,000

)

 

(6,714,000

)

 

(7,894,000

)

Adjusted Net income attributable to common stockholders

$

6,944,000

 

$

4,566,000

 

$

17,145,000

 

$

8,341,000

 

 
 

Diluted net income per common share:

GAAP net income per share before deemed dividends

$

(0.01

)

$

(0.03

)

$

(0.06

)

$

(0.22

)

Adjustments per share

(A-D)

$

0.16

 

$

0.16

 

$

0.51

 

$

0.57

 

Non-GAAP adjusted net income per share before deemed dividends

$

0.15

 

$

0.13

 

$

0.44

 

$

0.35

 

 
 

Deferred tax (benefit) expense impact to Non-GAAP adjusted net income before deemed dividends per share

(E)

$

0.02

 

$

(0.00

)

$

(0.00

)

$

(0.04

)

Non-GAAP adjusted net income before deemed dividends per share excluding deferred tax (benefit) expense

$

0.17

 

$

0.13

 

$

0.44

 

$

0.31

 

 
 

Deemed dividends per share impact to Non-GAAP adjusted net income

$

(0.04

)

$

(0.04

)

$

(0.12

)

$

(0.15

)

Adjusted Net income per share attributable to common stockholders

$

0.13

 

$

0.09

 

$

0.32

 

$

0.16

 

 
 

Shares used to compute Non-GAAP adjusted net income per share – diluted

 

54,999,114

 

 

53,148,078

 

 

53,933,721

 

 

52,965,163

 

 

Reconciliation of Net income to EBITDA and Adjusted EBITDA:

(F)

Net income

$

(725,000

)

$

(1,597,000

)

$

(3,480,000

)

$

(11,568,000

)

Income tax provision

 

1,196,000

 

 

(133,000

)

 

(244,000

)

 

(2,308,000

)

Interest expense

 

2,035,000

 

 

2,973,000

 

 

7,190,000

 

 

7,398,000

 

Depreciation

 

1,204,000

 

 

1,402,000

 

 

3,801,000

 

 

3,637,000

 

Amortization

 

6,887,000

 

 

5,274,000

 

 

19,804,000

 

 

12,665,000

 

EBITDA

 

10,597,000

 

 

7,919,000

 

 

27,071,000

 

 

9,824,000

 

 

Adjustments:

Stock-based compensation charges (1)

(A)

 

2,108,000

 

 

1,633,000

 

 

7,349,000

 

 

4,826,000

 

Strategic consulting and litigation costs (2)

(B)

 

1,083,000

 

 

1,949,000

 

 

1,584,000

 

 

11,768,000

 

Corporate separation payment (4)

(D)

 

 

 

 

 

1,543,000

 

 

1,616,000

 

Adjusted EBITDA

$

13,788,000

 

$

11,501,000

 

$

37,547,000

 

$

28,034,000

 

 

Adjusted EBITDA margin

 

25.1

%

 

24.0

%

 

23.4

%

 

22.8

%

 

(1) Stock-based compensation charges are included as follows:

Cost of revenues

$

97,000

 

$

154,000

 

$

1,105,000

 

$

422,000

 

Research and development

 

433,000

 

 

295,000

 

 

1,184,000

 

 

765,000

 

Selling and marketing

 

565,000

 

 

473,000

 

 

1,877,000

 

 

1,590,000

 

General and administrative

 

1,013,000

 

 

711,000

 

 

3,183,000

 

 

2,049,000

 

$

2,108,000

 

$

1,633,000

 

$

7,349,000

 

$

4,826,000

 

(2) Strategic consulting, acquisition, integration and litigation costs are included as follows:

Cost of revenues

 

 

 

 

 

21,000

 

 

 

115,000

 

 

 

293,000

 

 

 

 

Research and development

 

 

 

459,000

 

 

132,000

 

 

795,000

 

Selling and marketing

 

160,000

 

 

511,000

 

 

212,000

 

 

1,253,000

 

General and administrative

 

923,000

 

 

958,000

 

 

1,125,000

 

 

9,427,000

 

$

1,083,000

 

$

1,949,000

 

$

1,584,000

 

$

11,768,000

 

(3) Intangible Amortization is included as follows:

Cost of revenues

 

2,486,000

 

 

1,943,000

 

 

7,432,000

 

 

4,472,000

 

Research and development

 

76,000

 

 

76,000

 

 

227,000

 

 

227,000

 

Selling and marketing

 

3,106,000

 

 

2,794,000

 

 

9,333,000

 

 

7,045,000

 

$

5,668,000

 

$

4,813,000

 

$

16,992,000

 

$

11,744,000

 

(4) Corporate separation payment is included as follows:

Cost of revenues

 

 

 

 

 

867,000

 

 

52,000

 

Research and development

 

 

 

 

 

128,000

 

 

236,000

 

Selling and marketing

 

 

 

 

 

439,000

 

 

639,000

 

General and administrative

 

 

 

 

 

109,000

 

 

689,000

 

$

 

$

 

$

1,543,000

 

$

1,616,000

 

 

(5) Net Income tax components:

Current tax (benefit)/expense

 

119,000

 

 

9,000

 

 

(115,000

)

 

(157,000

)

Deferred tax (benefit)/expense

 

1,077,000

 

 

(142,000

)

 

(129,000

)

 

(2,151,000

)

$

1,196,000

 

$

(133,000

)

$

(244,000

)

$

(2,308,000

)

 

Contacts

Zix Company Contact
Geoff Bibby

1-214-370-2241

gbibby@zixcorp.com

Zix Investor Contact
Matt Glover and Tom Colton

Gateway Investor Relations

1-949-574-3860

ZIXI@gatewayir.com

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