Revenue and earnings per share meet quarterly
guidance
Zix Corporation (ZixCorp), (Nasdaq: ZIXI), a leader in
email data protection, today announced financial results for the
second quarter ended June 30, 2015.
Second Quarter 2015 Financial Highlights
- Ending backlog of $73.9 million, an
increase of 8.1% year-over-year and the Company’s 13th consecutive
quarterly record in backlog
- Total orders of $17.4 million, an
increase of 10.6% year-over-year
- New first year orders of $2.5 million,
an increase of 5.5% year-over-year
- Revenue of $13.3 million, an increase
of 5.4% year-over-year
- GAAP net income of $0.02 per share, an
increase of 16.3% year-over-year (1)
- Non-GAAP adjusted net income of $0.04
per share, an increase of 0.9% year-over-year (1) (3)
- Cash flow from operations was
approximately $3.0 million, a decrease of $1.1 million
year-over-year, due to normal timing of cash receipts on the
statement of cash flows
- Cash and cash equivalents totaled $28.0
million at June 30, 2015, an increase of $1.8 million from the June
30, 2014, balance
“Our first half of 2015 was a great start to the year,” said
Rick Spurr, ZixCorp’s Chief Executive Officer. “Our sales
teams delivered a record level of total orders for the first half,
resulting in another record backlog at quarter end and providing a
healthy outlook for our company. Building on this success is the
increasing demand for our DLP and BYOD products and the excitement
around our recent partnership with Cisco.”
Second Quarter 2015 Corporate Financial Summary and Other
Operational Metrics
$ in Millions, except per share and % data Q2
2015 Q2
2014
% or $
Change (1)
Revenue
$13.3 $12.6
5.4% GAAP Gross Profit
$10.9
$10.6 2.7% GAAP Net Income
$1.1 $1.0
14.1% GAAP Net Income Per Share – Diluted
$0.02 $0.02 16.3%
Non-GAAP Adjusted Gross Profit(2)
$10.9
$10.6 2.7% Non-GAAP Adjusted Net Income
(2)
$2.2 $2.2
(0.9)% Non-GAAP Adjusted Net Income Per Share-Diluted (2)
$0.04 $0.04
0.9% Adjusted EBITDA (2) (3)
$2.8
$2.7 6.4% Adjusted EBITDA Margin
(2) (3)
21.3% 21.1%
0.2pt New First Year Orders
$2.5
$2.4 5.5% Total Orders
$17.4 $15.7 10.6%
Bookings Backlog (4)
$73.9 $68.4
8.1% (1)
Changes are based on actual financial results versus numbers
shown in the table which may reflect rounding (2)
A reconciliation of GAAP to Non-GAAP
adjusted results is attached to this press release and is available
on our investor relations Web site at
http://investor.zixcorp.com
(3) Adjusted earnings before interest, taxes, depreciation and
amortization (4) Service contract commitments that represent future
revenue to be recognized as the services are provided
Business Highlights
- As previously disclosed, ZixCorp’s
board of directors approved a share repurchase program in
May that enables the company to purchase up to $15
million of its shares of common stock from time to time in the
open market or in block purchase transactions. The share repurchase
program is scheduled to expire on Oct. 31, 2015.
- The first of two products to be
released in 2015 as part of ZixCorp’s new partnership with Cisco
was made available through the Cisco sales and reseller channels at
the end of June 2015.
- ZixCorp is in the final stages of
negotiating a “go-to-market” referral agreement with a major U.S.
information technology vendor.
Outlook
For the third quarter 2015, the Company forecasts revenue to be
between $13.6 million and $13.9 million and Non-GAAP fully diluted
adjusted earnings per share to be between $0.04 and $0.05. For the
full-year 2015, the Company reaffirms previously issued revenue
guidance of $54 million to $56 million and fully diluted Non-GAAP
adjusted earnings per share of $0.19 to $0.21.
Conference Call Information
The Company will discuss its financial results and outlook on a
conference call on Tuesday, July 21, 2015, at 5 p.m. ET. A live
webcast of the conference call will be available on our investor
relations Web site at http://investor.zixcorp.com. 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
75476822. An audio replay of the conference will be available until
July 28, 2015, by dialing 1-855-859-2056 (U.S. toll-free) or
1-404-537-3406 (international) and entering the access code
75476822. An archive for the webcast will also be available on the
ZixCorp investor relations Web site.
About Zix Corporation
ZixCorp is a leader in email data protection. ZixCorp offers
industry-leading email encryption, a unique email DLP solution and
an innovative email BYOD solution to meet your company’s data
protection and compliance needs. ZixCorp is trusted by the nation’s
most influential institutions in healthcare, finance and government
for easy to use secure email solutions. ZixCorp is publicly traded
on the Nasdaq Global Market under the symbol ZIXI, and its
headquarters are in Dallas, Texas. For more information, visit
www.zixcorp.com.
Statements in this release that are not purely historical facts
or that necessarily depend upon future events, including statements
about forecasts of sales, revenue or earnings, 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 ZixCorp on the date this
release was issued. ZixCorp 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 risks or uncertainties related to market acceptance of
new ZixCorp solutions and how privacy and data security laws may
affect demand for ZixCorp email data protection solutions. ZixCorp
may not succeed in addressing these and other risks. Further
information regarding factors that could affect ZixCorp financial
and other results can be found in the risk factors section of
ZixCorp’s most recent annual report on Form 10-K filed with the
Securities and Exchange Commission.
ZIX CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEETS June 30, 2015
December 31, (unaudited) 2014
ASSETS Current assets: Cash and cash equivalents $
27,974,000 $ 21,685,000 Receivables, net 1,259,000 1,452,000
Prepaid and other current assets 2,361,000 2,372,000 Deferred tax
assets 1,324,000 1,763,000 Total current assets
32,918,000 27,272,000 Property and equipment, net 4,595,000
4,399,000 Goodwill 2,161,000 2,161,000 Deferred tax assets
49,278,000 49,892,000 Total assets $ 88,952,000 $ 83,724,000
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and accrued expenses $ 3,689,000 $
3,436,000 Deferred revenue 21,159,000 21,587,000
Total current liabilities
24,848,000 25,023,000 Long-term liabilities: Deferred revenue
1,107,000 898,000 Deferred rent 1,479,000 1,533,000
Total long-term liabilities 2,586,000 2,431,000 Total
liabilities 27,434,000 27,454,000 Total stockholders’ equity
61,518,000 56,270,000 Total liabilities and stockholders’
equity $ 88,952,000 $ 83,724,000
ZIX
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
Three Months
Ended June 30, Six Months Ended June 30,
2015 2014 2015
2014 Revenue $ 13,302,000 $ 12,615,000
$ 26,375,000 $ 24,777,000 Cost of revenue 2,429,000
2,032,000 4,642,000
4,057,000 Gross profit 10,873,000 10,583,000 21,733,000
20,720,000 Operating expenses: Research and development 2,094,000
2,218,000 4,199,000 4,419,000 Selling, general and administrative
7,046,000 6,778,000 13,961,000
13,067,000 Total operating expenses
9,140,000 8,996,000 18,160,000
17,486,000 Operating income 1,733,000
1,587,000 3,573,000 3,234,000 Operating margin 13 % 13 % 14 % 13 %
Other income, net 29,000 12,000 52,000 74,000 Income
before income taxes 1,762,000 1,599,000 3,625,000 3,308,000 Income
tax benefit (expense) (647,000 ) (622,000 )
(1,334,000 ) (1,272,000 ) Net income $ 1,115,000 $
977,000 $ 2,291,000 $ 2,036,000 Basic
income per common share: $ 0.02 $ 0.02 $ 0.04
$ 0.03 Diluted income per common share: $ 0.02
$ 0.02 $ 0.04 $ 0.03 Shares used
in per share calculation - basic 57,146,014
58,565,002 56,822,953 58,967,904
Shares used in per share calculation - diluted
58,373,407 59,466,867 57,886,307
60,176,977
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 2015
2014 Operating activities: Net income $
2,291,000 $ 2,036,000 Non-cash items in net income 2,937,000
2,772,000 Changes in operating assets and liabilities
337,000 1,032,000 Net cash provided by
operating activities 5,565,000 5,840,000 Investing
activities: Purchases of property and equipment (1,400,000 )
(857,000 ) Net cash used in investing activities (1,400,000
) (857,000 ) Financing activities: Proceeds from exercise of
stock options 3,642,000 62,000 Purchase of Treasury Stock
(1,518,000 ) (6,403,000 )
Net cash used in financing activities
2,124,000 (6,341,000 ) Increase
(Decrease) in cash and cash equivalents 6,289,000 (1,358,000 ) Cash
and cash equivalents, beginning of period 21,685,000
27,518,000 Cash and cash equivalents, end of period $
27,974,000 $ 26,160,000
ZIX CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended Six
Months Ended June 30, June 30, 2015
2014 2015
2014 Revenue: GAAP revenue $ 13,302,000 $
12,615,000 $ 26,375,000 $ 24,777,000
Cost of revenue GAAP cost of revenue $ 2,429,000 $ 2,032,000 $
4,642,000 $ 4,057,000 Stock-based compensation charges (1) (A)
(47,000 ) (49,000 ) (98,000 ) (101,000
) Non-GAAP adjusted cost of revenue $ 2,382,000 $ 1,983,000
$ 4,544,000 $ 3,956,000 Gross profit:
GAAP gross profit $ 10,873,000 $ 10,583,000 $ 21,733,000 $
20,720,000 Stock-based compensation charges (1) (A) 47,000
49,000 98,000 101,000
Non-GAAP adjusted gross profit $ 10,920,000 $
10,632,000 $ 21,831,000 $ 20,821,000
Research and development expense GAAP research and development
expense $ 2,094,000 $ 2,218,000 $ 4,199,000 $ 4,419,000 Stock-based
compensation charges (1) (A) (61,000 ) (64,000 )
(127,000 ) (124,000 ) Non-GAAP adjusted research and
development expense $ 2,033,000 $ 2,154,000 $
4,072,000 $ 4,295,000 Selling and marketing
expense GAAP selling and marketing expense $ 4,859,000 $ 4,713,000
$ 9,653,000 $ 8,930,000 Stock-based compensation charges (1) (A)
(123,000 ) (150,000 ) (274,000 )
(294,000 ) Non-GAAP adjusted selling and marketing expense $
4,736,000 $ 4,563,000 $ 9,379,000 $ 8,636,000
General and administrative expense GAAP general and
administrative expense $ 2,187,000 $ 2,065,000 $ 4,308,000 $
4,137,000 Stock-based compensation charges (1) (A) (134,000 )
(173,000 ) (334,000 ) (398,000 ) Non-recurring consulting and legal
costs (2) (B) (163,000 ) (236,000 ) (329,000 )
(269,000 ) Non-GAAP adjusted general and administrative
expense $ 1,890,000 $ 1,656,000 $ 3,645,000 $
3,470,000 Operating income: GAAP operating income $
1,733,000 $ 1,587,000 $ 3,573,000 $ 3,234,000 Stock-based
compensation charges (1) (A) 365,000 436,000 833,000 917,000
Non-recurring litigation costs (2) (B) 163,000
236,000 329,000 269,000 Non-GAAP
adjusted operating income $ 2,261,000 $ 2,259,000 $
4,735,000 $ 4,420,000 Adjusted Operating Margin 17.0
% 17.9 % 18.0 % 17.8 % Net income: GAAP net income $
1,115,000 $ 977,000 $ 2,291,000 $ 2,036,000 Stock-based
compensation charges (1) (A) 365,000 436,000 833,000 917,000
Non-recurring consulting and legal costs (2) (B) 163,000 236,000
329,000 269,000 Income tax impact (C) 511,000
525,000 1,054,000 1,061,000
Non-GAAP adjusted net income $ 2,154,000 $ 2,174,000
$ 4,507,000 $ 4,283,000 Diluted net
income per common share: GAAP net income $ 0.02 $ 0.02 $ 0.04 $
0.03 Adjustments per share (A-C) $ 0.02 $ 0.02 $ 0.04
$ 0.04 Non-GAAP adjusted net income $ 0.04 $
0.04 $ 0.08 $ 0.07 Shares used to
compute Non-GAAP adjusted net income per share - diluted
58,373,407 59,466,867 57,886,307
60,176,977
Reconciliation of Net income to
EBITDA and Adjusted EBITDA: (D) Net income $ 1,115,000 $
977,000 $ 2,291,000 $ 2,036,000 Income tax provision 647,000
622,000 1,334,000 1,272,000 Interest expense - - - - Depreciation
expense 547,000 395,000
1,052,000 794,000 EBITDA 2,309,000 1,994,000
4,677,000 4,102,000
Adjustments: Share-based
compensation expense (A) 365,000 436,000 833,000 917,000
Non-recurring litigation costs (B) 163,000
236,000 329,000 269,000
Adjusted EBITDA $ 2,837,000 $ 2,666,000 $
5,839,000 $ 5,288,000 Adjusted EBITDA margin
21.3 % 21.1 % 22.1 % 21.3 % (1) Stock-based compensation
charges are included as follows: Cost of revenues $ 47,000 $ 49,000
$ 98,000 $ 101,000 Research and development 61,000 64,000 127,000
124,000 Selling and marketing 123,000 150,000 274,000 294,000
General and administrative 134,000 173,000
334,000 398,000 $ 365,000
$ 436,000 $ 833,000 $ 917,000 (2)
Non-recurring litigation costs are included as follows: General and
administrative 163,000 236,000
329,000 269,000 $ 163,000 $ 236,000
$ 329,000 $ 269,000
This presentation includes Non-GAAP measures. Our Non-GAAP
measures are not meant to be considered in isolation or as a
substitute for comparable GAAP measures and should be read only in
conjunction with our consolidated financial statements prepared in
accordance with GAAP. For a detailed explanation of the adjustments
made to comparable GAAP measures, the reasons why management uses
these measures, the usefulness of these measures and the material
limitations of these measures, see Notes to Reconcilation of GAAP
to Non-GAAP Financial Measures on the next page.
ZIX CORPORATIONNOTES TO
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
USE OF NON-GAAP FINANCIAL INFORMATION
The Company occasionally utilizes financial measures and terms
not calculated in accordance with generally accepted accounting
principles in the United States (“GAAP”) in order to provide
investors with an alternative method for assessing our operating
results in a manner that enables investors to more thoroughly
evaluate our current performance as compared to past performance.
We also believe these Non-GAAP measures provide investors with a
more informed baseline for modeling the Company’s future financial
performance. Management uses these Non-GAAP financial measures to
make operational and investment decisions, to evaluate the
Company's performance, to forecast and to determine compensation.
Further, management utilizes these performance measures for
purposes of comparison with its business plan and individual
operating budgets and allocation of resources. We believe that our
investors should have access to, and that we are obligated to
provide, the same set of tools that we use in analyzing our
results. These Non-GAAP measures should be considered in addition
to results prepared in accordance with GAAP, but should not be
considered a substitute for or superior to GAAP results. We have
provided definitions below for certain Non-GAAP financial measures,
together with an explanation of why management uses these measures
and why management believes that these Non-GAAP financial measures
are useful to investors. In addition, in our earnings release we
have provided tables to reconcile the Non-GAAP financial measures
utilized to GAAP financial measures.
ADJUSTED NON-GAAP MEASURES
Our Non-GAAP measures adjust GAAP Cost of revenue, Gross profit,
Research and development expense, Selling and marketing expense,
General and administrative expense, Operating income, Net income,
Net income per share - diluted, and EBITDA for non-cash stock-based
compensation expense, and non-recurring litigation expense to
derive Non-GAAP adjusted Cost of revenue, adjusted Gross profit,
adjusted Research and development expense, adjusted Selling and
marketing expense, adjusted General and administrative expense,
adjusted Operating income, adjusted Net income, adjusted Net income
per share - diluted and adjusted EBITDA. We provide a
reconciliation of these adjusted Non-GAAP measures to GAAP Gross
profit, Operating income, Net income, Net income per share -
diluted and EBITDA.
We do not provide a reconciliation of forward-looking adjusted
Non-GAAP earnings per share to GAAP earnings per share. Our
forward-looking adjusted Non-GAAP earnings per share information
consistently excludes non-cash stock-based compensation expense.
Additionally, the adjusted Non-GAAP earnings per share will
consistently exclude non-recurring items that impact our ongoing
business. See items (A) through (C) below for further information
on the current quarter's reconciling items.
Items (A) through (D) on the "Reconciliation of GAAP to Non-GAAP
Financial Measures" table are listed to the right of certain
categories under "Gross profit," "Operating income," "Net income,"
"Net income per share - diluted" and "EBITDA" and correspond to the
categories explained in further detail below under (A) through
(D).
(A) Non-cash stock-based compensation charges relating to stock
option grants, restricted stock, and restricted stock units awarded
to and accounted for in accordance with Share-Based Payment
accounting guidance. See (1) on previous page for breakdown of
stock-based compensation. Because of varying valuation
methodologies, subjective assumptions and varying award types, the
Company believes that the exclusion of stock-based compensation
charges provides for more accurate comparisons to our peer
companies and for a more accurate comparison of our financial
results to previous periods. Additionally, the Company believes it
is useful to investors to understand the specific impact of
non-cash stock-based compensation charges on our operating
results.
(B) Non-recurring litigation costs. See item (2) on previous
page for breakdown of non-recurring litigation costs. The Company’s
management excludes these costs when evaluating its ongoing
performance and/or predicting its earnings trends and therefore
excludes these charges on our adjusted operating results.
(C) The Non-GAAP adjustment to the tax provision represents the
non-cash tax expense included in the GAAP tax provision, including
the current period utilization of deferred tax assets created in
previous periods. The remaining provision for income taxes
represents expected cash taxes to be paid.
(D) EBITDA represents earnings before interest, taxes,
depreciation and amortization. Adjusted EBITDA adds back
stock-based compensation charges and non-recurring litigation
expenses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150721006280/en/
ZixCorpInvestor RelationsTodd Kehrli or Jim Byers,
323-468-2300zixi@mkr-group.comorPublic RelationsTaylor Stansbury
Johnson, 214-370-2134tjohnson@zixcorp.com
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