Company meets high-end of full-year adjusted earnings
guidance
Zix Corporation (NASDAQ: ZIXI), a leader in email data
protection, today announced financial results for the fourth
quarter and full year ended Dec. 31, 2015.
Fourth Quarter 2015 Financial Highlights
- Fourth quarter new first year orders of
$2.9 million, an increase of 14.8% year-over-year
- Fourth quarter revenue of $14.3
million, an increase of 11.4% year-over-year
- Fourth quarter GAAP fully diluted
earnings per share of $0.01, a decrease of 11.0%
year-over-year
- Fourth quarter Non-GAAP fully diluted
earnings per share of $0.07, an increase of 105.2% year-over-year
(2)
- The Company generated approximately
$3.5 million in cash flow from operations, an increase of $727
thousand year-over-year
Full-Year 2015 Financial Highlights
- Ending backlog of $74.2 million, an
increase of 7.0% from the prior year end
- Full-year new first year orders of
$10.2 million, an increase of 19.7% year-over-year and a new
company record
- Full-year revenue of $54.7 million, an
increase of 8.7% year-over-year
- Full-year GAAP fully diluted earnings
per share of $0.09, an increase of 25.4% year-over-year (2)
- Full-year Non-GAAP fully diluted
earnings per share of $0.21, an increase of 43.8% year-over-year
(2)
- The Company generated approximately
$15.6 million in cash flow from operations for the full year ended
Dec. 31, 2015, an increase of 17.3% year-over-year
- Cash and cash equivalents at year-end
was $28.7 million, despite $15.0 million spent on share repurchases
during 2015. This $28.7 million is an increase of $7.0 million
compared to the ending cash balance for 2014
“Zix experienced a healthy 2015 punctuated by a record year in
New First Year Orders. All of our sales teams contributed to our
growth, demonstrating the meaningful results we can achieve in
combining the strengths of our direct team, VAR and MSP channels,
and strategic partnerships, including an exciting relationship with
Cisco,” said David Wagner, ZixCorp’s Chief Executive
Officer. “While a record in New First Year Orders is a positive
milestone for our company, it is also significant for our customers
who are united in a trusted community and benefit from greater ease
of use and security as our community expands. We look forward to
continued focus on growth in 2016, which strengthens our company’s
position, our customers’ protection and our shareholders’
value.”
Fourth Quarter and Full-Year 2015 Corporate Financial Summary
and Other Operational Metrics
$ in Millions, except per share data Q4
2015 Q4 2014 % or $
Change (1)
FY 2015 FY 2014
% or $
Change (1)
Revenue
$14.3 $12.9
11.4% $54.7
$50.3 8.7% GAAP Gross Profit
$11.8 $10.7
10.7% $45.1 $42.0
7.4% GAAP Net Income
$0.8
$0.9 (11.7) %
$5.0 $4.1
22.3% GAAP Net Income Per Share – Diluted
$0.01 $0.02
(11.0)% $0.09
$0.07 25.4% Non-GAAP Adjusted Gross
Profit (2)
$11.9 $10.7
10.8% $45.3
$42.2 7.3% Non-GAAP Adjusted Net Income
(2)
$4.0 $2.0
103.4% $12.3
$8.8 40.1% Non-GAAP Adjusted Net Income
Per Share – Diluted (2)
$0.07
$0.03 105.2% $0.21
$0.15 43.8% Adjusted
EBITDA (2) (3)
$4.5 $2.5
83.0% $14.9
$10.8 37.1% Adjusted EBITDA Margin (3)
(4)
31.4% 19.1%
12.3pts 27.2%
21.5% 5.6pts New First Year Orders
$2.9 $2.5
14.8% $10.2 $8.5
19.7% Total Orders
$14.7
$13.8 6.0%
$61.0 $55.4 10.2%
Backlog (4)
$74.2 $69.3
7.0%
(1)
Changes are based on actuals versus
numbers shown in the columns which may reflect rounding
(2)
A reconciliation of GAAP to Non-GAAP
adjusted results is attached to this press release and available on
our investor relations Web page 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
Outlook
For the first quarter 2016, the Company forecasts revenue to be
between $14.2 million and $14.4 million and fully diluted adjusted
earnings per share of $0.05. Full-year 2016 revenues are projected
to be between $59.5 million and $61.0 million. Fully diluted
Non-GAAP adjusted earnings per share are projected to be $0.23.
Conference Call Information
The Company will discuss its financial results and outlook on a
conference call on Tuesday, Feb. 16, 2016, at 5 p.m. ET. A live
webcast of the conference call will be available on its 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
34282096.
An audio replay of the conference will be available until Feb.
24, 2016, by dialing 1-855-859-2056 (U.S. toll-free) or
1-404-537-3406 (international) and entering the access code
34282096. An archive of 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 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 filing on Form 10-K with the Securities and
Exchange Commission.
ZIX CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEETS December 31,
2015 December 31, (unaudited) 2014
ASSETS Current assets: Cash and cash equivalents $
28,664,000 $ 21,685,000 Receivables, net 498,000 1,452,000 Prepaid
and other current assets 2,908,000 2,372,000 Deferred tax assets
- 1,763,000 Total current assets 32,070,000
27,272,000 Property and equipment, net 4,143,000 4,399,000 Goodwill
2,161,000 2,161,000 Deferred tax assets 48,912,000
49,892,000 Total assets $ 87,286,000 $ 83,724,000
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable and accrued expenses $ 5,067,000 $ 3,436,000
Deferred revenue 23,182,000 21,587,000 Total current
liabilities 28,249,000 25,023,000 Long-term liabilities: Deferred
revenue 839,000 898,000 Deferred rent 1,426,000
1,533,000 Total long-term liabilities 2,265,000
2,431,000 Total liabilities 30,514,000 27,454,000 Total
stockholders’ equity 56,772,000 56,270,000 Total
liabilities and stockholders’ equity $ 87,286,000 $ 83,724,000
ZIX CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended December 31, Twelve
Months Ended December 31, 2015
2014 2015
2014 Revenue $ 14,327,000 $ 12,865,000
$ 54,713,000 $ 50,347,000 Cost of revenue 2,522,000
2,205,000 9,593,000
8,324,000 Gross profit 11,805,000 10,660,000 45,120,000
42,023,000 Operating expenses: Research and development 2,074,000
2,398,000 8,317,000 9,051,000 Selling, general and administrative
8,506,000 6,611,000 28,887,000
26,222,000 Total operating expenses
10,580,000 9,009,000 37,204,000
35,273,000 Operating income 1,225,000
1,651,000 7,916,000 6,750,000 Operating margin 9 % 13 % 14 % 13 %
Other income, net 82,000 43,000 244,000 183,000
Income before income taxes 1,307,000 1,694,000 8,160,000 6,933,000
Income tax expense (509,000 ) (790,000 )
(3,144,000 ) (2,830,000 ) Net income $ 798,000 $
904,000 $ 5,016,000 $ 4,103,000 Basic
income per common share: $ 0.01 $ 0.02 $ 0.09
$ 0.07 Diluted income per common share: $ 0.01
$ 0.02 $ 0.09 $ 0.07 Shares used
in per share calculation - basic 55,537,228
56,282,492 56,421,833 57,948,864
Shares used in per share calculation - diluted
56,554,355 57,043,838 57,476,006
58,966,625
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Twelve Months Ended December 31,
2015 2014
Operating activities: Net income $ 5,016,000 $ 4,103,000 Non-cash
items in net income 7,068,000 5,702,000 Changes in operating assets
and liabilities 3,533,000 3,512,000 Net
cash provided by operating activities 15,617,000 13,317,000
Investing activities: Purchases of property and equipment
(1,951,000 ) (3,402,000 ) Net cash used in investing
activities (1,951,000 ) (3,402,000 ) Financing activities:
Proceeds from exercise of stock options 8,674,000 748,000 Purchase
of Treasury Stock (15,361,000 ) (16,496,000 ) Net
cash used in financing activities (6,687,000 )
(15,748,000 ) Increase (Decrease) in cash and cash
equivalents 6,979,000 (5,833,000 ) Cash and cash equivalents,
beginning of period 21,685,000 27,518,000
Cash and cash equivalents, end of period $ 28,664,000
$ 21,685,000
ZIX CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months
Ended Twelve Months Ended December
31, December 31, 2015
2014 2015
2014 Revenue: GAAP revenue $ 14,327,000
$ 12,865,000 $ 54,713,000 $ 50,347,000
Cost of revenue GAAP cost of revenue $ 2,522,000 $ 2,205,000 $
9,593,000 $ 8,324,000 Stock-based compensation charges (1) (A)
(45,000 ) (34,000 ) (181,000 ) (180,000
) Non-GAAP adjusted cost of revenue $ 2,477,000 $ 2,171,000
$ 9,412,000 $ 8,144,000 Gross profit:
GAAP gross profit $ 11,805,000 $ 10,660,000 $ 45,120,000 $
42,023,000 Stock-based compensation charges (1) (A) 45,000
34,000 181,000 180,000
Non-GAAP adjusted gross profit $ 11,850,000 $
10,694,000 $ 45,301,000 $ 42,203,000
Research and development expense GAAP research and development
expense $ 2,074,000 $ 2,398,000 $ 8,317,000 $ 9,051,000 Stock-based
compensation charges (1) (A) (59,000 ) (51,000 )
(243,000 ) (236,000 ) Non-GAAP adjusted research and
development expense $ 2,015,000 $ 2,347,000 $
8,074,000 $ 8,815,000 Selling and marketing
expense GAAP selling and marketing expense $ 4,265,000 $ 4,811,000
$ 18,075,000 $ 18,284,000 Stock-based compensation charges (1) (A)
(192,000 ) (107,000 ) (579,000 )
(532,000 ) Non-GAAP adjusted selling and marketing expense $
4,073,000 $ 4,704,000 $ 17,496,000 $
17,752,000 General and administrative expense GAAP
general and administrative expense $ 4,241,000 $ 1,800,000 $
10,812,000 $ 7,938,000 Stock-based compensation charges (1) (A)
(706,000 ) (155,000 ) (1,170,000 ) (734,000 ) Strategic consulting
and litigation costs (2) (B) (502,000 ) (3,000 ) (1,218,000 )
(599,000 ) Executive separation payment (3) (C) (1,152,000 )
- (1,152,000 ) - Non-GAAP
adjusted general and administrative expense $ 1,881,000 $
1,642,000 $ 7,272,000 $ 6,605,000
Operating income: GAAP operating income $ 1,225,000 $ 1,651,000 $
7,916,000 $ 6,750,000 Stock-based compensation charges (1) (A)
1,002,000 347,000 2,173,000 1,682,000 Strategic consulting and
litigation costs (2) (B) 502,000 3,000 1,218,000 599,000 Executive
separation payment (3) (C) 1,152,000 -
1,152,000 - Non-GAAP adjusted operating
income $ 3,881,000 $ 2,001,000 $ 12,459,000 $
9,031,000 $ - Adjusted Operating Margin 27.1 % 15.6 % 22.8 %
17.9 % Net income: GAAP net income $ 798,000 $
904,000 $ 5,016,000 $ 4,103,000 Stock-based compensation charges
(1) (A) 1,002,000 347,000 2,173,000 1,682,000 Strategic consulting
and litigation costs (2) (B) 502,000 3,000 1,218,000 599,000
Executive separation payment (3) (C) 1,152,000 - 1,152,000 - Income
tax impact (D) 574,000 726,000
2,744,000 2,396,000 Non-GAAP adjusted net
income $ 4,028,000 $ 1,980,000 $ 12,303,000 $
8,780,000 Diluted net income per common share:
GAAP net income $ 0.01 $ 0.02 $ 0.09 $ 0.07 Adjustments per share
(A-D) $ 0.06 $ 0.01 $ 0.12 $ 0.08
Non-GAAP adjusted net income $ 0.07 $ 0.03 $ 0.21
$ 0.15 Shares used to compute Non-GAAP
adjusted net income per share - diluted 56,554,355
57,043,838 57,476,006 58,966,625
Reconciliation of Net income to EBITDA and
Adjusted EBITDA: (E) Net income $ 798,000 $ 904,000 $ 5,016,000
$ 4,103,000 Income tax provision 509,000 790,000 3,144,000
2,830,000 Interest expense - - - - Depreciation expense
533,000 413,000 2,152,000
1,622,000 EBITDA 1,840,000 2,107,000 10,312,000 8,555,000
Adjustments: Share-based compensation expense (A)
1,002,000 347,000 2,173,000 1,682,000 Strategic consulting and
litigation costs (2) (B) 502,000 3,000 1,218,000 599,000 Executive
separation payment (3) (C) 1,152,000 -
1,152,000 -
Adjusted EBITDA $
4,496,000 $ 2,457,000 $ 14,855,000 $
10,836,000 Adjusted EBITDA margin 31.4 % 19.1 % 27.2
% 21.5 % (1) Stock-based compensation charges are included
as follows: Cost of revenues $ 45,000 $ 34,000 $ 181,000 $ 180,000
Research and development 59,000 51,000 243,000 236,000 Selling and
marketing 192,000 107,000 579,000 532,000 General and
administrative 706,000 155,000
1,170,000 734,000 $ 1,002,000 $ 347,000
$ 2,173,000 $ 1,682,000 (2) Strategic
consulting and litigation costs are included as follows: General
and administrative 502,000 3,000
1,218,000 599,000 $ 502,000 $ 3,000
$ 1,218,000 $ 599,000 (3) Executive separation
payment is included as follows: General and administrative
1,152,000 - 1,152,000 -
$ 1,152,000 $ - $ 1,152,000 $ -
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 Reconciliation of GAAP
to Non-GAAP Financial Measures on the next page.
ZIX CORPORATION NOTES 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, strategic consulting and litigation costs,
and executive separation payment 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 (E) 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
(E).
(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) Strategic consulting and litigation costs. See item (2) on
previous page. The Company’s management excludes certain
board-directed consulting costs and litigation expenses when
evaluating its ongoing performance and/or predicting its earnings
trends and therefore excludes these charges on our adjusted
operating results.
(C) Executive separation payment relating to CEO employment
termination benefits agreement. See item (3) on previous page. 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.
(D) 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.
(E) EBITDA represents earnings before interest, taxes,
depreciation and amortization. Adjusted EBITDA adds back
stock-based compensation charges and non-recurring litigation
expenses.
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version on businesswire.com: http://www.businesswire.com/news/home/20160216006298/en/
ZixCorpInvestor RelationsTodd Kehrli or Jim Byers,
323-468-2300zixi@mkr-group.com
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