Company Revenue, Backlog and Total Orders Increase
Year-over-Year
Zix Corporation (NASDAQ: ZIXI), a leader in email data
protection, today announced financial results for the first quarter
ended Mar. 31, 2016.
First Quarter 2016 Financial Highlights
- First quarter revenue of $14.3 million,
an increase of 9.6% year-over-year
- Ending backlog of $75.5 million, an
increase of 7.4% year-over-year
- First quarter total orders of $15.7
million, an increase of 9.9% year-over-year
- First quarter new first year orders of
$1.9 million, a decrease of 5.2% year-over-year
- First quarter GAAP fully diluted
earnings per share of $0.03, an increase of 35.4%
year-over-year
- First quarter Non-GAAP fully diluted
earnings per share of $0.06, an increase of 47.8% year-over-year
(2)
- The Company generated approximately
$4.0 million in cash flow from operations, an increase of $1.5
million year-over-year
- Cash and cash equivalents at
quarter-end was $27.1 million, despite $5.2 million spent on share
repurchases during the quarter. This $27.1 million is an increase
of $2.2 million compared to the Mar. 31, 2015, ending cash
balance
“The continued strength of our email encryption business enabled
us to achieve increased earnings per share and deliver healthy
growth in revenue, backlog and total orders,” said David
Wagner, ZixCorp’s Chief Executive Officer. “New First Year
Orders were not as strong as expected, but we are confident that
our pipeline across go-to-market channels and opportunities created
by Cloud email migrations keep us on track to meet our annual
revenue and earnings guidance.”
First Quarter 2016 Corporate Financial Summary and Other
Operational Metrics
$ in Millions, except per share data Q1
2016 Q1 2015
% or $Change (1)
Revenue
$14.3 $13.1
9.6% GAAP Gross Profit
$11.8 $10.9 8.6%
GAAP Net Income
$1.6 $1.2
33.5% GAAP Net Income Per Share – Diluted
$0.03 $0.02
35.4% Non-GAAP Adjusted Gross Profit (2)
$11.9 $10.9 8.6%
Non-GAAP Adjusted Net Income (2)
$3.4
$2.4 45.8% Non-GAAP Adjusted Net
Income Per Share – Diluted (2)
$0.06
$0.04 47.8% Adjusted EBITDA (2)
(3)
$4.1 $3.0
36.6% Adjusted EBITDA Margin (3) (4)
28.6% 23.0% 5.7
pts New First Year Orders
$1.9
$2.0 (5.2)% Total Orders
$15.7 $14.3
9.9% Backlog (4)
$75.5
$70.3 7.4% (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 second quarter 2016, the Company forecasts revenue to be
between $14.6 million and $14.8 million and fully diluted adjusted
earnings per share to be $0.06. For the full-year 2016, the Company
reaffirms previously issued revenue projections of between $59.5
million and $61.0 million. The Company increases guidance of fully
diluted Non-GAAP adjusted earnings per share to $0.24.
Conference Call Information
The Company will discuss its financial results and outlook on a
conference call on Tuesday, Apr. 26, 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
83041124.
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 83041124. 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 sales, revenue or earnings, potential benefits
of the Cisco strategic relationship, 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 March
31, 2016 December 31, (unaudited)
2015 ASSETS Current assets: Cash and cash equivalents
$ 27,089,000 $ 28,664,000 Receivables, net 1,140,000 498,000
Prepaid and other current assets 2,514,000 2,908,000
Total current assets 30,743,000 32,070,000 Property and equipment,
net 3,754,000 4,143,000 Goodwill 2,161,000 2,161,000 Deferred tax
assets 48,093,000 48,912,000 Total assets $
84,751,000 $ 87,286,000
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and
accrued expenses $ 4,552,000 $ 5,067,000 Deferred revenue
24,214,000 23,182,000 Total current liabilities 28,766,000
28,249,000 Long-term liabilities: Deferred revenue 1,317,000
839,000 Deferred rent 1,397,000 1,426,000 Total
long-term liabilities 2,714,000 2,265,000 Total
liabilities 31,480,000 30,514,000 Total stockholders’ equity
53,271,000 56,772,000 Total liabilities and stockholders’
equity $ 84,751,000 $ 87,286,000
ZIX
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
Three
Months Ended March 31, 2016 2015 Revenue $
14,328,000 $ 13,073,000 Cost of revenue 2,537,000
2,213,000 Gross profit 11,791,000 10,860,000
Operating expenses: Research and development 2,179,000 2,105,000
Selling, general and administrative 7,144,000
6,915,000 Total operating expenses 9,323,000
9,020,000 Operating income 2,468,000 1,840,000
Operating margin 17 % 14 % Other income, net 59,000 23,000
Income before income taxes 2,527,000 1,863,000 Income tax
expense (957,000 ) (687,000 ) Net income $ 1,570,000
$ 1,176,000 Basic income per common share: $
0.03 $ 0.02 Diluted income per common
share: $ 0.03 $ 0.02 Shares used in per share
calculation - basic 56,002,447 56,496,303
Shares used in per share calculation - diluted
56,581,366 57,395,616
ZIX
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited)
Three Months
Ended March 31, 2016 2015 Operating activities:
Net income $ 1,570,000 $ 1,176,000 Non-cash items in net income
1,715,000 1,514,000 Changes in operating assets and liabilities
756,000 (161,000 ) Net cash provided by
operating activities 4,041,000 2,529,000 Investing
activities: Purchases of property and equipment (183,000 )
(616,000 ) Net cash used in investing activities (183,000 )
(616,000 ) Financing activities: Proceeds from exercise of
stock options 50,000 1,489,000 Purchase of Treasury Stock
(5,483,000 ) (185,000 ) Net cash used in financing
activities (5,433,000 ) 1,304,000
Increase (Decrease) in cash and cash equivalents (1,575,000 )
3,217,000 Cash and cash equivalents, beginning of period
28,664,000 21,685,000 Cash and cash
equivalents, end of period $ 27,089,000 $ 24,902,000
ZIX CORPORATION RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES (Unaudited)
Three Months Ended March 31,
2016 2015 Revenue: GAAP revenue $ 14,328,000 $
13,073,000 Cost of revenue GAAP cost of revenue $
2,537,000 $ 2,213,000 Stock-based compensation charges (1) (A)
(60,000 ) (51,000 ) Non-GAAP adjusted cost of revenue
$ 2,477,000 $ 2,162,000 Gross profit: GAAP
gross profit $ 11,791,000 $ 10,860,000 Stock-based compensation
charges (1) (A) 60,000 51,000 Non-GAAP
adjusted gross profit $ 11,851,000 $ 10,911,000
Research and development expense GAAP research and
development expense $ 2,179,000 $ 2,105,000 Stock-based
compensation charges (1) (A) (77,000 ) (66,000 )
Non-GAAP adjusted research and development expense $ 2,102,000
$ 2,039,000 Selling and marketing expense GAAP
selling and marketing expense $ 4,409,000 $ 4,794,000 Stock-based
compensation charges (1) (A) (148,000 ) (151,000 )
Non-GAAP adjusted selling and marketing expense $ 4,261,000
$ 4,643,000 General and administrative expense GAAP
general and administrative expense $ 2,735,000 $ 2,121,000
Stock-based compensation charges (1) (A) (77,000 ) (200,000 )
Strategic consulting and litigation costs (2) (B) (679,000 )
(167,000 ) Non-GAAP adjusted general and administrative
expense $ 1,979,000 $ 1,754,000 Operating
income: GAAP operating income $ 2,468,000 $ 1,840,000 Stock-based
compensation charges (1) (A) 362,000 468,000 Strategic consulting
and litigation costs (2) (B) 679,000 167,000
Non-GAAP adjusted operating income $ 3,509,000 $
2,475,000
Adjusted Operating Margin 24.5 % 18.9 % Net income: GAAP net
income $ 1,570,000 $ 1,176,000 Stock-based compensation charges (1)
(A) 362,000 468,000 Strategic consulting and litigation costs (2)
(B) 679,000 167,000 Income tax impact (C) 820,000
543,000 Non-GAAP adjusted net income $ 3,431,000
$ 2,354,000 Diluted net income per common
share: GAAP net income $ 0.03 $ 0.02 Adjustments per share (A-C) $
0.03 $ 0.02 Non-GAAP adjusted net income $ 0.06
$ 0.04 Shares used to compute Non-GAAP
adjusted net income per share - diluted 56,581,366
57,395,616
Reconciliation of Net income to
EBITDA and Adjusted EBITDA: (D) Net income $ 1,570,000 $
1,176,000 Income tax provision 957,000 687,000 Depreciation expense
534,000 504,000 EBITDA 3,061,000
2,367,000
Adjustments: Share-based compensation
expense (A) 362,000 468,000 Strategic consulting and litigation
costs (2) (B) 679,000 167,000
Adjusted EBITDA $ 4,102,000 $ 3,002,000
Adjusted EBITDA margin 28.6 % 23.0 % (1) Stock-based
compensation charges are included as follows: Cost of revenues $
60,000 $ 51,000 Research and development 77,000 66,000 Selling and
marketing 148,000 151,000 General and administrative 77,000
200,000 $ 362,000 $ 468,000 (2)
Strategic consulting and litigation costs are included as follows:
General and administrative 679,000 167,000
$ 679,000 $ 167,000
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 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 strategic consulting and litigation costs
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 litigation expenses and 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) 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) 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 litigation expenses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160426006689/en/
ZixCorpInvestor RelationsTodd Kehrli or Jim Byers,
323-468-2300zixi@mkr-group.com
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