Zix Corporation (NASDAQ: ZIXI), the leader in email
encryption services, today announced financial results for the
fourth quarter and full year ended Dec. 31, 2011.
Fourth Quarter Financial Highlights
- The Company achieved record fourth
quarter revenue from continuing operations of $9.9 million, an
increase of 12%, year-over-year
- Fourth quarter 2011 GAAP net income of
$0.23 per share, compared to fourth quarter 2010 GAAP net income of
$0.54 per share(1)
- Fourth quarter Non-GAAP net income of
$0.04 per share, an increase of 22.0%, year-over-year
- Cash flow from operations for the
fourth quarter of $2.6 million, an increase of $1.8 million,
year-over-year
Full-Year 2011 Financial Highlights
- The Company achieved full-year record
revenue from continuing operations of $38.1 million, an increase of
15.4%, year-over-year
- Full-year GAAP net income of $0.34 per
share, compared to full-year 2010 GAAP net income of $0.62 per
share(1)
- Full-year Non-GAAP net income of $0.16
per share, an increase of 29.4%, year-over-year
- Cash flow from operations for the full
year ended Dec. 31, 2011, of $13.2 million, an increase of $6.0
million, year-over-year
- Cash, cash equivalents and commercial
paper investments at year-end was $20.7 million, despite $21.0
million spent on share repurchases during 2011. This $20.7 million
is a decrease of $3.9 million compared to the ending cash balance
for 2010
“We are very pleased to report record financial results for
revenue, adjusted earnings per share and cash generated from
operations during fiscal 2011,” said Rick Spurr, ZixCorp’s
Chairman and Chief Executive Officer. “During the year, we
continued to invest in enhancing easy-to-use email encryption,
including the launch of ZixMobility. Such innovations allow us to
maintain our position of leadership in the industry and create
opportunities for revenue growth as we look to 2012.”
Fourth Quarter and Full-Year 2011 Corporate Financial Summary
and Other Operational Metrics
$ in Millions, except per share data Q4 2011
Q4 2010 % or $
Change (2)
FY 2011 FY 2010 % or $
Change (2)
Revenue (3)
$ 9.9 $
8.8 11.8 % $
38.1 $ 33.1
15.4 % GAAP Gross Profit (3)
$
8.0 $ 7.1
13.0 % $ 30.9
$ 26.6 16.3 % GAAP Net
Income (1)
$ 15.0 $
37.2 (59.8 %) $
22.6 $ 41.2
(45.3 %) GAAP Net Income Per Share – Diluted (1)
$ 0.23 $ 0.54
(58.2 %) $ 0.34
$ 0.62 (45.7
%) Non-GAAP Adjusted Gross Profit (3) (4)
$
8.1 $ 7.2
12.7 % $ 31.0
$ 26.8 15.9 % Non-GAAP
Adjusted Net Income (4)
$ 2.9
$ 2.5 17.4 %
$ 10.9 $ 8.4
30.5 % Non-GAAP Adjusted Net Income Per Share
– Diluted (4)
$ 0.04 $
0.04 22.0 % $
0.16 $ 0.13
29.4 % Adjusted EBITDA (4) (5)
$
3.5 $ 2.8
26.6 % $ 12.7
$ 9.9 28.5 % Adjusted
EBITDA Margin (4) (5)
35.5 %
31.4 % 4.1pts
33.2 % 29.8 %
3.4pts Email Encryption New First Year Orders
$ 1.9 $ 2.1
(11.1 %) $ 7.1
$ 8.7 (18.3 %) Email
Encryption Total Orders
$ 11.1
$ 12.2 (9.1 %)
$ 42.3 $ 40.8
3.8 % Email Encryption Bookings Backlog (6)
$ 53.7 $ 49.9
7.6 % $ 53.7
$ 49.9 7.6
%
(1) GAAP Net Income for the
quarters and years ended Dec. 31, 2011, and Dec. 31, 2010, include
tax benefits of $11.8 million and $35.3 million, respectively,
resulting from reductions to the deferred tax valuation
allowance
(2) Changes reported are based
on actual results, and numbers shown in the columns may reflect
rounding
(3) Amounts indicated are from
continuing operations
(4) A reconciliation of GAAP to
Non-GAAP adjusted results is attached to this press release and is
available on our investor relations Web page at
http://investor.zixcorp.com
(5) Adjusted earnings before
interest, taxes, depreciation and amortization
(6) Service contract commitments
that represent future revenue to be recognized as the services are
provided
Fourth Quarter Business Highlights
- EarthLink, Inc. (NASDAQ: ELNK),
a leading IT services, network and communications provider to more
than 150,000 businesses and over one million consumers nationwide,
joined the ZixCorp® Partner Program as a managed security service
provider.
- ICON Central Laboratories chose
ZixEnableSM to securely and automatically deliver
patient results. ICON Central Laboratories, a division of ICON plc,
is a global central laboratory exclusively engaged in clinical
trial testing. ICON Central Laboratories uses ZixEnable, an
application-generated email encryption service, to provide lab
reports 24/7 worldwide through an encrypted email solution,
enabling physicians to better monitor and adjust patient treatment
during clinical trials.
- ZixCorp announced the approval of a
share repurchase program that enables the company to purchase
up to $15 million of its shares of common stock. The amount and
timing of specific repurchases are subject to market conditions,
applicable legal requirements and other factors. The share
repurchase program is scheduled to expire on June 30, 2012. This
was the second share repurchase program announced by ZixCorp in
2011. Earlier, the company implemented a share repurchase
program in March 2011 and completed it in July 2011. For the
year, the Company repurchased approximately 6.5 million shares at a
total price of $21 million.
- Recognizing a growing demand for email
encryption, IT solutions provider Sayers joined the ZixCorp
Partner Program and added ZixCorp Email Encryption Services to
its portfolio. Sayers selected ZixCorp based on its trusted
reputation and its leadership position in the market. Headquartered
near Chicago, Sayers is a value added reseller and provides
technology solutions for mid- to large-sized businesses.
Outlook
The Company forecasts revenue for the first quarter to be
between $10.0 million and $10.1 million and fully diluted adjusted
earnings per share of $0.04. Full-year 2012 revenues are projected
to be between $41 million and $43 million. Fully diluted Non-GAAP
adjusted earnings per share, which are adjusted primarily for
non-cash stock-based compensation and non-recurring expense items,
are projected to be between $0.19 and $0.20.
Conference Call Information
The Company will discuss its financial results and outlook on a
conference call on Tuesday, Feb. 21, 2012, 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
1-877-556-5921 (U.S. toll-free) or 1-617-597-5474 (international)
at least 15 minutes before the call and entering access code
61892879. An audio replay of the conference will be available until
Feb. 29, 2012, by dialing 1-888-286-8010 (U.S. toll-free) or
1-617-801-6888 (international) and entering the access code
22711811. An archive of the webcast will also be available on the
ZixCorp investor relations Web site.
About Zix Corporation
Zix Corporation (ZixCorp) provides the only email encryption
services designed with your most important relationships in mind.
Many of the most influential companies and government organizations
use the proven ZixCorp® Email Encryption Services, including
WellPoint, the SEC, and more than 1,200 hospitals and 1,600
financial institutions. ZixCorp Email Encryption Services are
powered by ZixDirectory®, the largest email encryption community in
the world. The tens of millions of ZixDirectory members can feel
secure knowing their most important relationships are protected.
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 how privacy and data
security law mandates may affect demand for email encryption and
ZixCorp’s ability to obtain and retain customers and grow revenues.
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, 2011
December 31, (unaudited) 2010
ASSETS Current assets: Cash and cash equivalents $
20,680,000 $ 24,619,000 Receivables, net 704,000 1,344,000 Prepaid
and other current assets 1,422,000 1,115,000 Deferred tax assets
1,551,000 1,056,000 Total current assets 24,357,000
28,134,000 Property and equipment, net 2,228,000 2,209,000 Goodwill
2,161,000 2,161,000 Deferred tax assets 48,806,000 34,304,000 Other
assets - 44,000 Total assets $ 77,552,000 $
66,852,000
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Accounts payable and accrued
expenses $ 2,292,000 $ 2,844,000 Deferred revenue 16,568,000
15,331,000 License subscription note payable -
137,000 Total current liabilities 18,860,000 18,312,000 Long-term
liabilities: Deferred revenue 795,000 1,439,000 License
subscription note payable, non-current - 49,000 Deferred rent
140,000 165,000 Total long-term liabilities
935,000 1,653,000 Total liabilities 19,795,000 19,965,000
Total stockholders’ equity 57,757,000 46,887,000
Total liabilities and stockholders’ equity $ 77,552,000 $
66,852,000
ZIX CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended December 31,
Twelve Months Ended December 31, 2011
2010 2011
2010 Revenues $ 9,885,000 $ 8,845,000 $ 38,145,000 $
33,066,000 Cost of revenues 1,849,000
1,734,000 7,211,000 6,468,000
Gross profit 8,036,000 7,111,000 30,934,000 26,598,000 Operating
expenses: Research and development 1,281,000 1,272,000 5,229,000
5,089,000 Selling, general and administrative 3,818,000
4,121,000 15,128,000
16,363,000 Total operating expenses 5,099,000
5,393,000 20,357,000 21,452,000
Operating income 2,937,000 1,718,000 10,577,000
5,146,000 Operating margin 30 % 19 % 28 % 16 % Other income,
net 9,000 8,000 88,000 74,000 Income from continuing
operations before income taxes 2,946,000 1,726,000 10,665,000
5,220,000 Income tax (expense) benefit 12,021,000
35,420,000 11,889,000 35,500,000
Income from continuing operations 14,967,000 37,146,000
22,554,000 40,720,000 Discontinued operations Income from
operations of discontinued e-Prescribing segment - 134,000 -
762,000 Income tax expense - (48,000 )
- (269,000 ) Income on discontinued operations (Note
1) - 86,000 - 493,000 Net income $ 14,967,000 $
37,232,000 $ 22,554,000 $ 41,213,000
Basic income per common share: Income from continuing operations $
0.23 $ 0.57 $ 0.34 $ 0.63 Income from discontinued operations
- 0.00 - 0.01
Net income $ 0.23 $ 0.57 $ 0.34 $ 0.64
Diluted income per common share: Income from
continuing operations $ 0.23 $ 0.54 $ 0.34 $ 0.61 Income from
discontinued operations - 0.00 -
0.01 Net income $ 0.23 $ 0.54 $
0.34 $ 0.62 Shares used in per share
calculation - basic 65,259,001 65,672,265
65,439,078 64,401,384
Shares used in per share calculation - diluted 65,865,826
68,441,439 67,261,514
66,741,681 Note: EPS totals off due to rounding
Note 1 Three Months Ended Dec. 31, Twelve
Months Ended Dec 31, Components of Income from discontinued
operations:
2011 2010
2011 2010 Revenue
from discontinued operations $ - $ 482,000 $ - $ 2,632,000 Expenses
from discontinued operations - 348,000 - 1,870,000 Tax expense
- (48,000 ) - (269,000 )
Income from discontinued operations $ - $ 86,000 $ -
$ 493,000
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Twelve Months Ended December 31,
2011 2010 Operating activities:
Net income $ 22,554,000 $ 41,213,000 Non-cash items in net income
(9,806,000 ) (31,960,000 ) Changes in operating assets and
liabilities 471,000 (2,063,000 ) Net cash
provided by operating activities 13,219,000 7,190,000
Investing activities: Purchases of property and equipment
(1,471,000 ) (1,492,000 ) (Purchase) sale of marketable securities
- 25,000 Net cash used in investing
activities (1,471,000 ) (1,467,000 ) Financing activities:
Proceeds from exercise of stock options 1,791,000 2,786,000
Proceeds from exercise of warrants 3,707,000 2,949,000 Payment of
license subscription note payable (186,000 ) (126,000 ) Purchase of
Treasury Stock (20,999,000 ) - Net cash (used
by) provided by financing activities (15,687,000 )
5,609,000 (Decrease) increase in cash and cash
equivalents (3,939,000 ) 11,332,000 Cash and cash equivalents,
beginning of period 24,619,000 13,287,000
Cash and cash equivalents, end of period $ 20,680,000
$ 24,619,000
ZIX CORPORATION RECONCILIATION
OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31, 2011
2010 2011
2010 Revenue: GAAP revenue $ 9,885,000 $
8,845,000 $ 38,145,000 $ 33,066,000
Gross profit: GAAP gross profit $ 8,036,000 $ 7,111,000 $
30,934,000 $ 26,598,000 Stock-based compensation charges (1) (A)
26,000 38,000 71,000 161,000 (B) - 4,000
- 4,000 Non-GAAP adjusted gross
profit $ 8,062,000 $ 7,153,000 $ 31,005,000 $
26,763,000 Operating income: GAAP operating income $
2,937,000 $ 1,718,000 $ 10,577,000 $ 5,146,000 Stock-based
compensation charges (1) (A) 204,000 385,000 617,000 1,835,000
Non-recurring severance payments (2) (B) - 4,000 - 262,000 Expenses
related to wind down of e-Prescribing business (3) (C) -
- - 4,000 Non-GAAP
adjusted operating income $ 3,141,000 $ 2,107,000 $
11,194,000 $ 7,247,000 Income from continuing
operations: GAAP income from continuing operations $ 14,967,000 $
37,146,000 $ 22,554,000 $ 40,720,000 Stock-based compensation
charges (1) (A) 204,000 385,000 617,000 1,835,000 Non-recurring
severance payments (2) (B) - 4,000 - 262,000 Expenses related to
wind down of e-Prescribing business (3) (C) - - - 4,000 Income tax
impact (D) (12,252,000 ) (35,348,000 )
(12,248,000 ) (35,560,000 ) Non-GAAP adjusted income from
continuing operations $ 2,919,000 $ 2,187,000 $
10,923,000 $ 7,261,000 Income from
discontinued operations: GAAP income on discontinued operations $ -
$ 86,000 $ - $ 493,000 Stock-based compensation charges (1) (A) -
8,000 - 94,000 Non-recurring severance payments (2) (B) - 6,000 -
96,000 Expenses related to wind down of e-Prescribing business (3)
(C) - 152,000 - 160,000 Income tax impact (D) -
48,000 - 269,000 Non-GAAP
adjusted income from discontinued operations $ - $ 300,000
$ - $ 1,112,000 Net income: GAAP net
income $ 14,967,000 $ 37,232,000 $ 22,554,000 $ 41,213,000
Stock-based compensation charges (1) (A) 204,000 393,000 617,000
1,929,000 Non-recurring severance payments (2) (B) - 10,000 -
358,000 Expenses related to strategic review and wind down of
e-Prescribing business (3) (C) - 152,000 - 164,000 Income tax
impact (D) (12,252,000 ) (35,300,000 )
(12,248,000 ) (35,291,000 ) Non-GAAP adjusted net income $
2,919,000 $ 2,487,000 $ 10,923,000 $ 8,373,000
Diluted income from continuing operations per common
share: GAAP income from continuing operations $ 0.23 $ 0.54 $ 0.34
$ 0.61 Adjustments per share (A-D) $ (0.19 ) $ (0.51 ) $ (0.18 ) $
(0.51 ) Non-GAAP adjusted income from continuing operations $ 0.04
$ 0.03 $ 0.16 $ 0.11 Diluted net
income per common share: GAAP net income $ 0.23 $ 0.54 $ 0.34 $
0.62 Adjustments per share (A-D) $ (0.19 ) $ (0.51 ) $ (0.18 ) $
(0.49 ) Non-GAAP adjusted net income $ 0.04 $ 0.04 $
0.16 $ 0.13 Shares used to compute Non-GAAP
adjusted net income per share - diluted 65,865,826
68,441,439 67,261,514 66,741,681
Reconciliation of Net income to EBITDA and
Adjusted EBITDA: (E) Net income $ 14,967,000 $ 37,232,000 $
22,554,000 $ 41,213,000 Income tax provision (12,021,000 )
(35,372,000 ) (11,889,000 ) (35,231,000 ) Interest expense 10,000
5,000 7,000 22,000 Depreciation expense 353,000
355,000 1,373,000 1,402,000
EBITDA 3,309,000 2,220,000 12,045,000 7,406,000
Adjustments: Share-based compensation expense (A) 204,000
393,000 617,000 1,929,000 Non-recurring severance payments (B) -
10,000 - 358,000 Expenses related to strategic review and wind down
of e-Prescribing business (C) - 152,000
- 164,000
Adjusted EBITDA $
3,513,000 $ 2,775,000 $ 12,662,000 $ 9,857,000
Adjusted EBITDA margin 35.5 % 31.4 % 33.2 % 29.8 %
(1) Stock-based compensation charges are included as
follows: Cost of revenues $ 26,000 $ 38,000 $ 71,000 $ 161,000
Research and development 21,000 44,000 68,000 183,000 Selling,
general and administrative 157,000 303,000 478,000 1,491,000
Discontinued operations - 8,000
- 94,000 $ 204,000 $ 393,000 $
617,000 $ 1,929,000 (2) Non-recurring severance
payments are included as follows: Cost of revenues - 4,000 - 4,000
Selling, general and administrative - - - 258,000 Discontinued
operations - 6,000 -
96,000 $ - $ 10,000 $ - $
358,000 (3) Expenses related to strategic review and the
wind down of e-Prescribing business are as follows: Selling,
general and administrative - - - 4,000 Discontinued operations
- 152,000 -
160,000 $ - $ 152,000 $ - $ 164,000
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
items (A) through (E) on the next age.
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 Gross profit, Operating
income, Income from continuing operations, Income from discontinued
operations, Net income, Income per share - diluted from continuing
operations, Net income per share - diluted, and EBITDA for non-cash
stock-based compensation expense, non-recurring severance expenses
and expense related to the wind down of our e-Prescribing business
to derive Non-GAAP adjusted Gross profit, adjusted Operating
income, adjusted Income from continuing operations, adjusted Income
from discontinued operations, adjusted Net income, adjusted Income
per share - diluted from continuing operations, 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, Income from continuing operations, Income
from discontinued operations, Net income, Income per share -
diluted from continuing operations, 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
from continuing operations," "Net income from discontinued
operations," "Net income," "Net income from continuing operations
per share - diluted," "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 awarded to employees and third-party service
providers 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) Severance payments related to reduction in workforce. See
item (2) on previous page for breakdown of severance payments. The
Company’s management excludes these costs when evaluating the
ongoing performance and/or predicting its earnings trends and
therefore excludes these charges on our adjusted operating
results.
(C) Expenses related to strategic review and wind down of the
Company’s e-Prescribing business segment. The Company’s management
excludes these costs when evaluating the ongoing performance and/or
predicting its earnings trends and therefore excludes these charges
when presenting Non-GAAP financial measures.
(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
pervious 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, severance payments and expenses relating
to the wind down of the Company's e-Prescribing business.
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