Strong Cross-Selling Efforts Drive 15%
Organic Annual Revenue Growth to $173.4 Million and 16% Organic
Annual Recurring Revenue (ARR) Growth to $209.7 Million
Zix Corporation (Zix) (NASDAQ: ZIXI), a leading provider
of cloud email security solutions, today announced financial
results for the fourth quarter and full year ended December 31,
2019.
Fourth Quarter 2019 Financial Highlights (results compared to
the same year-ago quarter)
- Revenue increased 173% to $50.4 million. Total overall organic
revenue growth across Zix and AppRiver was 15%.
- Annual recurring revenue (ARR) increased 177% to $209.7
million. Total overall organic ARR growth across Zix and AppRiver
was 16%.
- GAAP net loss attributable to common stockholders totaled
($5.2) million compared to net income of $9.2 million. The
company’s net loss attributable to common shareholders includes the
effect of a deemed dividend to preferred shareholders of $2.1
million and acquisition-related expenses of $4.3 million.
- GAAP fully diluted earnings (loss) per share attributable to
common stockholders totaled ($0.10) compared to $0.17.
- Non-GAAP adjusted net income before deemed dividends and
excluding deferred tax (benefit) expense totaled $6.7 million
compared to $4.6 million.
- Non-GAAP adjusted net income per share before deemed dividends
and excluding deferred tax (benefit) expense increased 48% to
$0.13.
- Adjusted EBITDA increased 106% to $11.5 million, representing
an adjusted EBITDA margin of 23%.
Recent Operational and Product Highlights
- Zix added nearly 11,000 mailboxes in Q4 2019, an increase of
more than 200% from Q3 2019.
- AppRiver direct customers and Managed Service Provider partners
(MSPs) started over 600 trials of ZixEncrypt and ZixArchive in Q4
2019.
- Zix-AppRiver reported findings from its Q4 Cyberthreat Index
for Business Survey, uncovering the top cybersecurity concerns and
mitigation strategies among small- and medium-sized businesses in
2020.
- ZixSuite solution was named the winner of the “Overall
Enterprise Email Security Solution of the Year” award in the 2019
CyberSecurity Breakthrough Awards.
- Appointed technology veteran John Di Leo to the new position of
Chief Revenue Officer.
Management Commentary
“The fourth quarter was a strong finish to a record year for
Zix,” said David Wagner, Zix’s Chief Executive Officer. “Our
successful integration efforts accelerated our performance as a
unified, larger company, driving combined annual growth of 146% in
revenue, 96% in adjusted EBITDA dollars and 177% in ARR. We are
gaining momentum across each of our go-to-market motions. In the
MSP channel, we increased the ZixEncrypt and ZixArchive trial
activity by 70% and grew ARR for those products by more than 100%.
In the Zix channel, we added nearly 11,000 Office 365 mailboxes in
Q4, an increase of more than 200% from the prior quarter alone. Our
execution as an integrated team continues to validate our attach
strategy, and we are well-positioned to continue our revenue and
earnings growth into 2020 and beyond.”
Zix’s Chief Financial Officer Dave Rockvam commented: “In the
fourth quarter we exceeded our revenue and ARR guidance, achieving
15% or greater year-over-year organic growth for both metrics for
the third consecutive quarter. We are encouraged by the continued
success with productivity, having added more than 77,000 net seats
in the quarter, an increase of more than 9% from Q3. This strong
contribution caused our gross margin percentage to compress
slightly during the period and is consistent with our continued
focus on delivering profitable adjusted EBITDA growth on an
absolute basis. Going forward, we believe the migration of
mailboxes to the cloud provides us with a highly effective, low
cost, lead generation tool for our higher-margin security and
compliance portfolio. In Q4, we also delivered $11.5 million of
adjusted EBITDA, an increase of 106% from Q4 2018 even though we
recorded slightly higher than expected expenses as we finalized the
integration. Looking ahead, we are confident that our financial
performance in 2019, coupled with building sales momentum, will
allow us to maintain steady, predictable revenue growth of 14% to
16% and adjusted EBITDA growth of 11% to 15% in our three to five
year model.”
Fourth Quarter 2019 Corporate Financial Summary and Other
Operational Metrics (1)
$ in Millions, except per share
data
Q4 2019
Q4 2018
Change (2)
Revenue
$50.4
$18.4
173.1%
GAAP Net Income (Loss) Attributable to
Common Stockholders
($5.2)
$9.2
(155.9%)
GAAP Net Income (Loss) Per Share
Attributable to Common Stockholders – Diluted
($0.10)
$0.17
(156.5%)
Non-GAAP Adjusted Net Income Attributable
to Common Stockholders (4)
$4.6
$4.6
1.2%
Non-GAAP Adjusted Net Income Per Share
Attributable to Common Stockholders – Diluted (4)
$0.09
$0.09
2.3%
Non-GAAP Adjusted Net Income Before Deemed
Dividends(4)
$9.0
$12.0
(25.1%)
Non-GAAP Adjusted Net Income Per Share
Before Deemed Dividends - Diluted(4)
$0.17
$0.22
(24.3%)
Non-GAAP Adjusted Net Income Before Deemed
Dividends Excluding Deferred Tax (Benefit) Expense(4)
$6.7
$4.6
46.8%
Non-GAAP Adjusted Net Income Per Share
Before Deemed Dividends Excluding Deferred Tax (Benefit)
Expense(4)
$0.13
$0.09
48.4%
EBITDA (3)(4)
$5.6
$3.1
78.0%
EBITDA Margin
11.1%
17.0%
(5.9 pts)
Adjusted EBITDA (4)
$11.5
$5.6
105.8%
Adjusted EBITDA Margin (4)
22.8%
30.2%
(7.4 pts)
Total Billings
49.3
44.0
12.1%
Full Year 2019 Corporate Financial Summary and Other
Operational Metrics (1)
$ in Millions, except per share
data
FY 2019
FY 2018
Change (2)
Revenue
$173.4
$70.5
146.1%
GAAP Net Income (Loss) Attributable to
Common Stockholders
($24.6)
$15.4
(259.5%)
GAAP Net Income (Loss) Per Share
Attributable to Common Stockholders – Diluted
($0.46)
$0.29
(260.9%)
Non-GAAP Adjusted Net Income Attributable
to Common Stockholders (4)
$13.0
$17.5
(25.7%)
Non-GAAP Adjusted Net Income Per Share
Attributable to Common Stockholders – Diluted (4)
$0.24
$0.33
(25.1%)
Non-GAAP Adjusted Net Income Before Deemed
Dividends(4)
$27.4
$22.2
23.3%
Non-GAAP Adjusted Net Income Per Share
Before Deemed Dividends – Diluted (4)
$0.52
$0.41
24.3%
Non-GAAP Adjusted Net Income Before Deemed
Dividends Excluding Deferred Tax (Benefit) Expense(4)
$23.0
$17.5
31.5%
Non-GAAP Adjusted Net Income Per Share
Before Deemed Dividends Excluding Deferred Tax (Benefit) Expense -
Diluted(4)
$0.43
$0.33
32.6%
EBITDA (3)(4)
$15.4
$14.4
6.8%
EBITDA Margin
8.9%
20.5%
(11.6 pts)
Adjusted EBITDA (4)
$39.5
$20.1
96.1%
Adjusted EBITDA Margin (4)
22.8%
28.6%
(5.8 pts)
Total Billings
170.2
156.4
8.9%
(1)
Metrics include results from AppRiver,
unless otherwise specified
(2)
Changes are based on actual numbers versus
numbers shown in the columns, which may reflect rounding
(3)
Earnings before interest, taxes,
depreciation and amortization
(4)
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
For the first quarter of 2020, the company forecasts revenue to
range between $52.2 million and $52.7 million, which implies a 14%
to 16% organic 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 ($0.04)
and ($0.03) 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
$0.12 and $0.13 for the first quarter of 2020. The company
forecasts adjusted EBITDA to be approximately 23% of forecast
revenue for Q1 2020. The per share guidance figures are based on an
approximate basic share count of 53.3 million for Q1 2020.
For the full fiscal year of 2020, the company forecasts revenue
to range between $220.0 million and $225.0 million, representing an
increase of between 27% and 30% compared to fiscal year 2019 and
between 16% and 18% on an organic basis. The company also expects
fully diluted GAAP earnings (loss) per share (attributable to
common stockholders) to range between ($0.10) and ($0.07) and fully
diluted non-GAAP adjusted earnings per share (attributable to
common stockholders) before deemed dividends and excluding deferred
tax (benefit) expense guidance to be $0.56 to $0.58 for fiscal year
2020. The company forecasts adjusted EBITDA to be in the range of
$51.0 million and $53.0 million (or approximately 23% to 24% of
forecast revenue) for 2020, representing a year-over-year increase
of between 29% and 34% compared to fiscal year 2019. The per share
figures are based on an approximate basic share count of 54.2
million for 2020.
Zix expects ARR at the end of fiscal 2020 to be in the range of
$243 million to $247 million, representing an organic growth rate
of approximately 16 to 18% compared to fiscal 2019.
Conference Call Information
Management will discuss these financial results and outlook on a
conference call today (February 20, 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
6096378. 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 6096378. 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.
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, and how privacy and data security laws may affect demand
for Zix data protection solutions. 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
December 31,
2019
December 31,
(unaudited)
2018
ASSETS
Current assets:
Cash and cash equivalents
$
13,349,000
$
27,109,000
Receivables, net
10,081,000
3,188,000
Prepaid and other current assets
4,984,000
3,176,000
Total current assets
28,414,000
33,473,000
Property and equipment, net
8,591,000
3,924,000
Operating lease assets
10,128,000
-
Other assets and deferred costs
11,968,000
9,424,000
Intangible Assets, Net
145,876,000
15,251,000
Goodwill
171,209,000
13,783,000
Deferred tax assets
36,535,000
28,785,000
Total assets
$
412,721,000
$
104,640,000
LIABILITIES, PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
28,132,000
$
10,516,000
Deferred revenue
40,757,000
30,622,000
Other current liabilities
6,135,000
-
Total current liabilities
75,024,000
41,138,000
Long-term liabilities:
Deferred revenue
2,524,000
1,539,000
Deferred rent
-
1,016,000
Operating lease liabilities
9,105,000
-
Debt
178,250,000
-
Total long-term liabilities
189,879,000
2,555,000
Total liabilities
264,903,000
43,693,000
Total preferred stock
106,527,000
-
Total stockholders’ equity
41,291,000
60,947,000
Total liabilities, preferred stock and
stockholders’ equity
$
412,721,000
$
104,640,000
ZIX CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
`
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Revenue
$
50,380,000
$
18,448,000
$
173,428,000
$
70,478,000
Cost of revenue
24,043,000
3,997,000
76,908,000
15,186,000
Gross profit
26,337,000
14,451,000
96,520,000
55,292,000
Operating expenses:
Research and development
5,383,000
2,603,000
20,431,000
11,323,000
Selling, general and administrative
23,502,000
9,875,000
85,230,000
33,999,000
Total operating expenses
28,885,000
12,478,000
105,661,000
45,322,000
Operating income
(2,548,000
)
1,973,000
(9,141,000
)
9,970,000
Operating margin
-5
%
11
%
-5
%
14
%
Other income (expense)
Investment and other income
6,000
92,000
121,000
754,000
Interest expense and other expense
(2,707,000
)
-
(10,105,000
)
-
Total other income (expense)
(2,701,000
)
92,000
(9,984,000
)
754,000
Income before income taxes
(5,249,000
)
2,065,000
(19,125,000
)
10,724,000
Income tax benefit (expense)
2,170,000
7,175,000
4,478,000
4,720,000
Net (loss) income
$
(3,079,000
)
$
9,240,000
$
(14,647,000
)
$
15,444,000
Deemed and accrued dividends on preferred
stock
(2,090,000
)
-
(9,984,000
)
-
Net (loss) income attributable to common
shareholders
$
(5,169,000
)
$
9,240,000
$
(24,631,000
)
$
15,444,000
Basic (loss) income per share attributable
to common shareholders:
$
(0.10
)
$
0.18
$
(0.46
)
$
0.29
Diluted (loss) income per share
attributable to common shareholders:
$
(0.10
)
$
0.17
$
(0.46
)
$
0.29
Shares used in per share calculation -
basic
53,199,409
52,539,091
53,025,152
52,591,714
Shares used in per share calculation -
diluted
53,199,409
53,758,033
53,025,152
53,481,295
Other Comprehensive income, net of
tax:
Foreign currency translation
adjustments
267,000
-
215,000
(16,000
)
Comprehensive (loss) income
$
(2,812,000
)
$
9,240,000
$
(14,432,000
)
$
15,428,000
ZIX CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Months Ended December
31,
2019
2018
Operating activities:
Net (loss) income
$
(14,647,000
)
$
15,444,000
Non-cash items in net income
27,351,000
2,270,000
Changes in operating assets and
liabilities
1,247,000
(1,043,000
)
Net cash provided by operating
activities
13,951,000
16,671,000
Investing activities:
Purchases of property and equipment and
capitalized software
(11,653,000
)
(4,179,000
)
Acquisition of business, net of cash
acquired
(284,590,000
)
(11,773,000
)
Net cash used in investing activities
(296,243,000
)
(15,952,000
)
Financing activities:
Proceeds from issuance of series A
preferred stock, net of offering costs
96,588,000
-
Proceeds from exercise of stock
options
415,000
166,000
Proceeds from long term debt
187,000,000
-
Debt issuance costs
(6,444,000
)
(60,000
)
Repayment of long term debt
(1,363,000
)
-
Repayment of finance lease obligations
(1,707,000
)
-
Payment of acquisition-related contingent
consideration
(3,843,000
)
(605,000
)
Purchase of treasury stock
(1,906,000
)
(6,049,000
)
Net cash provided used in financing
activities
268,740,000
(6,593,000
)
Effect of exchange rate changes on
cash
(208,000
)
(26,000
)
(Decrease) Increase in cash and cash
equivalents
(13,760,000
)
(5,900,000
)
Cash and cash equivalents, beginning of
period
27,109,000
33,009,000
Cash and cash equivalents, end of
period
$
13,349,000
$
27,109,000
ZIX CORPORATION
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Revenue:
GAAP revenue
$
50,380,000
$
18,448,000
$
173,428,000
$
70,478,000
Cost of revenue
GAAP cost of revenue
$
24,043,000
$
3,997,000
$
76,908,000
$
15,186,000
Stock-based compensation charges (1)
(A)
(147,000
)
(89,000
)
(569,000
)
(327,000
)
Strategic consulting and litigation costs
(2)
(B)
(93,000
)
(2,000
)
(386,000
)
(3,000
)
Intangible Amortization (3)
(C)
(2,660,000
)
(89,000
)
(7,132,000
)
(369,000
)
Corporate separation payment (4)
(D)
-
-
(52,000
)
(28,000
)
Non-GAAP adjusted cost of revenue
$
21,143,000
$
3,817,000
$
68,769,000
$
14,459,000
Gross profit:
GAAP gross profit
$
26,337,000
$
14,451,000
$
96,520,000
$
55,292,000
Stock-based compensation charges (1)
(A)
147,000
89,000
569,000
327,000
Strategic consulting and litigation costs
(2)
(B)
93,000
2,000
386,000
3,000
Intangible Amortization (3)
(C)
2,660,000
89,000
7,132,000
369,000
Corporate separation payment (4)
(D)
-
-
52,000
28,000
Non-GAAP adjusted gross profit
$
29,237,000
$
14,631,000
$
104,659,000
$
56,019,000
Research and development expense
GAAP research and development expense
$
5,383,000
$
2,603,000
$
20,431,000
$
11,323,000
Stock-based compensation charges (1)
(A)
(292,000
)
(136,000
)
(1,056,000
)
(469,000
)
Strategic consulting and litigation costs
(2)
(B)
(686,000
)
(3,000
)
(1,481,000
)
(61,000
)
Intangible Amortization (3)
(C)
(76,000
)
(51,000
)
(303,000
)
(126,000
)
Non-GAAP adjusted research and development
expense
$
4,329,000
$
2,413,000
$
17,356,000
$
10,667,000
Selling and marketing expense
GAAP selling and marketing expense
$
17,580,000
$
5,325,000
$
54,903,000
$
20,380,000
Stock-based compensation charges (1)
(A)
(350,000
)
(233,000
)
(1,941,000
)
(884,000
)
Strategic consulting and litigation costs
(2)
(B)
(2,175,000
)
(7,000
)
(3,427,000
)
(13,000
)
Intangible Amortization (3)
(C)
(3,433,000
)
(156,000
)
(10,478,000
)
(537,000
)
Non-GAAP adjusted selling and marketing
expense
$
11,451,000
$
4,929,000
$
38,246,000
$
18,946,000
General and administrative expense
GAAP general and administrative
expense
$
5,922,000
$
4,550,000
$
30,327,000
$
13,619,000
Stock-based compensation charges (1)
(A)
(636,000
)
(487,000
)
(2,685,000
)
(1,638,000
)
Strategic consulting and litigation costs
(2)
(B)
(1,328,000
)
(1,475,000
)
(10,755,000
)
(2,333,000
)
Corporate separation payment (4)
(D)
-
-
(689,000
)
40,000
Non-GAAP adjusted general and
administrative expense
$
3,958,000
$
2,588,000
$
16,198,000
$
9,688,000
Operating income:
GAAP operating income
$
(2,548,000
)
$
1,973,000
$
(9,141,000
)
$
9,970,000
Stock-based compensation charges (1)
(A)
1,425,000
945,000
6,251,000
3,318,000
Strategic consulting and litigation costs
(2)
(B)
4,282,000
1,487,000
16,049,000
2,410,000
Intangible Amortization (3)
(C)
6,169,000
296,000
17,913,000
1,032,000
Corporate separation payment (4)
(D)
171,000
-
1,787,000
(12,000
)
Non-GAAP adjusted operating income
$
9,499,000
$
4,701,000
$
32,859,000
$
16,718,000
$
-
Adjusted Operating Margin
18.9
%
25.5
%
18.9
%
23.7
%
Net income:
GAAP net (loss) income
$
(3,079,000
)
$
9,240,000
$
(14,647,000
)
$
15,444,000
Stock-based compensation charges (1)
(A)
1,425,000
945,000
6,251,000
3,318,000
Strategic consulting and litigation costs
(2)
(B)
4,282,000
1,487,000
16,049,000
2,410,000
Intangible Amortization (3)
(C)
6,169,000
296,000
17,913,000
1,032,000
Corporate separation payment (4)
(D)
171,000
-
1,787,000
(12,000
)
Non-GAAP adjusted net income
$
8,968,000
$
11,968,000
$
27,353,000
$
22,192,000
Deferred tax (benefit) expense
(2,236,000
)
(7,383,000
)
(4,387,000
)
(4,722,000
)
Non-GAAP adjusted net income excluding
deferred tax (benefit) expense
$
6,732,000
$
4,585,000
$
22,966,000
$
17,470,000
Deemed and accrued dividends on preferred
stock
(2,090,000
)
-
(9,984,000
)
-
Adjusted Net income attributable to common
stockholders
$
4,642,000
$
4,585,000
$
12,982,000
$
17,470,000
Diluted net income per common share:
GAAP net income per share before deemed
dividends
$
(0.06
)
$
0.17
$
(0.28
)
$
0.29
Adjustments per share
(A-D)
$
0.23
$
0.05
$
0.80
$
0.13
Non-GAAP adjusted net income per share
before deemed dividends
$
0.17
$
0.22
$
0.52
$
0.41
Deferred tax (benefit) expense impact to
Non-GAAP adjusted net income before deemed dividends per share
(E)
$
(0.04
)
$
(0.13
)
$
(0.09
)
$
(0.08
)
Non-GAAP adjusted net income before deemed
dividends per share excluding deferred tax (benefit) expense
$
0.13
$
0.09
$
0.43
$
0.33
Deemed dividends per share impact to
Non-GAAP adjusted net income
$
(0.04
)
$
-
$
(0.19
)
$
-
Adjusted Net income per share attributable
to common stockholders
$
0.09
$
0.09
$
0.24
$
0.33
Shares used to compute Non-GAAP adjusted
net income per share - diluted
53,199,409
53,758,033
53,025,152
53,481,295
Reconciliation of Net income to EBITDA
and Adjusted EBITDA:
(F)
Net income
$
(3,079,000
)
$
9,240,000
$
(14,647,000
)
$
15,444,000
Income tax provision
(2,170,000
)
(7,175,000
)
(4,478,000
)
(4,720,000
)
Interest expense
2,707,000
-
10,105,000
-
Depreciation
1,355,000
679,000
4,992,000
2,435,000
Amortization
6,772,000
393,000
19,437,000
1,270,000
EBITDA
5,585,000
3,137,000
15,409,000
14,429,000
Adjustments:
Stock-based compensation charges (1)
(A)
1,425,000
945,000
6,251,000
3,318,000
Strategic consulting and litigation costs
(2)
(B)
4,282,000
1,487,000
16,049,000
2,410,000
Corporate separation payment (4)
(D)
171,000
-
1,787,000
(12,000
)
Adjusted EBITDA
$
11,463,000
$
5,569,000
$
39,496,000
$
20,145,000
Adjusted EBITDA margin
22.8
%
30.2
%
22.8
%
28.6
%
(1) Stock-based compensation charges are
included as follows:
Cost of revenues
$
147,000
$
89,000
$
569,000
$
327,000
Research and development
292,000
136,000
1,056,000
469,000
Selling and marketing
350,000
233,000
1,941,000
884,000
General and administrative
636,000
487,000
2,685,000
1,638,000
$
1,425,000
$
945,000
$
6,251,000
$
3,318,000
(2) Strategic consulting, acquisition,
integration and litigation costs are included as follows:
Cost of revenues
93,000
2,000
386,000
3,000
Research and development
686,000
3,000
1,481,000
61,000
Selling and marketing
2,175,000
7,000
3,427,000
13,000
General and administrative
1,328,000
1,475,000
10,755,000
2,333,000
$
4,282,000
$
1,487,000
$
16,049,000
$
2,410,000
(3) Intangible Amortization is included as
follows:
Cost of revenues
2,660,000
89,000
7,132,000
369,000
Research and development
76,000
51,000
303,000
126,000
Selling and marketing
3,433,000
156,000
10,478,000
537,000
$
6,169,000
$
296,000
$
17,913,000
$
1,032,000
(4) Corporate separation payment is
included as follows:
Cost of revenues
-
-
52,000
28,000
Research and development
-
-
235,000
-
Selling and marketing
171,000
-
811,000
-
General and administrative
-
-
689,000
(40,000
)
$
171,000
$
-
$
1,787,000
$
(12,000
)
(5) Net Income tax components:
Current tax (benefit)/expense
66,000
208,000
(91,000
)
2,000
Deferred tax (benefit)/expense
(2,236,000
)
(7,383,000
)
(4,387,000
)
(4,722,000
)
$
(2,170,000
)
$
(7,175,000
)
$
(4,478,000
)
$
(4,720,000
)
This presentation includes Non-GAAP measures. Our Non-GAAP
measures, including "Non-GAAP adjusted net income and net income
per share excluding deferred tax expense" 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
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES OUTLOOK
LOW
HIGH
LOW
HIGH
Three Months Ended
Three Months Ended
Twelve Months Ended
Twelve Months Ended
March 31,
March 31,
December 31,
December 31,
2020
2020
2020
2020
Revenue:
GAAP revenue
$
52,200,000
$
52,700,000
$
220,000,000
$
225,000,000
Diluted net income per common share:
GAAP net income
$
(0.03
)
$
(0.04
)
$
(0.07
)
$
(0.10
)
Stock-based compensation charges
$
0.03
$
0.04
$
0.16
$
0.19
Strategic consulting, acquisition and
litigation costs
$
0.00
$
0.01
$
0.01
$
0.01
Intangible Amortization
$
0.11
$
0.12
$
0.47
$
0.49
Corporate separation payment
$
0.00
$
0.01
$
0.01
$
0.01
Non-GAAP adjusted net income per share
$
0.12
$
0.14
$
0.57
$
0.60
Deferred tax (benefit) expense
$
(0.01
)
$
(0.01
)
$
(0.01
)
$
(0.02
)
Non-GAAP adjusted net income before deemed
dividends per share excluding deferred tax (benefit) expense
$
0.12
$
0.13
$
0.56
$
0.58
Deemed dividends per share impact to
Non-GAAP adjusted net income
$
(0.04
)
$
(0.04
)
$
(0.15
)
$
(0.16
)
Adjusted Net income per share attributable
to common stockholders
$
0.08
$
0.09
$
0.41
$
0.41
Shares used to compute Non-GAAP adjusted
net income per share - diluted
53,300,000
53,300,000
53,500,000
53,500,000
This presentation includes Non-GAAP measures. Our Non-GAAP
measures, including "Non-GAAP adjusted net income per share
excluding deferred tax expense" 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 excluding deferred tax (benefit) expense, Net income per
share - diluted, Net income per share - diluted excluding deferred
tax (benefit) expense, 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.
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 (E)
below for further information on the current quarter's reconciling
items.
Items (A) through (F) 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 excluding deferred tax (benefit) expense," "Net income
per share - diluted," "Net income per share excluding deferred tax
(benefit) expense- diluted," and "EBITDA" and correspond to the
categories explained in further detail below under (A) through
(F).
(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, acquisition integration 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) Intangible amortization costs. See item (3) on previous
page. The Company’s management excludes amortization expenses
associated with the acquisition of intangible assets when
evaluating its ongoing performance and/or predicting its earnings
trends and therefore excludes these charges on our adjusted
operating results.
(D) Corporate separation payment relating to employment
termination benefits agreement. See item (4) 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.
(E) Deferred tax expense 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.
(F) 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: https://www.businesswire.com/news/home/20200220005924/en/
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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