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 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, 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.
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