Zix Reports Second Quarter 2017 Financial Results
New Products ZixProtect and ZixArchive Gain Early Traction and Contribute to Another Record Revenue
Quarter
Zix Corporation (Zix) (NASDAQ: ZIXI), a leader in email security, today announced financial results for the
second quarter ended June 30, 2017.
Second Quarter 2017 Financial Highlights (results compared to the same year-ago quarter)
- Revenue increased 10% to a record $16.4 million
- Annual contract value increased 10% to a record $65.2 million
- New First Year Orders decreased 13% to $2.6 million
- GAAP net income increased 104% to $1.1 million
- GAAP fully diluted earnings per share increased 103% to $0.02
- Non-GAAP fully diluted earnings per share was flat at $0.06
- The company ended the quarter with $29.5 million in cash and no debt
Management Commentary
“The leadership team and I could not have asked for a better start to the customer adoption of our recently launched solutions:
ZixProtect and ZixArchive,” said David Wagner, Zix’s Chief Executive Officer. “During the quarter, our sales teams closed 44 ZixProtect and
ZixArchive transactions, with every one of our corporate sales reps generating at least one transaction for our new offerings. In
addition to our early success in selling these new bundles and add-ons, we also experienced momentum on the OEM front, having won a
large U.S. federal government agency contract with our key partner Cisco. Overall, Q2 was another solid quarter, punctuated by
record revenue, healthy new first year orders, and strong traction in the broader email security market with the early customer
adoption of ZixProtect and ZixArchive. Looking ahead, we will continue to execute and invest to build on our consistent track
record of generating profitable growth.”
Zix’s Chief Financial Officer David Rockvam added: “We achieved record revenue for a 13th consecutive quarter, up 10% in Q2 over
the same period a year ago. Our strong results were once again driven by the success of our sales teams in securing new customer
orders and add-ons, which were bolstered by our recently enhanced suite of offerings. Our continued industry leadership in email
encryption—coupled with our expanded email protection solutions and solid execution on the Greenview Data acquisition—has us
positioned to execute on our second half of the year business and financial objectives. Given the progress we’ve made and the
pipeline we’ve built, we are reiterating our full year revenue guidance range of $66.2 million to $66.7 million for 2017,
representing 10% to 11% growth compared to fiscal year 2016.”
Second Quarter 2017 Operational Highlights
- Entered advanced threat protection and archiving markets with the launch of ZixProtect and ZixArchive
- Secured a large U.S. federal government agency win with OEM partner Cisco
-
Expanded leadership team with the appointment of Bhavin Merchant as Vice President of Corporate Development
and named Vice President of Business Development Nigel Johnson as Chief Technology Officer
Second Quarter 2017 Corporate Financial Summary and Other Operational Metrics
| $ in Millions, except per share data |
|
|
Q2 2017 |
|
|
Q2 2016 |
|
|
Change (1) |
| Revenue |
|
|
$16.4 |
|
|
$14.9 |
|
|
9.7% |
| GAAP Gross Profit |
|
|
$13.1 |
|
|
$12.3 |
|
|
6.8% |
| GAAP Net Income |
|
|
$1.1 |
|
|
$0.6 |
|
|
103.8% |
| GAAP Net Income Per Share – Diluted |
|
|
$0.02 |
|
|
$0.01 |
|
|
103.0% |
| EBITDA (2) |
|
|
$3.4 |
|
|
$1.6 |
|
|
119.3% |
| EBITDA Margin |
|
|
20.9% |
|
|
10.4% |
|
|
10.4 pts |
| Non-GAAP Adjusted Gross Profit (3) |
|
|
$13.3 |
|
|
$12.4 |
|
|
7.4% |
| Non-GAAP Adjusted Net Income (3) |
|
|
$3.5 |
|
|
$3.3 |
|
|
7.3% |
| Non-GAAP Adjusted Net Income Per Share – Diluted (3) |
|
|
$0.06 |
|
|
$0.06 |
|
|
6.9% |
| Adjusted EBITDA (3) |
|
|
$4.2 |
|
|
$3.9 |
|
|
7.9% |
| Adjusted EBITDA Margin |
|
|
25.9% |
|
|
26.3% |
|
|
(0.4 pts) |
| New First Year Orders |
|
|
$2.6 |
|
|
$3.0 |
|
|
(12.9%) |
| Total Orders |
|
|
$15.7 |
|
|
$20.4 |
|
|
(23.1%) |
| Backlog (4) |
|
|
$77.8 |
|
|
$80.9 |
|
|
(3.7%) |
|
|
|
|
|
|
|
|
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|
|
(1)
|
|
Changes are based on actual numbers versus numbers shown in the columns, which may
reflect rounding |
|
(2)
|
|
Adjusted earnings before interest, taxes, depreciation and amortization |
|
(3)
|
|
A reconciliation of GAAP to non-GAAP adjusted results is included in this press release and
available on our investor relations Web page at http://investor.zixcorp.com
|
|
(4)
|
|
Service contract commitments that represent future revenue to be recognized as the
services are provided |
|
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|
The acquisition of Greenview Data and the introduction of ZixProtect and ZixArchive demonstrate the company’s focus on meeting the entire breadth of its
customers’ email data protection and compliance needs, enhancing its leadership position in email encryption and expanding its
growth opportunities with add-on business in a larger total addressable market. Along with Zix’s seven growth pillars and customer
success model, this focus will continue to drive the company’s long-term profitable growth initiatives.
Financial Outlook
For the third quarter 2017, the company forecasts revenue to range between $16.7 million and $16.9 million, representing an
increase of 9% to 10% year-over-year. The company forecasts fully diluted GAAP earnings per share to be in a range of $0.02 and
$0.03 and fully diluted non-GAAP adjusted earnings per share to be $0.07 for the third quarter 2017.
For fiscal year 2017, the company is reiterating its revenue guidance range of $66.2 million and $66.7 million, representing an
increase of 10% to 11% compared to fiscal year 2016. The company forecasts fully diluted GAAP earnings per share to be between
$0.10 and $0.12 and reiterates its fully diluted non-GAAP adjusted earnings per share guidance of $0.28 for fiscal year 2017.
Conference Call Information
Management will discuss these financial results and outlook on a conference call today (August 1, 2017) at 5:00 p.m. ET (2:00
p.m. PT).
A live webcast of the conference call will be available in the investor 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 40885768. If you have any difficulty
connecting with the conference call, please contact Liolios Group 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 40885768. An archive of the webcast will also be available on the Zix investor
relations Web site.
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, 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 or earnings, potential benefits of 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 risks or
uncertainties related to market acceptance of new Zix solutions and how privacy and data security laws may affect demand for Zix
email data protection solutions. Zix may not succeed in addressing these and other risks. Further information regarding factors
that could affect Zix financial and other results can be found in the risk factors section of Zix’s most recent filing on Form 10-K
with the Securities and Exchange Commission.
|
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|
|
|
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|
|
| ZIX CORPORATION |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
2017 |
|
|
December 31, |
|
|
|
(unaudited) |
|
|
2016 |
| ASSETS |
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
$ |
29,508,000 |
|
|
$ |
26,457,000 |
| Receivables, net |
|
|
|
993,000 |
|
|
|
1,209,000 |
| Prepaid and other current assets |
|
|
|
2,845,000 |
|
|
|
2,829,000 |
| Total current assets |
|
|
|
33,346,000 |
|
|
|
30,495,000 |
| Property and equipment, net |
|
|
|
4,308,000 |
|
|
|
3,976,000 |
| Intangible Assets, Net |
|
|
|
4,934,000 |
|
|
|
- |
| Goodwill |
|
|
|
6,488,000 |
|
|
|
2,161,000 |
| Deferred tax assets |
|
|
|
41,886,000 |
|
|
|
45,726,000 |
| Total assets |
|
|
$ |
90,962,000 |
|
|
$ |
82,358,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
| Accounts payable and accrued expenses |
|
|
$ |
5,456,000 |
|
|
$ |
4,720,000 |
| Deferred revenue |
|
|
|
25,738,000 |
|
|
|
25,773,000 |
| Total current liabilities |
|
|
|
31,194,000 |
|
|
|
30,493,000 |
| Long-term liabilities: |
|
|
|
|
|
|
| Deferred revenue |
|
|
|
1,606,000 |
|
|
|
1,448,000 |
| Deferred rent |
|
|
|
1,270,000 |
|
|
|
1,347,000 |
| Total long-term liabilities |
|
|
|
2,876,000 |
|
|
|
2,795,000 |
| Total liabilities |
|
|
|
34,070,000 |
|
|
|
33,288,000 |
| Total stockholders’ equity |
|
|
|
56,892,000 |
|
|
|
49,070,000 |
| Total liabilities and stockholders’ equity |
|
|
$ |
90,962,000 |
|
|
$ |
82,358,000 |
|
|
|
|
|
|
|
|
|
| |
| ZIX CORPORATION |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
| Revenue |
|
|
$ |
16,378,000 |
|
|
|
$ |
14,930,000 |
|
|
|
|
$ |
32,271,000 |
|
|
|
$ |
29,258,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
|
|
|
3,247,000 |
|
|
|
|
2,635,000 |
|
|
|
|
|
6,070,000 |
|
|
|
|
5,172,000 |
|
| Gross profit |
|
|
|
13,131,000 |
|
|
|
|
12,295,000 |
|
|
|
|
|
26,201,000 |
|
|
|
|
24,086,000 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development |
|
|
|
2,708,000 |
|
|
|
|
2,321,000 |
|
|
|
|
|
5,131,000 |
|
|
|
|
4,500,000 |
|
| Selling, general and administrative |
|
|
|
7,783,000 |
|
|
|
|
9,028,000 |
|
|
|
|
|
15,768,000 |
|
|
|
|
16,172,000 |
|
| Total operating expenses |
|
|
|
10,491,000 |
|
|
|
|
11,349,000 |
|
|
|
|
|
20,899,000 |
|
|
|
|
20,672,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
|
2,640,000 |
|
|
|
|
946,000 |
|
|
|
|
|
5,302,000 |
|
|
|
|
3,414,000 |
|
| Operating margin |
|
|
|
16 |
% |
|
|
|
6 |
% |
|
|
|
|
16 |
% |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income, net |
|
|
|
66,000 |
|
|
|
|
50,000 |
|
|
|
|
|
145,000 |
|
|
|
|
109,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income before income taxes |
|
|
|
2,706,000 |
|
|
|
|
996,000 |
|
|
|
|
|
5,447,000 |
|
|
|
|
3,523,000 |
|
| Income tax expense |
|
|
|
(1,567,000 |
) |
|
|
|
(437,000 |
) |
|
|
|
|
(2,533,000 |
) |
|
|
|
(1,394,000 |
) |
| Net income |
|
|
$ |
1,139,000 |
|
|
|
$ |
559,000 |
|
|
|
|
$ |
2,914,000 |
|
|
|
$ |
2,129,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic income per common share: |
|
|
$ |
0.02 |
|
|
|
$ |
0.01 |
|
|
|
|
$ |
0.05 |
|
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted income per common share: |
|
|
$ |
0.02 |
|
|
|
$ |
0.01 |
|
|
|
|
$ |
0.05 |
|
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in per share calculation - basic |
|
|
|
53,573,431 |
|
|
|
|
53,766,979 |
|
|
|
|
|
53,268,005 |
|
|
|
|
54,884,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in per share calculation - diluted |
|
|
|
54,479,963 |
|
|
|
|
54,270,000 |
|
|
|
|
|
54,075,003 |
|
|
|
|
55,425,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| ZIX CORPORATION |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2017 |
|
|
2016 |
| Operating activities: |
|
|
|
|
|
|
| Net income |
|
|
$ |
2,914,000 |
|
|
|
$ |
2,129,000 |
|
| Non-cash items in net income |
|
|
|
4,806,000 |
|
|
|
|
3,326,000 |
|
| Changes in operating assets and liabilities |
|
|
|
(438,000 |
) |
|
|
|
2,087,000 |
|
| Net cash provided by operating activities |
|
|
|
7,282,000 |
|
|
|
|
7,542,000 |
|
|
|
|
|
|
|
|
| Investing activities: |
|
|
|
|
|
|
| Purchases of property and equipment |
|
|
|
(1,266,000 |
) |
|
|
|
(1,238,000 |
) |
| Acquisition of business, net of cash acquired |
|
|
|
(6,594,000 |
) |
|
|
|
- |
|
| Net cash used in investing activities |
|
|
|
(7,860,000 |
) |
|
|
|
(1,238,000 |
) |
|
|
|
|
|
|
|
| Financing activities: |
|
|
|
|
|
|
| Proceeds from exercise of stock options |
|
|
|
4,128,000 |
|
|
|
|
50,000 |
|
| Purchase of Treasury Stock |
|
|
|
(499,000 |
) |
|
|
|
(14,290,000 |
) |
| Net cash provided by (used in) financing activities |
|
|
|
3,629,000 |
|
|
|
|
(14,240,000 |
) |
|
|
|
|
|
|
|
| Increase (Decrease) in cash and cash equivalents |
|
|
|
3,051,000 |
|
|
|
|
(7,936,000 |
) |
| Cash and cash equivalents, beginning of period |
|
|
|
26,457,000 |
|
|
|
|
28,664,000 |
|
| Cash and cash equivalents, end of period |
|
|
$ |
29,508,000 |
|
|
|
$ |
20,728,000 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| ZIX CORPORATION |
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
| (Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP revenue |
|
|
|
|
|
$ |
16,378,000 |
|
|
|
$ |
14,930,000 |
|
|
|
|
$ |
32,271,000 |
|
|
|
$ |
29,258,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP cost of revenue |
|
|
|
|
|
$ |
3,247,000 |
|
|
|
$ |
2,635,000 |
|
|
|
|
$ |
6,070,000 |
|
|
|
$ |
5,172,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(77,000 |
) |
|
|
|
(56,000 |
) |
|
|
|
|
(148,000 |
) |
|
|
|
(116,000 |
) |
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
(2,000 |
) |
|
|
|
- |
|
|
|
|
|
(2,000 |
) |
|
|
|
- |
|
| Intangible Amortization (3) |
|
|
(C) |
|
|
|
(50,000 |
) |
|
|
|
- |
|
|
|
|
|
(50,000 |
) |
|
|
|
- |
|
| Non-GAAP adjusted cost of revenue |
|
|
|
|
|
$ |
3,118,000 |
|
|
|
$ |
2,579,000 |
|
|
|
|
$ |
5,870,000 |
|
|
|
$ |
5,056,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP gross profit |
|
|
|
|
|
$ |
13,131,000 |
|
|
|
$ |
12,295,000 |
|
|
|
|
$ |
26,201,000 |
|
|
|
$ |
24,086,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
77,000 |
|
|
|
|
56,000 |
|
|
|
|
|
148,000 |
|
|
|
|
116,000 |
|
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
2,000 |
|
|
|
|
- |
|
|
|
|
|
2,000 |
|
|
|
|
- |
|
| Intangible Amortization (3) |
|
|
(C) |
|
|
|
50,000 |
|
|
|
|
- |
|
|
|
|
|
50,000 |
|
|
|
|
- |
|
| Non-GAAP adjusted gross profit |
|
|
|
|
|
$ |
13,260,000 |
|
|
|
$ |
12,351,000 |
|
|
|
|
$ |
26,401,000 |
|
|
|
$ |
24,202,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP research and development expense |
|
|
|
|
|
$ |
2,708,000 |
|
|
|
$ |
2,321,000 |
|
|
|
|
$ |
5,131,000 |
|
|
|
$ |
4,500,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(97,000 |
) |
|
|
|
(75,000 |
) |
|
|
|
|
(177,000 |
) |
|
|
|
(152,000 |
) |
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
(3,000 |
) |
|
|
|
- |
|
|
|
|
|
(3,000 |
) |
|
|
|
- |
|
| Non-GAAP adjusted research and development expense |
|
|
|
$ |
2,608,000 |
|
|
|
$ |
2,246,000 |
|
|
|
|
$ |
4,951,000 |
|
|
|
$ |
4,348,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling and marketing expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP selling and marketing expense |
|
|
|
|
|
$ |
5,222,000 |
|
|
|
$ |
5,083,000 |
|
|
|
|
$ |
10,395,000 |
|
|
|
$ |
9,492,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(231,000 |
) |
|
|
|
(156,000 |
) |
|
|
|
|
(436,000 |
) |
|
|
|
(304,000 |
) |
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
(1,000 |
) |
|
|
|
- |
|
|
|
|
|
(1,000 |
) |
|
|
|
- |
|
| Intangible Amortization (3) |
|
|
(C) |
|
|
|
(57,000 |
) |
|
|
|
- |
|
|
|
|
|
(57,000 |
) |
|
|
|
- |
|
| Non-GAAP adjusted selling and marketing expense |
|
|
|
|
|
$ |
4,933,000 |
|
|
|
$ |
4,927,000 |
|
|
|
|
$ |
9,901,000 |
|
|
|
$ |
9,188,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP general and administrative expense |
|
|
|
|
|
$ |
2,561,000 |
|
|
|
$ |
3,945,000 |
|
|
|
|
$ |
5,373,000 |
|
|
|
$ |
6,680,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
(283,000 |
) |
|
|
|
(433,000 |
) |
|
|
|
|
(518,000 |
) |
|
|
|
(510,000 |
) |
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
(128,000 |
) |
|
|
|
(1,293,000 |
) |
|
|
|
|
(670,000 |
) |
|
|
|
(1,972,000 |
) |
| Executive separation payment (4) |
|
|
(D) |
|
|
|
- |
|
|
|
|
(358,000 |
) |
|
|
|
|
(3,000 |
) |
|
|
|
(358,000 |
) |
| Non-GAAP adjusted general and administrative expense |
|
|
|
$ |
2,150,000 |
|
|
|
$ |
1,861,000 |
|
|
|
|
$ |
4,182,000 |
|
|
|
$ |
3,840,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP operating income |
|
|
|
|
|
$ |
2,640,000 |
|
|
|
$ |
946,000 |
|
|
|
|
$ |
5,302,000 |
|
|
|
$ |
3,414,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
688,000 |
|
|
|
|
720,000 |
|
|
|
|
|
1,279,000 |
|
|
|
|
1,082,000 |
|
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
134,000 |
|
|
|
|
1,293,000 |
|
|
|
|
|
676,000 |
|
|
|
|
1,972,000 |
|
| Intangible Amortization (3) |
|
|
(C) |
|
|
|
107,000 |
|
|
|
|
- |
|
|
|
|
|
107,000 |
|
|
|
|
- |
|
| Executive separation payment (4) |
|
|
(D) |
|
|
|
- |
|
|
|
|
358,000 |
|
|
|
|
|
3,000 |
|
|
|
|
358,000 |
|
| Non-GAAP adjusted operating income |
|
|
|
|
|
$ |
3,569,000 |
|
|
|
$ |
3,317,000 |
|
|
|
|
$ |
7,367,000 |
|
|
|
$ |
6,826,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted Operating Margin |
|
|
|
|
|
|
21.8 |
% |
|
|
|
22.2 |
% |
|
|
|
|
22.8 |
% |
|
|
|
23.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income |
|
|
|
|
|
$ |
1,139,000 |
|
|
|
$ |
559,000 |
|
|
|
|
$ |
2,914,000 |
|
|
|
$ |
2,129,000 |
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
688,000 |
|
|
|
|
720,000 |
|
|
|
|
|
1,279,000 |
|
|
|
|
1,082,000 |
|
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
134,000 |
|
|
|
|
1,293,000 |
|
|
|
|
|
676,000 |
|
|
|
|
1,972,000 |
|
| Intangible Amortization (3) |
|
|
(C) |
|
|
|
107,000 |
|
|
|
|
- |
|
|
|
|
|
107,000 |
|
|
|
|
- |
|
| Executive separation payment (4) |
|
|
(D) |
|
|
|
- |
|
|
|
|
358,000 |
|
|
|
|
|
3,000 |
|
|
|
|
358,000 |
|
| Income tax impact |
|
|
(E) |
|
|
|
1,425,000 |
|
|
|
|
326,000 |
|
|
|
|
|
2,232,000 |
|
|
|
|
1,146,000 |
|
| Non-GAAP adjusted net income |
|
|
|
|
|
$ |
3,493,000 |
|
|
|
$ |
3,256,000 |
|
|
|
|
$ |
7,211,000 |
|
|
|
$ |
6,687,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income |
|
|
|
|
|
$ |
0.02 |
|
|
|
$ |
0.01 |
|
|
|
|
$ |
0.05 |
|
|
|
$ |
0.04 |
|
| Adjustments per share |
|
|
(A-E) |
|
|
$ |
0.04 |
|
|
|
$ |
0.05 |
|
|
|
|
$ |
0.08 |
|
|
|
$ |
0.08 |
|
| Non-GAAP adjusted net income |
|
|
|
|
|
$ |
0.06 |
|
|
|
$ |
0.06 |
|
|
|
|
$ |
0.13 |
|
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used to compute Non-GAAP adjusted net income per share - diluted |
|
|
|
|
54,479,963 |
|
|
|
|
54,270,000 |
|
|
|
|
|
54,075,003 |
|
|
|
|
55,425,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reconciliation of Net income to EBITDA and Adjusted EBITDA: |
|
|
(F) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
|
$ |
1,139,000 |
|
|
|
$ |
559,000 |
|
|
|
|
$ |
2,914,000 |
|
|
|
$ |
2,129,000 |
|
| Income tax provision |
|
|
|
|
|
|
1,567,000 |
|
|
|
|
437,000 |
|
|
|
|
|
2,533,000 |
|
|
|
|
1,394,000 |
|
| Depreciation |
|
|
|
|
|
|
608,000 |
|
|
|
|
564,000 |
|
|
|
|
|
1,190,000 |
|
|
|
|
1,098,000 |
|
| Intangible Amortization (3) |
|
|
|
|
|
|
107,000 |
|
|
|
|
- |
|
|
|
|
|
107,000 |
|
|
|
|
- |
|
| EBITDA |
|
|
|
|
|
|
3,421,000 |
|
|
|
|
1,560,000 |
|
|
|
|
|
6,744,000 |
|
|
|
|
4,621,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation charges (1) |
|
|
(A) |
|
|
|
688,000 |
|
|
|
|
720,000 |
|
|
|
|
|
1,279,000 |
|
|
|
|
1,082,000 |
|
| Strategic consulting and litigation costs (2) |
|
|
(B) |
|
|
|
134,000 |
|
|
|
|
1,293,000 |
|
|
|
|
|
676,000 |
|
|
|
|
1,972,000 |
|
| Executive separation payment (4) |
|
|
(D) |
|
|
|
- |
|
|
|
|
358,000 |
|
|
|
|
|
3,000 |
|
|
|
|
358,000 |
|
| Adjusted EBITDA |
|
|
|
|
|
$ |
4,243,000 |
|
|
|
$ |
3,931,000 |
|
|
|
|
$ |
8,702,000 |
|
|
|
$ |
8,033,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA margin |
|
|
|
|
|
|
25.9 |
% |
|
|
|
26.3 |
% |
|
|
|
|
27.0 |
% |
|
|
|
27.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) Stock-based compensation charges are included as follows: |
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenues |
|
|
|
|
|
$ |
77,000 |
|
|
|
$ |
56,000 |
|
|
|
|
$ |
148,000 |
|
|
|
$ |
116,000 |
|
| Research and development |
|
|
|
|
|
|
97,000 |
|
|
|
|
75,000 |
|
|
|
|
|
177,000 |
|
|
|
|
152,000 |
|
| Selling and marketing |
|
|
|
|
|
|
231,000 |
|
|
|
|
156,000 |
|
|
|
|
|
436,000 |
|
|
|
|
304,000 |
|
| General and administrative |
|
|
|
|
|
|
283,000 |
|
|
|
|
433,000 |
|
|
|
|
|
518,000 |
|
|
|
|
510,000 |
|
|
|
|
|
|
|
$ |
688,000 |
|
|
|
$ |
720,000 |
|
|
|
|
$ |
1,279,000 |
|
|
|
$ |
1,082,000 |
|
| (2) Strategic consulting and litigation costs are included as follows: |
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenues |
|
|
|
|
|
|
2,000 |
|
|
|
|
- |
|
|
|
|
|
2,000 |
|
|
|
|
- |
|
| Research and development |
|
|
|
|
|
|
3,000 |
|
|
|
|
- |
|
|
|
|
|
3,000 |
|
|
|
|
- |
|
| Selling and marketing |
|
|
|
|
|
|
1,000 |
|
|
|
|
- |
|
|
|
|
|
1,000 |
|
|
|
|
- |
|
| General and administrative |
|
|
|
|
|
|
128,000 |
|
|
|
|
1,293,000 |
|
|
|
|
|
670,000 |
|
|
|
|
1,972,000 |
|
|
|
|
|
|
|
$ |
134,000 |
|
|
|
$ |
1,293,000 |
|
|
|
|
$ |
676,000 |
|
|
|
$ |
1,972,000 |
|
| (3) Intangible Amortization is included as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenues |
|
|
|
|
|
|
50,000 |
|
|
|
|
- |
|
|
|
|
|
50,000 |
|
|
|
|
- |
|
| Selling and marketing |
|
|
|
|
|
|
57,000 |
|
|
|
|
- |
|
|
|
|
|
57,000 |
|
|
|
|
- |
|
|
|
|
|
|
|
$ |
107,000 |
|
|
|
$ |
- |
|
|
|
|
$ |
107,000 |
|
|
|
$ |
- |
|
| (4) Executive separation payment is included as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative |
|
|
|
|
|
|
- |
|
|
|
|
358,000 |
|
|
|
|
|
3,000 |
|
|
|
|
358,000 |
|
|
|
|
|
|
|
$ |
- |
|
|
|
$ |
358,000 |
|
|
|
|
$ |
3,000 |
|
|
|
$ |
358,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
| 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 |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2017 |
|
|
2017 |
|
|
|
2017 |
|
|
2017 |
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP revenue |
|
|
$ |
16,700,000 |
|
|
$ |
16,900,000 |
|
|
|
$ |
66,200,000 |
|
|
$ |
66,700,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income |
|
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
|
$ |
0.10 |
|
|
$ |
0.12 |
| Stock-based compensation charges |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
|
$ |
0.05 |
|
|
$ |
0.05 |
| Strategic consulting and litigation costs |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
|
$ |
0.04 |
|
|
$ |
0.03 |
| Intangible Amortization |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
$ |
0.01 |
|
|
$ |
0.01 |
| Income tax impact |
|
|
$ |
0.03 |
|
|
$ |
0.02 |
|
|
|
$ |
0.08 |
|
|
$ |
0.07 |
| Non-GAAP adjusted net income |
|
|
$ |
0.07 |
|
|
$ |
0.07 |
|
|
|
$ |
0.28 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used to compute Non-GAAP adjusted net income per share - diluted |
|
|
|
54,606,559 |
|
|
|
54,606,559 |
|
|
|
|
54,399,631 |
|
|
|
54,399,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 per share - 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 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) Executive separation payment relating to CFO 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) 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.
(F) EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA adds back stock-based
compensation charges and litigation expenses.
Zix Corporation
Taylor Johnson, 214-370-2134
tjohnson@zixcorp.com
or
Investor Contact
Liolios Group, Inc.
Matt Glover and Najim Mostamand, 949-574-3860
ZIXI@liolios.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20170801006416/en/