Zix
Corporation (Zix) (NASDAQ: ZIXI), a leader in email security,
today announced financial results for the first quarter ended March 31,
2019.
First Quarter 2019 Financial Highlights (results compared to the same
year-ago quarter)
-
Revenue increased 76% to $29.3 million. Standalone Zix revenue (which
excludes revenue from the AppRiver acquisition, which closed on
February 20, 2019) increased 10% to $18.4 million. Total overall
organic revenue growth across Zix and AppRiver was 14%. -
Annual recurring revenue (ARR) increased 175% to $188.0 million.
Standalone Zix ARR increased 15% to $78.3 million. Total overall
organic ARR growth across Zix and AppRiver was 16%. -
Standalone Zix New First Year Orders (NFYO) increased 74% to a record
$4.0 million. - Total billings increased 15% to $28.5 million.
-
GAAP net loss attributable to common stockholders totaled $8.7 million
compared to a net income of $1.9 million. The company’s net loss
attributable to common shareholders includes a deemed and accrued
dividend of $2.4 million to preferred shareholders. -
GAAP fully diluted earnings (loss) per share attributable to common
stockholders totaled ($0.17) compared to $0.04. -
Non-GAAP adjusted net income before deemed dividends excluding
deferred tax (benefit) expense totaled $3.8 million compared to $4.3
million. Our Q1, 2019 Non-GAAP earnings exclude $7.0 million of
acquisition related expenses. -
Non-GAAP adjusted net income before deemed dividends per share
excluding deferred tax (benefit) expense totaled $0.07 compared to
$0.08. -
Adjusted EBITDA increased 20% to $5.8 million, representing an
adjusted EBITDA margin of 19.8%. - The company ended the quarter with $16.7 million in cash.
Management Commentary
“The first quarter of 2019 was positive in a number of meaningful ways:
we closed the acquisition of AppRiver, successfully executed on our
previously communicated cost-savings initiatives, and delivered 20%+
growth of Monthly Recurring Revenue (MRR) at AppRiver along with 74% New
First Year Orders growth at Zix. We topped off Q1 by winning the largest
deal in the company’s history with a top 5 U.S. bank,” said David
Wagner, Zix’s Chief Executive Officer. “As a consolidated team, we
achieved 76% GAAP revenue growth and 14% overall organic revenue growth
in Q1, and our adjusted EBITDA increased 20% to $5.8 million. In
addition, the integration of AppRiver is proceeding rapidly, with
several important milestones achieved ahead of schedule: Zix’s email
encryption solution was integrated into AppRiver’s platform and made
available to their more than 4,500 MSP partners on April 25th and Office
365 was made available to Zix partners beginning on May 1st. This is
truly an exciting time to be at Zix. Our growth strategy of expanding
our product suite in the cloud is accelerating our ability to cross-sell
and increase our attach rates. We are already seeing the benefits of
operating at a larger scale and expanding our addressable market. Taken
together, the successes of Q1 further support our commitment to our
profitable growth strategy and our ability to continue to deliver
meaningful returns to our shareholders.”
Zix’s Chief Financial Officer Dave
Rockvam added: “We’re pleased to once again generate revenue and
adjusted EPS above our guidance, demonstrating solid execution from our
sales teams and the market’s increasing adoption of our email security
solutions. Excluding AppRiver, Zix’s standalone ARR increased 15%
year-over-year to a record $78.3 million, as we continued to drive new
customer acquisition, higher cross-sell and upselling activity, and
higher retention. With respect to AppRiver, we drove 21% organic ARR
growth and record levels of customer trials. After more than three years
of hard work and dedication from the entire team, it’s encouraging to
not only see the business continue to grow profitably, but to also have
the opportunity to propel Zix to the next level by marrying our
established strengths in email security with our new productivity
solution capabilities. We could not have asked for a better opportunity
to create value for our employees, customers, partners and shareholders,
and we will look to aggressively build on our momentum to realize this
tremendous value-add potential.”
Recent Operational Highlights
-
Closed
the acquisition of AppRiver, a leading cloud-based cybersecurity
solutions provider, creating significant scale and accelerating
growth, attractive cross-selling opportunities, and a strengthened
position in the cloud-based email security market. - Completed $8 million of cost savings 12 months ahead of plan
-
Secured largest deal in the company’s history with a three-year
agreement with a top five U.S. bank -
Integrated
and launched ZixEncrypt for AppRiver’s 4,500+ MSP partners -
Integrated and launched Office 365 productivity solutions for Zix’s
direct sales teams and channel partners -
Launched
ZixSuite, a cloud-based business communications security and
compliance solution that combines advanced threat protection, business
email continuity, email encryption, email DLP and unified archiving,
all managed from a centralized interface. -
Expanded
unified archiving solution ZixArchive beyond email to include 48
new business communication channels, including social media, instant
message, mobile, web, audio and video.
First Quarter 2019 Corporate Financial Summary and Other Operational
Metrics (1)
| $ in Millions, except per share data | Q1 2019 | Q1 2018 |
Change (2) |
||||||||||
| Revenue | $ | 29.3 | $ | 16.7 | 75.9 | % | |||||||
| GAAP Net Income (Loss) Attributable to Common Stockholders | ($8.7 | ) | $ | 1.9 | NM | ||||||||
|
GAAP Net Income (Loss) Per Share Attributable to Common Stockholders – Diluted |
($0.17 | ) | $ | 0.04 | NM | ||||||||
| EBITDA (3)(4) | ($3.5 | ) | $ | 3.5 | NM | ||||||||
| EBITDA Margin | (11.8 | %) | 20.9 | % | NM | ||||||||
| Non-GAAP Adjusted Net Income Attributable to Common Stockholders (4) | $ | 1.3 | $ | 4.3 | (69.3 | %) | |||||||
|
Non-GAAP Adjusted Net Income Per Share Attributable to Common Stockholders – Diluted (4) |
$ | 0.03 | $ | 0.08 | (66.3 | %) | |||||||
|
Non-GAAP Adjusted Net Income Before Deemed Dividends Excluding Deferred Tax (Benefit) Expense |
$ | 3.8 | $ | 4.3 | (12.8 | %) | |||||||
|
Non-GAAP Adjusted Net Income Per Share Before Deemed Dividends Diluted |
$ | 0.09 | $ | 0.06 | 45.2 | % | |||||||
|
Non-GAAP Adjusted Net Income Before Deemed Dividends Per Share Excluding Deferred Tax (Benefit) Expense |
$ | 0.07 | $ | 0.08 | (11.5 | %) | |||||||
| Adjusted EBITDA (4) | $ | 5.8 | $ | 4.8 | 20.2 | % | |||||||
| Adjusted EBITDA Margin (4) | 19.8 | % | 29.0 | % | (9.2 pts) | ||||||||
| Standalone Zix New First Year Orders | $ | 4.0 | $ | 2.3 | 73.9 | % | |||||||
| Standalone Zix Total Orders | $ | 22.4 | $ | 14.8 | 51.5 | % | |||||||
| Total Billings | $ | 28.5 | $ | 24.8 | 14.6 | % | |||||||
| ARR | $ | 188.0 | $ | 68.4 | 174.9 | % | |||||||
NM = not meaningful
(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 second quarter of 2019, the company forecasts revenue to range
between $44.5 million and $45.0 million. The company forecasts fully
diluted GAAP earnings (loss) per share to be in a range of ($0.05) and
($0.03) and fully diluted non-GAAP adjusted earnings per share to be
between $0.11 and $0.12 for the second quarter of 2019. The financial
outlook includes a required GAAP adjustment on the deferred revenue
acquired from AppRiver for purchased revenue accounting.
For the fiscal year of 2019, the company is increasing its previously
disclosed revenue guidance to a range of between $167.0 million to
$169.0 million (previously $164.0 million to $167.0 million),
representing an increase of between 135% and 140% (previously 134% and
138%) compared to fiscal year 2018. The company forecasts fully diluted
GAAP earnings (loss) per share guidance to a range of between ($0.26)
and ($0.20) [previously ($0.12) and ($0.01)] and is increasing its fully
diluted non-GAAP adjusted earnings per share to a range of between $0.40
and $0.42 (previously $0.30 and $0.33) for fiscal year 2019. The
financial outlook includes approximately 10 months of AppRiver financial
results consolidated into Zix and also includes a required GAAP
adjustment on the deferred revenue acquired from AppRiver for purchased
revenue accounting.
Zix is targeting ARR of approximately $202 million to $209 million
(previously $200 million to $207 million) at fiscal 2019 year end,
representing a growth rate of approximately 12% to 16% (previously 11%
to 15%) year-over-year. Zix management is also expecting revenue of
approximately $47.5 million to $50 million with a 24% adjusted EBITDA
margin in the fourth quarter of 2019.
Conference Call Information
Management will discuss these financial results and outlook on a
conference call today (May 2, 2019) 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 8354249. 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 8354249. 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, 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.
| ZIX CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| March 31, | ||||||||
| 2019 | December 31, | |||||||
| (unaudited) | 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,691,000 | $ | 27,109,000 | ||||
| Receivables, net | 9,779,000 | 3,188,000 | ||||||
| Prepaid and other current assets | 5,253,000 | 3,176,000 | ||||||
|
Total current assets |
31,723,000 | 33,473,000 | ||||||
| Property and equipment, net | 7,000,000 | 3,924,000 | ||||||
| Operating lease assets | 8,932,000 | – | ||||||
| Other assets and deferred costs | 10,174,000 | 9,424,000 | ||||||
| Intangible Assets, Net | 152,012,000 | 15,251,000 | ||||||
| Goodwill | 161,003,000 | 13,783,000 | ||||||
| Deferred tax assets | 29,888,000 | 28,785,000 | ||||||
| Total assets | $ | 400,732,000 | $ | 104,640,000 | ||||
| LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 28,595,000 | $ | 10,516,000 | ||||
| Deferred revenue | 40,966,000 | 30,622,000 | ||||||
| Other current liabilities | 1,203,000 | – | ||||||
|
Total current liabilities |
70,764,000 | 41,138,000 | ||||||
| Long-term liabilities: | ||||||||
| Deferred revenue | 1,304,000 | 1,539,000 | ||||||
| Deferred rent | – | 1,016,000 | ||||||
| Operating lease liabilities | 8,880,000 | – | ||||||
| Debt | 168,666,000 | – | ||||||
| Total long-term liabilities | 178,850,000 | 2,555,000 | ||||||
| Total liabilities | 249,614,000 | 43,693,000 | ||||||
| Total preferred stock | 98,976,000 | – | ||||||
| Total stockholders’ equity | 52,142,000 | 60,947,000 | ||||||
| Total liabilities, preferred stock and stockholders’ equity | $ | 400,732,000 | $ | 104,640,000 | ||||
| ZIX CORPORATION | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Revenue | $ | 29,300,000 | $ | 16,654,000 | ||||||
| Cost of revenue | 11,139,000 | 3,514,000 | ||||||||
| Gross profit | 18,161,000 | 13,140,000 | ||||||||
| Operating expenses: | ||||||||||
| Research and development | 4,147,000 | 2,977,000 | ||||||||
| Selling, general and administrative | 20,264,000 | 7,554,000 | ||||||||
| Total operating expenses | 24,411,000 | 10,531,000 | ||||||||
| Operating income | (6,250,000 | ) | 2,609,000 | |||||||
| Operating margin | -21 | % | 16 | % | ||||||
| Other income (expense) | ||||||||||
| Investment and other income | 95,000 | 119,000 | ||||||||
| Interest expense | (1,255,000 | ) | – | |||||||
| Other expense | (3,000 | ) | – | |||||||
| Total other income (expense) | (1,163,000 | ) | 119,000 | |||||||
| Income before income taxes | (7,413,000 | ) | 2,728,000 | |||||||
| Income tax benefit (expense) | 1,148,000 | (836,000 | ) | |||||||
| Net (loss) income | $ | (6,265,000 | ) | $ | 1,892,000 | |||||
| Deemed and accrued dividends on preferred stock | (2,433,000 | ) | – | |||||||
| Net (loss) income attributable to common shareholders | $ | (8,698,000 | ) | $ | 1,892,000 | |||||
| Basic (loss) income per share attributable to common shareholders: | $ | (0.17 | ) | $ | 0.04 | |||||
| Diluted (loss) income per share attributable to common shareholders: | $ | (0.17 | ) | $ | 0.04 | |||||
| Shares used in per share calculation – basic | 52,713,576 | 53,430,492 | ||||||||
| Shares used in per share calculation – diluted | 52,713,576 | 53,430,492 | ||||||||
| Other Comprehensive income, net of tax: | ||||||||||
| Foreign currency translation adjustments | (32,000 | ) | – | |||||||
| Comprehensive income | $ | (6,297,000 | ) | $ | 1,892,000 | |||||
| ZIX CORPORATION | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Operating activities: | ||||||||||
| Net (loss) income | $ | (6,265,000 | ) | $ | 1,892,000 | |||||
| Non-cash items in net income | 2,938,000 | 2,284,000 | ||||||||
| Changes in operating assets and liabilities | 2,910,000 | (3,128,000 | ) | |||||||
| Net cash provided by operating activities | (417,000 | ) | 1,048,000 | |||||||
| Investing activities: | ||||||||||
| Purchases of property and equipment and capitalized software | (1,742,000 | ) | (546,000 | ) | ||||||
| Acquisition of business, net of cash acquired | (271,706,000 | ) | – | |||||||
| Net cash used in investing activities | (273,448,000 | ) | (546,000 | ) | ||||||
| Financing activities: | ||||||||||
|
Proceeds from issuance of series A preferred stock, net of offering costs |
62,692,000 | – | ||||||||
|
Proceeds from issuance of series B preferred stock, net of offering costs |
33,896,000 | – | ||||||||
| Proceeds from exercise of stock options | 36,000 | – | ||||||||
| Proceeds from term loan | 175,000,000 | – | ||||||||
| Debt issuance costs | (6,389,000 | ) | – | |||||||
| Earn-out payment | (415,000 | ) | (605,000 | ) | ||||||
| Purchase of treasury stock | (1,340,000 | ) | (3,637,000 | ) | ||||||
| Net cash provided used in financing activities | 263,480,000 | (4,242,000 | ) | |||||||
| Effect of exchange rate changes on cash | (33,000 | ) | – | |||||||
| (Decrease) Increase in cash and cash equivalents | (10,418,000 | ) | (3,740,000 | ) | ||||||
| Cash and cash equivalents, beginning of period | 27,109,000 | 33,009,000 | ||||||||
| Cash and cash equivalents, end of period | $ | 16,691,000 | $ | 29,269,000 | ||||||
| ZIX CORPORATION | ||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| Revenue: | ||||||||||||
| GAAP revenue | $ | 29,300,000 | $ | 16,654,000 | ||||||||
| Cost of revenue | ||||||||||||
| GAAP cost of revenue | $ | 11,139,000 | $ | 3,514,000 | ||||||||
| Stock-based compensation charges (1) | (A) | (104,000 | ) | (68,000 | ) | |||||||
| Strategic consulting and litigation costs (2) | (B) | (29,000 | ) | (1,000 | ) | |||||||
| Intangible Amortization (3) | (C) | (634,000 | ) | (77,000 | ) | |||||||
| Corporate separation payment (4) | (D) | (49,000 | ) | – | ||||||||
| Non-GAAP adjusted cost of revenue | $ | 10,323,000 | $ | 3,368,000 | ||||||||
| Gross profit: | ||||||||||||
| GAAP gross profit | $ | 18,161,000 | $ | 13,140,000 | ||||||||
| Stock-based compensation charges (1) | (A) | 104,000 | 68,000 | |||||||||
| Strategic consulting and litigation costs (2) | (B) | 29,000 | 1,000 | |||||||||
| Intangible Amortization (3) | (C) | 634,000 | 77,000 | |||||||||
| Corporate separation payment (4) | (D) | 49,000 | – | |||||||||
|
Non-GAAP adjusted gross profit |
$ | 18,977,000 | $ | 13,286,000 | ||||||||
| Research and development expense | ||||||||||||
| GAAP research and development expense | $ | 4,147,000 | $ | 2,977,000 | ||||||||
| Stock-based compensation charges (1) | (A) | (175,000 | ) | (90,000 | ) | |||||||
| Strategic consulting and litigation costs (2) | (B) | (171,000 | ) | (56,000 | ) | |||||||
| Intangible Amortization (3) | (C) | (76,000 | ) | – | ||||||||
| Non-GAAP adjusted research and development expense | $ | 3,464,000 | $ | 2,831,000 | ||||||||
| Selling and marketing expense | ||||||||||||
| GAAP selling and marketing expense | $ | 9,934,000 | $ | 4,379,000 | ||||||||
| Stock-based compensation charges (1) | (A) | (432,000 | ) | (182,000 | ) | |||||||
| Strategic consulting and litigation costs (2) | (B) | (401,000 | ) | (7,000 | ) | |||||||
| Intangible Amortization (3) | (C) | (1,141,000 | ) | (69,000 | ) | |||||||
| Non-GAAP adjusted selling and marketing expense | $ | 7,482,000 | $ | 4,121,000 | ||||||||
| General and administrative expense | ||||||||||||
| GAAP general and administrative expense | $ | 10,330,000 | $ | 3,175,000 | ||||||||
| Stock-based compensation charges (1) | (A) | (518,000 | ) | (287,000 | ) | |||||||
| Strategic consulting and litigation costs (2) | (B) | (6,417,000 | ) | (707,000 | ) | |||||||
| Corporate separation payment (4) | (D) | (240,000 | ) | 40,000 | ||||||||
| Non-GAAP adjusted general and administrative expense | $ | 3,155,000 | $ | 2,221,000 | ||||||||
| Operating income: | ||||||||||||
| GAAP operating income | $ | (6,250,000 | ) | $ | 2,609,000 | |||||||
| Stock-based compensation charges (1) | (A) | 1,229,000 | 627,000 | |||||||||
| Strategic consulting and litigation costs (2) | (B) | 7,018,000 | 771,000 | |||||||||
| Intangible Amortization (3) | (C) | 1,851,000 | 146,000 | |||||||||
| Corporate separation payment (4) | (D) | 1,028,000 | (40,000 | ) | ||||||||
| Non-GAAP adjusted operating income | $ | 4,876,000 | $ | 4,113,000 | ||||||||
| Adjusted Operating Margin | 16.6 | % | 24.7 | % | ||||||||
| Net income: | ||||||||||||
| GAAP net (loss) income | $ | (6,265,000 | ) | $ | 1,892,000 | |||||||
| Stock-based compensation charges (1) | (A) | 1,229,000 | 627,000 | |||||||||
| Strategic consulting and litigation costs (2) | (B) | 7,018,000 | 771,000 | |||||||||
| Intangible Amortization (3) | (C) | 1,851,000 | 146,000 | |||||||||
| Corporate separation payment (4) | (D) | 1,028,000 | (40,000 | ) | ||||||||
| Non-GAAP adjusted net income | $ | 4,861,000 | $ | 3,396,000 | ||||||||
| Deferred tax (benefit) expense | (1,104,000 | ) | 912,000 | |||||||||
| Non-GAAP adjusted net income excluding deferred tax (benefit) expense | $ | 3,757,000 | $ | 4,308,000 | ||||||||
| Deemed and accrued dividends on preferred stock | (2,433,000 | ) | – | |||||||||
| Adjusted Net income attributable to common stockholders | $ | 1,324,000 | $ | 4,308,000 | ||||||||
| Diluted net income per common share: | ||||||||||||
| GAAP net income per share before deemed dividends | $ | (0.12 | ) | $ | 0.04 | |||||||
| Adjustments per share | (A-D) | $ | 0.21 | $ | 0.03 | |||||||
| Non-GAAP adjusted net income per share before deemed dividends | $ | 0.09 | $ | 0.06 | ||||||||
|
Deferred tax (benefit) expense impact to Non-GAAP adjusted net income before deemed dividends per share |
(E) | $ | (0.02 | ) | $ | 0.02 | ||||||
|
Non-GAAP adjusted net income before deemed dividends per share excluding deferred tax (benefit) expense |
$ | 0.07 | $ | 0.08 | ||||||||
| Deemed dividends per share impact to Non-GAAP adjusted net income | $ | (0.04 | ) | $ | – | |||||||
| Adjusted Net income per share attributable to common stockholders | $ | 0.03 | $ | 0.08 | ||||||||
|
Shares used to compute Non-GAAP adjusted net income per share – diluted |
52,713,576 | 53,430,492 | ||||||||||
| Reconciliation of Net income to EBITDA and Adjusted EBITDA: | (F) | |||||||||||
| Net income | $ | (6,265,000 | ) | $ | 1,892,000 | |||||||
| Income tax provision | (1,148,000 | ) | 836,000 | |||||||||
| Depreciation | 685,000 | 599,000 | ||||||||||
| Amortization | 2,005,000 | 146,000 | ||||||||||
| EBITDA | (3,468,000 | ) | 3,473,000 | |||||||||
| Adjustments: | ||||||||||||
| Stock-based compensation charges (1) | (A) | 1,229,000 | 627,000 | |||||||||
| Strategic consulting and litigation costs (2) | (B) | 7,018,000 | 771,000 | |||||||||
| Corporate separation payment (4) | (D) | 1,028,000 | (40,000 | ) | ||||||||
| Adjusted EBITDA | $ | 5,807,000 | $ | 4,831,000 | ||||||||
| Adjusted EBITDA margin | 19.8 | % | 29.0 | % | ||||||||
| (1) Stock-based compensation charges are included as follows: | ||||||||||||
| Cost of revenues | $ | 104,000 | $ | 68,000 | ||||||||
| Research and development | 175,000 | 90,000 | ||||||||||
| Selling and marketing | 432,000 | 182,000 | ||||||||||
| General and administrative | 518,000 | 287,000 | ||||||||||
| $ | 1,229,000 | $ | 627,000 | |||||||||
|
(2) Strategic consulting, acquisition, integration and litigation costs are included as follows: |
||||||||||||
| Cost of revenues | 29,000 | 1,000 | ||||||||||
| Research and development | 171,000 | 56,000 | ||||||||||
| Selling and marketing | 401,000 | 7,000 | ||||||||||
| General and administrative | 6,417,000 | 707,000 | ||||||||||
| $ | 7,018,000 | $ | 771,000 | |||||||||
| (3) Intangible Amortization is included as follows: | ||||||||||||
| Cost of revenues | 634,000 | 77,000 | ||||||||||
| Research and development | 76,000 | – | ||||||||||
| Selling and marketing | 1,141,000 | 69,000 | ||||||||||
| $ | 1,851,000 | $ | 146,000 | |||||||||
| (4) Corporate separation payment is included as follows: | ||||||||||||
| Cost of revenues | 49,000 | – | ||||||||||
| Research and development | 261,000 | – | ||||||||||
| Selling and marketing | 478,000 | – | ||||||||||
| General and administrative | 240,000 | (40,000 | ) | |||||||||
| $ | 1,028,000 | $ | (40,000 | ) | ||||||||
| (5) Net Income tax components: | ||||||||||||
| Current tax (benefit)/expense | (44,000 | ) | (76,000 | ) | ||||||||
| Deferred tax (benefit)/expense | (1,104,000 | ) | 912,000 | |||||||||
| $ | (1,148,000 | ) | $ | 836,000 | ||||||||
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 | |||||||||||||||
| June 30, | June 30, | December 31, | December 31, | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | |||||||||||||||
| Revenue: | ||||||||||||||||||
| GAAP revenue | $ | 44,500,000 | $ | 45,000,000 | $ | 167,000,000 | $ | 169,000,000 | ||||||||||
| Diluted net income per common share: | ||||||||||||||||||
| GAAP net income | $ | (0.05 | ) | $ | (0.03 | ) | $ | (0.26 | ) | $ | (0.21 | ) | ||||||
| Stock-based compensation charges | $ | 0.03 | $ | 0.02 | $ | 0.10 | $ | 0.10 | ||||||||||
| Strategic consulting, acquisition and litigation costs | $ | 0.03 | $ | 0.02 | $ | 0.19 | $ | 0.18 | ||||||||||
| Intangible Amortization | $ | 0.10 | $ | 0.10 | $ | 0.34 | $ | 0.33 | ||||||||||
| Corporate separation payment | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | 0.03 | ||||||||||
|
Non-GAAP adjusted net income per share |
$ | 0.11 | $ | 0.12 | $ | 0.40 | $ | 0.42 | ||||||||||
| Deferred tax (benefit) expense | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.04 | ) | $ | (0.00 | ) | ||||||
|
Non-GAAP adjusted net income per share excluding deferred tax (benefit) expense |
$ | 0.10 | $ | 0.12 | $ | 0.36 | $ | 0.42 | ||||||||||
| Deemed dividends per share impact to Non-GAAP adjusted net income | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.20 | ) | $ | (0.20 | ) | ||||||
| Adjusted Net loss per share attributable to common stockholders | $ | 0.04 | $ | 0.06 | $ | 0.17 | $ | 0.22 | ||||||||||
|
Shares used to compute Non-GAAP adjusted net income per share – diluted |
53,000,000 | 53,000,000 | 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.
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