Achieves high end of both revenue and adjusted earnings per
share guidance for the quarter
Zix Corporation (NASDAQ: ZIXI), a leader in email data
protection, today announced financial results for the first quarter
ended Mar. 31, 2015.
First Quarter 2015 Financial Highlights
- Ending backlog of $70.3 million, an
increase of 6.7% year-over-year and the Company’s 12th consecutive
quarterly record in backlog
- First quarter total orders of $14.3
million, an increase of 14.7% year-over-year
- First quarter new first year orders of
$2.0 million, an increase of 3.7% year-over-year
- First quarter revenue of $13.1 million,
an increase of 7.5% year-over-year
- First quarter GAAP net income of $0.02
per share, an increase of 17.8% year-over-year (1)
- First quarter Non-GAAP net income of
$0.04 per share, an increase of 18.5% year-over-year (1) (3)
- The Company generated approximately
$2.5 million in cash flow from operations, an increase of $0.8
million year-over-year
- Cash and cash equivalents totaled $24.9
million, an increase of $2.4 million compared to the Mar. 31, 2014,
ending cash balance
“We had a solid quarter in Q1 showing good revenue and earnings
growth and strong momentum as we enter Q2 and beyond,” said Rick
Spurr, ZixCorp’s Chief Executive Officer. “We are excited about
adding Cisco, a leader in enterprise security, as a strategic
partner. This milestone partnership boosts ZixCorp’s reputation as
the leader in email encryption and should greatly expand our reach,
both domestically and internationally.”
First Quarter 2015 Corporate Financial
Summary and Other Operational Metrics
$ in Millions, except per share data
Q12015
Q12014
% or $Change (1)
Revenue
$ 13.1
$ 12.2 7.5 % GAAP
Gross Profit
$ 10.9
$ 10.1 7.1
% GAAP Net Income
$ 1.2
$ 1.1 11.0
% GAAP Net Income Per Share – Diluted
$
0.02 $ 0.02
17.8 % Non-GAAP Adjusted Gross Profit (2)
$ 10.9 $
10.2 7.1 % Non-GAAP
Adjusted Net Income (2)
$ 2.4
$ 2.1 11.7
% Non-GAAP Adjusted Net Income Per Share – Diluted (2)
$ 0.04 $
0.03 18.5 % Adjusted
EBITDA (2) (3)
$ 3.0
$ 2.6 14.5
% Adjusted EBITDA Margin (2) (3)
23.0 % 21.6 %
1.4 pts
New First Year Orders
$ 2.0
$ 2.0 3.7
% Total Orders
$ 14.3
$ 12.5 14.7
% Backlog (4)
$ 70.3
$ 65.9 6.7
%
(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
First Quarter Business Highlights
- Cisco and Zix Corporation
entered into an OEM relationship for the development and
distribution of enhanced email encryption solutions. The
partnership will focus on two solutions in 2015 – an update of the
Cisco IronPort Encryption Appliance (IEA) and a new solution that
integrates proven components of Cisco® and Zix® technology. Both
solutions will be distributed by Cisco.
- The Company’s common stock was added to
the NASDAQ US Buyback Achievers Index on February 2nd. The Index is
comprised of United States securities issued by corporations that
have effected a net reduction in shares outstanding of 5% or more
in the trailing 12 months.
Outlook
For the second quarter 2015, the Company forecasts revenue to be
between $13.2 million and $13.4 million and fully diluted adjusted
earnings per share of $0.04. For the full-year 2015, the Company
reaffirms previously issued revenue guidance of $54 million to $56
million and fully diluted Non-GAAP adjusted earnings per share of
$0.19 to $0.21.
Conference Call Information
The Company will discuss its financial results and outlook on a
conference call on Tuesday, Apr. 21, 2015, 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
1-800-706-7745 (U.S. toll-free) or 1-617-614-3472 (international)
at least 15 minutes before the call and entering access code
67942450.
An audio replay of the conference will be available until Apr.
28, 2015, by dialing 1-888-286-8010 (U.S. toll-free) or
1-617-801-6888 (international) and entering the access code
46780682. 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,
2015 December 31, (unaudited) 2014
ASSETS Current assets: Cash and cash equivalents $
24,902,000 $ 21,685,000 Receivables, net 1,045,000 1,452,000
Prepaid and other current assets 2,122,000 2,372,000 Deferred tax
assets 1,331,000 1,763,000 Total current assets
29,400,000 27,272,000 Property and equipment, net 4,650,000
4,399,000 Goodwill 2,161,000 2,161,000 Deferred tax assets
49,782,000 49,892,000 Total assets $ 85,993,000 $ 83,724,000
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and accrued expenses $ 3,014,000 $
3,436,000 Deferred revenue 21,102,000 21,587,000
Total current liabilities 24,116,000 25,023,000 Long-term
liabilities: Deferred revenue 1,153,000 898,000 Deferred rent
1,506,000 1,533,000 Total long-term liabilities
2,659,000 2,431,000 Total liabilities 26,775,000
27,454,000 Total stockholders’ equity 59,218,000
56,270,000 Total liabilities and stockholders’ equity $ 85,993,000
$ 83,724,000
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31,
2015 2014 Revenue $ 13,073,000 $ 12,162,000
Cost of revenue 2,213,000 2,025,000
Gross profit 10,860,000 10,137,000 Operating expenses: Research and
development 2,105,000 2,201,000 Selling, general and administrative
6,915,000 6,289,000 Total operating
expenses 9,020,000 8,490,000
Operating income 1,840,000 1,647,000 Operating margin 14 % 14 %
Other income, net 23,000 62,000 Income before income
taxes 1,863,000 1,709,000 Income tax benefit (expense)
(687,000 ) (650,000 ) Net income $ 1,176,000 $
1,059,000 Basic income per common share: $ 0.02
$ 0.02 Diluted income per common share:
$ 0.02 $ 0.02 Shares used in per share
calculation - basic 56,496,303 59,375,283
Shares used in per share calculation - diluted
57,395,616 60,891,563
ZIX CORPORATION CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited)
Three Months Ended
March 31, 2015 2014 Operating activities: Net
income $ 1,176,000 $ 1,059,000 Non-cash items in net income
1,514,000 1,417,000 Changes in operating assets and liabilities
(161,000 ) (743,000 ) Net cash provided by operating
activities 2,529,000 1,733,000 Investing activities:
Purchases of property and equipment (616,000 )
(391,000 ) Net cash used in investing activities (616,000 )
(391,000 ) Financing activities: Proceeds from exercise of
stock options 1,489,000 41,000 Purchase of Treasury Stock
(185,000 ) (6,403,000 ) Net cash used in financing
activities 1,304,000 (6,362,000 )
Increase (Decrease) in cash and cash equivalents 3,217,000
(5,020,000 ) Cash and cash equivalents, beginning of period
21,685,000 27,518,000 Cash and cash
equivalents, end of period $ 24,902,000 $ 22,498,000
ZIX CORPORATION RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES (Unaudited)
Three
Months Ended March 31, 2015 2014 Revenue:
GAAP revenue $ 13,073,000 $ 12,162,000 Cost of
revenue GAAP cost of revenue $ 2,213,000 $ 2,025,000 Stock-based
compensation charges (1) (A) (51,000 ) (51,000 )
Non-GAAP adjusted cost of revenue $ 2,162,000 $ 1,974,000
Gross profit: GAAP gross profit $ 10,860,000 $
10,137,000 Stock-based compensation charges (1) (A) 51,000
51,000 Non-GAAP adjusted gross profit $
10,911,000 $ 10,188,000 Research and
development expense GAAP research and development expense $
2,105,000 $ 2,201,000 Stock-based compensation charges (1) (A)
(66,000 ) (60,000 ) Non-GAAP adjusted research and
development expense $ 2,039,000 $ 2,141,000
Selling and marketing expense GAAP selling and marketing expense $
4,794,000 $ 4,217,000 Stock-based compensation charges (1) (A)
(151,000 ) (144,000 ) Non-GAAP adjusted selling and
marketing expense $ 4,643,000 $ 4,073,000
General and administrative expense GAAP general and administrative
expense $ 2,121,000 $ 2,072,000 Stock-based compensation charges
(1) (A) (200,000 ) (225,000 ) Non-recurring consulting and legal
costs (2) (B) (167,000 ) (33,000 ) Non-GAAP adjusted
general and administrative expense $ 1,754,000 $ 1,814,000
Operating income: GAAP operating income $ 1,840,000 $
1,647,000 Stock-based compensation charges (1) (A) 468,000 480,000
Non-recurring litigation costs (2) (B) 167,000
33,000 Non-GAAP adjusted operating income $ 2,475,000
$ 2,160,000 Adjusted Operating Margin 18.9 % 17.8 %
Net income: GAAP net income $ 1,176,000 $ 1,059,000
Stock-based compensation charges (1) (A) 468,000 480,000
Non-recurring consulting and legal costs (2) (B) 167,000 33,000
Income tax impact (C) 543,000 536,000
Non-GAAP adjusted net income $ 2,354,000 $ 2,108,000
Diluted net income per common share: GAAP net income
$ 0.02 $ 0.02 Adjustments per share (A-C) $ 0.02 $ 0.01
Non-GAAP adjusted net income $ 0.04 $ 0.03
Shares used to compute Non-GAAP adjusted net income per
share - diluted 57,395,616 60,891,563
Reconciliation of Net income to EBITDA and Adjusted
EBITDA: (D) Net income $ 1,176,000 $ 1,059,000 Income tax
provision 687,000 650,000 Interest expense - - Depreciation expense
504,000 399,000 EBITDA 2,367,000
2,108,000
Adjustments: Share-based compensation
expense (A) 468,000 480,000 Non-recurring litigation costs (B)
167,000 33,000
Adjusted EBITDA $
3,002,000 $ 2,621,000 Adjusted EBITDA margin
23.0 % 21.6 % (1) Stock-based compensation charges are
included as follows: Cost of revenues $ 51,000 $ 51,000 Research
and development 66,000 60,000 Selling and marketing 151,000 144,000
General and administrative 200,000 225,000
$ 468,000 $ 480,000 (2) Non-recurring
litigation costs are included as follows: General and
administrative 167,000 33,000 $ 167,000
$ 33,000
This presentation includes Non-GAAP
measures. Our Non-GAAP measures are not meant to be considered in
isolation or as a substitute for comparable GAAP measures and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with GAAP. For a detailed
explanation of the adjustments made to comparable GAAP measures,
the reasons why management uses these measures, the usefulness of
these measures and the material limitations of these measures, see
items (A) through (D) on the next page.
ZIX CORPORATIONNOTES 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 non-recurring litigation expense 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 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) Non-recurring litigation costs. See item (2) on previous
page for breakdown of non-recurring litigation costs. The Company’s
management excludes these costs when evaluating the ongoing
performance and/or predicting its earnings trends and therefore
excludes these charges on our adjusted operating results.
(C) 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 and non-recurring litigation expenses.
ZixCorpInvestor RelationsTodd Kehrli or Jim Byers,
323-468-2300zixi@mkr-group.com
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