Company exceeds quarterly guidance for revenue and earnings
per share
Zix Corporation (ZixCorp), (Nasdaq: ZIXI), a leader in
email data protection, today announced financial results for the
third quarter ended Sept. 30, 2015.
Third Quarter 2015 Financial Highlights
- Third quarter new first year orders of
$2.7 million, an increase of 66.8% year-over-year
- Third quarter revenue of $14.0 million,
an increase of 10.3% year-over-year
- Third quarter Non-GAAP adjusted net
income of $0.07 per share, an increase of 52.1% year-over-year (1)
(3)
- Third quarter GAAP net income of $0.03
per share, an increase of 68.3% year-over-year (1)
- The Company generated approximately
$6.6 million in cash flow from operations, an increase of $1.8
million year-over-year
- Cash and cash equivalents totaled $24.1
million at Sept. 30, 2015, an increase of $3.8 million from Sept.
30, 2014
- Ending backlog of $74.3 million, an
increase of 7.9% year-over-year and the Company’s 14th consecutive
quarterly record in backlog
“The many quarterly records for financial performance we
achieved represent the best quarter in ZixCorp’s history and
reflect the value of our innovative solutions, our go-to-market
strategies and the health and vitality of the information security
sector,” said Rick Spurr, ZixCorp’s Chief Executive Officer.
“Our year-to-date success, our momentum and our reliable recurring
revenue business model give us confidence in our ability to achieve
our expectations for fourth quarter and the full year. In addition,
our new strategic partnerships are starting to contribute and
should allow us to achieve even more accelerated top line growth in
2016 and beyond.”
Third Quarter 2015 Corporate Financial Summary and Other
Operational Metrics
$ in Millions, except per share and % data
Q32015
Q32014
% or $Change (1)
Revenue
$14.0 $12.7
10.3% GAAP Gross Profit
$11.6 $10.6 8.8%
GAAP Net Income
$1.9 $1.2
65.7% GAAP Net Income Per Share – Diluted
$0.03 $0.02
68.3%
Non-GAAP Adjusted Gross Profit (2)
$11.6 $10.7
8.7% Non-GAAP Adjusted Net Income (2)
$3.8 $2.5 49.7%
Non-GAAP Adjusted Net Income Per Share-Diluted (2)
$0.07 $0.04 52.1%
Adjusted EBITDA (2) (3)
$4.5
$3.1 46.2% Adjusted EBITDA Margin (2)
(3)
32.3% 24.3%
7.9pt New First Year Orders
$2.7
$1.6 66.8% Total Orders
$14.7 $13.4
10.0% Bookings Backlog (4)
$74.3
$68.8 7.9%
(1)
Changes are based on actual financial results versus numbers
shown in the table, which may reflect rounding
(2)
A reconciliation of GAAP to Non-GAAP
adjusted results is attached to this press release and is available
on our investor relations Web site 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
Other Business Highlights
- ZixCorp previously announced the
launch of ZixGateway® with Cisco®
Technology (ZCT), an on-site solution for easy-to-use
encrypted email to anyone, anywhere, on any device. ZCT is
available beginning on October 23, 2015, through Cisco direct sales
and its reseller network.
- ZixCorp previously announced that it
joined the Intel Security Innovation AllianceTM as a
Sales Teaming Partner, enabling Intel Security sales to recommend
Zix® Email Encryption, which interoperates with McAfee® Email
Gateway.
Outlook
For the fourth quarter 2015, ZixCorp forecasts revenue to be
between $14.1 million and $14.4 million and Non-GAAP fully diluted
adjusted earnings per share to be between $0.05 and $0.06. This
fourth quarter guidance yields full year revenue guidance to be
between $54.5 million and $54.8 million. ZixCorp narrows full year
fully diluted Non-GAAP adjusted earnings per share guidance to
range from $0.20 to $0.21.
Conference Call Information
ZixCorp will discuss its financial results and outlook on a
conference call on Tuesday, Oct. 20, 2015, at 5:00 p.m. ET. A live
webcast of the conference call will be available on our 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
42895465. An audio replay of the conference will be available until
Oct. 27, 2015, by dialing 1-855-859-2056 (U.S. toll-free) or
1-404-537-3406 and entering access code 42895465. An archive for
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 new products and contributions from our strategic
partnerships, forecasts of sales, revenue or earnings, 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
associated with the timely compilation and verification of
quarterly financial information and risks or uncertainties related
to market acceptance of ZixCorp products and 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 annual report on
Form 10-K filed with the Securities and Exchange Commission.
ZIX CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEETS September 30,
2015 December 31, (unaudited) 2014
ASSETS Current assets: Cash and cash equivalents $
24,058,000 $ 21,685,000 Receivables, net 1,243,000 1,452,000
Prepaid and other current assets 2,498,000 2,372,000 Deferred tax
assets 1,311,000 1,763,000 Total current assets
29,110,000 27,272,000 Property and equipment, net 4,422,000
4,399,000 Goodwill 2,161,000 2,161,000 Deferred tax assets
48,175,000 49,892,000 Total assets $ 83,868,000 $ 83,724,000
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and accrued expenses $ 3,397,000 $
3,436,000 Deferred revenue 24,413,000 21,587,000
Total current liabilities 27,810,000 25,023,000 Long-term
liabilities: Deferred revenue 978,000 898,000 Deferred rent
1,454,000 1,533,000 Total long-term liabilities
2,432,000 2,431,000 Total liabilities 30,242,000 27,454,000
Total stockholders’ equity 53,626,000 56,270,000
Total liabilities and stockholders’ equity $ 83,868,000 $
83,724,000
ZIX CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September
30,
Nine Months Ended September 30, 2015
2014 2015
2014 Revenue $ 14,011,000 $ 12,705,000 $ 40,386,000 $
37,482,000 Cost of revenue 2,429,000
2,062,000 7,071,000 6,119,000
Gross profit 11,582,000 10,643,000 33,315,000 31,363,000 Operating
expenses: Research and development 2,044,000 2,234,000 6,243,000
6,653,000 Selling, general and administrative 6,420,000
6,544,000 20,381,000
19,611,000 Total operating expenses 8,464,000
8,778,000 26,624,000 26,264,000
Operating income 3,118,000 1,865,000 6,691,000
5,099,000 Operating margin 22 % 15 % 17 % 14 % Other income,
net 110,000 66,000 162,000 140,000 Income before income
taxes 3,228,000 1,931,000 6,853,000 5,239,000 Income tax benefit
(expense) (1,301,000 ) (768,000 ) (2,635,000 )
(2,040,000 ) Net income $ 1,927,000 $ 1,163,000
$ 4,218,000 $ 3,199,000 Basic income
per common share: $ 0.03 $ 0.02 $ 0.07 $ 0.05
Diluted income per common share: $ 0.03
$ 0.02 $ 0.07 $ 0.05 Shares used in per
share calculation - basic 56,517,278
57,610,386 56,719,942 58,510,426
Shares used in per share calculation - diluted
57,590,136 58,501,937 57,786,463
59,613,658
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30,
2015 2014 Operating
activities: Net income $ 4,218,000 $ 3,199,000 Non-cash items in
net income 4,958,000 4,213,000 Changes in operating assets and
liabilities 2,977,000 3,168,000 Net
cash provided by operating activities 12,153,000 10,580,000
Investing activities: Purchases of property and equipment
(1,747,000 ) (1,797,000 ) Net cash used in investing
activities (1,747,000 ) (1,797,000 ) Financing activities:
Proceeds from exercise of stock options 4,328,000 457,000 Purchase
of Treasury Stock (12,361,000 ) (16,496,000 ) Net
cash used in financing activities (8,033,000 )
(16,039,000 ) Increase (Decrease) in cash and cash
equivalents 2,373,000 (7,256,000 ) Cash and cash equivalents,
beginning of period 21,685,000 27,518,000
Cash and cash equivalents, end of period $ 24,058,000
$ 20,262,000
ZIX CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2015 2014
2015 2014 Revenue: GAAP revenue
$ 14,011,000 $ 12,705,000 $ 40,386,000 $
37,482,000 Cost of revenue GAAP cost of revenue $
2,429,000 $ 2,062,000 $ 7,071,000 $ 6,119,000 Stock-based
compensation charges (1) (A) (38,000 ) (45,000 )
(136,000 ) (146,000 ) Non-GAAP adjusted cost of
revenue $ 2,391,000 $ 2,017,000 $ 6,935,000 $
5,973,000 Gross profit: GAAP gross profit $
11,582,000 $ 10,643,000 $ 33,315,000 $ 31,363,000 Stock-based
compensation charges (1) (A) 38,000 45,000
136,000 146,000 Non-GAAP
adjusted gross profit $ 11,620,000 $ 10,688,000 $
33,451,000 $ 31,509,000 Research and
development expense GAAP research and development expense $
2,044,000 $ 2,234,000 $ 6,243,000 $ 6,653,000 Stock-based
compensation charges (1) (A) (57,000 ) (61,000 )
(184,000 ) (185,000 ) Non-GAAP adjusted research and
development expense $ 1,987,000 $ 2,173,000 $
6,059,000 $ 6,468,000 Selling and marketing
expense GAAP selling and marketing expense $ 4,158,000 $ 4,543,000
$ 13,811,000 $ 13,473,000 Stock-based compensation charges (1) (A)
(113,000 ) (131,000 ) (387,000 )
(425,000 ) Non-GAAP adjusted selling and marketing expense $
4,045,000 $ 4,412,000 $ 13,424,000 $
13,048,000 General and administrative expense GAAP
general and administrative expense $ 2,262,000 $ 2,001,000 $
6,570,000 $ 6,138,000 Stock-based compensation charges (1) (A)
(130,000 ) (181,000 ) (464,000 ) (579,000 ) Non-recurring
consulting and legal costs (2) (B) (387,000 )
(327,000 ) (716,000 ) (596,000 ) Non-GAAP adjusted
general and administrative expense $ 1,745,000 $ 1,493,000
$ 5,390,000 $ 4,963,000 Operating
income: GAAP operating income $ 3,118,000 $ 1,865,000 $ 6,691,000 $
5,099,000 Stock-based compensation charges (1) (A) 338,000 418,000
1,171,000 1,335,000 Non-recurring litigation costs (2) (B)
387,000 327,000 716,000
596,000 Non-GAAP adjusted operating income $ 3,843,000
$ 2,610,000 $ 8,578,000 $ 7,030,000 $ -
Adjusted Operating Margin 27.4 % 20.5 % 21.2 % 18.8 %
Net income: GAAP net income $ 1,927,000 $ 1,163,000 $ 4,218,000 $
3,199,000 Stock-based compensation charges (1) (A) 338,000 418,000
1,171,000 1,335,000 Non-recurring consulting and legal costs (2)
(B) 387,000 327,000 716,000 596,000 Income tax impact (C)
1,116,000 609,000 2,170,000
1,670,000 Non-GAAP adjusted net income $ 3,768,000
$ 2,517,000 $ 8,275,000 $ 6,800,000
Diluted net income per common share: GAAP net income
$ 0.03 $ 0.02 $ 0.07 $ 0.05 Adjustments per share (A-C) $ 0.04
$ 0.02 $ 0.07 $ 0.06 Non-GAAP adjusted
net income $ 0.07 $ 0.04 $ 0.14 $ 0.11
Shares used to compute Non-GAAP adjusted net income per
share - diluted 57,590,136 58,501,937
57,786,463 59,613,658
Reconciliation of Net income to EBITDA and Adjusted EBITDA:
(D) Net income $ 1,927,000 $ 1,163,000 $ 4,218,000 $ 3,199,000
Income tax provision 1,301,000 768,000 2,635,000 2,040,000 Interest
expense - - - - Depreciation expense 567,000
415,000 1,619,000 1,209,000
EBITDA 3,795,000 2,346,000 8,472,000 6,448,000
Adjustments: Share-based compensation expense (A) 338,000
418,000 1,171,000 1,335,000 Non-recurring litigation costs (B)
387,000 327,000 716,000
596,000
Adjusted EBITDA $ 4,520,000 $
3,091,000 $ 10,359,000 $ 8,379,000
Adjusted EBITDA margin 32.3 % 24.3 % 25.6 % 22.4 % (1)
Stock-based compensation charges are included as follows: Cost of
revenues $ 38,000 $ 45,000 $ 136,000 $ 146,000 Research and
development 57,000 61,000 184,000 185,000 Selling and marketing
113,000 131,000 387,000 425,000 General and administrative
130,000 181,000 464,000
579,000 $ 338,000 $ 418,000 $ 1,171,000
$ 1,335,000 (2) Non-recurring litigation costs are included
as follows: General and administrative 387,000
327,000 716,000 596,000 $
387,000 $ 327,000 $ 716,000 $ 596,000
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 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 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 non-recurring litigation
expenses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151020006661/en/
ZixCorpInvestor RelationsTodd Kehrli or Jim Byers,
323-468-2300zixi@mkr-group.comorPublic RelationsTaylor Stansbury
Johnson, 214-370-2134tjohnson@zixcorp.com
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