Zix Corporation New Sales up 31 Percent Year to Date

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Zix Corporation New Sales up 31 Percent Year to Date

Company expects full-year revenue and EPS to be at high end of guidance range

Backlog at an all-time high of $57 million


DALLAS--(BUSINESS WIRE)-- Zix Corporation (NAS: ZIXI) , the leader in email encryption services, today announced financial results for the third quarter ended Sept. 30, 2012.

Third Quarter 2012 Financial Highlights

  • Third quarter new first year orders of $2.6 million, including a one-time catch up of approximately $300,000
  • New first year orders for the nine months ended Sept. 30, 2012, were $6.8 million compared to $5.2 million for the same period last year, representing 31.0% year-over-year growth
  • Third quarter revenue of $11.0 million, an increase of 15.3%, year-over-year, the Company's 15th consecutive quarterly record in revenue
  • Third quarter GAAP net income of $0.03 per share, a decrease of 18.9%, year-over-year (1)
  • Third quarter Non-GAAP net income of $0.04 per share, an increase of 3.6%, year-over-year (1)
  • The Company generated approximately $4.6 million in cash flow from operations, a decrease of $0.1 million, year-over-year
  • Cash and cash equivalents totaled $23.0 million, an increase of $4.2 million compared to the June 30, 2012, ending cash balance

"We are pleased with our new first year order performance over the last two quarters reflecting our product leadership, channel expansion and increasing demand in the marketplace. The positive results to date have us well-positioned to achieve our full-year goals," said Rick Spurr, ZixCorp's Chairman and Chief Executive Officer.

Third Quarter 2012 Corporate Financial Summary and Other Operational Metrics

$ in Millions, except per share and % data    

Q3
2012

  

Q3
2011

  

% or $

Change(1)

Revenue    $11.0  $9.6  15.3%
GAAP Gross Profit    $9.1  $7.8  17.6%
GAAP Net Income    $1.9  $2.6  (24.4)%
GAAP Net Income Per Share - Diluted    $0.03  $0.04  (18.9)%
Non-GAAP Adjusted Gross Profit(2)    $9.2  $7.8  17.8%
Non-GAAP Adjusted Net Income (2)    $2.7  $2.8  (3.4)%
Non-GAAP Adjusted Net Income Per Share-Diluted (2)    $0.04  $0.04  3.6%
Adjusted EBITDA (2) (3)    $3.1  $3.2  (3.6)%
Adjusted EBITDA Margin (2) (3)    28.2%  33.7%  (5.5)pt
New First Year Orders    $2.6  $1.6  57.6%
Total Orders    $12.7  $9.7  30.7%
Bookings Backlog (4)    $57.0  $52.6  8.4%

(1) Changes are based on actuals versus numbers shown in the columns which may reflect rounding
(2) A reconciliation of GAAP to Non-GAAP adjusted results is attached to this press release and 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

Business Highlights

  • ZixCorp enhanced its partner program with upgraded marketing and sales support and improved program infrastructure. Program changes were implemented to maximize channel growth and continue to recruit qualified value added resellers while assisting partners in lead generation and accelerating the sales cycle.
  • Growing at approximately 100,000 members per week, ZixDirectory®increased its membership to 33 million. ZixDirectory continues to be the largest email encryption community in the world and demonstrates the growing strength of ZixCorp's unique email encryption approach.

Outlook

For the fourth quarter 2012, the Company forecasts revenue to be between $11.2 million and $11.5 million and fully diluted adjusted earnings per share to be $0.03. Based on that fourth quarter guidance, the Company expects to be at or near the high end of the Company's previous revenue guidance of $42 million to $43 million for the full year 2012. The Company now expects Non-GAAP adjusted earnings per share of $0.17 for the full year, tightening its guidance toward the high end of its most recent forecast.

Conference Call Information

The Company will discuss its financial results and outlook on a conference call on Tuesday, Oct. 23, 2012, at 5 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 1-800-688-0836 (U.S. toll-free) or 1-617-614-4072 (international) at least 15 minutes before the call and entering access code 41074246. An audio replay of the conference will be available until Oct. 31, 2012, by dialing 1-888-286-8010 (U.S. toll-free) or 1-617-801-6888 (international) and entering the access code 70887357. An archive for the webcast will also be available on the ZixCorp investor relations Web site.

About Zix Corporation

Zix Corporation (ZixCorp) provides the only email encryption services designed with your most important relationships in mind. Many of the most influential companies and government organizations use the proven ZixCorp® Email Encryption Services, including WellPoint, the SEC, and more than 1,500 hospitals and 1,800 financial institutions. ZixCorp Email Encryption Services are powered by ZixDirectory®, the largest email encryption community in the world. The tens of millions of ZixDirectory members can feel secure knowing their most important relationships are protected. 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 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 related to how privacy and data security law mandates may affect demand for email encryption and ZixCorp's ability to obtain and retain customers and grow revenues. 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
     
 
September 30,
2012December 31,
(unaudited)2011
ASSETS
Current assets:
Cash and cash equivalents$23,031,000$20,680,000
Receivables, net1,156,000704,000
Prepaid and other current assets1,233,0001,422,000
Deferred tax assets 1,490,000 1,551,000
Total current assets26,910,00024,357,000
Property and equipment, net2,275,0002,228,000
Goodwill2,161,0002,161,000
Deferred tax assets48,785,00048,806,000
Other assets - -
Total assets$80,131,000$77,552,000
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses$3,273,000$2,292,000
Deferred revenue 19,193,000 16,568,000
Total current liabilities22,466,00018,860,000
Long-term liabilities:--
Deferred revenue690,000795,000
Deferred rent 93,000 140,000
Total long-term liabilities 783,000 935,000
Total liabilities23,249,00019,795,000
Total stockholders' equity 56,882,000 57,757,000
Total liabilities and stockholders' equity$80,131,000$77,552,000
 
 
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
     
 
 

Three Months Ended September 30,

Nine Months Ended September 30,

2012201120122011
Revenues$11,023,000$9,558,000$31,667,000$28,260,000
 
Cost of revenues 1,887,000  1,789,000  5,554,000  5,362,000 
Gross profit9,136,0007,769,00026,113,00022,898,000
Operating expenses:
Research and development2,046,0001,343,0004,988,0003,948,000
Selling, general and administrative 5,020,000  3,754,000  13,720,000  11,310,000 
Total operating expenses 7,066,000  5,097,000  18,708,000  15,258,000 
 
Operating income2,070,0002,672,0007,405,0007,640,000
Operating margin19%28%23%27%
 
Other income, net6,00018,00016,00079,000
 
Income before income taxes2,076,0002,690,0007,421,0007,719,000
Income tax (expense) benefit (133,000) (119,000) (409,000) (132,000)
Net income$1,943,000 $2,571,000 $7,012,000 $7,587,000 
 
Basic income per common share:$0.03 $0.04 $0.11 $0.12 
 
 
Diluted income per common share:$0.03 $0.04 $0.11 $0.11 
 
Shares used in per share calculation - basic 60,896,042  64,140,926  61,671,214  65,499,763 
 
Shares used in per share calculation - diluted 61,472,352  65,927,794  62,316,809  67,727,404 
Note: EPS totals off due to rounding
 
 
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
    
 

Nine Months Ended September 30,

2012

2011

Operating activities:
Net income$7,012,000$7,587,000
Non-cash items in net income1,874,0001,436,000
Changes in operating assets and liabilities 3,206,000  1,638,000 
Net cash provided by operating activities12,092,00010,661,000
 
Investing activities:
Purchases of property and equipment(1,049,000)(1,103,000)
(Purchase) sale of commercial paper -  (2,290,000)
Net cash used in investing activities(1,049,000)(3,393,000)
 
Financing activities:
Proceeds from exercise of stock options308,0001,778,000
Proceeds from exercise of warrants-1,259,000
Payment of license subscription note payable-
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