Zix Corporation Achieves 18th Consecutive Quarterly Record in Revenue for Second Quarter 2013

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Zix Corporation Achieves 18thConsecutive Quarterly Record in Revenue for Second Quarter 2013

Company exceeds earnings and revenue guidance

DALLAS--(BUSINESS WIRE)-- Zix Corporation (ZixCorp), (NAS: ZIXI) , a leader in email data protection, today announced financial results for the second quarter ended June 30, 2013.


Second Quarter 2013 Financial Highlights

  • Second quarter new first year orders of $2.4 million, compared to a near record $2.5 million in the second quarter of 2012
  • Second quarter revenue of $11.8 million, an increase of 14.5% year-over-year, the Company's 18th consecutive quarterly record in revenue
  • Second quarter GAAP net income of $0.03 per share, a decrease of 30.0% year-over-year (1)
  • Second quarter Non-GAAP net income of $0.04 per share, a decrease of 20.2% year-over-year (1)
  • The Company generated approximately $2.5 million in cash flow from operations, a decrease of $2.5 million year-over-year
  • Cash and cash equivalents totaled $26.3 million, an increase of $2.1 million compared to the Mar. 31, 2013, ending cash balance
  • The year-over-year decline in earnings and cash flow was in line with public guidance and the expected result of increased investments in new products and sales and marketing

"We achieved another consecutive quarter of record revenue and bookings and continue to deliver results that meet, if not exceed, our guidance, reflecting the consistency of our business model," said Rick Spurr, ZixCorp's Chairman and Chief Executive Officer. "We continue to see expansion both within our existing customer base and with the addition of new customers. At the same time, we are building on our leadership in email data protection with two new products that more than triple the size of our addressable market and that we believe will lead us to even higher growth rates in 2014. ZixDLP, which addresses an enterprise's number one data leakage problem, was launched in March. Our second new product is ZixOne, our innovative approach to BYOD. ZixOne is in beta with nearly 30 customers and receiving very positive feedback. ZixOne literally takes 30 minutes or less to connect to a company's email Exchange server, and then individual employees can download and implement the app in less than a minute. ZixOne can solve the BYOD security issue surrounding corporate email that is a top concern of nearly every CIO and CTO in the corporate world. We remain on track to meet our September 3 general availability date and look forward to delivering this disruptive product to the marketplace."

Second Quarter 2013 Corporate Financial Summary and Other Operational Metrics

$ in Millions, except per share and % data  

Q2
2013

  

Q2
2012

  % or $

Change(1)

Revenue  $11.8   $10.3   14.5%
GAAP Gross Profit  $9.9   $8.5   16.5%
GAAP Net Income  $1.9   $2.6   (29.2)%
GAAP Net Income Per Share - Diluted  $0.03   $0.04   (30.0)%
Non-GAAP Adjusted Gross Profit(2)  $10.0   $8.6   16.6%
Non-GAAP Adjusted Net Income (2)  $2.5   $3.1   (19.3)%
Non-GAAP Adjusted Net Income Per Share-Diluted (2)  $0.04   $0.05   (20.2)%
Adjusted EBITDA (2) (3)  $2.9   $3.5   (16.1)%
Adjusted EBITDA Margin (2) (3)   24.5%   33.5%  

9.0

pt

New First Year Orders  $2.4   $2.5   (2.7)%
Total Orders  $15.6   $13.6   14.8%
Bookings Backlog (4)  $63.4   $55.5   14.1%
      
(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 unveiled ZixOneTM , a unique bring-your-own-device (BYOD) secure mobile email app. ZixOne sets itself apart in the BYOD market by meeting the employees' desire to use their own devices for work and maintain control and privacy while giving IT the ability to secure data and meet compliance needs. Other BYOD solutions, such as mobile device management and containerization, do not meet both employee wants and corporate needs. ZixOne is scheduled for commercial availability on Sept. 3, 2013.
  • Lahey Hospital & Medical Center selected ZixCorp®Email Encryption Services to provide secure email to 6,000 internal users, including physicians, nurses and departments such as financial services and information technology. ZixCorp's ease of use combined with its reputation in the healthcare industry made ZixCorp the right choice for Lahey Hospital & Medical Center.
  • ZixCorp increased its competitive replacement wins in the first half of 2013 by 80% year-over-year.
  • ZixCorp surpassed more than 1,900 U.S. financial services customers. In addition, ZixCorp Email Encryption remains the solution of choice for all U.S. federal financial regulators, divisions of the U.S. Treasury Department, the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Outlook

For the third quarter 2013, the Company forecasts revenue to be between $11.9 million and $12.1 million and fully diluted adjusted earnings per share to be $0.05. For the full year 2013, the Company reaffirms guidance for revenue of $48 million to $50 million and fully diluted Non-GAAP adjusted earnings per share of $0.19 to $0.20.

Conference Call Information:

The Company will discuss its financial results and outlook on a conference call on Tuesday, July 23, 2013, 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 1-866-953-6860 (U.S. toll-free) or 1-617-399-3484 (international) at least 15 minutes before the call and entering access code 79066570. An audio replay of the conference will be available until July 31, 2013, by dialing 1-888-286-8010 (U.S. toll-free) or 1-617-801-6888 (international) and entering the access code 54698370. 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 forecasts of revenue, earnings or new products 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, ZixCorp's ability to obtain and retain customers, grow revenues and deliver new products. 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
 
 
June 30,
2013December 31,
(unaudited)2012
ASSETS
Current assets:
Cash and cash equivalents$26,308,000$22,988,000
Receivables, net1,775,000967,000
Prepaid and other current assets1,364,0001,697,000
Deferred tax assets 1,608,000 1,600,000
Total current assets31,055,00027,252,000
Property and equipment, net2,587,0002,384,000
Goodwill2,161,0002,161,000
Deferred tax assets 50,985,000 51,052,000
Total assets$86,788,000$82,849,000
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses$3,186,000$3,156,000
Deferred revenue 17,317,000 17,470,000
Total current liabilities20,503,00020,626,000
Long-term liabilities:
Deferred revenue957,000902,000
Deferred rent 81,000 76,000
Total long-term liabilities 1,038,000 978,000
Total liabilities21,541,00021,604,000
Total stockholders' equity 65,247,000 61,245,000
Total liabilities and stockholders' equity$86,788,000$82,849,000
    
 
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended June 30,Six Months Ended June 30,
2013201220132012
Revenue$11,838,000$10,343,000$23,602,000$20,644,000
 
Cost of revenue 1,903,000  1,812,000  3,839,000  3,667,000 
Gross profit9,935,0008,531,00019,763,00016,977,000
Operating expenses:
Research and development2,488,0001,465,0005,099,0002,942,000
Selling, general and administrative 5,532,000  4,370,000  12,148,000  8,700,000 
Total operating expenses 8,020,000  5,835,000  17,247,000  11,642,000 
 
Operating income1,915,0002,696,0002,516,0005,335,000
Operating margin16%26%11%26%
 
Other income, net64,0005,000124,00010,000
 
Income before income taxes1,979,0002,701,0002,640,0005,345,000
Income tax expense (108,000) (58,000) (202,000) (276,000)
Net income$1,871,000 $2,643,000 $2,438,000 $5,069,000 
 
Basic income per common share:$0.03 $0.04 $0.04 $0.08 
 
 
Diluted income per common share:$0.03 $0.04 $0.04 $0.08 
 
Shares used in per share calculation - basic 61,158,009  61,103,342  61,068,294  62,063,059 
 
Shares used in per share calculation - diluted 62,451,546  61,721,859  62,242,401  62,743,297 
  
 
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Six Months Ended June 30,
20132012
Operating activities:
Net income$2,438,000$5,069,000
Non-cash items in net income1,617,0001,177,000
Changes in operating assets and liabilities (504,000) 1,231,000 
Net cash provided by operating activities3,551,0007,477,000
 
Investing activities:
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