Zix Corporation Announces 2012 Fourth Quarter and Year-End Results

Zix Corporation Announces 2012 Fourth Quarter and Year-End Results

Company's full-year 2012 performance sets records in new first year orders, backlog, revenue and adjusted earnings per share

DALLAS--(BUSINESS WIRE)-- Zix Corporation (NAS: ZIXI) , the leader in email encryption services, today announced financial results for the fourth quarter and full year ended Dec. 31, 2012.

Fourth Quarter 2012 Financial Highlights

  • Fourth quarter new first year orders of $2.2 million
  • Fourth quarter revenue of $11.7 million, an increase of 18.2% year-over-year, the Company's 16th consecutive quarterly record in revenue
  • Fourth quarter GAAP net income of $0.06 per share, a decrease of $0.16 year-over-year due to changes in deferred tax valuation allowances(1)
  • Fourth quarter Non-GAAP net income of $0.05 per share, an increase of 9.8% year-over-year
  • The Company generated approximately $0.4 million in cash flow from operations, a decrease of $2.1 million year-over-year primarily due to increased R&D and sales and marketing expenditures
  • Cash and cash equivalents totaled $23.0 million, the same as the Sept. 30, 2012, ending cash balance

Full-Year 2012 Financial Highlights

  • Ending backlog of $57.7 million, an increase of 7.5% from the prior year
  • Full-Year new first year orders of $9.0 million, an increase of 27.0% from the prior year
  • Full-year revenue of $43.4 million, an increase of 13.7% year-over-year and a record high for the company
  • Full-year GAAP net income of $0.17 per share, down $0.16 year-over-year due to changes in deferred tax valuation allowances(1)
  • Full-year Non-GAAP net income of $0.18 per share, an increase of 13.6% year-over-year and a record high for the company
  • The Company generated approximately $12.5 million in cash flow from operations for the full year ended Dec. 31, 2012, a decrease of $0.7 million year-over-year primarily due to increased R&D and sales and marketing expenditures
  • Cash and cash equivalents at year-end was $23.0 million, despite $9.0 million spent on share repurchases during 2012. This $23.0 million is an increase of $2.3 million compared to the ending cash balance for 2011

"We are very pleased to report record financial results for 2012 in new first year orders, backlog, revenue and adjusted earnings per share," said Rick Spurr, ZixCorp's Chairman and Chief Executive Officer. "During the year, we continued to enhance our email encryption solution, maintaining our industry-leading ease of use and our position as the market leader. We also began investments in two new data protection products and expanded our resources in sales and marketing to extend our reach. These investments, and the recent unveiling of the final omnibus HIPAA rule, position ZixCorp for revenue growth as we progress through 2013."

Fourth Quarter and Full-Year 2012 Corporate Financial Summary and Other Operational Metrics

 Q4 Q4 % or $ FY FY % or $
$ in Millions, except per share data 2012 2011 


 2012 2011 


Revenue (3) $11.7  $9.9  18.2% $43.4  $38.1  13.7%
GAAP Gross Profit (3) $9.6  $8.0  19.9% $35.7  $30.9  15.6%
GAAP Net Income (1) $4.0  $15.0  (73.3%) $11.0  $22.6  (51.2%)
GAAP Net Income Per Share - Diluted (1) $0.06  $0.23  (71.5%) $0.17  $0.34  (47.8%)
Non-GAAP Adjusted Gross Profit (3) (4) $9.7  $8.1  20.0% $35.9  $31.0  15.7%
Non-GAAP Adjusted Net Income (4) $3.0  $2.9  2.7% $11.6  $10.9  6.2%
Non-GAAP Adjusted Net Income Per Share - Diluted (4) $0.05  $0.04  9.8% $0.18  $0.16  13.6%
Adjusted EBITDA (4) (5) $3.4  $3.5  (4.0%) $13.3  $12.7  4.9%
Adjusted EBITDA Margin (4) (5)  28.9%  35.5% (6.7pts)  30.6%  33.2% (2.6pts)
Email Encryption New First Year Orders $2.2  $1.9  16.0% $9.0  $7.1  27.0%
Email Encryption Total Orders $12.9  $11.1  16.2% $48.2  $42.3  14.8%
Email Encryption Bookings Backlog (6) $57.7  $53.7  7.5%      

(1) GAAP Net Income for the quarters and years ended Dec. 31, 2012, and Dec. 31, 2011, include tax benefits of $2.3 million and $11.8 million, respectively, resulting from reductions to the deferred tax valuation allowance

(2) Changes reported are based on actual results, and numbers shown in the columns may reflect rounding

(3) Amounts indicated are from continuing operations

(4) A reconciliation of GAAP to Non-GAAP adjusted results is attached to this press release and is available on our investor relations Web page at http://investor.zixcorp.com

(5) Adjusted earnings before interest, taxes, depreciation and amortization

(6) Service contract commitments that represent future revenue to be recognized as the services are provided


For the first quarter 2013, the Company forecasts revenue to be between $11.7 million and $11.9 million and fully diluted adjusted earnings per share to be $0.03. Full-year 2013 revenues are projected to be between $48 million and $50 million. Fully diluted Non-GAAP adjusted earnings per share, which are adjusted primarily for non-cash stock-based compensation and non-recurring expense items, are projected to be between $0.19 and $0.20.

Conference Call Information

The Company will discuss its financial results and outlook on a conference call on Tuesday, Feb. 19, 2013, 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 1-800-561-2693 (U.S. toll-free) or 1-617-614-3523 (international) at least 15 minutes before the call and entering access code 78780561. An audio replay of the conference will be available until Feb. 26, 2013, by dialing 1-888-286-8010 (U.S. toll-free) or 1-617-801-6888 (international) and entering the access code 69992551. An archive of the webcast will also be available on the ZixCorp investor relations Web site.

About Zix Corporation

ZixCorp offers industry-leading email encryption and a unique email DLP 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 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.

December 31,
2012December 31,
Current assets:
Cash and cash equivalents$22,988,000$20,680,000
Receivables, net967,000704,000
Prepaid and other current assets1,697,0001,422,000
Deferred tax assets 1,600,000 1,551,000
Total current assets27,252,00024,357,000
Property and equipment, net2,384,0002,228,000
Deferred tax assets51,052,00048,806,000
Other assets - -
Total assets$82,849,000$77,552,000
Current liabilities:
Accounts payable and accrued expenses$3,156,000$2,292,000
Deferred revenue 17,470,000 16,568,000
Total current liabilities20,626,00018,860,000
Long-term liabilities:--
Deferred revenue902,000795,000
Deferred rent 76,000 140,000
Total long-term liabilities 978,000 935,000
Total liabilities21,604,00019,795,000
Total stockholders' equity 61,245,000 57,757,000
Total liabilities and stockholders' equity$82,849,000$77,552,000

Three Months Ended December 31,

Twelve Months Ended December 31,

Cost of revenue 2,055,000  1,849,000  7,609,000  7,211,000 
Gross profit9,634,0008,036,00035,747,00030,934,000
Operating expenses:
Research and development2,431,0001,281,0007,419,0005,229,000
Selling, general and administrative 5,665,000  3,818,000  19,385,000  15,128,000 

Total operating expenses

 8,096,000  5,099,000  26,804,000  20,357,000 
Operating income1,538,0002,937,0008,943,00010,577,000
Operating margin13%30%21%28%
Other income, net95,0009,000111,00088,000
Income before income taxes1,633,0002,946,0009,054,00010,665,000
Income tax (expense) benefit 2,358,000  12,021,000  1,949,000  11,889,000 
Net income$3,991,000 $14,967,000 $11,003,000 $22,554,000 
Basic income per common share:$0.07 $0.23 $0.18 $0.34 
Diluted income per common share:$0.06
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