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8-K - FORM 8-K - ZIX CORP | d81631e8vk.htm |
Exhibit 99.1
Zix Corporation Exceeds Q1 Revenue and EPS Guidance
DALLAS April 26, 2011 Zix Corporation (NASDAQ: ZIXI), the leader in email encryption
services, today announced financial results for the first quarter ended March 31, 2011.
First Quarter 2011 Financial Highlights
| The Company achieved first quarter revenue from continuing operations of $9.3 million, an increase of 24%, year-over-year | ||
| First quarter GAAP net income of $0.03 per share, an increase of 215%, year-over-year (1) | ||
| First quarter Non-GAAP net income of $0.04 per share, an increase of 91%, year-over-year | ||
| Cash flow from operations for the quarter of $3.5 million, an increase of $0.9 million, year-over-year | ||
| Cash, cash equivalents and commercial paper investments totaling $24.1 million after $5 million repurchase of the Companys common stock, a decrease of $0.6 million compared to the December 31, 2010 ending cash balance |
ZixCorps subscription business model and strong reputation as the leader in email encryption
continues to result in revenue growth, said Rick Spurr, ZixCorps Chairman and Chief Executive
Officer. We are proud to announce that we exceeded guidance on revenue and earnings per share. We
look forward to building on these strengths and continuing our success throughout the rest of 2011
and into the future.
First Quarter 2011 Corporate Financial Summary and Other Operational Metrics
Q1 | Q1 | % or $ | ||||||||||
$ in Millions, except per share and % data | 2011 | 2010 | Change(1) | |||||||||
Revenue (2)
|
$ | 9.3 | $ | 7.5 | 24.0 | % | ||||||
GAAP Gross Profit (2)
|
$ | 7.5 | $ | 6.0 | 24.7 | % | ||||||
GAAP Net Income
|
$ | 2.4 | $ | 0.7 | 236.9 | % | ||||||
GAAP Net Income Per Share Diluted
|
$ | 0.03 | $ | 0.01 | 215.3 | % |
Q1 | Q1 | % or $ | ||||||||||
$ in Millions, except per share and % data | 2011 | 2010 | Change(1) | |||||||||
Non-GAAP Adjusted Gross Profit (2) (3)
|
$ | 7.5 | $ | 6.0 | 24.1 | % | ||||||
Non-GAAP Adjusted Net Income (3)
|
$ | 2.5 | $ | 1.2 | 104 | % | ||||||
Non-GAAP Adjusted Net Income Per Share-Diluted (3)
|
$ | 0.04 | $ | 0.02 | 91 | % | ||||||
Adjusted EBITDA (3) (4)
|
$ | 2.9 | $ | 1.6 | 76 | % | ||||||
Adjusted EBITDA Margin (3) (4)
|
31 | % | 22 | % | 9pts | |||||||
Email Encryption New First Year Orders
|
$ | 1.5 | $ | 2.2 | (32.6 | %) | ||||||
Email Encryption Total Orders
|
$ | 9.0 | $ | 9.2 | (2.9 | %) | ||||||
Email Encryption Bookings Backlog (5)
|
$ | 49.7 | $ | 44.4 | 11.8 | % |
(1) | Changes are based on actuals versus numbers shown in the columns which may reflect rounding | |
(2) | Amounts indicated are from continuing operations | |
(3) | 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 | |
(4) | Adjusted earnings before interest, taxes, depreciation and amortization | |
(5) | Service contract commitments that represent future revenue to be recognized as the services are provided |
Business Highlights
| ZixCorp announced ZixMobility®, the new standard in simple mobile access for encrypted email services. Prior to ZixMobility, users in the industry had to overcome inconvenient steps, distorted screen layouts and inefficient implementations to access secure email. ZixCorp addressed these challenges to offer single-click sign-on that functions across all major mobile platforms, including AndroidTM, BlackBerry® and iPhone®. | |
| To leverage ZixCorps superior ease of use, Highmark Inc. selected ZixCorp to replace its legacy email encryption provider. Highmark becomes the 32nd Blue Cross Blue Shield organization to use ZixCorp® Email Encryption Services. | |
| ZixCorp announced the approval of a share repurchase program that enables the company to purchase up to $15 million of its shares of common stock. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors. In the first quarter of 2011, the Company repurchased 1,368,300 shares at an average price of $3.65. | |
| Manchester Memorial Hospital signed a renewal with ZixCorp for an additional three years. Manchester Memorial Hospital initially selected ZixCorp Email Encryption Services |
in 2004 and continues to renew with ZixCorp because of its reliable, easy to manage security solution. | ||
| Dedicated to meeting the highest standards for availability, integrity, security and confidentiality, ZixCorp achieved compliance with the Payment Card Industry (PCI) Data Security Standard (DSS). ZixCorp is recognized as Level 1 compliant based on DSS version 2.0, enabling companies to confidently send payment card information to individual customers or other businesses via ZixPort®. | |
| In a new three-year contract, ZixCorp will provide secure email to Rush University Medical Center Email. Eight thousand Rush users, including physicians, nurses, staff, students, faculty and researchers, will send encrypted email through ZixGateway®. |
Outlook
The Company forecasts revenue for the second quarter to be between $9.0 and $9.2 million and fully
diluted adjusted earnings per share of $0.03. For the full year, the Company reaffirmed previously
issued revenue guidance of $38 to $40 million and fully diluted adjusted earnings per share of
$0.14 to $0.16.
Conference Call Information:
The Company will discuss its financial results and outlook on a conference call on Tuesday, April
26, 2011, 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 1-866-356-4441 (U.S. toll-free) or 1-617-597-5396 (international) at
least 15 minutes before the call and entering access code 15374340. An audio replay of the
conference will be available until May 3, 2011, by dialing 1-888-286-8010 (U.S. toll-free) or
1-617-801-6888 (international) and entering the access code 28099746. 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, Humana, the SEC, and more than 1,200 hospitals and 1,500 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.
SOURCE Zix Corporation
Contacts
ZixCorp Investor Relations: Charles Messman (323) 468-2300, zixi@mkr-group.com
Public Relations: Taylor Stansbury (214) 370-2134, tstansbury@zixcorp.com
Statements in this release that are not purely historical facts or that necessarily depend upon
future events, including statements about forecasts of new orders, 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 law mandates may affect demand
for email encryption and ZixCorps 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
ZixCorps most recent filing on Form 10-K with the Securities and Exchange Commission.
ZIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, | ||||||||
2011 | December 31, | |||||||
(unaudited) | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 21,763,000 | $ | 24,619,000 | ||||
Commercial paper |
2,290,000 | | ||||||
Receivables, net |
760,000 | 1,344,000 | ||||||
Prepaid and other current assets |
1,270,000 | 1,115,000 | ||||||
Deferred tax assets |
2,240,000 | 1,056,000 | ||||||
Total current assets |
28,323,000 | 28,134,000 | ||||||
Property and equipment, net |
2,125,000 | 2,209,000 | ||||||
Goodwill |
2,161,000 | 2,161,000 | ||||||
Deferred tax assets |
33,117,000 | 34,304,000 | ||||||
Other assets |
11,000 | 44,000 | ||||||
Total assets |
$ | 65,737,000 | $ | 66,852,000 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 2,684,000 | $ | 2,844,000 | ||||
Deferred revenue |
15,793,000 | 15,331,000 | ||||||
License subscription note payable |
140,000 | 137,000 | ||||||
Total current liabilities |
18,617,000 | 18,312,000 | ||||||
Long-term liabilities: |
||||||||
Deferred revenue |
1,291,000 | 1,439,000 | ||||||
License subscription note payable, non-current |
12,000 | 49,000 | ||||||
Deferred rent |
150,000 | 165,000 | ||||||
Total long-term liabilities |
1,453,000 | 1,653,000 | ||||||
Total liabilities |
20,070,000 | 19,965,000 | ||||||
Total stockholders equity |
45,667,000 | 46,887,000 | ||||||
Total liabilities and stockholders equity |
$ | 65,737,000 | $ | 66,852,000 | ||||
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Revenues |
$ | 9,271,000 | $ | 7,479,000 | ||||
Cost of revenues |
1,817,000 | 1,502,000 | ||||||
Gross profit |
7,454,000 | 5,977,000 | ||||||
Operating expenses: |
||||||||
Research and development |
1,313,000 | 1,308,000 | ||||||
Selling, general and administrative |
3,727,000 | 4,228,000 | ||||||
Total operating expenses |
5,040,000 | 5,536,000 | ||||||
Operating income |
2,414,000 | 441,000 | ||||||
Operating margin |
26 | % | 6 | % | ||||
Other income, net |
9,000 | 29,000 | ||||||
Income from continuing operations before income taxes |
2,423,000 | 470,000 | ||||||
Income tax
(expense) benefit |
(24,000 | ) | 54,000 | |||||
Income from continuing operations |
2,399,000 | 524,000 | ||||||
Discontinued operations |
||||||||
Income from operations of discontinued e-Prescribing segment |
| 290,000 | ||||||
Income tax expense |
| (102,000 | ) | |||||
Income on discontinued operations (Note 1) |
| 188,000 | ||||||
Net income |
$ | 2,399,000 | $ | 712,000 | ||||
Basic income per common share: |
||||||||
Income from continuing operations |
$ | 0.04 | $ | 0.01 | ||||
Income from discontinued operations |
| 0.00 | ||||||
Net income |
$ | 0.04 | $ | 0.01 | ||||
Diluted income per common share: |
||||||||
Income from continuing operations |
$ | 0.03 | $ | 0.01 | ||||
Income from discontinued operations |
| 0.00 | ||||||
Net income |
$ | 0.03 | $ | 0.01 | ||||
Shares used in per share calculation basic |
67,182,916 | 63,790,368 | ||||||
Shares used in per share calculation diluted |
70,006,906 | 65,511,791 | ||||||
Note: EPS totals off due to rounding
Note 1
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Components of Income from discontinued operations: |
||||||||
Revenue from discontinued operations |
$ | | $ | 937,000 | ||||
Expenses from discontinued operations |
| 647,000 | ||||||
Tax expense |
| (102,000 | ) | |||||
Income from discontinued operations |
$ | | $ | 188,000 | ||||
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Operating activities: |
||||||||
Net income |
$ | 2,399,000 | $ | 712,000 | ||||
Non-cash items in net income |
455,000 | 858,000 | ||||||
Changes in operating assets and liabilities |
637,000 | 1,045,000 | ||||||
Net cash provided by operating
activities |
3,491,000 | 2,615,000 | ||||||
Investing activities: |
||||||||
Purchases of property and equipment |
(285,000 | ) | (379,000 | ) | ||||
Purchase of commercial paper |
(2,290,000 | ) | | |||||
Net cash used in investing activities |
(2,575,000 | ) | (379,000 | ) | ||||
Financing activities: |
||||||||
Proceeds from exercise of stock options |
1,239,000 | 249,000 | ||||||
Proceeds from exercise of warrants |
23,000 | | ||||||
Payment of license subscription note payable |
(34,000 | ) | (31,000 | ) | ||||
Purchase of Treasury Stock |
(5,000,000 | ) | | |||||
Net cash
(used by) provided by financing activities |
(3,772,000 | ) | 218,000 | |||||
(Decrease) increase in cash and cash equivalents |
(2,856,000 | ) | 2,454,000 | |||||
Cash and cash equivalents, beginning of period |
24,619,000 | 13,287,000 | ||||||
Cash and cash equivalents, end of period |
$ | 21,763,000 | $ | 15,741,000 | ||||
ZIX CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2011 | 2010 | |||||||||||
Revenue: |
||||||||||||
GAAP revenue |
$ | 9,271,000 | $ | 7,479,000 | ||||||||
Gross profit: |
||||||||||||
GAAP gross profit |
$ | 7,454,000 | $ | 5,977,000 | ||||||||
Stock-based compensation charges (1) |
(A | ) | 12,000 | 37,000 | ||||||||
Non-GAAP adjusted gross profit |
$ | 7,466,000 | $ | 6,014,000 | ||||||||
Operating income: |
||||||||||||
GAAP operating income |
$ | 2,414,000 | $ | 441,000 | ||||||||
Stock-based compensation charges (1) |
(A | ) | 119,000 | 446,000 | ||||||||
Non-GAAP adjusted operating income |
$ | 2,533,000 | $ | 887,000 | ||||||||
Income from continuing operations: |
||||||||||||
GAAP income from continuing operations |
$ | 2,399,000 | $ | 524,000 | ||||||||
Stock-based compensation charges (1) |
(A | ) | 119,000 | 446,000 | ||||||||
Income tax impact |
(D | ) | 4,000 | (96,000 | ) | |||||||
Non-GAAP adjusted income from continuing operations |
$ | 2,522,000 | $ | 874,000 | ||||||||
Income from discontinued operations: |
||||||||||||
GAAP income on discontinued operations |
$ | | $ | 188,000 | ||||||||
Stock-based compensation charges (1) |
(A | ) | | 63,000 | ||||||||
Non-recurring severance payments (2) |
(B | ) | | 3,000 | ||||||||
Expenses
related to wind down of e-Prescribing business (3) |
(C | ) | | 8,000 | ||||||||
Income tax impact |
(D | ) | | 102,000 | ||||||||
Non-GAAP adjusted income from discontinued operations |
$ | | $ | 364,000 | ||||||||
Net income: |
||||||||||||
GAAP net income |
$ | 2,399,000 | $ | 712,000 | ||||||||
Stock-based compensation charges (1) |
(A | ) | 119,000 | 509,000 | ||||||||
Non-recurring severance payments (2) |
(B | ) | | 3,000 | ||||||||
Expenses
related to strategic review and wind down of e-Prescribing business (3) |
(C | ) | | 8,000 | ||||||||
Income tax impact |
(D | ) | 4,000 | 6,000 | ||||||||
Non-GAAP adjusted net income |
$ | 2,522,000 | $ | 1,238,000 | ||||||||
Diluted income from continuing operations per common share: |
||||||||||||
GAAP income from continuing operations |
$ | 0.03 | $ | 0.01 | ||||||||
Adjustments per share |
(A-D | ) | $ | 0.01 | $ | 0.01 | ||||||
Non-GAAP adjusted income from continuing operations |
$ | 0.04 | $ | 0.02 | ||||||||
Diluted net income per common share: |
||||||||||||
GAAP net income |
$ | 0.03 | $ | 0.01 | ||||||||
Adjustments per share |
(A-D | ) | $ | 0.01 | $ | 0.01 | ||||||
Non-GAAP adjusted net income |
$ | 0.04 | $ | 0.02 | ||||||||
Shares used
to compute Non-GAAP adjusted net income per share diluted |
70,006,906 | 65,511,791 | ||||||||||
Reconciliation of Net income to EBITDA and Adjusted EBITDA: |
(E | ) | ||||||||||
Net income |
$ | 2,399,000 | $ | 712,000 | ||||||||
Income tax provision |
24,000 | 48,000 | ||||||||||
Interest expense |
3,000 | 7,000 | ||||||||||
Depreciation expense |
331,000 | 344,000 | ||||||||||
EBITDA |
2,757,000 | 1,111,000 | ||||||||||
Adjustments: |
||||||||||||
Share-based compensation expense |
(A | ) | 119,000 | 509,000 | ||||||||
Non-recurring severance payments |
(B | ) | | 3,000 | ||||||||
Expenses related to strategic review and wind down of e-Prescribing business |
(C | ) | | 8,000 | ||||||||
Adjusted EBITDA |
$ | 2,876,000 | $ | 1,631,000 | ||||||||
Adjusted EBITDA margin |
31.0 | % | 21.8 | % | ||||||||
(1) Stock-based compensation charges are included as follows: |
||||||||||||
Cost of revenues |
$ | 12,000 | $ | 37,000 | ||||||||
Research and development |
13,000 | 43,000 | ||||||||||
Selling, general and administrative |
94,000 | 366,000 | ||||||||||
Discontinued operations |
| 63,000 | ||||||||||
$ | 119,000 | $ | 509,000 | |||||||||
(2) Non-recurring severance payments are included as follows: |
||||||||||||
Discontinued operations |
$ | | $ | 3,000 | ||||||||
(3) Expenses related to strategic review and the wind down of
e-Prescribing business are as follows: |
||||||||||||
Discontinued operations |
$ | | $ | 8,000 | ||||||||
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 (E) on the next page.
ZIX CORPORATION
NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
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 Companys future financial performance. Management uses these Non-GAAP financial measures to
make operational and investment decisions, to evaluate the Companys 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 Gross profit, Operating income, Income from continuing
operations, Income from discontinued operations, Net income, Income per share diluted from
continuing operations, Net income per share diluted, and EBITDA for non-cash stock-based
compensation expense, non-recurring severance expenses and expense related to the wind down of our
e-Prescribing business to derive Non-GAAP adjusted Gross profit, adjusted Operating income,
adjusted Income from continuing operations, adjusted Income from discontinued operations, adjusted
Net income, adjusted Income per share diluted from continuing operations, 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, Income from continuing operations, Income from
discontinued operations, Net income, Income per share diluted from continuing operations, 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. At this time, such one-time transactions are unknown and not available. Estimates of
these one-time items may differ materially from actual results. See items (A) through (C) below
for further information on the current quarters reconciling items.
Items (A) through (E) 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
from continuing operations, Net income from discontinued operations, Net income, Net income
from continuing operations per share diluted, Net income per share diluted and EBITDA and
correspond to the categories explained in further detail below under (A) through (E).
(A) Non-cash stock-based compensation charges relating to stock option grants awarded to employees
and third-party service providers 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) Severance payments related to reduction in workforce. See item (2) on previous page for
breakdown of severance payments. The Companys 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) Expenses related to strategic review and wind down of the Companys e-Prescribing business
segment. The Companys management excludes these costs when evaluating the ongoing performance
and/or predicting its earnings trends and therefore excludes these charges when presenting
Non-GAAP financial measures.
(D) 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
pervious periods. The remaining provision for income taxes represents expected cash taxes to be
paid.
(E) EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted
EBITDA adds back stock-based compensation, severance payments and expenses relating to the wind
down of the Companys e-Prescribing business.