ZixCorp (ZIXI) Reports In-Line Q4 EPS, Revenues Beat; Offers Q1 & FY20 EPS Mid-Point Guidance Above Consensus, Q1 & FY20 Revenue Views Above Consensus

ZixCorp (NASDAQ: ZIXI) reported Q4 EPS of $0.13, in-line with the analyst estimate of $0.13. Revenue for the quarter came in at $50.4 million versus the consensus estimate of $49.55 million.

Fourth Quarter 2019 Financial Highlights (results compared to the same year-ago quarter)

• Revenue increased 173% to $50.4 million. Total overall organic revenue growth across Zix and AppRiver was 15%.
• Annual recurring revenue (ARR) increased 177% to $209.7 million. Total overall organic ARR growth across Zix and AppRiver was 16%.
• GAAP net loss attributable to common stockholders totaled ($5.2) million compared to net income of $9.2 million. The company’s net loss attributable to common shareholders includes the effect of a deemed dividend to preferred shareholders of $2.1 million and acquisition-related expenses of $4.3 million.
• GAAP fully diluted earnings (loss) per share attributable to common stockholders totaled ($0.10) compared to $0.17.
• Non-GAAP adjusted net income before deemed dividends and excluding deferred tax (benefit) expense totaled $6.7 million compared to $4.6 million.
• Non-GAAP adjusted net income per share before deemed dividends and excluding deferred tax (benefit) expense increased 48% to $0.13.
• Adjusted EBITDA increased 106% to $11.5 million, representing an adjusted EBITDA margin of 23%.

Management Commentary

“The fourth quarter was a strong finish to a record year for Zix,” said David Wagner, Zix’s Chief Executive Officer. “Our successful integration efforts accelerated our performance as a unified, larger company, driving combined annual growth of 146% in revenue, 96% in adjusted EBITDA dollars and 177% in ARR. We are gaining momentum across each of our go-to-market motions. In the MSP channel, we increased the ZixEncrypt and ZixArchive trial activity by 70% and grew ARR for those products by more than 100%. In the Zix channel, we added nearly 11,000 Office 365 mailboxes in Q4, an increase of more than 200% from the prior quarter alone. Our execution as an integrated team continues to validate our attach strategy, and we are well-positioned to continue our revenue and earnings growth into 2020 and beyond.”

Zix’s Chief Financial Officer Dave Rockvam commented: “In the fourth quarter we exceeded our revenue and ARR guidance, achieving 15% or greater year-over-year organic growth for both metrics for the third consecutive quarter. We are encouraged by the continued success with productivity, having added more than 77,000 net seats in the quarter, an increase of more than 9% from Q3. This strong contribution caused our gross margin percentage to compress slightly during the period and is consistent with our continued focus on delivering profitable adjusted EBITDA growth on an absolute basis. Going forward, we believe the migration of mailboxes to the cloud provides us with a highly effective, low cost, lead generation tool for our higher-margin security and compliance portfolio. In Q4, we also delivered $11.5 million of adjusted EBITDA, an increase of 106% from Q4 2018 even though we recorded slightly higher than expected expenses as we finalized the integration. Looking ahead, we are confident that our financial performance in 2019, coupled with building sales momentum, will allow us to maintain steady, predictable revenue growth of 14% to 16% and adjusted EBITDA growth of 11% to 15% in our three to five year model.”

GUIDANCE:

ZixCorp sees Q1 2020 EPS of $0.12-$0.13, versus the consensus of $0.12. ZixCorp sees Q1 2020 revenue of $52.2-52.7 million, versus the consensus of $50.23 million.

ZixCorp sees FY2020 EPS of $0.56-$0.58, versus the consensus of $0.56. ZixCorp sees FY2020 revenue of $220-225 million, versus the consensus of $211.41 million.

For earnings history and earnings-related data on ZixCorp (ZIXI) click here.

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