ZixCorp (ZIXI) Reports In-Line Q1 EPS; Offers 2Q & FY20 EPS/Revenue Outlook

ZixCorp (NASDAQ: ZIXI) reported Q1 EPS of $0.12, in-line with the analyst estimate of $0.12. Revenue for the quarter came in at $52.4 million versus the consensus estimate of $52.03 million.

First Quarter 2020 Financial Highlights (results compared to the same year-ago quarter)

• Revenue increased 79% to $52.4 million. Total overall organic revenue growth across Zix and AppRiver was 15%.
• Annual recurring revenue (ARR) increased 15% organically to $214.3 million.
• GAAP net loss attributable to common stockholders totaled ($3.1) million compared to net loss attributable to common stockholders of ($8.7) million. The company’s net loss attributable to common shareholders includes the effect of a deemed dividend to preferred shareholders of $2.2 million and acquisition-related expenses of $0.4 million.
• GAAP fully diluted earnings (loss) per share attributable to common stockholders totaled ($0.06) compared to ($0.17).
• Non-GAAP adjusted net income before deemed dividends and excluding deferred tax (benefit) expense totaled $6.7 million compared to $3.8 million.
• Non-GAAP adjusted net income per share before deemed dividends and excluding deferred tax (benefit) expense increased 75% to $0.12.
• Adjusted EBITDA increased 91% to $11.1 million, representing an adjusted EBITDA margin of 21%.
• The company ended the quarter with $16.3 million in cash.

Management Commentary

“Our stable financial performance and uninterrupted operational execution in the first quarter is a testament to our team’s unwavering commitment to helping our customers and partners meet the challenges of today’s remote work environment,” said David Wagner, Zix’s Chief Executive Officer. “The COVID-19 pandemic is accelerating digital transformation and is increasing the need for robust business communications solutions that ensure organizations remain secure, compliant and productive. Our launch of Secure Cloud offers a new, secure modern workplace solution to empower our customers and partners to deliver business value in the digital workplace. It also embodies the complete integration of Zix and AppRiver, bringing together the best of our technologies to enable users to collaborate securely and productively across a broad range of communication channels and locations; capabilities that are essential in today’s remote work environment.

“Internally, we are focused on employee safety and our dedicated team is delivering for partners and customers to ensure the long-term health and viability of our business. Our 100% subscription business delivers essential productivity, security and compliance solutions to a diversified customer base with a concentration in the healthcare and financial services industries where our solutions are critical. However, we know that we are not immune to the current market dynamic. Many of our customers, especially our smaller customers, are struggling with decreased demand. As a result, we are focused on balancing profitability as we capitalize on the positive market momentum for digital transformation. We are confident in our long-term vision of growth through taking additional market share, facilitating the successful transition of our customer base to Secure Cloud, and operating our organization as efficiently as possible. Our success today will better position Zix in a post-COVID-19 environment and enable the realization of our vision to be the leading provider of cloud email security, compliance and productivity solutions for companies of all sizes.”

Zix’s Chief Financial Officer Dave Rockvam added: “We delivered on our revenue and EPS guidance for the quarter, demonstrating the resiliency of our business model and our focus on delivering profitable adjusted EBITDA growth on an absolute basis. We were also encouraged by our continued success within productivity, and we ended the quarter in a solid and durable liquidity position with $16.3 million in cash and $17 million available through our revolving credit facility. Additionally, the $9 million of annualized costs we recently took out of our business, along with our strong free cash flow generation and adjusted EBITDA outlook, provide us with enough cushion on our leverage ratio to meet our debt obligations. We have a plan and foundation in place to ensure we can navigate these uncertain times, and we believe that our industry-leading solutions, proven strategy and world-class team will enable us to capitalize on the digital transformation opportunity that’s already underway.”

GUIDANCE:

ZixCorp sees Q2 2020 EPS of $0.12-$0.14, versus the consensus of $0.13. ZixCorp sees Q2 2020 revenue of $52-53 million, versus the consensus of $53.03 million.

ZixCorp sees FY2020 EPS of $0.56-$0.58, versus the consensus of $0.54. ZixCorp sees FY2020 revenue of $210-217 million, versus the consensus of $213.59 million.

Zix provides guidance based on current market conditions and expectations. The company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled below, including risks and uncertainties associated with the COVID-19 pandemic.

• For the second quarter of 2020, the company forecasts revenue to range between $52.0 million and $53.0 million, which implies a 10% to 12% organic growth rate compared to the same year-ago quarter. The company forecasts fully diluted GAAP earnings (loss) per share (attributable to common stockholders) to be in the range of ($0.07) and ($0.06) and fully diluted non-GAAP adjusted earnings per share (attributable to common stockholders) before deemed dividends and excluding deferred tax (benefit) expense to be in the range of $0.12 and $0.14 for the second quarter of 2020. The company forecasts adjusted EBITDA to be approximately 23% to 25% of forecast revenue for Q2 2020. The per share guidance figures are based on an approximate basic share count of 53.7 million for Q2 2020.
• Based on management’s current visibility, the company has updated its revenue range for the full fiscal year of 2020 to reflect the currently anticipated impact of the COVID-19 pandemic on its operations. The company now forecasts revenue to range between $210 million and $217 million, representing an increase of between 21% and 25% compared to fiscal year 2019 and between 9% and 13% on an organic basis. The company also expects fully diluted GAAP earnings (loss) per share (attributable to common stockholders) to range between ($0.13) and ($0.09) and fully diluted non-GAAP adjusted earnings per share (attributable to common stockholders) before deemed dividends and excluding deferred tax (benefit) expense to be $0.56 to $0.58 for fiscal year 2020. The company forecasts adjusted EBITDA to be in the range of $51.0 million and $53.0 million (or 23% to 25% of forecast revenue) for 2020, representing a year-over-year increase of between 29% and 34% compared to fiscal year 2019. The per share figures are based on an approximate basic share count of 54.0 million for 2020. The company is withdrawing its full year 2020 Annual Recurring Revenue (ARR) forecast due to the current market conditions and uncertainties related to the ongoing COVID-19 pandemic.

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

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