ZixCorp (ZIXI) Tops Q2 EPS by 1c, Revenues Beat; Offers 3Q & FY20 EPS Guidance Above Consensus; Provides 3Q & FY20 Revenue Outlook

ZixCorp (NASDAQ: ZIXI) reported Q2 EPS of $0.15, $0.01 better than the analyst estimate of $0.14. Revenue for the quarter came in at $53.3 million versus the consensus estimate of $52.37 million.

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

• Revenue increased 16% to $53.3 million.
• Annual recurring revenue (ARR) increased 11% to $215.9 million.
• GAAP net loss attributable to common stockholders totaled ($4.1) million compared to a year ago net loss attributable to common stockholders of ($7.1) million. The company’s Q2 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 $0.1 million.
• GAAP fully diluted earnings (loss) per share attributable to common stockholders totaled ($0.08) compared to ($0.13).
• Non-GAAP adjusted net income before deemed dividends and excluding deferred tax (benefit) expense totaled $8.0 million compared to $5.8 million.
• Non-GAAP adjusted net income per share before deemed dividends and excluding deferred tax (benefit) expense increased 32% to $0.15.
• Adjusted EBITDA increased 18% to $12.7 million, representing an adjusted EBITDA margin of 24%.
• The company ended the quarter with $14.1 million in cash. Cash flow from operations was $4.7 million, an increase of $3.0 million compared to the same year-ago quarter.

“The dramatic shift to remote work in the second quarter allowed us to support our customers and partners more assertively than ever before,” said David Wagner, Zix’s Chief Executive Officer. “Even under that strain, we again delivered profitable growth with 16% revenue growth and 18% adjusted EBITDA growth, further demonstrating the resiliency of our operating model and the importance of secure remote work to our partners and customers. We are benefitting from this positioning as we empower our partners and customers with the technology, tools, and service to drive cloud adoption and digital transformation. Our partners are the digital-first responders in the face of a tsunami of demands placed on them to support remote work. In today’s uncertain and constantly evolving environment, we exceeded all of our financial objectives and we remain confident in our ability to deliver on our vision of becoming the leading provider of cloud email productivity, security, and compliance solutions for businesses of all sizes.”

Zix’s Chief Financial Officer Dave Rockvam commented: “We delivered on our financial guidance for the quarter and maintained our commitment to consistently delivering profitable adjusted EBITDA growth on an absolute basis. We are encouraged by our continued success with productivity, in particular, as it provides a highly effective entry point for attaching our organic, higher-margin products. We are confident that we can leverage this opportunity as we bring new customers onto our Secure Cloud platform. Now with over 90% of customers beginning their journey on Secure Cloud, it is easier than ever to take advantage of multiple Zix products in our modern workplace ecosystem. As an illustrative example, our top five new customer transactions in the quarter averaged three solutions, respectively. While our business continues to operate according to plan, we are also encouraged by the strength of our financial foundation. The over $30 million of cash and other available financial resources at our disposal, coupled with our considerable free cash flow generation and adjusted EBITDA outlook, provide us with a diversified and stable plan to meet our debt obligations as well as execute our growth plan.”

GUIDANCE:

ZixCorp sees Q3 2020 EPS of $0.15-$0.16, versus the consensus of $0.14. ZixCorp sees Q3 2020 revenue of $53.5-54 million, versus the consensus of $53.57 million.

ZixCorp sees FY2020 EPS of $0.58-$0.60, versus the consensus of $0.57. ZixCorp sees FY2020 revenue of $211-217 million, versus the consensus of $213.23 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 "Forward-Looking Statements" below, including risks and uncertainties associated with the COVID-19 pandemic.

For the third quarter of 2020, the company forecasts revenue to range between $53.5 million and $54.0 million, which implies a 12% to 13% 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 ($0.02) and ($0.01), 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 $0.15 and $0.16, for the third quarter of 2020. The company forecasts adjusted EBITDA to be approximately 24% to 25% of forecast revenue for Q3 2020. The per share guidance figures are based on an approximate basic share count of 55.3 million for Q3 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 $211 million and $217 million, representing an increase of between 22% and 25% compared to fiscal year 2019. 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 $0.58 to $0.60 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 average share count of 54.8 million for 2020.

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

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