ZixCorp (ZIXI) Misses Q3 EPS by 2c, Revenues Beat; Offers 4Q EPS/Revenue Guidance Above Consensus

ZixCorp (NASDAQ: ZIXI) reported Q3 EPS of $0.13, $0.02 worse than the analyst estimate of $0.15. Revenue for the quarter came in at $54.8 million versus the consensus estimate of $53.74 million.

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

• Revenue increased 15% to $54.8 million.
• Annual recurring revenue (ARR) increased 11% to $222.3 million. Cloud ARR increased 19% to $190.3 million or 86% of total ARR.
• GAAP net loss totaled ($0.7) million compared to a year ago net loss of ($1.6) million.
• GAAP net loss attributable to common stockholders totaled ($3.0) million compared to a year ago net loss attributable to common stockholders of ($3.7) million. The company’s Q3 2020 net loss attributable to common shareholders includes the effect of a deemed dividend to preferred shareholders of $2.3 million and acquisition-related expenses of $1.1 million.
• GAAP fully diluted earnings (loss) per share attributable to common stockholders totaled ($0.05) compared to ($0.07).
• Non-GAAP adjusted net income before deemed dividends and acquisition related expenses and excluding deferred tax (benefit) expense totaled $9.2 million compared to $6.7 million.
• Non-GAAP adjusted net income per share before deemed dividends and excluding deferred tax (benefit) expense increased 34% to $0.17.
• Adjusted EBITDA increased 20% or $2.3 million to $13.8 million, representing an adjusted EBITDA margin of 25%.
• The company ended the quarter with $23.7 million in cash, an increase of 68% or $9.6 million from $14.1 million at the end of the prior sequential quarter. Cash flow from operations was $15.1 million, an increase of 78% or $8.5 million compared to the same year-ago quarter.

Management Commentary

“Our solid third quarter results demonstrate both our team’s continued commitment to driving profitable growth as well as our partners’ and customers’ adoption of our Secure Cloud platform,” said David Wagner, Zix’s Chief Executive Officer. “With 15% revenue growth and 25% adjusted EBITDA margins in the quarter, we are seeing clear feedback for the growing value Zix is providing our partners with our Secure Cloud platform by delivering comprehensive digital productivity, security and compliance solutions for businesses globally. Additionally, through our recently announced acquisition of CloudAlly, we’re now able to offer cloud-based data backup, enabling us to further expand our product suite and also address a clear demand from our partners for an integrated cloud backup offering. Cloud data back-up is a critical component of a secure modern workplace, and we believe it will further improve our standing with current and potential partners as we enable them to navigate and thrive in an increasingly work-from-anywhere world. Our continued, efficient rate of new customer acquisition and the rapid adoption of our Secure Cloud platform both underscore our early success on this long-term secular market trend.”

Zix’s Chief Financial Officer Dave Rockvam commented: “In the third quarter we delivered on our commitment to drive revenue growth as well as adjusted gross margin and adjusted EBITDA increases on an absolute basis, the latter two of which were up $0.3 million and $1.1 million from Q2 2020, respectively. We also produced strong cash flow from operations, generating $15.1 million in the third quarter and $24.2 million on a year-to-date basis. During the quarter we also added $9.6 million of cash and ended the quarter with $23.7 million. Our strengthening balance sheet, coupled with our unlevered free cash flow generation capabilities, will reliably allow us to service our debt obligations and execute our growth strategy.”

GUIDANCE:

ZixCorp sees Q4 2020 EPS of $0.16-$0.17, versus the consensus of $0.15. ZixCorp sees Q4 2020 revenue of $56.4-57.4 million, versus the consensus of $55.32 million.

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

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