ZixCorp (ZIXI) Reports In-Line Q1 EPS, Revenues Beat; Offers 2Q & FY21 EPS Guidance Below Consensus, 2Q & FY21 Revs. Views Above Consensus

ZixCorp (NASDAQ: ZIXI) reported Q1 EPS of $0.15, in-line with the analyst estimate of $0.15. Revenue for the quarter came in at $60 million versus the consensus estimate of $59.13 million.

First Quarter 2021 Financial Highlights (results compared to the same year-ago quarter)

• Revenue increased 14% to $60.0 million.
• Annual recurring revenue (ARR) increased 14% to $243.6 million. Cloud ARR increased 20% to $214.3 million or 88% of total ARR.
• GAAP net loss totaled ($2.5) million compared to a year ago net loss of ($0.9) million.
• GAAP net loss attributable to common stockholders totaled ($4.8) million compared to a year ago net loss attributable to common stockholders of ($3.1) million. The company’s Q1 2021 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 $0.4 million.
• GAAP fully diluted earnings (loss) per share attributable to common stockholders totaled ($0.09) compared to ($0.06).
• Non-GAAP adjusted net income before deemed dividends and excluding deferred tax (benefit) expense totaled $7.9 million compared to $6.7 million.
• Non-GAAP adjusted net income per share before deemed dividends and excluding deferred tax (benefit) expense increased 16% to $0.15.
• Adjusted EBITDA increased 18% or $2.0 million to $13.1 million, representing an adjusted EBITDA margin of 22%.
• The company ended the quarter with $23.7 million in cash. Cash flow from operations was $10.7 million, an increase of 142% or $6.3 million compared to the prior year period.

“Our consistent results for the first quarter reflect our continued commitment to driving profitable growth as well as our partners’ and customers’ increasing adoption of Zix’s Secure Cloud platform,” said David Wagner, Zix’s Chief Executive Officer. “We delivered 14% growth in revenue and ARR in Q1, along with an 18% increase in adjusted EBITDA dollars and solid cash flow from operations. These strong results underscore the growing role Zix is playing in empowering businesses of all sizes with the technology to drive cloud adoption, facilitate digital transformation, and protect communications. CloudAlly has continued to perform exceedingly well post acquisition with ARR recently hitting record levels; cloud data back-up is playing an increasingly critical role within a secure modern workplace, and we have a leading solution to address that growing need. Overall, Zix remains well positioned to take advantage of many secular market trends and to realize highly efficient new customer acquisition and greater adoption of our Secure Cloud platform.”

Zix’s Chief Financial Officer Dave Rockvam commented: “The first quarter of 2021 marked another period of consistent profitable growth, increased year-over-year adjusted EBITDA dollars, and strong cash flow generation. Our Secure Cloud platform and high-velocity sales model is enabling our partners to empower our end customers to add more services. The macro acceleration of the business cloud journey and increased focus on email security give us confidence we can continue to capture meaningful growth opportunities well into the future. Moreover, our current base of more than 5,000 partners and 90,000 end customers provide a built-in growth opportunity to attach Zix’s organic, higher-margin products. As we execute this strategy, we believe our 100% subscription business, favorable profitability profile and strong cash flow generation positions well us to meet our manageable debt obligations and achieve our adjusted EBITDA guidance of $56.0 million.”

GUIDANCE:

ZixCorp sees Q2 2021 EPS of ($0.09)-($0.08), versus the consensus of $0.14. ZixCorp sees Q2 2021 revenue of $61.2-61.6 million, versus the consensus of $59.97 million.

ZixCorp sees FY2021 EPS of ($0.36)-($0.33), versus the consensus of $0.60. ZixCorp sees FY2021 revenue of $248-250.5 million, versus the consensus of $245.98 million.

Zix provides guidance based on current market conditions and expectations. The company emphasizes that its 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 second quarter of 2021, the company forecasts revenue to range between $61.2 million and $61.6 million. Zix’s revenue forecast for the second quarter of 2021 implies a 15% 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 ($0.09) and ($0.08), and fully diluted non-GAAP adjusted earnings per share (attributable to common stockholders) before deemed dividends and excluding deferred tax (benefit) expense to be $0.14 for the second quarter of 2021. The company forecasts adjusted EBITDA to be approximately 22% of forecast revenue for Q2 2021. The per share guidance figures are based on an approximate basic share count of 57.0 million for Q2 2021.

Based on management’s current visibility, the company increased its revenue guidance for fiscal 2021 to range between $248.0 million and $250.5 million, representing an increase of between 14% and 15% compared to fiscal year 2020. The company also expects fully diluted GAAP earnings (loss) per share (attributable to common stockholders) to range between ($0.36) and ($0.33) and fully diluted non-GAAP adjusted earnings per share (attributable to common stockholders) before deemed dividends and excluding deferred tax (benefit) expense to range between $0.58 to $0.60 for fiscal year 2021. The company forecasts adjusted EBITDA to be $56.0 million (or approximately 22% of forecast revenue) for 2021, representing a year-over-year increase of approximately 10% compared to fiscal year 2020. The per share figures are based on an approximate basic average share count of 55.5 million for 2021. Fiscal 2021 guidance adds back approximately $3.0 million of expenses related to travel, compensation, and marketing, which were reduced in 2020 due to COVID-19.

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

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