Exhibit 99.1
Zix Corporation Announces Fourth Quarter and Year-End Results for Fiscal 2011
Company’s quarterly and full-year 2011 results continue to set records in revenue, adjusted earnings per share and cash generated from operations
DALLAS — Feb. 21, 2012 —Zix Corporation (NASDAQ: ZIXI), the leader in email encryption services, today announced financial results for the fourth quarter and full year ended Dec. 31, 2011.
Fourth Quarter Financial Highlights
| | • | | The Company achieved record fourth quarter revenue from continuing operations of $9.9 million, an increase of 12%, year-over-year |
| | • | | Fourth quarter 2011 GAAP net income of $0.23 per share, compared to fourth quarter 2010 GAAP net income of $0.54 per share(1) |
| | • | | Fourth quarter Non-GAAP net income of $0.04 per share, an increase of 22.0%, year-over-year |
| | • | | Cash flow from operations for the fourth quarter of $2.6 million, an increase of $1.8 million, year-over-year |
Full-Year 2011 Financial Highlights
| | • | | The Company achieved full-year record revenue from continuing operations of $38.1 million, an increase of 15.4%, year-over-year |
| | • | | Full-year GAAP net income of $0.34 per share, compared to full-year 2010 GAAP net income of $0.62 per share(1) |
| | • | | Full-year Non-GAAP net income of $0.16 per share, an increase of 29.4%, year-over-year |
| | • | | Cash flow from operations for the full year ended Dec. 31, 2011, of $13.2 million, an increase of $6.0 million, year-over-year |
| | • | | Cash, cash equivalents and commercial paper investments at year-end was $20.7 million, despite $21.0 million spent on share repurchases during 2011. This $20.7 million is a decrease of $3.9 million compared to the ending cash balance for 2010 |
“We are very pleased to report record financial results for revenue, adjusted earnings per share and cash generated from operations during fiscal 2011,” saidRick Spurr, ZixCorp’s
Chairman and Chief Executive Officer. “During the year, we continued to invest in enhancing easy-to-use email encryption, including the launch of ZixMobility. Such innovations allow us to maintain our position of leadership in the industry and create opportunities for revenue growth as we look to 2012.”
Fourth Quarter and Full-Year 2011 Corporate Financial Summary and Other Operational Metrics
| | | | | | | | | | | | | | | | | | | | | | | | |
$ in Millions, except per share data | | Q4
2011 | | | Q4
2010 | | | % or $
Change (2) | | | FY
2011 | | | FY
2010 | | | % or $
Change (2) | |
Revenue(3) | | $ | 9.9 | | | $ | 8.8 | | | | 11.8 | % | | $ | 38.1 | | | $ | 33.1 | | | | 15.4 | % |
GAAP Gross Profit(3) | | $ | 8.0 | | | $ | 7.1 | | | | 13.0 | % | | $ | 30.9 | | | $ | 26.6 | | | | 16.3 | % |
GAAP Net Income(1) | | $ | 15.0 | | | $ | 37.2 | | | | (59.8 | %) | | $ | 22.6 | | | $ | 41.2 | | | | (45.3 | %) |
GAAP Net Income Per Share – Diluted(1) | | $ | 0.23 | | | $ | 0.54 | | | | (58.2 | %) | | $ | 0.34 | | | $ | 0.62 | | | | (45.7 | %) |
Non-GAAP Adjusted Gross Profit(3) (4) | | $ | 8.1 | | | $ | 7.2 | | | | 12.7 | % | | $ | 31.0 | | | $ | 26.8 | | | | 15.9 | % |
Non-GAAP Adjusted Net Income(4) | | $ | 2.9 | | | $ | 2.5 | | | | 17.4 | % | | $ | 10.9 | | | $ | 8.4 | | | | 30.5 | % |
Non-GAAP Adjusted Net Income Per Share – Diluted(4) | | $ | 0.04 | | | $ | 0.04 | | | | 22.0 | % | | $ | 0.16 | | | $ | 0.13 | | | | 29.4 | % |
Adjusted EBITDA(4) (5) | | $ | 3.5 | | | $ | 2.8 | | | | 26.6 | % | | $ | 12.7 | | | $ | 9.9 | | | | 28.5 | % |
Adjusted EBITDA Margin(4) (5) | | | 35.5 | % | | | 31.4 | % | | | 4.1 | pts | | | 33.2 | % | | | 29.8 | % | | | 3.4 | pts |
Email Encryption New First Year Orders | | $ | 1.9 | | | $ | 2.1 | | | | (11.1 | %) | | $ | 7.1 | | | $ | 8.7 | | | | (18.3 | %) |
Email Encryption Total Orders | | $ | 11.1 | | | $ | 12.2 | | | | (9.1 | %) | | $ | 42.3 | | | $ | 40.8 | | | | 3.8 | % |
Email Encryption Bookings Backlog(6) | | $ | 53.7 | | | $ | 49.9 | | | | 7.6 | % | | $ | 53.7 | | | $ | 49.9 | | | | 7.6 | % |
| (1) | GAAP Net Income for the quarters and years ended Dec. 31, 2011, and Dec. 31, 2010, include tax benefits of $11.8 million and $35.3 million, respectively, resulting from reductions to the deferred tax valuation allowance |
| (2) | Changes reported are based on actual results, and numbers shown in the columns may reflect rounding |
| (3) | Amounts indicated are from continuing operations |
| (4) | A reconciliation of GAAP to Non-GAAP adjusted results is attached to this press release and is available on our investor relations Web page athttp://investor.zixcorp.com |
| (5) | Adjusted earnings before interest, taxes, depreciation and amortization |
| (6) | Service contract commitments that represent future revenue to be recognized as the services are provided |
Fourth Quarter Business Highlights
| • | | EarthLink, Inc.(NASDAQ: ELNK), a leading IT services, network and communications provider to more than 150,000 businesses and over one million consumers nationwide, joined theZixCorp® Partner Program as a managed security service provider. |
| • | | ICON Central Laboratories choseZixEnableSM to securely and automatically deliver patient results. ICON Central Laboratories, a division of ICON plc, is a global central laboratory exclusively engaged in clinical trial testing. ICON Central Laboratories uses ZixEnable, an application-generated email encryption service, to provide lab reports 24/7 worldwide through an encrypted email solution, enabling physicians to better monitor and adjust patient treatment during clinical trials. |
| • | | ZixCorp announcedthe approval of a share repurchase program that enables the company to purchase up to $15 million of its shares of common stock. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors. The share repurchase program is scheduled to expire on June 30, 2012. This was the second share repurchase program announced by ZixCorp in 2011. Earlier, the company implemented ashare repurchase program in March 2011and completed it in July 2011. For the year, the Company repurchased approximately 6.5 million shares at a total price of $21 million. |
| • | | Recognizing a growing demand for email encryption, IT solutions providerSayers joined the ZixCorp Partner Program and added ZixCorp Email Encryption Services to its portfolio. Sayers selected ZixCorp based on its trusted reputation and its leadership position in the market. Headquartered near Chicago, Sayers is a value added reseller and provides technology solutions for mid- to large-sized businesses. |
Outlook
The Company forecasts revenue for the first quarter to be between $10.0 million and $10.1 million and fully diluted adjusted earnings per share of $0.04. Full-year 2012 revenues are projected to be between $41 million and $43 million. Fully diluted Non-GAAP adjusted earnings per share, which are adjusted primarily for non-cash stock-based compensation and non-recurring expense items, are projected to be between $0.19 and $0.20.
Conference Call Information
The Company will discuss its financial results and outlook on a conference call on Tuesday, Feb. 21, 2012, at 5 p.m. ET. A live webcast of the conference call will be available on its investor relations Web site athttp://investor.zixcorp.com. Alternatively, participants can access the conference call by dialing 1-877-556-5921 (U.S. toll-free) or 1-617-597-5474 (international) at least 15 minutes before the call and entering access code 61892879. An
audio replay of the conference will be available until Feb. 29, 2012, by dialing 1-888-286-8010 (U.S. toll-free) or 1-617-801-6888 (international) and entering the access code 22711811. An archive of the webcast will also be available on the ZixCorp investor relations Web site.
About Zix Corporation
Zix Corporation (ZixCorp) provides the only email encryption services designed with your most important relationships in mind. Many of the most influential companies and government organizations use the provenZixCorp® Email Encryption Services, including WellPoint, the SEC, and more than 1,200 hospitals and 1,600 financial institutions.ZixCorp Email Encryption Services are powered byZixDirectory®, the largest email encryption community in the world. The tens of millions ofZixDirectory members can feel secure knowing their most important relationships are protected. For more information, visitwww.zixcorp.com.
SOURCE Zix Corporation
Contacts
ZixCorp Investor Relations: Charles Messman (323) 468-2300,zixi@mkr-group.com
Public Relations: Taylor Stansbury (214) 370-2134,tstansbury@zixcorp.com
Statements in this release that are not purely historical facts or that necessarily depend upon future events, including statements about forecasts of revenue or earnings, or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements are based upon information available to ZixCorp on the date this release was issued. ZixCorp undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to how privacy and data security law mandates may affect demand for email encryption and ZixCorp’s ability to obtain and retain customers and grow revenues. ZixCorp may not succeed in addressing these and other risks. Further information regarding factors that could affect ZixCorp financial and other results can be found in the risk factors section of ZixCorp’s most recent filing on Form 10-K with the Securities and Exchange Commission.
ZIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | |
| | | December 31, | | | | |
| | | 2011 | | | December 31, | |
| | | (unaudited) | | | 2010 | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 20,680,000 | | | $ | 24,619,000 | |
Receivables, net | | | 704,000 | | | | 1,344,000 | |
Prepaid and other current assets | | | 1,422,000 | | | | 1,115,000 | |
Deferred tax assets | | | 1,551,000 | | | | 1,056,000 | |
| | | | | | | | |
Total current assets | | | 24,357,000 | | | | 28,134,000 | |
Property and equipment, net | | | 2,228,000 | | | | 2,209,000 | |
Goodwill | | | 2,161,000 | | | | 2,161,000 | |
Deferred tax assets | | | 48,806,000 | | | | 34,304,000 | |
Other assets | | | — | | | | 44,000 | |
| | | | | | | | |
Total assets | | $ | 77,552,000 | | | $ | 66,852,000 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable and accrued expenses | | $ | 2,292,000 | | | $ | 2,844,000 | |
Deferred revenue | | | 16,568,000 | | | | 15,331,000 | |
License subscription note payable | | | — | | | | 137,000 | |
| | | | | | | | |
Total current liabilities | | | 18,860,000 | | | | 18,312,000 | |
Long-term liabilities: | | | | | | | | |
Deferred revenue | | | 795,000 | | | | 1,439,000 | |
License subscription note payable, non-current | | | — | | | | 49,000 | |
Deferred rent | | | 140,000 | | | | 165,000 | |
| | | | | | | | |
Total long-term liabilities | | | 935,000 | | | | 1,653,000 | |
| | | | | | | | |
Total liabilities | | | 19,795,000 | | | | 19,965,000 | |
Total stockholders’ equity | | | 57,757,000 | | | | 46,887,000 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 77,552,000 | | | $ | 66,852,000 | |
| | | | | | | | |
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | | Twelve Months Ended December 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
Revenues | | $ | 9,885,000 | | | $ | 8,845,000 | | | $ | 38,145,000 | | | $ | 33,066,000 | |
Cost of revenues | | | 1,849,000 | | | | 1,734,000 | | | | 7,211,000 | | | | 6,468,000 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 8,036,000 | | | | 7,111,000 | | | | 30,934,000 | | | | 26,598,000 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Research and development | | | 1,281,000 | | | | 1,272,000 | | | | 5,229,000 | | | | 5,089,000 | |
Selling, general and administrative | | | 3,818,000 | | | | 4,121,000 | | | | 15,128,000 | | | | 16,363,000 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 5,099,000 | | | | 5,393,000 | | | | 20,357,000 | | | | 21,452,000 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 2,937,000 | | | | 1,718,000 | | | | 10,577,000 | | | | 5,146,000 | |
Operating margin | | | 30 | % | | | 19 | % | | | 28 | % | | | 16 | % |
| | | | |
Other income, net | | | 9,000 | | | | 8,000 | | | | 88,000 | | | | 74,000 | |
| | | | |
Income from continuing operations before income taxes | | | 2,946,000 | | | | 1,726,000 | | | | 10,665,000 | | | | 5,220,000 | |
Income tax (expense) benefit | | | 12,021,000 | | | | 35,420,000 | | | | 11,889,000 | | | | 35,500,000 | |
| | | | | | | | | | | | | | | | |
Income from continuing operations | | | 14,967,000 | | | | 37,146,000 | | | | 22,554,000 | | | | 40,720,000 | |
| | | | |
Discontinued operations | | | | | | | | | | | | | | | | |
Income from operations of discontinued e-Prescribing segment | | | — | | | | 134,000 | | | | — | | | | 762,000 | |
Income tax expense | | | — | | | | (48,000 | ) | | | — | | | | (269,000 | ) |
| | | | | | | | | | | | | | | | |
Income on discontinued operations (Note 1) | | | — | | | | 86,000 | | | | — | | | | 493,000 | |
Net income | | $ | 14,967,000 | | | $ | 37,232,000 | | | $ | 22,554,000 | | | $ | 41,213,000 | |
| | | | | | | | | | | | | | | | |
Basic income per common share: | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.23 | | | $ | 0.57 | | | $ | 0.34 | | | $ | 0.63 | |
Income from discontinued operations | | | — | | | | 0.00 | | | | — | | | | 0.01 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 0.23 | | | $ | 0.57 | | | $ | 0.34 | | | $ | 0.64 | |
| | | | | | | | | | | | | | | | |
Diluted income per common share: | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.23 | | | $ | 0.54 | | | $ | 0.34 | | | $ | 0.61 | |
Income from discontinued operations | | | — | | | | 0.00 | | | | — | | | | 0.01 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 0.23 | | | $ | 0.54 | | | $ | 0.34 | | | $ | 0.62 | |
| | | | | | | | | | | | | | | | |
Shares used in per share calculation - basic | | | 65,259,001 | | | | 65,672,265 | | | | 65,439,078 | | | | 64,401,384 | |
| | | | | | | | | | | | | | | | |
Shares used in per share calculation - diluted | | | 65,865,826 | | | | 68,441,439 | | | | 67,261,514 | | | | 66,741,681 | |
| | | | | | | | | | | | | | | | |
| | | | |
Note: EPS totals off due to rounding | | | | | | | | | | | | | | | | |
| | | | |
| Note 1 | | | | | | | | | | | | | | | | |
| | |
| | | Three Months Ended Dec. 31, | | | Twelve Months Ended Dec 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
Components of Income from discontinued operations: | | | | | | | | | | | | | | | | |
Revenue from discontinued operations | | $ | — | | | $ | 482,000 | | | $ | — | | | $ | 2,632,000 | |
Expenses from discontinued operations | | | — | | | | 348,000 | | | | — | | | | 1,870,000 | |
Tax expense | | | — | | | | (48,000 | ) | | | — | | | | (269,000 | ) |
| | | | | | | | | | | | | | | | |
Income from discontinued operations | | $ | — | | | $ | 86,000 | | | $ | — | | | $ | 493,000 | |
| | | | | | | | | | | | | | | | |
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | |
| | | Twelve Months Ended December 31, | |
| | | 2011 | | | 2010 | |
Operating activities: | | | | | | | | |
Net income | | $ | 22,554,000 | | | $ | 41,213,000 | |
Non-cash items in net income | | | (9,806,000 | ) | | | (31,960,000 | ) |
Changes in operating assets and liabilities | | | 471,000 | | | | (2,063,000 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 13,219,000 | | | | 7,190,000 | |
| | |
Investing activities: | | | | | | | | |
Purchases of property and equipment | | | (1,471,000 | ) | | | (1,492,000 | ) |
(Purchase) sale of marketable securities | | | — | | | | 25,000 | |
| | | | | | | | |
Net cash used in investing activities | | | (1,471,000 | ) | | | (1,467,000 | ) |
| | |
Financing activities: | | | | | | | | |
Proceeds from exercise of stock options | | | 1,791,000 | | | | 2,786,000 | |
Proceeds from exercise of warrants | | | 3,707,000 | | | | 2,949,000 | |
Payment of license subscription note payable | | | (186,000 | ) | | | (126,000 | ) |
Purchase of Treasury Stock | | | (20,999,000 | ) | | | — | |
| | | | | | | | |
Net cash (used by) provided by financing activities | | | (15,687,000 | ) | | | 5,609,000 | |
| | | | | | | | |
(Decrease) increase in cash and cash equivalents | | | (3,939,000 | ) | | | 11,332,000 | |
Cash and cash equivalents, beginning of period | | | 24,619,000 | | | | 13,287,000 | |
| | | | | | | | |
Cash and cash equivalents, end of period | | $ | 20,680,000 | | | $ | 24,619,000 | |
| | | | | | | | |
ZIX CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | | | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
Revenue: | | | | | | | | | | | | | | | | | | | | |
GAAP revenue | | | | | | $ | 9,885,000 | | | $ | 8,845,000 | | | $ | 38,145,000 | | | $ | 33,066,000 | |
| | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | |
GAAP gross profit | | | | | | $ | 8,036,000 | | | $ | 7,111,000 | | | $ | 30,934,000 | | | $ | 26,598,000 | |
Stock-based compensation charges (1) | | | (A | ) | | | 26,000 | | | | 38,000 | | | | 71,000 | | | | 161,000 | |
| | | (B | ) | | | — | | | | 4,000 | | | | — | | | | 4,000 | |
| | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjusted gross profit | | | | | | $ | 8,062,000 | | | $ | 7,153,000 | | | $ | 31,005,000 | | | $ | 26,763,000 | |
| | | | | | | | | | | | | | | | | | | | |
Operating income: | | | | | | | | | | | | | | | | | | | | |
GAAP operating income | | | | | | $ | 2,937,000 | | | $ | 1,718,000 | | | $ | 10,577,000 | | | $ | 5,146,000 | |
Stock-based compensation charges (1) | | | (A | ) | | | 204,000 | | | | 385,000 | | | | 617,000 | | | | 1,835,000 | |
Non-recurring severance payments (2) | | | (B | ) | | | — | | | | 4,000 | | | | — | | | | 262,000 | |
Expenses related to wind down of e-Prescribing business (3) | | | (C | ) | | | — | | | | — | | | | — | | | | 4,000 | |
| | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjusted operating income | | | | | | $ | 3,141,000 | | | $ | 2,107,000 | | | $ | 11,194,000 | | | $ | 7,247,000 | |
| | | | | | | | | | | | | | | | | | | | |
Income from continuing operations: | | | | | | | | | | | | | | | | | | | | |
GAAP income from continuing operations | | | | | | $ | 14,967,000 | | | $ | 37,146,000 | | | $ | 22,554,000 | | | $ | 40,720,000 | |
Stock-based compensation charges (1) | | | (A | ) | | | 204,000 | | | | 385,000 | | | | 617,000 | | | | 1,835,000 | |
Non-recurring severance payments (2) | | | (B | ) | | | — | | | | 4,000 | | | | — | | | | 262,000 | |
Expenses related to wind down of e-Prescribing business (3) | | | (C | ) | | | — | | | | — | | | | — | | | | 4,000 | |
Income tax impact | | | (D | ) | | | (12,252,000 | ) | | | (35,348,000 | ) | | | (12,248,000 | ) | | | (35,560,000 | ) |
| | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjusted income from continuing operations | | | | | | $ | 2,919,000 | | | $ | 2,187,000 | | | $ | 10,923,000 | | | $ | 7,261,000 | |
| | | | | | | | | | | | | | | | | | | | |
Income from discontinued operations: | | | | | | | | | | | | | | | | | | | | |
GAAP income on discontinued operations | | | | | | $ | — | | | $ | 86,000 | | | $ | — | | | $ | 493,000 | |
Stock-based compensation charges (1) | | | (A | ) | | | — | | | | 8,000 | | | | — | | | | 94,000 | |
Non-recurring severance payments (2) | | | (B | ) | | | — | | | | 6,000 | | | | — | | | | 96,000 | |
Expenses related to wind down of e-Prescribing business (3) | | | (C | ) | | | — | | | | 152,000 | | | | — | | | | 160,000 | |
Income tax impact | | | (D | ) | | | — | | | | 48,000 | | | | — | | | | 269,000 | |
| | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjusted income from discontinued operations | | | | | | $ | — | | | $ | 300,000 | | | $ | — | | | $ | 1,112,000 | |
| | | | | | | | | | | | | | | | | | | | |
Net income: | | | | | | | | | | | | | | | | | | | | |
GAAP net income | | | | | | $ | 14,967,000 | | | $ | 37,232,000 | | | $ | 22,554,000 | | | $ | 41,213,000 | |
Stock-based compensation charges (1) | | | (A | ) | | | 204,000 | | | | 393,000 | | | | 617,000 | | | | 1,929,000 | |
Non-recurring severance payments (2) | | | (B | ) | | | — | | | | 10,000 | | | | — | | | | 358,000 | |
Expenses related to strategic review and wind down of e-Prescribing business (3) | | | (C | ) | | | — | | | | 152,000 | | | | — | | | | 164,000 | |
Income tax impact | | | (D | ) | | | (12,252,000 | ) | | | (35,300,000 | ) | | | (12,248,000 | ) | | | (35,291,000 | ) |
| | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjusted net income | | | | | | $ | 2,919,000 | | | $ | 2,487,000 | | | $ | 10,923,000 | | | $ | 8,373,000 | |
| | | | | | | | | | | | | | | | | | | | |
Diluted income from continuing operations per common share: | | | | | | | | | | | | | | | | | | | | |
GAAP income from continuing operations | | | | | | $ | 0.23 | | | $ | 0.54 | | | $ | 0.34 | | | $ | 0.61 | |
Adjustments per share | | | (A-D | ) | | $ | (0.19 | ) | | $ | (0.51 | ) | | $ | (0.18 | ) | | $ | (0.51 | ) |
| | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjusted income from continuing operations | | | | | | $ | 0.04 | | | $ | 0.03 | | | $ | 0.16 | | | $ | 0.11 | |
| | | | | | | | | | | | | | | | | | | | |
Diluted net income per common share: | | | | | | | | | | | | | | | | | | | | |
GAAP net income | | | | | | $ | 0.23 | | | $ | 0.54 | | | $ | 0.34 | | | $ | 0.62 | |
Adjustments per share | | | (A-D | ) | | $ | (0.19 | ) | | $ | (0.51 | ) | | $ | (0.18 | ) | | $ | (0.49 | ) |
| | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjusted net income | | | | | | $ | 0.04 | | | $ | 0.04 | | | $ | 0.16 | | | $ | 0.13 | |
| | | | | | | | | | | | | | | | | | | | |
Shares used to compute Non-GAAP adjusted net income per share - diluted | | | | | | | 65,865,826 | | | | 68,441,439 | | | | 67,261,514 | | | | 66,741,681 | |
| | | | | | | | | | | | | | | | | | | | |
Reconciliation of Net income to EBITDA and Adjusted EBITDA: | | | (E | ) | | | | | | | | | | | | | | | | |
Net income | | | | | | $ | 14,967,000 | | | $ | 37,232,000 | | | $ | 22,554,000 | | | $ | 41,213,000 | |
Income tax provision | | | | | | | (12,021,000 | ) | | | (35,372,000 | ) | | | (11,889,000 | ) | | | (35,231,000 | ) |
Interest expense | | | | | | | 10,000 | | | | 5,000 | | | | 7,000 | | | | 22,000 | |
Depreciation expense | | | | | | | 353,000 | | | | 355,000 | | | | 1,373,000 | | | | 1,402,000 | |
| | | | | | | | | | | | | | | | | | | | |
EBITDA | | | | | | | 3,309,000 | | | | 2,220,000 | | | | 12,045,000 | | | | 7,406,000 | |
| | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Share-based compensation expense | | | (A | ) | | | 204,000 | | | | 393,000 | | | | 617,000 | | | | 1,929,000 | |
Non-recurring severance payments | | | (B | ) | | | — | | | | 10,000 | | | | — | | | | 358,000 | |
Expenses related to strategic review and wind down of e-Prescribing business | | | (C | ) | | | — | | | | 152,000 | | | | — | | | | 164,000 | |
| | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA | | | | | | $ | 3,513,000 | | | $ | 2,775,000 | | | $ | 12,662,000 | | | $ | 9,857,000 | |
| | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA margin | | | | | | | 35.5 | % | | | 31.4 | % | | | 33.2 | % | | | 29.8 | % |
| | |
(1) Stock-based compensation charges are included as follows: | | | | | | | | | |
| | | | | |
Cost of revenues | | | | | | $ | 26,000 | | | $ | 38,000 | | | $ | 71,000 | | | $ | 161,000 | |
Research and development | | | | | | | 21,000 | | | | 44,000 | | | | 68,000 | | | | 183,000 | |
Selling, general and administrative | | | | | | | 157,000 | | | | 303,000 | | | | 478,000 | | | | 1,491,000 | |
Discontinued operations | | | | | | | — | | | | 8,000 | | | | — | | | | 94,000 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | $ | 204,000 | | | $ | 393,000 | | | $ | 617,000 | | | $ | 1,929,000 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
(2) Non-recurring severance payments are included as follows: | | | | | | | | | |
| | | | | |
Cost of revenues | | | | | | | — | | | | 4,000 | | | | — | | | | 4,000 | |
Selling, general and administrative | | | | | | | — | | | | — | | | | — | | | | 258,000 | |
Discontinued operations | | | | | | | — | | | | 6,000 | | | | — | | | | 96,000 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | $ | — | | | $ | 10,000 | | | $ | — | | | $ | 358,000 | |
| | | | | | | | | | | | | | | | | | | | |
|
(3) Expenses related to strategic review and the wind down of e-Prescribing business are as follows: | |
| | | | | |
Selling, general and administrative | | | | | | | — | | | | — | | | | — | | | | 4,000 | |
Discontinued operations | | | | | | | — | | | | 152,000 | | | | — | | | | 160,000 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | $ | — | | | $ | 152,000 | | | $ | — | | | $ | 164,000 | |
| | | | | | | | | | | | | | | | | | | | |
This presentation includes Non-GAAP measures. Our Non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations of these measures, see items (A) through (E) on the next page.
ZIX CORPORATION
NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
USE OF NON-GAAP FINANCIAL INFORMATION
The Company occasionally utilizes financial measures and terms not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in order to provide investors with an alternative method for assessing our operating results in a manner that enables investors to more thoroughly evaluate our current performance as compared to past performance. We also believe these Non-GAAP measures provide investors with a more informed baseline for modeling the Company’s future financial performance. Management uses these Non-GAAP financial measures to make operational and investment decisions, to evaluate the Company’s performance, to forecast and to determine compensation. Further, management utilizes these performance measures for purposes of comparison with its business plan and individual operating budgets and allocation of resources. We believe that our investors should have access to, and that we are obligated to provide, the same set of tools that we use in analyzing our results. These Non-GAAP measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We have provided definitions below for certain Non-GAAP financial measures, together with an explanation of why management uses these measures and why management believes that these Non-GAAP financial measures are useful to investors. In addition, in our earnings release we have provided tables to reconcile the Non-GAAP financial measures utilized to GAAP financial measures.
ADJUSTED NON-GAAP MEASURES
Our Non-GAAP measures adjust GAAP Gross profit, Operating income, Income from continuing operations, Income from discontinued operations, Net income, Income per share - diluted from continuing operations, Net income per share - diluted, and EBITDA for non-cash stock-based compensation expense, non-recurring severance expenses and expense related to the wind down of our e-Prescribing business to derive Non-GAAP adjusted Gross profit, adjusted Operating income, adjusted Income from continuing operations, adjusted Income from discontinued operations, adjusted Net income, adjusted Income per share - diluted from continuing operations, adjusted Net income per share - diluted and adjusted EBITDA. We provide a reconciliation of these adjusted Non-GAAP measures to GAAP Gross profit, Operating income, Income from continuing operations, Income from discontinued operations, Net income, Income per share - diluted from continuing operations, Net income per share - diluted and EBITDA.
We do not provide a reconciliation of forward-looking adjusted Non-GAAP earnings per share to GAAP earnings per share. Our forward-looking adjusted Non-GAAP earnings per share information consistently excludes non-cash stock-based compensation expense. Additionally, the adjusted Non-GAAP earnings per share will consistently exclude non-recurring items that impact our ongoing business. See items (A) through (C) below for further information on the current quarter’s reconciling items.
Items (A) through (E) on the “Reconciliation of GAAP to Non-GAAP Financial Measures” table are listed to the right of certain categories under “Gross profit,” “Operating income,” “Net income from continuing operations,” “Net income from discontinued operations,” “Net income,” “Net income from continuing operations per share - diluted,” “Net income per share - diluted” and “EBITDA” and correspond to the categories explained in further detail below under (A) through (E).
(A) Non-cash stock-based compensation charges relating to stock option grants awarded to employees and third-party service providers and accounted for in accordance with Share-Based Payment accounting guidance. See (1) on previous page for breakdown of stock-based compensation. Because of varying valuation methodologies, subjective assumptions and varying award types, the Company believes that the exclusion of stock-based compensation charges provides for more accurate comparisons to our peer companies and for a more accurate comparison of our financial results to previous periods. Additionally, the Company believes it is useful to investors to understand the specific impact of non-cash stock-based compensation charges on our operating results.
(B) Severance payments related to reduction in workforce. See item (2) on previous page for breakdown of severance payments. The Company’s management excludes these costs when evaluating the ongoing performance and/or predicting its earnings trends and therefore excludes these charges on our adjusted operating results.
(C) Expenses related to strategic review and wind down of the Company’s e-Prescribing business segment. The Company’s management excludes these costs when evaluating the ongoing performance and/or predicting its earnings trends and therefore excludes these charges when presenting Non-GAAP financial measures.
(D) The Non-GAAP adjustment to the tax provision represents the non-cash tax expense included in the GAAP tax provision, including the current period utilization of deferred tax assets created in pervious periods. The remaining provision for income taxes represents expected cash taxes to be paid.
(E) EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA adds back stock-based compensation, severance payments and expenses relating to the wind down of the Company’s e-Prescribing business.
