ZIXI - Earnings call transcript Q1 2019

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Operator

Good afternoon. Welcome to Zix First Quarter 2019 Earnings Conference Call. My name is Victor and I will be your operator this afternoon.

Joining us for today’s presentation are the company’s President and CEO, David Wagner; CFO, David Rockvam; and Vice President of Marketing, Geoff Bibby.

Following their remarks, we will open the call for your questions. the remind available this link for Investor section to recorded will in like Relations made and replay of would everyone call that be the I website. Company’s via a

please to like over Bibby. the Now, proceed. I’d turn to call Geoff Sir,

Geoff Bibby

differ the contained SEC those to differ factor update also provides the subject company that are examples We and to with factors materially results future Thank Dave, the risks those and forward-looking you results our Relations is note the no cause closed, CFO. that the our of XX, in afternoon, These that CEO for company. most those could me to today Please website we you of statements everyone, copy events call. in will section could note financial quarter of XXXX, statements actual caution this forward-looking statements. call. ended cause and first market the www.zixcorp.com. call, press XX-K this statements. important in the filings XX-Q to our risk release quarter forward-looking a and for XXXX With available performance press risk which Good release on today’s issued from to obligation from statements the in at of are forward-looking course you, the joining Investor undertakes materially future Victor. thank results first It’s The recent uncertainties make section the to Dave such that the we the announcing a during and and regarding consider actual risks. in After our March Form and of

GAAP section be and measures in non-GAAP our reconciliation call, in performance. all non-GAAP the or financial We to be to certain from, press release, measures which of today’s financial measures. encourage both site. are superior isolation to a not to can of the intended results. GAAP for, you is analyzing GAAP Non-GAAP substitute measures Investor included Company’s considered our when present found During Relations A in consider the we’ll

Now the Dave remarks, turn opening to to I’d with call his for Wagner Dave? that, like over

David Wagner

afternoon, and joining Thanks, for us Geoff. today. you thank everyone Good

strategy disrupt the momentum, results. in quarter with business, course We which The our attach broader driven of most the the momentum rates. of of attaching success success MSP Top is of meaningful new and teams QX demonstrates partners. XX% executed a achieved and integration AppRiver to number the The momentum primarily XXXX $XX.X high that million, fourth team MRR Perhaps of Zix was Zix saving progress continued the a by also growth revenue first growth. did organic QX year our also seeing new sales The topline first the and days strong nearly also closed first of schedule. our and into we gained. of the was of in align the velocity ZixEncrypt of driven get product our AppRiver XXXX year-over-year. winning growth history and exceeding at pace a not achieve platform from done The to expectations to record than XX% integration year by the integrated in terms From customers has delivered in the increasing collaborating the shareholders. but our deal Bank. have more the cloud with million energizing team growth a the this fact and channel Zix our motion product this best the of Standalone the by five momentum Standalone AppRiver one and growth was fact cost an customers. all AppRiver into acquisition at deliveries our and call, Zix growth the sales been positive XX teams savings, XX% XXXX last MRR AppRiver model quarter integration. and We partners XX% that new than $X of The is just strong company’s of exceptional a in making materially row couple U.S. encouraging of was a AppRiver, represented by it one our our the range first outcome strong program of schedule, who more orders and later Office more attach, Standalone of largest I’ll and double-digit costs part job email with the the and close XXX security. been topped continued closed both XXX days power quarters channel another by business have partners, in orders of terms sell-through also for their of ahead moving delivered second ways. deliver $X year consecutive strong AppRiver, on of sales forward drive deal in and QX for the performance QX team’s the the of positive large delivery quarter our the achieved at million and deal in rapid off solutions on possible complements successfully a growth Zix. XX% high delivered to orders new recorded of and detail

time May been go-to-market it’s incredibly We Zix. X, also short, busy launched and an the slightly here of sale ahead into Zix at exciting of on Office XXX the In schedule. team

to product in our sell is attach suite the cloud accelerating rates. growth Our cross expanding is of our ability and increasing strategy our

benefits We expanding are our already at operating seeing and market. a scale the addressable larger of

for to progress turn the But the I I’d over more QX Taken together, and the our outlook. to our forward sharing CFO, financials deliver like further Dave our details on for of growth to quarter. to to look strategy our to call our Dave? commitment support returns first profitable more the our successes details Rockvam, opportunity meaningful shareholders. provide and on

David Rockvam

and strong quarter Dave, QX Thank Zix. for good you, afternoon, was everyone. another

revenue We’re once the market’s sales again for execution increasing first pleased double-digit generate row. a us security of EPS enabling as demonstrating topline and our quarter new revenue reached guidance solid adjusted as adoption teams orders email the our solutions. from above in record to and highs, to second achieve our year standalone growth well Zix

orders record which up also Zix achieved standalone year-over-year. We $XX.X was of XX% million, total

organic to own the due all, solutions. As AppRiver toward execution Zix mentioned, of been very significantly with XX% Dave ARR and generating to Microsoft has the of productivity higher and in largely strong the XXXX quarter vision represented having on our significant their traction profitability. driving five-year QX All scaling growth had business work three team a successful AppRiver’s the

for to new Turning now year increased detail. million last year. more orders record numbers the to quarter quarter million XX% Zix first compared same our $X to $X.X a financial in in the

year For selling in growth of row, strong is new a which XX%, first the quarter exceeded orders fourth robust motion. a reflection our

but of growth first revenue is million more million, same key organic a focus metric familiar for in we’ll quarter that for million. to provider, not revenue a last overall from been are New going we basis, $XX.X Total fact growth metric. standalone million implied and a was our the of recurring end and during to $XX.X the of at quarter, increased to revenue the annual On which a first exceeded Because year. increased become AppRiver XX% $XX.X this year the orders historical record across measurement our XX% growth continuing high guidance company’s we was quarter the the guidance. more on With with. AppRiver Revenue quarter. cloud $XX.X Zix was growth the for a forward has XX% Zix SaaS Zix, as

in businesses are We the see guidance. – and of the full-year will both momentum ability pleased our our mid-teens that the you through with how in and quarter revenue plays its increased XXXX grow in very way plays to

for from adjusted or an in total $X.X was the a quarter profit quarter of million total on was XX.X% or of the dollar $XX Our XXXX. million improvement basis revenue, which of gross first XX.X% revenue

was Our margin adjusted QX down for year-over-year. gross

lower reseller carry standalone reminder, AppRiver’s a due Zix’s As business. which primarily third-party this to was than margin products

With in range. a we’re AppRiver’s early X,XXX the than more partners to of and Zix’s sales MSP position Zix’s of launch launch the these to teams, early long-term to good encryption margins model solution Microsoft the our maintain productivity solution within

$X.X adjusted to million with Our XXXX revenue year. million our software of in offsetting and due to this expenses increase of AppRiver. The new quarter was total XX% was and were functions platforms first features dollar of or the added about or AppRiver. R&D million of quarter for of $X.X revenue increase the both XX.X% to the of across Partially associated in compared QX $X.X Zix inclusion last hosted capitalization of year-over-year primarily the total first

Our adjusted primarily of or were selling The the $X.X QX compared in increase selling for total XX.X% to revenue expenses million of last marketing to the revenue and $X.X was million total of or AppRiver. and year. XX.X% marketing quarter in expenses due of inclusion

XX.X% For the revenue $X.X administrative first QX million last reported revenue compared of and million XX.X% year. general to quarter of expenses or in total total XXXX, were of of $X.X our or adjusted

On accordance over to a net reminder, to the basis, achieving diluted $X.XX fully expenses percentage a of couple share significant adjusted with of recorded compared a loss as years with year. are model. $X.XX of million QX per in per million a the we a with our revenue long-term or anticipate we fully profit last AppRiver, share scale As operational of next in decline of we or GAAP $X.X $X.X diluted

excluding per last $X.X our QX $X.XX income first and diluted exceeded we net before reported the per of adjusted was non-GAAP from Our the million quarter in share. for represents of deferred XX% tax a or fully decrease $X.XX $X.XX dividends guidance deemed share year. quarter

basis EPS. mentioned to QX we were that would loss the of totaled be quarter, EBITDA to I position calls, we share slightly count, expected that we a for basic acquisition a we our QX for starting adjusted compared first to of we highlight share on our our expect give QX XXXX on adjusted XXXX. accretive prior As in because did in would AppRiver year-over-year dilutive used year. which reported earnings GAAP adjusted finally, And million but QX, an the we in acquisition to million non-GAAP $X.XX $X.X per earnings last in $X.X EPS us on be the extra only to our

a a quarter We are in able growth EBITDA. adjusted we’re to XX% we in very made such that in pleased which acquisition, deliver transformational

percentage XX.X% reported for QX to of of total a As QX from adjusted decreased XX% in we last XXXX revenue, EBITDA year.

XXXX adjusted anticipate remainder margins the gradually QX we for year specifically We operations within Cash trend we towards range model. from the our range Per first EBITDA XX% of throughout high finish million climb a actually to At of and QX, outlined XX%s of for to $XX.X we higher have margins cash long-term cash. the of to expect have the adjusted usage of had end quarter XX% back our historically XX% was $XXX,XXX. the in around in the at EBITDA long-term we XXXX. model, experienced flow

Our XXXX March XXst, million. as was debt of total $XXX

growth, even Given EBITDA net in years we adjusted potentially asset; in our the we from the already this strong the valuation step-up and to carry have still growth. pay debt cash while we investing company’s the received matures flow believe in ample loss forwards five room loan generating AppRiver projected ability, before down significant

and squarely consisted software capitalized executing $X.X vision. quarter remains value business our on were primarily development shareholder capital projects which and focus and normal CapEx million, for purchases, of software further development. internal Our the on intangibles enhancing other long-term

$X and We expect and to the be full-year million for XXXX. between CapEx million $X other intangibles

of We amortization approximately $X in also to continue expect XXXX. million depreciation and

$XX.X the represents up dollar March million, was last million, was year. which same Zix as of year. XXst, of committed X% date a over of was from of XXXX, contracts, last the $XX increase backlog million backlog, Our decrease as – standalone which $XX.X value XX% an

increased it ARR end from XX% standalone year-over-year up our as to million. basis, don’t backlog to now of with contracts while significant AppRiver’s recurring ARR, and of $XXX.X the billing the ARR $XXX year. of cloud-based ARR million XX% makes QX in expect – ARR. and annual move heavy as total operating the the monthly strongly been overall past. million, Zix’s Zix totaled At to for the the we it monthly first revenue combined a up revenue last as growth rate metric an a our AppRiver, XX% over $XX.X significant don’t expect to to of total XXX% increase company On increased quarter, more be year-over-year standalone our business – has Given as MSPs

retention. because one will base, of mentioned selling the together into positively the total new by But new our the investors I retention. renewals and and focus by had winning earlier, solutions This of was and we XXX% the our the have users, had our Investor installed our available many and for quarter into protection. the focus key over to ARR, sales Relations our further other metrics our customers, page brings still revenue net be business, new In represents the posted This that deck will net new unit per added we that website of we advanced metrics; on we out our threat five transparency impacted – And breaks Top categories; to with key unique dollar products ARR annual divided As even productivity, encryption renewals our ARPU retention. attaching bank. major out, quarter, were further by a that help XXX% dollar plus quarter. of total investor chart at the base understand licenses on ARR a beginning

cross better another solutions have will to better models will also company. attach stay We build and ARR. the feel over transparency where our XX% on of total our until this opportunity they understand We help business, bucket investors

anticipate Now between second quarter We . guidance. for second XXXX and for financial range and our the $XX quarter million full-year currently XX.X to revenue

which impact required on a from outlook of million. of fully $X.XX be deferred includes loss to a GAAP QX earnings accounting, be the a has approximately revenue AppRiver between diluted $X.XX We fully of the and share our and financial and to diluted The $X.XX. on adjustments are $X.X between non-GAAP earnings purchase negative forecasting revenue loss acquired share per also for revenue per $X.XX GAAP

between revenue range compared For XX% represents total this basis, for XXX% in increase $XXX fiscal be XXXX, revenue to AppRiver. a an to and the between XXX% full-year be our increasing pro we between organic growth and million and of would $XXX Zix which guidance , are XX% million On the XXXX. and forma

required for a $X acquired adjustment purchase on guidance has AppRiver deferred on accounting, revenue Our the revenue includes of impact the million. over from revenue our revenue negative guidance GAAP XXXX which

be of per – and are increasing share Our be loss further between fully diluted demonstrating loss GAAP of expected earnings and $X.XX adjusted earnings acquisition. the of a is per to non-GAAP $X.XX share to diluted we and between a now full accretive $X.XX fully guidance the XXXX nature our $X.XX for fiscal

adjusted for Our $X.XX in our increase $X.XX count. guidance the of in to a an of compared is now $X.XX from representing our we non-GAAP guidance to to XX% XXXX. increase share reported midpoint EBITDA XXXX at change $X.XX is the the

will guidance prior Wind count. in True our that preferred be million – guidance our share Our assumes all shares XX.X included

of a use approximately net have XX we basic and QX that GAAP and just shares denominator. income share and count net million fully QX, achieving will XX.X assumes which we million guidance our current that use GAAP the means in shares anticipate million would In diluted we QX in XX.X of in QX. shares loss Our QX, in

of We XX% expect million fourth XXXX. quarter end of to increase range million, of which also in bottom to EBITDA revenue adjusted $XX.X continue an is in $XX margin with the the a of approximately the slight

fiscal We XXXX million XX% approximately year-over-year. rate are increasing million $XXX year-end approximately our growth to target of to ARR $XXX to a XX% at representing

that full of XX initiatives and earlier, months addressable suite well the the profitable but last could expanded exceptional opportunity see completes only impact moving job As This done that growth company we summary. Zix it the the an forward of to not shareholders. better completed months savings my profitability. previously level should $X the create of where has savings of asked partners, our million these for remarks, to have us mentioned and to have we have the larger in growth Wrapping a financial next also up all employees, we significantly The cost stated Dave get team we’re we more ahead product steers and my to today in towards our third years encouraged for quarter. scale, a entire more those market, not and and opportunity few customers propel are value to XX

detailed more of to a we results, analysis For our please financial refer Dave? plan by our which to XX-Q, file Form XX. May

David Wagner

our open up progress an with the the in growth I Thanks where context main call as for drivers. AppRiver the of we three Dave. we the our review update will for provide I’ll company financial integration then are before now an overview, of questions. integrated

our three customers, customers new to sales in increase to As reminder, are a orders new and drivers growth existing retention.

driver Top orders purchased new strong continue our advanced email the core Four adoption other that customers Our new we threat the one email solutions of bundle five by customers. first is and was standalone From new encryption to drive perspective, growth customers. while protection to Zix encryption. a for includes the new of

new largest a were Our their was for was primary end-to-end They competitive legacy encryption state in quarter customer a win vertical department. email security the requirement. government solution for healthcare using the and

existing perspective, use move and in So, ease the their their both strong and terms our decision new we to healthcare of offerings From already adding to to new state. users adding breadth our to win Zix. will MSPs. presence of new in of customers our solidify end further its This platform look in MSPs also an drove at AppRiver

new MSP Looking at wins of the some quarter. top the in

MSP wins getting from from where one Two just one started. are to MSP were direct, and we moving an UK, transitioning now in just more the new the in moving three Microsoft have a one distributor We model. large U.S.;

additional in users, net the new new churn. approximately XX,XXX productivity X,XXX end total unique customers on users, quarter terms of just basis AppRiver added total again net with In over a of

XX% Now orders core large deal, attach. the first installed look bank the let’s growth take year sales driver, to percentage base. is Zix which and a was closer from by customers, during upsell came driven second existing new our our strong at This of higher quarter

let spend me each. So, a on moment

Our history and earlier. largest signed all the ZixMail Gateway, five three-year of we deal This for during our deal Zix’s Top five Top add-on largest a bank the a quarter was products; bank mentioned with encryption EMS. in and

to driven deployment While of their including range all their was we win are on our ability of deal a broad the premise and a to moving options, of our have important delivery elements support long-term fact the very hybrid and encryption cloud customer, that offering leveraging both to to model. the this cloud vision hybrid by environment

which favorably adherence on-premise EMS with the win our that deep of positioned commitment to to deal also in a win. the compliance, we standards the capability of bolstered to highest to maintaining We the requirement. our So acquisition including due were was crucial with XXXX, this meets Disabilities Act to service Americans

we email of leader strong meet to evolving security we vendor This email the market. their use As in more robust strong the a large the standards, in time. encryption, devote customer needs compliance, encryption resources and of ease importance vendor other than believe appreciates to any over with R&D roadmap a

be encryption these added the encryption in two accounts added and threat expect product four deals. endorsement archiving. We strong in healthcare; excited capabilities suite protection are leverage of only, our one The and to remaining one obviously core added enterprise about enterprise future able were add-ons to and

retention. driver, for third our growth on retention Standalone XX% Moving the target. Zix our was to at quarter increasing now

still AppRiver to the retention an was we drive from attach strategy. is net synergies dollar we if It’s rate time also call over XXX%. will XXX% as bank milestone and higher. includes quarter exclude net XXX% This now our retention and as retention broader greater Zix before spend over over about five with execute even was we metric where strategy open services our AppRiver available for to you With of integration the important continue up AppRiver in key we dollar even are be on talking the to our dollar well we than at Top which the the add-ons, XX% questions. revenue a a was net I’ll Looking retention, range was deal. this and working drive the our now for of rate deal. partners, some net

focusing I integration, enablement, five stated roadmap. selling a brand on principles; we building cross combined become product with one are As to and guiding one channel integrating company previously, culture,

of we terms the and and in already tremendous delivering collaboration our collaborating milestones, oftentimes phone overall integrating of causing a of integration, strides integrated customers. take platforms. In without missing we’ve We’ve on two ahead care or partners key are well schedule. well and beat Both how made teams systems businesses networks, in exceptionally our disruption

run for of most integrated customer the which of organization separately and the foreseeable future. the functionally with expect exception support sales have We the organizations, facing we to

IT solutions process. is who different more very the purchase for step procurement is to integrate to carefully fact foreseeable alignment speaks opportunities. and to XX brand track as the pursue most of this Our the by just integration early days. of the in buying customers of between This platform on In to our to we every the managed last channel service which the were cultural complete and those teams, pursuit, a sales week’s launch be leadership of QX. is ZixEncrypt, motion schedule priority, in the to also way. will culture the we parallel overlap future so enabling second continue indicator our control the on to to of organizations able visible so which completed in This local prefer the also partners set there little close that do work was aggressively recommended brings both But velocity and the who of integration is and in so integration work quickly base. teams perhaps and strength me which continue the because and take complex cross-sell into the managed the AppRiver our ZixEncrypt strength of The partner provider is to

partners. of the had availability. by AppRiver’s trials within encouraged start of hours introduction to We’re We ZixEncrypt

be excited about integrated to now archiving opportunity. in scheduled ZixArchive the is XX days ahead plan. also almost June, of We’re

just Office complete Zix for the until the we months for it Email May limited fashion side, Xst. met MSP to keep roadmap security channel combination hosted Zix we sale From partners integration email to was is past will of partners. channel I’ve of in tied most and the solution introduced Secure beginning controlled offering the Zix security. technically spoken exchange the security a Zix virtually to the on the so SMBs On AppRiver email – be a XXX more sales all mind enthusiastically AppRiver. perspective, for for with have welcomed of over and the couple is top of channel and

mind that combined. the greater Our security leaders than shows of flood have the a cyber theft risk every to cyber risk day. of of be business XX% of research fire, top attack perceive They and small

They’re integration to with cross ZixAppRiver, ability big the improved advanced the accelerated to them. compliance the Zix base deliver stickier demonstrates best Microsoft excited we’re for on for technical ZixArchive, ZixAppRiver, economics for integrated protection the business. a of on be also become partner a in when With one productivity drive superior to most integration. captures for finally, how the The of to are the customers. AppRiver So, and of ZixArchive business with they customers. drive win ZixEncrypt focused they will about vendor, sell best email the and roadmap to doing All ZixEncrypt and an customers, building successful ingredients products and key higher their client security that security, email is relationship. our well and opportunity believe we profitability and the And breed both have to value product we partners

deliberately the longer-term integrated accelerated agility on we roadmap. these work will to As we finalize intentional continue product deliveries, with

We opportunities our further are made security we progress and of our solutions together bringing time. delivered one the powerful over power the QX growth results, double-digit and solution together best even of rapid expand Zix another quarter We them opportunity standalone organic to more excited platforms was as on about benchmark achieved of the the into the In two and integration for AppRiver. important record Zix. bring closing, of email

enhanced and the migration to outsourced benefit level and IT security the positioned ability us the more the base the rapid across As of become we one our than significantly to from one more It’s cross email and of has and the our go-to-market team, capability ascend XX,XXX cloud Zix Execution sell increasing to the customers. providers. our leading strategy opportunistic to to cloud-based productivity associated for of of providers. use time aggressively next

excited opportunity We’re and challenge a working that to are tirelessly the about reality. make and we vision ahead

Now with Victor? your questions. to that, for open the call ready we’re

Operator

question [Operator Instructions] Mike sir. Yes, the from first And of our from comes line Malouf Craig-Hallum.

You may begin.

Mike Malouf

Great. taking Thanks integration congrats and thought. Looks one than on much my gone far. have the so questions smoother it’s would for like

David Wagner

Mike. Thanks,

Mike Malouf

talk a bit and if it Office we space. bit you just with selling little wondering you start into I’m about that go your customers? approaching the Zix maybe could little explore Can about how more that on the you XXX opportunity as

David Wagner

So, smaller mailboxes our with focus first be mailboxes we have going – customers our our customer, XXX that’s is to be that focus. customer on to base, going than the less per

what but first the very, call we’ll also making cloud especially believe price that as what And our sure that time. ability move Microsoft our at a that the through option AppRiver to we think taken that’s care very yet to there’s advantage base Office their and we to have move so they’re for phenomenal known with we’re smaller same similar customer from be migration to to doesn’t probably consolidate not using a customers, set customers appetite here kind cloud to of at who XXX, a vendor directly customers, is testing knows the are a customers base getting best our service. another is this that the to opportunity great have and partner of outstanding dark the and of their of I those large support

call So, that on forward went have QX we I data yesterday opportunity. said, expect something to into as July. earnings would we’re to I when in we’ll that’s so get looking that more just It the market, our

Mike Malouf

guidance you how Can sense predicated is the back much your of us success a half of of on give that? into

David Wagner

see the end two we unit the on I suite. of which revenue per that both is base the the the success cross AppRiver at where the we’re in And were we of built productivity more that. into end then partner we’d the per guidance customer top the from. the of through, the very businesses, So when topline that’s at if ZixEncrypt of office focusing coming lower that XXX Office high the range much of unit were was expect the range, results standalone in of of and come the be so where end It’s high expansion, quarter And topline think base. to range ZixArchive last Zix of average the would sell momentum into the course you’re and terms terms would - a price in automized successful, the

Mike Malouf

And a down the but of we margins starts to great. we that? Zix the Can about gross for remind of just Thanks. where margins me question. do. the Okay, one then be gross trend margins think try line margins, have remind maybe David Obviously products? AppRiver you think is When coming impact us the and gross can have we can good and you the more on after will sort in us a one for this just you give for threat – to what on Encrypt, profit bundling it impact gross sense

David Rockvam

Mike. Rockvam. It’s question, Dave Good

before, Looking this on the that XX% offerings ran gross we level. products had – margin our core Zix at that

that across look their you advanced proprietary, protection that running were they AppRiver’s If in range. same were offerings other threat XX% and

a you proprietary. new our highlighted advanced in gross that, when which it’s look range. high then other in see businesses a the at but is put in XX% we productivity that category can run gross chart you’ll there; the and deck protection and in range, in encryption, threat margin running take So, not Those margin mostly XX%

we we together, XX% XX% blended target the – where range. So get that’s to

color there. you that some hopefully So, gives

Mike Malouf

a great. Okay, Thanks lot. Appreciate it.

David Wagner

Thanks.

David Rockvam

Mike. Thanks,

Operator

next the our Catharine Thank Dougherty from Company. of you. from comes Trebnick And & question line

begin. may You

Catharine Trebnick

three said juggling two repeat. Can organic was. phone taking trying where on things early for AppRiver calls the to tonight. had Zix you you to you you have apologize I I I was and between thanks for quickly Yes, been question. what review the But growth – get given just

I you jumped and quickly Sorry. joined at and the I gave beginning that off think again,

David Rockvam

Right.

was acquisitions AppRiver On Zix and pure XX%, for organic numbers the the was growth perspective, are taking out growth had. any for ARR the Those ARR company XX% either

Catharine Trebnick

Thank correct? been domestic right. primarily and through then had is with All AppRiver, your you. has And reaching mentioned you’re the now UK – into that now Zix relationship you

David Wagner

good we distribute really about. is platform for That’s The Europe. right that’s really and to something cloud-based we’re products servicing AppRiver excited a model MSPs security in think

wins but of of And MSP new getting so Sales had five market, recently in – MSP and hired two UK. and UK Director AppRiver Europe that team in started his already for are showed just the quarter in a the the larger based in he the up

early, we’re there, and opportunity about success excited team in So the small the early days the had QX. but we’re

Catharine Trebnick

at email the look have and average products? guys you’re say getting old aggressive other like your in they And email would if for this at quarter system you would question into pretty – AppRiver. been was AppRiver, yours say have you then it What prior you the size looks data Okay. encrypt a pretty seat is the you

David Wagner

seat was the it new and X,XXX customer net with was new was count data it I per XX users at average well. XX really tightly productivity the customers average churn So, so life shared with size that’s aligned the the to given unique AppRiver XX,XXX the as that customer with date of

Catharine Trebnick

you. thank Okay,

David Rockvam

Thanks.

Operator

And our Capital. next of the line Northland from Instructions] Klasell [Operator Tim question comes from

You may begin.

Tim Klasell

questions few a just Yes, here.

congratulation there could maybe $X that further to maybe But of – and ahead what begs sort we there there? be question, is little go a way schedule. on bit the million should of what in First, thinking synergies the

David Wagner

No. It care to that was us really important to get as possible. of as soon taken

that able at really pleased with are team of all we working those out So Zix, we to get collaboratively of way. savings AppRiver cost leadership were the the

is what bit volume really little bit effective the stage what forward, continue happen. to a growth So anticipating more is created everything we’re saying, mid-teens Dave will was a as scale we’re rates of is to by synergies of and expecting efficient, becoming organic in little growing with going more each be

Tim Klasell

then over helpful. sales very That’s force. And the jumping to great. Okay,

schedule, product to and have incenting of is of you now sort and that’s but how is AppRiver Zix ahead obviously also Now going force? encryption to sources the speak to into about with What promote that industry Zix sales are going channel product getting customer what we we when what product should seeing the be doing base? to you’re be the the AppRiver

David Wagner

Yes.

base. But archiving and of it’s really that offerings the competitive AppRiver very at top for ZixArchive customer ultimately ZixEncrypt really very, best that several AppRiver and fold. the the proposition market. breed solution compliance is The first, into the encryption and into in – So is of partner the

to going are take MSPs the of So able be that. advantage

is second XXX% on Microsoft than the them of able they’re give the in we’re lot of advantage to kinds that’s what resale higher The organic a of margins fact IP they’re the normal offering. to as are organic thing that that getting IP, going the and take

per with margin we from per up what focused as And incentives partner user driving through introducing margin they from same sales that ARR gross be mix. per for which – we’re blended would at their team, user that move channel with are that the the golds So, the what’s the is gross similarly incentive delivering on the level. the either customer align that thinking, and the end or is or partners mailbox platinum they’re the

Tim Klasell

– that are does roll And force. How the you How then into... incent question that are that them? Office let’s going into rather going you to Zix Okay, great. XXX sales reverse to how

David Wagner

buy incentive Microsoft it’s well alignment complement security call to with one solutions and The there Zix’s with it. same real phone solution, really a extremely is is it natural vendor, phenomenal great everybody your – knows the support. a The email

really And XXs adjusted that margin run then for be in that care AppRiver, as that solution they’ll this first So, it’s set comes by we we going matters the XX but with that phenomenal And to as AppRiver. combining scores and is as the and much one businesses. earlier, the then that’s their high channel a support and the Microsoft. get with on vendor lot promoter margins, talked a net really don’t the value better about the the lot – the they’re fact on that’s and make for to

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Tim Klasell

been Thank helpful. very you. That’s

David Rockvam

Thank Tim. you,

Operator

back Thank turn this like time, to remarks. you. And Mr. his closing session. for at the this our Wagner over I’d call to question-and-answer concludes

David Wagner

just QX and late and further you this forward you in your to earnings thank time I on everybody look updating on our July. afternoon attention call for we progress our

Operator

you Thank first for today XXXX Zix’s earnings us call. joining on quarter

You a may have now great Everyone, day. disconnect.

Zix (ZIXI) 3 May 192019 Q1 Earnings call transcript