Zix Reports Fourth Quarter and Full Year 2018 Financial Results

Higher Cloud Based Encryption Adoption and Increasing Attach Rates
Drive Record Fourth Quarter New First Year Orders, Double-Digit Revenue
Growth and Record Adjusted EBITDA

DALLAS–(BUSINESS WIRE)–Zix
Corporation
(Zix) (NASDAQ: ZIXI), a leader in email security,
today announced financial results for the fourth quarter and full year
ended December 31, 2018.

Fourth Quarter 2018 Financial Highlights (results compared to the
same year-ago quarter)

  • Revenue increased 10% to a record $18.4 million.
  • Annual recurring revenue (ARR) increased 13% to a record $75.8 million.
  • New First Year Orders (NFYO) increased 23% to $3.1 million.
  • Total orders increased 21% to $17.6 million.
  • GAAP net income increased from ($12.9) million to $9.2 million.*
  • GAAP fully diluted earnings per share increased from ($0.24) to $0.17.*
  • Non-GAAP fully diluted earnings per share increased from ($0.20) to
    $0.22.
  • Non-GAAP fully diluted earnings per share excluding deferred tax
    (benefit) expense increased 1% to $0.09.
  • Cash flow from operations increased 16% to $4.9 million.
  • Adjusted EBITDA increased 14% to a record $5.6 million, representing
    an adjusted EBITDA margin of 30.2%.
  • The company ended the quarter with $27.1 million in cash.
* The income of $9.2 million (or $0.17 per fully diluted share) was
largely the result of a $7.8 million reduction in the company’s
deferred tax valuation allowance based on current and expected
future profitability. The net loss of $12.9 million (or $0.24 per
fully diluted share) in Q4 2017 was largely a result of a one-time
non-cash charge of $12.5 million due to the future effect of the
lower U.S. corporate income tax rate resulting from the 2017 tax
reform legislation.
 

Management Commentary

“With revenue up 10% to a record $18.4 million and adjusted EBITDA up
14% to a record level of $5.6 million, representing an adjusted EBITDA
margin of 30.2%, the fourth quarter of 2018 topped off another strong
year for the company,” said David
Wagner
, Zix’s Chief Executive Officer. “Our commitment to profitable
growth continues to inform our growth strategy and is shaping our
journey to become one of the leading cloud-based email security
providers. Building off of the success we have been experiencing with
ZixProtect and ZixArchive, earlier this year we announced major
enhancements to ZixArchive, significantly expanding our archiving
capabilities. Our work in 2018 also focused on strengthening our
distribution capabilities. We expanded our managed service provider
(MSP) program, added dozens of G-Suite resellers and reduced our
reliance on OEM partnerships in favor of partners more aligned with our
cloud-based offerings. Earlier this quarter we launched ZixSuite, a
cloud-based business communications security and compliance solution
that combines advanced threat protection, business email continuity,
email encryption, email DLP and unified archiving, all managed from a
centralized interface. We believe the end result has been the successful
alignment of our business to the cloud—and a really strong foundation
from which to further build with the acquisition of AppRiver that closed
earlier this month. Today, we are a much stronger business that is even
better positioned to help our customers. We’re also a business with much
greater scale, and with significant cost synergies, cross-selling
opportunities, and market tailwinds working in our favor.”

Zix’s Chief Financial Officer Dave
Rockvam
added: “Q4 was a success in many ways, with record revenue,
record ACV, a return to double-digit topline growth, and New First Year
Orders growth of more than 20% for the third consecutive quarter. This
strong performance was once again driven by the success of our sales
teams in attracting new customers and selling additional solutions into
our growing installed base. Our progress in driving stronger topline
growth coupled with our continued success in managing our costs enabled
us to achieve a 30.2% adjusted EBITDA margin during the quarter—the
highest level achieved since Dave and I joined Zix in 2016. Overall, our
results for the quarter and full year demonstrate that the strategy we
laid out three years ago to drive strong returns for our shareholders is
really starting to bear fruit. With our recent transformational
acquisition of AppRiver, we look to extend this success in a much more
impactful way by leveraging our newfound scale, cost synergies, expanded
customer base, and complementary solutions.”

Recent Operational Highlights

  • Acquired
    AppRiver
    , a leading cloud-based cybersecurity solutions provider,
    creating significant scale and accelerating growth, attractive
    cross-selling opportunities, and a strengthened position in the
    cloud-based email security market.
  • Expanded
    unified archiving solution ZixArchive
    beyond email to include 48
    new business communication channels, including social media, instant
    message, mobile, web, audio and video.
  • Launched
    ZixSuite
    , a cloud-based business communications security and
    compliance solution that combines advanced threat protection, business
    email continuity, email encryption, email DLP and unified archiving,
    all managed from a centralized interface.

2018 Operational Highlights

  • Acquired
    Seattle-based Erado
    to expand unified archiving, eDiscovery, and
    compliance solution.
  • Strengthened
    the Zix managed service provider program
    by expanding offerings to
    include email threat protection and email archiving and providing
    additional partner value with flexible billing, rapid deployment and a
    centralized management console for administration of Zix solutions.
  • Launched ZixEncrypt EMS featuring a new, on-premise portal capability,
    a broader range of delivery options (including SMIME) and meaningfully
    improved the EMS user experience.
  • Strengthened
    the Zix partner program
    with addition of top Google partners,
    which will resell the full suite of Zix solutions, including ZixArchive®,
    ZixEncrypt® and ZixProtect®.

Fourth Quarter 2018 Corporate Financial Summary and Other Operational
Metrics

$ in Millions, except per share data   Q4 2018   Q4 2017   Change ((1 ))
Revenue   $ 18.4     $ 16.8     9.8 %
GAAP Gross Profit   $ 14.5     $ 13.5     6.7 %
GAAP Net Income   $ 9.2       ($12.9 )   NM  
GAAP Net Income Per Share – Diluted   $ 0.17       ($0.24 )   NM  
EBITDA (2)(3)   $ 3.1     $ 2.8     10.3 %
EBITDA Margin     17.0 %     16.9 %   0.1 pt
Non-GAAP Adjusted Gross Profit (3)   $ 14.6     $ 13.7     7.0 %
Non-GAAP Adjusted Net Income (3)   $ 12.0       ($10.7 )   NM  
Non-GAAP Adjusted Net Income Per Share – Diluted (3)   $ 0.22       ($0.20 )   NM  
Non-GAAP Adjusted Net Income Excluding Deferred Tax (Benefit) Expense   $ 4.6     $ 4.5     1.8 %
Non-GAAP Adjusted Net Income Excluding Deferred Tax (Benefit)
Expense Per Share
  $ 0.09     $ 0.08     1.1 %
Adjusted EBITDA (3)   $ 5.6     $ 4.9     14.3 %
Adjusted EBITDA Margin (3)     30.2 %     29.0 %  

1.2 pts

New First Year Orders   $ 3.1     $ 2.5     22.7 %
Total Orders   $ 17.6     $ 14.5     21.0 %
Backlog (4)   $ 73.0     $ 72.6     0.6 %
ACV   $ 75.8   $ 67.3   13.1 %
 

Full Year 2018 Corporate Financial Summary and Other Operational
Metrics

$ in Millions, except per share data   FY 2018   FY 2017   Change ((1 ))
Revenue   $ 70.5     $ 65.7     7.3 %
GAAP Gross Profit   $ 55.3     $ 53.1     4.2 %
GAAP Net Income   $ 15.4       ($8.1 )   NM  
GAAP Net Income Per Share – Diluted   $ 0.29       ($0.15 )   NM  
EBITDA (2)(3)   $ 14.4     $ 13.3     8.6 %
EBITDA Margin     20.5 %     20.2 %   0.2 pts
Non-GAAP Adjusted Gross Profit (3)   $ 56.0     $ 53.5     4.7 %
Non-GAAP Adjusted Net Income (3)   $ 22.2       ($2.9 )   NM  
Non-GAAP Adjusted Net Income Per Share – Diluted (3)   $ 0.41       ($0.05 )   NM  
Non-GAAP Adjusted Net Income Excluding Deferred Tax (Benefit) Expense   $ 17.5     $ 15.6     12.0 %
Non-GAAP Adjusted Net Income Excluding Deferred Tax (Benefit)
Expense Per Share
  $ 0.33     $ 0.29     11.9 %
Adjusted EBITDA (3)   $ 20.1     $ 18.2     10.9 %
Adjusted EBITDA Margin (3)     28.6 %     27.7 %   0.9 pts
New First Year Orders   $ 11.3     $ 9.3     20.8 %
Total Orders   $ 73.3     $ 58.9     24.5 %
 
NM = not meaningful
 
(1) Changes are based on actual numbers versus numbers shown in the
columns, which may reflect rounding
 
(2) Earnings before interest, taxes, depreciation and amortization
 
(3)

A reconciliation of GAAP to non-GAAP results is included in this
press release and available on the Zix investor relations website
at http://investor.zixcorp.com

 
(4) Service contract commitments that represent future revenue to be
recognized as the services are provided
 

Financial Outlook

For first quarter of 2019, the company forecasts revenue to range
between $26.5 million and $27.5 million. The company forecasts fully
diluted GAAP earnings per share to be in a range of ($0.04) and ($0.01)
and fully diluted non-GAAP adjusted earnings per share excluding
deferred tax (benefit) expense to be between $0.03 and $0.04 for the
first quarter of 2019. The financial outlook includes approximately one
month of AppRiver financial results consolidated into Zix and also
includes a required GAAP adjustment on the deferred revenue acquired
from AppRiver for purchased revenue accounting.

For fiscal year of 2019, the company forecasts revenue to range between
$164.0 million to $167.0 million, representing an increase of between
134% and 138% compared to fiscal year 2018. The company forecasts fully
diluted GAAP earnings per share to be between ($0.12) and ($0.01) and
fully diluted non-GAAP adjusted earnings per share excluding deferred
tax (benefit) expense to be between $0.30 and $0.33 for fiscal year
2019. The financial outlook includes approximately 10 months of AppRiver
financial results consolidated into Zix and also includes a required
GAAP adjustment on the deferred revenue acquired from AppRiver for
purchased revenue accounting.

Zix is targeting Annual Recurring Revenue(ARR) of approximately $200
million to $207 million at fiscal 2019 year end, representing a growth
rate of approximately 11% to 15% year-over-year. Zix management is also
expecting revenue of approximately $47 million to $50 million with a 24%
adjusted EBITDA margin in the fourth quarter of 2019.

The company’s targeted earnings per share both on a GAAP and non-GAAP
adjusted basis include the addition of approximately 16.6 million common
shares equivalents associated with the $100 million preferred stock
investment by True Wind Capital, which occurred simultaneously with the
acquisition of AppRiver.

Conference Call Information

Management will discuss these financial results and outlook on a
conference call today (February 28, 2019) at 5:00 p.m. ET (2:00 p.m. PT).

A live webcast of the conference call will be available in the investor
relations section of Zix’s website here.
Alternatively, participants can access the conference call by dialing
1-855-853-6940 (U.S. toll-free) or 1-720-634-2906 (international) at
least 15 minutes before the call and entering access code 5776605. If
you have any difficulty connecting with the conference call, please
contact Liolios Group at 1-949-574-3860.

An audio replay of the conference will be available for seven days, by
dialing 1-855-859-2056 (U.S. toll-free) or 1-404-537-3406
(international) and entering the access code 5776605. An archive of the
webcast will also be available on the Zix investor relations website.

About Zix Corporation

Zix Corporation (Zix) is a leader in email security. Trusted by the
nation’s most influential institutions in healthcare, finance and
government, Zix delivers a superior experience and easy-to-use solutions
for email encryption and data loss prevention, advanced threat
protection, unified information archiving and bring your own device
(BYOD) mobile security. Focusing on the protection of business
communication, Zix enables its customers to better secure data and meet
compliance needs. Zix is publicly traded on the Nasdaq Global Market
under the symbol ZIXI. For more information, visit www.zixcorp.com.

Statements in this release that are not purely historical facts or that
necessarily depend upon future events, including statements about
forecasts of sales, revenue, earnings or earnings per share, potential
benefits of acquisitions and strategic relationships, 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 Zix on the date this release was issued.
Zix 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 but not limited to risks or uncertainties related
to the completion and integration of acquisitions, the effects of our
debt and equity financing transactions, year-end adjustments to
previously reported preliminary unaudited financial information, market
acceptance of both existing and new Zix solutions, changing market
dynamics resulting from technological change, innovation and continuing
customer migration to the cloud, changes in the competitive ecosystem,
and how privacy and data security laws may affect demand for Zix data
protection solutions. Zix may not succeed in addressing these and other
risks. Further information regarding factors that could affect Zix
financial and other results can be found in the risk factors section of
Zix’s most recent annual report on Form 10-K and quarterly report on
Form 10-Q, each as filed with the Securities and Exchange Commission, as
those risk factors may be supplemented in subsequent filings.

   
ZIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
December 31,
2018 December 31,
(unaudited)   2017
ASSETS
Current assets:
Cash and cash equivalents $ 27,109,000 $ 33,009,000
Receivables, net 3,188,000 1,389,000
Prepaid and other current assets   3,176,000   3,222,000
Total current assets 33,473,000 37,620,000
Property and equipment, net 3,924,000 4,048,000
Other assets and deferred costs 9,424,000
Intangible Assets, Net 15,251,000 5,524,000
Goodwill 13,783,000 8,469,000
Deferred tax assets   28,785,000   25,647,000
Total assets $ 104,640,000 $ 81,308,000
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 10,516,000 $ 7,154,000
Deferred revenue   30,622,000   28,362,000
Total current liabilities 41,138,000 35,516,000
Long-term liabilities:
Deferred revenue 1,539,000 1,087,000
Deferred rent   1,016,000   1,185,000
Total long-term liabilities   2,555,000   2,272,000
Total liabilities 43,693,000 37,788,000
Total stockholders’ equity   60,947,000   43,520,000
Total liabilities and stockholders’ equity $ 104,640,000 $ 81,308,000
       
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
Three Months Ended December 31, Twelve Months Ended December 31,
  2018     2017     2018     2017  
Revenue $ 18,448,000 $ 16,800,000 $ 70,478,000 $ 65,663,000
 
Cost of revenue   3,997,000     3,260,000     15,186,000     12,602,000  
Gross profit 14,451,000 13,540,000 55,292,000 53,061,000
Operating expenses:
Research and development 2,603,000 2,933,000 11,323,000 10,980,000
Selling, general and administrative   9,875,000     8,590,000     33,999,000     31,871,000  
Total operating expenses   12,478,000     11,523,000     45,322,000     42,851,000  
 
Operating income 1,973,000 2,017,000 9,970,000 10,210,000
Operating margin 11 % 12 % 14 % 16 %
 
Other income, net 92,000 108,000 754,000 339,000
 
Income before income taxes 2,065,000 2,125,000 10,724,000 10,549,000
Income tax benefit (expense)   7,175,000     (15,003,000 )   4,720,000     (18,606,000 )
Net income $ 9,240,000   $ (12,878,000 ) $ 15,444,000   $ (8,057,000 )
 
Basic income per common share: $ 0.18   $ (0.24 ) $ 0.29   $ (0.15 )
 
Diluted income per common share: $ 0.17   $ (0.24 ) $ 0.29   $ (0.15 )
 
Shares used in per share calculation – basic   52,535,091     53,391,153     52,591,714     53,430,492  
 
Shares used in per share calculation – diluted   53,758,033     53,391,153     53,481,295     53,430,492  
 
Other Comprehensive income, net of tax:
Foreign currency translation adjustments           (16,000 )    
Comprehensive income $ 9,240,000   $ (12,878,000 ) $ 15,428,000   $ (8,057,000 )
   
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Twelve Months Ended December 31,
  2018     2017  
Operating activities:
Net income $ 15,444,000 $ (8,057,000 )
Non-cash items in net income 2,270,000 24,085,000
Changes in operating assets and liabilities   (1,043,000 )   2,176,000  
Net cash provided by operating activities 16,671,000 18,204,000
 
Investing activities:
Purchases of property and equipment and capitalized software (4,179,000 ) (3,041,000 )
Acquisition of business, net of cash acquired   (11,773,000 )   (8,244,000 )
Net cash used in investing activities (15,952,000 ) (11,285,000 )
 
Financing activities:
Proceeds from exercise of stock options 166,000 4,206,000
Deferred debt financing costs (60,000 )
Stock issuance costs (45,000 )
Earn-out payment (605,000 )
Purchase of treasury stock   (6,049,000 )   (4,573,000 )
Net cash provided used in financing activities   (6,593,000 )   (367,000 )
 
Effect of exchange rate changes on cash   (26,000 )    
 
(Decrease) Increase in cash and cash equivalents (5,900,000 ) 6,552,000
Cash and cash equivalents, beginning of period   33,009,000     26,457,000  
Cash and cash equivalents, end of period $ 27,109,000   $ 33,009,000  
 
ZIX CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
       
Three Months Ended

Twelve Months Ended

December 31,

December 31,

  2018     2017     2018     2017  
Revenue:
GAAP revenue $ 18,448,000   $ 16,800,000   $ 70,478,000   $ 65,663,000  
 
Cost of revenue
GAAP cost of revenue $ 3,997,000 $ 3,260,000 $ 15,186,000 $ 12,602,000
Stock-based compensation charges (1) (A) (89,000 ) (78,000 ) (327,000 ) (304,000 )
Strategic consulting and litigation costs (2) (B) (2,000 ) (3,000 ) (3,000 )
Intangible Amortization (3) (C) (89,000 ) (50,000 ) (369,000 ) (149,000 )
Corporate separation payment (4) (D)       (4,000 )   (28,000 )   (4,000 )
Non-GAAP adjusted cost of revenue $ 3,817,000   $ 3,128,000   $ 14,459,000   $ 12,142,000  
 
Gross profit:
GAAP gross profit $ 14,451,000 $ 13,540,000 $ 55,292,000 $ 53,061,000
Stock-based compensation charges (1) (A) 89,000 78,000 327,000 304,000
Strategic consulting and litigation costs (2) (B) 2,000 3,000 3,000
Intangible Amortization (3) (C) 89,000 50,000 369,000 149,000
Corporate separation payment (4) (D)       4,000     28,000     4,000  
Non-GAAP adjusted gross profit $ 14,631,000   $ 13,672,000   $ 56,019,000   $ 53,521,000  
 
Research and development expense
GAAP research and development expense $ 2,603,000 $ 2,933,000 $ 11,323,000 $ 10,980,000
Stock-based compensation charges (1) (A) (136,000 ) (98,000 ) (469,000 ) (374,000 )
Strategic consulting and litigation costs (2) (B) (3,000 ) (75,000 ) (61,000 ) (130,000 )
Intangible Amortization (3) (C)   (51,000 )       (126,000 )    
Non-GAAP adjusted research and development expense $ 2,413,000   $ 2,717,000   $ 10,667,000   $ 10,433,000  
 
Selling and marketing expense
GAAP selling and marketing expense $ 5,325,000 $ 5,226,000 $ 20,380,000 $ 20,464,000
Stock-based compensation charges (1) (A) (233,000 ) (330,000 ) (884,000 ) (999,000 )
Strategic consulting and litigation costs (2) (B) (7,000 ) (13,000 ) (4,000 )
Intangible Amortization (3) (C)   (156,000 )   (56,000 )   (537,000 )   (170,000 )
Non-GAAP adjusted selling and marketing expense $ 4,929,000   $ 4,511,000   $ 18,946,000   $ 18,962,000  
 
General and administrative expense
GAAP general and administrative expense $ 4,550,000 $ 3,364,000 $ 13,619,000 $ 11,407,000
Stock-based compensation charges (1) (A) (487,000 ) (346,000 ) (1,638,000 ) (1,197,000 )
Strategic consulting and litigation costs (2) (B) (1,475,000 ) (494,000 ) (2,333,000 ) (1,252,000 )
Corporate separation payment (4) (D)       (232,000 )   40,000     (235,000 )
Non-GAAP adjusted general and administrative expense $ 2,588,000   $ 2,292,000   $ 9,688,000   $ 8,723,000  
 
Operating income:
GAAP operating income $ 1,973,000 $ 2,017,000 $ 9,970,000 $ 10,210,000
Stock-based compensation charges (1) (A) 945,000 852,000 3,318,000 2,874,000
Strategic consulting and litigation costs (2) (B) 1,487,000 569,000 2,410,000 1,389,000
Intangible Amortization (3) (C) 296,000 106,000 1,032,000 319,000
Corporate separation payment (4) (D)       608,000     (12,000 )   611,000  
Non-GAAP adjusted operating income $ 4,701,000   $ 4,152,000   $ 16,718,000   $ 15,403,000  
$
Adjusted Operating Margin 25.5 % 24.7 % 23.7 % 23.5 %
 
 
Net income:
GAAP net income $ 9,240,000 $ (12,878,000 ) $ 15,444,000 $ (8,057,000 )
Stock-based compensation charges (1) (A) 945,000 852,000 3,318,000 2,874,000
Strategic consulting and litigation costs (2) (B) 1,487,000 569,000 2,410,000 1,389,000
Intangible Amortization (3) (C) 296,000 106,000 1,032,000 319,000
Corporate separation payment (4) (D)       608,000     (12,000 )   611,000  
Non-GAAP adjusted net income $ 11,968,000   $ (10,743,000 ) $ 22,192,000   $ (2,864,000 )
 
 
Deferred tax (benefit) expense   (7,383,000 )   15,245,000     (4,722,000 )   18,460,000  
Non-GAAP adjusted net income excluding deferred tax (benefit) expense $ 4,585,000   $ 4,502,000   $ 17,470,000   $ 15,596,000  
 
Diluted net income per common share:
GAAP net income per share $ 0.17 $ (0.24 ) $ 0.29 $ (0.15 )
Adjustments per share (A-D) $ 0.05   $ 0.04   $ 0.13   $ 0.10  
Non-GAAP adjusted net income per share $ 0.22   $ (0.20 ) $ 0.41   $ (0.05 )
 
 
Deferred tax (benefit) expense impact to Non-GAAP adjusted net
income per share
(E) $ (0.13 ) $ 0.28   $ (0.09 ) $ 0.34  
Non-GAAP adjusted net income per share excluding deferred tax
(benefit) expense
$ 0.09   $ 0.08   $ 0.33   $ 0.29  
 
 
 
Shares used to compute Non-GAAP adjusted net income per share –
diluted
  53,758,033     53,391,153     53,481,295     53,430,492  
 
Reconciliation of Net income to EBITDA and Adjusted EBITDA: (F)
Net income $ 9,240,000 $ (12,878,000 ) $ 15,444,000 $ (8,057,000 )
Income tax provision (7,175,000 ) 15,003,000 (4,720,000 ) 18,606,000
Depreciation 679,000 612,000 2,435,000 2,423,000
Amortization   393,000     106,000     1,270,000     319,000  
EBITDA 3,137,000 2,843,000 14,429,000 13,291,000
 
Adjustments:
Stock-based compensation charges (1) (A) 945,000 852,000 3,318,000 2,874,000
Strategic consulting and litigation costs (2) (B) 1,487,000 569,000 2,410,000 1,389,000
Corporate separation payment (4) (D)       608,000     (12,000 )   611,000  
Adjusted EBITDA $ 5,569,000   $ 4,872,000   $ 20,145,000   $ 18,165,000  
 
Adjusted EBITDA margin 30.2 % 29.0 % 28.6 % 27.7 %
 
(1) Stock-based compensation charges are included as follows:
Cost of revenues $ 89,000 $ 78,000 $ 327,000 $ 304,000
Research and development 136,000 98,000 469,000 374,000
Selling and marketing 233,000 330,000 884,000 999,000
General and administrative   487,000     346,000     1,638,000     1,197,000  
$ 945,000   $ 852,000   $ 3,318,000   $ 2,874,000  
(2) Strategic consulting, acquisition, and litigation costs are
included as follows:
Cost of revenues 2,000 3,000 3,000
Research and development 3,000 75,000 61,000 130,000
Selling and marketing 7,000 13,000 4,000
General and administrative   1,475,000     494,000     2,333,000     1,252,000  
$ 1,487,000   $ 569,000   $ 2,410,000   $ 1,389,000  
(3) Intangible Amortization is included as follows:
Cost of revenues 89,000 50,000 369,000 149,000
Research and development 51,000 126,000
Selling and marketing   156,000     56,000     537,000     170,000  
$ 296,000   $ 106,000   $ 1,032,000   $ 319,000  
(4) Corporate separation payment is included as follows:
Cost of revenues 4,000 28,000 4,000
Research and development 43,000 43,000
Selling and marketing 329,000 329,000
General and administrative       232,000     (40,000 )   235,000  
$   $ 608,000   $ (12,000 ) $ 611,000  
 
(5) Net Income tax components:
Current tax (benefit)/expense 208,000 (242,000 ) 2,000 146,000
Deferred tax (benefit)/expense   (7,383,000 )   15,245,000     (4,722,000 )   18,460,000  
$ (7,175,000 ) $ 15,003,000   $ (4,720,000 ) $ 18,606,000  

Contacts

Zix Company Contact
Geoff Bibby
(214) 370-2241
[email protected]

Zix Investor Contact
Matt Glover and Najim Mostamand, CFA
Liolios
Group, Inc.
(949) 574-3860
[email protected]

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