Zix Corporation (ZIXI)

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ZIXIhttp://www.nasdaq.com/symbol/zixiTechnologyn/aEDP Services

Latest Zix Corporation (ZIXI) company news

Zix to Webcast 2018 Annual Meeting of Shareholders on June 6

DALLAS--(BUSINESS WIRE)--

Zix Corporation (Zix) (ZIXI), a leader in email security, will host a live webcast of its 2018 annual shareholders meeting on Wednesday, June 6, 2018, at 10:00 a.m. CT. The meeting will include brief remarks concerning the company’s business from David Wagner, Chief Executive Officer of Zix.

All shareholders and any interested parties are invited to listen to the webcast, accessible through Zix’s investor relations Web site at http://investor.zixcorp.com. Please visit the web site in advance to register, download and install any necessary audio software. A recording of the webcast will also be available on Zix’s investor relations Web site until June 6, 2019.

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, 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 zixcorp.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180530005317/en/

Zix Sets May 2018 Financial Conference Schedule

DALLAS--(BUSINESS WIRE)--

Zix Corporation (Zix) (NASDAQ: ZIXI), a leader in email security, is scheduled to participate at the following financial conferences during May:

19th Annual B. Riley FBR Institutional Investor Conference
Thursday, May 24, 2018, at 12:30 p.m. PT
Loews Santa Monica Beach Hotel, Santa Monica, California
Executive: Chief Financial Officer Dave Rockvam

Cowen and Company 46th Annual Technology, Media & Telecom Conference
Wednesday, May 30, 2018, at 3:20 p.m. ET
The Lotte New York Palace, New York, New York
Executive: Chief Financial Officer Dave Rockvam
Webcast: http://wsw.com/webcast/cowen47/zixi/

Ladenburg Thalmann 2018 Technology Expo
Thursday, May 31, 2018, at 9:00 a.m. ET
Park Avenue Convene, New York, New York
Executive: Chief Financial Officer Dave Rockvam

To schedule a one-on-one meeting, request a conference invitation or receive additional information, please contact Zix’s investor relations team at 949-574-3860.

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, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180522005340/en/

Recent Analysis Shows Capital Senior Living, Digital Realty Trust, Minerva Neurosciences, Zix, First Merchants, and PennantPark Investment Market Influences — Renewed Outlook, Key Drivers of Growth

NEW YORK, May 22, 2018 (GLOBE NEWSWIRE) -- In new independent research reports released early this morning, Fundamental Markets released its latest key findings for all current investors, traders, and shareholders of Capital Senior Living Corporation (CSU), Digital Realty Trust, Inc. (DLR), Minerva Neurosciences, Inc (NERV), Zix Corporation (ZIXI), First Merchants Corporation (FRME), and PennantPark Investment Corporation (PNNT), including updated fundamental summaries, consolidated fiscal reporting, and fully-qualified certified analyst research.

Complimentary Access: Research Reports

Full copies of recently published reports are available to readers at the links below.

CSU DOWNLOAD: http://Fundamental-Markets.com/register/?so=CSU
DLR DOWNLOAD:
http://Fundamental-Markets.com/register/?so=DLR
NERV DOWNLOAD:
http://Fundamental-Markets.com/register/?so=NERV
ZIXI DOWNLOAD:
http://Fundamental-Markets.com/register/?so=ZIXI
FRME DOWNLOAD:
http://Fundamental-Markets.com/register/?so=FRME
PNNT DOWNLOAD:
http://Fundamental-Markets.com/register/?so=PNNT

(You may have to copy and paste the link into your browser and hit the [ENTER] key)

The new research reports from Fundamental Markets, available for free download at the links above, examine Capital Senior Living Corporation (CSU), Digital Realty Trust, Inc. (DLR), Minerva Neurosciences, Inc (NERV), Zix Corporation (ZIXI), First Merchants Corporation (FRME), and PennantPark Investment Corporation (PNNT) on a fundamental level and outlines the overall demand for their products and services in addition to an in-depth review of the business strategy, management discussion, and overall direction going forward. Several excerpts from the recently released reports are available to today's readers below.

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Important Notice: the following excerpts are not designed to be standalone summaries and as such, important information may be missing from these samples. Please download the entire research report, free of charge, to ensure you are reading all relevant material information. All information in this release was accessed May 18th, 2018. Percentage calculations are performed after rounding. All amounts in millions (MM), except per share amounts.

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CAPITAL SENIOR LIVING CORPORATION (CSU) REPORT OVERVIEW

Capital Senior Living's Recent Financial Performance

For the three months ended March 31st, 2018 vs March 31st, 2017, Capital Senior Living reported revenue of $114.64MM vs $115.99MM (down 1.16%) and basic earnings per share -$0.24 vs -$0.75. For the twelve months ended December 31st, 2017 vs December 31st, 2016, Capital Senior Living reported revenue of $467.00MM vs $447.45MM (up 4.37%) and basic earnings per share -$1.50 vs -$0.97. Capital Senior Living is expected to report earnings on August 7th, 2018. The report will be for the fiscal period ending June 30th, 2018. The reported EPS for the same quarter last year was -$0.08. The estimated EPS forecast for the next fiscal year is -$0.70 and is expected to report on February 26th, 2019.

To read the full Capital Senior Living Corporation (CSU) report, download it here: http://Fundamental-Markets.com/register/?so=CSU

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DIGITAL REALTY TRUST, INC. (DLR) REPORT OVERVIEW

Digital Realty Trust's Recent Financial Performance

For the three months ended March 31st, 2018 vs March 31st, 2017, Digital Realty Trust reported revenue of $744.37MM vs $550.57MM (up 35.20%) and basic earnings per share $0.42 vs $0.42 (unchanged). For the twelve months ended December 31st, 2017 vs December 31st, 2016, Digital Realty Trust reported revenue of $2,457.93MM vs $2,142.21MM (up 14.74%) and basic earnings per share $0.99 vs $2.21 (down 55.20%). Digital Realty Trust is expected to report earnings on July 26th, 2018. The report will be for the fiscal period ending June 30th, 2018. The reported EPS for the same quarter last year was $1.54. The estimated EPS forecast for the next fiscal year is $7.06 and is expected to report on February 21st, 2019.

To read the full Digital Realty Trust, Inc. (DLR) report, download it here: http://Fundamental-Markets.com/register/?so=DLR

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MINERVA NEUROSCIENCES, INC (NERV) REPORT OVERVIEW

Minerva Neurosciences' Recent Financial Performance

Minerva Neurosciences is expected to report earnings on August 2nd, 2018. The report will be for the fiscal period ending June 30th, 2018. The reported EPS for the same quarter last year was -$0.27. The estimated EPS forecast for the next fiscal year is -$1.50 and is expected to report on March 11th, 2019.

To read the full Minerva Neurosciences, Inc (NERV) report, download it here: http://Fundamental-Markets.com/register/?so=NERV

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ZIX CORPORATION (ZIXI) REPORT OVERVIEW

Zix's Recent Financial Performance

For the three months ended March 31st, 2018 vs March 31st, 2017, Zix reported revenue of $16.65MM vs $15.89MM (up 4.79%) and basic earnings per share $0.04 vs $0.03 (up 33.33%). For the twelve months ended December 31st, 2017 vs December 31st, 2016, Zix reported revenue of $65.66MM vs $60.14MM (up 9.18%) and basic earnings per share -$0.15 vs $0.11. Zix is expected to report earnings on August 7th, 2018. The report will be for the fiscal period ending June 30th, 2018. The reported EPS for the same quarter last year was $0.05. The estimated EPS forecast for the next fiscal year is $0.22 and is expected to report on February 28th, 2019.

To read the full Zix Corporation (ZIXI) report, download it here: http://Fundamental-Markets.com/register/?so=ZIXI

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FIRST MERCHANTS CORPORATION (FRME) REPORT OVERVIEW

First Merchants' Recent Financial Performance

For the three months ended March 31st, 2018 vs March 31st, 2017, First Merchants reported interest income of $93.62MM vs $68.23MM (up 37.20%) and basic earnings per share $0.75 vs $0.57 (up 31.58%). For the twelve months ended December 31st, 2017 vs December 31st, 2016, First Merchants reported interest income of $314.90MM vs $253.31MM (up 24.31%) and basic earnings per share $2.13 vs $1.99 (up 7.04%). First Merchants is expected to report earnings on July 26th, 2018. The report will be for the fiscal period ending June 30th, 2018. The reported EPS for the same quarter last year was $0.57. The estimated EPS forecast for the next fiscal year is $3.29 and is expected to report on January 24th, 2019.

To read the full First Merchants Corporation (FRME) report, download it here: http://Fundamental-Markets.com/register/?so=FRME

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PENNANTPARK INVESTMENT CORPORATION (PNNT) REPORT OVERVIEW

PennantPark Investment's Recent Financial Performance

For the three months ended March 31st, 2018 vs March 31st, 2017, PennantPark Investment reported revenue of $27.23MM vs $33.72MM (down 19.25%) and basic earnings per share $0.08 vs $0.16 (down 50.00%). For the twelve months ended September 30th, 2017 vs September 30th, 2016, PennantPark Investment reported revenue of $124.53MM vs $142.07MM (down 12.34%) and basic earnings per share $0.87 vs $0.26 (up 234.62%). PennantPark Investment is expected to report earnings on August 6th, 2018. The report will be for the fiscal period ending June 30th, 2018. The reported EPS for the same quarter last year was $0.18.

To read the full PennantPark Investment Corporation (PNNT) report, download it here: http://Fundamental-Markets.com/register/?so=PNNT

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ABOUT FUNDAMENTAL MARKETS

Fundamental Markets serves thousands of members and have provided research through some of the world's leading brokerages for over a decade–and continue to be one of the best information sources for investors and investment professionals worldwide. Fundamental Markets' roster boasts decades of financial experience and includes top financial writers, FINRA® BrokerCheck® certified professionals with current and valid CRD® number designations, as well as Chartered Financial Analyst® (CFA®) designation holders, to ensure up to date factual information for active readers on the topics they care about.

REGISTERED MEMBER STATUS

Fundamental Markets' oversight and audit staff are registered analysts, brokers, and/or financial advisers ("Registered Members") working within Equity Research, Media, and Compliance departments. Fundamental Markets' roster includes qualified CFA® charterholders, licensed securities attorneys, and registered FINRA® members holding duly issued CRD® numbers. Current licensed status of several Registered Members at Fundamental Markets have been independently verified by an outside audit firm, including policy and audit records duly executed by Registered Members. Complaints, concerns, questions, or inquiries regarding this release should be directed to Fundamental Markets' Compliance department by Phone, at +1 667-401-0010, or by E-mail at [email protected]

LEGAL NOTICES

Information contained herein is not an offer or solicitation to buy, hold, or sell any security. Fundamental Markets, Fundamental Markets members, and/or Fundamental Markets affiliates are not responsible for any gains or losses that result from the opinions expressed. Fundamental Markets makes no representations as to the completeness, accuracy, or timeliness of the material provided and all materials are subject to change without notice. Fundamental Markets has not been compensated for the publication of this press release by any of the above mentioned companies. Fundamental Markets is not a financial advisory firm, investment adviser, or broker-dealer, and does not undertake any activities that would require such registration. For our full disclaimer, disclosure, and terms of service please visit our website.

Media Contact:
Andrew Duffie, Media Department
Office: +1 667-401-0010
E-mail: [email protected]

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Zix to Present at the Needham Emerging Technology Conference on May 16, 2018

DALLAS--(BUSINESS WIRE)--

Zix Corporation (Zix) (NASDAQ: ZIXI), a leader in email security, has been invited to present at the Needham Emerging Technology Conference on May 16, 2018 at 1:40 p.m. ET. The conference will be held on May 15-16, 2018 at the Westin Grand Central Hotel in New York, New York.

The presentation will be webcast and available for replay for 90 days. To access the presentation, visit the webcast page or the investor section of Zix’s website.

Zix management will also hold one-on-one meetings throughout the conference. To schedule a one-on-one meeting, request a conference invitation or receive additional information, please contact your Needham representative or Zix’s investor relations team at 949-574-3860.

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, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180514005919/en/

Edited Transcript of ZIXI earnings conference call or presentation 2-May-18 9:00pm GMT

Q1 2018 Zix Corp Earnings Call

DALLAS May 4, 2018 (Thomson StreetEvents) -- Edited Transcript of Zix Corp earnings conference call or presentation Wednesday, May 2, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David E. Rockvam

Zix Corporation - VP, CFO & Principal Accounting Officer

* David J. Wagner

Zix Corporation - CEO, President and Director

* Geoffrey R. Bibby

Zix Corporation - VP of Marketing

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Conference Call Participants

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* Eric Anthony Des Lauriers

Craig-Hallum Capital Group LLC, Research Division - Associate Analyst

* Wonchoon Kim

Imperial Capital, LLC, Research Division - SVP

* Zack Turcotte

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Presentation

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Operator [1]

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Good afternoon. Welcome to Zix First Quarter 2018 Earnings Conference Call. My name is Skyler, 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 questions. I would now like to remind you that the call has been recorded and made available for replay via a link in the Investor Relations section of the company's website.

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

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Geoffrey R. Bibby, Zix Corporation - VP of Marketing [2]

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Thanks, Skyler. Good afternoon, everyone, and thank you for joining us for our First Quarter 2018 Call. After the market closed we issued a press release announcing our results for the first quarter ended March 31, 2018, a copy of which is available in the Investor Relations section of our website at www.zixcorp.com.

Please note that during the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the company. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. It's important to note also that the company undertakes no obligation to update such statements.

We caution you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release and in this conference call. The Risk Factors section in our most recent Form 10-K filing with the SEC provides examples of those risks.

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

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

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David J. Wagner, Zix Corporation - CEO, President and Director [3]

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Thanks, Geoff. Good afternoon, and thank you, everyone, for joining us today. We entered 2018 continuing to build on the momentum generated by our growth in cloud-based encryption and our strategy of enhancing customer value with a full suite of e-mail protection services.

Whether it's growth in the number of new customers acquired or success in building our add-on activity and retention, Q1 was a solid quarter all around and is further evidence that we're on the right path.

More specifically in the first quarter, we delivered on our commitment to profitable growth. We grew revenue in Q1 by 5%, annual contract value by 7%, new first year orders by 9% and adjusted EBITDA by 8%.

We recognized more than a year ago that building a full suite of e-mail security services was what customers are looking for in this market, and that's exactly what we delivered. Now a year after the introduction and early success of our bundles, we are winning new customers and becoming a more formidable force in the e-mail security space.

ZixProtect and ZixArchive are continuing their impressive momentum from 2017 generating meaningful competitive displacements. Our cross-selling initiatives are delivering as planned, and the market is responding favorably to our positioning.

With our recent addition of Erado, we have advanced our bundles to meet the absolute gold standard and compliance when it comes to protecting and archiving business communications.

Our existing cloud-based solution is now bolstered by unified archiving and supervision capabilities that are best-in-class for compliance focused buyers.

So we're now in an even stronger position to meet our customers’ needs. Our leadership position is strengthened beyond e-mail to all forms of digital communications, including social media, instant messaging, mobile, web, audio and video. We are also welcoming a large customer base of 18,000 customers across the financial services vertical whole, who we can continue servicing with best-in-class archiving solutions that they're already familiar with and also, provide added value to our bundled offerings and complete e-mail security solutions.

The result is, one, a happy customer because they are better able to efficiently comply with FINRA and SEC regulations; two, a robust and complete e-mail security solutions because we're able to combine these archiving solutions with our e-mail encryption and advanced threat protection offerings; and three, a platform for continued growth as we work to solidify our status as one of the preferred choices for customers who must meet compliance requirements.

In addition to bolstering our solutions, we also made positive strides on the distribution front. Just shortly after the quarter ended, we announced the expansion of our MSP program, which integrates additional offerings to provide best-in-class security for our partners. As we mentioned on our previous call, we're focusing more on distributor relationships that can drive the most value for us and our customers. So strengthening the MSP program and giving our valued partners more flexible options and a path to growing their businesses more successfully is high on our priority list.

When you combined the expansion of our services, the continued investments in our products and strengthening of our channel program, it's clear that we've had a very busy and productive start to 2018.

Not only did we achieve another record in annual contract value of $68.4 million, but we also delivered year-over-year growth on our new first year orders and total orders, demonstrating successful execution of our strategy.

As a result, we are becoming increasingly convinced that our recent results and business transitions are putting us on the front foot strategically and on the trajectory towards reaccelerating profitable growth.

Now, I'll turn the call over to our CFO, Dave Rockvam, to provide more details on the financials for the quarter. Dave?

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David E. Rockvam, Zix Corporation - VP, CFO & Principal Accounting Officer [4]

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Thank you, Dave, and good afternoon, everyone. Once again, we achieved our guidance for both the top and bottom line and generated another quarter of solid new first year orders growth, over 20% of which were driven by ZixProtect and ZixArchive. We also returned to year-over-year growth in our total orders and maintained our 29% adjusted EBITDA margin.

As our results for the quarter demonstrate, we're making steady progress in our efforts to capture a larger share of the broader e-mail security market. From both an operational and financial standpoint, we believe we're well positioned to build on this progress and move closer towards our next stage

of growth.

Turning to our financial numbers in more detail. Revenue for the first quarter increased 5% to $16.7 million from $15.9 million in the same quarter last year, with $16.7 million we achieved our top line guidance for the quarter. The revenue for Q1 was primarily driven by the continued success of our e-mail protection, bundled offerings and rapid adoption of our cloud-based hosted encryption solution. Given our subscription accounting model, we determined no material impact of ASC 606 on our revenues.

Our new first year orders for the quarter increased 9% to $2.3 million compared to $2.1 million in the same quarter last year. Once again, our cloud-based hosted solution and our bundled offerings made up a bigger percent of this metric. Successful add-on sales to the base was also a strong driver of new first year orders with nearly 60% of new first year orders coming from the installed base in the quarter.

Our adjusted gross profit for the quarter was $13.3 million or 79.8% of total revenue, which was an improvement on a dollar basis from $13.1 million or 82.7% of total revenue in the first quarter of 2017.

Our adjusted gross margin percent for Q1 was down year-over-year. This is because over the past year, the significant growth in our hosted customer base, our expansion into the broader business communication market has led us to a necessary higher-level of support and infrastructure. We expect our adjusted gross margins to move higher from current levels but remain within 80% to 81% for the remainder of 2018.

As we continue to invest to provide best-in-class customer support, threat intelligence and operational excellence. Our adjusted R&D expenses for the first quarter of 2018 were $2.7 million or 16.2% of total revenue compared to $2.3 million or 14.7% of total revenue in the first quarter of last year.

The year-over-year increase was primarily due to investments in our advanced threat protection and archiving capabilities. Our adjusted selling and marketing expenses for the quarter were $4.1 million or 24.7% of total revenue compared to $5 million or 31.3% of total revenue in Q1 of last year. The decrease was partially due to last year's rebranding exercise, which pushed up marketing spend in Q1 of 2017. However, the decrease in dollars was due primarily to our accounting change to comply with ASC 606 accounting.

In accordance with ASC 606, we reported an intangible asset on our balance sheet of approximately $6.6 million. This intangible asset will be amortized over the expected life of the solution, which we have estimated at 8 years for new contracts, 4 years for add-ons and 18 months for renewals. Our Q1 amortization was $444,000 versus a normalized expense for commissions pre-ASC 606 of approximately $983,000.

For the first quarter of 2018, our adjusted general and administrative expenses were $2.1 million or 12.9% of total revenue compared to $2 million or 12.8% of total revenue reported in Q1 of last year.

The year-over-year increase was primarily due to G&A associated with the acquisitions over the last year.

On a GAAP basis, we reported net income of $1.9 million or $0.04 per fully diluted share compared to $1.8 million or $0.03 per share in Q1 last year.

Our first quarter non-GAAP adjusted net income was $4.3 million or $0.08 per fully diluted share. $0.08 per share was consistent with our guidance for the quarter and represent an improvement of $0.01 per share over the amount we reported in Q1 of last year.

And finally, our adjusted EBITDA for Q1 2018 totaled $4.8 million, an increase of 8.4% compared to $4.5 million we reported in Q1 of last year.

As a percentage of total revenue, adjusted EBITDA for Q1 was 29%, which was higher than the same quarter last year and consistent with a 29% we reported last quarter.

Cash flow from operations for the first quarter of 2018 was $1 million. This was down from last year mainly due to our lower deferred revenue balance, which is primarily from our designed shorter contract term length.

Our balance sheet at the end of the quarter once again reflected our financial strength with $29.3 million in cash and no debt.

Turning to our share repurchase program, which the Board of Directors approved in April 2017. During Q1 2018, we repurchased 706,994 shares for an aggregate amount of $3.1 million at an average share price of $4.37.

Under the current program, we are authorized to purchase an additional $3.1 million worth of shares as of April 1, 2018 subject to certain conditions. In fact, we continue to repurchase shares during April of this year. While we continue to invest in our solutions to better serve the compliance-oriented and security-driven customers in the midmarket segment, we are reiterating our commitment to a balanced capital allocation strategy.

Over the last 27 months, we have demonstrated this balance by purchasing $19.2 million of our stock and used approximately $20 million for acquisitions. The mindset of deploying capital in the areas where we see highest returns will be what guides us as we look to continue increasing shareholder value.

CapEx for the quarter was $546,000, which consisted primarily of normal business capital purchases. We continue to expect CapEx for 2018 to be between $2.3 million and $2.7 million and for depreciation to be approximately $2.7 million.

Our backlog, which represents the dollar value of committed contracts, was $70.8 million as of March 31, 2018, which was down 10.3% from $78.9 million as of the same date last year.

Similar to prior quarters, the decrease in backlog was due to the shorter-term commitment associated with new customer pricing and bundled offerings. This has produced the desired effect of increasing our transaction volume and number of touch points with customers.

As a reminder, we accomplish this by decreasing the financial incentives for most of our customers to go longer term. However, we note that our average term length has stabilized to a level that aligns with our goals, and we don't expect to see further decline in term length, as we did last year.

Looking at our deferred revenue, we expect to recognize approximately $43.2 million or 61.1% of our deferred revenue balance as revenue over the next 12 months.

Just like the prior 3 quarters, you can see the impact of the shift toward shorter-term contracts when you compare with 61.1% of revenue recognition of deferred over the next 12 months to last year's 57.3%.

At the end of the first quarter, our ACV, or annual contract value, totaled a record $68.4 million, up 7% from Q1 of last year.

From an industry perspective, our revenue breakdown was 50% from health care, 28% from financial services, 7% from government and 15% from other verticals, all excluding our acquisitions from 2017 and 2018.

Now for our second quarter and full year 2018 financial guidance. Because of the acquisition of Erado in April, we are updating our guidance for the quarter and full year. As we disclosed earlier this month, for the full year of 2018, we expect subscription revenue from the acquisition to contribute $1.5 million and expect operating cash flow to be neutral, but expect net income and EBITDA to decrease approximately $1 million due primarily to an anticipated purchase accounting adjustment to deferred revenues.

We currently anticipate revenue for the second quarter to range between $17.3 million and $17.5 million, representing an increase of 6% to 7% compared to Q2 of last year.

We are also forecasting fully diluted GAAP earnings per share to be between $0.03 and $0.04, and fully diluted non-GAAP adjusted earnings per share to be $0.07.

We expect revenue for the full year range to be between $69 million and $70.5 million, which represents an increase of 5% to 7% compared to revenue in fiscal 2017.

Our previous guidance for revenue range between $67.5 million and $69 million. The only adjustment being adding the $1.5 million of revenue for the Erado acquisition.

As part of our updated guidance, we are also forecasting our fully diluted GAAP earnings per share to be between $0.15 and $0.16, and our fully diluted non-GAAP adjusted earnings per share to be $0.30 for fiscal 2018.

In closing, while we have not yet cleared through all the additional churn in our on-premise appliance customers, we have made significant progress and have our business aligned well to execute in 2018. With our bundles performing exceptionally well, along with our cloud-based encryption solution, we are displacing competitors and becoming a bigger part of our customers overall data protection platform.

We also, as Dave mentioned, have expanded our product suite and capabilities and now having a much stronger distribution channel through the launch of our new MSP program. All of these steps articulate our progress towards reaccelerating our growth, improving our retention and building on our overall traction in the market.

This completes my financial summary. For a more detailed analysis of our financial results, please reference our Form 10-Q, which we plan to file by May 9. Dave?

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David J. Wagner, Zix Corporation - CEO, President and Director [5]

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Thank you for the financial overview, Dave. On our last call, we introduced our 3 main growth drivers, which are: one, new customer acquisition; two, sales to existing customers through add-on and cross-selling; and three, reducing churn and increasing retention.

I'll now spend the remainder of the call going over our financial performance and progress with respect to each of these 3 growth areas before double-clicking our acquisition of Erado and what it means for Zix going forward.

Starting with our first growth area. As noted earlier, total new first year orders were $2.3 million, up 9% year-over-year. Similar to last quarter, ZixProtect and ZixArchive new first year orders represented more than 20% of the total new first year orders. Although the percentage of orders from the new products was relatively flat as both a percentage and in absolute dollar terms, the number of ZixProtect and ZixArchive customers was up almost 10% sequentially.

New first year orders from new customers made up 41% of total new first year orders or about $900,000. 4 of our top 5 wins in the quarter were in our core health care vertical, the fifth was in government.

Similar to last quarter, 2 of our top 5 new customer wins during the quarter were for ZixEncrypt. One was the PGP displacement and the other had no prior meaningful encryption use.

The other 3 top 5 new customer wins were for the bundle. One of them was a competitive displacement of Microsoft, one Proofpoint and one Barracuda, demonstrating again that our bundling proposition is resonating with our customers.

When you look at our total new first year orders during the quarter by distribution channel, 46% came from our directed sale efforts, 44% through borrowers and MSPs, 2% from web sales and 8% through our OEM partners.

So we were relatively light in both MSPs and OEMs, which are both areas that we are taking specific steps to improve.

Our April launch of our new Zix partner MSP program is a perfect example of our plans to improve our distribution. The new program is a major step forward for MSPs and will help us attract new partners to the program for continued growth.

At a very high level, the program provides MSPs with the ability to sell and administer e-mail threat protection and e-mail archiving, in addition to our existing e-mail encryption offering.

The program offers MSPs flexible billing, rapid deployment and a centralize management console for administration of all of our solutions.

We've already added 5 new MSP partners to the program and we are looking forward to adding more in addition to migrating many of our existing encryption partners into the program to give them the ability to operate broader Zix solution set to their customers.

On the OEM side, we had a good quarter with Symantec in Q1, and we are pleased with the progress that we made with both Google and Cisco during the quarter towards realigning our partnerships for maximum value to our end customers.

On the Google side, during Q2, we are moving from our historical OEM arrangement into the Google cloud partner program, and we are working collaboratively with Google to transition the existing gain customers into standard Zix customers, primarily through the end customers current reseller.

This new arrangement gives Zix the ability to better address the needs of the Google end users and resellers with our full suite of e-mail services. The launch of our new MSP Zix partner program was perfectly timed to intercept this transition and maximize the cross-sell opportunity into our Google end customers.

On the Cisco side, we continue to collaborate with the Cisco go-to-market teams to position ZCT and increasingly also ZixEncrypt and ZixEncrypt EMS into accounts where Cisco CRES solution is not well suited to meet the customers’ requirements.

As a result of these changes, beginning on the Q2 earnings call, we will no longer be reporting Cisco and Google as OEM channels, and we will bundle the remaining immaterial OEM partner orders into a new category of web sales and other. We do not expect any meaningful impact to this year's new first year orders or revenues from these relationship transitions, although we do think that both transitions will be positive for our end customers, our resellers and Zix.

Turning quickly to our progress on the international front. During the first quarter, we announced our partnership with Progress Distribution and Proact IT to distribute ZixEncrypt to help U.K. and European enterprises comply with the new GDPR rules.

Proact IT is a publicly traded company with more than 3,500 customers, primarily in the U.K. and Nordic regions. They will be selling our standard ZixEncrypt solution hosted in their data centers. They're excited about the opportunity of providing our gold standard encryption services to their customers, as they help their end users comply with GDPR.

Moving on to our second main growth area, which is additional sales to the existing customers. Approximately 59% of our new first year orders during the first quarter came from our installed base, which is above our average of 40% and totaled approximately $1.3 million in the quarter.

Similar to new customers, 4 of our top 5 add-on sales were in the health care and fifth, was a government customer. 3 of the 5 are encryption add-ons, 1 was ZixProtect and the other added both ZixProtect and ZixArchive. We are very pleased to see the increasing sales into our installed base as we add products and services.

The third and final growth area we're focused on is reducing churn and increasing retention. I'm pleased to report that our retention is gradually improving and that we were solidly above 90% in the quarter and that we achieved the second highest quarterly retention rate since 2016.

We continue to get in front of our on-premise appliance customers. Total ACV from on-premise appliance customers decreased from 20% and 19% of ACV in the quarter. We can't stress enough how important it is that we migrate our on-premise customers to the cloud because that's where they become stickier and where they can most easily take advantage of a complete product suite.

During Q1, we successfully migrated 200 customers to our hosted platform and an additional 30 from Google game to our multitenant cloud. It's very encouraging to see the pace at which our customers are moving to our multitenant cloud solutions. And during Q1, we reached the point where just over 50% of our ACV is from customers who are 100% cloud deployed.

So as a result, retention is improving, both in the quarter and on a rolling 12-month basis. Going forward, excluding the last part of the 2017 excess churn that we expect to work through this quarter, we expect our renewal rates to stabilize at a new normal.

ZixProtect and ZixArchive are no longer new products, but our products with hundreds of reference customers allowing us to position a strong bundle for our existing customers as well as new prospects. This success combined with success we are having migrating customers from on-premise, both appliance and virtual to our cloud, has us increasingly confident that the retention drag will subside.

However, the new normal on the cloud-based bundle means that we do not expect to return to the record high retention rates we saw in 2016 for some time.

Lastly, before we open the call for questions, I'd like to spend a moment on our acquisition of Erado, which was announced in early April. We are very excited about the acquisition as it expands our cloud-based e-mail archiving capabilities into more than 50 digital communication content channels and add strong supervisory capabilities for compliance officers to monitor and review all of the organization's business communications from one centralized uniformly indexed set of content.

More than 50% of Erado's revenue comes from archiving channels other than e-mail, with LinkedIn being by far the most important channel other than e-mail.

Many businesses with compliance requirements are moving to LinkedIn and other social channels to prospect and to communicate with customers. The unified archiving capabilities are a perfect fit for our compliance-oriented customers in health care, finance and government sectors. And the addition of the Erado customers to the Zix family makes us even stronger in financial services.

We see a very strong opportunity for Erado capability in the market. And as we integrate, we will be focusing on 2 areas: first, accelerating the current market momentum in a broker-dealer and financial services space. Like most IT services, archiving is transitioning to the cloud and they're the large installed base of on-premise legacy capability that is right for disruption. We are investing immediately in more go-to-market capability to support the existing team in Seattle and to grow our market presence in the broker-dealer segment.

The second focus area is integrating the additional data channels and supervisory capability into our core ZixArchive product on the ZixCentral platform.

One of the reasons we selected Erado is that their 100% cloud-based architecture is consistent with our platform architecture, and we expect to be able to integrate the majority of the functionality into a good, better, best set of archiving packages that we can position strongly to the existing Zix installed base and through our MSP and VAR partners.

The planning work for this integration is well underway, and we expect to have integration completed before year-end. This gives you a sense of why we're so pleased to welcome the entire team of Erado employees and customers to Zix. Together with our acquisition of Greenview Data in 2017, this acquisition represents the successful continuation of our previously stated build, partner, buy, growth strategy.

In summary, Q1 was more than just a strong quarter operationally. It provided further evidence that our strategy of expanding our product capability through build, partner, buy is delivering strong results and positioning us well for increasing our profitable growth. We've made significant enhancements to our product suite and are executing in the right areas from a distribution perspective to deliver this added value to customers.

This work has enabled us to penetrate our installed base with the additional capabilities to acquire more new customers, to win larger deals and to displace entrenched competitors. We are seeing improvements in our core business and retention is also improving. We're also seeing improvements in the competitive environment, which we're certainly taking the advantage of, especially as it becomes more apparent that Microsoft Office 365 is not enough to keep customers or their business communications fully protected.

Zix is the preferred choice for anyone with compliance requirements and we look to build upon this reputation, while laying the groundwork for higher growth and profitability going forward.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Michael Malouf with Craig-Hallum Group.

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Eric Anthony Des Lauriers, Craig-Hallum Capital Group LLC, Research Division - Associate Analyst [2]

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This is Eric on for Mike. I was wondering if we could just drill in a little bit more into churn and retention. I know you've talked a lot about it. But could you just give us a sense of the new normal level? And how that relate -- how that compares to what the previous level was?

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David J. Wagner, Zix Corporation - CEO, President and Director [3]

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Yes. So what we're talking about is, anyway, has been consistent is over 90%, is what we achieved last year and expect to continue to achieve. But 2016 was an exceptionally strong year, we were several hundred basis points above that. And given the shortening term contracts in the market space and the lack of stickiness or the less stickiness in the advanced threat space, we think will be in the low-90s opposed to mid-90s as our new normal.

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Eric Anthony Des Lauriers, Craig-Hallum Capital Group LLC, Research Division - Associate Analyst [4]

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Okay, that make sense. And then gross margins, they were down this quarter. I think you said it was just because of higher staffing. Could you just talk about that a bit more? And then do you expect that to stay more in that 80% to 81% as we look forward? Or should that be a little bit more of a gradual return to that level?

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David J. Wagner, Zix Corporation - CEO, President and Director [5]

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So the increase is people related as we continue to grow the customers on the ZixProtect offering. We have some great technology that's intercepting a threat and staying active and light and current all the time. But we also use 24/7 threat analyst to review the traffic update to build those rules and so it's that -- that the people side of that business that has caused our margins to go down a couple hundred basis points since the acquisition last March. Dave, can maybe give a little more color about that.

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David E. Rockvam, Zix Corporation - VP, CFO & Principal Accounting Officer [6]

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Yes, I would just add a little bit. Like in the past quarters, we had a full quarter of Greenview Data expense in this quarter and just catching up with the full revenues are little bit higher than in the last quarter. So that's part of it. And then the 80% to 81% as we bring on Erado, we'll kind of be in the similar situation during the years that will have that a little bit of the revenue haircut, while we have all of the expense. So that takes it up a little bit for the 80% to 81%. So we hit right at 80% here, and we expect to march towards the 81% towards the end of the year. And we should be able to pick up a little bit from that as we go forward.

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Eric Anthony Des Lauriers, Craig-Hallum Capital Group LLC, Research Division - Associate Analyst [7]

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Okay, that make sense. And then lastly, you guys have had some good success with the bundling and cloud efforts. Do you feel that your offering is now pretty complete? Or are they still -- are you still looking for tuck-in acquisitions throughout the year to sort of continue to enhance your bundle and cloud offering?

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David J. Wagner, Zix Corporation - CEO, President and Director [8]

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Yes. So we believe our offering is really complete. And I'll say compellingly complete with respect to compliance buyers when you look at the capability that we bring around e-mail encryption and archiving for compliance. Our capability has been really, really strong. And so we're pleased with where we are. On the build, partner, buy strategy, we've been able to achieve a couple of really nice acquisitions that are on track to deliver really strong returns. So as Dave mentioned in his prepared remarks, we're looking as we allocate capital to continue to be balanced, to continue to look for high return opportunities for our shareholders for M&A. And at the same time, be in a position to buy back stock as our cash balances allow for that as well.

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Operator [9]

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Our next question comes from Michael Kim with Imperial Capital.

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Wonchoon Kim, Imperial Capital, LLC, Research Division - SVP [10]

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Can you talk about the opportunity upsell or cross-sell into the Erado customer base? And where they see the most uptick is from ZixEncrypt or ZixProtect? And where -- how we should see that roll out over the balance of the year?

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David J. Wagner, Zix Corporation - CEO, President and Director [11]

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Yes. So that's one of the things that as we get to that bundled offering late in the year, we'll really start to be able to take advantage of. What the Erado leadership team was seeing from their customer base with the earlier stages of what we're seeing with the desire to reduce number of vendors, consolidate cloud-based services. And so they had a -- an encryption offer as a part of what they provided. So that's something that we'll certainly have a much more robust encryption offer as we integrate for that customer set to add encryption there. And then when you look at the broker-dealer segment, there are a lot of small financial organizations that have these SEC, FINRA requirements and also I need to protect their small family offices from advanced threat and deliver e-mail securely. So we see our cloud-based bundle be in a really nice bit for many of their existing customers. The full integration of that though, as I suggest, it won't be complete until late in the year. So this year is really about driving the existing market motion forward with those investments I talked about in the call.

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Wonchoon Kim, Imperial Capital, LLC, Research Division - SVP [12]

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And is this new MSP program something you can leverage or accelerate your penetration into that customer base? Or do you envision serving most of those customers directly?

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David J. Wagner, Zix Corporation - CEO, President and Director [13]

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Yes, it's a huge opportunity. They were using very, very little in the terms of partners. And so the building out the partner channel this year for their existing -- for the existing capabilities and opportunity. And then, again, as the integration complete late in the year, we'll be able to deliver the full set of capability to both sets of customers.

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Wonchoon Kim, Imperial Capital, LLC, Research Division - SVP [14]

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Got it. And with regards to the on-premise appliance customer base, should we just expect that it would be a sort of declining contributor to ACV over a longer period of time or do you see server a natural base to that part of your business?

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David J. Wagner, Zix Corporation - CEO, President and Director [15]

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So we're being very, very intentional as we talked about last call with every renewal of an on-prime client of making sure that we understand why they continue to have an on-prem appliance. And through those interviews, we are successful in moving increasing number over, but we're also finding that many customers are at this time not seeing a need to move. So we saw a 1% decline in ACV quarter-over-quarter. That's kind of the pace that I perceive we'll see. We are, in instances, when customers believe that they were going to stay on-prem for a longer period of time, we are offering a 3-year renewals. And so we're starting to see an uptick in our term renewal length as we are looking to lock those customers and for those on-prem customers in for 3-year term.

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Wonchoon Kim, Imperial Capital, LLC, Research Division - SVP [16]

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Got it. And then lastly with regards to some of the competitive displacements you highlighted that you had 3 of the more notable vendors Microsoft, Proofpoint and Barracuda. Did -- were those competitive displacements for the same reasons or different reasons? Or any context for why some of those customers moved to Zix?

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David J. Wagner, Zix Corporation - CEO, President and Director [17]

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The consistent context would be the encryption lag part of the bundle, where they see superior value in our part of the bundle and are looking to consolidate vendors. When we talk to our largest customers, they're still very much staffed to support a best-in-breed and a very operating Zix encryption right next to a competitive. But it's more of those midmarket buyers that are consolidating vendors are finding us to be a really good choice if they've got the compliance-oriented requirements vis-à-vis the competition.

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Operator [18]

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Our next question comes from Zack Turcotte with Dougherty.

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Zack Turcotte, [19]

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Zack Turcotte on for Catharine Trebnick here. So you guys said ZixProtect and ZixArchive were over 20% in new first year orders, again, pretty similar to last quarter. Is this kind of a general level you expected to stay at? Or is there still somewhat of a mix shift going on where you think these will contribute a higher percentage in the future?

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David J. Wagner, Zix Corporation - CEO, President and Director [20]

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We're expecting them to contribute a higher percentage going forward. That 20% in -- the more than 20% in Q4 was up pretty markedly from Q3 and Q1 represent a kind of a stabilization. But we would expect to be 20% and moving probably north of 25% as we move through the year. There's still lots of opportunity to attach into our base. We're at 4 -- little over 4%, almost 5% on ZixProtect attach, just over 1% on Archive. And with the added packaging bundles, later in the year, early next year, that will help us a lot. So anyway, we definitely expect to see that continuing to increase as a percentage of our new first year orders. The other thing I'll just emphasize that Zix partner MSP program will also help drive that. And I talked about this on the last call. But that gives us the opportunity for our partners to not have to sell encryption first, they could displace our existing advanced threat vendor with ZixProtect and not take advantage of the other pieces of the bundle. So putting that platform out in the market this past month in April, we think it will also be an accelerating opportunity for the newer parts of our protection bundle.

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Zack Turcotte, [21]

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Okay, that was pretty much my next question. Are you still kind of leading the majority of sales with Encrypt and then trying to add those on? So in that same vein kind of if you're seeing more bundling sales to the channel, is this bringing you into larger mailbox sizes seeing different competitors going towards the 1,000 mailbox or north of that kind of size?

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David J. Wagner, Zix Corporation - CEO, President and Director [22]

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So we continue -- we've had increasing success with what we call enterprise the last several quarters. And we're increasingly -- on the larger customers, we got a couple of new wins. We're seeing more existing in the larger 10,000, 5,000 user customers. ZixProtect and ZixArchive are more often being sold through an existing encryption customer who is very aware of our service quality and capability and just sees less risk in the decision. But as I said, ZixProtect and ZixArchive are no longer new products. We have hundreds and hundreds of customers, all performing extremely well. And so we'll continue to see that rotation throughout this year and into next where the newer parts of our bundle perform increasingly well.

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Operator [23]

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At this time, I'm showing no further questions. I'd like to turn the call back over to Mr. Wagner for his closing remarks.

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David J. Wagner, Zix Corporation - CEO, President and Director [24]

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Well, I would just like to thank everybody for taking a little bit of your time to get an update from Zix this evening and wish you all a great evening. Good night.

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Operator [25]

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Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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