Zix Corporation Announces Fourth Quarter And Year-End Results For Fiscal 2011

Zix Corporation (NASDAQ: ZIXI), the leader in email encryption services, today announced financial results for the fourth quarter and full year ended Dec. 31, 2011.

Fourth Quarter Financial Highlights

• The Company achieved record fourth quarter revenue from continuing operations of $9.9 million, an increase of 12%, year-over-year
• Fourth quarter 2011 GAAP net income of $0.23 per share, compared to fourth quarter 2010 GAAP net income of $0.54 per share ⁽¹⁾
• Fourth quarter Non-GAAP net income of $0.04 per share, an increase of 22.0%, year-over-year
• Cash flow from operations for the fourth quarter of $2.6 million, an increase of $1.8 million, year-over-year

Full-Year 2011 Financial Highlights

• The Company achieved full-year record revenue from continuing operations of $38.1 million, an increase of 15.4%, year-over-year
• Full-year GAAP net income of $0.34 per share, compared to full-year 2010 GAAP net income of $0.62 per share ⁽¹⁾
• Full-year Non-GAAP net income of $0.16 per share, an increase of 29.4%, year-over-year
• Cash flow from operations for the full year ended Dec. 31, 2011, of $13.2 million, an increase of $6.0 million, year-over-year
• Cash, cash equivalents and commercial paper investments at year-end was $20.7 million, despite $21.0 million spent on share repurchases during 2011. This $20.7 million is a decrease of $3.9 million compared to the ending cash balance for 2010

“We are very pleased to report record financial results for revenue, adjusted earnings per share and cash generated from operations during fiscal 2011,” said Rick Spurr, ZixCorp’s Chairman and Chief Executive Officer. “During the year, we continued to invest in enhancing easy-to-use email encryption, including the launch of ZixMobility. Such innovations allow us to maintain our position of leadership in the industry and create opportunities for revenue growth as we look to 2012.”

Fourth Quarter and Full-Year 2011 Corporate Financial Summary and Other Operational Metrics

$ in Millions, except per share data		Q4 2011				Q4 2010				% or $ Change (2)			FY 2011				FY 2010				% or $ Change (2)
Revenue (3)		$	9.9			$	8.8			11.8	%		$	38.1			$	33.1			15.4	%
GAAP Gross Profit (3)		$	8.0			$	7.1			13.0	%		$	30.9			$	26.6			16.3	%
GAAP Net Income (1)		$	15.0			$	37.2			(59.8	%)		$	22.6			$	41.2			(45.3	%)
GAAP Net Income Per Share – Diluted (1)		$	0.23			$	0.54			(58.2	%)		$	0.34			$	0.62			(45.7	%)
Non-GAAP Adjusted Gross Profit (3) (4)		$	8.1			$	7.2			12.7	%		$	31.0			$	26.8			15.9	%
Non-GAAP Adjusted Net Income (4)		$	2.9			$	2.5			17.4	%		$	10.9			$	8.4			30.5	%
Non-GAAP Adjusted Net Income Per Share – Diluted (4)		$	0.04			$	0.04			22.0	%		$	0.16			$	0.13			29.4	%
Adjusted EBITDA (4) (5)		$	3.5			$	2.8			26.6	%		$	12.7			$	9.9			28.5	%
Adjusted EBITDA Margin (4) (5)			35.5	%			31.4	%		4.1pts				33.2	%			29.8	%		3.4pts
Email Encryption New First Year Orders		$	1.9			$	2.1			(11.1	%)		$	7.1			$	8.7			(18.3	%)
Email Encryption Total Orders		$	11.1			$	12.2			(9.1	%)		$	42.3			$	40.8			3.8	%
Email Encryption Bookings Backlog (6)		$	53.7			$	49.9			7.6	%		$	53.7			$	49.9			7.6	%

⁽¹⁾ GAAP Net Income for the quarters and years ended Dec. 31, 2011, and Dec. 31, 2010, include tax benefits of $11.8 million and $35.3 million, respectively, resulting from reductions to the deferred tax valuation allowance

⁽²⁾ Changes reported are based on actual results, and numbers shown in the columns may reflect rounding

⁽³⁾ Amounts indicated are from continuing operations

⁽⁴⁾ A reconciliation of GAAP to Non-GAAP adjusted results is attached to this press release and is available on our investor relations Web page at http://investor.zixcorp.com

⁽⁵⁾ Adjusted earnings before interest, taxes, depreciation and amortization

⁽⁶⁾ Service contract commitments that represent future revenue to be recognized as the services are provided

Fourth Quarter Business Highlights

• EarthLink, Inc. (NASDAQ: ELNK), a leading IT services, network and communications provider to more than 150,000 businesses and over one million consumers nationwide, joined the ZixCorp ^® Partner Program as a managed security service provider.
• ICON Central Laboratories chose ZixEnableSM to securely and automatically deliver patient results. ICON Central Laboratories, a division of ICON plc, is a global central laboratory exclusively engaged in clinical trial testing. ICON Central Laboratories uses ZixEnable, an application-generated email encryption service, to provide lab reports 24/7 worldwide through an encrypted email solution, enabling physicians to better monitor and adjust patient treatment during clinical trials.
• ZixCorp announced the approval of a share repurchase program that enables the company to purchase up to $15 million of its shares of common stock. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors. The share repurchase program is scheduled to expire on June 30, 2012. This was the second share repurchase program announced by ZixCorp in 2011. Earlier, the company implemented a share repurchase program in March 2011 and completed it in July 2011. For the year, the Company repurchased approximately 6.5 million shares at a total price of $21 million.
• Recognizing a growing demand for email encryption, IT solutions provider Sayers joined the ZixCorp Partner Program and added ZixCorp Email Encryption Services to its portfolio. Sayers selected ZixCorp based on its trusted reputation and its leadership position in the market. Headquartered near Chicago, Sayers is a value added reseller and provides technology solutions for mid- to large-sized businesses.

Outlook

The Company forecasts revenue for the first quarter to be between $10.0 million and $10.1 million and fully diluted adjusted earnings per share of $0.04. Full-year 2012 revenues are projected to be between $41 million and $43 million. Fully diluted Non-GAAP adjusted earnings per share, which are adjusted primarily for non-cash stock-based compensation and non-recurring expense items, are projected to be between $0.19 and $0.20.

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