Zix Corp. ( ZIXI) Q1 2011 Earnings Call April 26, 2011 5:00 pm ET Executives Geoff Bibby - VP, Corporate Marketing Rick Spurr - CEO Mike English - Controller Analysts Mike Malouf - Craig-Hallum Jeb Terry - Aberdeen Presentation Operator
The company undertakes no obligation to publicly update or revise any forward-looking statements. Forward-looking statements are subject to risks that could cause actual results to differ materially from our expectations. The risk factors section of the company's most recent 10-K filing with the SEC gives some examples of those risks.Rick and Mike will refer to various non-GAAP financial measures, such as adjusted gross profit, adjusted operating expense, adjusted earnings and adjusted EBITDA. You can find in our earnings press release and on our investor website, detailed explanations of our non-GAAP financial measures along with reconciliations of our adjusting items to the most directly comparable GAAP financial measures. Now, I'm pleased to turn the call over to Rick. Rick Spurr Good afternoon everyone, and thank you for joining Zix Corporation's 2011 first quarter conference call. I am pleased to report another solid quarter for the company as we continue to build upon the momentum of a very strong 2010. As we have stated over the past few quarters, we continue to build a solid and predictable business based on our successful subscription model. As a result, we reported $9.3 million in revenue in the first quarter, up from 24% year-over-year, and slightly above our guidance of $9 million to $9.2 million. This quarter represented the strongest Email Encryption quarter in the company's history, outpacing last quarter's $8.8 million in revenue. New first year orders for the quarter were $1.5 million, down from $2.2 million in the first quarter of 2010 and below our internal expectations. We believe our new first year orders were impacted by several factors, none of which appear to be long-lasting or recurring. I'll elaborate on some of these factors later in the call. Total bookings for the first quarter came in slightly below last year's Q1 number at $9 million, down 3% primarily due to the decline in new first year orders. Our bookings backlog at the end of March was $49.7 million, up 12% over Q1 of 2010.
As most of you know, last year was our first full whole year of GAAP profitability, and we are pleased to report that we continued that trend this quarter, recording our fifth consecutive quarter of GAAP profitability. Our GAAP net income for the quarter was $2.4 million or $0.03 per share, an increase of 237% over the first quarter of last year. Our non-GAAP adjusted net income for the quarter was $2.5 million, an increase of 104% year-over-year and resulted in $0.04 per share on a fully diluted basis.During the quarter, we generated approximately $3.5 million in cash flow from operations, an increase of $900,000 year-over-year. We ended the quarter with a cash balance, including investments in commercial paper of $24.1 million, which was down to $570,000 from our year-end 2010 as a result of our share repurchase plan. In the first quarter, we bought back $5 million worth of our own stock as part of the share repurchase program we initiated in March of this year. Mike English will provide more details on the buyback in his remarks. But to summarize, we feel our healthy balance sheet and strong cash flow provide us an opportunity to invest in growing our business while also driving value to our shareholders through a share repurchase. The last metric I want to cover in my overview is our ZixDirectory membership. We continue to add to our industry-unique cloud-based ZixDirectory, which currently has 26 million members, including some of the most respected institutions in the country. This year, Directory architecture the only one of its kind, allows for unequalled ease of use, most notably through our transparent email encryption capability, and is growing at approximately 100,000 new members per week. Now, let's discuss what happened during the first quarter with our new first year orders. But first of all to review, we have three sources of new first year orders. The first is our direct enterprise group, which is aptly named sales Direct to large commercial enterprises. Read the rest of this transcript for free on seekingalpha.com