INVESTORS

investors

News Release

<< Back
Printer Friendly Version View printer-friendly version
Records in Both Revenues and Email Encryption Orders Highlight Zix Corporation's Fourth Quarter and Year-End 2009 Results
PDF File

ZixCorp projects that it will achieve annual profitability for the first time in 2010
 

DALLAS, Feb 16, 2010 /PRNewswire via COMTEX/ -- Zix Corporation (ZixCorp(R)), (Nasdaq: ZIXI), the leader in hosted services for email encryption, today announced financial results for the fourth quarter ended December 31, 2009. ZixCorp recorded fourth quarter revenues of $8.2 million and a GAAP net loss of $0.3 million for the quarter, or $0.00 per share, compared with revenues of $7.2 million, and a GAAP net loss of $0.9 million, or $0.01 per share, in the corresponding quarter of 2008. Total revenues for the full year 2009 were $30.7 million compared with $28.0 million in 2008. GAAP net loss for the full year 2009 was $4.4 million, or $0.07 per share, compared with a GAAP net loss of $5.4 million, or $0.09 per share, in 2008. Total cash and cash equivalents as of December 31, 2009 were $13.3 million, reflecting a slight increase over year end 2008.

 "ZixCorp delivered an excellent fourth quarter to complete a very solid year in 2009," said Rick Spurr, Chairman of the Board and Chief Executive Officer. "Record revenues for our Email Encryption business in the fourth quarter led to record quarterly and annual overall revenues for the Company in 2009, our fifth consecutive quarter of growth. Record orders for our Email Encryption business in the fourth quarter point toward a continued strong top-line performance in 2010. Due to the expansion of HIPAA regulations under the American Recovery and Reinvestment Act of 2009 driving demand in our core healthcare vertical, our track record of consistent success in securing deals in the financial services and government sectors, the superiority of our Software as a Service ("SaaS") offering supported by the largest directory of users in the industry and the consolidation in the email encryption industry around just a few competitors, I am confident we'll have a strong year in the Email Encryption business. With the announcement of our planned exit from the e-Prescribing segment and wind down of that business over the course of this year, I am very pleased to report we are now projecting that 2010 will be the first year of profitability in the history of this Company."

Corporate Highlights

Note: For full financial details, reconciliations of non-GAAP financial measures, and a description of adjusting items, see "Use of Non-GAAP Financial Information" and the "Reconciliation of GAAP to Non-GAAP Financial Measures" presented with attached financial statements.

  • Company-wide fourth quarter 2009 revenue of $8.2 million was up 14 percent over the comparable quarter in 2008, exceeding previously-issued revenue guidance of $7.9 to $8.1 million. Company-wide revenue for all of 2009 was $30.7 million, an increase of 9 percent over 2008
  • The Company's year-end balance of cash and cash equivalents was $13.3 million, up slightly over the 2008 ending cash balance of $13.2 million
  • The Company achieved the high end of its fourth quarter guidance for non-GAAP adjusted earnings per share of $0.02, resulting in an adjusted earnings per share of $0.01 for the year 2009, the Company's first ever year with positive adjusted earnings per share

Business Highlights

Email Encryption

  • Email Encryption revenue for fourth quarter 2009 was a record $7.1 million, up 17 percent over the fourth quarter 2008. The full year 2009 revenues for Email Encryption of $26.4 million also represented a 17% increase over 2008
  • Email Encryption achieved a record in new first-year orders for the fourth quarter 2009 of $2.4 million, 35 percent higher than any previous quarter and 61 percent higher than the $1.5 million in the comparable quarter of 2008. For the full year 2009, new first-year orders were a record $6.5 million, a 19 percent increase over 2008. Total orders for 2009 were also a record at $35.2 million, an increase of 20 percent over 2008
  • ZixCorp maintained a strong renewal rate for eligible contracts at 92.5 percent for the fourth quarter, resulting in a rate of 91 percent for the year
  • The ZixDirectory(TM), the community of users which forms the backbone of ZixCorp's Email Encryption Service, recently achieved a new milestone, topping 20 million members, growing at a rate of approximately 100,000 new addresses each week
  • ZixCorp also surpassed 1,200 financial services customers using its Email Encryption Service
  • During the fourth quarter, the Company renewed its OEM contract with Google, its largest channel partner

e-Prescribing

  • On December 8, 2009, ZixCorp announced its planned exit from the e-Prescribing business. The Company is targeting to exit this business on December 31, 2010, while fulfilling its existing obligations to customers and partners
  • e-Prescribing revenue for fourth quarter 2009 was $1.1 million, essentially flat when compared with the fourth quarter in 2008. Full-year revenue of $4.2 million in 2009 represented a 22 percent decline from 2008, or approximately $1.2 million

Financial Highlights

Note: All gross profit and expenditure explanations below are based on adjusted non-GAAP amounts, the primary adjustments of which are non-cash stock-based compensation and non-recurring expense items - see "Use of Non-GAAP Financial Information" below and the "Reconciliation of GAAP to Non-GAAP Financial Measures" presented with attached financial statements.

Revenues by Product Fourth Quarter and Full Year 2008 - 2009

                                                            3-month Variance
                              3 Months Ended December 31,    2009 vs. 2008
                              ---------------------------   ----------------
                                    2009         2008          $         %
                                    ----         ----         ---       ---

    Email Encryption             $7,101,000   $6,070,000  $1,031,000    17%
    e-Prescribing                 1,088,000    1,099,000     (11,000)   (1%)
                                  ---------    ---------     -------
    Total revenues               $8,189,000   $7,169,000  $1,020,000    14%
                                 ==========   ==========  ==========

                                                           12-month Variance
                             12 Months Ended December 31,   2009 vs. 2008
                             ----------------------------  -----------------
                                    2009         2008          $         %
                                    ----         ----         ---       ---
    Email Encryption            $26,407,000  $22,604,000  $3,803,000    17%
    e-Prescribing                 4,244,000    5,431,000  (1,187,000)  (22%)
                                  ---------    ---------  ----------
    Total revenues              $30,651,000  $28,035,000  $2,616,000     9%
                                ===========  ===========  ==========


Revenues: The Company's Email Encryption business had its highest quarterly revenue in Company history, while the e-Prescribing quarterly revenue was flat when compared to 2008. The increase in annual Email Encryption revenue was due to the revenue growth inherent in a successful subscription model with steady additions to the subscriber base coupled with a high rate of renewing existing customers, which was 91 percent for the year. For full year 2009, the e-Prescribing revenue decline was driven primarily by lower deployments in 2008 and early 2009 compared with the previous 12 months, a drop in fee revenue relative to 2008 after reaching the contractual cap in one customer program in the first half of 2008 and a one-time contractual catch-up that occurred in early 2008. The Company's order backlog (contractually bound service contracts that represent future revenue to be recognized as the services are provided) was a record $44.5 million on December 31, 2009.

Gross Profit: The Company recorded the highest gross profit in its history with $6.3 million (77 percent of revenue) for the fourth quarter 2009, as compared with $4.9 million or 68 percent of revenue for the same period in 2008. For the fourth quarter 2009, the gross profit from the Email Encryption business was $5.8 million (82 percent gross margin), while the gross profit from e-Prescribing was $0.5 million (43 percent gross margin). For full year 2009, the Company-wide gross profit was $22.1 million (72 percent gross margin), a 20 percent improvement over the $18.5 million gross profit for 2008. The annual year-on-year gross profit improvement came from solid revenue growth in Email Encryption on a largely fixed cost structure and a slight improvement in e-Prescribing gross profit where e-Prescribing cost of revenues decreased by more than the decline in e-Prescribing revenues described above due to lower headcount in e-Prescribing and, because of that lower headcount, a shift in the allocation of shared expenses, such as corporate costs including insurance and facility costs and personnel-related costs for employees who provide services for both lines of business.

R&D and SG&A Expenditures: In the fourth quarter 2009, the Company's research and development (R&D) expense was $1.5 million, a 3 percent decrease compared with the fourth quarter in 2008. Full-year 2009 R&D expenses were $6.5 million, an increase of 10 percent over 2008 as the Company continued to invest in its Email Encryption business, primarily in areas including multiple language support, design improvements such as increased deployment speed and feature enhancements, such as improved reporting functionality. Sales, general and administrative (SG&A) expenses were $3.5 million in the fourth quarter 2009, a decline of 11 percent compared with the same period in 2008, primarily due to reduced headcount in the Company's e-Prescribing business. Full-year 2009 SG&A expenses were $15.2 million, a decrease of 5 percent when compared with 2008.

Adjusted Earnings: The Company recorded adjusted net income of $1.2 million, or $0.02 per share for the fourth quarter of 2009, compared with an adjusted net loss of $0.3 million or $0.00 loss per share for the comparable quarter of 2008. The increase in adjusted net income resulted from growth in revenue combined with the decline in cost of sales and operating expenses, primarily SG&A as noted above, compared with 2008. Full-year adjusted earnings were $0.5 million, or $0.01 per share, the Company's first positive annual adjusted earnings, compared with a loss of $2.9 million, or $0.05 loss per share, in 2008.

Outlook: The Company forecasts revenue for the first quarter to be between $8.0 and $8.2 million, based on growth in Email Encryption and continued decline in e-Prescribing revenues as the Company winds down the business. Fully-diluted adjusted earnings per share are expected to be between $0.01 and $0.02 in the quarter, reflecting some increase in costs, such as the Company's investment in Email Encryption sales and marketing. The Company also reiterated full-year 2010 guidance provided in January, with revenues projected to be between $34 and $36 million and positive net income for the first time, on both a GAAP and an adjusted, non-GAAP basis. Basic GAAP earnings per share are projected to be between $0.06 and $0.09 for the year, and fully-diluted earnings per share are projected to be between $0.05 and $0.08 for the year, assuming 67 million shares outstanding. 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 $0.08 and $0.11.

Fourth Quarter and Year-End Conference Call Information

The Company's conference call to discuss this information will occur on February 16, 2010 at 5:00 p.m. ET. A live webcast of the conference call will be available on the investor relations portion of ZixCorp's website at http://investor.zixcorp.com. Alternatively, participants can listen to the conference call by dialing 617-213-8833 or toll-free 866-700-5192 and entering access code 18258596. An audio replay of the conference will be available until February 23, by dialing 617-801-6888 or toll-free 888-286-8010 and entering the access code 13713238, and after that date via webcast from the Company's website.

About Zix Corporation

Zix Corporation is the leader in email encryption services. ZixCorp offers the simplicity of Software as a Service with the convenience of customizable encryption policies. ZixCorp provides automated key management "in the cloud" for all its customers, resulting in a scalable, reliable, easy-to-use and simple-to-administer service. ZixDirectory is the largest email encryption directory in the world enabling seamless and secure communication among communities of interest. ZixDirectory connects over 20 million members and includes over 1,200 financial institutions, the FFIEC federal banking regulators, over 1,000 hospitals, over 30 Blue Cross Blue Shield organizations and 20 state banking regulators. For more information, visit http://www.zixcorp.com/

Statements in this release that are not purely historical facts or that necessarily depend upon future events, including statements about exiting the e-Prescribing business, forecasts of revenue or earnings, 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 ZixCorp on the date this release was issued. ZixCorp 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 risks or uncertainties related to ZixCorp's ability to establish and maintain strategic and OEM relationships to gain customers and grow revenues in its Email Encryption business. ZixCorp may not succeed in addressing these and other risks. Further information regarding factors that could affect ZixCorp financial and other results can be found in the risk factors section of ZixCorp's most recent filing on Form 10-Q with the Securities and Exchange Commission.

                               ZIX CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                             December 31,
                                                 2009       December 31,
                                             (unaudited)       2008
                                             ------------   -----------
    ASSETS
    Current assets:
      Cash and cash equivalents               $13,287,000   $13,245,000
      Marketable securities                        25,000             -
      Receivables, net                            760,000       476,000
      Prepaid and other current assets          1,142,000     1,145,000
                                                ---------     ---------
        Total current assets                   15,214,000    14,866,000
    Restricted cash                                     -        28,000
    Property and equipment, net                 2,137,000     2,236,000
    Goodwill and other assets                   2,397,000     2,227,000
                                                ---------     ---------
        Total assets                          $19,748,000   $19,357,000
                                              ===========   ===========


    LIABILITIES AND STOCKHOLDERS' DEFICIT
    Current liabilities:
      Accounts payable and accrued expenses    $3,893,000    $2,916,000
      Deferred revenue                         14,478,000    14,960,000
      License subscription note payable           126,000             -
                                                  -------           ---
        Total current liabilities              18,497,000    17,876,000
    Long-term liabilities:
      Deferred revenue                          2,821,000     2,484,000
      License subscription note payable,
       non-current                                186,000             -
      Deferred rent                               233,000       300,000
                                                  -------       -------
        Total long-term liabilities             3,240,000     2,784,000
                                                ---------     ---------
        Total liabilities                      21,737,000    20,660,000
        Total stockholders' deficit            (1,989,000)   (1,303,000)
                                               ----------    ----------
        Total liabilities and stockholders'
         deficit                              $19,748,000   $19,357,000
                                              ===========   ===========



                                  ZIX CORPORATION
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (Unaudited)

                                Three Months Ended      Twelve Months Ended
                                   December 31,             December 31,
                                ------------------      -------------------
                                 2009        2008         2009         2008
                                 ----        ----         ----         ----
    Revenues                 $8,189,000  $7,169,000  $30,651,000  $28,035,000

    Cost of revenues          2,296,000   2,345,000    9,384,000    9,850,000
                              ---------   ---------    ---------    ---------
    Gross profit              5,893,000   4,824,000   21,267,000   18,185,000
    Operating expenses:
      Research and
       development            1,710,000   1,642,000    6,948,000    6,158,000
      Selling, general and
       administrative         4,451,000   4,377,000   18,880,000   18,033,000
                              ---------   ---------   ----------   ----------
        Total operating
         expenses             6,161,000   6,019,000   25,828,000   24,191,000
                              ---------   ---------   ----------   ----------

    Operating loss             (268,000) (1,195,000)  (4,561,000)  (6,006,000)

    Other income, net            17,000     171,000      193,000      606,000

    Loss before income taxes   (251,000) (1,024,000)  (4,368,000)  (5,400,000)
    Provision for income
     taxes                      (60,000)    145,000      (67,000)     (42,000)
                                -------     -------      -------      -------

    Net loss                  $(311,000)  $(879,000) $(4,435,000) $(5,442,000)
                              =========   =========  ===========  ===========

    Basic and diluted loss
     per common share            $(0.00)     $(0.01)      $(0.07)      $(0.09)
                                 ======      ======       ======       ======

    Basic and diluted
     weighted average
     common shares
     outstanding             63,679,004  63,244,489   63,422,088   62,981,958
                             ==========  ==========   ==========   ==========



                                 ZIX CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                       Twelve Months Ended
                                                           December 31,
                                                       -------------------
                                                           2009         2008
                                                           ----         ----
    Operating activities:
      Net loss                                      $(4,435,000) $(5,442,000)
      Non-cash items in net loss                      4,426,000    4,998,000
      Changes in operating assets and liabilities       612,000    2,508,000
                                                        -------    ---------
          Net cash provided by operating activities     603,000    2,064,000

    Investing activities:
      Purchases of property and equipment            (1,141,000)  (1,238,000)
      Restricted cash investments and marketable
       securities, net                                    3,000    1,731,000
                                                          -----    ---------
          Net cash (used in) provided by
           investing activities                      (1,138,000)     493,000

    Financing activities:
      Proceeds from exercise of stock options            19,000      164,000
      Proceeds from exercise of warrants                636,000            -
      Payment of promissory note                        (78,000)           -
                                                        -------          ---
          Net cash provided by financing activities     577,000      164,000
                                                        -------      -------

    Increase  in cash and cash equivalents               42,000    2,721,000
    Cash and cash equivalents, beginning of year     13,245,000   10,524,000
                                                     ----------   ----------
    Cash and cash equivalents, end of year          $13,287,000  $13,245,000
                                                    ===========  ===========



                                      ZIX CORPORATION
                   RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
                                        (Unaudited)

                                Three Months Ended       Twelve Months Ended
                                   December 31,              December 31,
                                ------------------       -------------------
                                2009          2008       2009           2008
                                ----          ----       ----           ----
    Revenue:
      GAAP revenue          $8,189,000   $7,169,000  $30,651,000  $28,035,000
                            ==========   ==========  ===========  ===========

    Gross profit:
      GAAP gross profit     $5,893,000   $4,824,000  $21,267,000  $18,185,000
      Stock-based
       compensation
       charges (1)       (A)    54,000       68,000      387,000      304,000
      Non-recurring
       severance
       payments (2)      (B)   284,000            -      376,000            -
      Expenses related
       to wind-down of
       e-Prescribing
       business (3)      (C)    84,000            -       84,000            -
                                ------          ---       ------          ---
        Non-GAAP
         adjusted
         gross profit       $6,315,000   $4,892,000  $22,114,000  $18,489,000
                            ----------   ----------  -----------  -----------

    Operating income
     (loss):
      GAAP operating
       loss                  $(268,000) $(1,195,000) $(4,561,000) $(6,006,000)
      Stock-based
       compensation
       charges (1)       (A)   596,000      599,000    3,094,000    2,546,000
      Non-recurring
       severance
       payments (2)      (B)   732,000            -    1,451,000            -
      Expenses related
       to wind-down of
       e-Prescribing
       business (3)      (C)   225,000            -      393,000            -
                               -------          ---      -------          ---
        Non-GAAP
         adjusted
         operating
         income (loss)      $1,285,000    $(596,000)    $377,000  $(3,460,000)
                            ==========    =========     ========  ===========

    Net income (loss):
      GAAP net (loss)        $(311,000)   $(879,000) $(4,435,000) $(5,442,000)
      Stock-based
       compensation
       charges (1)       (A)   596,000      599,000    3,094,000    2,546,000
      Non-recurring
       severance
       payments (2)      (B)   732,000            -    1,451,000            -
      Expenses
       related to
       wind-down of
       e-Prescribing
       business (3)      (C)   225,000            -      393,000            -
      Income tax impact  (D)     3,000      (41,000)       3,000        7,000
                                 -----      -------        -----        -----
        Non-GAAP
         adjusted net
         income (loss)      $1,245,000    $(321,000)    $506,000  $(2,889,000)
                            ==========    =========     ========  ===========

    Net income (loss)
     per share - basic:
      GAAP net loss per
       share - basic            $(0.00)      $(0.01)      $(0.07)      $(0.09)
      Adjustments per
       share            (A-D)     0.02         0.01         0.08         0.04
                                  ----         ----         ----         ----
        Non-GAAP
         adjusted net
         income (loss)
         per share *             $0.02       $(0.00)       $0.01       $(0.05)
                                 =====       ======        =====       ======

      Shares used to
       compute non-GAAP
       adjusted net
       income per share     63,679,004   63,244,489   63,422,088   62,981,958


    (1) Stock-based
         compensation
         charges are
         included as
         follows:
        Cost of revenues       $54,000      $68,000     $387,000     $304,000
        Research and
         development            58,000       60,000      338,000      255,000
        Selling, general
         and administrative    484,000      471,000    2,369,000    1,987,000
                               -------      -------    ---------    ---------
                              $596,000     $599,000   $3,094,000   $2,546,000
                              ========     ========   ==========   ==========

    (2) Non-recurring
         severance
         payments are
         included as
         follows:
        Cost of revenues      $284,000           $-     $376,000           $-
        Research and
         development           111,000            -      119,000            -
        Selling, general
         and administrative    337,000            -      956,000            -
                               -------          ---      -------          ---
                              $732,000           $-   $1,451,000           $-
                              ========          ===   ==========          ===

    (3) Expenses related
         to the wind-down
         of e-Prescribing
         business are
         included as
         follows:
        Cost of revenues       $84,000           $-      $84,000           $-
        Research and
         development                 -            -            -            -
        Selling, general
         and administrative    141,000            -      309,000            -
                               -------          ---      -------          ---
                              $225,000           $-     $393,000           $-
                              ========          ===     ========          ===

* Non-GAAP adjusted net income (loss) per share is computed independently for each period presented. 
The sum of GAAP net income (loss) per share and non-GAAP adjustments may not equal non-GAAP adjusted 
net income (loss) per share due to rounding differences.

  This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in 
isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our
consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments 
made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these
measures and the material limitations of these measures, see items (A) through (D) on the next page.

                                                                 ZIX CORPORATION
                       NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

USE OF NON-GAAP FINANCIAL INFORMATION

The Company occasionally utilizes financial measures and terms not calculated in accordance with generally accepted 
accounting principles in the United States ("GAAP") in order to provide investors with an alternative method for assessing 
our operating results in a manner that enables investors to more thoroughly evaluate our current performance as compared 
to past performance. We also believe these non-GAAP measures provide investors with a more informed baseline for 
modeling the Company's future financial performance. Management uses these non-GAAP financial measures to make 
operational and investment decisions, to evaluate the Company's performance, to forecast and to determine compensation. 
Further, management utilizes these performance measures for purposes of comparison with its business plan and individual 
operating budgets and allocation of resources.  We believe that our investors should have access to, and that we are 
obligated to provide, the same set of tools that we use in analyzing our results. These non-GAAP measures should be 
considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior
to GAAP results. We have provided definitions below for certain non-GAAP financial measures, together with an explanation 
of why management uses these measures and why management believes that these non-GAAP financial measures are useful
to investors. In addition, in our Earnings Release we have provided tables to reconcile the non-GAAP financial measures utilized
to GAAP financial measures.

ADJUSTED NON-GAAP MEASURES

Our non-GAAP measures adjust GAAP Gross profit, Operating income (loss), Net income (loss) and Net income (loss) per 
share - basic for non-cash stock-based compensation expense, non-recurring severance expenses and expense related to the 
wind-down of our e-Prescribing business to derive non-GAAP adjusted Gross profit, adjusted Operating income (loss), adjusted 
Net income (loss) and adjusted Net income (loss) per share - basic. We provide a reconciliation of these adjusted non-GAAP 
measures to GAAP Gross profit, Operating income (loss), Net income (loss) and Net income (loss) per share - basic.

Items (A) through (D) on the "Reconciliation of GAAP to Non-GAAP Financial Measures" table are listed to the right of certain 
categories under "Gross profit', "Operating income (loss)", "Net income (loss)" and "Net income (loss) per share - basic" and 
correspond to the categories explained in further detail below under (A) through (D).
     
    (A)  Non-cash stock-based compensation charges relating to stock option grants awarded to employees and third-party 
    service providers and accounted for in accordance with Share-Based Payment accounting guidance. See (1) on previous page 
    for breakdown of stock-based compensation. Because of varying valuation methodologies, subjective assumptions and varying 
    award types, the Company believes that the exclusion of stock-based compensation charges provides for more accurate 
    comparisons to our peer companies, and for a more accurate comparison of our financial results to previous periods. 
    Additionally, the Company believes it is useful to investors to understand the specific impact of non-cash stock-based 
    compensation charges on our operating results.
    
    (B) Severance payments related to reduction in workforce.  See item (2) on the previous page for breakdown of severance 
    payments. The Company's management excludes these costs when evaluating the ongoing performance and/or predicting
    its earnings trends, and therefore excludes these charges when presenting non-GAAP financial measures.
     
    (C) Expenses related to strategic review and wind-down of the Company's e-Prescribing business segment including $84,000
    write-off of e-Prescribing inventory. See item (3) on the previous page for breakdown of expenses related to the wind-down of 
    the Company's e-Prescribing business. The Company's management excludes these costs when evaluating the ongoing
    performance and/or predicting its earnings trends, and therefore excludes these charges when presenting non-GAAP financial
    measures.
     
    (D) The Company's U.S. operations' net losses for U.S. tax purposes are fully provisioned.  The non-GAAP provision for 
    income taxes represents expected cash taxes to be paid.
    
    SOURCE: Zix Corporation