UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2020
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-17995
ZIX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
|
Texas |
|
75-2216818 |
|
(State of Incorporation) |
|
(I.R.S. Employer Identification Number) |
2711 North Haskell Avenue
Suite 2200, LB 36
Dallas, Texas 75204-2960
(Address of Principal Executive Offices)
(214) 370-2000
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☒ |
|
|
|
|
|
|
|
|
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☐ |
|
Emerging growth company |
|
☐ |
|
|
|
|
If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class |
|
Outstanding at May 5, 2020 |
|
Common Stock, par value $0.01 per share |
|
56,925,946 |
Securities registered pursuant to Section 12(b) of the Exchange Act:
|
Title of Each Class |
|
Trading Symbols(s) |
|
Name of Exchange on Which Registered |
|
Common Stock, par value $0.01 per share |
|
ZIXI |
|
NASDAQ Global Market |
|
|
|
|
|
Page Number |
|
PART I — FINANCIAL INFORMATION |
|
|
||
|
Item 1. |
|
Financial Statements (Unaudited) |
|
|
|
|
|
Condensed Consolidated Balance Sheets at March 31, 2020 (unaudited) and December 31, 2019 |
|
3 |
|
|
|
|
4 |
|
|
|
|
|
5 |
|
|
|
|
|
7 |
|
|
|
|
|
8 |
|
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
22 |
|
Item 3. |
|
|
29 |
|
|
Item 4. |
|
|
29 |
|
|
|
|
|||
|
Item 1. |
|
|
30 |
|
|
Item 1A. |
|
|
30 |
|
|
Item 2. |
|
|
30 |
|
|
Item 3. |
|
|
30 |
|
|
Item 4. |
|
|
31 |
|
|
Item 5. |
|
|
31 |
|
|
Item 6. |
|
|
32 |
|
2
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands, except share and par value data) |
|
March 31, 2020 |
|
|
December 31, 2019 |
|
||
|
|
|
(unaudited) |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
16,295 |
|
|
$ |
13,349 |
|
|
Receivables, net |
|
|
13,037 |
|
|
|
10,081 |
|
|
Prepaid and other current assets |
|
|
4,796 |
|
|
|
4,984 |
|
|
Total current assets |
|
|
34,128 |
|
|
|
28,414 |
|
|
Property and equipment, net |
|
|
8,368 |
|
|
|
8,591 |
|
|
Operating lease assets |
|
|
9,709 |
|
|
|
10,128 |
|
|
Intangible assets, net |
|
|
142,993 |
|
|
|
145,876 |
|
|
Goodwill |
|
|
170,377 |
|
|
|
171,209 |
|
|
Deferred tax assets |
|
|
37,423 |
|
|
|
36,535 |
|
|
Deferred costs and other assets |
|
|
12,302 |
|
|
|
11,968 |
|
|
Total assets |
|
$ |
415,300 |
|
|
$ |
412,721 |
|
|
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
14,954 |
|
|
$ |
14,400 |
|
|
Accrued expenses |
|
|
11,164 |
|
|
|
13,732 |
|
|
Deferred revenue |
|
|
42,417 |
|
|
|
40,757 |
|
|
Current portion of long-term debt |
|
|
1,850 |
|
|
|
1,850 |
|
|
Operating lease liabilities, current |
|
|
2,690 |
|
|
|
2,947 |
|
|
Finance lease liabilities, current |
|
|
1,134 |
|
|
|
1,338 |
|
|
Total current liabilities |
|
|
74,209 |
|
|
|
75,024 |
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
1,994 |
|
|
|
2,524 |
|
|
Noncurrent operating lease liabilities |
|
|
8,197 |
|
|
|
8,389 |
|
|
Noncurrent finance lease liabilities |
|
|
515 |
|
|
|
716 |
|
|
Long-term debt |
|
|
184,107 |
|
|
|
178,250 |
|
|
Total long-term liabilities |
|
|
194,813 |
|
|
|
189,879 |
|
|
Total liabilities |
|
|
269,022 |
|
|
|
264,903 |
|
|
Commitments and contingencies (see Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock: |
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $1 par value; 100,206 shares designated, issued and outstanding in 2020 and in 2019 |
|
|
108,756 |
|
|
|
106,527 |
|
|
Total preferred stock |
|
|
108,756 |
|
|
|
106,527 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Preferred stock, $1 par value, 10,000,000 shares authorized; none issued and outstanding |
|
|
— |
|
|
|
— |
|
|
Common stock, $0.01 par value, 175,000,000 shares authorized; 84,953,964 issued and 56,962,705 outstanding in 2020 and 83,393,514 issued and 55,640,397 outstanding in 2019 |
|
|
781 |
|
|
|
780 |
|
|
Additional paid-in capital |
|
|
393,710 |
|
|
|
391,605 |
|
|
Treasury stock, at cost; 27,991,259 common shares in 2020 and 27,753,117 common shares in 2019 |
|
|
(112,083 |
) |
|
|
(110,298 |
) |
|
Accumulated deficit |
|
|
(244,180 |
) |
|
|
(240,995 |
) |
|
Accumulated other comprehensive income (loss) |
|
|
(706 |
) |
|
|
199 |
|
|
Total stockholders’ equity |
|
|
37,522 |
|
|
|
41,291 |
|
|
Total liabilities, preferred stock and stockholders’ equity |
|
$ |
415,300 |
|
|
$ |
412,721 |
|
See notes to condensed consolidated financial statements.
3
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
(In thousands, except share and per share data) |
|
2020 |
|
|
2019 |
|
||
|
Revenue |
|
$ |
52,434 |
|
|
$ |
29,300 |
|
|
Cost of revenue |
|
|
26,079 |
|
|
|
11,139 |
|
|
Gross margin |
|
|
26,355 |
|
|
|
18,161 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
5,386 |
|
|
|
4,147 |
|
|
Selling, general and administrative |
|
|
20,029 |
|
|
|
20,264 |
|
|
Total operating expenses |
|
|
25,415 |
|
|
|
24,411 |
|
|
Operating income (loss) |
|
|
940 |
|
|
|
(6,250 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Investment and other income (expense) |
|
|
(15 |
) |
|
|
92 |
|
|
Interest expense |
|
|
(2,648 |
) |
|
|
(1,255 |
) |
|
Total other (expense) income |
|
|
(2,663 |
) |
|
|
(1,163 |
) |
|
Loss before income taxes |
|
|
(1,723 |
) |
|
|
(7,413 |
) |
|
Income tax benefit |
|
|
870 |
|
|
|
1,148 |
|
|
Net loss |
|
$ |
(853 |
) |
|
$ |
(6,265 |
) |
|
|
|
|
|
|
|
|
|
|
|
Deemed and accrued dividends on preferred stock |
|
|
2,229 |
|
|
|
2,433 |
|
|
Net loss attributable to common stockholders |
|
$ |
(3,082 |
) |
|
$ |
(8,698 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share attributable to common stockholders |
|
$ |
(0.06 |
) |
|
$ |
(0.17 |
) |
|
Diluted loss per common share attributable to common stockholders |
|
$ |
(0.06 |
) |
|
$ |
(0.17 |
) |
|
Basic weighted average common shares outstanding |
|
|
53,496,042 |
|
|
|
52,713,576 |
|
|
Diluted weighted average common shares outstanding |
|
|
53,496,042 |
|
|
|
52,713,576 |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
(905 |
) |
|
|
(32 |
) |
|
Comprehensive loss |
|
$ |
(1,758 |
) |
|
$ |
(6,297 |
) |
See notes to condensed consolidated financial statements
4
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
|
Preferred Stock and Stockholders’ Equity |
|
|||||||||||||||||||||||||||||||||
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
Total |
|
|||||||||||||
|
(In thousands, except shares) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-In Capital |
|
|
Treasury Stock |
|
|
Accumulated Deficit |
|
|
Comprehensive Income (Loss) |
|
|
Stockholders’ Equity |
|
|||||||||
|
Balances, December 31, 2019, as reported |
|
|
100,206 |
|
|
$ |
106,257 |
|
|
|
83,393,514 |
|
|
$ |
780 |
|
|
$ |
391,605 |
|
|
$ |
(110,298 |
) |
|
$ |
(240,995 |
) |
|
$ |
199 |
|
|
$ |
41,291 |
|
|
Cumulative effect adjustment from changes in accounting standard (Note 2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(103 |
) |
|
|
— |
|
|
|
(103 |
) |
|
Balance, January 01, 2020 |
|
|
100,206 |
|
|
|
106,257 |
|
|
|
83,393,514 |
|
|
|
780 |
|
|
|
391,605 |
|
|
|
(110,298 |
) |
|
|
(241,098 |
) |
|
|
199 |
|
|
|
41,188 |
|
|
Accretion of beneficial conversion feature of Series A Preferred Shares (Participating) |
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(48 |
) |
|
|
— |
|
|
|
(48 |
) |
|
Accrued dividend on Series A preferred stock |
|
|
— |
|
|
|
2,181 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,181 |
) |
|
|
— |
|
|
|
(2,181 |
) |
|
Net issuance of common stock upon exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
46,875 |
|
|
|
1 |
|
|
|
116 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
117 |
|
|
Net issuance of common stock upon vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
30,084 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net issuance of common stock upon vesting of performance stock units |
|
|
— |
|
|
|
— |
|
|
|
16,062 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net issuance of restricted common stock |
|
|
— |
|
|
|
— |
|
|
|
1,062,983 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net issuance of restricted performance common stock |
|
|
— |
|
|
|
— |
|
|
|
404,746 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Employee stock-based compensation costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,989 |
|
|
|
(1,785 |
) |
|
|
— |
|
|
|
— |
|
|
|
204 |
|
|
Adjustment from foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(905 |
) |
|
|
(905 |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(853 |
) |
|
|
— |
|
|
|
(853 |
) |
|
Balances, March 31, 2020 |
|
|
100,206 |
|
|
$ |
108,486 |
|
|
|
84,954,264 |
|
|
$ |
781 |
|
|
$ |
393,710 |
|
|
$ |
(112,083 |
) |
|
$ |
(244,180 |
) |
|
$ |
(706 |
) |
|
$ |
37,522 |
|
See notes to condensed consolidated financial statements.
5
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(Unaudited)
Continued
|
|
|
Preferred Stock and Stockholders’ Equity |
|
|||||||||||||||||||||||||||||||||
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
Total |
|
|||||||||||||
|
(In thousands, except shares) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-In Capital |
|
|
Treasury Stock |
|
|
Accumulated Deficit |
|
|
Comprehensive Income (Loss) |
|
|
Stockholders’ Equity |
|
|||||||||
|
Balances, December 31, 2018, as reported |
|
|
— |
|
|
$ |
— |
|
|
|
81,715,330 |
|
|
$ |
779 |
|
|
$ |
384,940 |
|
|
$ |
(108,392 |
) |
|
$ |
(216,364 |
) |
|
$ |
(16 |
) |
|
$ |
60,947 |
|
|
Issuance of Series A preferred stock in connection with private placement, net of issuance costs of $2,253 |
|
|
64,914 |
|
|
|
62,662 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of Series B preferred stock in connection with private placement, net of issuance costs of $1,204 |
|
|
35,086 |
|
|
|
33,881 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Beneficial conversion feature of Series A preferred stock |
|
|
— |
|
|
|
1,407 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,407 |
) |
|
|
— |
|
|
|
(1,407 |
) |
|
Accretion of beneficial conversion feature of Series A Preferred Shares (Participating) |
|
|
— |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
|
|
(12 |
) |
|
Accrued dividend on Series A preferred stock |
|
|
— |
|
|
|
563 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(563 |
) |
|
|
— |
|
|
|
(563 |
) |
|
Accrued dividend on Series B preferred stock |
|
|
— |
|
|
|
380 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(380 |
) |
|
|
— |
|
|
|
(380 |
) |
|
Redemption Accretion of Series B preferred stock |
|
|
— |
|
|
|
71 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(71 |
) |
|
|
— |
|
|
|
(71 |
) |
|
Net issuance of common stock upon exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
17,438 |
|
|
|
— |
|
|
|
36 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
36 |
|
|
Net issuance of common stock upon vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
40,334 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net issuance of common stock upon vesting of performance stock units |
|
|
— |
|
|
|
— |
|
|
|
392,500 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net issuance of restricted common stock |
|
|
— |
|
|
|
— |
|
|
|
1,116,724 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net issuance of restricted performance common stock |
|
|
— |
|
|
|
— |
|
|
|
5,777 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Employee stock-based compensation costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,229 |
|
|
|
(1,340 |
) |
|
|
— |
|
|
|
— |
|
|
|
(111 |
) |
|
Adjustment from foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(32 |
) |
|
|
(32 |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,265 |
) |
|
|
— |
|
|
|
(6,265 |
) |
|
Balances, March 31, 2019 |
|
|
100,000 |
|
|
$ |
98,976 |
|
|
|
83,288,103 |
|
|
$ |
779 |
|
|
$ |
386,205 |
|
|
$ |
(109,732 |
) |
|
$ |
(225,062 |
) |
|
$ |
(48 |
) |
|
$ |
52,142 |
|
See notes to condensed consolidated financial statements.
6
ZIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
(In thousands) |
|
2020 |
|
|
2019 |
|
||
|
Operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(853 |
) |
|
$ |
(6,265 |
) |
|
Non-cash items in net loss: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,792 |
|
|
|
2,696 |
|
|
Amortization of debt issuance costs |
|
|
320 |
|
|
|
116 |
|
|
Employee stock-based compensation costs |
|
|
1,991 |
|
|
|
1,229 |
|
|
Noncash lease costs |
|
|
782 |
|
|
|
(4,385 |
) |
|
Changes in deferred taxes |
|
|
(887 |
) |
|
|
(1,103 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(2,947 |
) |
|
|
(113 |
) |
|
Prepaid and other current assets |
|
|
179 |
|
|
|
(1,004 |
) |
|
Deferred costs and other assets |
|
|
(330 |
) |
|
|
(856 |
) |
|
Accounts payable |
|
|
562 |
|
|
|
5,989 |
|
|
Deferred revenue |
|
|
1,135 |
|
|
|
(212 |
) |
|
Earn-out payment |
|
|
— |
|
|
|
(385 |
) |
|
Accrued and other liabilities |
|
|
(3,337 |
) |
|
|
3,876 |
|
|
Net cash provided by (used in) operating activities |
|
|
4,407 |
|
|
|
(417 |
) |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of property, equipment and internal-use software |
|
|
(5,007 |
) |
|
|
(1,742 |
) |
|
Acquisition of business, net of cash acquired |
|
|
— |
|
|
|
(271,706 |
) |
|
Net cash used in investing activities |
|
|
(5,007 |
) |
|
|
(273,448 |
) |
|
Financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds of long-term debt |
|
|
6,000 |
|
|
|
175,000 |
|
|
Debt issuance cost |
|
|
— |
|
|
|
(6,389 |
) |
|
Proceeds from issuance of Series A preferred stock, net of offering costs |
|
|
— |
|
|
|
62,692 |
|
|
Proceeds from issuance of Series B preferred stock, net of offering costs |
|
|
— |
|
|
|
33,896 |
|
|
Proceeds from exercise of stock options |
|
|
117 |
|
|
|
36 |
|
|
Repayment of long-term debt |
|
|
(460 |
) |
|
|
— |
|
|
Repayment of finance lease liabilities |
|
|
(406 |
) |
|
|
— |
|
|
Purchase of treasury shares |
|
|
(1,785 |
) |
|
|
(1,340 |
) |
|
Earn-out payment |
|
|
— |
|
|
|
(415 |
) |
|
Net cash provided by financing activities |
|
|
3,466 |
|
|
|
263,480 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on cash |
|
|
80 |
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
2,946 |
|
|
|
(10,418 |
) |
|
Cash and cash equivalents, beginning of period |
|
|
13,349 |
|
|
|
27,109 |
|
|
Cash and cash equivalents, end of period |
|
$ |
16,295 |
|
|
$ |
16,691 |
|
See notes to condensed consolidated financial statements.
7
ZIX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated financial statements of Zix Corporation (“Zix” the “Company,” “we,” “our” or “us”) should be read in conjunction with the audited consolidated financial statements included in the Company’s 2019 Annual Report on Form 10-K. These financial statements are unaudited, but have been prepared in the ordinary course of business for the purpose of providing information with respect to the covered interim periods.
Management of the Company believes that all adjustments necessary for a fair presentation for such periods have been included and are of a normal recurring nature. The results of operations for the three-month period ended March 31, 2020, are not necessarily indicative of the results to be expected for any future periods or for the full fiscal year. The preparation of financial
statements and related disclosures in accordance with accounting principles generally accepted in the United States requires the Company’s management to make estimates and assumptions that affect reported amounts and disclosures. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including but not limited to the potential impacts arising from the recent coronavirus (COVID-19) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of the COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.
2. Recent Accounting Standards and Pronouncements
Credit Losses
On January 1, 2020, we adopted Accounting Standard Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments with a net increase of our receivables allowance and a related cumulative adjustment to our retained earnings recorded at the beginning of adoption. Upon adoption, we changed our impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss impairment model for our accounting receivable balance. The cumulative effect adjustment from adoption was immaterial to our condensed consolidated financial statements.
Intangibles – Goodwill and Other
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04) to simplify the subsequent measurement of goodwill. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The accounting standard became effective for us beginning January 1, 2020, and did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Income Taxes
In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, and early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.
3. Stock- Based Awards and Stock-Based Employee Compensation Expense
Our stock-based awards include (i) stock options, (ii) restricted stock awards, some of which are subject to time-based vesting (“Restricted Stock”) and some of which are subject to performance-based vesting (“Performance Stock”), and (iii) restricted stock units, some of which are subject to time-based vesting (“RSUs”) and some of which are subject to performance-based vesting (“Performance RSUs”). As of March 31, 2020, the Company had 809,510 stock options outstanding, 2,354,445 non-vested Restricted Stock awards; 723,517 non-vested Performance Stock awards; 238,643 non-vested RSUs; 77,197 non-vested Performance RSUs and 2,381,311 shares of common stock available for grant future award grants.
8
Stock Option Activity
The following is a summary of all stock option transactions during the three months ended March 31, 2020:
|
|
|
Options |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Term (Yrs) |
|
|||
|
Outstanding at December 31, 2019 |
|
|
756,385 |
|
|
$ |
3.39 |
|
|
4.46 |
|
|
|
Granted at market price |
|
|
100,000 |
|
|
|
8.03 |
|
|
|
|
|
|
Cancelled or expired |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Exercised |
|
|
(46,875 |
) |
|
|
2.49 |
|
|
|
|
|
|
Outstanding at March 31, 2020 |
|
|
809,510 |
|
|
$ |
4.02 |
|
|
|
5.03 |
|
|
Options exercisable at March 31, 2020 |
|
|
697,010 |
|
|
$ |
3.45 |
|
|
|
4.30 |
|
At March 31, 2020, 809,510 stock options outstanding and 697,010 stock options exercisable had an exercise price lower than the market price of the Company’s common stock on that date. The aggregate intrinsic value of these stock options were $625 thousand and $621 thousand, respectively.
Restricted Stock Activity
The following is a summary of Restricted Stock activity during the three months ended March 31, 2020:
|
|
|
Restricted Shares |
|
|
Weighted Average Fair Value |
|
||
|
Non-vested restricted stock at December 31, 2019 |
||||||||