Zix (ZIXI) 26 Feb 212020 Q4 Earnings call transcript

Good afternoon. Welcome to Zix Fourth Quarter and Full Year 2020 Earnings Conference Call. My name is Olivia, and I will be your operator today.

Joining us for today's presentation are the company's President and CEO, David Wagner; CFO, David Rockvam; and Chief Marketing Officer, Geoff Bibby.

Following their remarks, we will open the call for your questions. website. remind available this in for section the to recorded will Investor like of made and replay company's would everyone call that be Relations I via link

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

afternoon, operator. thank and quarter Good our conference call. you XXXX full year Thank earnings joining fourth everyone, you, for and

actual differ to risk update note statements could materially SEC provides Factors conference examples of We cause contained to the XX-Q company risks. in the release with for and available market results that future that the On of obligation also most CFO, no Dave our of These and during could fourth the Wagner; closed, to on actual that issued full December our Dave we filings in you financial to undertakes and caution today's we year call risks forward-looking results results section in that important of cause those uncertainties is from recent company. and today, copy note statements course events XX, differ materially CEO, Please we call, our this in call. press release such those forward-looking www.zix.com. statements announcing the a and quarter the XXXX, It's section press the forward-looking to After factors and in the Relations will performance Risk the statements. of forward-looking have the our our website the ended Rockvam. this The Form consider which subject Investor from to statements. are make at XX-K future regarding those a

COVID-XX be the has the XXXX, the in Form discussed on COVID-XX, impact are in on measures travel. the for our for further situation of employee's XX-K on actively both the of and volatility more quarter in including in and year will the as business quarterly been for impact XX, company the ended report our The As in spread in the our September operate. company upcoming and our report payment XX, our its and disruptions prevent business fully annual we and changes products, XXXX, ended in monitoring XX-Q spending patterns, its and world Form behavior, described to operations unprecedented customer our partners which their limitations and various ability third-party ways, demand to work suppliers causing affecting on December

our significance operational government by the it expect make will our pandemic in the dictated We duration ultimate extent unknowable particularly results of that circumstances these and of the length impact the near of of depend estimate more will response. term. be and the time and COVID-XX business, which to future financial the on These currently on actions performance challenging the and over taken factors management for public also continue,

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

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

of million; Revenue XXXX, again today. Achieving strong quarter EBITDA million; of year of operating delivered a and adjusted ARR of XX% record for afternoon, $XX.X for unprecedented annual the joining us marked model. finish and and XX% revenue for operations fourth growth you, by million, a all Good our challenges resilience in The to EBITDA million; profitable growth, and company. face is adjusted of to Zix. customers and revenue our levels our our cash team, partners, marked transformative a our results from recurring successful of the Geoff. XX% highlighted $XXX.X thank We $XX.X flow testament Thanks, in these everyone, growth. $XXX.X growth

reflect challenges we important were to year's values grow culture perhaps we XXXX, ways, was able investment helping on strong as manage stronger. did establishing made culture challenges in in we in the I to As many essential us our the in of in back and XXXX. The even and use XXXX, the was build most core thing

learning team pressures. changes adaptable the and to on many and kept able to emphasis Our respond

which our Our goal I'm plan, on the setting are and track proud ability meet enabled very objective commitments and and and to our execute. executing XXXX. of operational team key financial OKR-focused, on to us us and kept results in

March, channel to the secure to Zix tenets found the our increasingly cloud organization caused cloud where on secure transient. are already work remote but technology well that These to platform to of our Forrester, The leveraging XX% see support remote productivity, compliance we in pandemic was areas organizations Last work. to resilience remote was April focus to to between enhanced That remote surveyed support companies that decision-makers work not environments modern learned that not security, XXXX prepared According the Our and work. full-time a hybrid shift to same rapid and reported transition. are and excels. shift investment the provided effectively not by the of were timed, remote fully that to further key is transition as May and workplace. and many transition they their Forrester work organizations survey prepared

enterprises. remind home #X medium-sized greater that and threat pandemic second workers Remote larger data and of attack Some are new, will Cloud restoration sometimes creates layer that critical for threat need breaches and the from an tools SolarWinds industry work recedes. security vector. following provides even attacks, factors, and the recent breach. a The Mimecast of bigger enabling breaches more Zix' remains e-mail impact increasingly protection small regularly, Secure us a even as COVID-XX the analysts XX% estimate that all for of work

will year. CFO, turn to over our financial the provide to our details I our call on Dave? Dave Rockvam, quarter results for Now and

afternoon, and everyone. good Dave, Thank you,

our mentioned, Dave delivered cash growth, drive EBITDA than and operating for of we adjusted on generated commitment profitable more the As increased revenue flow year. $XX again million to

Looking of totaled the QX, detail, our at at XX% the numbers million, end QX ARR in year. up $XXX.X more last from of

and is customers' being driven adoption. Our ARR secure continued cloud a sustained to growth by modern which move emphasizes workplace, our

and that ARR comprises our XX% last We ARR, cloud-based of are $XXX.X XX% over million. pleased or QX total our year grew

customers totaled Cloud per averaged per fourth Secure classically average the services is per mailbox, New customers above to X.X quarter the over added the X,XXX. company. were in Cloud. onboarded onboarded which Secure of historically services across quarter the on QX, customers those Zix in the new mailbox XX% X.X In

are quarter, in $XXX.X $XXX quarter quarter. pleased XX% last full $XX.X renewals the plus million for new revenue was sales by The million Revenue dollar in divided base that quarter, Revenue for the exceeded our of the XX% guidance $XX.X year million. XXX% same at year XXXX, to fourth into the million between the to range the year. once dollar and increased for was retention above million net million. that $XXX.X to was $XXX again increased at XXX.X%. available For million were million we the $XXX.X million our installed our fourth million The renewals the from our represents retention the Net beginning quarter exceeded of XXXX. for from which of $XX.X which guidance the full fourth revenue $XX.X range $XX.X

XX% profit strength was of lowering the on million was the revenue. from the down slightly on Our or This $XX.X from total of million continued during XX.X% XXXX. to products in fourth from from of year due QX million, in fourth percentage dollar basis quarter $XX.X rebates but year of productivity on of margin The the the some for last adjusted year. a mainly GAAP basis gross revenue was XXXX. an last to $XX.X $XX.X quarter total QX gross of quarter SKUs our on a a The up basis in was profit Microsoft improvement change in the million, and gross

fourth in our the expenses was of year. million, projects amortize costs. R&D development we X.X% or certain The and XXXX for due million, primarily increase Our begun were their expenses dollar into quarter's of adjusted total year of quarter to QX during completed R&D $X.X to X.X% last the revenue, total to revenue, compared or $X.X of have

reflects year. Our percentage contain primarily are due revenue, customer lower took total April winning The customers our adjusted and quarter of and last marketing the sales also selling in compared share from decrease and selling of cost to marketing were expenses X,XXX our model. travel revenue to due lower quarter The the for to for XX.X% velocity having, to MSP quarter expenses of of the and or of the wallet for acquisition a in or actions we selling total COVID-XX. we success gains expenses XXXX and the our expense partners. nearly in reflects of was marketing $XX.X of QX XX.X% as active high million, from It total revenue, new lower benefits $XX.X million,

customer model well overall relative Our CAC strategy CAC including to as and go-to-market as industry-leading lifetime maintain enables to efficiency Zix value. ratios,

total general was last or the The common number million, the XXXX, revenue, $X stock-based of expenses $X.XX in of for of diluted them expense utilize profitability a GAAP primarily million, and a was and profitability all net basis lower QX deferred expenses to share down of use at our loss fourth loss plan quarter expenses to to in other in On lower we recorded which XXXX. share actions COVID-XX. due year. have For revenue fully to QX for and loss in quarter on per million, from our to includes attributable ability total of our impairment a this to due adjusted administrative of revenue, $X.XX X.X% variable tax $X.X NOLs, expenses, took our a percentage of $X asset. will we basis, decrease X.X% acquisition The model. were a still compensation We reported of approximately April to prior that per current in a travel we loss shareholders or GAAP of an share, per but our $X.XX time, compensation-related or

within before share increase guidance. fully non-GAAP last was income excluding QX year. net dividends was or or $X.XX our of $X.X to quarter fully This $X.X per an million, we $X.XX compared share, diluted nearly which tax diluted deemed in fourth and reported was million, adjusted Our of XX% per deferred

million, totaled QX million $XX.X QX full we $XX.X deemed adjusted excluding million, per for before EBITDA our $XX.X year. Our tax, in deferred non-GAAP fully finally, net XX% to $X.XX And or from XXXX diluted increase year share. last reported adjusted increased income an dividends of and

to compared XX.X% of total last in percentage XX.X% EBITDA for a QX was As adjusted QX revenue, of XXXX year.

Our million, adjusted $XX.X year an full increase for we $XX.X totaled the the from million XXXX. full EBITDA year XXXX for reported

compared end for a in revenue As internal said, the XX% than our a due percentage from numbers planning our payout accruals as XX.X% XXXX. on revenue, in our the our we to accrual came on of about being our That higher lower attain guidance our forecast. as EBITDA half because achieved EBITDA be of results, XXXX which COVID-XX total program plan. to vacation of are due XXXX in COVID-XX caused the bonus first Adjusted higher impact to bonus higher to XXXX XX.X% slightly we to to adjusted quarter well below related was

development. original the that like to presented We of to an fourth come were operations and million, primarily XXXX $X purchases for are in of business increase bottom internal of for increase from so real our capabilities demonstrates flow last the we economy We million, at many flow of for $XX.X Cash XXXX quarter $X end XX% country, the capitalized in pleased year that QX was of were the the million, capital XXXX, which $XX.X or the gave fourth of year. right consisted from use of quarter challenges full over February that and XXXX our guidance our adjusted XXXX. flow feel XXXX operations company. generation Cash and really normal EBITDA cash CapEx to strong other XXXX. we year an able from software intangibles cash million, operations of in a XXX%, was

year the CapEx with XXXX, be expect approximately other million $XX to consistent for spend. XXXX full and We our intangibles

million XXXX million the to and $XX.X for for million XX.X% totaled We also year fourth in approximately last depreciation quarter for XXXX the XXXX. $XXX.X amortization XXXX. adjusted $XXX.X million, full QX $XX.X year full up full Billings up expect from year for the $XX.X be million, year. the totaled XX.X% Billings from

we sheet, balance our ended the cash. to quarter Turning in million with $XX.X

credit cash borrowing under have revolving addition million facility. strong In for also available our our to position, we $XX

of debt end In $XXX.X terms our metrics, structure debt million the we our of the on had quarter. balance capital at of sheet and

a of million EBITDA QX, permitted of nearly ratio leverage year-end EBITDA year to in conditions putting fiscal revenue adjusted million maximum gears for $XX leverage the X.Xx our Our end the based of us and currently below at XXXX, ratio approximately expectations. of we million. guidance reflects to XXXX, the range and $XX.X which QX, current market between on quarter Shifting XXXX. expect of for $XX.X first financial is X.Xx In

of Our XX% year. a growth to implies XXXX revenue to forecast rate QX quarter of XX% for the first compared last

deferred share And $X.XX. GAAP per diluted range attributable fully in loss to of are We common of loss for adjusted quarter common count and share a the non-GAAP diluted a expense is a to tax $X.XX stockholders per dividends a excluding attributable which the earnings of and forecasting of $X.XX of be benefit shares. million and to first based share be of before to in XX.X fully loss stockholders $X.XX deemed on XXXX, range

to forecast visibility, we and are compared $XXX XX% be revenue XX% QX of of total forecasting full on between adjusted between current an between currently and representing We XXXX. revenue million, are EBITDA increase Based XX% year forecasting million our for to $XXX.X to XXXX. and XX% XXXX range

expected On of share tax basis, for diluted before a a to of deemed to XXXX. is loss equate compared to EBITDA year We to adjusted and a of fiscal year. dividends XXXX of adjusted revenue GAAP in is share million. also be full stockholders of a $X.XX would of range non-GAAP Adjusted XX% $XX be XX% forecast of to deferred expect common earnings attributable increase to $X.XX over XXXX in year-over-year stockholders be expense, fully and range the loss per a excluding per attributable common loss to total $X.XX. $X.XX and approximately for approximately EBITDA This benefits to year a

the guidance travel, approximately approximately but credit XXXX $X XX.X which bank to in added basis. are anticipate XXXX, flat to We and on for a return to that per our on a us fiscal of important note and includes that But an dollar XXXX. facility. on to in R&D approximate allow million additional continue based count stated current expenses of concluded in more variable is share lower raises, relatively $X.X normalized levels amortization over basic in have expense year-over-year goal. and have XXXX due target in were that our R&D we does are projects are as of figures million It The the marketing, XXXX. we million from us expense employee to Those XXXX expenses forecasting compensation related COVID-XX, to scheduled on to growth EBITDA shares adjusted EPS XX% interest share conclude

and of cash flow in approximately EBITDA generate XXXX. maintain adjusted cash $XX expect dollars flow ratio conversion to a to We healthy million

completes reflects permitted of fiscal leverage Xx us summary, a my million ratio strategy. enter XXXX, with just EBITDA providing cash to end adjusted of solid X.Xx with foundation XXXX, in XXXX. as putting ratio $XX debt we guidance growth financial have our executing resources In QX a meet the This leverage at XXXX adjusted approximately of flow while we our EBITDA and for obligations the comfortably the generation, below financial summary. of maximum year-end predictability consistent Our us

Dave? more website to as Also, which XX. investor our to as our recent to results, visit by view well file our please Investor earnings our XX-K, of detailed For most presentation. Relations we a today's refer plan financial analysis release March

Year, Transform Transform into for at Heading XXXX. theme us. is a is on our but change, happens just Zix something we're focusing Dave. that is word change New the fancy that to Thanks, idea

is execution transformation add-ons customer for core our underlying success continue power natural beliefs and change. while more remains growth recipe While new and A And acquisition, and retention. transformation the intentional. drivers: and we our partner enables partner and transform to customer of modifies

growth and customer pillar is acquisition. Our first new partner

of from our about new our As QX, we customers partners, new primarily MSP XX% comes In partners. added were partners. by increasingly acquisition customer transform, our

previously quarter and a to IP MSP partner from for better backup, consolidate the wins distributor cloud who different key superior purchases, platform. global partner and the U.K. Microsoft support their a XXX win had a OXXX included: wanted and is Some provider in Zix buying Secure that MSP X We from new a single Office similar and same security to vendors U.K. a their global to The in consolidated new MSP MSP from including Cloud. distributor.

with threat of Zix with are XXX. advanced large the Office really MSP These audit our clear security to a moved partners. Another Cloud tool bundle our Secure of power a U.K. for of and wins example

partners SMBs, provides needs. to usually customers, Secure And Our most layers their X keep the that Cloud secure. need MSP security important every

malware second and When clients and the layer built security to tenants manual monitor our Office XXX third, their e-mail what I a audit to First, talk for configuration error refer protection their of Zix is solution restore and backup should and it's compromise; indications recovery breach delivers. filtering it as partners, of what attacks; in, they security occur. to second, to tool this a to phishing prevent of a

in in finance reseller well transaction, value-added the great another wins on direct and impressively, indication X attach Most the with right construction. the in X care, per averaged that the of high and excess included wins track X health On the previous top in business, X of rates. in customer and side solutions we're top our new quarter X our X our

all included Cloud. XXX wins wins encryption new customer new logo and were and deployed All Secure of the e-mail top X on X Office

of XXXX, attracting and a and partners our to customer existing will added our who sales a quarter, sales MSPs laser-focused growth XX% key are in and be growing and key and second customers. MSP us a XX% of in in are partners XXXX QX us. pillar, we The increases last which of larger to MSP which customers better new are year. quarter sell prior Which through at growth XXXX us we partner on source partners positioned to MRR additions in rate partners focus IP. brings accounted the are existing to New In for is growth Existing for for QX, to annual XX%. the XX% compound compares between over the

through bar in direct in X and included our X team, on largest top add-ons and encryption. only X care our Moving The in encryption sales health X all to were X add-ons and were banking, legal. X

higher-than-historical pillar, QX. on retention. Moving at was We Gross is which in company third net with increasing greater Total than in slightly year, was programs the to which retention. retention XX%, in to text e-mail to from value dollar however, both Secure encryption. more up QX, initiated through level experience both could to XX% and customers Cloud. QX term actively on-premise programs growth company churn historical in longer-term short we our was on-premise packs began increase These and year-end. levels XXX.X% did, trends. rates line and products accelerate optimizing Earlier on Churn in migrate encryption in elevated this continue the to while churn retention

recovery of the over due partner by and history. a growing Zix Cloud. valuable At their the billion our CloudAlly company, The been last large increasing data No nearly sets backup Microsoft and customer I'd backup migration in performed which product cloud represents Surely, Germany, the has for like Before XX% to and players into the as into channel expanded and with only XX% acquisition for markets market months the a to the CloudAlly backup, XXXX cloud for by with retains us also that to expansion have customers was from I but turn days. suite To market of incredibly a initiatives: legacy product CloudAlly buzz there's backups market to recommend X cloud Microsoft since on requested strongest at Zix. this high larger X expand acquisition their some to ARR X partners. We're partner away $X.X level, and our Secure exceedingly of date, market, team of cloud accounts become the and our joining Google transform Q&A, we're well growth increasingly growth is backups extension Both according relationships Office in momentum. half and #X factor markets. step is the months XXX a of technology. one winning growing third-party backup Salesforce trials. how the the resolved is market. XX proud helping call

for reminder, just integration the the team American direct North is into of a and backup began selling in As back Cloud planned Secure up sales bar cloud XXXX. cloud February QX

highlight the doubled international international in our XXXX was in a XXXX Another of ARR than We on focus with our U.K. progress markets. more

are of launching during into the market quarter the German XXXX Cloud. Secure localization with second of We the

population in cloud number and use suggests survey German market on-premise knowledge hardware solution U.K. the the behind both business Traditional rate Germany that the years know in IT providers modern the behind terms and Our of is American market a opportunity X that German X cloud to North transform for and market in is of businesses to cloud from adoption. perfect market, secure need than we the And case. years larger subscription of market in is models U.K. the workers. their the

logging Our XXXX migrated, Secure Secure easily begin begin other is Programmatic opportunity able attach customers migrations migrating more Cloud legacy cloud and customers into will these to once will and Cloud. will Zix third to solutions. March be in

about XX% meaningful highlighted before our would work But of culture earlier. customers of to on moving I close, minute goal throughout to the focus of all XXXX, cloud XX% our another with from take broadly. today. more I cohorts of highlight the Secure XXXX, our customers on I end having Cloud begin up of by like ESG will We

productivity solutions protect to is mission that partners empowering and resilient. company them are compliant core and Our our customers with secure, by

the highest them top their put quality and a do and objectives Diversity, work. inclusion a are are capital position developing Our in talent priority to develop further attract, culture. best equity our in retain to and human

on We minimizing remain environment. and And also in continue energy practices we on conservation to to the committed corporate best governance. focus our impact

are with XX% to array bestowed Secure business our a companies. communications provider the and to the prepared Together security, to compliance benefit recognition customers NASDAQ, extend partners, of less remarks. ESG email productivity solutions, secular from we our time, prime provide public compliant Operator? company the our landscape platform drivers, recognized cloud Cloud call its applications, as open cloud. position leading Over including be ready In growing need on as to for we of Zix increasingly questions. are by and to with we're proud growth positioned We be believe dynamic the an Operator, the than conclusion, solutions. will to move concludes resilient. of secure, threat and and we the strong That the

Northland And from Nehal line Instructions]. with our [Operator first of Chokshi the Capital. question coming

and results nice by the on solid way. congratulations the guidance, and Yes

the about Let's talk though. guidance,

so did guidance, have guidance, solid your better than what quarter line for given Q-o-Q characterize in to March you in you seen QX, provide XX% So results you have the revenue to I these this slightly characterize which as guidance, expectations? far would that can

Yes.

watching line you've nicely, what since been line in as been Things have in we're is for seeing. things grow. think I us progressing QX,

those big really months, around that these seeing strongest and you're commentary, the the is business, backup the three the really relatively but from strong think message buzz continuation this security that built-in in are that cloud the CloudAlly us seeing. working not of with and the that a have confidence partners well. our we've been things kinds trends of I success, And

exclude then organic. Great. your just to clear, it CloudAlly that you is contribution? Does include or say be numbers, Okay. ARR And the

CloudAlly include the contribution. That does

So there. it be the one point X CloudAlly in less without would or

Okay. Good.

I think bringing it be was million ARR about of calendar 'XX? going in to $X

right. That's

Okay. right. All Yes.

an were Q-on-Q about of that So does But it the up rate larger. That's ARR. cloud quarter. which detail up Q-over-Q, ARR Q-over-Q, as prior year-over-year out, about reflect both because is subtract I'd if year cloud the up the X% same ARR about X% come ago with the ongoing ARR and increases I

So analysis is me is, is is that correct two, the then I correct? that And that before -- make let one, question that. follow-up sure on analysis first

Yes, correct. that's

Okay. All right.

does driven pandemic-induced growth a so And cuts? to going year is job on? to continue relative something by else ago, slower it the Q-o-Q be Or

exactly been It's that.

we're to environment As a the of talks we've strong helping it the with year back partners that. that advantage seen, to thing, a the not XXX% as think our our ago. pleased we growth rotation, If cloud take it ARR the was overall is momentum. and as getting great is and of position, the power But

Got it.

talk net Okay. rate. improved And about Q-o-Q, about points XXX then finally, you correct? your did retention did revenue It improve. basis It

right. That's

were of that quarter components And relative improvement, can the Okay. of the what you the versus between just discuss churn upsell, drivers to the ago?

Yes. It was a combination actually. of both,

the strong. churn, -- threat archiving protection, to stay it that advanced specifically we're continues pleased productivity, very and CloudAlly, So around

higher little on a the exchange hosted the on-premise Dave specifically on As encryption. encryption churn mentioned the call, and bit on or

the And wins, that's continued a to the we this. to with wins, harder it's still new place from strong strength of core upsell. has seen be then seen with new So there customer we've our QX, good that from and there of we bit while with What strength in and get customers QX, base retention -- little out the in continue but to it good upsell, partners, the new did continue see but can we come have out well XX%. our out see in new but we strength the to over customer a where COVID, see on you

Bennett Craig-Hallum. next with of line question, from the Your Chad coming

either services Secure of cloud of product amount sounds point on seen new of significant what in a the directly and good the kind of And questions expansion I ticking -- like there? up, net the talk is products that, that suite, obviously, a which lot Secure are converted it's kind logos accomplish, So with you or that, and on or base in to there. trying or conjunction that Davids, to one you're then -- or Cloud of per now mailbox see see at just of when in Any we've net a that believe, on also net kind little Cloud the margins where Are Cloud. bit? we move a new flowing with retention of it But the and there? ARR we can those kind gross to lift Secure starts needle commentary do overall

Yes.

all, be of and nice to Cloud. year were attach First starts customers new movement, large Cloud this XX%, XXXX, those on even the in higher to with from And clear, we to we'd That with customers, customers. to us see the the of drive existing next Zix customers Secure cohorts successful opportunity on what over is XXXX the was the bring coming to Secure bringing month opportunity of Secure during start some rotation, getting our I to really be discussed, Cloud. Cloud for as a that's in, the quarter. where actually

excited It's up. MSP. the that fundamental towards strong. about driven part largely and shift, Secure channel So really The Cloud shift is inside coming retention by the

than you channel even stronger retention. our is break retention so And direct down, as our it

than dollars. in powerful the gross powerful from margin tool, The we're really the a results, underpin go positive XX%. the margin gross on the in XXXX in year. that is about Microsoft's greater XXX I talked really really those in are really those growth MSP in way. they're trends guide that cohorts Those you The seeing our So confidence leaning focused Office piece, and to have cohorts, performing grown to XXXX a

to as line. confident it our the margin dilutes attach and that mix grow to shifts but we the gross in percentages. bottom so deliver the up, dollars really margin And to continue that

a sorry, And Okay. then just on -- follow-up CloudAlly. maybe

of year-over-year. David months ARR growth I Wagner, their had X think they best you mentioned, that

you you expect next the that years perspective? ARR it that was double I couple commented business think I believe, that deal you over to, of an from once announced

Yes. Exactly. Exactly.

we Okay. Are on of do that track how kind think about that? with you and

Yes, of strong. really is gates, is out integrating team business really, that executing. and the The

have lot of market. important customers a need things increasingly Salesforce Salesforce up. the up their pointing really -- than the they're working to a data, thought and is strong of that's for a really the sets That that we better in back we backup back Salesforce One of data and there's

So was Office thesis. really there of that the investment piece, our trends addition in nice growing wins and XXX a core of to the which couple

the the doesn't really So with rate And full to we're team, again, product, adoption existing performing, pleased they're come the by just our QX. partners. integration how really

is start really early the So nice.

then And one last one. Okay. maybe

I X, XXXX, a what Do just little months think to kind commented on question. of today ago? your things stability you previous the you here feel on improving? on relative are in the bit churn it you visibility the maybe Or thoughts there as But are net stand last and retention we of just end more maybe have than X year? like of the

it's strong No, people that to steady that, strong retention. the since to the a think a know, macro to vaccines it's activity, forward increasing overall looking second pretty which economic dollar -- see July July good thing the months. XXX% thing able the We're is in in we steady are can the again. good around, help -- relatively with June, net we experienced for then. comes look moving it, drive -- since stronger at we in much is relatively a as of half higher, when position pretty It's has the stayed we being we've We're a you way looking really forward couple since from stayed and

[Operator Instructions].

of coming the Brian line Our with from Colley Stephens. next question,

a just what excess And quarter. of drove products on guys just this sort are baking of line beat from what maybe to in environment of year? perspective, the economic on digging in off macro if assuming I top you strength your guys in back or half maybe spending guidance? start any you're wanted on recovery if kind then you and better -- just the the what also, cybersecurity curious in could touch of you the Congrats

I'll on the revenue front take of Okay. beat the the question side. around part the

continue Of Office see XXX. course, strength we the in to

or onto end of that the beat So of the had AppRiver onto IP we almost we've XX% trials that, ARR IP growth products we was -- highest what And seen. that number we a base and I say had the then provided QX for of historic from us. attach QX, part platform, the -- that are saw you IP heard -- we the AppRiver a had -- Zix and trials, on of were our would of our Zix with XX% with and

bring up the So that revenue. helped

we little higher than QX. bit was and into it going a expected QX into then So

and So XXX, base AppRiver that say. Office be And I I'd performing that then into Zix IP to then the archiving continues would say nicely.

growth Yes. in to XX% contribute XX% start acquisition we're XX% We beauty half. in wins as And -- model of think, QX, growth steady the I'd new in in XXXX. than revenue a at think and QX, point planning the XX% customer to ratable will the will revenue to year. means the the do to But to those improve XXXX XX% second macro on trends guide, level, I XX% our more

this a steady this less trends, are as year year you they're, what ago go, but at than were again, time. So good experiencing we is slightly think we

helpful. to mentioned one over legacy then base. And the initiatives that Secured customer All the if migrating you I'm I the rate? it. a churn you Got of that can That's any curious there's for make mean, churn you your customers on think that lower Cloud, in that in that, can this Zix on business investments higher follow-up as just rates year, mentioned right. touching you

really the of Well, focused But that on. is a is future a productivity XXX. future know that Microsoft lot we exchange of the the of cloud. gross enjoy is Office one execution. really in We the than business hosted higher The hosted on it and we're margin exchange

existing want that that a building and XXX our accelerate more customers. don't And know aggressively than higher-margin that create, down customers margin. watch base thing. better the and strong bundles it's We're and moving customers that relationship we've HECs not got the but higher right is sit long-term packages we're obviously, to who customer. losing presence, Office our packages to a the at go bundles marketing are churn continue to we We're it making to so sure don't And think that move, is

the to that's I we offer. it's HEC another in coming where make losing partners not and and more that on that piece And with to are so into them get cycle customers that, was longer alluding those provider in we're proactive and going sure for term managing the us to the cloud given that we're

expense we for would about, made you're seeing you the travel, marketing, XXXX, last in add the variable a not XX% for $XX higher really Yes, $X a compensation year. just I assuming I have we of than to The little guidance cut bit, didn't the EBITDA that in expenses talked on million is million additional as that. coming attainment much year. got We've because

bring You you more $X like million-plus right, number. a million those in, the get $XX to

up those tools bring being and side, then look when So of and an that spend the some sure why $XX I make across is cloud bring strong EPS do come on need we that the in. really had did here a on properly, at we with million numbers those platform. secure of continue to they it that customers we flat, spend to to to things And bring has that that into back you kind is R&D we in alignment relatively the

customers. bit our of and sure the that, And additional taking for so try that's little to expense that we're goes make smooth a

That's maybe it really rate the Obviously, and you what your ARR to the potential being And could over it. XXXX? was was if or the question provide strong really in growth some seeing of X there. has that My maybe what on helpful. international years? business. just what growth been next XXXX X international in last kind is curious disclosure what you I'm on Got see

really growing well. It's Yes.

the really years. year, to We It's could XX% of years have sub-XX% year X.X sub of strong getting But this next them there. ARR. grown team as X from -- ago, And they've doubling. was still meaningfully a see a we nascent in ARR

in a later IT that the Just them a big in We're far the now investment U.K. the to to there, April, market, to able their to migrate being move making period. X needing help platform really Secure cloud, match years, way Cloud a well. needing that see which we market launch X-year into in to isn't to, now X investments is businesses, German where the fits providers which

profile in ARR So that XX% or investment market. of under that with just that our another sits XX%

question coming from of Our next Andrew King line Colliers the Securities. with

quarter. Congrats on a great

into over the also bit impact that seen And to the Can a add are course result from this XXXX? then MSP your forward as slowdown expectations last little we've just a the of So what of talk your you in partners a that pandemic. pandemic, quarter? for ability going

Yes.

number put we should the So out.

of was of added. a terms number This quarter last better in bit quarter the little than MSPs

focus than, we're the a pace. So for on a the slower add again, to MSP. larger is It's little continuing pre-pandemic bit year But MSPs. than focus this just laser

out do of building attract we're is so to can X one our MSPs And IP. who OKRs, meaningful amounts careful

of that the And so secure, product represent more the targeting. carefully ability in we're segmenting a really part to suite compliant, around little resilient the

supporting thing get of is on on getting platform MSPs. MSPs and other our The then engine their over that That's we're targeting time, our bringing we built existing those the to is as to attracting as growing all and the real continuing growth existing larger really partners our we're model of that's as lean that their growth businesses. our partners. And part new into a really well targeting that powerful of customers

Can new Allphin. fits hiring how just a Ryan strategic he then the announced quarter, you And guys X done what first little about in company? Great. the bit And product a of the view he's his officer, last larger into months of you talk there?

big brings learning, improve have how Well, yes, uniquely leadership experience He's looking with a for platforms, and asking. thank the we the helping carefully the for really about intelligence. tremendous, data artificial artificial and carefully our Ryan in only experience have to machine partners information not how to you that and we sets building take team. at to but intelligence, customers and think add

have and going So great expected, to monetize the view we architectural a I to think be he's a can more vision like that we see as bringing But and from. I ultimately effort think and capitalize build move you'll we start product longer-term is really helpful. assets that to it data forward,

this Wagner At over Mr. our like session. would turn remarks. call to this time, to I now for closing back his question-and-answer concludes the

our us with look to you for to this this speaking spend to earnings to QX in everybody the afternoon, to XX days evening thank time that like forward XX call. I'd taking and on Well, again

for Ladies for us Year Full you thank XXXX Quarter Conference joining Fourth and Earnings today and gentlemen, Call. Zix

disconnect. now may You