Zix (ZIXI) 8 Aug 212021 Q2 Earnings call transcript

Good morning, and welcome to Zix's Second Quarter 2021 Earnings Conference Call. My name is Carmen, and I will be your operator today.

Joining us for today's presentations 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. I would like to remind everyone that this call will be recorded and made available for replay via a link in the Investor Relations section of the company's website.

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

Good thank everyone, our you, morning, Thank operator. and XXXX conference second earnings you call. quarter joining for

Wagner; today, our we On CFO, the CEO, call Dave Rockvam. Dave and have our

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

affecting our business with employer the competition in the COVID-XX The XX-K variant, been volatility changes causing in its their increased operate. and and more ended third-party annual in in patterns, payment actively disruption The products, future ability spending As the both Form for travel. Delta term. prevent resulting These our partners. various which on of our labor including COVID-XX, in behavior, market on the also more XX, and ways, for the our particularly the employees' customer are limitations impact make to and measures year company operation suppliers, for our we XXXX, of fully to over the on demand described business near company spread monitoring unprecedented in and performance and December business, the factors turnover world the in and impact estimate its the has challenging it our to work management the report

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

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

for you, Thanks, Good everyone, morning, Geoff. thank today. joining us and

our within backups' increasingly on workplace. critical more layer X,XXX compliant. secure, reflecting Secure solid As recurring second partners which enabling a transformation ARR, XX% accelerating $XXX.X strong of us cloud-first secure company. a Secure $XXX.X ARR customer XX% by board enhancing partner across turn, growth. services can than totaled productive, perform revenue in we earnings Annual from and and recurring the relationships and highlighted adoption annual growth M&A CloudAlly the deepening you our modern and customers see QX. results thesis our quarter, Cloud continuing total revenue more revenue, customers This is our release, more encryption XX% and additional in record platform we is a In or second delivered be into a effectively. well, validating XX% to migrated ARR end, million increased half total year-over-year to Zix's at or Operationally, reflects year. us their providing Cloud to of quarter to and role are exceedingly and helping the is to experiences, our cloud visibility we with Cloud million

market this new in ARR our continue error. the sets tailwinds quarter, ransomware since backup Cloud valuable grow weeks We protecting is partners XX encouraging The to in the We take cloud advantage XX% the of employee international adding and short market of in from generally. at validation cloud acceptance this in increasingly launched more and of our we've seen German expansion approximately year-over-year German data investment we Secure into strong launch. secular new as Germany

further, Before to financial over for our Dave? I our provide CFO, on Rockvam, QX. now call I the go results details turn Dave will to

and Dave you, everyone. good Thank morning

our quarter again profitable continue growth. driving to ability demonstrated second The

period, In strong on addition and layering we margin flow expansion generation, meaningful to robust highlighting performances organic, the dollar our in in products. revenue cash higher-margin and success delivered gross ARR

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

or ARR cloud-based $XXX.X and our a QX ARR Our grew last XX% of million. over total of comprises record XX% year

roughly quarter customers totaled X,XXX. the New in added

second be plus dollar that quarter. the the divided we level have highest and XXX.X%, represents net For at was we beginning renewals the to installed quarter, sales our new the retention pleased available XXX.X% above plus pre-COVID, base the renewals our which were by the is into exceeded year. $XX.X increased seen once are XXX% past, the customers board the of to second quarter. again since second last level. we saw majority platform. to in The Revenue as Secure of million range guidance same quarter new the for quarter $XX.X million in XX% for on from the revenue our In all of $XX.X Cloud million the Zix QX, the the

over Given mostly XX% the we this in are license single we won't be highlighting not Cloud running metric our Secure customers to desktop and coming of on users, cohort future. meaningful the only are

we growth, of customer solutions past Secure at per our so build services strong. the per are We continue partners revenue in and more of a helped just and customer quarter year to to is the continue from the our move QX feel attach Secure the customers us X.XX will pleased driving trend one year has and that adoption been Cloud that additional Cloud, of This end as last platform. second more gross X.XX from gain has launch XXXX. value as and to and margin services

gross total This profit quarter and year $XX.X increase $X.X the adjusted improvement of was million QX of million over for XX% revenue. XXXX. of a or X% of $X.X QX last Our or was million $XX.X in from an million

first dollar our full This year. this confident level in rest of performance quarter's was gross we the after as throughout AppRiver. on of quarter We the since go acquiring growth margin the building feel highest trend

customers assist email the us to Our to partner cloud more ability us give and XXX,XXX partners as an to and cloud confidence well provide to to make capture even end to them. continues growth of The customers than products. and move we our Moreover, increased attach built-in acceleration organic, MSP our they security us on business more growth direct opportunities journey the focus the into continue partners of opportunity valuable over meaningful Zix's current X,XXX can a future. base higher-margin macro

due increase cash total Our $X.X XXXX This adjusted for of compares for last X% amortization year. year-over-year was dollar R&D total XX% expenses The or We that R&D in amortization the be being or to of projects the second we don't Cloud. to in of to this in current quarter increases, Secure continue deployed certain of the QX primarily revenue to of expense million to anticipate quarter. the were million projects expect quarter increase revenue. $X.X past on We development but completed year. are expenses during

of our and they EBITDA. impact out are adjusted EPS, expenses these income net While

million trade expenses expenses marketing and sales selling to and revenue $XX.X direct activity by travel were million and for marketing total in basis dollar marketing adjusted Our of or total to commissions revenues. the a and pickup $XX.X teams the last and QX on The XX% our of or in of partner XX% revenue, selling due reflects increased show year. compared quarter and increased higher

year other active from decline our in hand, and of increases We selling customer selling market. into from MSP the sales do share in to gains lower the seeing and cost lean the growing marketing wallet a total expect the marketing we the we we to of the and and of customers acquisition of percentage as opportunity success partners. are high-velocity expenses reflects in new having the winning as our benefits revenue model the are rest our see continue On

of made in of the hybrid fully loss by diluted GAAP quarter common loss recorded administrative shareholders or better of per changes were For of result $X.XX the We or our and workforce of adjusted diluted work and predominantly the total result million for net a expenses attributable basis, was million to of our year. to loss share. $X.XX loss work. of a approximately changes $X.X a million of a or common a attributable compares $X.X over The change of expenses loss second reported loss share QX the dozen per to shareholders of in last as compensation $X.X we severance On a These in or of primarily loss a of fully net QX did X% higher revenue, positions organization. general quarter elimination to million the last year. X% the of were stock-based prior a incur revenue $X.X in of COVID quarter XXXX, for compares from driven a align $X.XX year. to The total as which work-from-home a

adjusted past is And the an our our were we XXXX last year guidance. to per from was net during year. diluted reported compared second-quarter deemed which QX $XX.X we million, on or non-GAAP in to tax the adjusted are EBITDA $X.XX as income share $X.X $X.XX totaled the million share, $XX.X increase R&D finally, projects was income reported adjusted These removed line fully net EBITDA QX XX completed before due amortization with increase deferred This calculation. in that compares Our year. quarter, months. slightly of of or excluding QX and and for that last amortization million $X last is dividends of the The impacting non-cash part diluted per lower fully million in in our to of

intangibles quarter business the up and of XX% management. continued development. was capitalized consisted XXXX from for on million Billings flow other increase primarily As by normal capital $XX $X.X quarter CapEx and capital adjusted flow QX which was second of careful of year. compares business primarily XXXX QX software $XX.X a or revenue, quarter which operations guidance year. over of the an of and from total for to year. XXXX Cash was cash was XXX% in for XX%, with last operations increase The from EBITDA million, line our percentage of of $XX.X focus QX in working million, driven internal-use last in last QX second million XX% operations of $XX million, continued for were the second the totaled purchases and XXXX in

ended XXXX. first cash, Turning million balance quarter increase to $XX.X sheet. the quarter of over our $XX from We of with in an was which the million

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

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

adjusted below current expect ratio the Delta maximum a into between Our market at range ratio EBITDA as or of and approximately QX, is financial currently $XX.X trailing on the the to and quarter such gears revenue million. EBITDA $XX.X conditions of for third QX, million for the doesn't market million take activity end variant. which permitted we adjusted guidance leverage leverage X.Xx $XX reflects us changes nearly X.Xx expectations the In of and of quarter. COVID-XX based XX-month Shifting to increased potential our of account putting XXXX,

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

diluted third earnings fully a loss tax excluding of to common in to and forecasting quarter diluted per attributable deemed deferred fully common expense to range the $X.XX a per loss $X.XX adjusted attributable are of and to share We for of share the benefits stockholders stockholders before of XXXX. $X.XX loss and GAAP be dividends a non-GAAP be

approximate million figures guidance forecasting XXXX. XX.X our increase be XXXX for are approximately be to we between XX% EBITDA based on QX Based and representing between currently XXXX. on share guidance XXXX. an current increasing XX% forecast QX adjusted our for XX.X% $XXX.X visibility, count million of basic The compared We revenue per are of and are of share to for million, to $XXX.X revenue

$X.XX. basic be $XX a a attributable our GAAP loss On loss expect stockholders to the is to to count per attributable approximately $X.XX operating range year-over-year year a flow non-GAAP XXXX. revenue for to figures adjusted diluted continued share stockholders and between expected an also fully to $X.XX XXXX. and approximate million of common for or approximately basis, based approximately per forecasted we for is to a XX% fiscal range of We $X.XX outlook, compared of Adjusted EBITDA on common XXXX, share million to current earnings of loss between per share are of The total cash XXXX. on and strong XX% XX.X increase generate Based in expect share year.

forecasting approximately favorable execute bank items credit other strong XXXX. on debt our million well million. and this as adjusted us summary. obligations financial our profitability interest positions In This EBITDA achieve are meet interest-bearing completes cash of expense we my strategy, believe manageable We guidance for profile model, we our approximately subscription XXX% and flow $X in summary, generation and our to $XX facility

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

Thanks, Dave.

reacceleration focus security, financial on reflects, we're email a QX, journey we resilience. As and to the steady as ahead compliance, continue market our their an our seeing and performance in increased experienced business globally businesses with cloud growth in

me updates with on built growth to add-ons, As in new partner key these acquisition. a pillars; three provide minutes is of about, acquisition, partner strategy retention. talk each customer new take partner you've customer first few heard areas. and our and and Starting I'll and customer

customers. QX, During new added X,XXX we

especially and Our to global in partner UK expansion gain continues the traction, Germany.

with new three all the UK five international, partner were top our fact, two of and in wins Germany. in In

UK-based email our users advanced Our MSP of the wins a who Microsoft the Threat initially moved MSP moved security in recently Email quarter accredited UK over more highly more over X,XXX included Protection. and to seats than

and backup. working are this We including cloud add additional with partner services, to seats

who XX of new current one consolidated was XX, MSP range contributed partner, us providing a billing of so record solution offerings, Secure as businesses strategic transition to Cloud wins replacing that MSPs. our quarter enthusiastic value-add to Germany recruit nice about in with becoming traditional their businesses including Another well-positioned which providers from EMEA in remain UK higher with because were These in IT We a win a their backup with Germany. CloudAlly. subscription in opportunity to help market break-fix-focused partner is

the strategic seeing helping Equally tools. strengthening success partners, and UK and Our us capture German those partners and examples to expansion security, customers. we're our of backup, and investments new the compliance, reflect of our resilience commitment cloud exciting are new

of effectiveness selected us seats X,XXX XXX sales our win to and of the as of an demonstrate opportunity time. dissatisfied capabilities, with learned were North seats competitive a force backup add both that Our their a brought force but they later further X,XXX X,XXX Cloud, with seats with management UK expand level team of secured as new well. new us phenomenal licensing seats When partners as quarter. more support than types value X,XXX of for the partner also backup solution for offering. gives the our account over learned plans value they to This partner story, one they of of even and Microsoft backup seats that situation competing only the and more cybersecurity It's of from a chose our Microsoft archive Zix's was end where Secure of reflect well. Zix In this a cloud heard the these service, as well not backup cloud and they dissatisfied the When solutions our capabilities. backup partner receiving success their the customer was stories backup This service over sales provider. America, our

five sales and our healthcare, through of direct included wins wins team, had VAR one new in two top we our of consumer, and terms email the four in vertical; top in encryption. two government five In the

were competitive incumbent superior for VAR end-user selected encryption vendor experience support. largest win an with was six-figure a We process and defense quarter and Our a our government direct displaced the contractor. large in in win a

forward. We America, our Turning and In North up partners SMB the in as partner white largely hiring pillar, see which XXX,XXX through COVID customers. March us include of in X,XXX increase transacting reflect it numbers. going growth Dave we customers. in the the the than which XX% existing In the we key in his sales CloudAlly's partners, updated of for than When and in QX. the end users mentioned reversal second to existing customer customers the to sales to April. of XX% growth quarter, and to portion, more MRR for and space space second to are is saw our This to and more increase MSPs quarter, is especially partners we in of reducing accounted trend this compares the source

top through sales construction. terms phenomenal our who was provides licenses The VAR and data five to were a loss add-ons with and who In four team, one consolidate organization prevention, Microsoft one direct our of with in healthcare encryption, in wanted healthcare and largest support. add-on vendor was

customers. than This cloud more for Our attached meet signed QX than doing We're customers more XXX solutions track with or adoption direct well already attach partners Zix's accounts. great per account on had of offering. existing We and to in in cloud job goals backup XX continue we top customers to capability our a a solutions on as existing has our cloud of backup more had introducing exceed and five to average also us to an add-on three successfully XXXX. backup

level company base. as our retention remained trends. which net pillar, third attach in more over our to at Gross historical remain dollar to retention. with We strong we our to Total XX% retention services rates from in over this to line XXX% QX increased the is increasing anticipate company growth retention Moving quarter. XX%,

five past from the provider transitioned email we've solutions years, provider on of Secure to platform. our Cloud encryption a broad a cloud-first Over range Zix an with successfully based

proud and are As accomplished we are today, have still much as in we as we of transition. Zix

Our improving our predictable going platform. partner and Secure our our growth customers well. in driving strategy in growth, Cloud encryption Cloud customer by centered and XXXX onto profitable migration phenomenally of The consolidating Secure around to on addition transformation to services our focus is is of experiences, remains more

completed year-to-date. customers Cloud existing Cloud In cloud been partners will onboarded to unify more to like Secure than further applications data and Salesforce, fact, Secure customers Secure quarter, into to which SaaS nearly Cloud Microsoft be and all customers will platform this backup and Box. business-critical encryption we've integration year, XXX, new our migrated the of platform Workplace, have Dropbox, protect allow today's this our X,XXX and within CloudAlly modern The Google

and on resilient. Looking ahead, Zix work to trends remains cloud well-positioned that compliant, productive, secular market ensuring hybrid secure, environment's and capitalize adoption,

up cloud the for has for building remarks. to realize setting XXXX. also long-term XXXX, Our concludes greater us That questions. This by goals on with a growth $XXX success Operator, open call even momentum for financial million revenue ready our the includes recurring us annual to of goal in track our prepared while we're down road. achieving Operator?

Thank you. with first Chad [Operator from Instructions] comes Our Bennett question Craig-Hallum.

Thanks was really guys. Reacceleration questions. taking on Great. metric. especially the secondary my Congrats, for impressive,

has step mean on I last function or mailbox I'm And know you NFIB I nicely. from their just acceleration saw know numbers, rate say, like Office up should just So there guess, numbers. curious mailboxes growth their I the then in ticked And some standpoint, numbers quarter? from in new-customer I I results, on based a we Microsoft huge XXX, in saw growth

what uptick those those mean, highly than pretty but a Just dramatic happened? I of metrics, figures. other correlated it's really in kind two macro,

Yes.

always are the and those for but you about much does mentioned, execution, don't and driving are is and right team improving drivers. feel of you think items Dave and about really team together I, good key leadership We they're the executing which the quarter, do execute this those feel I really now. absolutely the we as question, thank that well, whole macro the way So proud came Chad. what better

again, If Cloud, all examples various the in attach mean, year, the add-ons now go services do X.XX? you couple we just last or should gave, been from look Or attach per X.XX acceleration to we terms from think of And love Secure the in exiting then this have, expect a of we And can David, that or displacements do partners year rate? with of some I customers the quarters? what about in rate and I the we and quarter. how it's

Yes.

especially you're see makes in since to and recovery year think that points coming I over we've point we're to been right. Secure launched going products, on X.XX can two we do per we things to quarter. that to That's on get Cloud, them for – customer April to Secure continue of long up that continue think We've every one with seen seen as buy it and Secure good trial last services the attach, customers and Cloud, with easier Cloud now. implement the We easier grow, really makes to them know products. it as the

that expect what drives that forward. do we that's model drive So number, going long-term our continue and can to we

And cloud backup. my market And is have our you product is things we for of right other heard there is commentary with one The market of the demand I good. that's strong. we acceleration the backup really area think The Chad, now. high that how that's really that thing product the is that's cloud pleased are new in helping in

highest from just standpoint CloudAlly, success service-product standpoint the your from What two rate one a kind me. assume would backup of mind? Well, Right. cloud last is now. one be three for right I in attach and

of one be customers set set data attach Well, – cloud advanced then is by up. product cloud the backed product. believe also have. every that second our layer number threat we backup, the And we It's believe seats defense one natural of should that key should our every data

believe business posture, compliance of we irrespective on mailbox demands that organization, every has. So are additional the the layers regulatory those two

have. So opportunity highest those attached we are products two the

Got it. job, Thanks. Nice again.

Chad. Thanks,

with King from Securities. Colliers Andrew comes question next Our

question. Hey, my Thanks taking guys. for

some give a got already couple saw new And pre-pandemic call a you events? color you the of little if that see adds? off U.S. you adds ramping in-person how this. MSP Can pulled return the given to but of times, partner obviously I addressed levels do the partner in Sorry, new us EMEA. specifically, nice you into

Yes, great Andrew. that's a question,

new closely, but this COVID. we So But doing think partner in North events during partner during quarter, do of are That's up we like new new in-person more And America in North second our on here steady accrue. out North half. that kind they we're I I let here partner have for a into watching we're know, and the been have to leaning looking event. adds we're May focused was Obviously, folks area accrued was partner an the pick all that team in lot that, as in-person America's steadier a actually first COVID, getting Delta America. variant said

as the And in but support marketing there's QX. focusing Dave on, North and international with said, is I think there of We're well, is year. Yes. to function. opportunity. QX up effort second opportunity the and continue to And seat invest, you saw the want saw the half really investment lean in my the We see our that license as we in for that going mentioned accrued America direct partner seeing that to that side We marketing to leaning mainly along adds, comments, and the QX. come be in your on into and counts selling selling

us specifically to out more then you hiring in where and international as little Great. investments. regarding just completed at markets what color Can you're functions? there? and still Are give you bit And the there? those you're where a Have that with German building on initiatives you double-clicking the hiring at

right, That's Andrew. Yes. Yes.

the region, they're small see team the in implementation, with the numbers. we're bring expect can in region, functions and a already, doing the It's we We pleased Germany, first really we're customers. as time, to there's we of had not from make folks doing support the to where a geography continue in hires there the dozens you they’re So new not people as nice a at – market. adding in and work. handful in but in salespeople staffed obviously, doing and people, that, by have German all job, It's great first call, partners we this of relationship our the sure to partner implementations invest largely resources those

Great. and you Thank the on congrats my questions, quarter. for taking

Andrew. Thanks,

Nehal Thank is you. with Northland Capital. And from Chokshi our next question

results. Great Thanks.

So ARR this you quarter. of break growth $X and between Did up the AppRiver higher-margin XQ you that services? million had

I probably coming Yes. seeing would you productivity the gross margin write-in XX%, and say that IP, probably running Microsoft on from as probably in balance that coming today. the XX% that we're we're from XX% XX%,

Great.

increase of great past, Okay. out of revenue And talked you that of I q-to-q elements And then AppRiver dollars million of trajectory. love there? really out the that tailwind since acquisition, you in then also the the of in Can In to these see. simply also the a headwind what increase the had customers. ZIXI the profit there's Exchange. amount profit and pointed of there's terms sequential There about organic $X.X that's you've services guys terms are And gross gross that Hosted elements you the to AppRiver highest growth. closing three lots break of cited going just you help on

Yes.

to point As offers we're as functionalities. out encouraging off with to and the that, move Exchange you customers do customers and course, over onto that Exchange of additional and partners is Hosted Teams encouraging, cloud newer more the the other is Microsoft empower time Hosted one actually,

helping that's the when now what quite of a focused which Chad had the which margin. out and it in we the But mailboxes" are stabilized, in at drive of XXX. pointed out that leveled one April, asked stronger success tailwind, at was the really QX execution we as but on, as of didn't employee saw the that the we us. things we biggest strong cloud really cloud call are the remains, add that seems pointing what saw said his about saw "suffered we pointed COVID to of has And the really we rotation we that we the premise those talked of at beginning And was mailboxes, which excess of addition one that course, question. that, to and remember helped attached that churn is customers, drive generally existing customers, headwind that QX, of I move the my again, from call, backup that AppRiver, March pretty that in a seeing and out we're mailboxes are attach. services, to careful for customers So of they're lines we're kind that acquisition, of modest. the team really plans biggest that capability early months the contraction the lost back Office things tailwind as that's quarter, existing we relative the the – when of we out And in in there, in lose is and QX good that it's least hit, we year, strong gross for the that the back

September dollars was you June Can as should little help then color for Great. you Dave, again a trajectory that of last expect quarter? Awesome. what And quarter, with gross which quarter, the we for bit super the helpful. out profit us a in gave as far

Yes.

dollars good This from which As band, $X.X got in little of a script, gross million bit increase. we a quarter, really through the margin March I increase was June. this said to expect rubber continue to

in QX help coming off number that significantly a us drive for of on that QX, So disappointing metric. really the

margin see strong we it couple $X.X quarter. quarters, see a coming million maybe of quarter next $X.X here, from So for nice increases, the we as next as really a the gross number But but do high dollar to this far bar up, million, increase. that continue is do

you very Thank Great. much.

Thanks, Nehal.

question Colley And is our next Stephens. with from Brian

Hey, morning. guys. Good

Good morning, Brian.

Hey, impressive. cash really think is strength impressive flow XX.X% cash quarter. how so, and what flow free I the pretty is? mean, curious, I'm I in drove mean, sustainable you specifically, Because margin that that

up. come flow And important that continued quarters. have We've last, to it been We Yes. operating our really been – think cash flow say, the I'd on four cash us. we've able to numbers to is focused

we've four that quarters our I we'll got focus. history, three in to think probably keep best continue and of company

quarter, but that sure our $XX.X always I very know know all think We increase. to that that $XX.X capital, continue be level that don't in $XX million. that we'll the And at we'll continue I line. we I and we million I don't focused, stayed of like do, is are making This we'll think that. as were Earnings on – – again. all last do things build on working to million.

conversion of dollars we'll a grow to that, cash able do that. to we And is continue our as So EBITDA XX% be to flow. guidance XX% to

we'll so, on And focused that. in keep

and This through we'll nicely keep pushing ahead quarter was that, of there.

much Got encouraging. mean, cash it. had than historically, abnormal Well, that's profile really I I nothing if flow there's thought of a mean, so congrats. higher that's in there, especially kind I

Yes.

gross can we we to pushed a adjusted along Like we little cash. We drive wouldn't this I can think And that's it's but focus. margin through bottom our that growth. that can good a I and quarter. for EBITDA, drive high quarter, drive is said, line to all it strong it our it number dollar EBITDA, premise the call I been every

Absolutely. Understood.

of anything just interpret Or at XQ prudent growth guidance as guidance? we happening XQ So looking of the bit the drive just implies that outlook guys posted specific the a XX% that mean, you on mean, should is I I being there guidance kind for based would you on a the quarter. slowdown. with in that? this

the I'd prudent being say on guidance.

bringing look when you know, inorganic In we'll a there that will point head about one you CloudAlly, be is delta. it QX. in So against bit in of QX, up little at

be organic versus couple our points. of together right a it runs And back now, on almost inorganic. we'll So

just conservative, a Delta exactly growth. know don't be happen variant that we think to going and bit little I still strong good, its to So up that head what's stuff. COVID the back and But as picks

We year So we'll revenue second the always, numbers but be started year at of we XX% as to think hard pushing the up. growth. to I half continue as wanted we move for just be the the XX% to prudent

this quarter So guide up second quarter. just full-year position to and a be got we're be we XX% at through pleased in over to a now ended XX% the that

with approach. agree Yes, absolutely. I that

there level understand the services like of kind completely Cloud of attach margins, what a you just So what from stabilize, it get – margin rates to just kind to curious, the customer gross as of for level like relates But what's am in perspective? number Secure the growth. to per is run to need gross the driving to – math, margins customer I drive per I'm does that as metric, in order margins, a profit curious, I services dollar higher gross stabilization seeing and on strategies the

to there's about $XXX that that the have enthusiastic Yes. that and value Microsoft number I'm to and I they Brian, growing. more that and don't into today Microsoft opportunity, and a their their really know suite. we more us working as mailbox puts two, more pricing a they the one, for stabilized that supporting value partner margin make us, drive have and have; more for

in with am as to really their lots we it draft on working So I continue just see the opportunity of to continues market, the the really, actually them. lead continue growth bullish Microsoft opportunity to market, we

a profit These under margin understand gone. gross is So tight we're tightly set to we're customer they to are once services could and which that a that went together that number is really challenge you think and exploit on we are pure market. consolidating enjoy. the that drives that it's value puts going till extensibilities going perspective, that percentage, the of and attaches both to analysts thinking from work were XX%. about one be back don't the Zix bringing the some company transformation software a the integrated to we what well simplicity, in, our solution And I now, I their to propositions customers partners maximum, use. investors Those so in the integration, days are flexibility, the And partner opportunities

software hardware. I as think the continue to and own are we for our aren't companies running leverage gone, those appreciated cloud days on most

So we don't is that for percentage think to something profit I the margin dollar we to. not it's analysts a I and attention encourage close as pay metric this good growth. investors think us. focused And on really gross are really are to trying

like don't cash then Understood. Well, keep I care. think are, up people flow you if putting you will

last here. one question So

to for target XXXX XX% think any ARR given maybe that $XXX give? million. an or for I mean, we could the time XX% EBITDA type frame? about range you how Is You've decent of a margin range should ballpark there

ARR when you're that, So so the December things XX processing two objective a that objective. is through

EBITDA but would of in but math kind back and EBITDA but very some down percentage we would on on as percentage, still it, terms would in terms of to years strong in mid difference we strong, it. mid a percentage guide the mix the to have kind the EBITDA that of think that. So at line or compression are But unfurl spreadsheet, terms a going There's There's are XXXX, which EBITDA ways have is really line, been high a XXXs, be on themselves put five well. next have thinking at not of compression we of the I the strict how to to revenue years an other of XX% I time in in then you'd the be out EBITDA said, as revenue, because four will on frame. margin some thinking putting no is be gross really really the big line, or the growth we in

questions, helpful. guys answering that's the super congrats, Got I you and again. Well, appreciate it. all

Thanks, Brian.

Thank you.

Nehal follow-up a Northland is Capital. question next with from Chokshi Our

sheet and here. payable, you. deferred also flow both good in revenue. strong One in you Thank a there had had you a Can in looks on the discuss good upticks like increase cash you sequential nice balance free main accounts items? I the then increase elements were why of strong these on that was want two free Yes. cash to It double-click flow.

Yes.

payable which accounts There's it conservative at out little like pressure working bills quarter being stuff. bit is I that you're few of on side, certain said, third longer just our will year-end, There we'll up services on a people of with with things, and payables clean different and the those. that types down the themselves course, sit was end. the little On of put a there in

really good can $XX.X said it cash we and cash to is a So flow number numbers the million number, numbers, and up that every operating quarter. I that's not hit put why continue flow might good

Zix's good, you, quarter just that to Yes. around hold in it, billings the they One strong thing a annual you've and that to, long QX. enough been remind are

XX% pleased number, term, which then obviously billings, off the the that with kind other and alluded steady little gotten management, timing to but a in consistent, on high watermark we've as the as of terms thinking that to pressure. been grower quarters the question. really of So And that's some have the contribute capital and payables really about contracts move moving. were working does it that with We that over is deferred we've revenue we've the But EBITDA had upward XX% a ARR of time, a at more volatility. I flow annual Dave Dave team our than to I'm think to longer do still cash whole

time. of stable do be to over more expect ahead we it, way we're but Now, that

If I pre-pandemic still it's levels, below days the at that. to look relative payables,

think you days days? your you that payables are or just those do extending for room different So still have

days. different are Those Yes.

looks increase things. Okay. All is q-over-q It you're to million why shares right. a outstanding, in like other two And that? $X nitpicky guiding

based It's how the all averages. works balance coming through. on It's

our second do grants year, the quarter. we the in so the in quarter last came mainly in quarter also they and And second through first

So grants its that it's through. works timing of and just the way how

So it and up we coming is QX was QX in in but through pulling QX. and average lower expected, the than QX it on

Got it.

behind q-to-q increase $X.X your did million and that? the then $X.X million narrative And G&A What's year-over-year. Okay.

with related travel, Q a do coming coming year better of K year, last pulled variable we compensation to everything last lot We're accruing in, range. was read in of back A COVID so variable up coming it or our back but to Yes. proxy, lot has with not XX% – of QX travel back number. in, expenses hitting, you higher from a back toward our now can compensation really

up. those kind number that into that pushed of So that are things go have it

again, congrats a Thanks And very strong Great. on quarter. much.

Nehal. Thanks,

like to would to his session. at I concludes this Wagner Q&A time, you. thank the closing our turn for call Mr. this remarks. And And back

morning XX then, talk And in again going have forward and look Well, you, in thank joining us We I'm to everybody, meeting results. you day. a I a all, all through just I you would add. pre-market to about days. Thank earnings with great for release. QX this our early

earnings joining for second you XXXX Thank today conference Zix's quarter for us call.

You may now disconnect.