Zix Corporation

ZIXI Details

Zix Corporation (NASDAQ: ZIXI) is a primary cloud provider of email security, productivity, and compliance solutions for healthcare, financial services, insurance, and government clients. Email encryption, data loss prevention (DLP), sophisticated threat protection, unified archiving, and cloud data backup are among the company's offerings. ZIXI makes its money by charging one to three-year subscription fees.

Bolstering Innovation for Email Encryption Services: ZIXI announced the introduction of its Secure Large File add-on for its email encryption services on September 21, 2021. As a result, customers can now securely transmit huge files by enabling the transmission of any file type up to 100 gigabytes (GB) per message, with no storage restrictions and no new recipient credentials.

H1FY21 Results: The company reported an increase of 16.14% in revenues to USD 122.84 million during H1FY21 (ended June 30, 2021) compared to USD 105.77 million during H1FY20, due to an increase in subscriber base, a high rate of existing customer renewals, and the realization of previously contracted revenue in its backlog. However, it witnessed an increase in net losses to USD 5.39 million during H1FY21 from USD 2.75 million reported in H1FY20. The backlog was USD 82.9 million as of June 30, 2021, down 2% from USD 85.0 million as of June 30, 2020. As of Q2FY21, annual recurring revenue (ARR) was USD 252.44 million, up 16.91% YoY.

Key Risks: The firm constantly generates a significant percentage of its income from sales to federal, state, and local government agency clients in the United States. Hence, any changes in public sector budgeting cycles or financing authorizations that could negatively impact public sector demand for the company's products might harm ZIXI's commercial prospects.

Outlook: ZIXI estimates its Q3FY21 sales to range between USD 64 – 64.4 million, according to its Q2FY21 press release. It also expects its fully diluted GAAP earnings (loss) per share (attributable to common shareholders) to range between USD (0.09) and USD (0.08) for Q3FY21, assuming a basic share count of 56.9 million.

In FY21, the estimated sales range is USD 253.1 to 253.9 million, with fully diluted GAAP earnings (loss) per share ranging from USD (0.38) to USD (0.36), based on a 55.5 million basic average share count.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ZIXI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ZIXI's share price has surged 20.33% in the past twelve months and is currently leaning towards the lower end of the 52-week range of USD 5.87 to USD 10.37. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 50.26. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 8.84. Considering the current trading levels, improvement in topline, the introduction of new add-ons, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 7.28, up 1.53% as of October 05, 2021, 1:23 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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