ZixIt Corp. (ZIXI, Financial) filed Quarterly Report for the period ended 2009-09-30.
Zix Corporation is the leading provider of hosted email encryption and e-prescribing services. ZixCorp's hosted Email Encryption Service provides an easy and cost-effective way to ensure customer privacy and regulatory compliance for corporate email. Its PocketScript e-prescribing service reduces costs and improves patient care by automating the prescription process between payors doctors and pharmacies. Zixit Corp. has a market cap of $118.4 million; its shares were traded at around $1.87 with and P/S ratio of 4.2.
Email Encryption Orders Total orders for Email Encryption were approximately $6,500,000 and $5,200,000 for the three-month periods ended September 30, 2009 and 2008, respectively. Total orders include customer orders that management separates into three components for measurement purposes: contract renewals, NFYOs, and in the case of new multi-year contracts, the years beyond the first year of service. NFYOs were $1,314,000 and $1,170,000 for the three months ended September 30, 2009 and 2008, respectively. About half of our new orders were from the healthcare sector reflecting a growing emphasis on security and privacy for healthcare and specifically patient medical information. Regulatory compliance with specific measures including the expansion of HIPAA in the American Recovery and Reinvestment Act and new state laws continued to fuel strong demand for our services from new customers.
Selling, general and administrative expenses (SG&A) consist primarily of salary, stock-based compensation and benefit costs for marketing, selling, executive and administrative personnel as well as costs associated with promotions, professional services and general corporate activities. The increase in SG&A expenses in the third quarter of 2009 compared to the same quarter in 2008 reflected (i) a $186,000 increase in salary and benefit expenses due to non-recurring severance costs, (ii) a $160,000 increase resulting primarily from professional services cost related to shifting legal work to outside counsel, and (iii) a $313,000 increase in stock-based compensation expense largely offset by a decrease in salary and benefit costs of $294,000 due to lower average headcount and other decreases across several spending categories including consulting, marketing, and travel expenses.
The increase in SG&A expenses for the nine month period ending September 30, 2009, compared to the same period in 2008 reflected, (i) a $620,000 increase in severance costs, (ii) a $456,000 increase in legal fees resulting from shifting work to outside counsel, (iii) a $370,000 increase in stock-based compensation expense and (iv) increases in various other non-people costs, primarily IT services and insurance. Increases were partially offset by (i) a $222,000 decrease in salary and benefits costs resulting from lower average headcount, (ii) a $316,000 decrease in travel expense and (iii) a $219,000 decrease in marketing and advertising.
Other income, net consists primarily of investment income. Investment income was $35,000 and $97,000 for the quarters ended September 30, 2009 and 2008, respectively. The decrease was primarily due to slightly lower cash balances in 2009 and a drop in interest rates between periods. Also included in the three and nine-month periods ended September 30, 2009 is interest expense of $8,000 and $13,000 respectively, which resulted from a third party note for a 36 month Microsoft license subscription. For the nine month period ended September 30, 2009, versus the same period in 2008, Other income, net was $176,000 compared to $435,000. The decrease between periods resulted from a lower cash balance in 2009 plus lower interest rates.
Provision for income taxes was ($39,000) and $110,000 for the three-month periods ended September 30, 2009 and 2008, respectively and $7,000 and $187,000 for the nine-month periods ended September 30, 2009 and 2008, respectively. The provision relates primarily to the Companys state income taxes and Canadian Federal and Provincial tax liabilities. The operating losses incurred by the Companys U.S. operations and the resulting net operating losses for U.S. Federal tax purposes are subject to a $112,403,000 reserve because of the uncertainty of future taxable income. As a result, our 2009 provision for the nine-month period ending September 30, 2009, of $7,000 consists of taxes on our Canadian operation totaling $129,000, a ($27,000) benefit for over accrual of prior-year state taxes based on gross revenues and a $95,000 refund for historical U.S. tax credits under certain provisions of the American Recovery and Reinvestment Act of 2009. The 2008 provision consisted of $149,000 for taxes on our Canadian operation and $38,000 for state taxes based on gross revenues.
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Zix Corporation is the leading provider of hosted email encryption and e-prescribing services. ZixCorp's hosted Email Encryption Service provides an easy and cost-effective way to ensure customer privacy and regulatory compliance for corporate email. Its PocketScript e-prescribing service reduces costs and improves patient care by automating the prescription process between payors doctors and pharmacies. Zixit Corp. has a market cap of $118.4 million; its shares were traded at around $1.87 with and P/S ratio of 4.2.
Highlight of Business Operations:
Company-wide backlog Our end-user order backlog totals $40,980,000 and is comprised of contractually bound agreements that we expect to fully amortize into revenue. As of September 30, 2009, the backlog was comprised of the following elements: $17,186,000 of deferred revenue that has been billed and paid, $4,208,000 billed but unpaid, and approximately $19,586,000 of unbilled contracts. The total backlog distributed by segment was $38,974,000 for Email Encryption and $2,006,000 for e-Prescribing.Email Encryption Orders Total orders for Email Encryption were approximately $6,500,000 and $5,200,000 for the three-month periods ended September 30, 2009 and 2008, respectively. Total orders include customer orders that management separates into three components for measurement purposes: contract renewals, NFYOs, and in the case of new multi-year contracts, the years beyond the first year of service. NFYOs were $1,314,000 and $1,170,000 for the three months ended September 30, 2009 and 2008, respectively. About half of our new orders were from the healthcare sector reflecting a growing emphasis on security and privacy for healthcare and specifically patient medical information. Regulatory compliance with specific measures including the expansion of HIPAA in the American Recovery and Reinvestment Act and new state laws continued to fuel strong demand for our services from new customers.
Selling, general and administrative expenses (SG&A) consist primarily of salary, stock-based compensation and benefit costs for marketing, selling, executive and administrative personnel as well as costs associated with promotions, professional services and general corporate activities. The increase in SG&A expenses in the third quarter of 2009 compared to the same quarter in 2008 reflected (i) a $186,000 increase in salary and benefit expenses due to non-recurring severance costs, (ii) a $160,000 increase resulting primarily from professional services cost related to shifting legal work to outside counsel, and (iii) a $313,000 increase in stock-based compensation expense largely offset by a decrease in salary and benefit costs of $294,000 due to lower average headcount and other decreases across several spending categories including consulting, marketing, and travel expenses.
The increase in SG&A expenses for the nine month period ending September 30, 2009, compared to the same period in 2008 reflected, (i) a $620,000 increase in severance costs, (ii) a $456,000 increase in legal fees resulting from shifting work to outside counsel, (iii) a $370,000 increase in stock-based compensation expense and (iv) increases in various other non-people costs, primarily IT services and insurance. Increases were partially offset by (i) a $222,000 decrease in salary and benefits costs resulting from lower average headcount, (ii) a $316,000 decrease in travel expense and (iii) a $219,000 decrease in marketing and advertising.
Other income, net consists primarily of investment income. Investment income was $35,000 and $97,000 for the quarters ended September 30, 2009 and 2008, respectively. The decrease was primarily due to slightly lower cash balances in 2009 and a drop in interest rates between periods. Also included in the three and nine-month periods ended September 30, 2009 is interest expense of $8,000 and $13,000 respectively, which resulted from a third party note for a 36 month Microsoft license subscription. For the nine month period ended September 30, 2009, versus the same period in 2008, Other income, net was $176,000 compared to $435,000. The decrease between periods resulted from a lower cash balance in 2009 plus lower interest rates.
Provision for income taxes was ($39,000) and $110,000 for the three-month periods ended September 30, 2009 and 2008, respectively and $7,000 and $187,000 for the nine-month periods ended September 30, 2009 and 2008, respectively. The provision relates primarily to the Companys state income taxes and Canadian Federal and Provincial tax liabilities. The operating losses incurred by the Companys U.S. operations and the resulting net operating losses for U.S. Federal tax purposes are subject to a $112,403,000 reserve because of the uncertainty of future taxable income. As a result, our 2009 provision for the nine-month period ending September 30, 2009, of $7,000 consists of taxes on our Canadian operation totaling $129,000, a ($27,000) benefit for over accrual of prior-year state taxes based on gross revenues and a $95,000 refund for historical U.S. tax credits under certain provisions of the American Recovery and Reinvestment Act of 2009. The 2008 provision consisted of $149,000 for taxes on our Canadian operation and $38,000 for state taxes based on gross revenues.
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