Zix Corporation (NASDAQ:ZIXI) Q3 2019 Earnings Conference Call - Final Transcript

Oct 31, 2019 • 05:00 pm ET

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Zix Corporation (NASDAQ:ZIXI) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
David Wagner

we believe will make us even stronger in the years to come.

When we acquired AppRiver our strategic goal was to become the leading provider of cloud e-mail security compliance and productivity solutions for companies of all sizes. So as pleased as I am with the growth and profitability we are delivering as a larger company I'm even more pleased with how our year-to-date 2019 results validate our progress towards our strategic goal. There are three things we believe leading into the acquisition belief number one businesses are moving mailboxes to the cloud and are looking for partners to help them with that transition. Validation point. Along with our channel partners we added over 54000 net new cloud mailboxes in Q3 alone. Belief number two cross-selling opportunities between security compliance and productivity are strong. Validation point number one the Zix sales team closed almost 4000 Office 365 mailboxes in Q3 which is up from less than 2000 in Q2. Validation number two the Zix sales team attached our new products to 47% of new customer add-ons in the quarter.

Validation three AppRiver customers and partners more than doubled their number of ZixEncrypt and ZixArchive trials to more than 350 in Q3 from about 150 in Q2. Belief number three two leading e-mail security companies would be better together. Validation point number one two quarters in a row we have exceeded the top end of our revenue guidance delivering organic ARR growth of 17% in Q2 and then 18% in Q3. Validation number two achieving 24.4% adjusted EBITDA margins in just our second full quarter after the acquisition. And validation three the level of collaboration and the amount of product enhancement we are delivering also demonstrates that we are better together. I look forward to spending more time sharing validating metrics from our Q3 results.

But first I'd like to turn the call over to our CFO Dave Rockvam to provide more details on the financials for the quarter. Dave?

Executive
Dave Rockvam

Thank you Dave, and good morning everyone. As our results for the quarter clearly demonstrated, we are firing on all cylinders and we are continuing to recognize meaningful financial benefits as well as operational and sales process efficiencies as we move forward in our ongoing integration with AppRiver. Now let's talk about the numbers in more detail. At the end of the third quarter our ARR totaled $200.3 million up 167% from Q3 of last year and 18% on a purely organic basis. On a combined basis cloud-based ARR now makes up over 80% of total ARR. For the third quarter we had just over 102% net dollar retention which represents our renewals plus our new sales into the installed base divided by the renewals that were available at the beginning of the quarter. Our strong gross dollar retention of over 90% growth in new customers and continued success in cross-selling drove yet another quarter of record ARR. Revenue for the third quarter increased 168% to $47.8 million from $17.9 million