Zix Corporation
Q2 2018 Earnings Call Transcript

Published: 1 Aug 2018

[Operator:]

Good afternoon. Welcome to Zix Second Quarter 2018 Earnings Conference Call. My name is Eugene and I will be your operator this afternoon. Joining us for today’s presentation are the company’s President and CEO, David Wagner; CFO, David Rockvam; and Vice President of Marketing, 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. Now, I would like to turn the call over to Geoff Bibby. Sir, please proceed.

[Geoff Bibby:]

Thank you, Eugene. Good afternoon, everyone and thank you for joining our second quarter 2018 earnings conference call. With me today are CEO, Dave Wagner and CFO, Dave Rockvam. After the market closed, we issued a press release announcing our results for the second quarter ended June 30, 2018. A copy of which is available in the Investor Relations of our website at www.zixcorp.com. Please note that during the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the company. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. It’s important to note also that the company undertakes no obligation to update such statements. We caution you to consider Risk Factors that could cause actual results to differ materially from those in the forward-looking statements contained in today’s press release and in this call. The Risk Factors section in our most recent Form 10-K filing with the SEC provides examples of those risks. During the call, we will present both GAAP and non-GAAP financial measures. Non-GAAP financial measures are not intended to be considered in isolation from, a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing the company’s performance. A reconciliation of certain GAAP to non-GAAP measures is included in today’s press release. Now with that, I would like to turn the call over to Dave Wagner for his opening remarks. Dave?

[David Wagner:]

Thanks, Geoff. Good afternoon and thank you everyone for joining us today. With new records established virtually across the board, Q2 2018 represented a standout quarter for Zix. Nearly all of our key metrics, including revenue, ACV, new first year orders and total orders reached all-time highs. Driven by the strong performance of our enterprise, corporate and mid-market sales teams, we once again delivered on a commitment of profitable growth. Revenue was up 7%. ACV up 13%. New first year orders up 27% and total orders were up 39% to a company record 21.9 million. GAAP earnings increased, cash flow improved and adjusted EBITDA was up 2%. Record new first year orders of 3.3 million were driven by strong new customer acquisition as well as record add-on activity during the quarter. They were driven by success across all of our direct and bar channel teams and no single transaction accounted for more than 5% of total new first year orders. We're very pleased with the breadth of our sales success last quarter. Collectively, our advanced threat and unified archiving solutions made up 25% of our total new first year orders during the quarter. ZixProtect and ZixArchive more than doubled and tripled respectively on a year-over-year basis and demand for our ZixEncrypt products was also strong, up 10% year-over-year. This demonstrates the success we're having, positioning our cloud bundle and validates the strategic investments and product enhancements we've made these past several quarters. Overall, the record financial performance in Q2 represents a meaningful milestone on our journey and it demonstrates that we're executing on the right strategy. As we look ahead, we will continue to assemble the right product offering, expand our sales force and focus on marketing to expand our market presence, not just an e-mail protection, but also in the broader digital communications landscape. I'll talk about unified archiving later in the call, but at a high level, we see a business communication market where e-mail continues to grow, but is increasingly supplemented with a vast array of additional communication channels that will need to be protected and archived. We see a market where compliance requirements continue to increase and where cyber threats continue to evolve and exploit multiple business communication channels. We see a market where companies increasingly leverage the cloud and their employees do even more work on mobile devices, whether it's social media, mobile, audio, video, e-mail, business customers, both small and large, will require an even more advanced set of tools and solutions to combat security threats and securely retain the communications data necessary to protect their businesses. Now, I will turn the call over to our CFO, David Rockvam to provide more details on the financials for the quarter. Dave?

[David Rockvam:]

Thank you, Dave and good afternoon, everyone. Q2 was an extremely positive quarter for Zix. We were able to continue growing our host of email encryption offering, extend the success of our e-mail protection bundles and manage our costs more effectively, all of which have led us to once again achieve our top and bottom line guidance for the quarter. Revenue of $17.5 million and new first year orders of $3.3 million were both new records for the company. Along with a solid top and bottom line performance in the quarter, we also continued to execute on our balanced capital allocation strategy with the acquisition of Erado, working on our M&A pipeline and repurchasing more than $2 million of our common stock. Overall, our strong execution and results have enabled us to raise the midpoint of our revenue and GAAP earnings per share guidance for 2018. Turning now to our financial numbers in more detail, our new first year orders for the quarter increased 27% to a record $3.3 million, compared to $2.6 million in the same quarter last year. What is most exciting to us about the record new first year orders is first, all three of our sales teams, corporate, mid-market and enterprise contributed strongly to the success and second, there were no especially large deals in the quarter. Similar to last quarter, we achieved 44% of our new first year orders to net new customers and 56% of our new orders were to the installed base. That means that $1.4 million of our new first year orders were to net new customers. This is 2% higher than Q2 of 2017, with Q2 of last year was helped by a large Cisco order. $1.9 million came from our installed base, which is the highest level in over five years. This strong performance shows not only the ability of our sales teams to sell the bundled offering, but more importantly, the value our customers see from the additional services we've added to our portfolio over the last 18 months. Revenue for the second quarter increased 7% to a record $17.5 million from $16.4 million in the same quarter last year. With $17.5 million, we achieved the top end of our revenue guidance for the quarter. Our adjusted gross profit for the quarter was $13.9 million or 79.2% of total revenue, which was an improvement on a dollar basis from $13.3 million or 81% of total revenue in the second quarter of 2017. Our adjusted gross profit margin percentage for Q2 was down year-over-year. This was primarily due to Erado and the deferred haircut associated with the acquisition -- of the acquired subscription revenue. We anticipate adjusted gross profit margins to move back to 80% in the third quarter and expect them to remain around this level for the remainder of the year. Our adjusted R&D expenses for the second quarter of 2018 were $2.8 million or 15.9% of total revenue, compared to $2.6 million or 15.9% of total revenue in the second quarter of last year. The year-over-year increase was primarily due to acquired headcount. Our adjusted selling and marketing expenses for the quarter were $5.1 million or 29% of total revenue compared to $4.9 million or 30.1% of total revenue in Q2 of last year. The additional expenses in selling and marketing related to the building out of our business development rep team and other quota carrying headcount. Selling and marketing expense increases have been offset by lower commission expenses in conjunction with our implementation of ASC 606. For the second quarter of 2018, our adjusted general and administrative expenses were $2.6 million or 14.8% of total revenue compared to $2.2 million or 13.1% of total revenue reported in Q2 of last year. The year-over-year increase was primarily due to one-time outside legal services to support the business during the transition period between general counsels in April and May. The increase was also due to G&A expenses associated with our Erado acquisition in early April. We expect G&A expenses to move back toward historical levels in the second half of 2018. On a GAAP basis, we recorded net income of $1.8 million or $0.03 per fully diluted share compared to $1.1 million or $0.02 per fully diluted share in Q2 of last year. Our second quarter non-GAAP adjusted net income was $3.9 million or $0.07 per fully diluted share. $0.07 per share was consistent with our guidance for the quarter and represents an improvement of $0.01 over the amount we reported in Q2 of last year. And finally, our adjusted EBITDA for Q2 2018 totaled $4.3 million, an increase of 2% compared to the $4.2 million we reported in Q2 of last year. As a percentage of total revenue, adjusted EBITDA for Q2 was 24.8%. The lower EBITDA percentage was due to the accounting revenue haircut for the acquired revenue from Erado. As we move through the year, we would expect adjusted EBITDA to move back towards the 30% target we discussed on our Q4 2017 earnings call in February. Cash flow from operations for the second quarter of 2018 was up 7% to $3.4 million. Our 100% subscription model serves as a backbone of our business, which enables us the visibility to build on our profitable growth objective, continue to generate strong cash flow and maintain a solid balance sheet. In addition, we completed quarter with a higher deferred revenue balance compared to Q1, 2018, which is primarily due to our strong order growth in collections during the quarter. At the end of Q2, we had $17.7 million in cash and no debt, reflecting once again our financial strength. Turning to our share repurchase program, which our Board of Directors approved in April 2017. During Q2 of 2018, we repurchased 500,000 shares for an aggregate of $2.3 million at an average share price of $4.61. This program expired in May of 2018. The board will continue to monitor the possibility of reestablishing a buyback, but historically has done so only after the cash balance is greater than $30 million. As we've talked about before, maintaining the balance between share buybacks and investments and acquisitions the support our growth remains a key focus of ours. Over the past 2.5 years, we have demonstrated this balance by purchasing approximately $24.2 million of our stock and using cash of approximately $20 million for acquisitions. We will continue to allocate capital toward the areas where we see the most accretive returns for shareholders, especially as it relates to capturing additional growth opportunities and share gains in the ever expanding business communications protection market. For further alignment with our balanced capital approach, we filed earlier today with the SEC a shelf registration statement on Form S3 to register 25 million shares of our common stock for offering and possible sale in one or more future offerings. Any use of the shelf in the future would require an additional prospectus supplement with more details. Our goals position the company to take advantage of favorable market conditions for raising equity capital that may be used to finance future acquisitions and for other general corporate purposes. CapEx and other intangibles for the quarter were $1.2 million, which consisted primarily of normal business capital purchases, internal software development projects and capitalized R&D. We are increasing our CapEx and other intangibles forecast for 2018 to be between $2.8 million and $3.4 million. This increase has to do with two things. First, continued investment in our business systems for both modernization and the integrator acquisitions. Second, we have begun to capitalize a portion of our R&D, as we increase investment in our multi-tenant cloud platform. We're doing this in accordance with GAAP guidance, ASC 350-40 for internal used software, as it applies to hosting arrangements. We also expect depreciation to be approximately $2.8 million for all of 2018. Our backlog, which represents the dollar value of committed contracts was $73.2 million as of June 30, 2018, which was down 6% from $77.8 million as of the same date last year. Similar to prior quarters, the decrease in backlog was due to the shorter-term commitment associated with the new customer pricing and bundled offerings. This has produced the desired effect of increasing our transaction volume and number of touch points with customers. However, backlog did increase 3.5% from Q1, 2018 due to the fact that we have stabilized our average contract term length to a level that aligns with our objectives. In addition, the sequential uptick in backlog was helped by the record number of total orders achieved by our sales team this quarter. Looking at our deferred revenue, we expect to recognize approximately $45.6 million or 62% of deferred revenue balance as revenue over the next 12 months. At the end of the quarter, our ACV or annual contract value totaled a record $74 million, up 13% from Q2 of last year. From an industry perspective, our revenue breakdown was 49% from healthcare, 29% from financial services, 7% from government and 15% from other verticals, all excluding our acquisitions from 2017 and 2018. Now for our third quarter and full year 2018 financial guidance. We currently anticipate revenue for the third quarter to range between $17.7 million and $17.8 million. We are also forecasting fully diluted GAAP earnings per share to be between $0.03 and $0.04 and fully diluted non-GAAP adjusted earnings per share to be $0.08. Because of our strong results year-to-date and visibility into our business for the rest of the year, we are raising the midpoint of our 2018 guidance. We now expect revenue for the full year to range between $69.5 million and $70.5 million, which represents an increase of 6% to 7% compared to revenue in fiscal 2017. Our previous guidance for revenue range between $69 million and $70.5 million. As part of our updated guidance, we are also forecasting our fully diluted GAAP earnings per share to be between $0.15 and $0.17 and increasing our fully diluted non-GAAP adjusted earnings per share to be $0.31 for fiscal 2018. In summary, our recent results and operational momentum indicate that we're executing our plan to meaningfully grow the company. Over the last 18 months, we have dramatically increased the addressable market for the company and we are pleased to be seeing those investments pay off in the form of record revenue and new first year orders. These early success indicators give us confidence that we are making the right strategic moves and we're starting to reap the fruits of our labor and ultimately guiding the business toward higher growth market share and customer retention. This completes my financial summary. For a more detailed analysis of our financial results, please reference our Form 10-Q, which we plan to file by August 8. Dave?

[David Wagner:]

Thanks for the financial overview, Dave. In this final portion of the call, I will review our progress with respect to each of our three main growth drivers. As a reminder, the three growth drivers are, one, new customer acquisitions, two, sales of existing customers through add-ons and cross-selling and three, reducing churn and increasing retention. Then, I'll conclude by sharing more details about our unified archiving opportunity and how we're gradually transitioning the business from one that's focused exclusively on email security to one that increasingly protects all types of business communications with a special focus on compliance oriented markets. First, our first growth area is new orders to new customers. As I mentioned in my opening remarks, total new first year orders hit a record 3.3 million, representing 27% growth over the same period last year. As Dave mentioned, orders from new costumers made up 44% or $1.4 million of total new first year orders this quarter. To illustrate some of the areas where we're gaining traction with new customers, let's take a quick look at our top five new customer wins for the quarter. The top five new customer wins were high weighted more to encryption in Q2 than in the past several quarters. Four of the top five new customers were encryption only, while the fifth purchased our complete bundle with email encryption, advanced threat protection and archiving. Four of the top five new customer wins were competitive displacements where we displaced Barracuda, Microsoft, Sophos and Virtru. Only one did not have an existing email encryption solution. Ease of use, the effectiveness of our filtering, outstanding end user experience and the depth of our portal functionality were the driving reasons we displaced existing encryption vendors. The full bundle sale was driven by an Office 365 migration where we displaced Microsoft for ATP and encryption and an on-prem archive with our cloud solution. Three of the top five new customer wins were healthcare, the other two were in the finance vertical. The largest new customer win was another top five Canadian bank and it was the only top five new customer that is not deploying in a multi-tenant cloud environment. We are very pleased to see the continuing strength of our gold standard email encryption offering and the continuing adoption of our multi-tenant cloud service to new customers. If we look at our total new first year orders during the quarter by distribution channel, 53% came from our direct sales efforts, 37% through VARs and MSPs and 10% from web sales and other, which as a reminder includes contributions from our OEM partners. As we discussed on our Q1 earnings call, we launched our new Zix partner MSP program in April, which is a major step forward for MSPs and a great platform for us to use to attract new partners. We are seeing a gradual pick up in the number of new MSP partners that are joining the program. We fully enabled eight partners since the launch, five of whom added new customers during the quarter. We have another seven partner signed who are currently in the on-boarding process. We are pleased with this early traction and are excited to build on this progress throughout the year. As expected, our OEM partners’ contribution to total new first year orders continues to diminish and represented less than 6% of new first year orders in Q2. We continued to make progress, winding down the Cisco relationship and over the next several quarters, we will collaborate on the migration of our joint customers to the most appropriate platform, which in many cases will be ZixEncrypt, but in some cases will be CRES. Our ACV with Cisco is approximately $1 million and we expect a modest positive impact to our overall ACV on renewals due to the margin pickup we will achieve with the direct renewals going forward. In collaboration with Google, we successfully migrated our joint game customers away from the Google relationship and into a direct relationship with Zix. In the vast majority of the cases, we retained the existing reseller of record. We retained over 75% of our customers and 80% of the ACV in the migration. We also added 12 new Google resellers to our VAR program as a result of the transition. So as we expected, there will not be a meaningful negative impact of this transition and we believe that the transition will benefit our game customers, our resellers and our organization as a whole. Going forward, we expect to drive considerably more value from these customers through our VAR channel. We were also adding a premier part in the Google marketplace so that we can continue to contract with customers who prefer to purchase directly from the Google marketplace. Moving on to international markets, we are continuing to make modest progress with our modest investments. We won the large Canadian bank that I mentioned earlier, added several Google resellers as a part of that transition and we continue to move forward with partnerships in the UK and South Africa. Moving on to our second main growth area, which is additional sales to existing customers. Roughly 56% or about $1.9 million of our new first year orders during Q2 came from our installed base. This is similar to the 60% last quarter, but meaningfully higher than our long term average of 40%. We believe this change evidences the success we've been having cross-selling and up-selling our customers. Diving deeper into our add-on sales in the quarter, two of our top five add-on sales were in healthcare, two were in government and the fifth was in finance. In addition, four of our top five add-on sales were ZixEncrypt only add-on and one added ZixProtect premium along with the new ZixArchive premium, which is based on the acquired Erado platform. This customer represents our first sale of the Erado platform by the Zix sales team and it aligned exactly with the strategic intent of the acquisition. The customer was a 2000 user regional bank who has been easy ZixEncrypt customer since 2008. They are undergoing an Office 365 migration and our cloud solution displace its on-premise ATP and archive solutions. We're encouraged to see the increased amount of cross selling thus far in 2018 and we expect that the launch of our expanded archiving capability plan for Q1 2019 will help our catch rates even further. The higher we drive our tax rates, the stickier we become with our customers, which translates to lower churn and higher retention. So, moving on to our third growth area, retention, we again achieved a healthy retention rate of about 90% during the second quarter. Our customer success team is laser focused on our on-premise customers to ensure that they are aware of the value of transitioning into our cloud. The early results are promising and suggests that we are moving in the right direction. Since the beginning of this calendar year, we have reduced the number of customers with on-premise hardware from 800 to 675. Of the 125 customers who moved from on-premise deployments, 63% were transitioned to another Zix platform and 37% were losses. Total ACV from on-prem appliance customers decreased from 19% of ACV in Q1 to 17% of ACV in Q2. While we're not through all of the excess churn in our hardware appliance base, we are seeing progress for our enhanced focus on the migration of these customers. The takeaway is that retention is improving, not just on a quarterly basis, but on a rolling 12-month basis as well. We're still working through the final stages of excess churn that we talked about it Q4, 2017, but renewal rates have stabilized. Leveraging the market traction we’ve gained with ZixProtect and ZixArchive and the migration of more customers to the cloud, we put ourselves in a position to meaningfully improve retention rates in 2019. I’ll now spend a couple of minutes talking about the unified archiving opportunity before we open the call for questions. Earlier this year, with the acquisition of Erado, we strengthened our leadership position beyond e-mail to all forms of digital communications, including social media, instant messaging, mobile, web, audio and video. In fact, there are now over 50 digital communication content channels that we can archive. Of course, email is by far the most archived business communication channel today, but LinkedIn now represents a meaningful portion of our archived content as customers continue to make use of a broader range of business communication channels. In fact, FINRA Regulatory Notice 07-59 states that regulated organizations must have supervisory policies and procedures to monitor all electronic communications technology used by the firm. So as compliance oriented verticals continue to expand the use of additional digital communication channels, the requirement to archive these channels will grow. What we like so well about our acquired technology is that using a patented approach, we re-format communications data from virtually any digital content channel into an EML format that is entirely consistent with our customer's existing email oriented workflows. So for example, posts, comments, likes and shares made by a broker on the LinkedIn page are recorded and archived in a consistent indexed format just like their emails and are accessible in an admin interface where they can be searched, supervised and discovered using existing workflows that an organization’s compliance staff are completely comfortable with. For many years, our Seattle team has been focused on making sure that customers can achieve compliance as easily as possible, which fits perfectly with Zix’s core brand promise of simplicity and ease of use that is so valued by our large base of mid-market customers in the healthcare and financial verticals. By opening up Zix’s market opportunity from email to include virtually all digital communication channels, we are now even better positioned to capture share in the archiving market, as customers look to move from on-premise archiving solution into the cloud. The migration of business computing from on-promise to the cloud is the most powerful trend in IT today. Archiving is no different and we believe with our best-in-class unified archiving capabilities, we’re in the perfect spot to help migrate customers from their on-premise archives to our hosted solutions, which will drive even deeper relationships with our compliance oriented buyers. So in closing, Q2 results mark an important milestone on our strategic journey to reaccelerate the growth of Zix. The strong new customer orders demonstrate that our product investments to migrate our solutions to a multi-tenant cloud bundle are working. Our record add-on sales are evidence that our customers value the high level of support and service we deliver and that they have propensity to attach additional services to those Zix subscription. The stabilizing retention also supports the assertion that we’re on the right strategic path. We are equally pleased with the growth maturation and execution of our go-to-market team as they absorb the transition of our OEM relationships and deliver record orders. We’re excited about the opportunities ahead, as we continue to execute with the team. We believe our strategy will continue to deliver profitable growth and increasing shareholder value. Now, with that, we’re ready to open the call for your questions. Eugene?

[Operator:]

[Operator Instructions] Now, our first question will come from Zack Turcotte from Dougherty.

[Zack Turcotte:]

Zack on for Catherine. Great quarter. Just a couple of questions. So first if you have any sort of quantification on the contribution from Erado in the quarter and then more qualitatively, is the integration going as planned? You still expect it to be done by the end of this year, do you have any feedback from customers that have purchased that solution?

[David Wagner:]

Thanks for the question. So, first of all, what we have in the script obviously is the 25% of total orders from ZixArchive and ZixProtect together and that's up a little bit from prior quarters. So -- but it's less than 5% directly from Erado in the new first year orders for the quarter. The really exciting thing for me that I mentioned was sooner than we expected, we got that first 2000 user bank to adopt that platform, which is a very relatively short sales cycle for that kind of technology. So that was a real positive early indicator for us. So the feedback is quite good. The appetite for a cloud based archiving solution that works cross-channel resonates well. As far as the integration, those plans have been moving ahead throughout the second quarter. I'm really pleased with the team in Seattle and the collaboration and the cooperation and the integration and the work they're doing, so that team has been augmented with developers from Dallas and I think they’ve actually even made some additional hiring in the Seattle Office as well for support. The integration that's planned for the end of the year, so that we’ll have a January launch where the unified archiving becomes the core archiving platform in ZixCentral.

[Zack Turcotte:]

Got it. And then I want to touch on the archiving opportunity that you were talking about at the end there. What’s the size of the opportunity in that market? Do you think it will be as big for you as encryption, say and is there a particular vertical or target basically you see for archiving? I know most of your customers already are highly regulated industries, would maybe financial services be a large target for archiving?

[David Wagner:]

Yes. So financial services is the focus. When we look at the archiving market where we moved into it with the added vision of addition of Zix Archive in 2017, we had estimated about $800 million to $900 million for that. With the unified archiving, we estimate there is an additional $0.5 billion market across the unified archiving piece. So it's a much bigger total addressable market of course than email encryption. We're really honing our focus in, as you can tell from my remarks on the compliance oriented buyer that is primarily in the finance and healthcare vertical, but there are many other organizations that care about compliance, even if they're not regulated and the ability for those buyers to integrate emerging, complementary content channels with their e-mail is what we're focused on and where we see the best opportunity for Zix.

[Zack Turcotte:]

Got it. And then the last thing would just be the M&A marker right now, are you -- are you actively looking for acquisitions? I think last quarter, you said you're -- you feel the solution set you have now is pretty complete. The Erado, you acquired a lot of customers as well as technologies. So still active in that or kind of just working on investing in the current platform with Erado?

[David Wagner:]

Well, our focus today of course is on Erado, but all the things that go with – again, technology integrated, the sales force is trained and that's going extremely well. We do have one full-time corporate development person and he continues to monitor the ecosystem for, as Dave said, opportunities that would be really good use of shareholder capital and create value, but there's nothing on the radar screen in the near term. We're just continuing to do good corporate job of assessing the environment.

[Operator:]

Our next question is from Alex Henderson from Needham.

[Alex Henderson:]

Thanks. I was hoping you could give us a couple of breaks. One, could you talk a little bit about what percentage of your business is coming out of VAR versus MPS versus direct and then two, could you give us a little bit of a break on -- between business and multi-tenant cloud versus on-prem. That would be very helpful. Thank you.

[David Wagner:]

Okay. Good. Dave can pull out the first question for you, Alex. On the multi-tenant cloud, we shifted at the end of Q1 to over 50% of our customers being 100% cloud deployed and so we probably picked the two points that I mentioned in that on-prem decrease for sure. So we’ve put this in the 52% to 53% of our customers are 100% cloud deployed. If you remember, our Zix port offering, nearly all of our customers have a component of their Zix solution in a multi-tenant cloud, but I’m talking about the portion of ZixEncrypt that remains on-prem is now less than 47%.

[David Rockvam:]

Yeah. Looking at the new first year orders from a distribution perspective, we had 53% were from our direct channel, 37% were from VARs and MSPs and 10% was web sales and OEM.

[Alex Henderson:]

And can you just clarify for me, this is probably just my ignorance, but you've got the other asset and deferred number jumped in the first quarter, can you remind me what that was?

[David Rockvam:]

Yes. That would have had to do with the ASC 606 for deferral or commissions. So we did not have to make any adjustments on revenue because of our subscription base, but we did have to make adjustments on the commissions side where now we have to line our commissions to the length of term of the contracts that they’re associated with. So that put a large asset on to the books for commissions and that’s being amortized out now.

[Operator:]

[Operator Instructions]

[David Wagner:]

Okay. There being no further questions, we thank you all again for your time and attention this afternoon. Look forward to speaking with you in about 90 days with Q3 results.

[Operator:]

Thank you for joining us for today's Zix second quarter 2018 earnings call. You may now disconnect.