Zix Corporation
Q2 2015 Earnings Call Transcript

Published: 21 Jul 2015

[Operator:]

Good day, ladies and gentlemen. Welcome to Zix Corporation Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Geoff Bibby, Vice President of Corporate Marketing. You may begin.

[Geoff Bibby:]

Thank you, Nicole and thank you for joining our 2015 Q2 conference call. You can find our earnings press release on our investor website at investor.zixcorp.com. The earnings release contains instructions for accessing the recording of this call. Our President and CEO, Rick Spurr will provide an overview of the company’s performance in the quarter and then our CFO, Mike English, will give you details of our financial results. Later in the call, they will answer questions from analysts and institutional investors. Listeners can also submit questions during the call to our Investor Relations mailbox at [e-mail]. Rick and Mike will provide forward-looking statements on matters such as forecast of revenues, earnings, operating margins and cash flow, projections about contracts or business and comments on trend information. The company undertakes no obligation to publicly update or revise any forward-looking statements. Forward-looking statements are subject to risks that could cause actual results to differ materially from our expectations. The Risk Factors section of the company’s most recent Form 10-K filing with the SEC gives examples of those risks. Rick and Mike will refer to various non-GAAP financial measures such as adjusted gross profit, adjusted operating expenses, adjusted earnings and adjusted EBITDA. You can find in our earnings press release and on our Investor website, detailed explanations of our non-GAAP financial measures along with reconciliations of our adjusting items to the most directly comparable GAAP financial measure. Now, I am pleased to turn the call over to Rick.

[Rick Spurr:]

Thank you, Geoff. I’m pleased to report a strong second quarter for the company, which included record total orders, record backlog and solid gains in our new products, including our best new customer quarter ever for ZixDLP and second best for our ZixOne solution. Revenue for the second quarter was a record $13.3 million, which met our guidance for the quarter and represented a 5.4% increase from the $12.6 million in the same quarter last year. Our new first year orders for the second quarter were $2.5 million, up 5.5% from the second quarter last year and up 25% from the preceding quarter. Our new first year orders for the first half of 2015 totaled $4.5 million, which sets a new record for the company for the six month period of January through June. Total orders during the second quarter was a record $17.4 million, which is an increase of 11% over the previous record of $15.7 million in the second quarter last year. This substantial increase reflects strong new first year orders and renewals in the quarter. Our backlog which reflects all contractually committed business that has not yet been recognized as revenue also reached a record of $73.9 million at quarter end. This is an increase of 8% over the backlog of $68.4 million at the end of the same quarter last year and up more than 5% from the previous record backlog of $70.3 million that we reported at the end of Q1 2015. On the bottom line, we achieved GAAP net income of $1.1 million or $0.02 per share on a fully diluted basis. Non-GAAP adjusted net income in the second quarter was $2.2 million or $0.04 per share on a fully diluted basis. And during the second quarter, our business generated $3 million in cash from operations. Now let me share some detail on the composition of our new first year orders in the quarter. Our enterprise sales group which sells to large accounts contributed 24% of our new first year orders. This strong second quarter when combined with Q1 2015 results ties for the best six months in over seven years. And our second quarter results for this enterprise sales unit would have been even stronger if it hadn’t been for the movement of enterprise IEA replacement opportunities since the second half of 2015 because of our announced partnership with Cisco. Our corporate sales team achieved $1.6 million in new first year orders, which is a 10% increase over the second quarter last year, and represents 65% of our new first year orders in the quarter. Our OEM business represented 8% of the new first year orders and is more than double the OEM contribution in last year's second quarter. This year-over-year increase primarily reflects a substantial increase in orders from Google and we expect to see continuing growth in orders from Google in Q3, as we typically do, amount coming on sales contribution from an industry perspective. Our new first year orders in the second quarter broke down as follows. Healthcare represented 40% followed by finance at 35%, government at 4% and other at 21%. As most of you know, other for us is a category that captures new first year orders from all non-healthcare, non-finance and non-government accounts. Now I'll turn to an update on our new products, ZixDLP and ZixOne, first of all ZixDLP. This is our email data loss prevention solution, designed to help both new and existing customers, address the number one data leakage problem in our organization, email. We have the best new customer quarter ever for DLP. During the second quarter, we signed a record 28 new DLP customers, totaling nearly 27,000 new DLPs; this represents 115% increase in new customers versus last year's second quarter and 31% increase in the total number of ZixDLP customers since we introduced the product. It's noteworthy that more than 20% of these new seats were sold into previously existing DLP accounts. So we continue to see meaningful upsell activity reflecting the quality and effectiveness of our DLP product. Also the price per seat in Q2 for these new DLP customers was higher than our average and was a little over $5 per seat, bringing our lifetime price per seat up a bit to just over $4. In terms of customers and licensed seats, we now have a lifetime total of 119 DLP customers and approximately 186,000 licensed seats, with approximately 84% of these seats in large enterprise accounts. We continue to see DLP as a highly complementary offering to our core email encryption solution and our sales teams, both corporate and enterprise, offer it as a package solution to account new to Zix. Slightly more than half of our sales come in this manner and the other half have been upsells to our existing base of email encryption customers. Let me turn to ZixOne, our new bring your-own-device or BYOD solution. As most of you know, this is a unique BYOD solution, that let’s employees access their work related email using their own smartphones or tablets without ever storing any corporate email data on those devices. This approach and its underlying patent pending technology provide the highest level of security available and have zero impact on employee's personal device, personal data or privacy, unlike the competitive approaches. We had our second best new customer quarter ever for ZixOne, adding a near record 82 new ZixOne customers. This represents an 82% increase year-over-year. This addition of new ZixOne customers grew our number of lifetime ZixOne customers 26% to a total of 393. Of these 393 total customers, approximately 40% are new accounts to Zix and 60% have been additions into our installed base. The number of new seats sold during the quarter was nearly 4,800. This brings the total number of ZixOne licensed seats to nearly 26,000, up from approximately 21,000 last quarter, a 23% increase in a single quarter. The average price per user per year, looking at all ZixOne customers at the end of the quarter, was $33; no change from the prior quarter. The average number of seats per customer across all ZixOne customers was 66, which highlights the opportunity for expansion within these customers, similar to what we’ve seen occur with our DLP product. In terms of new first year orders, ZixOne contributed 50% more to our results in the first half of 2015 versus the same period last year. I now like to highlight a significant expansion during the quarter with one of our existing ZixOne customers. This customer is one of the nation’s largest providers of specialized healthcare with over 30,000 employees and one of our early enterprise wins in 2014 with an initial small purchase of 350 seats. During the second quarter, they added another 750 seats, more than doubling their original purchase, which was a strong indication of their satisfaction level. This follows the pattern that we strive for within enterprise accounts where initial ZixOne deployments expand to cover an ever larger percentage of customers’ employee base. During the quarter, we also began development of a new feature that integrates ZixOne with Zix gateway in a way that leverages the benefits of both products. Someone using Zix gateway will be able to send an encrypted message with a simple click using ZixOne. So, we can now show Zix gateway customers how adding ZixOne will give them this new functionality and capability for their employees and we can show ZixOne users why adding Zix gateway will give them enhanced functionality with a secured transmission of email. We anticipate that this new feature will increase cross-sell opportunities for our sales teams. We are planning for continued growth in sales of our two new products, ZixDLP and ZixOne, throughout the remainder of the year and except them to have a meaningful impact on accelerating our revenue growth in 2015 and beyond. Now, let me provide an update on our strategic partnership with Cisco. As we announced in March, we had joined forces with one of the largest, if not the largest, enterprise security vendor in the world to approach the market as partners and combine the strength of Cisco’s world-class distribution and our technology. The partnership will focus on two solutions in 2015. First, as we've noted before, the announced end-of-life of the Cisco IEA product has created a number of large displacement opportunities within Cisco's install base. So to capture these opportunities, with Cisco's help, Zix has developed an updated version of IEA that includes new hardware as well as software patches to protect against the latest security threats. Encryption capabilities, reporting and end user interaction with the updated Cisco IEA remain the same. So existing Cisco customers can have a seamless transition to this updated version. Zix will provide the technical support for this new product and is called ZEA or Zix Encryption Appliance. In late June we completed development and testing of this first new product and is now available for ordering through Cisco's sales and distribution partners. Since our last earnings call, we have gained much greater visibility into these customers and have begun several awareness campaigns in conjunction with Cisco to reach out to them with information regarding ZEA. We also trained Cisco's security sales team and resellers. We have evaluations ongoing and will see orders begin this quarter. It's important to note that both Cisco and most importantly their IEA customers generally want to move off the old solution since it exposes customers to security risks. We expect that this first phase of our Cisco partnership will allow us to maximize sales to this large base of IEA customers and it will position us well for potential future upgrades to our new combined new product which we are working on with Cisco in phase 2 of our partnership. We are even more excited about the second phase of the Cisco agreement. In this second phase, both Cisco and Zix will take a brand new product to market that incorporates the best of both architectures. We will have ZixGateway with our unique ability to send and receive encrypted email transparently without the use of passwords, along with the Cisco capability that allows for storage of encryption keys and encrypted messages on-site at the client, which is a feature that high-end security conscious customers find especially attractive. The second new product is being developed by Zix and is currently in the design phase. As previously announced, we are on track to release this new product which will be called ZCT, or ZixGateway with Cisco technology in the fourth quarter of this year. All of the sales from this new combined product will become part of the Zix network of customers and as Metcalfe's law states, the value of the network will grow exponentially as these new users are added. As a result, all of our existing customers and all of the new customers will benefit from a larger network of users. Transparency will increase dramatically and the need for passwords will continue to dissipate. The distribution for this new product will be worldwide and done predominantly through Cisco's sales teams and their massive partner network. While Zix has built the solid network of around 300 resellers, Cisco's distribution network is made of 68,000 resellers and obviously provides us far greater reach in distributing this new product, including its international markets. Needless to say, we believe the second phase of this new partnership can take Zix to a new level. We still expect the total 2015 new first year order contribution from our Cisco relationship to be between $1 million and $3 million down. The revenue impact in 2015 from our new Cisco relationship is still uncertain and is a portion of a number of variables still in flux, including the timing of new product installations. The revenue impact in 2016 should map to the 2015 new first year order amount, the $1 million to $3 million range just mentioned. New sales in 2016 will also have a contribution to 2016 revenue. We’re also excited to announce today that we’re in the final stages of setting up a significant sales partnership agreement with yet another large security vendor. The referral agreement is designed to provide a more complete email security suite of solutions for our new partner, by adding ZixGateway email encryption to their offering and greater sales coverage and lead flow to Zix from this partner’s very large security sales team. After leads are registered, the Zix sales team would do the selling and close the sales on Zix contracts and then pay the partner a referral fee. The partner in turn would provide full compensation to their sales team that generated the lead. We believe this new agreement and our strategic partnership with Cisco are game changers for Zix and that we replace formerly competitive relationships with partnerships that provide very large broad based US and international sales coverage for our leading edge email encryption products. To conclude, with the significant opportunities we see for growth, including the strength of our pipeline for email encryption, the growth in orders from Google, expanded sales through our Cisco partnership, our new potential strategic partnership and increase in contribution from ZixDLP and ZixOne, we have heightened confidence about accelerating growth in both the back half of 2015 and beyond. And now, I’ll turn the call over to Mike, our CFO, to discuss the second quarter financial results and our guidance for 2015 in more detail.

[Mike English:]

Thanks, Rick. Our SaaS model continued to generate solid financial results and predictable earnings and cash flow in the second quarter of this year. Strong new first year orders and renewals drove record total orders of $17.4 million, resulting in a record backlog of $73.9 million. Over the next 12 months, based on scheduled revenue and backlog, we expect to recognize as revenue approximately 56% of the backlog or $41.4 million. At the same time last year, the backlog was $68.4 million, and we expect it to recognize revenue of approximately 55% or $37.9 million over the ensuing 12 months. So this year’s 12 month scheduled revenue and backlog represents 9% year-over-year growth. And over 99% of this revenue is recurring, which of course gives us confidence in the future and reduces risk. For the second quarter of this year, revenue was $13.3 million, which was at the midpoint of our guidance of $13.2 million to $13.4 million. Adjusted fully diluted earnings per share were $0.04, which met our previously issued guidance of $0.04. Although we achieved our projected earnings during the second quarter, we did incur what we believe to be a couple of one-time expenses. These included recruitment and training expenses related to the Cisco agreement and a spike in legal fees. For the second half of 2015, we forecast these costs to normalize and we have reflected a lower cost in our full-year earnings guidance. Reviewing these two items in more detail, the second quarter cost of sales expense included new investment and support staff, associated with our Cisco relationship. These costs totaled approximately $200,000 in the quarter and included hiring support staff and the purchase of computer equipment and software licenses as well as training and recurring fees. For the second half of 2015, we expect the ongoing Cisco related support costs to run about $160,000 per quarter. It is too early in the process with Cisco to know the specific timing of future revenue, but consistent with our existing business, this new business will be recurring revenue and will be recognized ratably over the terms of the agreement. Therefore, as revenue is recognized and associated support costs remain flat or only slightly increase, we expect gross margins to begin to normalize. It is our expectation that specific to the Cisco transaction, gross margins should return to normal levels once revenue recognition reaches the forecast level of $1 million to $3 million. The spike in outside legal fees that I mentioned is reflected in general and administrative expenses for the second quarter of 2015, and is due to a number of items including transition costs, in light of the departure of our general counsel in May. Operating cash flow for the quarter was $3 million compared to $4.1 million in the same quarter last year. The year-over-year reduction of $1.1 million resulted entirely from the impact on our statement of cash flows of a normal change to our deferred revenue balance. This is caused by the timing of cash receipts. As more cash is collected in the future, the deferred revenue balance should grow resulting in a benefit to operating cash flow. Given our forecasted higher earnings in 2015 compared to 2014, we estimate that our 2015 cash flow from operations will exceed last year’s amount. Capital expenditures were $784,000 for the quarter. This is up from our run rate due to timing of normal capital purchases and capital spending resulting from our recently completed office remodel. We do anticipate lower CapEx in the second half of the year and estimate returning to approximately $400,000 to $500,000 per quarter on a run rate basis. In May of this year, we announced that our Board of Directors had approved a $15 million stock repurchase plan. The plan is set to expire at the end of October this year. Under that plan, during the second quarter, we repurchased 278,600 shares of our common stock on the open market at a cost of approximately $1.3 million. Fully diluted shares outstanding at the end of June 2015 were up close to 1 million shares compared to the first quarter 2015 ending balance. This increase was due to the exercise of employee stock options during the quarter and the impact of our higher share price on the diluted share calculation under the GAAP treasury stock method. Approximately 740,000 options were exercised by employees in the second quarter compared to just over 400,000 options in Q1. Common stock equivalents, which are the additional number of shares included in the fully diluted shares outstanding, when applying the treasury stock method as required by GAAP, increased in the second quarter relative to the first quarter due to the increase in our share price. This number grew from approximately 900,000 shares at the end of the first quarter to approximately 1.2 million shares at the end of the second quarter. The company’s stock price at the end of the first quarter was $3.93 and $5.17 at the end of the second quarter. The total increase in the number of shares from option exercises and increase in share price was only partially offset by the share repurchases mentioned earlier. At the $5.17 price at the end of the second quarter, approximately 3.1 million of the 3.3 million options outstanding were in the money. Moving on to our forecast, we are reiterating our full year 2015 revenue guidance of $54 million to $56 million and fully diluted adjusted earnings per share of $0.19 to $0.21. For the third quarter of 2015, we forecast revenue to be between $13.6 million and $13.9 million and adjusted fully diluted earnings per share of $0.04 to $0.05. With that, I will turn the call over to Rick for some final comments.

[Rick Spurr:]

Thank you, Mike. Before, we open the call for questions, as most of you probably saw this afternoon, we also announced today my plans to step down as CEO of ZixCorp after 11 years with the Company. My career in the technology industry expand more than 40 years and during my time with Zix, I truly believe that the Company's market opportunities, products, people and strategic partners have never been stronger. So after much personal reflection, I decided that the time is right for me to pursue my outside interest in charitable service. I’m tremendously grateful to the Board and our exceptional management team and employees for an 11 wonderful years. The Board has engaged a nationally recognized executive search firm to conduct a search for my replacement and I will assist in the search process and remain President and CEO to ensure a smooth transition. Until the appointment of my successor, I'm fully committed to delivering outstanding results for our customers, employees and shareholders. During the search and the after the new CEO is in place, I will remain on the Board of Directors. Now let's turn to the audience for questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Mike Malouf of Craig-Hallum, your line is now open.

[Mike Malouf:]

Great, thanks a lot for taking my questions and I wish you a ton of luck on your next step Rick and pleasure working with you over the last four or five years.

[Rick Spurr:]

Thanks Mike, same.

[Mike Malouf:]

My question is, with regards to the Google relationship, I know that it was a much larger percentage a couple of years ago and I'm just wondering if you can give us a little bit of color on that ramp and that maturation of coming back on board and where that can go over the next year or so. Thanks.

[Rick Spurr:]

Well, obviously as you know as well as anybody, the percentage growth, the percentage contribution will be smaller even if we get back to the same absolute volume just because our overall sales volumes are larger. So it was as you say, it was probably 10% to 15%, I don't know remember exactly, so we just said it was 8%. I said before that the contribution in 2012 from Google was about 250,000 to 300,000 in new first year orders per quarter, generating about 1 million to 1.2 million in new first year orders over the course of a given year that dwindled off to almost nothing. We just reported that, at 8%, you do the math, it's about 200,000 that does include some Symantec business so that's not all Google but the outlook for Q3 looks good too. So we're still hopeful that we'll get back to at least that earlier run rate. What it can become Mike is just hard to determine or forecast, we are still a very, very small part of penetration in terms of overall Google Apps’ usage. Google Apps is used by 50 million people and so, you can do the math, our current penetration with our gain product is miniscule, so it's really just a function of the acceleration and that penetration rate, I don't want to predict what that might become.

[Mike Malouf:]

Okay, great and then just, I have a one follow-up question. With regards to BYOD, I know that a couple of years ago, when we're spending, when the Company was spending the money to develop the product, which was quite a bit investment at the time, obviously margins took a big hit as you ramped up the RD. As you look at it now, where does this need to get to, to be considered a success when it's all set and done because it seems like even though you are making progress that you’re still ways away from really moving the dial when it comes to meet new first year orders.

[Rick Spurr:]

Yeah, so we're focused on growth, we've said before that we want to do everything we can to get our growth on the topline up to 20%, we were 5% last year, midpoint of our guidance would imply we'll double that to 10% this year or thereabout and so we still got our ways to go. Introduction of new products like ZixOne is a very important component of accelerating growth. In terms of win, will it get there, different people have different views of that. I read an interesting comment by the Google economist this week in the newspaper, he said, everyone seems to overestimate what you can do in two years and grossly underestimate what you can do in ten years. So, we’re not really shocked, we’re actually happy with almost 400 new customers. We do want and expect to see some acceleration in that but I’m not prepared to give people a breakeven analysis on the earnings call.

[Mike Malouf:]

Yeah, okay. All right, thanks for the color, appreciate it.

[Rick Spurr:]

Thanks, Mike.

[Operator:]

[Operator Instructions] Our next question comes from Joe Maxa of Dougherty & Company. Your line is now open.

[Joe Maxa:]

Thank you, and I’ll also wish you the best when you move forward and will be talking more between now and then, Rick.

[Rick Spurr:]

I expect so to. Thank you, Joe.

[Joe Maxa:]

I wanted to ask about the Cisco and then the second large security provider and being global in nature. I believe you’re primarily in North America with your products today. I know there is some international but I was just wondering how that affects your infrastructure and what you may have to do and maybe any additional costs you need to bring on perhaps related to various markets.

[Rick Spurr:]

That’s a really good question, Joe. So, our product is ready for international markets, it has been for some time. So, the investments necessary are ready, the technology have already been laid. The only increase in cost that I can anticipate have to do with support and those are really a relatively small part of overall expense composition. So, we will have to have support as we expand internationally to cover all the various time zones and deal with languages and such, but it’s not major in the scheme of things. Actually, we’ve already ramped up to support some of the international customers that Cisco has. And our current go-to market is through these partners. So, we don’t anticipate or expect to be putting a lot of feet on the street in these international markets. That’s really the value of the partnership.

[Joe Maxa:]

All right, that’s helpful. I did recall you had some data center at UK to support some customers. I was wondering if you had to add different -- do a similar thing in other countries.

[Rick Spurr:]

Yeah, that’s a good question, Joe. It is possible. To refresh everyone on that, we have a small data center that was initially $250,000 expense item one-time and that was to support the storage of encrypted messages on European soil to adhere the European privacy loss. We could have to do a similar very small investment on other continents at some point. We don’t have that plan, nor anticipate it, nor has the demand made itself evident yet, but there is that possibility. Again, that’s a just a little small component of what we do. It’s actually storage as I said of the actual payload.

[Joe Maxa:]

It was relatively small, so, that’s good to know.

[Rick Spurr:]

Yeah, exactly.

[Joe Maxa:]

All right, thank you.

[Rick Spurr:]

All right. Thank you Joe for your question.

[Operator:]

Thank you. Our next question comes from Fred Ziegel of Topeka Capital Markets. Your line is now open.

[Fred Ziegel:]

Hey, Rick.

[Rick Spurr:]

Hey, Fred.

[Fred Ziegel:]

Just one follow-on question to Joe’s and I suspect you don’t have liberty to answer those, but I’ll ask it anyway. Is the new partnership with a company against whom you use to compete or the security vendor altogether different areas?

[Rick Spurr:]

It is a company that we use to compete against. In fact, in certain extent, we’ll continue to compete with them in the -- in what I’ll call the commodity market or encryption but in the larger customers and higher demands that lot of the compliance regulations placed on customers, they need a product like Zix to adhere to that requirement.

[Fred Ziegel:]

So in that scenario, are you going to be doing a more customized version for this partnership or is it what you are offering today just using that as the channel.

[Rick Spurr:]

The latter. So our products work very easily and freely with competitive tools. So to put our product in a -- on a contract and install it next to a competitive email security suite, for instance, doesn't require any additional work or customization. And so as this partner goes into, for instance, large healthcare and large banking accounts, the state of their current product doesn't meet the demand. So they recognize that and they are excited about having us as a partner.

[Fred Ziegel:]

And I don't remember if you said, if not, when would you expect this to be in market?

[Rick Spurr:]

Yeah, I didn't say. I said we are in the final stages of working out the agreement, but certainly I expect it will be relevant in the second half of the year. I don't know the volumes are, how it will ramp, but I expect it to be in place to accommodate some sales in the second half.

[Fred Ziegel:]

Okay, thanks.

[Rick Spurr:]

Thank you.

[Operator:]

Thank you. And our next question comes from the line of David Kanen of Aegis Capital. Your line is now open.

[David Kanen:]

Good evening, guys. First question. I had jumped off the call for a second and I know you had addressed the gross margin, can you just reiterate that for me please?

[Mike English:]

Sure, Dave, it's Mike. So what I said was, in the quarter, we had incurred about $200,000 related to the Cisco agreement, consisted of support staff, equipment, software, training and along those lines, some of which were one-time costs. So the go-forward cost we expect to be closer to $160,000.

[David Kanen:]

Okay. So gross margin will probably remain in this level, creep up slightly until we start recording revenue from Cisco to offset that increase in COGS. Is that correct?

[Mike English:]

Exactly right, Dave, and that's very close to what I said in the script, so, yeah, you’ve got it.

[David Kanen:]

Okay. And then can you just take me through some of the directional guidance you gave in OpEx? I believe there were some moving parts there relating to go-to-market with Cisco as well.

[Mike English:]

I don't think so. We did mention the thing about the margins with Cisco, but didn't talk about any further costs. I'm not sure we talked --

[David Kanen:]

So in the second half of the year, for example -- okay, I am sorry. In G&A, was there some legal expense?

[Mike English:]

Yeah, there was.

[David Kanen:]

It's non-recurring? Okay.

[Mike English:]

Yeah, we -- go ahead.

[David Kanen:]

So what kind of a run rate should we expect in terms of SG&A for the back half of the year?

[Mike English:]

Yeah, I think we will get back to more of our normal levels. I provide that to you in the guidance that we give on our website in our investor deck. So those percentages I will provide you for the full year and the remaining quarters. We expect it to normalize, so it won't -- I don't expect it to get down to the Q1 levels, but I do expect it to be lower than Q2 and the specifics we provide like I say in that investor deck, kind of toward the back, where we provide the financial guidance.

[David Kanen:]

Okay. And then last two quick questions. I know Rick said for DLP the average seat was a little better than $5, so that I kind of back into 144,000 in new first year orders. And then what was the average seat paid for ZixOne during the quarter.

[Rick Spurr:]

$33.

[David Kanen:]

$33. Okay, so it was actually almost even, DLP contributed about the same as ZixOne, if not a little bit more, is that correct?

[Rick Spurr:]

Yes, correct.

[David Kanen:]

Okay. Okay. Alright. Thanks, guys. Good luck.

[Mike English:]

Alright. Thanks, David.

[Operator:]

Thank you. And I’m showing no further questions at this time. I’d like to hand the call back over to Rick Spurr for any closing remarks.

[Rick Spurr:]

Thanks, everybody for participating. We look forward to continuing to work with you and continue to have fun here at Zix as we grow the business.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. That does conclude today’s program. You may all disconnect. Have a great day, everyone.