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Zix, AppRiver: Despite MSP Partner Growth, Some Layoffs

Zix, which acquired AppRiver in 2019, continues to grow its MSP partner base and quarterly revenues. But the cloud-based email security provider has also confirmed layoffs and various cost-cutting measures to help Zix navigate the coronavirus pandemic and associated economic challenges.

The Zix and AppRiver product lines and cloud services support email encryption, information archiving, secure file sharing, email threat protection, email message privacy and Microsoft 365-related services. The company's latest push involves the newly launched Secure Cloud platform.

For its first quarter ended March 31, 2020 Zix added 55 new MSPs as transacting partners -- which. expands the total MSP base to 4,393 partners. Also, the company acquired approximately 200 net new customers per week, and that pace continued in April, Zix CEO David Wagner disclosed during the company's earnings call on May 6, 2020.

On the Q1 financial front:

  • Revenue increased 79% to $52.4 million -- though much of that growth involved M&A.
  • Overall organic revenue growth across Zix and AppRiver was 15%.
  • Annual recurring revenue (ARR) increased 15% organically to $214.3 million.
  • GAAP net loss attributable to common stockholders was ($3.1) million compared to net loss attributable to common stockholders of ($8.7) million in the corresponding quarter last year.

Revenue slightly exceeded Wall Street's expectations, but earnings were slightly below analysts' expectations, SeekingAlpha reports.

Zix Cost Cuts, Layoffs

Despite the growth, Zix also sees economic headwinds amid the coronavirus pandemic. In particular, smaller partners and smaller customers face business challenges that could impact Zix's own business in 2020.

Amid the challenging economy, Zix in April 2020 launched an operational restructuring. The overall cost cuts, Wagner said, included:

  • Short-term cuts such as temporary marketing program reductions, travel reductions, executive compensation decreases, and deferred salary. Those are things that we would intend to put back into the business as the economy recovers, which of course we hope would just be as soon as later this year.
  • Permanent cuts that involve early retirements, some terminations and data center cost cuts.

Wagner added:

"In total, we were focusing on keeping the company positioned really strong. We do see very strong trends for us in digital transformation. The new customers are still onboarding at a great rate. We want to make sure that we're prepared to continue to provide phenomenal care and continue that.  So we tried to protect the product organization as much as possible in terms of the P&L line changes."

Zix didn't say how many positions were eliminated. But the cuts will trigger one-time costs of about $2.0 million to $2.5 million for early retirements, severance, one-time termination benefits, and other restructuring related costs, the company disclosed in its earnings release.

Zix is the latest in a growing list of data protection and cybersecurity software companies to cut headcount in recent days. Cohesity, OpenText (parent of Carbonite and Webroot), and FireEye have all confirmed targeted cuts in recent days.

Article originally published May 6, 2020, based on Zix earnings statement. Updated May 7, 2020, with statements and data from associated Zix earnings call.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.