Zix Acquires Microsoft 365, Google Workspace Cloud Backup Provider CloudAlly -

Zix has acquired CloudAlly, a provider of cloud data backup and recovery (BDR) software that works with more than 600 managed IT service providers (MSPs) to safeguard Microsoft 365, Google Workspace, and other platforms.

Updated: Zix reveals CloudAlly purchase price on earnings call.

This is M&A deal 456 that ChannelE2E has covered so far in 2020. See the full M&A deal list here.

CloudAlly, founded in 2011, offers GDPR- and HIPAA-compliant BDR solutions for Microsoft Office 365, Google Workspace (formerly G Suite), SharePoint, OneDrive, Salesforce, Box and Dropbox. CloudAlly expects to generate roughly $8 million in annual recurring revenue for 2020.

Zix, meanwhile, promotes email protection and other services to a large MSP ecosystem. The Zix and CloudAlly partner ecosystems are complementary with no pre-deal overlap, the buyer says.

Zix has M&A experience. The company in 2019 acquired AppRiver, and has since leveraged AppRiver’s strong ecosystem of MSPs and Microsoft Office 365 partners.

Zix Acquires Cloud Ally: Executive Perspectives

In a prepared statement about the deal, Zix CEO David Wagner (pictured at top) said:

“Our acquisition of CloudAlly greatly enhances the Zix suite of solutions and will provide our partners and customers with another robust tool to drive further cloud adoption in their digital transformation journeys. With CloudAlly, we can now directly address the growing demand we’ve seen from partners, customers and prospects alike for an enterprise-grade cloud backup offering with a best-in-class solution. In fact, through a recent survey of our MSP partner base, we found that at least 45% confirmed they would purchase a backup solution from Zix if it became available. Cloud backup being our number one product adjacency, coupled with our proven success attaching additional products to our customer base, gives us a high level of confidence that we can leverage CloudAlly to become a greater business than just the sum of its parts. With CloudAlly, we can greatly enhance our Secure Cloud platform and also mitigate concerns around ransomware which has become a large industry focus. With this transaction completed, Zix will be better positioned for profitable growth, higher attach rates, scaled customer retention, and with the opportunity to capture a greater share of the multi-billion-dollar business communications market.”

CloudAlly CEO Avinoam Katz added:

"A comprehensive data protection plan is more important than ever as companies around the world are focusing on cybersecurity for their remote workforce. We're extremely excited to join forces with Zix at this time and feel that our industry leading cloud backup service will be a complementary and valuable addition to their recently announced Secure Cloud Platform, an integrated suite of productivity, security and compliance services. This suite of services will give our rapidly growing combined customer and partner base around the world the tools they need to protect their critical cloud assets across an evolving distributed workforce."

Concluded Zix CFO Dave Rockvam:

“Beyond the direct benefits from an operational standpoint, our acquisition of CloudAlly should also be highly accretive from a financial perspective. Its 100% subscription business and favorable profitability profile provide us with predictable adjusted EBITDA and cash flow to augment our already-robust financial base. We sought out CloudAlly because of the strong, born-in-the-cloud business they have today, but we believe that what it could be in the future represents an even more attractive ROI for Zix. Longer-term, our strong, unlevered free cash flow generation capabilities, aided by CloudAlly, have us on solid footing to comfortably service our debt obligations over time.”

For its third quarter of fiscal year 2020 (before the CloudAlly acquisition), Zix says:

Revenue increased 15% to $54.8 million.

Annual recurring revenue (ARR) increased 11% to $222.3 million. Cloud ARR increased 19% to $190.3 million or 86% of total ARR.

GAAP net loss was $700,000 compared to a year ago net loss of $1.6 million.

Cloud Backup, Disaster Recovery and Security Converge

The deal reinforces growing synergies between cloud backup, disaster recovery, data protection and cybersecurity technologies. For instance:

Acronis has pivoted from traditional backup to cyber protection.

OpenText acquired Carbonite and Webroot in 2019.

MSP platform providers Barracuda, ConnectWise, Datto, Kaseya, NinjaRMM and SolarWinds MSP all have some form of backup and/or cybersecurity technology under ownership.