Zix Corp., the cloud-based email security company that recently acquired AppRiver, has completed $8 million in cost cuts and is now focused on four key business priories for 2019. Those priorities align with the company's growing channel partner and MSP initiatives, Zix CEO David Wagner said Thursday during an earnings call with Wall Street analysts.
Zix acquired AppRiver for $275 million in cash in January 2019. The deal combines an email security specialist with an MSP-friendly cybersecurity and Microsoft Office 365 cloud solutions provider (CSP) specialist.
Now that the deal has closed, AppRiver founders Mike Murdoch and Joel Smith plus COO Scott Cutler will exit the business over the next 30 days. Also, roughly 40 redundant positions (evenly distributed across both companies) have been eliminated, Wagner said.
Top Zix Priorities Include Partners
Looking ahead, Zix has four key focus areas for 2019, Wagner says. They include:
1. Unify Zix as One Company: This involves bringing the companies together to form one integrated cloud-based email security company. The firm will develop a unified vision, purpose and core values. The effort will include partners, customers and employees as Zix updates its brand frameworks and identities.
Still, customer facing sales and support organizations will remain largely unchanged to minimize potential partner and customer disruptions.
2. Pursue Cross-Selling Opportunities: The company expects to sell AppRiver's secure Office 365 and secure hosted Exchange to the Zix customer base by early Q2. On the flip side, watch for the company to sell ZixEncrypt and ZixArchive via AppRiver's MSP partners by early Q3.
3. Channel Development & Acceleration: This means actively engaging partners in meaningful cross-selling opportunities. "We believe that our channel partners will be the biggest beneficiaries of the combination of Zix and AppRiver," he said.
4. Integrate the Product Management, Software Development and Operations Organizations: That step will prep ZixEncrypt and ZixArchive for provisioning from AppRiver's Nautical platform. "Then we will move on to more meaningful integration, as we build an integrated product roadmap together," he said.
Tapping Into AppRiver's MSP Partners
Zix is working hard to engage and support AppRiver's 4,500 MSP partners.
Wagner met last week with a couple dozen of AppRiver's top partners after the buyout was completed. Independent research coupled with face-to-face meetings reinforces Wagner's belief that AppRiver's MSP base represents a strong cross-sell opportunity for Zix.
Zix had only about 30 MSP partners ahead of the deal. But that fledgling partner program has shown momentum. The evidence: Zix monthly recurring revenue from its new MSP Program more than doubled from September 2018 to December 2018.
Admittedly, direct sales still command about 55 percent of new first-year orders at Zix. But 39 percent of those fist-year deals involve VARs and MSPs, and 6 percent from other areas like web sales. And all of those figures are pre-AppRiver. "With the acquisition of AppRiver, we have the opportunity to expand on that progress in an even more meaningful way," Wagner says.
Zix Financial Results
For its Q4 0f 2018, Zix revenue increased 10 percent to a record $18.4 million. Also, GAAP net income was $9.2 million -- a big improvement from a $12.9 million net loss in Q4 the previous year. The results -- again, pre-AppRiver -- generally beat Wall Street's expectations.
Even so, the company's stock fell nearly 20 percent on March 1 as investors digested Zix's target revenue goals for the year ahead.
ChannelE2E is scheduled to meet Zix at RSA Conference 2019 next week in San Francisco. Stay tuned for more updates.