Zix Corporation (NASDAQ:ZIXI)
Q4 2015 Results Earnings Conference Call
February 16, 2016, 05:00 PM ET
Geoff Bibby - VP of Marketing
Dave Wagner - CEO
Mike English - CFO
Mike Malouf - Craig-Hallum Capital Group
Michael Kim - Imperial Capital
Joe Maxa - Dougherty & Company
David Kanen - Aegis Capital
Good day, ladies and gentlemen and welcome to the 2015 Q4 and Full Year Zix's Corporation Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to introduce your host for today's conference, Mr. Geoff Bibby. Sir, you may begin your conference.
Thank you, Chelsea. As Chelsea mentioned my name is Geoff Bibby, I am Vice President of Marketing for Zix Corporation. Thank you for joining our 2015 Q4 and full year 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 Chief Executive Officer, Dave Wagner will provide an overview of the Company's performance in the quarter. 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 email@example.com.
Dave 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.
Dave 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 very pleased to turn the call over to Dave.
Thank you, Geoff. Good afternoon and thank you everyone for joining us today. I'd like to first say that it’s a real privilege to be chosen by the Board to lead Zix Corp to its next phase of growth. I’m very excited about the strength of the company today as a leading player in email security and about the tremendous opportunity for future growth.
For those of you who may not know, I joined Zix Corp with a passion for cyber security. I have more than 20 years of leadership experience in Information Security, serving most recently as President at Entrust, a leading provider of digital secure identity solutions.
During my tenure at Entrust, we transitioned our business from a perpetual revenue model to a subscription model, and we grew our subscription revenues at a compound annual growth rate of 28% from 2005 to 2015.
During my time as President from 2013 to 2015, we delivered revenue growth, we accelerated transition of Entrust Solutions to the Cloud, and we successfully integrated the Company into Entrust Datacard.
In completing a two decade long career with Entrust and developing a deep understanding of the potential for value creation in a subscription revenue model, the next role and company needed to be a perfect fit, and that's exactly what I found at Zix.
Many things attracted me to Zix, but there are three that I'd like to highlight. First, the enduring nature of Zix's innovative founding vision; second, the strength of the company today; and finally, its tremendous opportunity for future growth.
Zix's Solutions, which were founded in 1990s and have been approved upon almost 20 years offer the most transparent, easiest-to-use encryption solutions available in the market today. The Zix encrypted network is a community that enables transparency between every end user of our service.
Therefore, the more users we add to this service, the more valuable our service becomes for end-users. The Zix community remains our key differentiator, it’s the core strength of Zix's Solution, that's why we are forming strong partnerships with leading companies like Cisco and Google.
Zix is obviously a strong company today. We are an industry leading cloud-based security company with more than 13,500 customers and over 50 million email addresses in our community.
We are generating more than $54 million a year in revenue, we are growing, we are profitable, and we are returning cash to our shareholders. But the real strength of the company is our people. Our people understand how to simplify security and compliance, and how to deliver it transparently to our customers. That customer value results in our strong customer attention and in our continued revenue growth.
Lastly, Zix had a tremendous opportunity for growth in the future. The Information Security market is in a time of incredible transition, computing and moving to mobile devices and into the cloud, and we are in the earliest stages of solving security challenges of the Internet-of-Things. These market transitions necessitates the transmission of exponentially increasing amounts of sensitive data.
Zix's innovative cloud-based secure communication service was built and enhanced by a team that understands how to deliver encrypted communications easily and transparently for our customers, and that provides a strong platform for growth.
Zix is in a solid position of combining a stable business model with industry leading solutions and a strong partner program. This offers an outstanding opportunity for our company and its shareholders. I'm excited about working with our customers, our partners, and my colleagues to deliver on the next stage of growth at Zix.
I'll now provide an overview of our revenue and new first year order performance for the fourth quarter and for the full year. I’m pleased to report a strong finish to 2015 including a record fourth quarter and record second half for the company. Our fourth quarter results included another record quarter for revenue, a record in new first year orders, and record adjusted earnings per share.
And for the second half of 2015, new first year orders were up 35% year-over-year from the second half of 2014 highlighting the increase in traction that we are seeing across all areas of our business, but particularly in our OEM partnerships.
Revenue for the fourth quarter was a record $14.3 million, which was at the high end of our guidance range for the quarter and was an increase of 11.4% over $12.9 million in the same quarter last year.
Our new first year orders for the fourth quarter were a record 2.9 million, up 15% from Q4 last year and again, up 7% sequentially from Q3. Now, let's look at the full year results.
For the full year, we achieved revenue of $54.7 million, which again was the high end of our guidance and represented an increase of almost 9% from 2014. Our new first year orders for 2015 reached 10.2 million, a 20% increase over new first year orders for 2014. Net income for the year was $5 million or $0.09 per share, and non-GAAP adjusted income was 12.3 million or $0.21 per fully diluted share, again at the high end of our guidance range.
For the year, our business generated approximately $15.6 million in cash flow from operations, and we closed the year with a cash balance of $28.7 million.
New first year orders in the fourth quarter, as I said, were 2.9 million, a 15% increase from Q4 last year and another record and also increasing 7% from the record we set just last quarter.
All three of our channels to market; corporate, enterprise, and OEM performed well but the year-over-year growth was concentrated in our OEM channels, specifically our partnerships with Cisco and Google.
The new first year orders from OEM contributed 25% of total new first year orders in the quarter, and were up over 300% year-over-year. I'm especially pleased with how the traction is improving with OEM Partners, while at the same time sales through our VAR partners and our direct sales team continued to grow.
I'm pleased to note that the contribution from Google has returned to more historical levels. For Q4, it was nearly double the contribution from the same quarter last year, and was about the same as the preceding quarter. And as you recall, we had large one-time order in Q3.
From an industry perspective, our new first year order success in the fourth quarter was across the board and was similar to what we’ve seen historically. Healthcare represented 50%, followed by finance 25%, government at 7%, and all other at 18%. For the year, our breakdown was healthcare 43%, finance 30%, government 7%, and all other verticals at 20% of total new first year orders.
As I just mentioned, we saw increased orders in the fourth quarter as result of our Cisco partnership that we announced back in March 2015. We are seeing healthy interest and uptick in our new ZixGateway with Cisco technology or ZCT.
While its' still early for ZCT, we saw initial sales in Q4 and we are building a healthy business pipeline in collaboration with Cisco in the resellers globally. And while at still early, we are expecting increasing order flow as we move through 2016.
As many of you know, ZCT represents the second phase in our partnership with Cisco where we are bringing a brand new product to market through Cisco and its partners that incorporates the best of both product architectures.
ZCT includes unique features from ZixGateway such as our community approach and its benefit of sending and receiving encrypted email transparently without the use of passwords, combined with Cisco's proprietary PXE delivery mechanism to store encrypted messages on site and to push messages directly to recipients, a capability that high end and security conscious customers find especially attractive.
A more detailed description of product can be found on Cisco's website, under the Tab, Products and Services. And again, it’s called ZixGateway with Cisco technology our ZCT.
In joining forces with one of the world's largest enterprise security vendors, we are combining the strength of Cisco's world class distribution and our leading edge unparalleled email encryption technology. All of the customers using this new combined products will become part of a Zix's encryption network. This is a community that enables transparency and ease of use which increases as new users are added.
As a result, all of our existing customers and all of the new ZCT customers will benefit as we form a larger community together. We are excited about the level of commitments and resources that Cisco is bringing to this partnership to support a successful launch of ZCT and our excitement around a combined marketing and branding activities continue to grow.
Now let me give you a quick update on our newer products ZixDLP and ZixOne. During the fourth quarter, we sold nearly 43,000 DLP seats, our third highest quarter for number of seat sold and we signed 16 new DLP customers.
Turning to ZixOne, during the quarter we had 54 new ZixOne customers, which is in line with historical level. These customers added nearly 3,300 new seats, which brings a total number of ZixOne licensed seats to date to 31,000. To conclude with our industry-leading solutions and our strong foundation along with strong partnerships with leading companies we're excited about the opportunity for future growth.
Our partners contributed more in the second half of 2015 than ever before and the pipeline-based partnerships look even better for 2016. At the same time, while we are developing these additive partnerships, we continue to deliver growth in our corporate and enterprise go-to market channels.
As we look ahead, our focus will be on continuing to execute on the things we've done back and we will focus on building upon our strong foundation with a focus on profitable growth. With the tremendous opportunity ahead, we have confidence in our continued momentum and accelerating growth in 2016 and beyond.
I'll now turn the call over to Mike English, our CFO, to discuss our financial results and to give you more detail about them, as well as our guidance for 2016. After that we'll take questions. Mike, over to you.
Thank you, Dave. Good afternoon everyone. Before I begin, as a reminder, we talk about adjusted EBITDA. And adjusted EBITDA excludes non-cash stock-based compensation expense, non-cash tax expense, expenses related to litigation, and non-recurring items related to executive separation expense. We include a reconciliation of GAAP to non-GAAP financial results in our earnings release.
We finished the year strong with excellent results across our key metrics. Most noteworthy was the full year earnings improvement, where on a percent of sales basis adjusted operating income improved from 17.9% in 2014 to 22.8% in 2015.
And adjusted EBITDA increased from 21.5% in 2014 to 27.2% in 2015. Adjusted operating expense increased 2.3% compared to the prior year. This small 2.3% increase was achieved despite new 2015 investments in Cisco support and higher bonus accruals compared to the prior year.
Beginning with the fourth quarter 2015 revenue, we achieved $14.3 million. This was within our guidance range of $14.1 million to $14.4 million. Fourth quarter revenue was 11.4% higher than the same period in 2014 and 2.3% better than the third quarter 2015. For the year, revenue of $54.7 million grew 8.7% compared to 2014.
On both the GAAP and non-GAAP basis, 2015 gross margin percentages saw a slight erosion for both the fourth quarter in full year compared to the same periods in 2014, due primarily to investments in Cisco new order support ahead of associated revenue recognition.
As I've said in the past, we anticipate modest swings in gross margin percentages both up and down depending on timing of customer support investments, new orders, and subsequent revenue recognition.
GAAP operating income for the fourth quarter 2015 was $1.2 million or 8.6% of sales, which was $500,000 lower than the fourth quarter of 2014 operating income of $1.7 million, 12.8% of sales. In the fourth quarter 2015, we fully accrued the expenses associated with the executive separation agreement previously disclosed in our July 21, 2015 8-K filing.
On a full year basis, GAAP operating income for 2015 was $7.9 million, 14.5% of sales compared to $6.8 million or 13.4% of sales for 2014. GAAP net income for the fourth quarter 2015 was $800,000 or 5.6% of sales. This compares to $900,000 or 7% of sales for the fourth quarter of 2014.
For the full year 2015, GAAP net income was $5 million or 9.2% of sales compared to $4.1 million or 8.1% sales for 2014. GAAP earnings for fully diluted share was $0.01 for the fourth quarter 2015, compared to $0.02 for the fourth quarter of 2014.
On an adjusted basis, earnings for fully diluted share was $0.07 for the fourth quarter 2015 more than twice the fourth quarter of 2014 adjusted EPS of $0.03. The difference between the GAAP and non-GAAP EPS was wide in this quarter due to the previously discussed non-recurring separation expenses.
GAAP earnings for fully diluted share for the year 2015 was $0.09 compared to $0.07 for 2014. And on adjusted basis, 2015 earnings of $0.21 for fully diluted share was up 43.8% compared to $0.15 for fully diluted share in 2014.
Adjusted EBITDA for the fourth quarter 2015 was $4.5 million or 31.4% of sales compared to $2.5 million or 19.1% of sales for the fourth quarter 2014. On an annual basis, adjusted EBITDA for 2015 was $14.9 million, 27.2% of sales compared to $10.8 million, 21.5% of sales for 2014.
We exited the back half of the year with 31.8% adjusted EBITDA. This is higher than we would typically see and reflects the leadership team's focus during the transition period on continued execution of programs that were already in place by slowing down hiring decision until a new CEO is in place. This contributed to the record profitability measures we achieved in the second half.
As we look forward, we are going to resume investment in these longer-term strategic priorities. And as a result, we are targeting adjusted EBITDA margins of approximately 25% going forward.
For the fourth quarter of 2015, we generated $3.5 million cash from operations and for the year $15.6 million. For previous year, we generated $2.7 million cash in the fourth quarter and $13.3 million cash for the year from operations.
Capital expenditures were $204,000 for the fourth quarter in 2015 and $2 million for the year. For 2016, capital expenditures should be similar or slightly lower compared to 2015.
As part of a $15 million share repurchase plan approved by our Board of Directors in May of 2015, in the fourth quarter of 2015, we used $3 million to repurchase 683,000 shares of our common stock at an average price of $4.39.
Over the life of this plan from May to the middle of October 2015, we used $15 million to repurchase a total of 3.2 million shares at an average price of $4.71. In January 2016, we announced that our Board of Directors had approved a new $15 million share repurchase plan. Through today's date, February 16, 2016, we made no purchases under this plan.
Ending backlog at December 31, 2015 was $74.2 million compared to $69.3 million at the end of 2014, a 7% increase. Of the $74.2 million ending backlog, approximately 57% or $42.1 million is scheduled to be recognized as revenue during 2016.
Turning now to the forecast. For the first quarter 2016, we forecast revenue of $14.2 to $14.4 million and adjusted earnings for fully diluted share of $0.05. For the year, we forecast 2016 revenue of $59.5 million to $61 million and $0.23 for fully diluted share.
Now, I'll turn the call back to Dave.
Thanks Mike. We'll now open the bridge up for questions.
[Operator Instructions] And our first question comes from the line of Mike Malouf with Craig-Hallum Capital Group. Your line is now open.
Great. Thanks guys for taking my questions and welcome Dave to your first conference call.
Quick question for you, wondering if you could just talk a little bit more, give a little bit more color on the Cisco relationship. I know that it's been a few months now since we've heard about what's going on with the update, and I would love to get your impressions, at least your initial impressions since you've joined of the opportunity there, and how much it's going to impact at least in the near term and maybe the longer term as well?
That's a great question. Thank you, Mike. So the Cisco partnership is one of the things I am really excited about. I'm excited about the level of collaborations that we're seeing between the teams on a weekly and frankly even a daily basis. The teams are working together, training the technical people on the new combined solution, which as you can imagine includes some of the best features of both offerings, frankly.
So, we're doing a lot of work from a technical perspective on our product to make sure that it meets most of the requirements of the existing Cisco customers' to provide a great place to transition those customers too, and then we are seeing a building pipeline.
As I said, we're seeing initial transactions happen in the fourth quarter. We're seeing a pipeline that's building, and we are optimistic that that will continue to grow through 2016.
Okay. And when you sort of sit back and see, you guys are doing, call it roughly $60 million a year in revenues as we look out to next year, how big could Cisco be for you as you look out two or three years?
Well, obviously what we're most excited about is the breadth of their distribution and their distribution globally. As any partnership, Cisco gets value from it and Zix gets value from it, but we see the international expansion part of that being a very meaningful opportunity.
But again, it remains an opportunity that we are working on really hard every day to make sure we are delivering the kind of partnership with Cisco that will help them and the resellers drive it globally.
Okay maybe a question for Mike. As you outlined the difference in profitability from say the September and December quarters of 2015, and as you look into 2016, it looks like if you average the profitability from those two quarters and then look at what you have guided for 2016, that looks maybe 500 or 600 basis points of extra spend, and I am just kind of wondering, can you give us a sense of where that's going to be? Is it R&D? It is G&A? Where is that extra spend going to be next? Thanks.
Though I would make sure that I referenced the investor deck where I've broken out for you the spending by P&L line and by percent of sales. So if you look just referencing that, this year we did 22.8% adjusted operating income, next year we are guiding to 21% to 22%. So there is a slight erosion in that percent. And if you look at that, you'll see that we are making investments. There are some investments in the cost of sales, and that is in support of these new partnerships.
But you'll also see some investment in R&D for investing in the base product and then also in sales and marketing. So there is business development, there is support for the new partnerships. The good news is the G&A is going down a little bit. So, if we take all that together and you come up with what I'm guiding to, the 21% to 22% adjusted operating income versus the 22.8% that we did this year.
Okay. Thanks guys.
[Operator Instructions] Our next question comes from the line of Michael Kim with Imperial Capital. Your line is now open.
Hi, good afternoon guys. And Dave also, I wanted to extend my welcome and congratulations on your new position.
So just following up on the Intel partnership, I hope you can provide an update, I think since it was launched late last September. Did it contribute in new first-year orders and how should we think about that partnership, and enabling that partnership over the next few quarters?
Well, that partnership in particular, I think that stands from a decision to exit the business, and so we are definitely seeing opportunities there and we're focused on getting our share of those, we’ll be focusing on those opportunities in partnership with Cisco, and particularly we see it as a very strong partnership to be able to absorb and attack a lot of those customers to bring them on.
But we're seeing it a little bit in our direct and VAR channels, but we're looking to gauge that more aggressively with our partnership with Cisco.
And can you give us a sense of scale, the relative scale of that business versus Zix's historical email encryption business?
In terms of the McAfee Intel email business?
I can just say it hasn't been a big part of our historical revenues. It's one that we expect to be able to continue as I said, take our fair share, that competitive displacement as they transition.
Okay, great. And then with regards to the newer products, ZixDLP and ZixOne, especially for ZixOne, how should we think about the opportunity to accelerate the adoption of ZixOne, particularly in your existing installed base and also maybe some of the new customer edition?
Okay. So ZixOne, it's a great product. I've come to use it every day, and it’s rock solid and a great way to make sure that your corporate information is not compromised in a BYOD scenario.
So it's a very good strong product. You can tell from the information released historically in this quarter that we continue to add new customers at a similar rate as we have in the past. And we'll continue to focus on that product with an increasing focus, I hope you're hearing in terms of partnerships in our core email encryption business as well.
Okay, great. And last question from me, I guess with regard to the Google reseller business, were there any large deals similar to what we saw in the last quarter?
No large deals, but very good -- just continuing deal flow. And so we're pleased with that deal flow, we're pleased with the engagement level of the sales reps on the team that are selling the game solution.
So we had good order through-put, but not the same -- not the kind of single large transaction benefit from -- last quarter those kinds of opportunities are in the pipeline, just didn't have a bigger one this quarter.
Okay, great. Broader based and hopefully some large orders to come through this year.
Great. Thank you.
Thank you. And our next question comes from the line of Joe Maxa with Dougherty & Company. Your line is now open.
Hi guys. I'm sorry I missed the prepared remarks, opening remarks, I just wanted to ask about the new first-year orders. Good number, did you break out where those came from, like historically has happened?
We didn't breakout in great detail. But what I -- I don't know what exactly historical was, but what I did say is that what I'm most pleased about was the growth in the OEM. And so we had really strong year-over-year growth in our OEM partnerships, primarily our Cisco and Google, which were up 300%.
We talked about Google being up 200%, so the Cisco number is largely from zero to what's becoming a really nice start to that partnership. From the corporate and enterprise perspective, they were both up year-over-year.
So what I'm most pleased about is that the VAR and direct business continues to grow via the OEM partnerships, I don't want to say kicking in but starting to emerge in a trend we're pleased with.
Okay. So it sounds like you don't want to give out the specific Cisco or Google like you've done in past quarters.
Not planning on it now.
Okay. Let me ask you, so a few quarters back it was mentioned that Cisco -- there was a thought Cisco could contribute $1 million to $3 million in new first-year orders in the back half of last year. Of course that didn't happen, but is that a reasonable number to think about now that they have the newer product and they are pushing it as far as we look into 2016?
I'd say it's reasonable for sure. Yes, what we did say is that the OEM partners contributed 25% of the $2.9 million. So the OEMs together were -- could have been just over 700k obviously. Rolling that forward, that kind of range is the kind of range that we're working to make happen for sure, that $1 million to $3 million kind of range.
Okay. And then on the ZixOne, ZixDLP, those products -- they've been in the market for a while now. I'm just wondering if you think there is opportunity to have stronger success, it's been modest so far. Should we think about kind of continuing at this rate or do you think there's an opportunity to really see some growth in some of these products?
Well we're going to be working hard on both. The ZixDLP marries very, very closely with an added capability that many of our customers are interested in, a stronger DLP offering, the quarantine, the kinds of things we offer.
So I think we'll continue to see good attach rate of DLP on to our existing customers. And then as I already said, ZixOne is a fantastic solution. It comes to market in such a different way than the -- I guess more market share leading enterprise mobility management solutions.
Frankly from my perspective, we're not hitting that vein the way that product should hit it. So we're going to be continuing to look for segments of the market where our solution hits more strongly.
We're seeing good growth in the SMB segments of our market, and so we will continue to really try and find the vein that we can drive that into.
That's all I got, thank you.
Thank you. And our next question comes from the line of David Kanen with Aegis Capital. Your line is now open.
Good afternoon. David, I wanted to just wish you well and much success on the new opportunity.
First question -- you're welcome. First question is, in the past, the Company has spent quite a bit of money on share repurchases. I don't have the figures exactly in front of me, but if I go back a few years, it's in the $10's of millions. What is your view on that as a member of the Board?
Do you believe that that is something that is very worthwhile and creates value? Or perhaps you have a slightly different view as to what the Company can do with their cash. I'm asking for your personal opinion.
Well, as a member of the Board, I am 100% in line with the Board. The Board, as I have in the past, will be continuing to look at that decision we announced the share repurchase.
In January, the Company is generating significant cash flow, which is what I'm most pleased about. So we'll continue to reassess or assess and reassess the timing of share repurchases, but right now I'm 100% aligned with the Board with the share repurchase program launched in January.
So you don't potentially take a divergent view that maybe the Company could put their money and the cash flow into other areas of investment? You think this is the best?
Well, based upon the data we have right now, that's what I said, that'll be constantly reassessed. My role with the management team is to look at and evaluate alternative uses. But those need to be identified before we can have a different view. And that's a view we would have together in a 100% alignment.
Okay. So if I back into the details that you gave in terms of new first-year orders, 25% coming from OEM partners, how can I come up with a number for ZixOne? I think you said you sold 3,300 seats. Can you tell me roughly what the ASP was per seat then also on DLP?
Go ahead Mike.
Hi, Dave its Mike. I'd say right around $35 per user per year for ZixOne.
Okay. And how about DLP?
DLP is going to be less, it's around $4 per user per year.
Okay. And Dave as a newcomer, observing, trying to assess the situation that you are coming into. BYOD seems like in the long run a much larger market opportunity than key pay product. And you have such a meaningful market share in gateway and such a nominal market share in ZixOne. What do you think the impediment is? What are the challenges that the Company is facing in terms of getting significant share relative to your competitors?
That's a great question. So, first of all the core encrypted email market, we are leading that space we are performing very, very well in that core capability.
As I mentioned, the Cisco partnership gives us a good way to look at addressing a larger segment of the U.S. market and gives us an opportunity to begin addressing international market. But I think the company strategy of staying really focused in the outbound email communication flow has been a good one and that focus is what's allowing our strong partnerships with the company like Cisco that have alternative solutions elsewhere in the email stack.
So I really like that position in encrypted email, that leading position that growth we see and the opportunities we have for growth in partnerships and in expanded addressable market.
The BYOD space is quite large. It's moving really fast and we have a really different approach to that problem than any other vendor. And again to me that's one of fine sub-segment of the market where we can get a meaningful share as opposed to focus more broadly and trying to compete with much, much larger vendors in that space.
I see. So part of the incremental spend this year is not going to be - a meaningful portion of it is not going to be spent in R&D specifically for enhancements in ZixOne?
Our focus is - ZixOne is an important and will be continuing, but our focus are on these OEM partnerships. So the Cisco partnership in particular deployment, sales and marketing and product enhancements all three are important - and as Mike said and helpdesk and support the whole business needs to be working on in a responsible way scaling up in anticipation and we're going to work 100% towards success in that partnership, which is going to involve some investments this year.
Okay. Just one follow-up question on ZixOne. I mean if I plotted out quarter-by-quarter for the last two years, there really isn't an upward trend, in fact we're well below probably our peak in new first-year orders.
So I’m just questioning, with the capabilities that we have on that product can we capture more market opportunity? What is the problem there versus our competitors? And then just a comment on stock buyback because I asked you the question. Actually my view for what it's worth, and I would just like to send the message to the Board, is that it's a very effective use of the cash and I hope the Company continues to very aggressively buy back their stock. I just wanted to know as a newcomer what your view was. So I will go back into queue and let you answer my question on ZixOne.
Okay. So I didn't hear ZixOne as a question, but more as an observation.
What is the issue? Why have we gone below our previous peak in new first-year orders and why aren't we getting any real traction? Is it an issue with features and functionalities that they are perhaps inferior, too competitive offerings? Have we failed in terms of execution and sales? Is this the product itself, why aren't we getting meaningful traction there?
My answer to that question which I've given, it's such an different solution than what's provided by the companies in the market that have the most market share today that we have not found the right sub-segment in the market for the solution feature set that we've build. And when I continue to look - to find that, what we are going to make our investments with an eye towards profitable growth of the entire company.
Okay. Good luck guys.
Thank you. And I am not showing any further questions at this time. I would now like to turn the call back to Mr. Dave Wagner for closing remark.
Well, thank you everybody for participating in our Q4 and full year '15 call. Company of course is very pleased with the record-setting fourth quarter and full year. We look forward to talking to you after the end of the first quarter.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.
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