Driven by an increasing awareness of the need to protect sensitive information in
transit as well as an evolving regulatory landscape that has stepped up enforcement, email encryption is becoming an important piece of the larger slice of the security budget and given its unique technology and market leadership, Zix is well-positioned to capitalize on this opportunity.
With a recent competitive displacement win at a Blue Cross & Blue Shield organization, the company, clearly demonstrated its unique combination of both hosted key management technology as well as filtering capability. With industry consolidation having greatly reduced the competitive landscape, we believe that Zix's expanded functionality in email encryption has put it "ahead of the pack" and into a solid position to continue to gain market share.
Acceleration in NFYO underscores opportunity for secular growth. We also note that from January 2007 to September 2009 the company saw annual new first year orders of $1.37M (quarterly average). From September 2009 through the last quarter this figure increased by 63% to $2.2M. This acceleration (which we believe will continue) is indicative of the growing opportunity around hosted email encryption.
Recent CFO departure does not present major issues. After a recent conversation with the CEO, we do not believe that the recent departure of CFO Susan Conner presents any larger issues around fundamentals. We are comfortable with the company's current plan to conduct a CFO search over the next six months.
Divestiture of e-prescribing business ahead of schedule. Management commented that the company is currently ahead of plan in its wind-down of the e-prescription business having successfully renegotiated all outstanding contracts.