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ZixIt Announces Financial Results for Third Quarter 2000; Chairman of the Board Jeff Papows Comments on Business Outlook for 2001

DALLAS--(BUSINESS WIRE)--Nov. 7, 2000--ZixIt Corporation (Nasdaq:ZIXI), premier provider of products and services that bring privacy and security to Internet communications, announced today financial results for the third quarter and nine-month period ended September 30, 2000. The company reported a third quarter net loss of $15,956,000, or $0.96 per share, and a nine-month period net loss of $36,548,000, or $2.27 per share, as compared to net losses of $11,310,000, or $0.74 per share, and $26,095,000, or $1.71 per share, respectively, for the corresponding periods in 1999.

The third quarter net loss of $15,956,000 includes discretionary advertising costs of $6,712,000 and non-cash charges of $5,310,000 for stock-based compensation and depreciation and amortization. Non-cash charges represent 44%, or $15,933,000, of the net loss for the nine-month period ended September 30, 2000, and 46%, or $11,923,000, of the net loss for the nine-month period ended September 30, 1999.

The company's net working capital position at September 30, 2000, is $58,197,000, including cash and marketable securities of $60,304,000. In the third quarter of 2000, as expected, the company received $16,270,000, representing the remaining cash proceeds from a private placement of equity securities during the second quarter. Net cash used by continuing operations during the third quarter of 2000 was $7,610,000, while the level of capital expenditures for property and equipment decreased in the current quarter to $1,080,000.

David Cook, president and chief executive officer, stated, "During our development phase, we have spent approximately $70 million. This includes a sizeable investment in technology, a state-of-the-art data center, and a back-office transaction processing system that enables us to realize our vision of bringing sophisticated security technology to both the corporate and consumer markets in the form of secure products that have the ease, the familiarity, and the universal reach of regular email. Our other announcement this week of the new marketing relationship with Entrust Technologies Inc., coupled with our previously announced Yahoo! relationship, clearly demonstrates that this investment is already paying off. SecureDelivery(TM) and ZixMail(TM) can become fundamental utilities, basic to all email users."

Outlook

Jeff Papows, chairman of the board, commented on the company's plans for the future, "With a comfortable cash position, ZixIt is well-placed to make the transition from a development stage company to an operating company, which occurs when we begin charging for our products and services in January 2001. We will now be focusing more and more on the sales side of the equation, taking advantage of the explosive growth in the use of email."

He continued, "Based on what we know now about our expected cash burn rate, revenue levels necessary to achieve a cash-flow break-even will be rather modest. We will incur some additional costs associated with the cost of acquisition of sales, but even so, the company's business model is designed to allow us to achieve break-even with a rather low number of subscribers paying recurring fixed fees. Income from additional subscribers and other revenue streams will represent upside potential for profitability."

The foundation of the company's business model for ZixMail and SecureDelivery.com centers around the financial leverage expected to be generated by revenues that are believed to be predominantly recurring in nature and an efficient cost structure for data center operations, the core of which is expected to remain relatively stable, regardless of the number of users. Revenue streams are projected to consist of recurring subscription fees, variable usage fees for certain services provided by ZixIt, and income due ZixIt from click-through promotional programs, banner advertising placed with ZixIt by third-parties, and branding purchased by corporate customers for promotional purposes. New business is expected to be generated from the company's own direct sales efforts, its affiliate marketing programs, and the promotional efforts of its strategic marketing partners.

Presently, the company's cash burn rate from operations averages approximately $2,500,000 per month. Discretionary advertising expenditures have averaged $900,000 per month for the first nine months of this year. The company is currently in the process of expanding its sales and marketing reach and will begin to incur certain variable costs, such as credit card fees and the costs associated with the ZixIt affiliate marketing program and the company's strategic marketing partnerships. If the company is able to maintain its targets for such costs, and if it is successful in tapping the growing demand for security in email communications, it is possible that the company could anticipate the potential for attaining positive cash flow from operations sometime in the next 9 to 18 months.

"When we have sufficient visibility, we will be able to provide more detailed guidance on the company's outlook -- sometime next quarter," concluded Mr. Papows. "The relationships we have recently announced are with recognized leaders that have impressive track records in their fields -- Entrust, one of the most well-respected names in e-trust and e-business; Control Systems, which can help make secure email as much a part of the legal and corporate billing system as fax and copying are today; and Yahoo, which according to the Nielsen/NetRatings reaches 60.6 percent of the combined U. S. home and work audience. These companies reach millions of customers already and will give us an automatic inroad into these important markets. As our sales and marketing pace further accelerates, we will be concentrating on forging further alliances that can capture the high-yield routes to market for today's second generation Web-messaging solutions."

Safe Harbor Statement

The following is a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. The "Outlook" section of this release contains forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the limited operating history of the company in the Internet arena; the rapid development of competition in the Internet arena; the company's ability to successfully and timely develop its products and execute its business strategy; and the company's ability to achieve broad market acceptance for its products and services. Further details on such risks and uncertainties may be found in the company's public filings with the SEC, including its 10-Q for the third quarter 2000.

About ZixIt

ZixIt Corporation provides products and services that enhance security, privacy, and convenience for users of the Internet. Principal services include: SecureDelivery.com(TM) -- an Internet secure-messaging portal, and ZixMail(TM) -- a secure document delivery, private email, and message tracking service that enables users worldwide to easily send and receive encrypted and digitally signed communications using their existing email systems and addresses. For further information, visit www.zixit.com or contact investor relations at 214/515-7357.

                           ZIXIT CORPORATION
                     (A Development Stage Company)

            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share data)
                              (Unaudited)

                               Three Months Ended   Nine Months Ended
                               ------------------- -------------------
                               Sept. 30, Sept. 30, Sept. 30, Sept. 30,
                                  2000      1999      2000      1999
                               --------- --------- --------- ---------
Revenues                       $     99  $      -- $    287  $      --
Research and development 
 expenses                        (2,346)   (5,112)   (6,762)  (19,177)
Operating costs and general
 corporate expenses             (14,799)   (7,310)  (32,681)  (10,585)
Investment income                 1,024       837     2,234     2,874
                               --------- --------- --------- ---------
Loss from continuing 
 operations before 
 income taxes                   (16,022)  (11,585)  (36,922)  (26,888)
Income tax benefit                   --        65        --       185
                               --------- --------- --------- ---------
Loss from continuing 
 operations                     (16,022)  (11,520)  (36,922)  (26,703)
Discontinued operations              66       210       374       608
                               --------- --------- --------- ---------

Net loss                       $(15,956) $(11,310) $(36,548) $(26,095)
                               ========= ========= ========= =========

Basic and diluted earnings 
 (loss) per common share:  
 Continuing operations         $  (0.97) $  (0.75) $  (2.30) $  (1.75)
 Discontinued operations           0.01      0.01      0.03      0.04
                               --------- --------- --------- ---------
 Net loss                      $  (0.96) $  (0.74) $  (2.27) $  (1.71)
                               ========= ========= ========= =========

Weighted average shares 
 outstanding                     16,572    15,282    16,081    15,219


                           ZIXIT CORPORATION
                     (A Development Stage Company)

                 CONDENSED CONSOLIDATED BALANCE SHEETS
                            (In thousands)
                              (Unaudited)


                                         Sept. 30,        Dec. 31,
                                            2000           1999
                                         ---------       ---------

ASSETS
 Cash and marketable securities          $  60,304       $  39,784
 Due from sale of discontinued 
  operations                                    --             581
 Property and equipment, net                20,767          21,006
 Other assets                                3,243           5,152
                                         ---------       ---------

                                         $  84,314       $  66,523
                                         =========       =========


LIABILITIES AND STOCKHOLDERS' EQUITY
 Accounts payable and accrued 
  expenses                               $   4,148       $   3,629
 Stockholders' equity                       80,166          62,894
                                         ---------       ---------

                                         $  84,314       $  66,523
                                         =========       =========

--30--let/da*

CONTACT: ZixIt Corporation, Dallas
Investor Contact:
Beverly V. Fuortes, 214/515-7357
invest@zixit.com
or
Financial Media:
CDR
Cindy Lawrence, 212/419-8343
cindy.lawrence@citigatedr-ny.com
or
Product Media:
Fleishman-Hillard
Melissa Martin, 214/665-1364
martinm@fleishman.com