Zix Corporation (ZIXI) Analysts: Jiamo Tian Analysts: Jiaxin Yang October 20, 2016

Agenda Company Overview Industry & Macroeconomic Overview Financial Analysis Projection & Valuation Recommendation

Current Holding Purchased 2000 shares at $2.89 on April 14, 2012 Sold 1000 shares at $3.96 on April 18, 2016  Current: 1000 shares @ $4.13/share on October 19, 2016 Market value: $4,130 Gain: 42.9% Source: Yahoo Finance, URL: https://finance.yahoo.com/portfolio/pf_1/view?bypass=true

Company Overview

Company Overview Leader in easy to use secure email solutions Incorporated in Texas in 1988 Publicly traded on the Nasdaq Global Market (Ticker: ZIXI) Headquartered in Dallas, Texas, additional offices in Burlington, Massachusetts, and Ottawa, Canada More than 14,000 customers, include the nation’s most influential institutions in healthcare, finance and government Services supported by ZixData Center, a data center storing transaction processing data Source: Zix Website. URL: https://www.zixcorp.com/; ZIXCORP 2015 Annual Report

Company Overview-Business Segments Email Encryption
 ZixDirectory+ Best Method of Delivery+ ZixGateway: enables the secure exchange of emails that include sensitive information Email Data Loss Prevention—launched in 2013 ZixDLP: addresses business’s greatest source of data loss – corporate email Bring Your Own Device solution—launched in 2013 ZixOne: provides access to corporate email while never allowing that data to be persistently stored Source: Zix Website, URL: https://www.zixcorp.com/; ZIXCORP 2015 Annual Report

Company Overview-Business Model Revenue source: customer subscription Contract terms: generally 1-5 years, average 2.5 years Historically retained approximately 90% of recurring revenue on an annual basis Channels: Direct sales—larger business Telesales—small to medium-sized accounts Value-added resellers OEM (Original Equipment Manufacture) Source: Zix Website, URL: https://www.zixcorp.com/

Company Overview-Recent Headlines 10/05/16 Zix Corporation Extends Superior Ease of Use and Security for Its Hosted Email Encryption Solutions 10/04/16 ZixCorp to Announce Third Quarter 2016 Results on October 25 09/27/16 LAWtrust and ZixCorp Partner to Expand Use of Industry-Leading, Easy-to-Use Email Encryption in South Africa Source: Zix Website, URL: https://www.zixcorp.com/

Company Overview-Management View Committed to easy to use, secure communication Seek long-term partnership with channel partners and strategic partners (Google, Cisco, Intel, Symantec) Achieve and maintain influential customers such as government institutions Secure new customer subscriptions and subscription renewals from existing customers Continually improve the performance, features and reliability of products and services, to keep pace with technological developments and frequent changes in customer requirements Source: Zix Website, URL: https://www.zixcorp.com/; ZIXCORP 2015 Annual Report

Company Overview—SWOT Analysis Zix Corporation Strength ease of use strategic alliance recommended by regulators no debt Weakness heavily rely on third party distributors without substantial financial and technical resources new to the BYOD and mobile security space, no established brand Opportunity stricter regulations increasing email users increasing demand in BYOD solutions expand business into other countries Threat customers shift messages to other communication channels industry consolidation rapid change in technology system breakdown and volatility Source: Zix Website, URL: https://www.zixcorp.com/; ZIXCORP 2015 Annual Report

Industry & Macroeconomic 0verview

Industry Overview Data Processing& Hosting Services Industry Life Cycle Stage: Growth Concentration Level: Low Competitions Level: High Annual growth 2011-16: 5.5% Annual growth 2016-21: 4.2% Trend toward industry consolidation expected to continue, lead to increased competition Trend toward mobile applications Source: Zix Website, URL: https://www.zixcorp.com/; ZIXCORP 2015 Annual Report; IBISWorld Industry Report 51821

Industry Overview-Email Encryption market 2015: $541.4mm 2020: $1,550mm Estimated annual growth: 37% Source: Statista, URL: https://www.statista.com/statistics/535009/worldwide-email-encryption-market-revenue/

Porter’s Five Forces Threat of New Entrants High Threat of Substitutes - Low new entrants barrier Threat of Substitutes Moderate - Product differentiation Competitive Rivalry - Several competitors - Industry consolidation Bargaining Power of Buyers - Increasing demand - Regulatory enforcement Bargaining Power of Suppliers Very High - Heavily relies on third-party supplier Source: ZIXCORP 2015 Annual Report

Key Drivers—Regulations on Data Security Demand in healthcare sector augmented by regulatory requirements under HIPAA and HITECH Act. Financial institutions and their service providers are subject to GLBA enforced by FTC ZIX’s services recommended by regulators Source: ZIXCORP 2015 Annual Report

Key Drivers—Email Users and Traffic % of Services Online Email Users and Email Traffic Source: IBISWorld Industry Report 51821; Radicati, URL: http://www.radicati.com/wp/wp-content/uploads/2016/01/Email_Statistics_Report_2016-2020_Executive_Summary.pdf

Key Driver—IT Spending Source: Statista, URL: https://www.statista.com/statistics/557099/worldwide-it-operations-spending-growth/

US GDP Growth 2011-2015

Financial Analysis

Financial Analysis—Stock Performance Nasdaq ZIXI Source: Yahoo Finance, URL: https://finance.yahoo.com/quote/zixi?ltr=1

Financial Analysis—Stock Performance Source: Yahoo Finance, URL: https://finance.yahoo.com/quote/zixi?ltr=1

Financial Analysis—Key Facts No Debt No Dividend $48.9mm Deferred Tax Assets From operating loss carry forwards and temporary timing differences Realized $1.0 million, $1.9 million, $11.9, and $35.5 million tax benefits in 2013, 2012, 2011, and 2010 resulted from decrease in deferred tax asset valuation allowance No tax benefit realized in 2014 and 2015 Source: ZIXCORP 2015 Annual Report

Financial Analysis—Key Facts Second Quarter 2016 Financial Highlights & Year-Over-Year Comparisons Revenue increased 12% to a record $14.9 million New first year orders (NFYO) increased 20% to a record $3.0 million Total quarterly orders increased 18% to a record $20.4 million Ending backlog increased 9% to a record $80.9 million Annual contract value increased 9% to a record $59.5 million Cash flow generated from operations increased by $0.5 million to $3.5 million Source: ZIXCORP recent press release, URL: https://zixcorp.com/news-events/press-releases/zixcorp-reports-strong-second-quarter-2016-financial-results

Financial Analysis

Financial Analysis

Projection & Valuation

DCF

DCF Source: 10-year treasury yield on Oct. 14, 2016, URL:https://ycharts.com/indicators/10_year_treasury_rate Source: Yahoo Finance, beta Source: URL:http://www.market-risk-premia.com/us.html

DCF $ 3.88

Competitors Company Name Market Capitalization Main Business Proofpoint, Inc. (NasdaqGM:PFPT) $3,076.1mm threat protection, incident response, regulatory compliance, archiving, governance, eDiscovery, and secure communication solutions MobileIron, Inc. (NasdaqGS:MOBL) $233.1mm purpose-built mobile IT platform that enables enterprises to secure and manage mobile applications, content, and devices while providing their employees with device choice, privacy, and a native user experience VirnetX Holding Corp (AMEX:VHC) $214.2mm develops software and technology solutions for securing real-time communications over the Internet in the United States Tucows Inc. (NasdaqCM:TCX) $328.3mm provides network access, domain names, and other Internet services in the United States, Canada, and Germany Source: Capital IQ

Comparable Analysis

Comparable Analysis

Recommendation

Hold Recommendation Potential Opportunities: Potential tax benefits DCF Valuation $ 3.88 Potential Opportunities: Potential tax benefits New CEO BYOD market Increasing email users Stricter regulations Current Price $ 4.13 Hold Comparable Valuation $ 4.65

Thank you! Q&A