Zix Corporation November 20, 2014

Agenda 1.Introduction 2.Macroeconomic Review 3.Relevant Stock Market Prospects 4.Company Review 5.Financial Analysis 6.Financial Projection 7.Application of Valuation Methodologies 8.Recommendation

Position Purchased 2000 $2.89/share on April 17, 2012 Basic cost: $5,780 Current: 2000 $3.25/share on November 19, 2014 Market value: $6,500 Holding period : 19 months Gain: 12.46% Annualized return: 7.82% Source: Yahoo Finance

Company Review A Leader in Data Protection Founded in 1998 as an encryption company Nearly 192 employees in the US and Canada Committed to innovative, easy-to-use encryption Expanded into data loss prevention (DLP) with -specific solution Innovator in the bring-your-own-device (BYOD) market Source: Zix Corporation Investor Relations, page 2

Revenue Origination Source: Zix Corporation Investor Relations, page 30

Macroeconomic Outlook BYOD - “Bring your own device” Strong trend & Growing fast 81% of Employees use at least one personal device for business use in The United States, currently the largest BYOD market with 71 million BYOD devices, will have 108 million by 2016, or a 52% growing rate. Security risk 90% of users disabled auto-lock for tablets and 75% of users disabled auto-lock smartphones 71% of businesses that permitted BYOD had NO specific security or support policies Sources: akuity, 2012; Cisco, 2013; ITIC, 2012akuityCiscoITIC

Macroeconomic Outlook Regulatory drivers The Health Insurance Portability and Accountability Act (HIPAA) Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”) Gramm-Leach-Bliley Act (“GLBA”) State specific encryption law Source:U.S. Department of Health & Human ServicesU.S. Department of Health & Human Services

Industry Analysis U.S. Software Market Value Forecast Source: Marketline

Industry Porter’s 5 Forces Bargaining Power of Suppliers: NA Bargaining Power of Buyers: Moderate to high Rivalry: High Threat of Substitutes: Low Threat of New Entrants: High

Management’s Strategy Be a leader and innovator in data security Maintain Ease of Use Launch new products to establish the reputation in data security Expand customer reach through a network of resellers and other distribution partners Source: Zix 2013 Annual Report, page 3

Company Products Encryption Services Enables the secure exchange of including sensitive information Allows an enterprise to use policy-driven rules Software-as-a-Service (“SaaS”) solution Customers pay an annual service subscription fee Senders Receivers ZixGateway ZixMail ZixGateway ZixAccess ZixPort ZixDirect Technology -ZixDirectory -Best Method of Delivery -ZixData Center -ZixResearch Center Source: Zix K, page 3

Easy-of-Use How Zix Different From Other Solutions Source: Zix Corporation Investor Presentation, page 9-10

New-launched Products Data Loss Prevention – ZixDLP March 29, 2013 Providing a straightforward DLP approach with a focus strictly on Addresses business’s greatest source of data risk Decreases the complexity and cost Reduces deployment timelines from month to hours Easy-to-use for both employees and administrators Source: Zix K, page 3

New-launched Products BYOD – ZixOne September 3, 2013 Enables Android or IOS mobile devices to view remotely-stored corporate and to interact with that data Never allows s to be stored on the device, where it might be subjected to exposure from theft or loss of the device Not requires employees to relinquish device control or personal privacy to their employer Source: Zix K, page 3

Why ZixOne MDM – Mobile Device Management Require individual users to permit their employer access to and control over personally-owned smartphones and tablet computers Create user concerns about loss of control and privacy of their devices ZixOne – Delivering a view of corporate on mobile devices in the cloud only Source: Zix Corporation Investor Relations, page 22-24

SWOT Analysis Strengths Easy-of-use Software-as-a-Service (“SaaS”) A more effective BYOD solution protecting business data High defer tax credit Weaknesses Limited resources Forced to exit business segments in the past few years Opportunities Cisco ending IronPort Encryption Appliance Increased demand on security of data and communication Strong trend of BYOD Threats Industry consolidation (M&A, strategic alliance) Rapid technology changes The reliability and sustainability of data center The relationships with third-party distributors

Financial Analysis – Ratio Liquidity Ratios 2010A2011A2012A2013A Current Ratio Quick Ratio Cash to Total Asset37%27%28%30% Profitability Ratios 2010A2011A2012A2013A Revenue Growth Rate25.22%15.36%13.66%11.03% Gross Margin80.44%81.10%82.45%84.18% Operating Margin15.79%27.96%20.88%19.62% ROA7.81%13.75%10.93%10.42% ROE (With Tax Benefit)86.8%39.0%18.0%15.8% ROE (Without Tax Benefit)11.1%18.5%14.8%14.3%

Financial Analysis – Ratio DuPont Analysis 2010A2011A2012A2013A Tax Burden Interest Burden1.01 Operating Profit Margin16%28%21%19% Asset Turnover Leverage TA/ TE ROE86.8%39.0%18.0%15.8% ROE (Without Tax Benefit)11.1%18.5%14.8%14.3% Greenblatt 2010A2011A2012A2013A EBIT/Tangible Assets43%137%99%63% EBIT/EV3%5%6%4%

Technical Analysis

Weighted Cost of Capital Beta Beta from Yahoo1.15 3yr Beta1.15 2yr Beta1.12 1yr Beta1.63 Adj Beta1.20 CAPM Risk Free Rate2.40% Market Premium6% CAPM9% Return to Owner 2 Year (Annualized)8% 1 Year-28% Half Year (Annualized)-8% Adj ZIXI Return to Owner9% Graham Growth Rate Trailing P/E24.85 Graham Implied g%8.18% Capital Structure Equity$198, % Total Financing$198,702100% Discount Rate ZIXI Return to Owner9%33% Graham Implied g%8.18%33% CAPM9%33% Adj Cost of Equity8.7% Cost of Equity8.7%100.0% WACC8.7% Risk Premium3.5% Discount Rate12.2%

Financial Projection Income Statement Historical FiguresForecasted Figures 2009A2010A2011A2012A2013A 2014E2015E2016E2017E2018E Revenues 26,40733,06638,145 43,35648,138 49,72756,19162,37269,23375,464 % growth 25%15%14%11% 3.3%13.0%11.0% 9.0% Cost of revenues 4,5766,4687,211 7,6097,614 7,9568,9919,98011,07712,074 % of Sales 17%20%19%18%16% 16.0% Gross margin 21,83126,59830,93435,74740,524 41,77047,20052,39258,15663,390 % margin 82.7%80.4%81.1%82.4%84.2% 84.0% R&D 3,6195,0895,229 7,4199,563 9,9457,8678,73211,77012,829 % of Sales 14%15%14%17%20% 20.0%14.0% 17.0% SG&A 15,92716,36315,128 19,38521,646 22,37725,28628,06729,07831,695 % of Sales 60.31%49.49%39.66%44.71%44.97% 45.0% 42.0% Operating income 2,2855,14610,5778,9439,315 9,58414,20215,76417,49819,073 % margin 9%16%28%21%19% 19.3%25.3% Interest expense % of Sales -0.08%-0.07%-0.02%0.00% 0.0% Income before income taxes 2,4785,22010,6659,0549,447 9,58414,20215,76417,49819,073 % margin 9%16%28%21%20% 19%25% Income tax benefit -6735,50011,889 1,9491, % of EBT -0.3%107.4%31.2%4.5%2.1%0.0% Income from operations 2,41140,72022,55411,00310,453 9,58414,20215,76417,49819,073 % margin 9%123%59%25%22% 19%25%

DCF Analysis

Implied Price DCF : $3.24 Current Stock Price : 3.25 Discount Rate %11.73%12.23%12.73%13.23% Terminal Growth Rate 1.75%$3.41$3.23$3.07$2.92$ %$3.48$3.29$3.12$2.97$ %$3.55$3.35$3.18$3.02$ %$3.62$3.42$3.24$3.07$ %$3.70$3.49$3.30$3.12$ %$3.79$3.56$3.36$3.18$3.02

Key Factors Pro Easy-of-Use BYOD trend ZixOne uniqueness Google partnership Cisco IronPort Encryption Appliance Con Industry rivalry high First year order decreasing Weak quarter expectation No specific industry alignment

Recommendation HOLD