1. ZIX CORPORATION OCTOBER 15, 2013 Dan Ballantine, Alexander Johansson & Ye Liang

2. Agenda  Introduction  Holding Information  Macroeconomic Outlook  Industry Overview  Company Overview  Financial Analysis  Valuation  Recommendation

3. Zix Corporation  Leading Provider of Email Encryption  Designed for Regulatory Compliance and Protecting Sensitive Communication  1 in Every 5 U.S. Bank and Hospital  Products & Services:  ZixGateway / ZixMail – Sender Service  ZixAccess – Receiver Service  ZixDirectory World’s Largest Shared Email Encryption Community  Zix Research Center Source: MarketLine, Zix 2012 10-K

4. Current Holding  April 17, 2012  Acquired 2,000 shares @ $2.89/share  Cost basis = $5,780  October 15, 2013  Current holdings 2,000 shares @ $4.85/share  Market value = $9,700  Annualized HPR = 41.22% Source: Yahoo Finance

5. Macroeconomic Overview  Unemployment Rate  BYOD Catalyst  4 Out of 5 Employees Use Their Own Devices At Work Sensitive Information Concerns Source: Bureau of Labor Statistics, Ribbit

6. Macroeconomic Overview  HIPAA Compliance  Health Insurance Portability and Accountability Act  Covered entities: health plan, health providers, health care clearinghouses  Also applies to business associates of covered entities  Requirements: privacy, security, and transaction standards regarding health care patient information  Deadline for compliance was September 23, 2013  Continued need for protection as more patient data is stored and transmitted electronically Source: Lorman, American Physical Therapy Association, US HHS

7. Stock Market Source: Google Finance

8. Industry Overview  What is Software Industry?  Components System Software Operating Systems Network and database management Other Application Software General business productivity and home use application Cross-industry and vertical market applications Other Source: MarketLine Industry Profile

9. Industry Overview Source: MarketLine

10. Industry Growth Source: MarketLine

11. Industry Life Cycle Steady growth in sales as product acceptance widens Source: UIUC BADM 449

12. Industry Forces Analysis Source: MarketLine

13. Industry Forces Analysis  Buyer Power: MEDIUM  High switching cost, open source substitutes available, large population of customers  Supplier Power: MEDIUM  Highly differentiated inputs, low threat of forward integration  Rivalry Among Existing Competitors: MEDIUM  Differentiated products, fast industry growth, many competitors Source: MarketLine

14. Industry Forces Analysis  Threat of New Entrants: MEDIUM  Low capital intensive, high labor intensive, trusts in certain sub-markets  Threat of Substitutes: MEDIUM  Cheap or free open source alternatives that update more frequently and quickly, capability issue with the alternatives Conclusion: Moderately attractive industry Source: MarketLine

15. Company Overview  Products and Services:  New to the Family in 2013  ZixONE; byod Source: Zix Corporation Website

16. Company Overview  Strategy: Differentiation  Highly specialized in data protection  Software-as-a-Service (SaaS)  Revenue method: Annual service subscription fee  Pricing is fixed per sender each year  75% of deals are 3-yr contracts with an average of 2.5 years  Cash generally collected annually upfront  Retention of 90%+ of revenue Source: ZixCorp Investor Relations

17. Company Overview Source: Zix Corporation Investor Relations

18. Product Life Cycle Steady growth in sales as product acceptance widens: Demand increases as business related online communication expanding Products reach out to wider range of audience Source: UIUC BADM 449

19. Business Risk Analysis  Changing regulations on internet privacy  Main customers subject to political factors  Rapidly growing technologies bring uncertainty  Dependent on strong human capital  Existing and potential big players  End user preference  Hacker population brings challenges

20. SWOT Analysis StrengthsWeaknesses -No long-term debt -Strong cash position -Growing product base -Subscription business model -Operating losses in past 5 years -Forced to exit business segments in the past few years OpportunitiesThreats -Healthcare compliance (HIPAA) -Increased emphasis on security of data and communication -BYOD trend in the workplace -Big data trends -NSA security threats -Increased hacker issues -Rapid technological change

21. Management Outlook  Optimistic about subscription business model coupled with over $60 million backlog  Enthusiastic about September release of ZixOne to address the BYOD segment  Concerns over increased SG&A expenses in 2013 due to increased sales force  Recognized increased competition from companies such as McAfee and Cisco Systems Source: Zix Corporation Q2 Earnings Call

22. Recent Financial Information Source: Zix 2012 10-K, Zix 2010 10-K

23. Recent Financial Information Source: Zix 2012 10-K, Zix 2010 10-K

24. Current Stock Information Source: Capital IQ, Yahoo Finance MetricValue Current Stock Price $4.85 Trailing P/E36.62 Forward P/E20.70 Market Cap ($ millions) $297.00

25. Financial Analysis

27. Comparable Companies Source: Capital IQ CompanyTicker (Exchange)Market Cap ($millions) Tucows Inc. TCX (AMEX)$105.44 Axway Software S.A. AXW (ENXTPA)$594.36 Fortinet Inc. FTNT (NASDAQ)$3,446.84 Trend Micro Inc. 4704 (TSE)$5,029.95 Proofpoint, Inc. PFPT (NASDAQ)$1,039.23 USA Technologies Inc. USAT (NASDAQ)$53.17 Zix CorporationZIXI (NASDAQ)$291.49

28. Stock Performance Source: Yahoo Finance

29. Comparable Company Analysis Source: Capital IQ

30. Comparable Company Analysis Source: Capital IQ

31. Discount Rate Source: Yahoo Finance

32. Discount Rate

33. DCF Analysis

34. Decision Drivers  Strengths  Strong cash position and improving balance sheet  Well positioned in health care segment  Additional BYOD segment growth opportunities  Concerns  Strong recent stock performance  Internet and data privacy threats  Operating losses in the past

35. Recommendation  Valuation Summary  Current Stock Price: $4.85/share  Comparable Companies Valuation: $4.66/share  DCF Valuation: $3.51/share  Recommendation: HOLD

36. Questions?