1. Analysts: Su Chen Jionghan Dai Liang Nan Presented: March 29, 2012

2.  Zix Corp. ◦ Zix Corporation provides email encryption solutions in software as a service model in the United States. ◦ Market Cap185 million ◦ PEG ratio0.83 ◦ Adjusted P/E18 ◦ 1-year implied growth in earning30% ◦ 7-10 years implied growth5%

3.  Stock price closed at $ 2.93 on Mar. 28, 2012 ◦ Underperformed compared to SP Small Cap 600 Index in the past 5 months Source: Yahoo Finance

4. Leader in providing email encryption What is the company doing Healthcare, financial services, insurance and government sectors Who does the company serve ZixDirectory Zix’s Best Method of Delivery ZixGateway How

5.  The initial unemployment claim lowered to 348,000 on March 22, 2012  Policy markers forecasts federal fund rate to keep near zero at least through late 2014  The U.S. economy is recovering slowly from the 2008 recession

6. Application Software Communication Data Deliver/ Security Email Gateway Email Encryption Sector: Technology GICS MAP: Application Software # 45103010

7.  External Driver ◦ Regulation Demand ◦ Corporation Demand  Risk Factor ◦ New technology and product ◦ High R&D investment ◦ Relationship with third party distributors ◦ Strong competition

8. Ironport Appliance-based, cloud-based, hybrid Cisco PGP Universal Gateway SaaS Symantec Email Gateway SaaS MacAfee Messaging Security Cloud-based Trend Micro Proofpoint Enterprise Privacy SaaS Proofpoint

9. Leader in providing email encryption What is the company doing Healthcare, financial services, insurance and government sectors Who does the company serve ZixDirectory Zix’s Best Method of Delivery ZixGateway How

10.  Protect confidential data from been seized by unauthorized parties while transporting via email ◦ Required by some data privacy laws, such as Health Information Portability Accountability Act (“HIPAA”), Gramm-Leach-Bliley Act (“GLBA”) ◦ Companies with business secrets want to protect the property

11.  Healthcare, financial services, insurance and government sectors  More than 1,200 hospitals and over 1,600 financial institutions, including SEC Source: Zix Corp investor presentation http://investor.zixcorp.com/phoenix.zhtml?c=10864 5&p=irol-IRHome

12. EncryptionDecryption

13. Key differentiator Enable interoperability between members 30 million members, 100,000 new members per week ZixDirectory Determine Encryption and delivery mechanism Clients can customize the protocol Zix’s Best Method of Delivery Automatically decrypt emails ZixGateway

14.  Stricter regulations ◦ increased penalties for violations, e.g. HIPAA ◦ stricter and more onerous breach notification requirements ◦ The first state law requiring encryption of emails containing sensitive information was passed by Nevada on Oct 1 st, 2008 ◦ Mar 1 st, 2010 in Massachusetts, they reach far beyond the state borders

15.  Trusted by most influential institutions ◦ 5 Divisions of the U.S. Treasury ◦ SEC ◦ All of the FFIEC U.S. federal banking regulators ◦ 17% US banks ◦ Nearly 1 in 5 US hospitals

16.  No significant customers ◦ Not any customer accounts for more than 10% sales  Low incremental costs to add new users ◦ Large up-front investment to establish the service  Strong renewal rate ◦ Result in retention of 95% of revenue from year to year

17.  On Dec 31, 2010, Zix Corp completed the wind down of its e-prescribing business ◦ Had previously been reported as a segment ◦ No longer fit the company’s strategy ◦ Assets were compatible with the remaining business and were therefore absorbed

18.  In 2011, the company included a tax benefit of 11.8 million, comparing to 35.3 million in 2010 ◦ Largely attribute to the reduction of valuation allowance because the company is optimistic about their future operation ◦ Still have 57.4 million valuation allowance left ◦ Involve subjective judgment of future taxable income from mangers, and thus we don’t want to include into our analysis

19.  In 2011, the company had a lower new first year order of 7.1 million compared to 8.7 million in 2010 ◦ Partly explain its underperformance recently ◦ Reorganization of sales force ◦ Uncertainty in economy ◦ Not because of pricing or competition  They actually have fewer competitors

20. Financial Data ComparablesPriceSharesMarket CapNet DebtEVRevenueEBITDAEBIT eGain Communications Corp. (NasdaqCM:EGAN) 5.4924.36133.75-2.1131.6742.74.33.6 SciQuest, Inc. (NasdaqGS:SQI) 15.222.07335.46-59.6275.8153.47.25.5 VASCO Data Security International Inc. (NasdaqCM:VDSI) 9.7537.69367.46-84.5282.96168.128.624.8 Technical Communications (NasdaqCM:TCCO) 11.591.8321.17-11.59.6913.84.44.2 Zix Corporation (NasdaqGM:ZIXI) 2.9362.88184.24-20.7163.5638.11210.6

21. Trading Data ComparablesTEV/RevTEV/EBITDATEV/EBIT eGain Communications Corp. (NasdaqCM:EGAN) 3.0830.7436.4 SciQuest, Inc. (NasdaqGS:SQI)5.1638.350.61 VASCO Data Security International Inc. (NasdaqCM:VDSI) 1.689.911.43 Technical Communications Corp. (NasdaqCM:TCCO) 0.72.182.29 Zix Corporation (NasdaqGM:ZIXI)4.2913.6915.46 Average2.65520.2825.1825 Implied Valuation1.944.204.57 Comprable Price3.57

22.  Improving operating results ◦ Revenue grows without increasing SG&A 201120102009 Gross Margin81.10%80.44%82.67% Operating Margin27.73%15.56%8.65%

23.  A big amount of cash ◦ Start repurchasing stock in 2011 201120102009 Cash From Operating (in million) 13.227.190.60 Cash ( in million)20.6824.6213.29 Cash / CA84.90%87.51%87.33% Cash / TA26.67%36.83%67.28%

24. 3/28/2012 $2.93 Current Price Multiple $3.57 DCF $3.53 Share Value Buy #2000 Shares @ $3.00Buy #2000 Shares @ $3.00 Present 2% of the total portfolio Recommendation