NOTE ON FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Statements in this report which are not purely historical facts or which necessarily depend upon future events, including statements about trends, uncertainties, hopes, beliefs, anticipations, expectations, plans, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks and uncertainties related to how privacy and data security law mandates may affect demand for Zix's products, business disruptions, uncertainty and market instability stemming from the COVID-19 pandemic as well as governmental actions related thereto, and those risks additionally described in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 . Any of these risk factors could have a material adverse effect on our business, financial condition or financial results and reduce the value of an investment in our securities. We may not succeed in addressing these and other risks associated with an investment in our securities, with our business and with our achieving any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements are based upon information available to us on the date the statements are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
Zix® is a leading provider of cloud email security, productivity and compliance solutions. Trusted by the nation's most influential institutions in healthcare, finance and government, Zix delivers a superior experience and easy-to-use solutions for email encryption and data loss prevention ("DLP"), advanced threat protection and archiving. As a leading provider of cloud-based cybersecurity, compliance, and productivity solutions for businesses of all sizes, we are focused on the protection of business communication, enabling our customers to better secure data and meet compliance needs. We serve organizations in many industries, with particular emphasis on the healthcare (including multiple major hospitals and severalBlue Cross Blue Shield plans), financial services (including severalU.S. Banks), and insurance and government (including divisions of theU.S. Treasury and theU.S. Securities and Exchange Commission (the "SEC")) sectors. Our email encryption and DLP capabilities enable the secure exchange of email that includes sensitive information. Through a comprehensive secure messaging service, called Email Encryption (formerly ZixEncrypt), we allow an enterprise to use policy-driven rules to determine which email messages should be sent securely or quarantined for review to comply with regulations or company-defined policies. The main differentiation for Email Encryption in the marketplace is our exceptional ease of use. The best example of this is our ability to provide transparent delivery of encrypted email. Most email encryption solutions are focused on the sender. They typically introduce an added burden on recipients, often requiring additional user authentication with the creation of a new user identity and password. We designed our solution to alleviate the recipient's burden by enabling the delivery of encrypted email automatically and transparently. Zix enables transparent delivery through (1) The Directory (formerly ZixDirectory®), the world's largest email encryption community which is designed to share identities of our tens of millions of members, (2) Zix's patented Best Method of Delivery®, which is designed to deliver email in the most secure, most convenient method possible for the recipient, and (3) Email Encryption, which automatically encrypts and decrypts messages with sensitive content. The result is secure, transparent encrypted email, such that secure email can be exchanged without any impact to administrators or extra steps for both senders and recipients. Our Email Encryption also addresses a business's greatest source of data loss - corporate email- with an easy, straightforward DLP approach. By focusing strictly on the risks of email, Email Encryption simplifies DLP in comparison to other DLP solutions by decreasing complexity and cost, reducing deployment time from months to hours and minimizing impact on customer resources and workflow. In addition, Zix offers a convenient experience for both employees interacting with our solution and administrators managing the system. Our Email Encryption solution enables DLP capabilities for email by combining proven policy and content scanning capabilities with quarantine functionality. The quarantine system and its intuitive interface allow administrators to (1) easily define policies and create custom lexicons for quarantining email messages, (2) conveniently manage quarantined messages using flexible searching and filtering options, (3) release or delete individual or multiple quarantined messages with one click, (4) review reports that monitor quarantine activities and trends and (5) automate custom notifications informing employees of quarantined messages. 22 -------------------------------------------------------------------------------- Email Encryption from Zix also provides greater visibility into an organization's data risks in email by capturing data in outbound emails and highlighting violations that trigger policy filters to encrypt or quarantine. Through our interactive, real-time interface, companies can monitor their greatest vulnerabilities, generate reports for business executives and train employees about the sensitivity of their company's data.
The solution is available as a hosted solution, as a multi-tenant solution, or as a physical or virtual on-premises appliance.
InMarch 2017 , Zix acquiredGreenview Data, Inc. ("Greenview"), an email security company. Zix's acquisition of Greenview addresses increasing buyer demand for email security bundles by adding advanced threat protection, antivirus, anti-spam and archiving capabilities to its industry-leading email encryption. Greenview was a good fit for Zix's business based on its employees' expertise in email security and its emphasis on customer success, which align with Zix's reputation for delivering industry-leading solutions and a superior experience. Through the acquisition of Greenview, Zix launched two new solutions inApril 2017 - ZixProtectSM and ZixArchiveSM. ZixProtect is now called Advanced Email Threat Protection while ZixArchive is called Information Archive. Advanced Email Threat Protection defends organizations from zero-day malware, ransomware, phishing, CEO fraud, W-2 phishing attacks, spam and viruses in email with multi-layer filtering techniques. Accuracy in protecting organizations from email threats is increased further with automated traffic analysis, machine learning and real-time threat analysis. The solution is available as a cloud-based service in a variety of bundles. Information Archive (formerly ZixArchive) is a low-cost, cloud-based email retention solution that easily enables user retrieval, compliance and eDiscovery. Available as a standalone or add-on solution for other products, Zix's Information Archive includes policy-based retention, automatic indexing and flexible search capabilities for audit and legal requirements. With on-demand access through the cloud, organizations can conveniently share messages with employees, auditors and outside consultants or legal counsel, as well as revoke access when needed. InApril 2018 , Zix acquired Erado, a unified archiving company. Erado strengthened Zix's comprehensive archiving solutions with unified archiving, supervision, security, and messaging solutions for customers that demand bundled services. Erado's long standing focus on helping its customers comply withFINRA andSEC regulations helped further strengthen Zix's offerings for customers with compliance requirements. This acquisition also expanded Zix's cloud-based email archiving capabilities into more than 50 content channels, including social media, instant message, mobile, web, audio and video. OnFebruary 20, 2019 , Zix acquiredAppRiver , a leading provider of cloud-based cybersecurity solutions for Small and Medium Businesses ("SMB"). The combined company creates one of the leading cloud based security solutions providers, particularly for the small and mid-size enterprise market. This acquisition further strengthened that alignment by bolstering our security offerings, expanding our go-to-market channels, and providing a stronger cloud platform to drive even more value for our customers and partners. In addition, we now can directly offer Microsoft's substantial catalog of productivity and Microsoft Office 365 cloud email solutions.
On
Our business operations and service offerings are supported by the ZixData Center™, which is PCI DSS 3.2 certified for applicable services, SOC2 accredited and SOC 3 certified. The operations of the ZixData Center are independently audited annually to maintain AICPA SOC3 certification in the areas of security, confidentiality, integrity and availability. Auditors also produce a SOC2 report on the effectiveness of operational controls used over the audit period. Our company was incorporated as a corporation inTexas in 1988. Originally namedAmtech Corporation , we changed our name to ZixIt® Corporation in 1999 when we entered the encrypted email market. In 2002, we becameZix Corporation , and in 2017, the Company rebranded to Zix.
Impacts of COVID-19
InMarch 2020 , theWorld Health Organization declared the outbreak of a novel strain of the coronavirus ("COVID-19") to be a pandemic. The pandemic has resulted in significant, unpredictable, and rapidly changing impacts onthe United States and global economies. The COVID-19 crisis and government responses have included limiting the operations of non-essential businesses and may result in long-term harm or permanent closures impacting our customers and our vendors. While COVID-19 had a minimal impact to our first and second quarter 2020 financial results, Zix has taken steps to insure the resilience of our company, while protecting the email security of our customers and the health of our employees, including the following actions:
• Offering healthy email checks and evaluating other efficiency solutions
for our customers;
• Working with partners and customers to provide more flexible billing
schedules; 23
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• Moving over 95% of our employees to remote work arrangements while
maintaining the integrity of our data center operations and providing
continued phenomenal support for our customers;
• Maintaining effective governance and internal controls in a remote work
environment;
• Implementing a reduction in force of approximately 6%, completed through
both voluntary and involuntary separation;
• Slowing our hiring plans, and reducing planned travel and conference
expenses;
• Continued review and adjustment of other operating expenses for potential
savings, including reduction of excess capacities in our network data centers; We have continued to provide our cloud email security, productivity and compliance solutions services to our customers and vendors during this ongoing pandemic. The full extent of the impact of the COVID-19 pandemic on the Company's operational and financial performance is currently uncertain and will depend on many factors outside the Company's control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy and demand for consumer products. See the additional risk factor included in Part II - Item 1A of this quarterly report.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted inthe United States requires the Company's management to make estimates and assumptions that affect the amounts reported in the Company's condensed consolidated financial statements and accompanying notes. These estimates and assumptions take into account historical and forward-looking factors that the Company believes are reasonable, including but not limited to the potential impacts arising from the recent COVID-19 and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of COVID-19 remain unclear, the Company's estimates and assumptions may evolve as conditions change. Actual results could differ from these estimates and assumptions. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of the Company's financial condition and results and require management's most subjective judgments. Actual results could differ from these estimates and assumptions. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of the Company's financial condition and results and require management's most subjective judgments. We describe our significant accounting policies in Note 2, Summary of Significant Accounting Policies, of the "Notes to Consolidated Financial Statements" included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . We discuss our Critical Accounting Policies and Estimates in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Results of Operations
Second Quarter 2020 Summary of Operations
Financial
• Revenue for the quarter ended
with$45.9 million for the same period in 2019, representing a 16% increase.
• Gross margin for the quarter ended
47% of revenues), compared with
comparable period in 2019. The period over period margin decline as a
percentage of revenues is attributable to the effect of the increasing
percentage of revenue associated withAppRiver sales of Microsoft Office365 and hosted exchange products.
• Net loss for the quarter ended
with net loss of
• Net loss attributable to common shareholders for the quarter ended June
30, 2020, was
shareholders of
Company's net loss attributable to common shareholders includes a deemed
and accrued dividend to preferred shareholders of$2.2 million and$3.4 million for the three-month period endedJune 30, 2020 and 2019, respectively.
• Net loss per diluted share was
compared with a net loss of$0.13 in the comparable period in 2019. 24
-------------------------------------------------------------------------------- • Ending cash and cash equivalents were$14.1 million onJune 30, 2020 , compared with$11.3 million onJune 30, 2019 , and$13.3 million onDecember 31, 2019 . Operations
• Total billings for the quarter ended
compared with
13% increase.
• The annual recurring revenue value of our customer subscriptions as ofJune 30, 2020 , was$215.9 million , compared with$193.7 million for the same period in 2019, representing an increase of$22.2 million .
• Net cash provided by operations in the six months ended
same period in 2019, representing a
• As of
million as of
Revenues
Our Company provides subscription-based services. The following table sets forth the quarter-over-quarter comparison of the Company's revenues:
3-month Variance 6-month Variance Three Months Ended June 30, 2020 vs. 2020 Six Months Ended June 30, 2020 vs. 2019 (in thousands) 2020 2019 $ % 2020 2019 $ % Revenues$ 53,337 $ 45,916 $ 7,421 16 %$ 105,771 $ 75,215 $ 30,556 41 % The increase in revenue was primarily related toAppRiver growth of$6.5 million and$28.5 million to the three and six months endedJune 30, 2020 , respectively.AppRiver's contribution to our first six months 2019 revenue was impacted by theFebruary 20, 2019 , acquisition date, contributing$27.2 million and$38.1 million in revenue to the three and six months endedJune 30, 2019 , respectively. As our Company continues to integrate our sales teams and product offerings to a single secure cloud platform, distinguishing revenue betweenAppRiver and legacy Zix sales is expected to become less meaningful. We are growing our revenue with continued success in our subscription-based business model with both steady additions to the subscriber base and a high rate of existing customer renewals and the realization of previously contracted revenue in our backlog. In the first six months of 2020, we categorized our revenue in the following core industry verticals: 20% healthcare, 18% financial services, 3% government, and 59% as other. In the first six months of 2019, excluding ourAppRiver and Erado sales, we categorized our revenue in the following core industry verticals: 47% healthcare, 28% financial services, 8% government sector and 17% as other. Annual Recurring Revenue We measure the health of our subscriber base by the growth of our Annual Recurring Revenue ("ARR"), which is defined as the aggregate annualized contract value attributable to recurring revenue contracts at the end of the applicable reporting period. We calculate ARR by determining the annual or monthly revenue of subscription agreements that are active as of the end of the applicable period and multiplying by 1 or 12. ARR aids us in determining to what extent individual customer relationships, considered in the aggregate, are growing or declining in financial magnitude. ARR is summarized in the table below: Variance As of June 30, 2020 vs. 2020 (in thousands) 2020 2019 $ % Annual Recurring Revenue$ 215,914 $ 193,715 $ 22,199 11 % Backlog Our end-user order backlog is comprised of contractually binding agreements that we expect to amortize into revenue as the services are performed. The timing of revenue is affected by both the length of time required to deploy a service and the length of the service contract. As ofJune 30, 2020 , total backlog was$85.0 million , and we expect approximately 72% of the total backlog, or approximately$61.5 million , to be recognized as revenue during the next twelve months. As ofJune 30, 2020 , the backlog was comprised of the following elements:$43.0 million of deferred revenue that has been billed and paid,$12.4 million billed but unpaid, and approximately$29.6 million of unbilled contracts. The backlog atJune 30, 2020 , was 7% lower than the$91.4 million backlog at the 25 -------------------------------------------------------------------------------- end of the second quarter 2019, and 5% lower than the ending backlog of$89.4 million atDecember 31, 2019 . Our decrease in backlog is the result of timing of our customer contracts and our continued trend toward monthly subscriptions.
Cost of Revenues
The following table sets forth the quarter-over-quarter comparison of the cost of revenues: 3-month Variance 6-month Variance Three Months Ended June 30, 2020 vs. 2020 Six Months Ended June 30, 2020 vs. 2019 (in thousands) 2020 2019 $ % 2020 2019 $ % Cost of revenues$ 28,258 $ 20,304 $ 7,954 39 %$ 54,337 $ 31,443 $ 22,894 73 % Cost of revenues is comprised of costs related to operating and maintaining the ZixData Center, a field deployment team, customer service and support, Microsoft fees associated with the resale of Microsoft Office365 and hosted exchange products, and the amortization of Company-owned, customer-based computer appliances. The increases in 2020 compared to 2019 reflected in the table above resulted primarily from revenue increases from Microsoft Office365 and hosted exchange products which are associated with lower profit margins. We expect our costs of revenue to remain at higher levels than we have historically incurred. We additionally incurred increases in depreciation, amortization, average headcount and other expenses.
Research and Development Expenses
The following table sets forth the quarter-over-quarter comparison of our research and development expenses:
3-month Variance 6-month Variance Three Months Ended June 30, 2020 vs. 2020 Six Months Ended June 30, 2020 vs. 2019 (in thousands) 2020 2019 $ % 2020 2019 $ % Research and development expenses$ 5,820 $ 5,311 $ 509 10 %$ 11,206 $ 9,458 $ 1,748 18 % Research and development expenses consist primarily of salary, benefits, and stock-based compensation for our development staff, independent development contractor expenses, and other direct and indirect costs associated with enhancing our existing products and services and developing new products and services. The increase in 2020 compared to 2019 reflected in the table above resulted primarily from amortization of previously capitalized internal use software due to project completions. For the six months endedJune 30, 2020 , we incurred increases in headcount expense as compared to the same period 2019 attributable to ourAppRiver acquisition inFebruary 2019 .
Selling and Marketing Expenses
The following table sets forth the quarter-over-quarter comparison of our selling and marketing expenses:
3-month Variance 6-month Variance Three Months Ended June 30, 2020 vs. 2019 Six Months Ended June 30, 2020 vs. 2019 (in thousands) 2020 2019 $ % 2020 2019 $ % Selling and marketing expenses$ 14,458 $ 14,077 $ 381 3 %$ 28,799 $ 24,011 $ 4,788 20 % Selling and marketing expenses consist primarily of salary, commissions, travel, stock-based compensation and employee benefits for selling and marketing personnel as well as costs associated with promotional activities and advertising. The increase in the three months endedJune 30, 2020 , compared to the same period in 2019, was due primarily to increases in commission and headcount expense, offset by COVID-19 related reductions in travel. In addition to the items noted above, our six-month increase in spending is attributable to the amortization of intangible assets acquired in our acquisition ofAppRiver . 26 --------------------------------------------------------------------------------
General and Administrative Expenses
The following table sets forth the quarter-over-quarter comparison of our general and administrative expenses:
3-month Variance 6-month Variance Three Months Ended June 30, 2020 vs. 2019 Six Months Ended June 30, 2020 vs. 2019 (in thousands) 2020 2019 $ % 2020 2019 $ % General and administrative expenses$ 4,758 $ 7,795 $ (3,037 ) (39 )%$ 10,446 $ 18,125 $ (7,679 ) (42 )% General and administrative expenses consist primarily of salary and bonuses, travel, stock-based compensation and benefits for administrative and executive personnel as well as fees for professional services and other general corporate activities. The decrease in the three and six months endedJune 30, 2020 , compared with the same periods in 2019 resulted primarily from reduction in acquisition and integration costs associated with our acquisitions ofAppRiver and of DeliverySlip, inFebruary 2019 andMay 2019 , respectively. During the second quarter 2020 the Company also incurred COVID-19 related reductions in headcount and travel expense, offset by an increase to stock-based compensation costs related to accelerated equity award vesting with voluntary terminations.
Other Income (Expense)
Our other income (expense) consists primarily of interest expense associated with our debt. InFebruary 2019 , we entered into a credit agreement with a syndicate of lenders andSunTrust Bank . During the three and six months endedJune 30, 2020 , we recorded interest expense of$2.5 million and$5.1 million , respectively associated with this debt. AtJune 30, 2020 , our outstanding debt balance was$185.8 million based on a weighted effective interest rate of 5.34% for the three months endedJune 30, 2020 . See above Note 7 "Long-term Debt" for additional information regarding our debt.
Provision for Income Taxes
The provision for income taxes was a$570 thousand and$1.0 million benefit for the three-month periods endedJune 30, 2020 and 2019, respectively, and a$1.4 million and$2.2 million benefit for each of the six months endedJune 30, 2020 and 2019, respectively. The operating losses incurred by the Company'sU.S. operations in past years and the resulting net operating losses forU.S. Federal income tax purposes are subject to a$22.9 million reserve because of the uncertainty of future taxable income levels sufficient to utilize our net operating losses and credits. OurJune 30, 2020 , provision benefit of$1.4 million includes$1.2 million in deferred taxes and a$337 thousand tax benefit related to the return of federal Alternative Minimum Tax credits, offset by$73 thousand in state taxes then payable based on gross revenues. OurJune 30, 2019 , provision benefit of$2.2 million includes$2.0 million in deferred taxes and a$170 thousand benefit related to the return of federal Alternative Minimum Tax credits. No tax penalty-related charges were accrued or recognized for the three-month periods endedJune 30, 2020 and 2019. Additionally, we have not taken a tax position that would have a material effect on our financial statements or our effective tax rate for the three-month period endedJune 30, 2020 . We are currently subject to a three year statute of limitations by major tax jurisdictions. 27 -------------------------------------------------------------------------------- AtJune 30, 2020 , the Company partially reserved itsU.S. net deferred tax assets due to the uncertainty of future taxable income being sufficient to utilize net loss carryforwards prior to their expiration, as noted above. The Company did not reserve$37.8 million of itsU.S. net deferred tax assets. The majority of this unreserved portion related to$32.9 million inU.S. net operating losses ("NOLs") because we believe the Company will generate sufficient taxable income in future years to utilize these NOLs prior to their expiration. The remaining balance consists of$4.2 million relating to temporary differences between GAAP and tax-related expense and$628 thousand relating toU.S. state income tax credits and net operating loss carryovers. Any reduction to the$22.9 million valuation allowance related to our deferred tax asset would be based on an assessment of future utilization following accounting guidance, which relies largely on historical earnings. Using this methodology, and updating the future taxable earnings estimates based on first and second quarter 2020 actual earnings, the Company believes the deferred tax asset allowance as ofDecember 31, 2019 , will remain unchanged atDecember 31, 2020 . For this reason, the Company has recognized its first and second quarter 2020 federal deferred tax provision in full. If in future periods we conclude our futureU.S. federal taxable estimate established at the end of the year will exceed the prior year estimate, the Company will offset its federal deferred tax provision by reducing its valuation allowance by an equal amount, thereby eliminating from its deferred tax provision federal taxes from the Company's financial statements. Significant judgment is required in determining any valuation allowance recorded against the deferred tax asset. In assessing the need for such an allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. The Company will continue to reevaluate the need for its valuation allowance each quarter, following the same assessment methodology described above. An increase or decrease to our valuation allowance could have a significant impact on operating results for each period during which it becomes more likely than not that an additional portion of our deferred tax assets will or will not be realized. We have determined that utilization of existing net operating losses against future taxable income is not currently subject to limitation by Section 382 of the Internal Revenue Code. Future ownership changes, however, may limit the Company's ability to fully utilize its existing net operating loss carryforwards against future taxable income. The Company currently hasU.S federal net operating loss carryforwards of approximately$239 million which begin to expire in 2021. Net Income (Loss) Our net loss for the three months endedJune 30, 2020 , of$1.9 million was an improvement of$1.8 million compared to our net loss of$3.7 million for the same period last year. The improvement in our net loss was primarily due to revenue growth and the completion of prior year acquisition and integration related costs associated with ourAppRiver purchase, offset by current year increases in our costs of revenues, research and development, and selling and marketing activities.
Liquidity and Capital Resources
Overview
Based on our performance over the last four quarters and current expectations, including our assessment of the COVID-19 potential impact to our Company, we believe our cash and cash equivalents, cash generated from operations, and availability under our$25 million Revolving Facility (under which$8 million was drawn as ofJune 30, 2020 . Therefore the undrawn balance of$17 million was available to fund working capital and for other general corporate purposes, including the financing of permitted acquisitions, investments, and restricted payments, subject to the conditions contained in the Credit Agreement) will satisfy our working capital needs, capital expenditure requirements, investment requirements, contractual obligations, commitments, and other liquidity requirements associated with our operations through at least the next twelve months. We plan for and measure our liquidity and capital resources through an annual budgeting process and quarterly reviews, and we will continue to monitor our position to protect our Company against uncertainties related to the COVID-19 crisis. During the first six months of 2020, net cash provided by operations was$9.1 million , an increase of$7.8 million compared with the$1.3 million of net cash provided by operations in the first six months of 2019. This year over year improvement is attributable to increased spending in the prior year associated with due diligence, banking and other fees associated with ourAppRiver acquisition inFebruary 2019 . AtJune 30, 2020 , our cash and cash equivalents totaled$14.1 million , an increase of$708 thousand from theDecember 31, 2019 balance, and we had outstanding debt of$185.8 million .
Sources and Uses of Cash Summary
Six Months Ended June 30, (In thousands) 2020 2019 Net cash provided by operations$ 9,120 $
1,313
Net cash used in investing activities$ (9,316 ) $ (287,781 ) Net cash provided by (used in) financing activities$ 956 $ 270,763 28
-------------------------------------------------------------------------------- Our primary source of liquidity from our operations is the collection of revenue in advance from our customers and collection of accounts receivable from our customers, net of the timing of payments to our vendors and service providers. Our investing activities in the first six months 2020 consisted of$9.3 million for capital expenditures, which includes$7.3 million in capitalized internal-use software and$2.0 million for computer and networking equipment. Our investing activities in the first six months of 2019 consisted of$283.2 million , net of cash acquired, used in the acquisitions ofAppRiver and DeliverySlip, and$4.5 million for capital expenditures, which include$3.0 million in capitalized internal-use software, and$1.5 million for computer and networking equipment. Financing activities in the first six months of 2020 include$6.0 million drawn from our Revolving Facility and$334 thousand received from the exercise of stock options. We used$2.6 million to repurchase common stock related to the tax impact of vesting restricted awards,$1.1 million for contingent consideration payment associated with our acquisition of Erado,$925 thousand for principle payments of our long-term debt, and$746 thousand for payments on our finance leases. Cash received from financing activities in the first six months of 2019 includes$178.6 million , net of issuance costs, incurred as debt,$96.6 million , net of issuance costs, raised through the private purchase of preferred stock, and$180 thousand received from the exercise of stock options. The proceeds from our debt and preferred stock issuance were used to fund ourAppRiver acquisition inFebruary 2019 and our DeliverySlip acquisition inMay 2019 . In addition to these items, we used$1.8 million to repurchase common stock related to the tax impact of vesting restricted awards, and$1.5 million for contingent consideration payments associated with our acquisitions of Greenview and Erado. We also used$770 thousand for payments on our finance leases and$438 thousand for principle payments of our long-term debt.
Options of Zix Common Stock
We have significant stock options outstanding that are currently vested. There is no assurance that any of these options will be exercised; therefore, the extent of future cash inflow from additional option activity is not certain. The following table summarizes the options that were outstanding as ofJune 30, 2020 . The vested shares are a subset of the outstanding shares. The value of the shares is the number of shares multiplied by the exercise price for each share. Summary of Outstanding Options Total Value of Vested Options Outstanding (included in Total Value of Outstanding Options outstanding Vested Options Exercise Price Range Options (In thousands) options) (In thousands)$2.00 -$3.49 180,000 481 180,000 481$3.50 -$4.99 462,010 1,754 455,760 1,730$8.00 -$9.50 100,000 803 6,250 50 Total 742,010 $ 3,038 642,010 $ 2,261
Off-Balance Sheet Arrangements
None.
Contractual Obligations, Contingent Liabilities and Commitments
We have not entered into any material, non-cancelable purchase commitments at
We have severance agreements with certain employees which would require the Company to pay approximately$5.1 million if all such employees were terminated from employment with our Company following a triggering event (e.g., change of control) as defined in the severance agreements.
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