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Zix Buys AppRiver: Email Security Game-Changer

Zix hopes to complete the $275 million deal by March 31 and in so doing will boost its channel presence 10- fold as it looks to solution providers to drive revenue, Zix CEO David Wagner tells CRN.

Dallas-based Zix is buying email security provider AppRiver and in doing so it is making a massive push into the channel, increasing the number of its partners 10-fold with the stroke of a pen.

The deal is expected to create a secure email juggernaut in the SMB market with annual recurring revenue of $180 million and “game-changing application delivery for MSPs,” Zix CEO David Wagner told CRN.

“We’re the first ones to bring together a platform for cloud email delivery that extends beyond just Microsoft to a broader security and compliance suite,” Wagner said. “The ability to acquire AppRiver, to more than double the size of the company and to position ourselves really strongly with MSP partners who are driving, frankly, they’re the enablers of cloud technology to small to medium business, and this acquisition puts us in a really great spot to help them deliver value to their customers.”

[RELATED: 6 Things You Need To Know About Zix’s Planned Purchase Of AppRiver]

The $275 million deal will see the number of Zix partners shoot from 400 to 4,000 as it absorbs AppRiver, a winner of numerous channel awards including CRN Security 100: Coolest Web and Application Security Vendor and Inc. 5000’s Fastest Growing Companies In America, among others.

Wagner said this acquisition provides big advantages for MSPs and solution providers who become partners.

“Partners and VARs want to make a good return,” Wagner said. “The first thing that I would talk to them about is the value of a 100 percent recurring revenue stream. So when they bring customers on to the AppRiver platform, it’s always going to be in a subscription model. Ninety percent of the time it’s going to be month-to-month billing, which is a really big advantage that a lot of our work tells us the channel really wants. They don’t want to take the risk of paying for all these Microsoft licenses up front and then having their end customers go out of business. So that month-to-month billing, the fact that their margins continue on a month-to-month basis across the life of the account is basically where I’d start.”

AppRiver completed two acquisitions in 2018. In October the company bought Total Defense, a cloud-based security and productivity services provider. In March AppRiver bought Roaring Penguin, which gave it technology enhancements around spam and virus filtering as well as entry into Canadian markets to sell Office 365.

“AppRiver will remain the primary MSP go-to-market brand,” Wagner said. “Very quickly, I’d say within 100 days, we’ll integrate the Zix suite of email security and compliance services into that platform, which will expose more value and ability for existing partners to sell more.”

Zix is the maker of email archiving and security products, including ZixMail secure email, which automates key management to provide end-to-end email encryption that protects messages and attachments. The publicly traded company has a market cap of $332 million.

The company acquired Seattle-based Erado in April 2018, which works in the financial industry and specializes in email archiving, compliance, supervision and analytics.

During its most recent quarter, Zix revenue was up 7 percent year over year to $17.9 million. During that earnings call, Wagner said Zix did 58 percent of its business direct with 41 percent through the channel, with another 1 percent coming from web sales. Wagner said market conditions are pushing Zix to do even more of its business through the channel.

“This migration to cloud, generally, and for security more specifically, customers, particularly end customers want to be serviced with someone they know, in their community, that’s delivering value to their business,” he said. “Therefore we want to enable that business to do their job as well as possible. This is all about adapting our business model to the new cloud business model and helping our MSP partners adapt their businesses to the cloud business model, while retaining the value that they deliver, which is right at the customer.”

To finance the deal to buy Gulf Breeze, Fla.-based AppRiver, Zix received a $100 million investment from True Wind Capital, as well as a $175 million five-year loan—with $25 million in revolving credit—from SunTrust Bank and KeyBanc Capital Markets.

Two True Wind partners will also sit on Zix board once the deal closes: Jamie H. Greene Jr., founding partner, and Brandon Van Buren, a principal.

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