Zix Buys Cloud-Based Backup & Recovery Provider CloudAlly

Cloud email security, productivity and compliance solutions provider, Zix (Nasdaq: ZIXI), has acquired privately-held CloudAlly – a provider of cloud-based data backup & recovery for businesses. CloudAlly enables Zix to enter the cloud backup and recovery market. CloudAlly would expand Zix’s product suite into Microsoft Office 365 backup, filling growing demand from AppRiver’s MSP channel and Zix’s value-added reseller and direct channels.

Founded in 2011, Israel-based CloudAlly is a pioneer of enterprise-grade, software-as-a-service (SaaS) cloud backup and recovery solutions. The company offers a suite of ISO 27001 certified and GDPR/HIPAA compliant solutions for Microsoft Office 365, Google Workspace (formerly G Suite), SharePoint, OneDrive, Salesforce, Box and Dropbox.

CloudAlly is a “channel-first” provider, serving more than 5,000 customers, 250,000 users, supported by 600 Managed Service Provider (MSP) partners. For the fiscal year ending December 31, 2020, CloudAlly is projecting to generate on a standalone basis approximately $8.0 million in Annual Recurring Revenue.

“Our acquisition of CloudAlly greatly enhances the Zix suite of solutions and will provide our partners and customers with another robust tool to drive further cloud adoption in their digital transformation journeys,” said David Wagner, Chief Executive Officer (CEO) of Zix. “With CloudAlly, we can now directly address the growing demand we’ve seen from partners, customers and prospects alike for an enterprise-grade cloud backup offering with a best-in-class solution. In fact, through a recent survey of our MSP partner base, we found that at least 45% confirmed they would purchase a backup solution from Zix if it became available.”

“Cloud backup being our number one product adjacency, coupled with our proven success attaching additional products to our customer base, gives us a high level of confidence that we can leverage CloudAlly to become a greater business than just the sum of its parts,” added Mr. Wagner. “With CloudAlly, we can greatly enhance our Secure Cloud platform and also mitigate concerns around ransomware which has become a large industry focus. With this transaction completed, Zix will be better positioned for profitable growth, higher attach rates, scaled customer retention, and with the opportunity to capture a greater share of the multi-billion-dollar business communications market.”

100% Subscription Business

David Wagner
“With CloudAlly, we can now directly address the growing demand we’ve seen from partners, customers and prospects alike for an enterprise-grade cloud backup offering with a best-in-class solution,” said David Wagner, Chief Executive Officer (CEO) of Zix.

“A comprehensive data protection plan is more important than ever as companies around the world are focusing on cybersecurity for their remote workforce,” said Avinoam Katz, Chief Executive Officer (CEO) of CloudAlly. “We’re extremely excited to join forces with Zix at this time and feel that our industry leading cloud backup service will be a complementary and valuable addition to their recently announced Secure Cloud Platform, an integrated suite of productivity, security and compliance services. This suite of services will give our rapidly growing combined customer and partner base around the world the tools they need to protect their critical cloud assets across an evolving distributed workforce.”

In connection with the acquisition, Zix modified its existing senior secured term loan led by Truist Bank by adding additional borrowings of $35.0 million, bringing the total outstanding amount of the term loan to $212.2 million.

“Beyond the direct benefits from an operational standpoint, our acquisition of CloudAlly should also be highly accretive from a financial perspective,” said Dave Rockvam, Chief Financial Officer (CFO) of Zix. “Its 100% subscription business and favorable profitability profile provide us with predictable adjusted EBITDA and cash flow to augment our already-robust financial base. We sought out CloudAlly because of the strong, born-in-the-cloud business they have today, but we believe that what it could be in the future represents an even more attractive ROI for Zix.”

Baker Botts and Gornitzky & Co. acted as legal advisors to Zix. Clairfield International acted as financial advisor and Gross Kleinhendler Hodak acted as legal advisor to CloudAlly.