Absolute Software Reports Fiscal 2012 First Quarter Results

Company delivers record Sales Contracts and fifth consecutive quarter of double-digit year-on-year growth

VANCOUVER, Nov. 17, 2011 /CNW/ - Absolute® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the leading provider of firmware-embedded endpoint security and management solutions, today announced its financial results for the three-month period ended September 30, 2011. This is the Company's first set of consolidated financial statements prepared under International Financial Reporting Standards ("IFRS") and reported in U.S. dollars.  All figures are in U.S. dollars unless otherwise stated.

       
Key Financial Metrics Q1-F2012 Q1-F2011 % change
Sales Contracts(1) $25.3M $21.1M +20%
Cash from operating activities $5.5M $3.4M +60%
Operating cash per share(2)      
  (basic and diluted) $0.13 $0.07 +86%
Revenue $18.2M $16.3M +12%
Adjusted Operating Income(3) $2.7M $(0.3)M nm
Net income (loss) $(1.9)M $0.1M nm
Net income (loss) per share (basic and diluted) $(0.04) $0.00 nm
Cash, cash equivalents, and investments $56.3M $56.3M -
Deferred revenue $118.2M $104.9M +13%

(1)(2)(3) - Please refer to "Non-IFRS Measures and Definitions"

Q1 Fiscal 2012 Highlights

  • Achieved 20% growth in Sales Contracts(1) while reducing expenses 7% year-over-year.
  • Increased commercial Sales Contracts by 36% compared to Q1-F2011.
  • Generated $5.5 million in cash from operating activities, representing an increase of 60% over Q1-F2011.
  • Adjusted Operating Income was $2.7 million, a significant improvement from an Adjusted Operating Loss of $0.3 million in Q1-F2011.
  • International sales increased 51% to 9% of total Sales Contracts, compared to 7% in Q1-F2011.
  • Announced the integration of Computrace® persistence technology into the firmware of the Lenovo ThinkPad Tablet.
  • Launched support for Mac OS X Lion.
  • LoJack for Laptops named Editors' Choice by PC Magazine.
  • Repurchased 683,000 shares for a total of $2.8 million under Company's Normal Course Issuer Bid.
  • Subsequent to quarter end, released Absolute Manage 6.0, which included 60 new features including Windows imaging and:
    • Launch of Mobile Device Management (MDM) for Android;
    • Extension of MDM support for iOS5 platforms; and
    • Launch of AbsoluteSafe, a ground breaking solution for document control on iOS devices.

"Our Q1 results reflect particularly strong commercial sales, which grew 36% year-over-year.  In addition to our seasonally strong education sales, we experienced double digit growth in all of our major commercial product lines, target market verticals and geographic regions," said John Livingston, CEO of Absolute. "Our performance in the quarter clearly demonstrates we have the right products and strategy in place, and as a result, we are capturing a larger share of the endpoint security and management market."

Mr. Livingston continued, "We are particularly excited about the success we are having with our MDM offerings. We are the leading vendor that can provide security and management across PC, Mac, iOS and Android devices, and with the launch of Absolute Safe, we have moved further ahead of the industry curve. Absolute safe provides organizations with a highly sought-after solution to address consumerization.  With these offerings, in combination with our Android persistence and early stage self-encrypting drive solutions, we believe that we are well positioned to deliver long-term growth. "

Q1 F2012 Financial Review
Absolute's Q1 F-2011 results are the Company's first set of consolidated financial statements prepared under IFRS and in U.S. dollars. For more detailed information regarding the Company's transition to IFRS, including a reconciliation of the Company's Q1 F-2011 results as originally reported in Canadian Generally Accepted Accounting Principles (CGAAP) to IFRS please refer to the Company's financial statements and MD&A filings on SEDAR at www.sedar.com.

Q1 F2012 Sales Contracts(1) grew 20% to $25.3 million from $21.1 million in Q1-F2011. The increase was driven by strong commercial sales globally across all of the Company's target market verticals - education, corporate, government and healthcare. Q1-F2012 Commercial sales were $22.9 million, or 91% of Sales Contracts, up 36% over Q1-F2011.

Commercial Sales Contracts from Absolute's flagship theft recovery products(4)  in Q1-F2012 grew 18% over Q1-F2011, as market demand for the Company's unique theft recovery and theft management services remained strong.

Commercial Sales Contracts from Absolute's non-theft recovery products(6) (i.e. management, tracking and data protection) grew 142% over Q1-F2011, as demand, particularly for Absolute Manage, MDM and the Company's Computrace Data Delete offering, gained momentum. The Company believes this to be an indication of its success in diversifying sales and developing new product lines with long-term growth potential.

For Q1-F2012, Sales Contracts for consumer solutions were $2.4 million, or 9% of Sales Contracts, compared to $4.2 million, or 20% of Sales Contracts, in Q1-F2011. The year-over-year decline was expected, and is primarily due to the phase-out of a low margin high volume OEM bundle program.

On the international front, sales increased 51% to $2.2 million in Q1-F2012, or 9% of sales, up from $1.5 million, or 7% of sales, in Q1 F2011.

Revenue for Q1-F2012 was $18.2 million, an increase of 12% from $16.3 million in Q1-F2011. Revenue is typically a lagging performance indicator for Absolute, as it is a function of deferred revenue as opposed to invoiced sales in the quarter. The majority of the revenue from Q1-F2012 Sales Contracts is included in the deferred revenue on the balance sheet at September 30, 2011, which was $118.2 million, compared to $111.2 million at June 30, 2011.

Adjusted Operating Expenses(3) for Q1-F2012 were $15.5 million, a decrease of 7% from $16.6 million in Q1 F2011, largely as a result of reductions in certain partner marketing activities as well as the Company's continued focus on driving growth while tightly managing expenses.

Reflecting the Company's revenue growth and its ongoing focus on cost control, Absolute generated Adjusted Operating Income(4) of $2.7 million in Q1-F2012, up from an Adjusted Operating Loss of $0.3 million in Q1-F2011. Absolute recorded a net loss of $1.9 million in Q1-F2012, compared to a net profit of $0.1 million in Q1-F2011. The current quarter loss was primarily due to foreign exchange losses of $1.9 million in Q1-F2012 on Canadian dollar net asset balances, as compared to a $1.6 million foreign exchange gain in Q1-F2011.

Cash from operating activities increased 60% in Q1-F2012 to $5.5 million, compared to $3.4 million in Q1-F2011.  The increased cash flow reflects the company's improved operational performance which produced rapidly growing sales contracts and reduced operating expenses.

Quarterly Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q1 F2012 can be obtained today from Absolute's corporate website at www.absolute.com. The documents will also be available at www.sedar.com.

Notice of Conference Call
Absolute Software will hold a conference call to discuss the Company's Q1 F2012 results on Thursday, November 17, 2011 at 2:00 p.m. PT (5:00 p.m. ET). All interested parties can join the call by dialing 647-427-7450, or 1-888-231-8191. Please dial-in 15 minutes prior to the call to secure a line.  The conference call will be archived for replay until Thursday, November 24, 2011 at midnight.

A live audio webcast of the conference call will be available at www.absolute.com and www.newswire.ca.  Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.  An archived replay of the webcast will be available for 365 days at www.newswire.ca. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 25033930.

Non-IFRS Measures and Definitions

Throughout this press release, we refer to a number of measures which we believe are meaningful in the assessment of the Company's performance. All these metrics are non-standard measures under International Financial Reporting Standards ("IFRS"), and are unlikely to be comparable to similarly titled measures reported by other companies. Readers are cautioned that the disclosure of these items is meant to add to, and not replace, the discussion of financial results or cash flows from operations as determined in accordance with IFRS.  For a discussion of the purpose of these non-IFRS measures, please refer to the Company's First Quarter 2012 MD&A on SEDAR at www.SEDAR.com.

These measures, as well as their method of calculation or reconciliation to IFRS measures, are as follows:

1)      Sales Contracts
  See the "Subscription Business Model" section of the MD&A for a detailed discussion of why we believe Sales Contracts (also known as "bookings") provide a meaningful performance metric.  Sales Contracts are included in deferred revenue (see Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements), and result from invoiced sales of our products and services.
2)      Basic and diluted Cash from Operating Activities per share
  As a result of the nature of our revenues (please refer to "Subscription Business Model" in the MD&A), we use Cash from Operating Activities as a measure of profitability. Accordingly, we believe that Cash from Operating Activities per share is a meaningful indicator of profitability per share. Cash from Operating Activities per share is calculated by dividing Cash from Operating Activities by the average number of shares outstanding for the period (basic), or using the treasury stock method (diluted).
3)      Adjusted Operating Expenses
  A number of significant non-cash expenses are reported in our Cost of Revenue and Operating Expenses.  Management believes that analyzing these expenses exclusive of these non-cash items provides a useful measure of the cash invested in the operations of its business.  The non-cash items excluded in the determination of Adjusted Operating Expenses are share-based compensation and amortization of acquired intangible assets. For a description of the reasons these items are adjusted, please refer to the First Quarter Fiscal 2012 MD&A.
4)     Adjusted Operating Income (Loss)
  Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company's performance. Adjusted Operating Income (Loss) refers to IFRS operating income excluding charges for share-based compensation and amortization of acquired intangible assets.
5)     Theft recovery products
  Management defines the Company's theft recovery product line as all products that include a theft recovery component.
6)      Non-theft recovery products
  Management defines the Company's non-theft recovery product line as its Absolute Manage, Absolute Track, Computrace Data Delete and Absolute Secure Drive products.

About Absolute Software

Absolute Software Corporation (TSX: ABT) is the world leader in firmware-embedded endpoint security and management for computers and ultra-portable devices. The Company's Computrace, Absolute Manage, Absolute Secure Drive, and LoJack for Laptops solutions provide organizations with actionable intelligence to prove compliance, generate fast ROI, reduce overhead, and deliver comprehensive visibility and control over all of their endpoints, anywhere, anytime. The Company's software agent is embedded in the firmware of computers, netbooks, and tablets by global leaders, including Acer, ASUS, Dell, Fujitsu, HP, Lenovo, Motion, Panasonic, Samsung, and Toshiba, and the Company has reselling partnerships with these OEMs and others, including Apple. For more information about Absolute Software, visit www.absolute.com and http://blog.absolute.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, the expected performance, functionality and availability of our services and products, and other expectations, intentions and plans contained in this press release that are not historical fact. When used in this press release, the words "plan," "expect," "believe," and similar expressions generally identify forward-looking statements. These statements reflect our current expectations. They are subject to a number of risks and uncertainties, including, but not limited to, changes in technology and general market conditions. In light of the many risks and uncertainties you should understand that we cannot assure you that the forward-looking statements contained in this press release will be realized.

©2011 Absolute Software Corporation. All rights reserved. Computrace and Absolute are registered trademarks of Absolute Software Corporation. LoJack is a registered trademark of LoJack Corporation, used under license by Absolute Software Corporation. LoJack Corporation is not responsible for any content herein. U.S. patents No. 5,715,174, No. 5,764,892, No. 5,802,280, No. 5,896,497, No. 6,087,937, No. 6,244,758, No. 6,269,392, No. 6,300,863, No. 6,507,914, No. 7,818,557, No. 7,818,803, and No. 7,945,709. Canadian patents No. 2,211,735, No. 2,284,806, and No. 2,205,370. U.K. patents No. EP0793823, No. GB2298302, and No. GB2338101. German patent No. 69512534. Australian patent No. 699045. Japanese patent No. JP4067035. The Toronto Stock Exchange has neither approved nor disapproved of the information contained in this news release.

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Financial Position
(Expressed in United States dollars) (Unaudited)


  September 30,
2011
June 30,
2011
ASSETS    
     
CURRENT    
  Cash and cash equivalents $  32,641,565 $  29,866,741
  Short-term investments 18,087,721 6,964,589
  Trade and other receivables 18,751,026 16,174,126
  Prepaid expenses and other 1,710,236 1,598,015
  71,190,548 54,603,471
INVESTMENTS 5,603,151 18,905,433
PROPERTY AND EQUIPMENT 1,647,848 1,840,824
DEFERRED INCOME TAX ASSETS 20,588,806 20,845,469
INTANGIBLE ASSETS 21,178,369 22,323,743
  $  120,208,722 $ 118,518,940
     
LIABILITIES    
     
CURRENT    
  Trade and other payables $   7,260,884 $   8,768,886
  Acquisition payable - current 1,593,018 1,762,611
  Accrued warranty 850,000 880,000
  Deferred revenue - current 58,811,304 55,923,312
  68,515,206 67,334,809
ACQUISITION PAYABLE 1,593,689 1,623,041
DEFERRED REVENUE 59,339,740 55,255,525
  129,448,635 124,213,375
     
SHAREHOLDERS' DEFICIENCY    
Share Capital 34,377,719 34,640,517
Equity reserve 35,075,350 34,431,802
Deficit (78,692,982) (74,766,754)
  (9,239,913) (5,694,435)
  $ 120,208,722 $  118,518,940

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive (Loss) Income
Three months ended September 30, 2011 and 2010
(Expressed in United States dollars) (Unaudited)



 

  Three months ended September 30,
    2011 2010
       
REVENUE   $  18,246,507 $  16,326,555
COST OF REVENUE   5,056,325 4,988,017
GROSS MARGIN   13,190,182 11,338,538
       
OPERATING EXPENSES      
  Sales and marketing   7,783,810 8,884,189
  Research and development   2,797,415 2,920,694
  General and administration   1,814,828 1,564,768
  Investment tax credits   (575,000) (383,368)
  Share-based compensation   696,813 761,927
    12,517,866 13,748,210
OPERATING INCOME (LOSS)   672,316 (2,409,672)
       
OTHER (EXPENSE) INCOME      
  Interest income, net   146,484 181,753
  Foreign exchange (loss) gain   (1,862,747) 1,627,106
  Gain on investments   - 1,316
    (1,716,263) 1,810,175
       
NET LOSS BEFORE INCOME TAXES   (1,043,947) (599,497)
INCOME TAX (EXPENSE) RECOVERY   (840,000) 664,830
NET (LOSS) INCOME AND TOTAL COMPREHENSIVE (LOSS) INCOME   $   (1,883,947) $   65,333
       
BASIC AND DILUTED (LOSS) INCOME PER SHARE   $        (0.04)          $  0.00
       
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC   43,406,230 46,695,030

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in United States dollars) (Unaudited)


  Share Capital      
  Number of Common shares Amount Equity reserve Deficit Total
           
BALANCE, JUNE 30, 2010 46,829,090 $  34,306,576 $  31,113,973 $ (64,653,724) $  766,825
Shares issued on options exercised 100,750 228,112 (78,017) - 150,095
Shares issued under Employee Share Purchase Plan 94,864 323,917 - - 323,917
Shares repurchased and cancelled under the Normal Course Issuer Bid (830,100) (489,303) - (2,786,894) (3,276,197)
Share-based compensation expense - - 761,927 - 761,927
Net income and total comprehensive income - - - 65,333 65,333
BALANCE, SEPTEMBER 30, 2010 46,194,604 34,369,302 $  31,797,883 $ (67,375,285) $   (1,208,100)
Shares issued on options exercised 196,025 3,328,091 (148,362) - 3,179,729
Shares issued under Employee Share Purchase Plan 90,123 296,017 - - 296,017
Shares repurchased and cancelled under the Normal Course Issuer Bid (2,966,920) (4,229,560) - (9,472,439) (13,701,999)
Shares issued on acquisition 166,666 876,667 - - 876,667
Share-based compensation expense - - 2,782,281 - 2,782,281
Net income and total comprehensive income - - - 2,080,970 2,080,970
BALANCE, JUNE 30, 2011 43,680,498 $  34,640,517 $  34,431,802 $ (74,766,754) $ (5,694,435)
Shares issued on options exercised 85,250 164,173 (53,265) - 110,908
Shares issued under Employee Share Purchase Plan 93,502 308,313 - - 308,313
Shares repurchased and cancelled under the Normal Course Issuer Bid (683,000) (735,284) - (2,042,281) (2,777,565)
Share-based compensation expense - - 696,813 - 696,813
Net loss and total comprehensive loss - - - (1,883,947) (1,883,947)
BALANCE, SEPTEMBER 30, 2011 43,176,250 $  34,377,719 $  35,075,350 $ (78,692,982) $ (9,239,913)

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows
Three months and year ended September 30, 2011 and 2010
(Expressed in U.S dollars) (Unaudited)


    Three months ended September 30,
    2011 2010
OPERATING ACTIVITIES      
Net loss   $    (1,883,947) $  65,333
Items not involving cash      
  Amortization of property and equipment   316,507 375,410
  Amortization of acquired intangible assets   1,336,856 1,327,829
  Amortization of intangible assets - contract costs and brand   1,468,903 1,225,417
  Share-based compensation   696,813 761,927
  Deferred income taxes   265,000 (732,597)
  Gain on investments   - (1,316)
  Unrealized foreign exchange loss (gain)   1,958,039 (873,899)
  Non-cash interest expense and amortization of investment premium   13,829 136,929
Change in non-cash working capital      
  Trade and other receivables   (2,576,900) (1,116,068)
  Prepaid expenses and other   (112,221) 39,136
  Intangible assets - contract costs and brand additions   (1,660,385) (1,598,475)
  Trade and other payables   (1,269,897) (520,216)
  Income tax payable   - (265,620)
  Accrued warranty   (30,000) (30,000)
  Deferred revenue   6,972,207 4,699,782
       
CASH FROM OPERATING ACTIVITIES   5,494,804 3,443,572
INVESTING ACTIVITIES      
  Purchase of property and equipment   (123,531) (266,992)
  Proceeds from maturities of short-term investments   - 4,990,877
  Purchase of short-term investments   - (375,257)
  Purchase of investments   - (370,898)
CASH (USED IN) FROM INVESTING ACTIVITIES   (123,531) 3,977,730
FINANCING ACTIVITIES      
  Repurchase of common shares for cancellation   (2,777,565) (3,276,197)
  Issuance of common shares   419,221 474,012
CASH USED IN FINANCING ACTIVITIES   (2,358,344) (2,802,185)
FOREIGN EXCHANGE EFFECT ON CASH   (238,105) 590,340
INCREASE IN CASH AND CASH EQUIVALENTS   2,774,824 5,209,457
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   29,866,741 26,375,048
CASH AND CASH EQUIVALENTS, END OF PERIOD   $  32,641,565 $  31,584,505

 

 

SOURCE Absolute Software Corporation

For further information:

Public Relations:
Kate Ryan, Affect Strategies
kryan@affectstrategies.com or 212.398.9680

Investor Relations:
Dave Mason, CFA, TMX|Equicom
dmason@equicomgroup.com or 416.815.0700 x237

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Absolute Software Corporation

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