Absolute Software Reports Fiscal 2012 Second Quarter Results

Second quarter sales contracts increase 17% as focused innovation and execution deliver sixth consecutive quarter of double-digit year-on-year growth

VANCOUVER, Feb. 8, 2012 /CNW/ - Absolute® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the global leader in firmware-embedded endpoint security and management solutions, today announced its financial results for the three- and six-month periods ended December 31, 2011. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and reported in U.S. dollars.

Key Financial Metrics Q2-F2012 Q2-F2011 %  change H1-F2012 H1-F2011 %  change
Sales Contracts(1) $20.7M $17.7M +17% $46.1M $38.8M +19%
Cash from operating activities $6.0M $3.2M +87% $11.5M $6.7M +73%
Operating cash per share(2)
(basic and diluted)
 
$0.14
 
$0.07
 
+100%
 
$0.27
 
$0.15
 
+80%
Revenue $18.4M $16.8M +9% $36.6M $33.1M +11%
Adjusted Operating Income(3) $2.9M $0.8M +254% $5.6M $0.5M +1043%
Net income (loss)
Net income (loss) per share
(basic and diluted)
$1.5M

$0.03
$(0.8)M

$(0.02)
nm

nm
$(0.4)M

$(0.01)
$(0.7)M

$(0.02)
nm

nm
Cash, cash equivalents, and
investments
$62.2M $53.6M        
Deferred revenue $120.5M $105.9M        

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

Q2 Fiscal 2012 Highlights

  • Achieved 17% growth in Sales Contracts year-over-year while maintaining flat operating expenses.
  • Generated $6.0 million in cash from operating activities, representing an 87% increase over Q2-F2011.
  • Increased commercial Sales Contracts by 22% compared to Q2-F2011.
  • Adjusted Operating Income was $2.9 million, a significant improvement from an Adjusted Operating Income of $0.8 million in Q2-F2011.
  • International sales increased 98% to 21% of total Sales Contracts, compared to 13% of total Sales Contracts in Q2-F2011.
  • Launched Absolute Manage 6.0, a major release with significant new features including:
    • Windows imaging;
    • Mobile Device Management (MDM) for Android; and
    • AbsoluteSafe, a solution for document control on iOS devices.
  • Announced a Computrace® SaaS license sale covering more than 60,000 student laptops with the Queensland Government's Department of Education and Training (DET) in Australia.
  • Renewed Company's Normal Course Issuer bid and repurchased 59,500 common shares in the quarter for a total cost of $0.2 million.
  • Subsequent to quarter end, added to the Visionaries Quadrant of Gartner Inc.'s Client Management Tools Magic Quadrant.

"Our dedication to delivering market-leading solutions for tracking, managing and securing endpoint devices is translating into solid financial results," said John Livingston, Chief Executive Officer of Absolute. "With innovative solutions that enable customers to easily and reliably manage and secure multiple devices, we are fulfilling an urgent market need and are driving demand for our entire suite of solutions. This unique approach is strengthening our overall competitive positioning and has led to Absolute being positioned as a Visionary in Gartner's CMT Magic Quadrant. "

Q2 F2012 Financial Review
Absolute's Q2-F2012 results are the Company's second set of consolidated financial statements prepared in U.S. dollars and under IFRS. For more detailed information regarding the Company's transition to IFRS, including a reconciliation of the Company's Q2-F2011 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.

Q2-F2012 Sales Contracts grew 17% to $20.7 million from $17.7 million in Q2-F2011. The increase was driven by strong commercial sales across all of the Company's target market verticals - education, corporate, government and healthcare. Q2-F2012 Commercial sales were $18.7 million, up 22% over Q2-F2011. For H1-F2012, Sales Contracts were $46.1 million, up 19% from $38.8 million in H1-F2011. Commercial sales for H1-F2012 were $41.6 million, up 30% from $32.1 million in H1-F2011.

Commercial Sales Contracts for Absolute's flagship theft recovery products(5)  in Q2-F2012 were $11.9 million, down 7% year-over-year, as Q2-F2011 benefited from atypically strong education sales in North America.  For H1-F2012, Commercial Sales Contracts for theft recovery products were $29.0 million, up 6% from H1-F2011, demonstrating that long-term demand for the Company's unique theft recovery and theft management services remains strong.

Commercial Sales Contracts from Absolute's non-theft recovery products(6) (i.e. management, tracking and data protection) grew 181% to $6.8 million over Q2-F2011, as demand, particularly for Absolute Manage, MDM and the Company's Computrace Data Protection offering,  gained momentum. The Company believes this continues to serve as an indication of its success in diversifying sales and developing new product lines with long-term growth potential. For H1-F2012 Commercial Sales Contracts from Absolute's non-theft recovery products were $12.6 million, up 162% from H1-F2011.

For Q2-F2012, Sales Contracts for consumer solutions were $2.1 million, or 10% of Sales Contracts, compared to $2.5 million, or 14% of Sales Contracts, in Q2-F2011. The year-over-year decline was primarily due to the planned reduction of a low margin high volume OEM bundle program. For H1-F2012, Sales Contracts for consumer solutions were $4.4 million, or 10% of Sales Contracts, compared to $6.7 million, or 17% of Sales Contracts.

On the international front, driven by strong commercial sales in all of the Company's target regions outside of North America, Sales Contracts increased 98% to $4.4 million in Q2-F2012, or 21% of sales, up from $2.2 million, or 13% of sales, in Q2-F2011. International Sales Contracts were $6.6 million for H1-F2012, up 79% from $3.7 million in H1-F2011.

Revenue for Q2-F2012 was $18.4 million, an increase of 9% from $16.8 million in Q2-F2011. For H1-F2012, revenue was $36.6 million, up 11% from $33.1 million. Indicative of the Company's Software-as-a-Service (SaaS) business model, revenue primarily represents the amortization of deferred revenue balances from recurring term license sales. During H1-F2012, 89% of revenue was related to the drawdown of deferred revenue balances accumulated to the end of the prior fiscal year. 

Adjusted Operating Expenses(3) for Q2-F2012 were $15.5 million, a decrease of 3% from $16.0 million in Q2 F2011, predominantly reflecting the Company's continued focus on driving growth while tightly managing expenses. Adjusted Operating Expenses for H1-F2012 were $31.0 million, down 5% from $32.6 million for H1-F2011.

Given the Company's revenue growth and its ongoing focus on cost control, Absolute generated Adjusted Operating Income(4) of $2.9 million in Q2-F2012, up from an Adjusted Operating Income of  $0.8 million in Q2-F2011. For H1-F2012, Adjusted Operating Income was $5.6 million compared to $0.5 million for H1-F2011.

Absolute recorded net income of $1.5 million in Q2-F2012, compared to a net loss of $0.8 million in Q2-F2011. The Company generated a net loss of $0.4 million for H1-F2012 compared to a net loss of $0.7 million for H1-F2011.

Cash from operating activities increased 87% year-over-year to $6.0 million compared to $3.2 million in Q2-F2011.  Cash from operating activities for H1-F2012 increased 73% to $11.5 million from $6.7 million in H1-F2011. The increased cash flow reflects the Company's improved operational performance, which produced growing sales contracts and reduced operating expenses.

Quarterly Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q2-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 Q2 F2012 results on Wednesday, February 8, 2012 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 Wednesday, February 15, 2012 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 47688192.

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 Second 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 9 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 Second 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. Positioned in the Visionaries quadrant of Gartner, Inc.'s Magic Quadrant for Client Management Tools in 2012, Absolute's solutions - Computrace, Absolute Manage, Absolute Secure Drive, and LoJack for Laptops - 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.

©2012 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, No. 7,945,709 and No. 8,062,380. 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)



            December 31,
2011
    June 30,
2011
    July 1,
2010
                               
ASSETS                              
                               
CURRENT                              
  Cash and cash equivalents           $   39,555,543     $   29,866,741     $   26,375,048
  Short-term investments             22,654,008       6,964,589       6,030,609
  Trade and other receivables             16,788,826       16,174,126       13,051,372
  Prepaid expenses and other             1,639,011       1,598,015       1,079,872
              80,637,388       54,603,471       46,536,901
INVESTMENTS             -       18,905,433       22,099,547
PROPERTY AND EQUIPMENT             1,482,353       1,840,824       2,417,005
DEFERRED INCOME TAX ASSETS             20,743,709       20,845,469       18,240,815
INTANGIBLE ASSETS             20,351,389       22,323,743       26,750,552
            $   123,214,839     $ 118,518,940     $ 116,044,820
                               
LIABILITIES                              
                               
CURRENT                              
  Trade and other payables           $      7,400,101     $    8,768,886     $    7,688,207
  Income tax payable             -       -       1,479,398
  Acquisition payable - current             1,652,367       1,762,611       1,623,681
  Accrued warranty             770,000       880,000       1,020,000
  Deferred revenue - current             60,182,269       55,923,312       51,507,198
              70,004,737       67,334,809       63,318,484
ACQUISITION PAYABLE             -       1,623,041       3,278,822
DEFERRED REVENUE             60,335,719       55,255,525       48,680,689
              130,340,456       124,213,375       115,277,995
CONTINGENCIES                              
                               
SHAREHOLDERS' (DEFICIENCY)
EQUITY
                             
  Share Capital             35,443,562       34,640,517       34,306,576
  Equity reserve             35,533,500       34,431,802       31,113,973
  Deficit             (78,102,679)       (74,766,754)       (64,653,724)
              (7,125,617)       (5,694,435)       766,825
            $   123,214,839     $   118,518,940     $   116,044,820



ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive Income (Loss)
Three and six months ended December 31, 2011 and 2010
(Expressed in United States dollars) (Unaudited)


          Three months ended
December 31,
    Six months ended
December 31,
            2011       2010       2011       2010
                                     
                                     
REVENUE         $   18,350,606     $ 16,763,762     $ 36,597,113     $   33,090,317
                                     
COST OF REVENUE           5,024,860       4,699,664       10,081,185       9,687,681
                                     
GROSS MARGIN           13,325,746       12,064,098       26,515,928       23,402,636
                                     
OPERATING EXPENSES                                    
  Sales and marketing           7,947,965       7,918,600       15,731,775       16,802,789
  Research and development           2,799,391       2,929,074       5,596,806       5,849,768
  General and administration           1,649,845       2,153,817       3,464,671       3,718,585
  Investment tax credits           (575,000)       (406,884)       (1,150,000)       (790,252)
  Share-based compensation           626,943       1,496,752       1,323,756       2,258,679
            12,449,144       14,091,359       24,967,008       27,839,569
                                     
OPERATING INCOME (LOSS)           876,602       (2,027,261)       1,548,920       (4,436,933)
                                     
OTHER INCOME (EXPENSE)                                    
  Interest income, net           150,842       151,786       297,325       333,539
  Foreign exchange gain (loss)           689,724       1,097,695       (1,173,024)       2,724,801
  Gain on investments           192,615       282,038       192,615       283,354
            1,033,181       1,531,519       (683,084)       3,341,694
                                     
NET INCOME (LOSS) BEFORE INCOME
TAXES
          1,909,783       (495,742)       865,836       (1,095,239)
                                     
INCOME TAX (EXPENSE) RECOVERY           (420,097)       (259,188)       (1,260,097)       405,642
                                     
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
        $    1,489,686     $    (754,930)     $    (394,261)     $    (689,597)
                                     
BASIC AND DILUTED INCOME (LOSS)
PER SHARE
        $            0.03     $ (0.02)     $            (0.01)     $   (0.02)
                                     
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING,
BASIC
         

43,199,412
     

45,136,675
     

43,302,821
     

45,915,853



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           142,300       328,864       (110,899)       -       217,965
Shares issued under Employee Share
Purchase Plan
         
94,864
     
323,917
     
-
     
-
     
323,917
Shares repurchased and cancelled
under the Normal Course Issuer Bid
         
(2,549,950)
     
(1,374,689)
     
-
     
(8,082,203)
     
(9,456,892)
Shares issued on acquisition           166,666       869,968       -              -       869,968
Share-based compensation expense           -       -       2,258,679       -       2,258,679
Net loss and total comprehensive loss           -       -       -       (689,597)       (689,597)
BALANCE, DECEMBER 31, 2010           44,682,970     $ 34,454,636     $   33,261,753     $ (73,425,524)     $   (5,709,135)
Shares issued on options exercised           154,475       355,831       (115,480)       -       240,351
Shares issued under Employee Share
Purchase Plan
         
90,123
     
296,017
     
-
     
-
     
296,017
Shares repurchased and cancelled
under the Normal Course Issuer Bid
         
(1,247,070)
     
(465,967)
     
-
     
(4,177,130)
     
(4,643,097)
Share-based compensation expense           -       -       1,285,529       -       1,285,529
Net income and total comprehensive
income
         
-
     
-
     
-
     
2,835,900
     
2,835,900
BALANCE, JUNE 30, 2011           43,680,498     $ 34,640,517     $   34,431,802     $ (74,766,754)     $ (5,694,435)
Shares issued on options exercised           203,125       699,661       (222,058)       -       477,603
Shares issued under Employee Share
Purchase Plan
         
93,502
     
308,313
     
-
     
-
     
308,313
Shares repurchased and cancelled
under the Normal Course Issuer Bid
         
(742,500)
     
(795,829)
     
-
     
(2,212,465)
     
(3,008,294)
Shares repurchased subsequent to
December 31, 2011
         
-
     
(236,534)
     
-
     
(729,199)
     
(965,733)
Shares issued on acquisition           166,666       827,434       -              -       827,434
Share-based compensation expense           -       -       1,323,756       -       1,323,756
Net loss and total comprehensive loss           -       -       -       (394,261)       (394,261)
BALANCE, DECEMBER 31, 2011           43,401,291     $ 35,443,562     $   35,533,500     $ (78,102,679)     $ (7,125,617)




ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows
Three and six months ended December 31, 2011 and 2010
(Expressed in U.S. dollars) (Unaudited)


          Three months ended
December 31,
    Six months ended
December 31,
          2011     2010     2011     2010
                                     
OPERATING ACTIVITIES                                    
Net income (loss)         $   1,489,686     $   (754,930)     $   (394,261)     $   (689,597)
Items not involving cash                                    
  Amortization of property and equipment           305,531       397,435       622,038       772,845
  Amortization of acquired intangible assets           1,349,357       1,336,856       2,686,213       2,664,685
  Amortization of intangible assets - contract costs and brand           1,339,807       1,301,483       2,808,710       2,526,900
  Share-based compensation           626,943       1,496,752       1,323,756       2,258,679
  Deferred income taxes           (154,903)       (713,364)       110,097       (1,445,961)
  Gain on investments           (192,615)       (282,038)       (192,615)       (283,354)
  Unrealized foreign exchange loss (gain)           (622,135)       (841,155)       1,335,904       (1,715,054)
  Non-cash interest and amortization
of investment premium
         
126,428
     
106,682
     
140,257
     
243,611
Change in non-cash working capital                                    
  Trade and other receivables           1,982,233       445,908       (594,667)       (720,160)
  Prepaid expenses and other           71,225       (143,482)       (40,996)       (104,346)
  Intangible assets - contract costs and brand additions           (1,562,115)       (1,322,536)       (3,222,499)       (2,921,011)
  Trade and other payables           (999,035)       659,922       (2,268,932)       139,706
  Income tax payable           -       615,045       -       349,425
  Accrued warranty           (80,000)       (30,000)       (110,000)       (60,000)
  Deferred revenue           2,366,944       966,439       9,339,150       5,666,221
                                     
CASH FROM OPERATING ACTIVITIES           6,047,351       3,239,017       11,542,155       6,682,589
INVESTING ACTIVITIES                                    
  Purchase of property and equipment           (140,037)       (180,354)       (263,568)       (447,346)
  Purchase of intangible assets           (300,069)       (159,488)       (300,069)       (159,488)
  Acquisition payable           (833,333)       (833,333)       (833,333)       (833,333)
  Proceeds from sales and maturities of short-term investments           1,851,614       1,168,672       1,851,614       6,159,549
  Purchase of short-term investments           -       (131,623)       -       (506,880)
  Purchase of investments           -       (125,586)       -       (496,484)
                                     
CASH FROM (USED IN) INVESTING ACTIVITIES           578,175       (261,712)       454,644       3,716,018
FINANCING ACTIVITIES                                    
  Repurchase of common shares for cancellation           (236,216)       (6,180,696)       (3,013,781)       (9,456,893)
  Issuance of common shares           366,695       61,172       785,916       535,184
                                     
CASH FROM (USED IN) FINANCING ACTIVITIES           130,479       (6,119,524)       (2,227,865)       (8,921,709)
                                     
FOREIGN EXCHANGE EFFECT ON CASH           157,973       375,852       (80,132)       966,192
                                     
INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS           6,913,978       (2,766,367)       9,688,802       2,443,090
                                     
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD           32,641,565       31,584,505       29,866,741       26,375,048
                                     
CASH AND CASH EQUIVALENTS, END OF PERIOD         $   39,555,543     $ 28,818,138     $   39,555,543     $ 28,818,138



 

 

 

SOURCE Absolute Software Corporation

For further information:

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

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

or

Kristen Dickson, TMX|Equicom
kdickson@equicomgroup.com or 416.815.0700 x273

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Absolute Software Corporation

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