Strong momentum continues with significant growth in sales contracts,
cash from operations and subscriptions
VANCOUVER, Nov. 6 /CNW/ - Absolute(R) Software (TSX: ABT), the leading
provider of firmware-based, patented Computer Theft Recovery, Data Protection
and Secure Asset Tracking(TM) solutions, announces its financial results for
the three-month period ended September 30, 2007. All dollar amounts are in
Canadian dollars unless otherwise stated.Key Financial Metrics Q1-F2008 Q1-F2007 % change
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Sales Contracts(*) $21.0M $11.1M +88%
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Cash from Operations(*) $8.9M $4.7M +92%
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Operating Cash per Share(*) $0.38 $0.21 +81%
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Revenue $7.7M $4.0M +92%
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Operating Profit (Loss) ($2.1M) ($1.5M) +35%
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Net Profit (Loss) ($2.9M) ($1.3M) +116%
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Loss per Share ($0.12) ($0.06) +100%
-------------------------------------------------------------------------(*) Absolute refers to "Sales Contracts" (invoiced sales added to
deferred revenue) as a revenue measure, Cash from Operations as a
profitability measure, and "Operating Cash per Share (Basic)" (Cash from
Operations divided by the average shares outstanding for the period) as
an earnings per share measure. With the exception of Cash from
Operations, these are non-standard measures under Generally Accepted
Accounting Principals ("GAAP"). Absolute considers these measures to be
key performance metrics as substantially all sales in each period are
deferred on the balance sheet, while the related costs are expensed in
the period. Refer to the Business Model section our Management Discussion
and Analysis for more details.Q1-F2008 Highlights:
- Increased sales contracts by 88% to $21.0 million
- Increased cash from operations by 92% to $8.9 million
- Grew subscriptions under contract at September 30, 2007 to
2.1 million, up from 1.6 million at June 30, 2007, and 810,000 at
September 30, 2006
- Won a $US1.7 million contract with a major U.S. Federal Government
agency
- Announced a contract with the State of Georgia to provide discount
pricing to staff and faculty at 35 state-wide universities
- Expanded relationship with HP by obtaining BIOS support in their
consumer notebooks and launching government and small business bundle
programs
- Launched a rebate bundle program with Symantec in Apple Stores"Q1 saw continued execution on our growth strategies resulting in another
quarter of significant sales and cash flow growth," said John Livingston,
Chairman and CEO of Absolute. "We believe that industry analysts, media
outlets, computer manufacturers and customers have embraced the market
category for theft recovery, data protection and secure asset tracking; a
market that we defined, created and now dominate. Our strategic partnerships,
patented technology, large customer base, and innovative team, present
significant barriers to entry for competitors; coupled with a strong balance
sheet to support our growth plans, we are well positioned to maintain our
leadership role in this rapidly expanding market."
Financial Review
Sales contracts for Q1-F2008 were $21.0 million, increasing 88% from
Q1-F2007. Sales contracts rose year-over-year due to growth in the Company's
target vertical markets (corporate, education, consumer and government),
increases in its headcount and sales and marketing cost base, expansion of the
BIOS embedded strategy, additional bundling agreements with OEM partners, and
the market's growing focus on security applications to protect computing
assets and data. It is also a result of the recurring nature of the Company's
Software-as-a-Service business model which resulted in over 50% of its
Q1-F2008 Sales Contracts being generated from existing commercial customers.
For Q1-F2008, Absolute sold 561,000 new and renewal subscriptions to its
security and asset tracking services, with an average term of 33 months and an
average selling price of $37.38, compared to 191,000, 33 months and $58.31,
respectively, in Q1-2007. The average price decreased year-over-year due to
volume pricing for certain bundle programs.
In Q1-F2008, Absolute generated Cash from Operations of $8.9 million
(Operating Cash per Share of $0.38), a 92% increase from $4.7 million
(Operating Cash per Share of $0.21), generated in Q1-F2007. Our "Cash Margin"
(a non-GAAP measure equal to Cash from Operations divided by Sales Contracts)
was 43% in Q1-2008, compared to 42% in Q1-F2007.
"We continued to see a seasonally strong first quarter with record level
Sales Contract and Cash from Operations, a trend consistent with the spending
cycles of our education, government and consumer customers," said Rob Chase,
CFO at Absolute. "In addition, the 29% sequential increase in Sales Contracts
reflects progress on our strategic plan and return on our increased investment
levels. Our Cash Margins were also a record 43%, which we expect to normalize
toward our 30-35% Cash Margin guidance as we continue to increase investment
levels through the year."
Q1-F2008 revenue of $7.7 million increased 92% from $4.0 million in
Q1-F2007. Revenue is a function of deferred revenue as opposed to sales in the
quarter, with approximately 92% of the revenue in both periods coming from
amortization of our opening deferred revenue balances. Substantially all of
the revenue from Q1-F2008 sales contracts is included in deferred revenue on
the balance sheet at September 30, 2007, which climbed to $67.5 million,
compared to $54.2 million at June 30, 2007.
Total operating expenses increased on a dollar-basis as Absolute invests
to drive growth and develop its next generation applications and services. For
Q1-F2008, total operating expenses of $9.7 million increased 76% compared to
$5.5 million in Q1-F2007. Since sales contracts grew at a faster rate, the
ratio of operating expenses to sales contracts improved to 46% for Q1-F2008
compared to 50% in Q1-F2007. Management believes that this performance
highlights the leverage inherent in its business model.
Absolute reported an operating loss of $2.1 million in Q1-F2008, up 35%
from $1.5 million in the same quarter last year. The increase was expected as
a majority of increased operating costs are incurred to generate Sales
Contracts growth, while the resulting revenue is deferred on the balance
sheet.
The net loss of $2.9 million, or ($0.12) per share, in Q1-F2008, compared
to a net loss of $1.3 million, or ($0.06) per share, in Q1-F2007 was primarily
due to foreign exchange losses from the devalued U.S. dollar and a
$0.3 million write-down against $2.1 million of asset backed commercial paper.
As noted, the Company focuses on Cash from Operations as its key profitability
measure, which was $8.9 million after affecting for foreign exchange losses.
Absolute is in a strong financial position with the necessary resources
to fund its operating and capital requirements and to execute on its growth
strategies. At September 30, 2007, the Company held cash, cash equivalents and
short-term investments of $44.0 million, up from $34.9 million at June 30,
2007.
The management discussion and analysis, consolidated financial statements
and notes thereto for the fourth quarter and year-end financial results 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 contents of
this release on November 6, 2007, at 7:00AM PST / 10:00AM EST. The dial-in
numbers for participants are 416-644-3419 or 1-800-732-9303. A taped replay
will be available until November 13, 2007. To access the archived conference
call, please dial 416-640-1917 or 1-877-289-8525 and enter the reservation
code 21250999 followed by the number sign.
A live audio webcast will be available at www.absolute.com and
www.newswire.ca. The webcast will be archived for 365 days at the Company's
website and at www.newswire.ca.
About Absolute
Absolute Software Corporation (TSX: ABT) is the leader in Computer Theft
Recovery, Data Protection and Secure Asset Tracking(TM) solutions. Absolute
Software provides organizations and consumers with solutions in the areas of
regulatory compliance, data protection and theft recovery. The Company's
Computrace(R) software is embedded in the BIOS of computers by global leaders,
including Dell, Fujitsu, Gateway, HP, Lenovo, Motion, Panasonic and Toshiba.
The Company has reselling partnerships with these OEMs and others, including
Apple. For more information about Absolute Software and Computrace, visit
www.absolute.com or 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 raised awareness of our services and products due to
security-related and other trends, the attainment of certain subscriber
thresholds, the adoption by PC OEMs of certain technological standards that
may be complementary to our success, the ability of the Company to
successfully build support for the EFI firmware standard, the consummation of
further bundling arrangements, the ability of the Company to successfully
execute on its growth strategies including international expansion, the demand
for our mobile devices and applications and our products continuing to
increase, 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.
(C)2007 Absolute Software Corporation. All rights reserved. Computrace
and Absolute are registered trademarks of Absolute Software Corporation. All
other trademarks are property of their respective owners. Computrace U.S.
patents No. 5,715,174, No. 5,764,892, No. 5,802,280, No. 5,896,497, No.
6,244,758, No. 6,269,392, No. 6,300,863, and No. 6,507,914. Canadian patents
No. 2,284,806 and No. 2,205,370. U.K. patents No. EP793823 and No. GB2338101.
German patent No. 695 125 34.6-08. Australian patent No. 699045. The Toronto
Stock Exchange has neither approved nor disapproved of the information
contained in this news release.ABSOLUTE SOFTWARE CORPORATION
Consolidated Balance Sheets (Unaudited)
(Expressed in Canadian dollars)
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As At
September 30, June 30,
2007 2007
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ASSETS
CURRENT
Cash and cash equivalents $ 12,593,427 $ 7,779,505
Short-term investments 31,411,601 27,116,968
Accounts receivable 14,795,725 11,656,260
Prepaid expenses and deposits 405,149 785,737
Current portion of
deferred contract costs 6,194,754 5,253,390
Current portion of
future income tax assets 1,477,516 1,477,516
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66,878,172 54,069,376
DEFERRED CONTRACT COSTS 6,697,818 5,935,111
PROPERTY AND EQUIPMENT 1,485,668 1,204,017
FUTURE INCOME TAX ASSETS 1,377,145 1,377,145
INTANGIBLE ASSET 351,380 383,324
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$ 76,790,183 $ 62,968,973
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LIABILITIES
CURRENT
Accounts payable
and accrued liabilities $ 2,359,906 $ 2,171,844
Current portion of accrued warranty 5,628,846 4,586,738
Current portion of deferred revenue 30,945,730 25,483,198
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38,934,482 32,241,780
ACCRUED WARRANTY 3,840,521 3,418,312
DEFERRED REVENUE 36,543,350 28,760,618
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79,318,353 64,420,710
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SHAREHOLDERS' EQUITY
Share capital and other equity 40,343,967 39,094,936
Contributed surplus 8,344,069 7,814,428
Deficit (51,216,206) (48,361,101)
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(2,528,170) (1,451,737)
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$ 76,790,183 $ 62,968,973
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Deficit (Unaudited)
Three months ended September 30, 2007 and 2006
(Expressed in Canadian dollars)
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2007 2006
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REVENUE 7,652,006 3,975,214
COST OF GOODS SOLD 2,752,264 1,354,269
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GROSS MARGIN 4,899,742 2,620,945
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EXPENSES
Sales and marketing 3,694,108 2,274,315
Research and development 884,093 604,562
General and administration 1,573,271 1,120,968
Stock-based compensation 839,353 170,329
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6,990,825 4,170,174
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OPERATING LOSS (2,091,083) (1,549,229)
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OTHER INCOME (EXPENSE)
Interest and other income 361,014 162,848
Interest and bank charges (22,731) (10,308)
Foreign exchange gain loss (786,105) (6,318)
Write-down of short-term investments (316,200) -
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(764,022) 146,222
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LOSS FOR PERIOD BEFORE INCOME TAXES (2,855,105) (1,403,007)
FUTURE INCOME TAX RECOVERY - 80,693
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NET LOSS FOR THE PERIOD (2,855,105) (1,322,314)
DEFICIT, BEGINNING OF PERIOD (48,361,101) (42,943,956)
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DEFICIT, END OF PERIOD $(51,216,206) $(44,266,270)
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BASIC AND DILUTED LOSS PER SHARE $ (0.12) $ (0.06)
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 23,477,565 22,141,141
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
Three months ended September 30, 2007 and 2006
(Expressed in Canadian dollars)
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2007 2006
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OPERATING ACTIVITIES
Net loss for the period $ (2,855,105) $ (1,322,314)
Items not involving cash
Amortization of property and equipment 157,749 95,688
Stock-based compensation 839,353 170,329
Amortization of intangible asset 31,944 31,943
Future income taxes - (80,693)
Write-down of short-term investments 316,200 -
Change in non-cash operating
working capital
Accounts receivable (3,139,465) (768,853)
Prepaid expenses and deposits 380,588 (337)
Deferred contract costs (1,704,070) (1,327,174)
Accounts payable and accrued liabilities 188,062 (672,837)
Accrued warranty 1,464,317 1,337,888
Deferred revenue 13,245,263 7,187,073
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CASH FROM OPERATING ACTIVITIES 8,924,836 4,650,713
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INVESTING ACTIVITIES
Property and equipment purchased (439,400) (181,539)
Proceeds from maturities
of short term investments 8,142,926 9,151,000
Purchases of short term investments (12,753,759) (9,036,185)
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CASH (USED IN) FROM INVESTING ACTIVITIES (5,050,233) (66,724)
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FINANCING ACTIVITIES
Issuance of common shares 939,319 335,193
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CASH FROM FINANCING ACTIVITIES 939,319 335,193
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NET CASH INFLOW 4,813,922 4,919,182
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 7,779,505 3,981,681
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 12,593,427 $ 8,900,863
-------------------------------------------------------------------------%SEDAR: 00013849E
For further information: John Livingston, Chief Executive Officer,
jliving@absolute.com, or Phone: (604) 730-9851; Rob Chase, Chief Financial
Officer, rchase@absolute.com, or Phone: (604) 730-9851; Dave Mason, Investor
Relations, dmason@equicomgroup.com, or Phone: (416) 815-0700 x237; Website:
http://www.absolute.com
