Absolute Software Reports First Quarter Fiscal 2011 Results
VANCOUVER, Nov. 1 /CNW/ - Absolute(R) Software Corporation ("Absolute" or the "Company") (TSX: ABT), the leading provider of firmware-based, patented, computer theft recovery, data protection and secure computer lifecycle management solutions announced today its financial results for the three-month period ended September 30, 2010. All dollar amounts are in Canadian dollars unless otherwise stated.
Key Financial Metrics Q1-F2011 Q1-F2010 % change
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Sales Contracts reported(2) $21.9M $19.2M +14%
Sales Contracts in constant
currency(3) $23.1M $19.2M +20%
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Cash from Operating Activities $3.0M $4.3M (30%)
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Operating cash per share(1)
Basic $0.07 $0.09 (22%)
Diluted $0.06 $0.09 (33%)
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Revenue $17.3M $15.0M +15%
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Net loss $(1.3M) $(2.0M) (35%)
Loss per share (basic and diluted) $(0.03) $(0.04) (25%)
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Deferred revenue $106.9M $99.6M +7%
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Subscriptions under contract 6.3M 4.3M 48%
(1)(2)(3) - Please refer to "Non-GAAP Measures"
Q1 F2011 Highlights:
- Generated record quarterly sales contracts of $21.9 million
($23.1 million in constant currency) compared to $19.2 million in
Q1-F2010 ($19.2 million in constant currency), representing a
constant currency increase of 20%.
- Closed the quarter with a subscription base of 6.3 million computers,
up 7% from 5.9 million at June 30, 2010.
- Deferred revenue was $106.9 million at September 30, 2010, up 4% from
$102.8 million at June 30, 2010.
- Repurchased 830,100 shares under the Company's Normal Course Issuer
Bid.
- Cash, cash equivalents & investments (including long-term) were
$57.9 million at September 30, 2010, compared to $58.0 million at
June 30, 2010.
- Integrated Computrace(R) persistence technology with Absolute Manage
to create the world's only self-healing lifecycle management
solution.
"Our primary focus in the quarter was on execution of our sales plan, which drove record first quarter Sales Contracts with 20% year-over-year constant currency growth," said John Livingston, Chairman and CEO of Absolute. "Mobile devices and laptop computers continue to proliferate in the marketplace. We are continuing to enhance our solution offering to address this growing opportunity for multi-platform computer lifecycle and mobile device management. Our product investment over the past few years has positioned us to capture increased market share by addressing the growing need for organizations to manage and control the multitude of mobile devices spreading into the enterprise. "
Financial Review:
Sales Contracts for Q1-F2010 were $21.9 million ($23.1 million in constant currency) compared to $19.2 million in Q1-F2010 ($19.2 million in constant currency), reflecting strong growth in both our commercial and consumer businesses, which saw year over year constant currency growth of 12% and 73%, respectively. The commercial business was supported by seasonally robust education sales while the growth in the consumer business was generated from an exceptionally strong back to school season.
Existing commercial customers continued to produce a majority of Absolute's sales, generating 72% of Q1-F2011 Sales Contracts (74% in Q1-F2010). In addition, consumer solutions increased to 20% of Q1-F2011 sales, up from 14% in Q1-F2010, and international sales increased to 7% of Q1-F2011 sales, up from 6% of sales in Q1-F2010.
Absolute has continued to expand its subscriber base, which increased to 6.3 million by the end of Q1-F2011, up from 4.3 million a year ago. In addition, the Company has 960,000 commercial subscriptions and 1.5 million consumer subscriptions coming up for renewal during the remainder of fiscal 2011.
Cash from Operating Activities for Q1-F2011 was $3.0 million, compared to $4.3 million in Q1-F2010. At September 30, 2010, Absolute's cash, cash equivalents, short-term investments and investments remained steady at $57.9 million, compared to $58.0 million at June 30, 2010, reflecting $3.0 million generated through operating activities net of the impact of cash used in the Company's share buyback program.
Revenue for Q1-F2011 was $17.3 million, an increase of 15% from $15.0 million in Q1-F2010. Revenue is typically a lagging performance indicator as it is a function of deferred revenue as opposed to invoiced sales in the quarter. The majority of the revenue from Q1-F2011 Sales Contracts is included in the deferred revenue on the balance sheet at September 30, 2010, which was $106.9 million, compared to $102.8 million at June 30, 2010.
Absolute generated a GAAP operating loss of $1.8 million in Q1-F2011 compared to a GAAP operating loss of $0.8 million in Q1-F2010. A majority of the increase in the operating loss is due to the $1.4 million in amortization of acquired intangible assets, which the Company did not incur in Q1-F2010.
Operating income reflecting Adjusted Operating Expenses(4) was $0.3 million, compared to a loss of $0.1 million in Q1-F2010. The improvement in adjusted operating income reflects increases in revenue from prior period Sales Contracts which were offset, in part, by increased operating costs.
GAAP net loss was $1.3 million in Q1-F2011 ($0.03 per share) compared to a loss of $2.0 million ($0.04 per share) in Q1-F2010.
F2011 Guidance
Management reiterates its F2011 guidance for Sales Contracts and annual Cash from Operating Activities to grow beyond the levels achieved in F2010.
Quarterly Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q1-F2011 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 Monday, November 1, 2010 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 Monday, November 8, 2010 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.newsire.ca. To access the archived conference call, please dial 416-849-0833 or 1-800-642-1687 and enter the reservation code 15630151.
Non-GAAP Measures
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 Canadian Generally Accepted Accounting Principles ("GAAP"), and may not be identical 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 Canadian GAAP. For a discussion of the purpose of these non-GAAP measures, please refer to the Company's First Quarter MD&A on SEDAR at www.SEDAR.com.
These measures, as well as their method of calculation or reconciliation to GAAP measures, are as follows:
1) 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).
2) Sales Contracts
See the "Subscription Business Model" section of the MD&A for a detailed discussion of why we believe Sales Contracts ("bookings") provide a meaningful performance metric. Sales Contracts are a component of deferred revenue (see Note 3 of the Notes to the Interim Consolidated Financial Statements), and result from invoiced sales of our products and services.
3) Sales Contracts in constant currency
Approximately 95% of our Sales Contracts are denominated in U.S. dollars, and we believe this is important to consider when evaluating underlying sales performance. Sales Contracts in "constant currency" refers to the Canadian dollar sales that would have been reported had the average U.S. dollar foreign exchange rate been unchanged from the rate in the comparable period(s) of F2010, and is calculated by applying the appropriate U.S. dollar foreign exchange rate from the comparable period to the current period sales denominated in U.S. dollars.
The average U.S. dollar to Canadian dollar exchange rate on sales was 1.0384 in Q1-F2011 compared to 1.0970 in Q1-F2010.
4) 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 generating potential of its business. The non-cash items excluded in the determination of Adjusted Operating Expenses are stock-based compensation and amortization of acquired intangible assets. For a description of why these items are adjusted, please refer to the First Quarter MD&A.
About Absolute Software
Absolute Software Corporation (TSX: ABT) is the leader in tracking, managing and protecting computers and mobile devices. The Company's Computrace, Absolute Manage and LoJack(R) for Laptops solutions provide theft recovery, data protection and computer lifecycle management capabilities to organizations and consumers. The Company's software agent is embedded in the firmware of computers by global leaders, including Acer, ASUS, Dell, Fujitsu, General Dynamics Itronix, HP, Lenovo, Motion, Panasonic 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.
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. Computrace 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. 7818557, No. 7818803. Canadian patents No. 2.211.735, No. 2,284,806 and No. 2,205,370. U.K. patents No. EP793823, No. GB2298302 and No. GB2338101. German patent No. 695 125 34.6-08. 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 Balance Sheets
(Expressed in Canadian dollars) (Unaudited)
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September 30, June 30,
2010 2010
-----------------------------
ASSETS
CURRENT
Cash and cash equivalents $ 32,500,579 $ 28,078,851
Short-term investments 1,615,470 6,420,210
Accounts receivable, net of allowance
for doubtful accounts of $1,883,000
(2010 - $1,935,000) 14,631,069 13,888,239
Prepaid expenses and other 1,070,999 1,149,428
Current portion of deferred contract costs 4,324,051 4,038,159
Current portion of future income tax
assets 10,151,179 9,904,709
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64,293,347 63,479,596
INVESTMENTS 23,780,593 23,527,677
DEFERRED CONTRACT COSTS 3,810,940 3,744,051
PROPERTY AND EQUIPMENT 2,631,268 2,754,271
FUTURE INCOME TAX ASSETS 10,565,513 10,308,983
INTANGIBLE ASSETS 19,092,414 20,477,801
-----------------------------
$ 124,174,075 $ 124,292,379
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-----------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 7,983,866 $ 8,183,219
Income tax payable 1,249,000 1,575,000
Current portion of acquisition payable 1,728,607 1,728,607
Current portion of accrued warranty 4,615,160 4,702,888
Current portion of deferred revenue, net 54,726,795 52,411,595
-----------------------------
70,303,428 68,601,309
ACQUISITION PAYABLE 3,457,214 3,457,214
ACCRUED WARRANTY 4,434,173 4,518,461
DEFERRED REVENUE, NET 52,176,346 50,346,988
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130,371,161 126,923,972
SHAREHOLDERS' DEFICIENCY
Share Capital 44,762,860 44,888,407
Contributed Surplus 28,971,001 28,393,491
Deficit (79,930,947) (75,913,491)
-----------------------------
(6,197,086) (2,631,593)
-----------------------------
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$ 124,174,075 $ 124,292,379
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive Loss
Three months ended September 30, 2010 and 2009
(Expressed in Canadian dollars) (Unaudited)
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2010 2009
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REVENUE $ 17,348,833 $ 15,047,060
COST OF REVENUE 4,886,579 3,134,121
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GROSS MARGIN 12,462,254 11,912,939
OPERATING EXPENSES
Sales and marketing 9,280,440 8,169,768
Research and development 2,612,696 2,249,400
General and administration 2,077,232 1,916,999
Investment tax credits (396,000) (250,000)
Stock-based compensation 663,537 586,461
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14,237,905 12,672,628
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OPERATING LOSS (1,775,651) (759,689)
OTHER INCOME (EXPENSE)
Interest income, net 188,840 157,707
Foreign exchange loss (176,928) (1,399,246)
Gain on investments 565 135,570
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12,477 (1,105,969)
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NET LOSS BEFORE INCOME TAXES (1,763,174) (1,865,658)
INCOME TAX RECOVERY (EXPENSE) 433,000 (170,000)
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NET LOSS AND COMPREHENSIVE LOSS $ (1,330,174) $ (2,035,658)
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BASIC AND DILUTED LOSS PER SHARE $ (0.03) $ (0.04)
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, BASIC AND DILUTED 46,695,030 45,920,705
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in Canadian dollars) (Unaudited)
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Share Capital
-------------------------
Number of
Common Contributed
shares Amount Surplus Deficit Total
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BALANCE,
JUNE 30,
2009 45,694,350 $41,988,977 $26,822,975 $(66,952,469) $ 1,859,483
Shares
issued
on
options
exerc-
ised 741,552 1,659,071 (259,911) - 1,399,160
Shares
issued
under
Employee
Share
Purchase
Plan 231,188 786,895 - - 786,895
Shares
repurch-
ased and
cancelled
under the
Normal
Course
Issuer
Bid (238,000) (202,086) - (807,141) (1,009,227)
Shares
issued
on
warrants
exercised 400,000 655,550 (255,550) - 400,000
Stock-based
compensa-
tion expense
recorded on
Option and
Purchase
Plans - - 2,085,977 - 2,085,977
Net loss - - - (8,153,881) (8,153,881)
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BALANCE,
JUNE 30,
2010 46,829,090 $44,888,407 $28,393,491 $(75,913,491) $(2,631,593)
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Shares
issued on
options
exercised 100,750 241,576 (86,027) - 155,549
Shares
issued
under
Employee
Share
Purchase
Plan 94,864 337,716 - - 337,716
Shares
repurchased
and
cancelled
under the
Normal
Course
Issuer
Bid (830,100) (704,839) - (2,687,282) (3,392,121)
Stock-based
compensa-
tion
expense
recorded
on Option
and
Purchase
Plans - - 663,537 - 663,537
Net loss - - - (1,330,174) (1,330,174)
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BALANCE,
SEPTEMBER
30,
2010 46,194,604 $44,762,860 $28,971,001 $(79,930,947) $(6,197,086)
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows
Three months ended September 30, 2010 and 2009
(Expressed in Canadian dollars) (Unaudited)
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2010 2009
-----------------------------
OPERATING ACTIVITIES
Net loss $ (1,330,174) $ (2,035,658)
Items not involving cash
Amortization of property and equipment 390,006 302,638
Amortization of intangible assets 1,385,388 31,944
Stock-based compensation 663,537 586,461
Future income taxes (503,000) (1,540,000)
Gain on investments (565) (135,570)
Change in non-cash working capital
Accounts receivable (742,830) 3,820,106
Prepaid expenses and other 78,429 (25,205)
Deferred contract costs (352,781) (167,169)
Accounts payable and accrued liabilities (199,353) (2,227,664)
Income tax payable (326,000) 1,460,000
Accrued warranty (172,016) 468,676
Deferred revenue 4,144,560 3,771,752
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CASH FROM OPERATING ACTIVITIES 3,035,201 4,310,311
INVESTING ACTIVITIES
Purchase of property and equipment (267,006) (270,922)
Proceeds from maturities of short-term
investments 5,185,355 7,306,458
Purchase of short-term investments (380,050) -
Purchase of investments (252,916) (20,108,654)
-----------------------------
CASH FROM (USED IN) INVESTING ACTIVITIES 4,285,383 (13,073,118)
FINANCING ACTIVITIES
Repurchase of common shares for cancellation (3,392,121) -
Issuance of common shares 493,265 852,222
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CASH (USED IN) FROM FINANCING ACTIVITIES (2,898,856) 852,222
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INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 4,421,728 (7,910,585)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 28,078,851 56,078,004
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,500,579 $ 48,167,419
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%SEDAR: 00013849E
For further information: Public Relations: Leslie Campisi, Affect Strategies, [email protected] or 212.398.9680 x144; Investor Relations: Dave Mason, CFA, The Equicom Group, [email protected] or 416.815.0700 x237
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