Absolute Software Reports Second Quarter Fiscal 2009 Results

    - Absolute revises financial outlook for fiscal 2009 -

    VANCOUVER, Feb. 3 /CNW/ - Absolute(R) Software (TSX: ABT), the leading
provider of firmware-based, patented Computer Theft Recovery, Data Protection
and IT Asset Management solutions, announces its financial results for the
three- and six-month periods ended December 31, 2008. All dollar amounts are
in Canadian dollars unless otherwise stated.

                              Q2-      Q2-      %      YTD      YTD      %
    Key Financial Metrics    F2009    F2008  change   F2009    F2008  change
    Sales Contracts
     reported(1.a)          $16.5M   $15.0M    +10%  $34.7M   $36.0M     -3%
    Sales Contracts in
     constant currency(1.b) $13.4M   $15.0M    -11%  $31.6M   $36.0M    -12%
    Cash from
     operations(1.a)         $3.1M    $9.1M    -66%  $12.2M   $18.0M    -32%
    Operating cash per
      Basic                  $0.06    $0.19    (68%)  $0.25    $0.39    (36%)
      Diluted                $0.06    $0.18    (67%)  $0.24    $0.36    (33%)
    Revenue                 $13.1M    $8.9M     48%  $25.2M   $16.5M     53%
    Net loss excluding
     stock-based compensation
     and restructuring
     charges                ($1.4M)  ($0.8M)    70%  ($2.0M)  ($2.8M)   (30%)
    Net Loss               ($15.5M)  ($1.9M)   719% ($17.6M)  ($4.7M)   272%
    Cash, cash equivalents
     and investments
     (including long term)                           $71.9M   $52.9M     36%
    Deferred revenue                                 $93.7M   $73.7M     27%

    Q2-F2009 Highlights:

    -   Increased contracted subscription base by 59% to 4.0 million, from
        2.5 million in Q2-F2008
    -   Joined forces with Intel Corporation and Lenovo to bring hardware-
        based anti-theft and computer-theft deterrence technology to business
        notebook users
    -   Launched Computrace Mobile beta program for Blackberry Smartphones
    -   Extended the number of PC OEMs providing embedded firmware support
        for Computrace solutions with the addition of ASUS computers
    -   Announced cancellation of 2.9 million out-of-the-money stock options
        following voluntary surrender of options by Absolute employees,
        resulting in a one-time non-cash stock-based compensation charge of
        $12.0 million
    -   Purchased 780,400 shares under the company's normal course issuer
        bid, at a total cost of $2.3 million
    -   Reported findings from a Ponemon Institute study indicating employees
        undermine traditional data protection solutions, like encryption, and
        that 92% of companies surveyed reported a lost or stolen laptop,
        with 71% of those resulting in a data breach

    "Despite a tough economic environment, we believe our overall strategic
growth prospects continue to improve due to the unique position we have in the
market place relating to the acceleration of mobile computing devices and the
security risk these computing devices create," said John Livingston, Chairman
and CEO of Absolute. "It is alarming how poorly traditional security measures
address these security risks - which was highlighted in the Ponemon Institute
Survey findings that we announced last month. We believe our persistent device
and data security solutions are uniquely-positioned to help solve this
problem. To this end, we intend to continue a balanced investment in our
products, people, infrastructure, partners and customers in order to
capitalize on our long-term opportunity."
    Mr. Livingston continued: "In the short-term, as a result of a
challenging business environment and our balanced investment in the business,
we are revising our sales contract outlook for fiscal 2009 to $70-$75 million,
and our cash from operations target to $16-$18 million. This reduced cash flow
reflects investments with which we intend to make in order to expand our sales
capability, product portfolio, international presence and worldwide support
infrastructure. We believe this expanded capability will strengthen our
leadership position in the industry and position us to capitalize on the
growing demand for data protection solutions, both now, and in the future."

    Financial Review

    Sales Contracts(1.a), a non-standard measure under Canadian Generally
Accepted Accounting Principals ("GAAP"), were $34.7 million YTD, down 3%
compared to $36.0 million in the same period last year. Sales Contracts for
Q2-F2009 were $16.5 million, up 10% compared to $15.0 million in Q2-F2008. A
majority of Absolute's sales are denominated in U.S. dollars and therefore,
periodic fluctuations in the US/Canadian exchange rate can impact reported
Sales Contract levels. In constant dollar terms, Sales Contracts have declined
12% for the YTD period and 11% for Q2-F2009 compared to the same periods last
    As a software-as-a-service ("SaaS") company, Absolute considers operating
cash flow one of its key financial metrics. On a YTD basis, cash from
operations for F2009 was $12.2 million, compared to $18.0 million in the prior
year period. Absolute's cash from operations for Q2-F2009 totaled $3.1 million
compared to $9.1 million in Q2-F2008. Cash from operations on a diluted share
basis was $0.24 YTD-F2009 and $0.06 in Q2-F2009, compared to $0.36 and $0.18
in the respective periods of the prior year.
    "The contraction in our cash flow is the result of reduced sales due to
the economic downturn, and increased operating costs from both an increase in
investment levels and the impact of the U.S. dollar appreciation," said Rob
Chase CFO at Absolute. "While we have increased investment levels in line with
our strategic plan, we have done so at a lower level than originally
anticipated. We believe we have struck an acceptable balance between our
fiscal 2009 cash flow targets and our investment in the business in order to
better position Absolute for future growth. We will continue to monitor our
sales and expenditure levels closely to ensure we achieve our revised fiscal
2009 guidance."
    Revenue was $25.2 million YTD, an increase of 53% from $16.5 million in
the same period last year. Revenue in Q2-F2009 increased 48% to $13.1 million,
compared to $8.9 million in Q2-F2008. Revenue is considered a lagging
indicator for business operations as it is a function of deferred revenue as
opposed to sales in the quarter. Substantially all of the revenue from
Q2-F2009 Sales Contracts is included in deferred revenue on the balance sheet
at December 31, 2008, which climbed to $93.7 million, compared to $87.8
million at June 30, 2008.
    Excluding stock-based compensation and restructuring charges, the fiscal
2009 net YTD net loss was $2.0 million, compared to $2.8 million last year,
and for Q2-F2009 it was $1.4 million, compared to $800,000 in Q2 last year.
The reduced YTD net loss is largely due to the 53% YTD increase in revenue.
The increased loss in Q2-F2009 is primarily due to investment write-downs of
$494,000 on marketable securities, and to forward exchange contract losses of
$1.2 million. In October 2008, the company entered into forward exchange
contracts to sell U$15 million at an average rate of $1.14, of which U$5
million settled in December 2008, and another U$5 million settles in each of
March and June 2009.
    The GAAP net loss increased to $17.6 million ($0.37 per share), compared
to $4.7 million ($0.10 per share) last year, and to $15.5 million ($0.32 per
share) in Q2-F2009 from $1.9 million ($0.04 per share) last year. The increase
is primarily due to stock-based compensation expense. On December 17, 2008,
the company announced cancellation of 2.9 million stock options, which
resulted in a one-time non-cash stock-based compensation charge of $12.0
million for Q2-F2009. The options were cancelled following voluntary surrender
by Absolute employees.
    In addition, the net loss includes foreign exchange gains of $1.0 million
in Q2-F2009 (loss of $648,000 in Q2-F2008) and of $2.0 million YTD (loss of
$1.4 million last YTD). Absolute is in a net U.S. dollar asset position and
therefore records gains in periods of rising U.S. dollar exchange rates and
losses in periods of decline rates. However, it should also be noted that
these gains and losses are effectively offset by the exchange impact on
operating income. Operating costs are converted at current exchange rates,
while revenue is recorded at historic rates from when the Sales Contracts were
booked, and therefore the operating loss is increased when the U.S. dollar
    Absolute is in a strong financial position, with no debt and the
financial resources necessary to fund its operating and capital requirements
and to execute on its growth strategies. At December 31, 2008, Absolute's
cash, cash equivalents and investments (including long term) were $71.9
million, compared to $72.8 million at September 30, 2008 and $64.0 million at
June 30, 2008.


    With today's announcement, Absolute has updated its financial guidance
for fiscal 2009 to:

    -   Sales Contracts of $70-75 million, down from $82-90 million
    -   Cash from operations of $16-18 million, down from $27-33 million

    Management's discussion and analysis (MD&A), consolidated financial
statements and notes thereto for the first quarter 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 Tuesday February 3, 2009 at 8:30 a.m. ET (5:30 a.m. PT). All
interested parties can join the call by dialing 416-644-3414 or
1-800-733-7560. Please dial-in 15 minutes prior to the call to secure a line.
The conference call will be archived for replay until Tuesday, February 10,
2009 at midnight. To access the archived conference call, please dial
416-640-1917 or 1-877-289-8525 and enter the reservation code 21295689
followed by number sign.
    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.

    1.a Absolute refers to "Sales Contracts" (invoiced sales) as a revenue
        measure, "Cash from Operations" as a profitability measure, and
        "Basic and Diluted Operating Cash per Share" (Cash from Operations
        divided by the average shares outstanding for the period; diluted
        calculated using the treasury stock method) as an earnings per share
        measure. With the exception of Cash from Operations, these are non-
        standard measures under Canadian Generally Accepted Accounting
        Principals. Absolute considers these measures to be key performance
        metrics as substantially all Sales Contracts in each quarter are
        deferred on the balance sheet, while the related costs are expensed
        in that same quarter. Refer to the Business Model section in our
        Management Discussion and Analysis for more details.

    1.b Sales Contracts in constant currency refers to the Canadian dollar
        sales that would have been reported had the U.S. dollar exchange rate
        been unchanged from the rate in the prior year. With approximately
        95% of Sales Contracts in U.S. dollars management believes this to be
        a more meaningful evaluation of the underlying performance of the

    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, HP, Lenovo, Motion, MPC, 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, a continuing, or increased need for data protection and theft recovery
services in difficult economic times, the attainment of certain subscription
targets and company performance, the increased adoption of the Company's data
protection and theft deterrence products, the ability of the Company to
achieve its FY 2009 $70-75 million Sales Contracts and $16-18 million Cash
from Operations, the ability of the Company to successfully execute on its
growth strategies, including attracting new distribution partners,
continuation of embedded firmware support from its current and anticipated PC
OEM partners, the demand for its products continuing to increase, stable
currency valuations and a sufficiently stable and healthy global economic and
business environment, 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
Absolute's 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 Absolute cannot assure you that the forward-looking
statements contained in this press release will be realized.

    (C)2009 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. Japan patent
No. JP4067035. The Toronto Stock Exchange has neither approved nor disapproved
of the information contained in this news release.

    Consolidated Balance Sheets (Unaudited)
    (Expressed in Canadian dollars)
                                                            As At
                                                 December 31,        June 30,
                                                        2008            2008
                                                -------------   -------------

      Cash and cash equivalents                 $ 58,412,515    $ 46,460,299
      Short-term investments                       3,549,849      10,488,167
      Accounts receivable, net of allowance
       for doubtful accounts of $1,652,000
       (2008 - $715,000)                          12,193,790      18,396,731
      Prepaid expenses and other assets            1,523,608         906,792
      Current portion of deferred contract
       costs                                       7,761,382       7,234,859
      Current portion of future income tax
       assets                                      1,341,691       1,341,691
                                                  84,782,835      84,828,539
    INVESTMENTS                                    9,958,132       7,016,074
    DEFERRED CONTRACT COSTS                        7,309,118       7,448,945
    PROPERTY AND EQUIPMENT                         2,431,413       1,971,003
    FUTURE INCOME TAX ASSETS                       2,812,970       1,512,970
    INTANGIBLE ASSET                                 191,662         255,549
                                                $107,486,130    $103,033,080


      Accounts payable and accrued liabilities  $  5,914,018    $  6,240,941
      Income tax payable                           1,300,000               -
      Current portion of accrued warranty          6,429,409       5,448,513
      Current portion of deferred revenue         46,678,753      41,675,479
                                                  60,322,180      53,364,933
    ACCRUED WARRANTY                               7,229,803       6,396,080
    DEFERRED REVENUE                              47,002,653      46,170,998
                                                 114,554,636     105,932,011


    Share capital and other equity                42,922,527      41,915,225
    Contributed surplus                           26,001,062      11,938,462
    Deficit                                      (75,992,095)    (56,752,618)
                                                  (7,068,506)     (2,898,931)
                                                $107,486,130    $103,033,080

    Consolidated Statements of Operations and Deficit (Unaudited)
    Three and six months ended December 31, 2008 and 2007
    (Expressed in Canadian dollars)

                                 Three Months                 Six Months
                              2008          2007          2008          2007
                      ------------- ------------- ------------- -------------

    REVENUE           $ 13,127,441     8,866,149  $ 25,236,489    16,518,155

    COST OF GOODS SOLD   3,600,744     2,981,969     6,924,429     5,734,233

    GROSS MARGIN         9,526,697     5,884,180    18,312,060    10,783,922

      Sales and
       marketing         6,996,446     4,010,106    13,920,664     7,704,213
      Research and
       development       1,740,668       962,951     3,443,656     1,847,044
      General and
       administration    1,989,333     1,546,295     3,709,096     3,119,567
      Investment tax
       credits            (675,000)            -      (675,000)            -
       compensation     13,110,373     1,087,194    14,670,700     1,926,547
                        23,161,820     7,606,546    35,069,116    14,597,371
    OPERATING LOSS     (13,635,123)   (1,722,366)  (16,757,056)   (3,813,449)

      Interest and
       bank charges        512,432       484,488       964,577       822,771
      Foreign exchange
       gain (loss)       1,049,534      (648,401)    1,965,682    (1,434,506)
      Loss on foreign
       contracts        (1,226,120)            -    (1,226,120)            -
       charges            (989,132)            -      (989,132)            -
      Write-down of
       investment         (493,815)            -      (917,904)     (316,200)
                        (1,147,101)     (163,913)     (202,897)     (927,935)
     TAXES             (14,782,224)   (1,886,279)  (16,959,953)   (4,741,384)
     RECOVERY           (1,975,000)            -    (1,975,000)            -
     (EXPENSE) RECOVERY  1,300,000             -     1,300,000             -
     FOR THE PERIOD    (15,457,224)   (1,886,279)  (17,634,953)   (4,741,384)
     OF PERIOD         (58,930,347)  (51,216,206)  (56,752,618)  (48,361,101)
     REPURCHASE         (1,604,524)            -    (1,604,524)            -
     PERIOD           $(75,992,095) $(53,102,485) $(75,992,095) $(53,102,485)

       PER SHARE      $      (0.32) $      (0.04) $      (0.37) $      (0.10)

     DILUTED            48,105,228    47,067,720    48,027,394    46,829,564

    See accompanying Notes to Interim Consolidated Financial Statements.

    Consolidated Statements of Cash Flows (Unaudited)
    Three and six months ended December 31, 2008 and 2007
    (Expressed in Canadian dollars)

                                 Three Months                 Six Months
                              2008          2007          2008          2007
                      ------------- ------------- ------------- -------------


      Net loss for
       the period     $(15,457,224) $ (1,886,279) $(17,634,953) $ (4,741,384)
      Items not
       involving cash
         of property
         and equipment     265,341       188,383       495,149       346,132
         compensation   13,110,373     1,087,194    14,670,700     1,926,547
         of intangible
         asset              31,944        31,944        63,888        63,888
        Future income
         taxes          (1,300,000)            -    (1,300,000)            -
        Write-down of
         investment        493,815             -       917,904       316,200
        Realized loss on
         forward foreign
         contract          416,500             -       416,500             -
      Change in
       working capital
         receivable        387,126     2,774,057     6,202,940      (365,408)
         expenses and
         deposits           25,571        32,809       108,558       413,397
         contract costs    (44,495)     (228,457)     (386,696)   (1,932,527)
        Accounts payable
         and accrued
         liabilities       (50,138)       62,016      (326,924)      250,078
        Income tax
         payable         1,300,000             -     1,300,000             -
        Accrued warranty   954,661       837,828     1,814,619     2,302,145
        Deferred revenue 2,950,405     6,207,385     5,834,929    19,452,648
     ACTIVITIES          3,083,879     9,106,880    12,176,614    18,031,716

      Property and
       purchased          (249,660)     (466,291)     (955,559)     (905,691)
      Other asset         (725,374)            -      (725,374)            -
      Realized loss on
       forward foreign
       contract           (416,500)            -      (416,500)            -
      Proceeds from
       maturities of
       short term
       investments       6,661,000     8,006,180     8,231,571    16,149,106
      Purchases of
       short term
       investments      (1,190,081)   (2,593,525)   (2,211,157)  (15,347,284)
      Proceeds from
       maturities of
       investments         961,000             -       961,000             -
      Purchases of
       investments      (1,780,704)            -    (3,903,058)            -
     ACTIVITIES          3,259,681     4,946,364       980,923      (103,869)

      Repurchase of
       common shares    (2,272,154)            -    (2,272,154)            -
      Issuance of
       common shares       173,171       249,994     1,066,833     1,189,313
     ACTIVITIES         (2,098,983)      249,994    (1,205,321)    1,189,313
    NET CASH INFLOW      4,244,577    14,303,238    11,952,216    19,117,160
       PERIOD           54,167,938    12,593,427    46,460,299     7,779,505
      END OF PERIOD   $ 58,412,515  $ 26,896,665  $ 58,412,515  $ 26,896,665

    %SEDAR: 00013849E

For further information:

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:

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