Absolute Software Reports Fourth Quarter and Full-Year Fiscal 2021 Financial Results

VANCOUVER, British Columbia and SAN JOSE, Calif. – August 10, 2021 – Absolute Software Corporation (Nasdaq: ABST) (TSX: ABST), a leader in next generation Endpoint Resilience™ solutions, today announced its financial results for its fourth quarter and full-year fiscal 2021 ended June 30, 2021. All dollar figures are stated in U.S. dollars, unless otherwise indicated.

“This was a year unlike any other in Absolute’s history, marked by record financial results and major business milestones, including our Nasdaq cross-listing and acquisition of NetMotion,” said Christy Wyatt, Absolute Software’s President and CEO. “With multi-device, hybrid environments becoming the rule rather than the exception, we’ve seen heightened demand for modern, zero trust security approaches that put the endpoint at the center. We believe our unique ability to enable visibility and self-healing from the endpoint to the edge will allow us to deliver a truly differentiated solution in a high-growth market and empower our customers to strengthen overall security and resiliency. It is an exciting time for our expanded company, and we are well-positioned to solidify our place as a critical component of today’s work-from-anywhere environments.”

• Revenue in Q4 F2021 was $31.8 million, representing an increase of 17% compared to Q4 of fiscal year 2020 (“F2020”). Revenue in F2021 was $120.8 million, representing an increase of 15% compared to F2020.
• Net loss in Q4 F2021 was $3.0 million, compared to net income of $2.2 million in Q4 F2020. Net income in F2021 was $3.7 million, compared to $10.6 million in F2020.
• Total ARR⁽¹⁾ at June 30, 2021 was $123.4 million, representing an increase of 14% over the prior year. The Enterprise & Government portions of Total ARR increased by 11% year over year compared to June 30, 2020 and represented 66% of Total ARR at June 30, 2021. The Education sector portion of Total ARR increased by 21% year over year compared to June 30, 2020 and represented 34% of Total ARR at June 30, 2021.
• New Logo ARR⁽¹⁾⁽²⁾ was $2.7 million in Q4 F2021, compared to $3.5 million in Q4 F2020.
• Net Dollar Retention⁽¹⁾⁽³⁾ was 106% in Q4 F2021, compared to 104% in Q4 F2020.
• Adjusted EBITDA⁽⁴⁾ in Q4 F2021 was $8.0 million or 25% of revenue, compared to $8.0 million or 29% of revenue in Q4 F2020. Adjusted EBITDA in F2021 was $31.9 million or 26% of revenue, compared to $27.4 million or 26% of revenue in F2020.
• Cash from operating activities was $11.4 million in Q4 F2021 and $46.8 million in F2021, compared to $11.6 million in Q4 F2020 and $25.0 million in F2020.
• A quarterly dividend of CAD$0.08 per outstanding common share was paid during Q4 F2021.

USD millions, except percentages, number of shares, and per share amounts

 

Business and organizational developments:

• In May, we announced that Absolute had signed a definitive agreement to acquire 100% of NetMotion Software, Inc. (“NetMotion”), a leading provider of connectivity and security solutions, for $340 million in cash. The acquisition closed on July 1, 2021 and was partly funded by a new $275 million term loan from Benefit Street Partners LLC.
• In June, we announced the appointment of Matthew Schoenfeld as Chief Revenue Officer.

Product and service highlights:

• In April, we delivered key platform enhancements focused on performance and usability, enabling IT and security administrators to verify device inventory details and vital security information, such as the status of anti-malware or encryption and sensitive data residing on the endpoint, through a single view.
• In April, we extended the power of Absolute’s Application Persistence™ capabilities to more mission-critical applications, including Symantec™ Endpoint Security and Nessus® by Tenable®, to help ensure they remain resilient and undeletable. We also added support for the latest version of Ivanti Security Controls (previously Ivanti® Patch for Windows), to help ensure covered devices have the latest OS patches and application updates.
• In April, G2, the world’s leading business solutions review website, recognized Absolute as a Leader in the Spring 2021 Grid® Report for Endpoint Management for the 7th quarter in a row.
• In May, we announced key findings from our third annual Endpoint Risk Report, including key trends affecting enterprise data and device security, and underscoring the dangers of compromised security controls in expanding attack surface targeting enterprises.
• In June, we introduced Absolute Firmware Lock, enabling system manufacturers to harden firmware controls and minimize the risk of compromise or attack for our joint customers.

Partner and other highlights:

• In Q4 F2021, we continued our partner growth trajectory, increasing the number of our Elite partners by 13% and Premier partners by 8%. We also increased our focus on enhanced partner training to help drive greater channel engagement.
• In Q4 F2021, we globalized our Partner Program to include additional MSPs and resellers in Europe and Latin America, helping to increase our presence and build relationships with new and prospective customers through trusted providers in those regions.

 

Business and organizational developments:

• In F2021, Absolute undertook two milestone corporate transactions:
  • In October 2020, Absolute completed a Canadian and US public offering of its common shares (“Common Shares”) for gross proceeds of approximately $69 million combined with a cross-listing of the Common Shares on to the Nasdaq Global Select Market (“Nasdaq”). The Common Shares are now dual-listed on the Toronto Stock Exchange (the “TSX”) and Nasdaq under the trading symbol ‘ABST’.
  • In May 2021, Absolute announced that it had signed a definitive agreement to acquire NetMotion for $340 million in cash. The acquisition closed on July 1, 2021 and was partly funded by a new $275 million term loan from Benefit Street Partners LLC.
• In F2021, Absolute continued strengthening its leadership team, reflected by the appointments of Steven Gatoff as Chief Financial Officer and Matthew Schoenfeld as Chief Revenue Officer.

Product and service highlights:

• In F2021, Absolute continued developing and delivering innovative solutions for IT and security teams in the emerging ‘work from anywhere’ era, including:
  • New platform capabilities for IT and security teams to automatically generate and distribute scheduled device reports, including the ability to instantly monitor any number of missing devices and the ability to track and execute custom workflows and remedial actions (‘Action History’).
  • An expanding library of autonomously self-healing applications powered by Absolute’s Application Persistence service, helping our customers keep common security controls and other applications healthy, active, and undeletable.
  • A new Absolute Control® mobile application, designed to help our customers secure endpoint devices and protect sensitive data while on the go.
  • ‘Software Inventory’ and ‘Web Usage’ analytics, which provide IT and security teams with helpful insights into software and web usage across their distributed endpoint device fleets. This feature provides historical insights and customizable reports to help understand software and website usage patterns and web application adoption, and identify unsanctioned web applications or out-of-policy web behaviour.
  • Prioritization by the United States Federal Risk and Authorization Management Program (“FedRAMP”) for Absolute’s platform to pursue a Provisional Authority to Operate (P-ATO) from the Joint Authorization Board (JAB), an important step towards growing our sales into US federal government agencies.

Partner and other highlights:

• In F2021, Absolute continued to be included as a key component in the global security portfolios of Dell, Lenovo, and HP.
• In F2021, Absolute launched a new Partner Program designed to increase revenue opportunities and tools for our global ecosystem of channel partners and resellers. In March 2021, Absolute was recognized in CRN’s 2021 Partner Program Guide for our delivery of helpful tools, programs, and resources to our managed service providers and reseller partners.
• Absolute released two annual reports discussing key insights about the state of endpoint controls in F2021:
  • The second annual education-focused report entitled “Distance Learning’s Impact on Education IT”, examining the effects of the rapid digital transformation and the sudden shift to remote learning on K-12 device health, security, and usage in the wake of the COVID-19 pandemic.
  • The third annual “Endpoint Risk Report”, highlighting key trends affecting enterprise data and device security, and underscoring the dangers of compromised security controls.
• Absolute’s President and CEO Christy Wyatt was named ‘New CEO of the Year’ in the December 2020 issue of The Globe and Mail's Report on Business.
• Absolute was recognized as a winner or finalist in 17 award programs, including a Cybersecurity Excellence Award for Cybersecurity Company of the Year; a Cyber Catalyst℠ designation by leading cyber insurers for the Absolute Resilience™ platform; and inclusion in The Globe and Mail’s Second-Annual ‘Women Lead Here’ Benchmark of Executive Gender Diversity.

 

The Company’s financial outlook for its 2022 fiscal year (July 1, 2021 – June 30, 2022) is as follows⁽¹⁾:

• Initial full-year F2022 adjusted revenue⁽²⁾ to be in the range of $203 million to $207 million; this equates to a full-year F2022 adjusted revenue growth of approximately 11% to 13%⁽³⁾.
• Initial full-year F2022 Adjusted EBITDA⁽⁴⁾ margin , calculated on adjusted revenue, to be in the range of 18% to 20%.

 

The foregoing outlook and expectations constitute forward-looking statements and financial outlook and are qualified in their entirety by the “Forward-Looking Statements” cautionary statement below. The purpose of this financial outlook is to provide readers with disclosure regarding management’s current reasonable expectations and plans for F2022. Readers are cautioned that this financial outlook may not be appropriate for other purposes.

Quarterly Dividend

On July 20, 2021, we declared a quarterly dividend of CAD$0.08 per share on our common shares, payable in cash on August 27, 2021 to shareholders of record at the close of business on August 11, 2021.

Quarterly Filings and Related Quarterly Financial Information

Management’s Discussion and Analysis (“MD&A”) and Consolidated Financial Statements and the notes thereto for the fiscal period ended June 30, 2021 can be obtained today from Absolute’s corporate website at www.absolute.com. The documents will also be available under Absolute’s SEDAR profile at www.sedar.com and on EDGAR at www.sec.gov. Additionally, the Company has published on the Investor Relations section of its website (www.absolute.com/company/investors/) a Q4 F2021 Earnings Presentation and a dashboard of Selected Operating and Financial Metrics.

The Company has also published its inaugural Corporate Social Responsibility Report, available at www.absolute.com/company/investors/

Conference Call

Absolute Software will host a conference call to discuss its Q4 and full-year F2021 financial results on Tuesday, August 10, 2021 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). The call will be accessible by dialing 416-764-8650 or 1- 888-664-6383. A live audio webcast of the conference call will also be available via the Absolute Investor Relations website.

The conference call will be archived for replay until Tuesday, August 17, 2021. To access the archived conference call, please dial 416-764-8677 or 1-888-390-0541 and enter the reservation code 477824. An archived replay of the webcast will be available for 90 days.

Use of non-IFRS measures and key metrics

Throughout this press release, we refer to a number of measures and metrics which we believe are meaningful in the assessment of the Company’s performance. Many of these measures and metrics do not have any standardized meaning under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board 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.

The purpose of these non-IFRS measures and key metrics is to provide supplemental information that may prove useful to readers who wish to consider the impact of certain non-cash or non-recurring items on the Company’s operating performance, and assist in comparison of our operating results over historical periods. Supplementing IFRS disclosures with non-IFRS measures outlined below provides management with an additional view of operational performance by excluding expenses that are not directly related to performance in any particular period. Management uses both IFRS and non-IFRS measures when planning, monitoring and evaluating the Company’s performance.

These measures and metrics are as follows.

1. Total ARR, Net Dollar Retention, and New Logo ARR

   As the majority of our customer contracts are sold under prepaid multi-year term licenses, there is typically a significant lag between the timing of the invoice and the associated revenue recognition. As a result, we focus on the annualized recurring value of all active contracts, measured by Annual Recurring Revenue (“ARR”), as an indicator of our future recurring revenues. ARR includes multi-year and short-term subscriptions for cloud-based services, as well as, managed professional services and professional services with terms greater than one year. Both multi-year contracts and contracts with terms less than one year are annualized by dividing the total committed contract value by the number of months in the subscription term and then multiplying by twelve. We believe that increases in the amount of New Logo ARR, and improvement in our Net Dollar Retention, will accelerate the growth of Total ARR and, in turn, our future revenues. We provide these metrics as they are used to manage the business, however we believe there is no similar measure under IFRS to which they would be reconciled.

   Total ARR is a key metric and measures the aggregate annualized recurring revenues of all active contracts at the end of a reporting period, and therefore is an indicator of our future revenue streams. Total ARR will change over a period through the retention, attrition and expansion of existing customers and the acquisition of new customers.

   Net Dollar Retention (previously “Net ARR Retention”) is a key metric and measures the percentage increase or decrease in Total ARR at the end of a year for customers that comprised Total ARR at the beginning of the year. This metric provides insight into the effectiveness of our activities to retain and expand the ARR of our existing customers.

   New Logo ARR (previously “ARR from New Customers”) is a key metric and measures the addition to Total ARR from sales to new customers during a period.

2. Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)

   Adjusted EBITDA is defined as net income before interest income or expense, income taxes, depreciation and amortization, foreign exchange gains or losses, share-based compensation expense, restructuring or reorganization charges and post-retirement benefits, and non-recurring items.

   We believe adjusted EBITDA provides a useful measure of the Company’s performance, as it helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business.

   Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other IFRS financial measures. Some of the limitations of Adjusted EBITDA are that it excludes recurring expenses for interest payments, does not reflect the dilution that results from share-based compensation, and does not reflect the cost to replace amortized property and equipment and right-of-use assets. It may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

   Reconciliation of Non-IFRS Measures: Adjusted EBITDA

   The following table provides a reconciliation of net income to Adjusted EBITDA:

   

   Notes:

   1. Depreciation and amortization includes depreciation of property and equipment, and amortization of right-of-use assets.
   2. Non-recurring items in Q4 F2021 includes $9.0 million of professional fees and other costs relating to the acquisition of NetMotion. Non-recurring items in F2021 includes $9.1 million of professional fees and other costs relating to the acquisition of NetMotion and $1.0 million relating to an accrued legal charge.

   The Company does not provide a reconciliation of forward-looking non-IFRS financial measures to the most directly comparable IFRS financial measure because it is unable to predict certain items contained in the IFRS measures without unreasonable efforts.