Absolute Reports Fiscal 2018 Third Quarter Financial Results

VANCOUVER, British Columbia – May 7, 2018 – Absolute^® (TSX: ABT), the endpoint visibility and control company, today announced financial results for the three and nine months ended March 31, 2018. All dollar figures are unaudited and stated in U.S. dollars, unless otherwise indicated.

“Absolute’s visibility and control platform goes beyond other solutions in the space by protecting the weakest link within the security landscape,” said Steve Munford, interim chief executive officer at Absolute. “Over the past quarter, after discussions with our current and prospective customers as well as our partners, it’s clear that Absolute has an opportunity to accelerate its growth rate with laser focus and a sense of urgency on specific market segments where our success rate is highest, including regulated and highly mobile markets. We plan to direct resources into those specific markets and rapidly build a repeatable process for success.”

Key Financial Metrics

• Commercial recurring revenue in Q3-F2018 was $22.2 million, representing a year-over-year increase of 3%. Year-to-date commercial recurring revenue was $66.0 million, increasing 4% over the prior year-to-date period.
• Total revenue in Q3-F2018 was $23.3 million, representing a year-over-year increase of 1%. Year-to-date total revenue was $69.5 million, representing an increase of 2% over the prior year-to-date period.
• The Commercial Annual Contract Value (“ACV”) Base at March 31, 2018, was $90.3 million, an increase of 2% year-over-year and 1% sequentially.
• The Enterprise portion of the ACV Base increased 9% year-over-year and was up 3% sequentially. Enterprise customers represented 52% of the ACV Base at March 31, 2018, compared with 49% in the prior year. The Public Sector portion of the ACV Base decreased 4% year-over-year and was down 1% sequentially.
• Net ACV Retention from existing Absolute customers was 100% during Q3-F2018, compared with 102% in Q3-F2017.
• Incremental ACV from New Customers was $0.8 million in Q3-F2018 compared with $0.6 million in Q3-F2017.
• Adjusted EBITDA in Q3-F2018 was $2.4 million, or 10% of revenue, compared with $2.3 million, or 10% of revenue, in Q3-F2017. For the year-to-date period, Adjusted EBITDA was $6.1 million, or 9% of revenue, compared with $6.0 million, or 9% of revenue in the prior year period.
• Cash generated from operating activities in Q3-F2018 was $2.3 million compared with negative $0.4 million in Q3-F2017. For the year-to-date period, cash generated from operating activities was $7.6 million, compared with $0.3 million in the prior year period. The prior year-to-date figures are net of reorganization and income tax payments of $6.0 million.
• Absolute paid a quarterly dividend of CAD$0.08 per common share during Q3-F2018.

Products and Organizational Developments

• In January 2018, the Company appointed former Absolute advisor Steve Munford as interim chief executive officer. Mr. Munford is an accomplished cybersecurity industry leader with a track record of guiding high-growth cybersecurity companies to market leadership. This includes serving as the chief executive officer of Sophos Group plc, a leading endpoint security vendor, from 2006 to 2012 where he led the company through a period of dramatic growth. Mr. Munford currently serves as a nonexecutive director at Sophos and as chairman of Carbonite Inc., in addition to board and advisory roles with a number of private companies.
• In March 2018, Absolute released new General Data Protection Regulation (“GDPR”) Data Risk and Endpoint Readiness Assessments to help global organizations identify and secure their sensitive data and devices in order prepare for the impending GDPR deadline. The assessment delivers a measurable estimate of risk and actionable recommendations to improve endpoint hygiene as well as insights into where sensitive data is at risk of being accessed, stored or shared.
• In February 2018, Absolute expanded its K12 Education offering with the addition of Student Technology Analytics (“STA”) to enable school administrators to track and analyze device usage. With Absolute’s unique ability to capture device telemetry and usage data across diverse device populations, STA delivers the analytics that school administrators need in order to optimize technology investments and to understand the correlation between student device usage and learning outcomes.
• In January 2018, the Company added new scripts to its growing Absolute Reach Library to automate the cleanup of Meltdown/Spectre vulnerabilities. Leveraging the power of Absolute Reach and its ability to apply customized workflows across an entire endpoint population, Absolute’s customers were able to perform endpoint assessment, remediation and protection within 24 hours of the patch announcement. Since the addition of the new Reach Library and Wizard to the Absolute platform, the number of automation use cases has grown to address hundreds of endpoint challenges.

Summary of Key Financial Metrics

Corporate Outlook

The Company is updating its outlook for F2018:

• The Company is narrowing its revenue forecast to $93.0 million to $94.0 million, from $93.0 million to $95.0 million.
• The Company is maintaining its guidance for Adjusted EBITDA of 8% to 10% of revenue.
• The Company is narrowing its guidance for cash from operating activities to 9% to 12% of revenue, compared with previous guidance of 8% to 12% of revenue.
• Expected capital expenditures remain unchanged at $3.0 million to $3.5 million.

Quarterly Dividend

On April 20, 2018, the Company declared a quarterly dividend of CAD$0.08 per share on its common shares, payable in cash on May 29, 2018, to shareholders of record at the close of business on May 8, 2018.

Quarterly Filings

Management’s Discussion and Analysis (“MD&A”) and Interim Condensed Consolidated Financial Statements and the notes thereto for the fiscal quarter and year-to-date period ended March 31, 2018 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 will hold a conference call to discuss the Company’s Q3-F2018 results on Monday, May 7, 2018, at 5:00 p.m. ET. All interested parties can join the call by dialing 647-427-7450 or 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, May 14, 2018, at midnight ET. To access the archived conference call, please dial 416-849-0833 or 1-855-859-2056 and enter the reservation code 8977316.

A live audio webcast of the conference call will be available at www.absolute.com and https://bit.ly/2JbZhqw. 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 on the Company’s website for 90 days.

Non-IFRS Measures and Definitions

Throughout this press release, the Company refers to a number of measures that the Company believes are meaningful in the assessment of the Company’s performance. All these metrics are nonstandard 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 March 31, 2018 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. Commercial ACV Base, Net ACV Retention and ACV from New Customers

   As the majority of the Company’s customer contracts are sold under multiyear term licenses, there is a significant lag between the timing of the billing and the associated revenue recognition. As a result, the Company focuses on the aggregate annualized value of its subscriptions under contract, measured by Annual Contract Value (“ACV”), as an indicator of its future revenues.

   Commercial ACV Base measures the amount of recurring annual revenue Absolute will receive from its commercial customers under contract at a point in time, and therefore is an indicator of the Company’s future revenue streams. Net ACV Retention measures the percentage increase or decrease in the Commercial ACV Base at the end of a period for the customers that made up the Commercial ACV Base at the beginning of the same period. This metric provides insight into the effectiveness of Absolute’s customer retention and expansion functions. ACV from New Customers measures the addition to the Commercial ACV base from sales to new commercial customers during the quarter.

   We believe that increases in the amount of ACV from New Customers, and improvement in the Company’s Net ACV Retention, will grow our Commercial ACV Base and, in turn, our future revenues.

2. Adjusted EBITDA

   Management believes that analyzing operating results exclusive of significant noncash items or items not controllable in the period provides a useful measure of the Company’s performance. The term Adjusted EBITDA refers to earnings before deducting interest and investment gains (losses), income taxes, amortization of acquired intangible assets and property and equipment, foreign exchange gain or loss, share-based compensation, and restructuring and reorganization charges and post-retirement benefits. The items excluded in the determination of Adjusted EBITDA are share-based compensation, amortization of acquired intangibles, amortization of property and equipment, and restructuring and reorganization charges and certain post-retirement benefits.

3. Adjusted Operating Expenses

   A number of significant noncash or nonrecurring expenses are reported in the Company’s Cost of Revenue and Operating Expenses. Management believes that analyzing these expenses exclusive of these noncash or nonrecurring items provides a useful measure of the cash invested in the operations of its business. The items excluded in the determination of Adjusted Operating Expenses are share-based compensation, amortization of acquired intangible assets, amortization of property and equipment, and restructuring and reorganization charges and certain post-retirement benefits. For a description of the reasons these items are adjusted, please refer to the “Non-IFRS Measures” section of the March 31, 2018 MD&A.