Absolute Issues Sales Contract and Cash from Operating Activities Guidance for F2010
Vancouver, Canada: August 25, 2009– Absolute® Software Corporation(“Absolute” or the “Company”) (TSX: ABT), the leading provider of firmware-based, patented, computer theft recovery, data protection and secure IT asset management solutions announces its financial results for the three- and twelve-month periods ended June 30, 2009. All dollar amounts are in Canadian dollars unless otherwise stated.
Fiscal 2009 Highlights:
Increased contracted subscription base by 26% to 4.1 million computers, from 3.3 million at the end of F2008
Expanded retail reach with Computrace® LoJack® for Laptops being rolled out to 1,010 Best Buy U.S. stores and online at bestbuy.com
Released IT Asset Management and Theft Recovery Solutions for netbooks
Added Wi-Fi geo-location tracking to the Computrace line of products
Announced general availability of Computrace with Intel’s Anti Theft technology on Lenovo Think Pad T400 notebooks
Launched a new Global Customer Center with multi-lingual capability enhanced security and management features
Launched Computrace Mobile for the BlackBerry® platform, which provides asset management, data protection and geo-location tracking
Launched Computrace LoJack for Laptops in Europe
Announced BIOS firmware support for the Computrace line of products with select Acer, ASUS and Getac laptop and notebook models
Purchased 3.26 million shares during F2009 under the company’s normal course issuer bid, at a total cost of $10.6 million
In fiscal 2009, despite it being a challenging year economically, we made strategic investments in our product, personnel, partner relationships and geographic reach in order to enhance our positioning for future growth,” said John Livingston, Chairman and CEO of Absolute. “As a result, we ended the year with renewed momentum throughout the business and we have firmly established Absolute as the industry leader capable of providing a diversified suite of asset management, data security and theft protection solutions.”
Mr. Livingston added: “With our extensive partnership network, we have one of the software industry’s broadest international footprints on desktop, notebook and netbook computers. Our solutions provide clients with a permanent tether to their devices that allows them to deploy a variety of services to track, manage and protect digital assets, both pre- and post-theft. In fiscal 2010 and beyond, we will continue to leverage our footprint and our unique technology capabilities to launch new services, expand our global presence and capitalize on our growing market opportunity.”
Sales Contracts1.a, a non-standard measure under Canadian Generally Accepted Accounting Principals (“GAAP”), totaled $71.9 million in F2009, down 1% compared to $72.5 million in F2008. Sales Contracts for Q4-F2009 totaled $20.2 million, down 6% compared to $21.5 million in Q4-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 declined 13% for F2009 and 17% for Q4-F2009 compared to the same periods last year. The declines from the prior periods in constant dollar terms are primarily due to reduced consumer sales (down 43% for the year in constant dollars) from a bundle sales program with one PC OEM partner. In addition, commercial sales were down 5% for the year in constant dollars (up 9% in Canadian dollars) primarily due to reduced U.S. federal government sales and new customer adoption due to the challenging economy. Conversely, commercial sales to existing customers continued to show strength, generating sales of $52.5 million for the year, up 23% (8% in U.S. dollars) compared to $42.6 million in fiscal 2008. On a sequential basis, Q4-F2009 sales increased 20% (30% in U.S. dollars) due to seasonally strong commercial sales.
As a software-as-a-service (“SaaS”) company, Absolute considers Cash from Operating Activities one of its key financial metrics. For F2009, Cash from Operating Activities was $17.4 million, compared to $30.0 million in F2008. Absolute’s Cash from Operating Activities for Q4-F2009 totaled $2.1 million compared to $5.4 million in Q4-F2008.
“Having navigated through a challenging economic environment, we view fiscal 2009 as an important year of investment and planning for strong future growth,” said Rob Chase, CFO of Absolute. “We continue to believe that the long term opportunity for Absolute is significant and expanding, and that our computer security management solutions are a “must-have” in our increasingly mobile world. Supported by our investment in fiscal 2009 as well as our ongoing sales and marketing and product development initiatives, in fiscal 2010 we expect to resume our Sales Contract growth. However, as we continue to invest significantly for future growth, and given the current economic conditions, we are expecting reduced cash flow in fiscal 2010.”
Revenue for F2009 was $53.2 million, an increase of 41% from $37.9 million in F2008. Revenue in Q4-F2009 increased 28% to $14.3 million, compared to $11.2 million in Q4-F2008. Revenue is a lagging performance indicator as it is a function of deferred revenue as opposed to sales in the quarter. The majority of all of the revenue from Q4-F2009 Sales Contracts is included in deferred revenue on the balance sheet at June 30, 2009, which climbed to $95.9 million, compared to $79.5 million at June 30, 2008.
For Q4-F2009, Absolute generated operating income, excluding stock-based compensation and investment tax credits, of $101,000, compared to a loss of $792,000 in Q4-F2008. For fiscal 2009, Absolute generated an operating loss, excluding stock-based compensation and investment tax credits, of $3.8 million, compared to $3.2 million in fiscal 2008. The operating income in Q4-F2009 is due to adjustments for positive warranty experience which benefited Q4-F2009, offset by an increase in bad debt provisions. The increased operating loss for fiscal 2009 reflects the revenue increase offset by increased operating costs resulting from Absolute’s investment in sales and marketing and research and development.
The GAAP net income in Q4-F2009 was $16.5 million ($0.36 earnings per share) compared to a net loss of $2.3 million ($0.05 loss per share) in Q4-F2008. The net income for Q4-F2009 was due to a $16.8 million income tax recovery for future income tax assets. For fiscal 2009, net loss decreased to $2.3 million ($0.05 loss per share), compared to $8.4 million ($0.18 loss per share) in fiscal 2008. The year-over-year decrease is primarily due to the income tax benefits recorded in Q4, offset by a one time $12.0 million stock-based compensation charge incurred in Q2-F2009 for the cancellation of 2.9 million employee stock options.
Absolute is in a strong financial position. The Company is generating positive operating cash flow, has no debt and has the financial resources necessary to fund its operating and capital requirements and to execute on its growth strategies. Accordingly, the company launched a normal course issuer bid in November 2008 for the repurchase and retirement of up to 4.2 million of Absolute’s shares. Under this bid, Absolute has repurchased 3.26 million shares for a total of $10.6 million. After the share repurchase, at June 30, 2009, Absolute’s cash, cash equivalents and investments (including long term) were $68.9 million, compared to $64.0 million at June 30, 2008.
With today’s announcement, based on current U.S. dollar exchange rates of $1.10, Absolute is issuing F2010 financial guidance of:
Sales Contracts of $80-86 million
Cash from Operations of $12-15 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 atwww.sedar.com.
Notice of Conference Call
Absolute Software will hold a conference call to discuss the contents of this release on Tuesday August 25, 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, September 1, 2009 at midnight. To access the archived conference call, please dial 416-640-1917 or 1-877-289-8525 and enter the reservation code 21311364 followed by the number sign.
A live audio webcast of the conference call will be available at www.absolute.com andwww.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.aAbsolute 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.bSales 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 business.
This press release contains forward-looking statements and financial outlook that involve risks and uncertainties. These forward-looking statements and financial outlook relate to, among other things, the expected performance, functionality and availability of the Company’s services and products, and other expectations, intentions and plans contained in this press release that are not historical facts. When used in this press release, the words “plan,” “expect,” “believe” and similar expressions generally identify forward-looking statements. These statements reflect the Company’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, readers of the press release should understand that Absolute cannot assure them that the forward-looking statements and financial outlook contained in this press release will be realized. Furthermore, the forward-looking statements and financial outlook contained in this press release are made as of the date hereof and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements and financial outlook, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Absolute empowers more than 12,000 customers worldwide to protect devices, data, applications, and users against theft or attack — both on and off the corporate network. With the industry’s only tamper-proof endpoint visibility and control solution, Absolute allows IT organizations to enforce asset management, security hygiene, and data compliance for today’s remote digital workforces. Absolute’s patented Persistence®technology is embedded in the firmware of Dell, HP, Lenovo, and 22 other leading manufacturers’ devices for vendor-agnostic coverage, tamper-proof resilience, and ease of deployment. See how it works atwww.absolute.comand follow us at@absolutecorp.