Vancouver, Canada: August 23, 2010– Absolute® Software Corporation (TSX: ABT), the leading provider of firmware-based, patented, computer theft recovery, data protection and secure computer lifecycle management solutions, announces its financial results for the three- and 12-month periods ended June 30, 2010. All figures are in Canadian dollars unless otherwise stated.
Closed the year with a subscription base of 5.9 million computers, up 43% from 4.1 million at June 30, 2009.
Generated Sales Contracts of $51.0 million from existing commercial customers, or $56.2 million in constant currency, up 7% in constant currency from $52.5 million last year.
Deferred revenue was $102.8 million at June 30, 2010, up 7% from $95.9 million at June 30, 2009.
Cash, cash equivalents & investments (including long-term) were $58.0 million at June 30, 2010, compared to $68.9 million at June 30, 2009, reflecting cash used for the acquisition of LANrev, FailSafe® and Freeze™ and the Company’s share buyback program.
Acquired LANrev, a comprehensive computer lifecycle management product (subsequently re-branded as Absolute Manage), and purchased the technology assets of FailSafe and Freeze from Phoenix® Technologies.
Announced the University of Texas’ selection of Absolute Manage for deployment on all of their Mac® computers in December 2009, and a $1.0 million new Absolute Manage customer sale in April 2010.
Expanded international operations, growing international sales 41% to $4.3 million in fiscal 2010, and opened a regional office in Japan.
Expanded availability of Computrace® solutions for HP Care Pack Services, and introduced Lenovo Lost & Found for ThinkPad laptops, both of which were instrumental in generating growth at these OEM partners.
Added Intel® Anti-Theft Technology, geolocation, device freeze and self-serve remote data delete functionality to Computrace LoJack for Laptops for the consumer market.
Purchased 400,300 common shares to date under the Company’s current normal course issuer bid (covering the period November 4, 2009 to November 4, 2010), at a total cost of $1.7 million.
Completed the prior normal course issuer bid which ended November 3, 2009, with a total of 3,257,000 shares purchased, at a total cost of $10.7 million.
“In fiscal 2010, despite a lag in the PC refresh cycle and a challenging overall economic environment, our Sales Contracts in constant currency increased 7% year-over-year,” said John Livingston, Chairman and CEO of Absolute. “Small acquisitions were a key part of our strategy during the year, as we repositioned ourselves as a broader player in the device and data management and security market. So far, sales of Absolute Manage have exceeded our internal targets, and now our sales team is able to lead with Computrace or Absolute Manage when pursuing new business, thus expanding our overall addressable market. We have already seen Absolute Manage win contracts against industry leaders in computer lifecycle management. Based on our results and the impact of these acquisitions, we are cautiously optimistic as we look ahead to fiscal 2011.”
Sales Contracts for F2010 were $69.7 million ($76.7 million in constant currency) compared to $71.9 million in F2009, and for Q4-F2010 were $19.3 million ($21.7 million in constant currency) compared to $20.2 million in Q4-F2009. The results were in line with Absolute’s revised guidance range of $68-72 million. A majority of Absolute’s sales are denominated in U.S. dollars, and therefore were negatively impacted as the U.S. dollar declined from CDN$1.16 in F2009 to CDN$1.05 in F2010. In constant currency, Sales Contracts increased 7% in F2010 compared to F2009, and also increased 7% compared to Q4-F2009.
Existing commercial customers continued to produce a majority of Absolute’s sales, generating 73% of F2010 Sales Contracts (70% in fiscal 2009) and 77% of Sales Contracts in Q4-F2010 (80% in Q4-F2009). In addition, international sales increased to 6% of F2010 sales up from 4% of sales in F2009, and represented 5% of Q4-F2010 sales, compared to 6% of sales in Q4-F2009.
While sales growth has been slowed by the economy and timing of computer refresh cycles, Absolute has continued to expand its customer base, and now has 1.2 million commercial subscriptions and 1.8 million consumer subscriptions coming up for renewal in fiscal 2011.
“This existing customer base gives us a good level of confidence in our ability to continue our Sales Contract growth trend in fiscal 2011,” said Rob Chase, COO. “However, readers are cautioned that our commercial expiring subscription ratio will likely decline due to the fact that our existing customers are more penetrated on average than they were last year. In addition, we expect the average selling price for our existing customer sales to decline as the expiring subscriptions have a higher weighting toward our lower priced non-theft recovery products.”
Absolute’s cash from Operating Activities for F2010 was in line with our guidance range at $6.4 million compared to $17.4 million in F2009, and for Q4-F2010 totaled $0.3 million compared to $2.1 million in Q4-F2009. The reduction reflects management’s investment strategy, the impact of the economic downturn on sales and the weakened U.S. dollar.
Revenue for F2010 was $64.1 million, an increase of 20% from $53.2 million in F2009. Revenue for Q4-F2010 was $16.6 million, an increase of 16% from $14.3 million in Q4-F2009. 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 Q4-F2010 Sales Contracts is included in deferred revenue on the balance sheet at June 30, 2010, which was $102.8 million, compared to $95.9 million at June 30, 2009.
Absolute generated an operating loss of $4.4 million in F2010, compared to an operating loss of $16.6 million in F2009, and an operating loss of $2.7 million in Q4-F2010 compared to operating income of $1.7 million in Q4-F2009. The year-over-year changes reflect a significant stock-based compensation charge recorded in F2009 as well as a $4.5 million positive adjustment related to warranty accruals and investment tax credits recorded in Q4-F2009.
The operating results adjusted for stock-based compensation and amortization of intangible assets (or the adjusted operating income or loss, a non-GAAP measure) was an adjusted operating income of $0.4 million for fiscal 2010, compared to a loss of $0.6 million in the prior year. The increased income in F2010 is due to revenue growth in excess of the rate of the cost increases associated with the Company’s expansion strategies.
For Q4-F2010, the adjusted operating loss was $0.8 million, compared to an adjusted operating income of $2.4 million in Q4-F2009. The loss in Q4-FY2010 compared to income in Q4-F2009 was primarily due to the previously mentioned non-cash adjustments in Q4-F2009.
GAAP net loss was $8.2 million in F2010 ($0.18 per share), compared to $2.3 million ($0.05 per share) in F2009, and was $3.8 million in Q4-F2010 ($0.08 per share) compared to net income of $16.5 million ($0.35 per share) in Q4-F2009. Net income results for F2009 and Q4-F2009 were affected by a one-time $16.7 million non-cash income tax recovery. The additional year-over-year variances in net loss reflect the changes in operating loss, interest income and foreign exchange losses.
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 June 30, 2010, Absolute’s cash, cash equivalents, short-term investments and investments were $58.0 million compared to $68.9 million at June 30, 2009. The reduction in cash position from June 30, 2009 is primarily due to the use of $17.5 million for the purchase of LANrev and certain assets from Phoenix Technologies, which was offset in part by cash generated from operations.
Absolute is providing guidance that it expects to continue its Sales Contracts growth trend in F2011, increasing beyond the $69.7 million achieved in F2010. In addition, Absolute expects to grow Cash from Operating Activities in F2011 beyond the $6.4 million achieved in F2010. However, Absolute is not providing specific guidance for the growth targets. Due to the unpredictable economic climate, Absolute believes that it is not practical to provide specific guidance with an acceptable degree of reliability.
Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for fiscal 2010 can be obtained today from Absolute’s corporate website atwww.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 Monday, August 23, 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, August 30, 2010 at midnight.
A live audio webcast of the conference call will be available atwww.absolute.comandwww.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 atwww.newswire.ca. To access the archived conference call, please dial 416-849-0833 or 1-800-642-1687 and enter the reservation code 89951179.
1.a “Sales Contracts” (invoiced sales) is used as a Non-GAAP measure of sales performance and an indicator for future cash flow and revenue, “Cash from Operating Activities” as a profitability measure, and “Basic and Diluted Operating Cash per Share” (Cash from Operating Activities 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 Operating Activities, these are non-standard measures under Canadian Generally Accepted Accounting Principles. 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 inconstant currencyrefers 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 sales performance of the business.
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.
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.