Absolute Software Reports First Quarter Fiscal 2011 Results
Vancouver, Canada: November 1, 2010–Absolute® Software Corporation(“Absolute” or the “Company”) (TSX: ABT), the leading provider of firmware-based, patented, computer theft recovery, data protection and secure computer lifecycle management solutions announced today its financial results for the three-month period ended September 30, 2010. All dollar amounts are in Canadian dollars unless otherwise stated.
Q1 F2011 Highlights:
Generated record quarterly sales contracts of $21.9 million ($23.1 million in constant currency) compared to $19.2 million in Q1-F2010 ($19.2 million in constant currency), representing a constant currency increase of 20%.
Closed the quarter with a subscription base of 6.3 million computers, up 7% from 5.9 million at June 30, 2010.
Deferred revenue was $106.9 million at September 30, 2010, up 4% from $102.8 million at June 30, 2010.
Repurchased 830,100 shares under the Company’s Normal Course Issuer Bid.
Cash, cash equivalents & investments (including long-term) were $57.9 million at September 30, 2010, compared to $58.0 million at June 30, 2010.
Integrated Computrace®persistence technology with Absolute Manage to create the world’s only self-healing lifecycle management solution.
“Our primary focus in the quarter was on execution of our sales plan, which drove record first quarter Sales Contracts with 20% year-over-year constant currency growth,” said John Livingston, Chairman and CEO of Absolute. “Mobile devices and laptop computers continue to proliferate in the marketplace. We are continuing to enhance our solution offering to address this growing opportunity for multi-platform computer lifecycle and mobile device management. Our product investment over the past few years has positioned us to capture increased market share by addressing the growing need for organizations to manage and control the multitude of mobile devices spreading into the enterprise. ”
Sales Contracts for Q1-F2010 were $21.9 million ($23.1 million in constant currency) compared to $19.2 million in Q1-F2010 ($19.2 million in constant currency), reflecting strong growth in both our commercial and consumer businesses, which saw year over year constant currency growth of 12% and 73%, respectively. The commercial business was supported by seasonally robust education sales while the growth in the consumer business was generated from an exceptionally strong back to school season.
Existing commercial customers continued to produce a majority of Absolute’s sales, generating 72% of Q1-F2011 Sales Contracts (74% in Q1-F2010). In addition, consumer solutions increased to 20% of Q1-F2011 sales, up from 14% in Q1-F2010, and international sales increased to 7% of Q1-F2011 sales, up from 6% of sales in Q1-F2010.
Absolute has continued to expand its subscriber base, which increased to 6.3 million by the end of Q1-F2011, up from 4.3 million a year ago. In addition, the Company has 960,000 commercial subscriptions and 1.5 million consumer subscriptions coming up for renewal during the remainder of fiscal 2011.
Cash from Operating Activities for Q1-F2011 was $3.0 million, compared to $4.3 million in Q1-F2010. At September 30, 2010, Absolute’s cash, cash equivalents, short-term investments and investments remained steady at $57.9 million, compared to $58.0 million at June 30, 2010, reflecting $3.0 million generated through operating activities net of the impact of cash used in the Company’s share buyback program.
Revenue for Q1-F2011 was $17.3 million, an increase of 15% from $15.0 million in Q1-F2010. 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 Q1-F2011 Sales Contracts is included in the deferred revenue on the balance sheet at September 30, 2010, which was $106.9 million, compared to $102.8 million at June 30, 2010.
Absolute generated a GAAP operating loss of $1.8 million in Q1-F2011 compared to a GAAP operating loss of $0.8 million in Q1-F2010. A majority of the increase in the operating loss is due to the $1.4 million in amortization of acquired intangible assets, which the Company did not incur in Q1-F2010.
Operating income reflecting Adjusted Operating Expenses(4)was $0.3 million, compared to a loss of $0.1 million in Q1-F2010. The improvement in adjusted operating income reflects increases in revenue from prior period Sales Contracts which were offset, in part, by increased operating costs.
GAAP net loss was $1.3 million in Q1-F2011 ($0.03 per share) compared to a loss of $2.0 million ($0.04 per share) in Q1-F2010.
Management reiterates its F2011 guidance for Sales Contracts and annual Cash from Operating Activities to grow beyond the levels achieved in F2010.
Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for Q1-F2011 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, November 1, 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, November 8, 2010 at midnight.
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 atwww.newswire.ca. To access the archived conference call, please dial 416-849-0833 or 1-800-642-1687 and enter the reservation code 15630151.
Throughout this press release, we refer to a number of measures which we believe are meaningful in the assessment of the Company’s performance. All these metrics are non-standard measures under Canadian Generally Accepted Accounting Principles (“GAAP”), and may not be identical 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 Canadian GAAP. For a discussion of the purpose of these non-GAAP measures, please refer to the Company’s First Quarter MD&A on SEDAR at www.SEDAR.com.
These measures, as well as their method of calculation or reconciliation to GAAP measures, are as follows:
Basic and diluted Cash from Operating Activities per share
As a result of the nature of our revenues (please refer to “Subscription Business Model” in the MD&A), we use Cash from Operating Activities as a measure of profitability. Accordingly, we believe that Cash from Operating Activities per share is a meaningful indicator of profitability per share. Cash from Operating Activities per share is calculated by dividing Cash from Operating Activities by the average number of shares outstanding for the period (basic), or using the treasury stock method (diluted).
See the “Subscription Business Model” section of the MD&A for a detailed discussion of why we believe Sales Contracts (“bookings”) provide a meaningful performance metric. Sales Contracts are a component of deferred revenue (see Note 3 of the Notes to the Interim Consolidated Financial Statements), and result from invoiced sales of our products and services.
Sales Contracts in constant currency
Approximately 95% of our Sales Contracts are denominated in U.S. dollars, and we believe this is important to consider when evaluating underlying sales performance. Sales Contracts in “constant currency” refers to the Canadian dollar sales that would have been reported had the average U.S. dollar foreign exchange rate been unchanged from the rate in the comparable period(s) of F2010, and is calculated by applying the appropriate U.S. dollar foreign exchange rate from the comparable period to the current period sales denominated in U.S. dollars.
The average U.S. dollar to Canadian dollar exchange rate on sales was 1.0384 in Q1-F2011 compared to 1.0970 in Q1-F2010.
Adjusted Operating Expenses
A number of significant non-cash expenses are reported in our Cost of Revenue and Operating Expenses. Management believes that analyzing these expenses exclusive of these non-cash items provides a useful measure of the cash generating potential of its business. The non-cash items excluded in the determination of Adjusted Operating Expenses are stock-based compensation and amortization of acquired intangible assets. For a description of why these items are adjusted, please refer to the First Quarter MD&A.
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.