Absolute Software Reports Fiscal 2011 Year-End and Fourth Quarter Results
Growth Trend Continues as Absolute Generates Record Fourth Quarter and Fiscal Year Sales Contracts and Adjusted Operating Income
Vancouver, Canada: August 18, 2011 – Absolute® Software Corporation (“Absolute” or the “Company”) (TSX: ABT), the leading provider of firmware-based endpoint security and management solutions that reduce IT costs, prove regulatory compliance, respond to computer theft, and optimize productivity, today announced its financial results for the three month period and year ended June 30, 2011. All figures are in Canadian dollars unless otherwise stated.
Fiscal Year 2011 Highlights
Delivered 20% constant currency growth in Sales Contracts(1) while maintaining costs in line with the prior year.
Generated $12.5 million in cash from operating activities, representing an increase of 94% over F2010.
Achieved record Adjusted Operating Income(4) of $9.4 million, an increase of 2,177% over $0.4 million last year.
Launched Computrace® Mobile for the Android platform, and Absolute Manage Mobile Device Management for Apple® iOS 4 devices (iPhone®, iPad™ and iPod touch®).
Extended data and device protection capabilities with the launch of Absolute Secure Drive to manage self-encrypted drives.
Introduced Remote File Retrieval, a data leakage prevention feature, for Computrace®.
Integrated Computrace® persistence technology with Absolute Manage to create the world’s only self-healing lifecycle management solution.
Appointed seasoned technology executive, Daniel P. Ryan, to Company’s Board of Directors.
Repurchased 3,797,020 shares (674,600 in the fourth quarter) for a total of $14.2 million under Company’s Normal Course Issuer Bids.
Subsequent to year end, announced persistence support for Lenovo tablet devices.
“In fiscal 2011 we significantly grew sales contracts and nearly doubled our cash from operations by capitalizing on the leverage available in our business model,” said John Livingston, Chairman and CEO of Absolute. “We saw robust global sales for Computrace, and we continued to gain momentum for Absolute Manage, with an exceptionally strong fourth quarter. In addition, we further expanded our product offering and partner relationships to target opportunities in the emerging Mobile Device Management and Self Encrypting Drive markets.”
Mr. Livingston continued: “Heading into fiscal 2012, we remain committed to driving top line growth while carefully managing our expenses. We plan to continue to expand the business by growing our core anti-theft offering, diversifying revenue by accelerating growth in our non-theft recovery product lines, maximizing existing customer and channel relationships and expanding our distribution network.”
F2011 Year-End and Q4 Financial Review
Reflecting Absolute’s success in increasing sales productivity through resource alignment, growing sales of its anti-theft product line and diversifying sales through the introduction of new products, F2011 Sales Contracts(1) grew 14% (20% in constant currency) to $79.1 million ($83.4 million in constant currency) from $69.7 million in F2010. The increase was driven by strong results in both the Company’s commercial and consumer verticals, which saw year-over-year growth of 12% and 21%, respectively (18% and 28% in constant currency). Sales Contracts for Q4-F2011 were $22.1 million ($23.4 million in constant currency), an increase of 14% (21% in constant currency) compared to $19.3 million in Q4-F2010. For Q4-F2011, the Company’s commercial and consumer verticals increased 15% and 4%, respectively, (22% and 11%, in constant currency) from Q4-F2010.
F2011 commercial Sales Contracts from Absolute’s theft recovery products(5) grew 16% in constant currency over F2010, demonstrating that theft recovery services continue to be valued in the market. Commercial Sales Contracts from the Company’s non-theft recovery products(6) (i.e. management, tracking and data protection) grew 31% in constant currency over F2010, as Absolute continued to expand its product portfolio in both management and security. For F2011, Absolute’s non-theft recovery products represented 21% of commercial Sales Contracts. For Q4-F2011, Sales Contracts from Absolute’s theft recovery products grew 13% in constant currency over Q4-F2010. Q4-F2011 Sales Contracts from the Company’s non-theft recovery products grew 57% in constant currency over Q4-F2010. For Q4-F2011, Absolute’s non-theft recovery products represented 26% of commercial Sales Contracts.
Consistent with prior years, 80-85% of Absolute’s commercial sales are from existing customers, as the Company maintains a high customer retention rate and continues to expand its footprint within its existing customer base. During F2011, Absolute also continued to add new customers, which the Company expects will generate continued growth as Absolute further develops its relationships with these new customers.
Within the consumer segment, F2011 non-bundled sales increased by 43% in constant currency compared to F2010 and increased by 26% in constant currency for Q4-F2011 compared to Q4-F2010. Consumer solutions were 14% of F2011 sales compared to 13% of F2010 sales and were 7% of sales for Q4-F2011 compared to 8% for Q4-F2010. This is a result of Absolute’s strategic initiatives to diversify its consumer business, leverage the Company’s leadership position and continue to evangelize the importance of managed theft recovery.
International sales increased 84% (93% in constant currency) to $8.0 million in F2011 (10% of sales), up from $4.3 million in F2010 (6% of sales). For Q4-F2011, international sales were $1.3 million (6% of sales), up from $0.9 million in Q4-F2010 (5% of sales).
Revenue for F2011 was $72.2 million, an increase of 13% from $64.1 million in F2010. Revenue is typically a lagging performance indicator as it is a function of deferred revenue as opposed to invoiced sales in the quarter. For Q4-F2011, revenue was $18.9 million, an increase of 14% from $16.6 million in Q4-F2010. The majority of the revenue from Q4-F2011 Sales Contracts is included in the deferred revenue on the balance sheet at June 30, 2011, which was $109.4 million, compared to $102.8 million at June 30, 2010.
Adjusted Operating Expenses(4) for F2011 were $62.8 million, a decrease of 1% from $63.7 million in F2010. Adjusted Operating Expenses for Q4-F2011 were $14.9 million, down 14% from $17.4 million for the same period in F2010, largely due to a reduction in partner marketing programs.
Reflecting the Company’s 13% increase in revenue and its ongoing focus on cost control, Absolute generated Adjusted Operating Income(4) of $9.4 million in F2011, a significant increase from $0.4 million in F2010. For Q4-F2011, Adjusted Operating Income was $4.0 million, compared to $(0.8) million in Q4-F2010.
Absolute generated a net loss of $1.1 million in F2011 compared to $8.2 million in F2010. For Q4-F2011, the Company recorded net income of $0.5 million compared to a net loss of $3.8 million for Q4-F2010.
In F2012, Absolute expects to grow Sales Contracts and Cash from Operating Activities above F2011 levels.
Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for 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 Thursday, August 18, 2011 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 Thursday, August 25, 2011 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 1-855-859-2056 and enter the reservation code 90670734.
Non-GAAP Measures and Definitions
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 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 Canadian GAAP. For a discussion of the purpose of these non-GAAP measures, please refer to the Company’s Fiscal 2011 MD&A on SEDAR atwww.SEDAR.com
These measures, as well as their method of calculation or reconciliation to GAAP measures, are as follows:
1) Sales Contracts
See the “Subscription Business Model” section of the MD&A for a detailed discussion of why we believe Sales Contracts (also known as “bookings”) provide a meaningful performance metric. Sales Contracts are a component of deferred revenue (see Note 10 of the Notes to the Consolidated Financial Statements), and result from invoiced sales of our products and services.
2) 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 $1.001 in F2011 compared to $1.055 in F2010. The average U.S. dollar to Canadian dollar exchange rate on sales was $0.970 in Q4-F2011 compared to $1.030 in Q4-F2010.
3) 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).Adjusted Operating Income (Loss)
Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company’s performance. Adjusted Operating Income (Loss) refers to GAAP operating income excluding charges for stock-based compensation and amortization of acquired intangible assets.
4) 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 invested in the operations 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 the reasons these items are adjusted, please refer to the Fiscal 2011 MD&A.
5) Theft recovery products
Management defines the Company’s theft recovery product line as all products that include a theft recovery component.
6) Non-theft recovery products
Management defines the Company’s non-theft recovery product line as its Absolute Manage, Absolute Track, Computrace Data Delete and Absolute Secure Drive products.
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.