Company Delivers Record Sales Contracts and Fifth Consecutive Quarter of Double-digit Year-on-year Growth
Vancouver, Canada: November 17, 2011 – Absolute® Software Corporation (“Absolute” or the “Company”) (TSX: ABT), the leading provider of firmware-embedded endpoint security and management solutions, today announced its financial results for the three-month period ended September 30, 2011. This is the Company’s first set of consolidated financial statements prepared under International Financial Reporting Standards (“IFRS”) and reported in U.S. dollars. All figures are in U.S. dollars unless otherwise stated.
Q1 Fiscal 2012 Highlights
- Achieved 20% growth in Sales Contracts(1) while reducing expenses 7% year-over-year.
- Increased commercial Sales Contracts by 36% compared to Q1-F2011.
- Generated $5.5 million in cash from operating activities, representing an increase of 60% over Q1-F2011.
- Adjusted Operating Income was $2.7 million, a significant improvement from an Adjusted Operating Loss of $0.3 million in Q1-F2011.
- International sales increased 51% to 9% of total Sales Contracts, compared to 7% in Q1-F2011.
- Announced the integration of Computrace® persistence technology into the firmware of the Lenovo ThinkPad Tablet.
- Launched support for Mac OS X Lion.
- LoJack for Laptops named Editors’ Choice by PC Magazine.
- Repurchased 683,000 shares for a total of $2.8 million under Company’s Normal Course Issuer Bid.
- Subsequent to quarter end, released Absolute Manage 6.0, which included 60 new features including Windows imaging and:
- Launch of Mobile Device Management (MDM) for Android;
- Extension of MDM support for iOS5 platforms; and
- Launch of AbsoluteSafe, a ground breaking solution for document control on iOS devices.
“Our Q1 results reflect particularly strong commercial sales, which grew 36% year-over-year. In addition to our seasonally strong education sales, we experienced double digit growth in all of our major commercial product lines, target market verticals and geographic regions,” said John Livingston, CEO of Absolute. “Our performance in the quarter clearly demonstrates we have the right products and strategy in place, and as a result, we are capturing a larger share of the endpoint security and management market.”
Mr. Livingston continued, “We are particularly excited about the success we are having with our MDM offerings. We are the leading vendor that can provide security and management across PC, Mac, iOS and Android devices, and with the launch of Absolute Safe, we have moved further ahead of the industry curve. Absolute safe provides organizations with a highly sought-after solution to address consumerization. With these offerings, in combination with our Android persistence and early stage self-encrypting drive solutions, we believe that we are well positioned to deliver long-term growth. ”
Q1 F2012 Financial Review
Absolute’s Q1 F-2011 results are the Company’s first set of consolidated financial statements prepared under IFRS and in U.S. dollars. For more detailed information regarding the Company’s transition to IFRS, including a reconciliation of the Company’s Q1 F-2011 results as originally reported in Canadian Generally Accepted Accounting Principles (CGAAP) to IFRS please refer to the Company’s financial statements and MD&A filings on SEDAR at www.sedar.com.
Q1 F2012 Sales Contracts(1) grew 20% to $25.3 million from $21.1 million in Q1-F2011. The increase was driven by strong commercial sales globally across all of the Company’s target market verticals – education, corporate, government and healthcare. Q1-F2012 Commercial sales were $22.9 million, or 91% of Sales Contracts, up 36% over Q1-F2011.
Commercial Sales Contracts from Absolute’s flagship theft recovery products(4) in Q1-F2012 grew 18% over Q1-F2011, as market demand for the Company’s unique theft recovery and theft management services remained strong.
Commercial Sales Contracts from Absolute’s non-theft recovery products(6) (i.e. management, tracking and data protection) grew 142% over Q1-F2011, as demand, particularly for Absolute Manage, MDM and the Company’s Computrace Data Delete offering, gained momentum. The Company believes this to be an indication of its success in diversifying sales and developing new product lines with long-term growth potential.
For Q1-F2012, Sales Contracts for consumer solutions were $2.4 million, or 9% of Sales Contracts, compared to $4.2 million, or 20% of Sales Contracts, in Q1-F2011. The year-over-year decline was expected, and is primarily due to the phase-out of a low margin high volume OEM bundle program.
On the international front, sales increased 51% to $2.2 million in Q1-F2012, or 9% of sales, up from $1.5 million, or 7% of sales, in Q1 F2011.
Revenue for Q1-F2012 was $18.2 million, an increase of 12% from $16.3 million in Q1-F2011. Revenue is typically a lagging performance indicator for Absolute, as it is a function of deferred revenue as opposed to invoiced sales in the quarter. The majority of the revenue from Q1-F2012 Sales Contracts is included in the deferred revenue on the balance sheet at September 30, 2011, which was $118.2 million, compared to $111.2 million at June 30, 2011.
Adjusted Operating Expenses(3) for Q1-F2012 were $15.5 million, a decrease of 7% from $16.6 million in Q1 F2011, largely as a result of reductions in certain partner marketing activities as well as the Company’s continued focus on driving growth while tightly managing expenses.
Reflecting the Company’s revenue growth and its ongoing focus on cost control, Absolute generated Adjusted Operating Income(4) of $2.7 million in Q1-F2012, up from an Adjusted Operating Loss of $0.3 million in Q1-F2011. Absolute recorded a net loss of $1.9 million in Q1-F2012, compared to a net profit of $0.1 million in Q1-F2011. The current quarter loss was primarily due to foreign exchange losses of $1.9 million in Q1-F2012 on Canadian dollar net asset balances, as compared to a $1.6 million foreign exchange gain in Q1-F2011.
Cash from operating activities increased 60% in Q1-F2012 to $5.5 million, compared to $3.4 million in Q1-F2011. The increased cash flow reflects the company’s improved operational performance which produced rapidly growing sales contracts and reduced operating expenses.
Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for Q1 F2012 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 Software will hold a conference call to discuss the Company’s Q1 F2012 results on Thursday, November 17, 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, November 24, 2011 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 at www.newswire.ca. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 25033930.
Non-IFRS 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 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 First Quarter 2012 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) 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 included in deferred revenue (see Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements), and result from invoiced sales of our products and services.
2) 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).
3) 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 share-based compensation and amortization of acquired intangible assets. For a description of the reasons these items are adjusted, please refer to the First Quarter Fiscal 2012 MD&A.
4) 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 IFRS operating income excluding charges for share-based compensation and amortization of acquired intangible assets.
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.