Absolute Software Reports Fiscal 2013 First Quarter Results

Vancouver, Canada: November 5, 2012 – Absolute® Software Corporation (“Absolute” or the “Company”) (TSX: ABT), the leading provider of persistent endpoint security and management solutions for PCs, Macs, iOS, Android, Windows and BlackBerry devices, today announced its financial results for the three months ended September 30, 2012. All financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and reported in U.S. dollars.

• Sales Contracts were $20.6 million, down 19% from Q1 F2012, reflecting challenging factors in the PC industry.
• Commercial Sales Contracts were $18.6 million, down 19% from Q1 F2012, reflecting the impact of challenging PC industry trends, most significantly within the education and government verticals.
• Company achieved year-over-year growth in key expansion areas of the business – corporate and healthcare verticals, the Absolute Manage product line and international sales.
• Sales of Theft Management Products⁽⁵⁾ were $12.8 million, down 25% compared to Q1 F2012.
• Device Management and Data Security product sales were $5.8 million, a 1% decrease compared to Q1 F2012.
• Cash from operating activities was $5.3 million, down 3% from Q1 F2012.
• Adjusted Operating Income was $1.4 million, a 48% decrease compared to Q1 F2012.
• Announced Computrace embedded persistence for the Fujitsu STYLISTIC M532 Android Media Tablet.
• Released Absolute Manage support for Windows 8 and Mac OS X 10.8 Mountain Lion.
• Announced availability of Absolute Data Protect for Android devices.
• Expanded data protection capabilities with new Absolute Secure Drive features.
• Opened a sales, marketing and customer support office in Kuala Lumpur, Malaysia.
• Repurchased 608,100 shares under the Company’s Normal Course Issuer Bid at a cost of $2.8 million.

“We achieved year-over-year increases in the corporate and healthcare verticals, the Absolute Manage product line and in our international business, all of which are key expansion areas for Absolute,” said John Livingston, CEO of Absolute. “However, we faced broader PC industry challenges in the quarter that placed downward pressure on our overall Q1 results. The magnitude of the impact of these challenges was unforeseen by our PC OEM and infrastructure partners, most of whom also underwent layoffs and reduced their guidance late in the September quarter. While we are disappointed with our overall results for the quarter, we are encouraged by industry forecasts, which are predicting a transition to an improved sales environment toward the end of the fiscal year.”

Mr. Livingston continued: “In response to our experience in the first quarter, we are taking a more measured approach to our investment levels. We are scaling back on our initial plans and partially offsetting spending increases with cost reductions in certain areas of the business. We balanced these cost reductions against the long-term market opportunity for our unique product vision that we believe is well positioned within the key secular trends in the PC industry. This belief is founded in the growth we continued to generate in Q1 in our emerging products and markets, particularly in the mobile device management space where we continue to experience exciting growth.”

Q1 F2013 Sales Contracts were $20.6 million, down 19% from $25.3 million in Q1 F2012. The year-over-year decline was a result of several PC industry factors, including a slowdown in PC sales due to the upcoming Windows 8 release, budget reallocations to iOS devices in the education sector and uncertainty in the US public sector as a result of the impending election. The negative impact these factors had on the Company’s Q1 F2013 results was partially offset by growth in expansion areas of the business, including stronger year-over-year sales in the corporate and healthcare verticals, increased sales of the Company’s Absolute Manage product line and expansion of the Company’s international sales.

Commercial Sales Contracts for Absolute’s flagship theft management products⁽⁵⁾ were $12.8 million for Q1 F2013. This was down 25% from $17.1 million in Q1 F2012, as these product sales are heavily driven by PC sales, with an emphasis on the education market.

Q1 F2013 Commercial Sales Contracts from Absolute’s device management and data security products⁽⁶⁾ were $5.8 million, down 1% from Q1 F2012. In the quarter, Absolute had strong year-over-year sales gains for its Absolute Manage product line, in particular its Mobile Device Management offering. These gains were offset by a decline in Computrace Data Protection sales, which were negatively affected by the same factors as the Company’s theft management products.

International Sales Contracts grew 21% to $2.7 million in Q1 F2013 from $2.2 million in Q1 F2012. This reflects the benefits of the Company’s strategy to invest in expansion into markets outside of North America that have the same needs for all of Absolute’s products, but with lower current levels of penetration.

For Q1 F2013, Sales Contracts for consumer solutions were $2.0 million, or 10% of Sales Contracts, down 17% from $2.4 million, or 9% of Sales Contracts, in Q1 F2012. The year-over-year decline was a result of delays in PC purchases in anticipation of the Windows 8 launch and some displacement of PC purchases by tablets.

Revenue for Q1 F2013 was $19.8 million, an 8% increase from $18.2 million in Q1 F2012. Indicative of the Company’s Software-as-a-Service (SaaS) business model, revenue primarily represents the amortization of deferred revenue balances from recurring term license sales. For Q1 F2013, 94% of revenue was related to the drawdown of deferred revenue balances accumulated to the end of the prior fiscal year.

Adjusted Operating Expenses⁽³⁾ for Q1 F2013 were $18.4 million. This was up 18% from $15.5 million in Q1 F2012 and up 3% from $17.9 million in Q4 F2012. The year-over-year change was due to increased investment levels, particularly in sales, marketing, and research and development. These increased spending levels were initiated near the end of F2012.

Absolute generated Adjusted Operating Income⁽⁴⁾ of $1.4 million in Q1 F2013, down 48% from an Adjusted Operating Income of $2.7 million in Q1 F2012, due to the combination of lower sales contracts and increased investment in the business in Q1 F2013.

Absolute recorded net income of $0.5 million in Q1 F2013, compared to a net loss of $1.9 million in Q1 F2012. Q1 F2013 net income included a foreign exchanges gain of $0.5 million compared to a foreign exchange loss of $1.9 million in Q1 F2012.

Cash from operating activities was $5.3 million for Q1 F2013, down 3% from $5.5 million in Q1 F2012.

At September 30, 2012, Absolute had cash, cash equivalents and investments of $72.5 million compared to $69.9 million at June 30, 2012.

Management believes that many of the negative PC industry factors the Company experienced in Q1 F2013 will persist through to the end of fiscal 2013.  As a result, management expects sales contracts for F2013 to be slightly below F2012 levels. Given the current challenging market conditions and the outlook for improved conditions toward the end of the fiscal year, management is taking a balanced approach to spending and expects cash generated from operating activities to decline moderately compared to F2012. As part of the Company’s overall growth plans, management also anticipates completing one, or more acquisitions during F2013. The Company is targeting acquisitions with a purchase price of $25 million or less.

Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for Q1 F2013 can be obtained today from Absolute’s corporate website at www.absolute.com. The documents will also be available at www.sedar.com.

Absolute Software will hold a conference call to discuss the Company’s Q1 F2013 results on Monday, November 5, 2012 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 12, 2012 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 1-855-859-2056and enter the reservation code 43441455.

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 Fiscal 2013 Q1 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 7 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 Fiscal 2013 Q1 MD&A.

4) Adjusted Operating Income

Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company’s performance. Adjusted Operating Income refers to IFRS operating (loss) income excluding charges for share-based compensation and amortization of acquired intangible assets.

5) Theft Management products

Management defines the Company’s theft management product line as Computrace products that include an investigations and recovery services component.

6) Device Management and Data Security products

Management defines the Company’s device management and data security product line as are defined as our Absolute Manage and Absolute Secure Drive products, as well as Computrace products that do not include an investigations and recovery services component (for example, Absolute Track and Computrace Data Protection).