Absolute Software Reports Fiscal 2013 Second Quarter Results

February 12, 2013

Device Management and Data Security products fueling top line growth

Vancouver, Canada: February 12, 2013Absolute® Software Corporation (“Absolute” or the “Company”) (TSX: ABT), the industry standard for persistent endpoint security and management solutions for computers, laptops and ultra-portable devices – and the data they contain, today announced its financial results for the three and six months ended December 31, 2012. All financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and are reported in U.S. dollars.

fy13_q2_1

Q2 F2013 Highlights

  • Sales Contracts increased 8% to $22.5 million from $20.7 million in Q2 F2012.
  • Commercial Sales Contracts increased 12% to $20.9 million from $18.7 million in Q2 F2012, driven primarily by strong healthcare and corporate sales activity.
  • Sales of Device Management and Data Security products were up 36% compared to Q2 F2012, growing to 44% of total sales.
  • Cash from Operating Activities was $4.2 million compared to $6.0 million in Q2 F2012.
  • Adjusted Operating Income increased 23% to $3.5 million from $2.9 million in Q2 F2012. 
  • Signed a $3.5 million Computrace contract with a Fortune 100 healthcare customer.
  • Announced expanded data protection capabilities with new Absolute Secure Drive features.
  • Broadened management product line with the acquisition of LiveTime Software, a SaaS and on-premise IT Service Management provider for $8.0 million cash plus contingent consideration.
  • Repurchased 2,186,600 common shares under the Company’s Normal Course Issuer Bid (“NCIB”) for a total cost of $10,612,000. Subsequent to quarter end, announced the renewal of Company’s NCIB for the period of January 25, 2013 to January 24, 2014.
  • Subsequent to quarter end, declared a quarterly dividend of CAD$0.05 per common share.

“We continue to gain sales traction with corporate and healthcare customers, as they increasingly realize the benefits our offerings provide for governance, risk management and regulatory compliance,” said John Livingston, CEO of Absolute. “This trend fueled our Sales Contract growth in the quarter, including the signing of the largest contract in our history with a Fortune 100 healthcare company. More broadly, the marketplace continues to go mobile. From inception, Absolute has focused on solving mobile computing security and management challenges. With the addition of Absolute Service and continuing wins for our persistence technology on Windows and Android tablets, we continue to expand our offerings to manage and protect any device on any platform. This remains unique in the new mobile IT paradigm.”

“Looking toward the remainder of fiscal 2013, while we are encouraged by our second quarter Device Management and Data Security growth, we believe the challenges we experienced in the education vertical in the first half of the year, mainly due to reduced PC shipments for one-to-one student programs, will persist.  As such, our expectation for a slight year-over-year decline in Sales Contracts and cash from operations remains unchanged. However, as evidenced by our declaration of a quarterly dividend, we are confident in our strategic positioning and prospects for continued growth over the long-term.”

Q2 F2013 and F2013 YTD Financial Review

Q2 F2013 Sales Contracts were $22.5 million, up 8% from $20.7 million in Q2 F2012. The year-over-year increase was largely driven by strength in the corporate and healthcare verticals, with Absolute closing a multi-million deal with a major healthcare customer in the quarter.  F2013 Year-to-date (“YTD”) Sales Contracts were $43.1 million, down 6% from $46.1 million for the same period in F2012, reflecting a challenging PC industry environment during the first half of the fiscal year, particularly in the education vertical.

Commercial Sales Contracts for Absolute’s flagship Theft Management products(5) were $11.7 million for Q2 F2013. This was down 2% from $11.9 million in Q2 F2012. YTD Commercial Sales Contracts for theft management products were $24.6 million, down 15% from $29.0 million in YTD F2012. Demand for these products is correlated with PC sales in the education market, which led to the year-over-year declines. However, the softness in the education sector was partially offset by advances in the Corporate and Healthcare verticals, which Absolute has targeted as expansion opportunities.

Q2 F2013 Commercial Sales Contracts from Absolute’s Device Management and Data Security products(6) were $9.2 million, up 36% from $6.8 million in Q2 F2012. For the YTD period, Commercial Sales Contracts from device management and data security products were $15.0 million, up 19% from $12.6 million for the same period in F2012. The year-over-year improvements for the quarter and the YTD period reflect an increase in sales across all of the Company’s Device management and Security products, including the Company’s multi-million dollar contract win in the healthcare space.

International Sales Contracts were $2.5 million in Q2 F2013 (11% of total Sales Contracts) down 43% from $4.4 million in Q2 F2012 (21% of total Sales Contracts). YTD International Sales Contracts were $5.2 million (12% of total Sales Contracts), down 21% from $6.6 million (14% of total Sales Contracts) for the same period in F2012. The Q2 and YTD year-over-year reductions relate to a significant sale in Australia that was included in the Company’s Q2 F2012 results.

For Q2 F2013, Sales Contracts for consumer solutions were $1.6 million (7% of total Sales Contracts), down 24% from $2.1 million (10% of total Sales Contracts), in Q2 F2012. YTD consumer Sales Contracts were $3.5 million (8% of total Sales Contracts), down 20% from $4.4 million (10% of total Sales Contracts), for the same period in F2012.

Revenue for Q2 F2013 was $20.6 million, a 12% increase from $18.4 million in Q2 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. YTD revenue was
$40.3 million, a 10% increase from $36.6 million for the same period in F2012. As a result of the SaaS business model, a majority of revenue (88% for the YTD period) was from the drawdown of deferred revenue balances accumulated to the end of the prior fiscal year.

Adjusted Operating Expenses(3) for Q2 F2013 were $17.1 million. This was up 10% from $15.5 million in Q2 F2012. The year-over-year change was due to increased investment levels, particularly in sales, marketing, and research and development. The Company initiated these increased spending levels near the end of F2012. YTD Adjusted Operating Expenses were $35.4 million, up 14% from $31.0 million for the same period in F2012.

Absolute generated Adjusted Operating Income(4) of $3.5 million in Q2 F2013. This was up 23% from $2.9 million in Q2 F2012 due to higher revenue, which was offset in part by increased investment in the business. YTD Adjusted Operating Income was $4.9 million, down 11% from $5.6 million for the same period in F2012, reflecting the net impact of higher YTD F2013 revenue and the Company’s increased investment in the business.

Absolute recorded net income of $1.3 million, or $0.03 per share, in Q2 F2013, compared to $1.5 million, or $0.03 per share, in Q2 F2012. YTD net income was $1.7 million, or $0.04 per share, compared to a net loss of $(0.4) million or $(0.01) per share for the same period in F2012. YTD net income included a foreign exchange gain of $0.5 million compared to a foreign exchange loss of $1.2 million for the same period in F2012.

Cash from operating activities was $4.2 million for Q2 F2013, down 30% from $6.0 million in Q2 F2012.  YTD cash from operating activities was $9.6 million, down 17% from $11.5 million for the same period in F2012.

At December 31, 2012, Absolute had cash, cash equivalents and investments of $57.1 million compared to $69.9 million at June 30, 2012. Significant uses of cash in the quarter included the acquisition of LiveTime and the repurchase of stock under the Company’s NCIB.

Outlook

The Company’s F2013 outlook remains unchanged. Management believes that the Company will continue to face challenging market conditions through the remainder of F2013. As a result, management continues to expect sales contracts for F2013 to be slightly below F2012 levels. Management remains committed to taking a balanced approach to operational investments, but also expects cash generated from operating activities to decline modestly compared to F2012.

Quarterly Filings

Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for Q2 F2013 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 Q2 F2013 results on Tuesday, February 12, 2013 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 Tuesday, February 19, 2013 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 93075560.

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 Fiscal 2013 Q2 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 Fiscal 2013 Q2 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).

Share this article

About Absolute Software

Absolute Software (NASDAQ: ABST) (TSX: ABST) is the only provider of self-healing, intelligent security solutions. Embedded in more than 600 million devices, Absolute is the only platform offering a permanent digital connection that intelligently and dynamically applies visibility, control and self-healing capabilities to endpoints, applications, and network connections - helping customers to strengthen cyber resilience against the escalating threat of ransomware and malicious attacks. Trusted by more than 18,000 customers, G2 recognized Absolute as a leader for the tenth consecutive quarter in the Summer 2022 Grid® Report for Endpoint Management and as a high performer in the G2 Grid Report for Zero Trust Networking.

©2022 Absolute Software Corporation. All rights reserved. ABSOLUTE, the ABSOLUTE logo, and NETMOTION are registered trademarks of Absolute Software Corporation or its subsidiaries. Other names or logos mentioned herein may be the trademarks of Absolute or their respective owners. The absence of the symbols ™ and ® in proximity to each trademark, or at all, herein is not a disclaimer of ownership of the related trademark.

Forward-Looking Statements

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.

For more information, please contact:

Media Relations
[email protected] or 858-524-9443

Investor Relations
[email protected] or 212-868-6760

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Financial Position

(Expressed in United States dollars) (Unaudited)

absolute-fy13-q2-2


ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive Income

Three and six months ended December 31, 2012 and 2011(Expressed in United States dollars) (Unaudited)

absolute-fy13-q2-3


ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Changes in Shareholders’ Deficiency

(Expressed in United States dollars) (Unaudited)

absolute-fy13-q2-4


ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows

Three and six months ended December 31, 2012 and 2011 (Expressed in United States dollars) (Unaudited)

absolute-fy13-q2-5

Financial Services