Absolute Software Reports Fiscal 2013 Third Quarter Results
Extension of Absolute’s persistent technology to Samsung smartphones and tablets sets stage for long-term growth
Vancouver, Canada: May 8, 2013 – Absolute® Software Corporation (TSX: ABT), the industry standard for persistent endpoint security and management solutions for computers, laptops and ultra-portable devices, today announced its financial results for the three and nine months ended March 31, 2013. All financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and are reported in U.S. dollars.
Q3 F2013 and Subsequent Highlights
Announced global partnership with Samsung Electronics to provide enterprise mobility management and theft protection for flagship GALAXY smartphones and tablets.
Extended Absolute’s persistent technology to Samsung’s smartphone and tablet platforms, and to Dell, HP, Lenovo, Panasonic and Fujitsu tablet platforms (Android and Windows x86).
Sales Contracts increased 1% to $19.0 million from $18.9 million in Q3 F2012.
Commercial Sales Contracts increased 4% to $17.8 million from $17.1 million in Q3 F2012, driven by strong corporate and healthcare sales.
Sales of Device Management and Data Security products were up 45% compared to Q3 F2012 and grew to 36% of total sales, up from 26% in Q3 F2012.
Cash From Operating Activities was $4.8 million, up from $2.6 million in Q3 F2012.
Adjusted Operating Income was $2.6 million, compared to $3.2 million in Q3 F2012.
Launched Absolute Manage 6.1.5 with a number of enhancements to the Company’s Mobile Device Management solution including a new web-based user interface, certificate-based authentication, Mobile Content Management capabilities for Android devices, and integration with SharePoint for content access from mobile devices.
Expanded alliance with Panasonic for its Toughbook® line of laptops to Latin America.
Announced the appointment of Thomas Kenny to the role of Executive Vice President and General Manager of Global Sales and Marketing.
Paid first quarterly dividend and declared second dividend of CAD$0.05 per common share.
Announced renewal of the Company’s Normal Course Issuer Bid.
Awarded a new patent for a “Persistent Servicing Agent” that includes services such as remote data deletion.
Announced positive movement in the Visionaries Quadrant of the Gartner Magic Quadrant for Client Management Tools.
“We have set the stage for future growth with our Samsung persistence win,” said John Livingston, CEO of Absolute. “The agreement crystallizes our mobile cross-platform strategy, and provides our customers with a level of enterprise grade security that no other vendor can match. In the near-term, we expect to see increased education opportunities for Computrace Mobile as customers adopt Android and Windows x86 tablets where Absolute’s persistence is supported. We are also working with Samsung on global go-to-market opportunities to accelerate our smartphone and tablet security services growth in fiscal 2014 and beyond.”
“In addition, our corporate vision of ‘Many Devices, One Solution’ is resonating with customers, and Absolute is winning business against key competitors in the Client Management Tools (CMT) and Mobile Device Management (MDM) markets,” continued Mr. Livingston. “Commercial sales grew 4% over Q3 last year, despite a 14% decline in PC shipments. This growth demonstrates market acceptance of our Governance, Risk management and Compliance (GRC) solutions in the corporate and healthcare verticals, and the continued diversification of our cross-platform security and management.”
Q3 F2013 and F2013 YTD Financial Review
Q3 F2013 Sales Contracts were $19.0 million, up 1% from $18.9 million in Q3 F2012. The year-over-year increase was driven by strength in the corporate and healthcare verticals, which offset weakness in the education vertical. F2013 year-to-date (“YTD”) Sales Contracts were $62.1 million, down 4% from $64.9 million for the same period in F2012.
Commercial Sales Contracts for Absolute’s Theft Management products(5) were $11.5 million for Q3 F2013. This was down 10% from $12.8 million in Q3 F2012. YTD Commercial Sales Contracts for Theft Management products were $36.0 million, down 14% from $41.8 million in YTD F2012. Demand for these products is highly correlated to PC sales in the education market, which led to the year-over-year declines. However, the softness in the education sector continued to be partially offset by advances in the corporate, healthcare and government verticals. In addition, the Company expects the extension of its persistence technology to additional Android tablets, including Samsung, and to Microsoft x86 tablets offered by its OEM partners to enable it to improve its sales in the education sector in future quarters.
Q3 F2013 Commercial Sales Contracts from Absolute’s Device Management and Data Security products(6), which also includes Absolute Service, were $6.3 million, up 45% from $4.4 million in Q3 F2012. For the YTD period, Commercial Sales Contracts from Device Management and Data Security products were $21.4 million, up 26% from $17.0 million for the same period in F2012.
International Sales Contracts were $2.9 million in Q3 F2013 (15% of total Sales Contracts) up 38% from $2.1 million in Q3 F2012 (11% of total Sales Contracts). YTD International Sales Contracts were $8.1 million (13% of total Sales Contracts), down 7% from $8.7 million (13% of total Sales Contracts) for the same period in F2012. The third quarter growth reflects strong gains in the APAC (Asia-Pacific) and LATAM (Latin American) regions, while the YTD reduction reflects a large one-time sale in the second quarter last year.
For Q3 F2013, Sales Contracts for consumer solutions were $1.2 million (6% of total Sales Contracts), down 29% from $1.7 million (9% of total Sales Contracts), in Q3 F2012. YTD consumer Sales Contracts were $4.7 million (8% of total Sales Contracts), down 23% from $6.1 million (9% of total Sales Contracts) for the same period in F2012.
Revenue for Q3 F2013 was $20.9 million, a 13% increase from $18.4 million in Q3 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 $61.2 million, an 11% increase from $55.0 million for the same period in F2012. As a result of the SaaS business model, a majority of revenue (82% 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 Q3 F2013 were $18.2 million, up 20% from $15.2 million in Q3 F2012. The year-over-year change was primarily due to increased investment levels that the Company initiated near the end of F2012 to support its long-term strategic growth initiatives. Adjusted Operating Expenses(3) for Q3 F2013 were also up 7% sequentially from $17.1 million in Q2 F2013, primarily because the prior quarter included the positive impact from a doubtful debt reversal. YTD Adjusted Operating Expenses were $53.7 million, up 16% from $46.3 million for the same period in F2012.
Absolute generated Adjusted Operating Income(4) of $2.6 million in Q3 F2013. This was down 19% from $3.2 million in Q3 F2012, reflecting the increased investment in the business. YTD Adjusted Operating Income was $7.5 million, down 14% from $8.8 million for the same period in F2012.
Absolute recorded a net loss of $(0.5) million, or $(0.01) per share, in Q3 F2013, compared to net income of $1.4 million, or $0.03 per share, in Q3 F2012. YTD net income was $1.3 million, or $0.03 per share, compared to $1.0 million, or $0.02 per share, for the same period in F2012.
Cash from operating activities was $4.8 million for Q3 F2013, up 83% from $2.6 million in Q3 F2012. YTD cash from operating activities was $14.4 million, up 1% from $14.2 million for the same period in F2012.
At March 31, 2013, Absolute had cash, cash equivalents and investments of $61.3 million compared to $69.9 million at June 30, 2012. Significant uses of cash in the quarter included a dividend payment of CAD$0.05 per common share as per the Company’s new policy.
The Company’s F2013 outlook is unchanged. Management believes that the Company will continue to face improving, yet still challenging market conditions through the remainder of F2013. While management expects the Company to return to growth in F2014, they continue 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.
Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for Q3 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 Q3 F2013 results on Wednesday, May 8, 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 Wednesday, May 15, 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 33539909.
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 Q3 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:
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 the Company’s products and services.
Basic and diluted Cash from Operating Activities per share
As a result of the nature of the Company’s 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 Expenses
A number of significant non-cash expenses are reported in the Company’s 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 Q3 MD&A.
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.
Theft Management products
Management defines the Company’s theft management product line as Computrace products that include an investigations and recovery services component.
Device Management and Data Security products
Management defines the Company’s Device Management and Data Security product line as are defined as the Company’s Absolute Manage, Absolute Secure Drive and Absolute Service offerings, as well as Computrace products that do not include an investigations and recovery services component (for example, Absolute Track and Computrace Data Protection).
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.