Absolute Software Reports First Quarter F2014 Results
Sales Contracts rise 15% with growth in all market verticals
Vancouver, Canada: November 6, 2013 – Absolute® Software Corporation (“Absolute” or the “Company”) (TSX: ABT), the industry standard for persistent endpoint security and management solutions for computers, laptops, tablets and smartphones, today announced its financial results for the three months ended September 30, 2013. All financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and reported in U.S. dollars.
Q1 F2014 Highlights:
Achieved Sales Contracts of $23.8 million, a year-over-year increase of 15% compared to $20.6 million in Q1-F2103
Sales Contracts grew in each of the education, corporate, healthcare and government verticals
Commercial Sales Contracts increased by 16% to $21.7 million compared to $18.6 million in Q1-F2013
Sales of Device Management and Data Security products were up 15% compared to Q1-F2013, while sales of Theft Management products increased 17% over the same period
International Sales Contracts increased by 32%, which included a significant Computrace Data Protection sale in the Asia Pacific region
Generated $5.4 million in Cash from Operating Activities compared to $5.3 million in Q1-F2013
Paid a quarterly dividend of $2.0 million, or CAD$0.05 per common share. Subsequent to quarter-end, announced a 20% dividend increase to CAD$0.06 per common share
Announced first to market theft recovery solution for Android smartphones, available on Samsung Galaxy S4 mobile devices
Released Absolute Service version 8.0, an ITIL® 2011 Certified IT Service Management solution
“Strong momentum with our core Computrace products has continued into fiscal 2014, helping to deliver 15% overall growth in sales contracts for Q1,” said John Livingston, CEO of Absolute. “Our vision of ‘Many Devices One Solution’ is resonating well with customers across all of our target markets. We believe that managing governance, risk and compliance will continue to become increasingly important for all types of organizations as they work to manage the potential liabilities associated with the growing adoption of mobile computing.”
“Our focus in fiscal 2014 remains on execution,” added Mr. Livingston. “In particular we are focusing on sales and product development. On the sales side, we have modified our sales incentive programs and we are working to enhance our opportunity with value-added resellers. On the product side, we will focus our efforts on adding new features to our existing products, and delivering an integrated web console for our Computrace and Absolute Manage products. We believe the impact of these initiatives will help to drive growth through the second half of the year and into fiscal 2015.”
F2013 Q1 Financial Review
Q1-F2014 Sales Contracts increased 15% to $23.8 million compared to $20.6 million in Q1-F2013. This stronger sales performance was driven by strength in all industry verticals and associated growth in both the device management and data security and the theft management product lines.
Commercial Sales Contracts for Absolute’s flagship theft management products were $15.0 million for Q1-F2014. This represents a 17% increase from $12.8 million in Q1-F2013.
Q1-F2014 commercial Sales Contracts from Absolute’s device management and data security products were $6.7 million. This was up 15% compared to $5.8 million in Q1-F2013.
International Sales Contracts increased 32% over Q1-F2013 from $2.7 million to $3.5 million. The growth in our international business included the impact of a large Computrace sale in the Asia Pacific region.
For Q1-F2014, Sales Contracts for consumer solutions were $2.1 million, or 9% of Sales Contracts, compared to $2.0 million, or 10% of Sales Contracts in Q1-F2013.
Revenue for Q1-F2014 was $21.7M million, a 10% increase from $19.8 million in Q1-F2013. Indicative of the Company’s Software-as-a-Service Model (“SaaS”) business model, revenue primarily represents the amortization of deferred revenue balances from recurring term license sales.
Adjusted Operating Expenses for Q1-F2014 were $18.4 million, up 2% from $18.0 million in Q1-F2013. The year-over-year increase was primarily attributable to additional sales and marketing headcount and increased use of contract staff within our research and development department.
Absolute generated Adjusted EBITDA of $3.3 million in Q1-F2014, up 89% from $1.7 million in Q1-F2013. The increase reflects a greater increase in revenue relative to expenses.
Absolute recorded net income of $1.1 million, or $0.03 per share, in Q1-F2014, compared to net income of $0.5 million or $0.01 per share in Q1-F2013.
Cash from operating activities was $5.4 million for Q1-F2014, compared to $5.3 million in Q1-F2013.
In F2013, Absolute initiated a dividend policy of CAD$0.05 per common share paid quarterly. During Q1-F2014, Absolute paid total dividends of $2.0 million, or CAD$0.05 per common share, compared to nil in the same period in F2013. Subsequent to quarter-end, the Board of Directors announced a 20% increase in the dividend to CAD$0.06 per common share paid quarterly.
At September 30, 2013, Absolute had cash, cash equivalents and investments of $68.5 million compared to $72.5 million at September 30, 2012.
Fiscal 2014 Outlook
We remain confident in the market opportunity for our solutions and intend to make continued investments, particularly in the key areas of sales and marketing and research and development, in order to fully capitalize on this opportunity. For F2014, we expect Sales Contracts to increase over F2013 levels and for cash generated from operating activities to grow modestly from F2013 levels.
Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for Q1-F2014 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-F2014 results on Wednesday, November 6, 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.
To access the archived conference call, please dial 416-849-0833 or 1-855-859-2056 enter the reservation code 90965516.The conference call will be archived for replay until Wednesday, November 13, 2013 at midnight.
A live audio webcast of the conference call will be available at www.absolute.com and http://bit.ly/161d1gE. 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 http://bit.ly/161d1gE.
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 Q4 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 11 of the Notes to the 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, amortization of acquired intangible assets, and amortization of property and equipment. For a description of the reasons these items are adjusted, please refer to the Fiscal 2013 MD&A.
4) Adjusted EBITDA
Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company’s performance. The term Adjusted EBITDA refers to earnings before deducting interest and investment gains (losses), income taxes, amortization of acquired intangible asset and property and equipment, foreign exchange gain or loss, and share-based compensation. The non-cash items excluded in the determination of Adjusted EBITDA include share-based compensation, amortization of acquired intangibles, and amortization of property and equipment.
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).
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.