Absolute Software Reports Fiscal 2014 Year-End and Fourth Quarter Results

August 18, 2014

Absolute closes year with record quarterly Sales Contracts, achieves 18% growth

Vancouver, Canada: August 18, 2014Absolute® Software Corporation (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 and year ended June 30, 2014. All financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and are reported in U.S. dollars.

Q4-F2014 Highlights:

Sales Contracts

  • Record total Sales Contracts of $30.7 million, representing 18% year-over-year growth
  • Commercial Sales Contracts of $29.9 million, representing 20% year-over-year growth
  • 35% year-over-year growth in Device Management and Data Security product sales
  • 13% year-over-year growth in Theft Management product sales
  • 8% year-over-year growth in International commercial sales

Operations and Corporate

  • $1.9 million in Cash from Operating Activities ($2.4 million prior to the payment of post retirement benefits) compared to $3.2 million in Q4-F2013
  • $2.4 million (CAD$0.06 per common share) dividend paid during the quarter
  • Geoff Haydon appointed as Chief Executive Officer and as a member of the Company’s Board of Directors

Technology

  • Absolute persistence technology embedded in the Microsoft Surface Pro 3 tablet
  • Positive movement in the Visionaries Quadrant of the Gartner Magic Quadrant for Client Management Tools
  • Maintained positioning in the Niche Quadrant of the Gartner Magic Quadrant for Enterprise Mobility Management Software
  • Absolute is one of only four vendors who are positioned in both of the above Magic Quadrants
  • Integration of additional Computrace and Absolute Manage features within the Absolute Service console 
  • First to market with BYOD support of Windows and Mac computers

"Data security has become a key driver in heavily regulated segments. Accordingly, it’s not a surprise that in Q4 Absolute delivered strong sales growth in the corporate and healthcare segment,” said Geoff Haydon, CEO of Absolute. “Our customers recognize the risk as well as their responsibility to secure sensitive business data on and off corporate networks. I believe Absolute is in a unique position to capture a growing share of this market opportunity."

F2014 Highlights:

Sales Contracts

  • Total Sales Contracts of $97.3 million, representing 10% year-over-year growth
  • Commercial Sales Contracts of $92.4 million, representing 12% year-over-year growth
  • 15% year-over-year growth in sales of Device Management and Data Security products
  • 11% year-over-year growth in sales of Theft Management products
  • 23% year-over-year growth in International commercial sales

Operations and Corporate

  • $15.5 million in Cash from Operating Activities ($17.3 million prior to the payment of post-retirement benefits) compared to $17.5 million in Q4-F2013
  • $9.3 million (CAD$0.23 per common share) in dividends paid during the fiscal year
  • Appointed Sal Visca to the Company’s Board of Directors

Technology

  • Absolute persistence technology embedded in additional Samsung Galaxy devices including the Galaxy S5, NotePRO, and TabPRO
  • Absolute Service version 8.0 achieved certification in 10 ITIL 2011 processes
  • Absolute Manage version 6.4.2 support for the Apple streamlined device enrollment program
  • Achieved inclusion in the Gartner Magic Quadrant for Content-Aware Data Loss Prevention

Services

  • Absolute Safe Schools was launched, a program for Computrace Education customers to support them in the training and safety of student end users

“Looking forward, fiscal 2015 will be an exciting year for Absolute. We’ve sharpened our focus, and will deliver on key initiatives,” stated Mr. Haydon.  “This includes concentrating on the growth of Computrace, which is perfectly positioned to provide a persistent and effective response to the data and security risks inherent to a mobile workforce. This will also involve leveraging our persistence technology – and existing customer base – to cross-sell our Absolute Manage and Absolute Service offerings. We will invest selectively in product market segments that provide optimum return on investment.  We will execute tightly against the renewal and expansion of existing customer relationships, and the development of new ones. The entire Absolute team is energized as we head into the new fiscal year.”

“The board of directors recognizes the tremendous opportunity ahead of us, as well as our strong current financial position and ability to continue to generate strong operating cash flow,” continued Mr. Haydon.  “As such, the board of directors has resolved to increase our quarterly dividend going forward from $0.06 to $0.07 per common share.”

Q4-F2014 and F2014 Financial Review

Q4-F2014 Sales Contracts were $30.7 million, up 18% from $26.2 million in Q4-F2013. Sales Contract growth in Q4-F2014 reflected strength in the corporate and healthcare segment. F2014 Sales Contracts were $97.3 million, up 10% from $88.3 million in F2013.

Invoiced sales to commercial customers increased 20% in Q4-F2014 compared to Q4-F2013, and increased 12% for the fiscal year. Commercial Sales Contracts for Absolute’s Theft Management products(5)  were $18.9 million in Q4-F2014, representing an increase of 13% from $16.8 million in Q4-F2013. F2014 Commercial Sales Contracts for theft management products were $58.4 million, up 11% from $52.8 million in F2013. 

Q4-F2014 Commercial Sales Contracts from Absolute’s Device Management and Data Security products(6)  were $11.1 million, up 35% from $8.2 million in Q4-F2013. For F2014, Commercial Sales Contracts from device management and data security products were $34.0 million, up 15% from $29.6 million in F2013. Growth in this category during the quarter was primarily driven by strong sales of Computrace Data Protect.

International commercial Sales Contracts were $3.0 million in Q4-F2014 (10% of total Sales Contracts), up 8% from $2.7 million in Q4-F2013 (11% of total Sales Contracts). F2014 International Sales Contracts were $13.3 million (14% of total Sales Contracts), up 23% from $10.8 million (12% of total Sales Contracts) for F2013.

Sales Contracts for consumer solutions were $0.8 million (3% of total Sales Contracts), down from $1.2 million (4% of total Sales Contracts), in Q4-F2013. F2014 consumer Sales Contracts were $4.9 million (5% of total Sales Contracts), down from $5.9 million (7% of total Sales Contracts), in F2013.

Revenue in Q4-F2014 was $23.3 million, a 6% increase from $22.0 million in Q4-F2013. 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. F2014 revenue was $91.0 million, a 9% increase from $83.2 million in F2013.

Adjusted Operating Expenses(3) for Q4-F2014 were $19.1 million, up 2% from $18.8 million in Q4-F2013. The change reflected higher sales and marketing expenditures, which were offset by a higher Canadian Scientific Research and Experimental Development investment tax credit which effectively reduced research and development expenditures for the period. F2014 Adjusted Operating Expenses were $74.7 million, up 5% from $71.4 million in F2013.

Absolute generated Adjusted EBITDA(4) of $4.3 million in Q4-F2014, up 34% from $3.2 million in Q4-F2013. F2014 Adjusted EBITDA was $16.3 million, up 39% from $11.7 million in F2013.

Absolute recorded net income of $0.8 million, or $0.02 per share, in Q4-F2014, compared to net income of $0.4 million, or $0.01 per share, in Q4-F2013. F2014 net income was $3.6 million, or $0.08 per share, compared to net income of $1.7 million, or $0.04 per share, in F2013.

Cash from operating activities was $1.9 million for Q4-F2014, down 38% from $3.2 million in Q4-F2013.  F2014 cash from operating activities was $15.5 million, down 12% from $17.5 million in F2013. F2014 Cash from operating activities reflects the payment of $1.4 million of post-retirement benefits made during Q3-F2014 and an additional $0.4 million made during Q4-F2014.

At June 30, 2014, Absolute had cash, cash equivalents and investments of $73.6 million compared to $62.9 million at June 30, 2013. 

Quarterly Dividend

Given the Company’s strong financial position, the Board of Directors has approved a change in the Company's dividend policy. The quarterly dividend will increase from $0.06 to $0.07 per common share.  This increase is expected to be implemented in the second quarter of fiscal 2015.  There is no change to the current $0.06 per share dividend scheduled to be paid on August 28, 2014 to those persons who were shareholders of record at the close of business on August 7, 2014. 

Corporate Outlook

Management remains confident in Absolute’s market opportunity. For F2015, management expects Sales Contracts and cash from operating activities to increase over F2014 levels.

Annual Filings

Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for 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 F2014 results on Monday, August 18, 2014 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, August 25, 2014 at midnight.  To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 73132799.

A live audio webcast of the conference call will be available at www.absolute.com and http://bit.ly/abtq4.  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. 

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 2014 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 10 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 weighted average number of shares outstanding for the period (basic), or the fully diluted number of shares using the treasury stock method (diluted).

3) Adjusted Operating Expenses
A number of significant non-cash or non-recurring expenses are reported in our Cost of Revenue and Operating Expenses.  Management believes that analyzing these expenses exclusive of these non-cash or non-recurring items provides a useful measure of the cash invested in the operations of its business. The items excluded in the determination of Adjusted Operating Expenses are share-based compensation, amortization of acquired intangible assets, amortization of property and equipment, and restructuring charges and certain post-retirement benefits. For a description of the reasons these items are adjusted, please refer to the Fiscal 2014 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 assets and property and equipment, foreign exchange gain or loss, share-based compensation, and restructuring charges and post-retirement benefits.  The non-cash items excluded in the determination of Adjusted EBITDA include share-based compensation, amortization of acquired intangibles, amortization of property and equipment, and restructuring charges and certain post-retirement benefits. 

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 Absolute Manage and Absolute Service products, as well as Computrace products that do not include an investigations and recovery services component (for example, Absolute Track and Computrace Data Protection).

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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)

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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive Income

Three months and year ended June 30, 2014 and 2013(Expressed in United States dollars) (Unaudited)

(Expressed in United States dollars) (Unaudited)

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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Changes in Shareholders’ Deficiency

(Expressed in United States dollars) (Unaudited)

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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows

Three months and year ended June 30, 2014 and 2013

(Expressed in United States dollars) (Unaudited)

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