Enterprise Segment ACV Base Increases 12% Year-Over-Year
Vancouver, Canada: November 13, 2017 – Absolute® (TSX: ABT), the new standard for endpoint visibility and control, today announced financial results for the three months ended September 30, 2017. All dollar figures are unaudited and stated in U.S. dollars, unless otherwise indicated.
“Our Q1 results were supported by strong growth in the North American enterprise segment, demonstrating the continuing success of our focused strategy and targeted investment and reflecting the value enterprise customers are realizing from our technology,” said Geoff Haydon, Chief Executive Officer, Absolute. “The Absolute 7 platform launch is particularly significant for this segment, featuring our new Absolute Reach offering, which empowers customers to customize and extend a definitive endpoint visibility and control capability across their entire endpoint populations. While these features were only deliverable for the last couple of weeks of the quarter, early reactions have been very positive from customers, prospects, and analysts”.
Key Financial Metrics
- Commercial recurring revenue increased 5% year-over-year to $21.8 million in Q1-F2018.
- Total revenue in Q1-F2018 was $23.0 million, representing a year-over-year increase of 2%.
- The Commercial Annual Contract Value (“ACV”) Base at September 30, 2017 was $88.5 million, an increase of 5% year-over-year and 1% sequentially.
- The enterprise portion of the ACV Base increased 12% year-over-year and was up 3% sequentially, led by strength in the North American enterprise segment. The public sector portion of the ACV Base decreased 1% year-over-year and was down 2% sequentially, with the decline being attributable to pricing pressure in the North American education segment. Enterprise customers represented 50% of the September 30, 2017 ACV Base, compared to 47% in the prior year.
- Net ACV Retention from existing Absolute customers was 100% during Q1-F2018, consistent with 100% in Q1-F2017.
- Incremental ACV from New Customers was $0.8 million in Q1-F2018 compared to $1.0 million in Q1-F2017.
- Adjusted EBITDA in Q1-F2018 was $1.3 million, or 6% of revenue, compared to $1.9 million, or 8% of revenue, in Q1-F2017.
- Cash generated from operating activities in Q1-F2018 was $2.1 million compared to $1.9 million in Q1-F2017.
- Absolute paid a quarterly dividend of CAD$0.08 per common share during Q1-F2018.
Technology and Products
- In mid-September 2017, we released the new Absolute 7 platform to our customer base. This next generation version of our cloud-based endpoint visibility and control platform features an intuitive redesigned user interface, powerful endpoint hygiene automation, and enhanced self-healing of third-party applications.
- In conjunction with the Absolute 7 release, we debuted Absolute Reach, which provides critical endpoint security automation to assess and control an entire endpoint population—on and off the corporate network. Absolute customers now have the ability to execute custom queries and remediation to speed and streamline the detection and remediation of security vulnerabilities and incidents.
Summary of Key Financial Metrics
The company has revised its outlook for F2018 based on Q1 results and observed trends, including continued pipeline growth in the Enterprise vertical but recognizing longer sales cycles and weaker than expected performance in the public sector:
- The Company is lowering its revenue guidance to between $94.0 million and $96.0 million, representing 3% to 5% annual revenue growth.
- The Company is maintaining its Adjusted EBITDA guidance of 9% to 11% of revenue.
- The Company is lowering its guidance for cash from operating activities to 9% to 12% of revenue.
- Capital expenditures remain unchanged at $3.0 million to $3.5 million.
On October 20, 2017, the Company declared a quarterly dividend of CAD$0.08 per share on its common shares, payable in cash on November 27, 2017 to shareholders of record at the close of business on November 6, 2017.
Management’s Discussion and Analysis (“MD&A”) and Interim Condensed Consolidated Financial Statements and the notes thereto for the fiscal quarter ended September 30, 2017 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 will hold a conference call to discuss the Company’s Q1-F2018 results on Monday, November 13, 2017 at 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 20, 2017 at midnight ET. To access the archived conference call, please dial 416-849-0833 or 1-855-859-2056 and enter the reservation code 9896039.
A live audio webcast of the conference call will be available at www.absolute.com and http://bit.ly/2yObYq9. 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 on the Company’s website for 90 days.
Non-IFRS Measures and Definitions
Throughout this press release, the Company refers to a number of measures which the Company believes 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 September 30, 2017 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:
- Commercial ACV Base, Net ACV Retention, and ACV from New Customers
As the majority of the Company’s customer contracts are sold under multi-year term licenses, there is a significant lag between the timing of the Billing and the associated revenue recognition. As a result, the Company focuses on the aggregate annualized value of its subscriptions under contract, measured by Annual Contract Value (“ACV”), as an indicator of its future revenues.
Commercial ACV Base measures the amount of recurring annual revenue Absolute will receive from its commercial customers under contract at a point in time, and therefore is an indicator of the Company’s future revenue streams. Net ACV Retention measures the percentage increase or decrease in the Commercial ACV Base at the end of a period for the customers that comprised the Commercial ACV Base at the beginning of the same period. This metric provides insight into the effectiveness of Absolute’s customer retention and expansion functions. ACV from New Customers measures the addition to the Commercial ACV base from sales to new commercial DDS customers during the quarter.
We believe that increases in the amount of ACV from New Customers, and improvement in the Company’s Net ACV Retention, will grow our Commercial ACV Base and, in turn, our future revenues.
- Adjusted EBITDA
Management believes that analyzing operating results exclusive of significant non-cash items or items not controllable in the period 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 and reorganization charges and post-retirement benefits. The items excluded in the determination of Adjusted EBITDA are share-based compensation, amortization of acquired intangibles, amortization of property and equipment, and restructuring and reorganization charges and certain post-retirement benefits.
- Adjusted Operating Expenses
A number of significant non-cash or non-recurring expenses are reported in the Company’s 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 and reorganization charges and certain post-retirement benefits. For a description of the reasons these items are adjusted, please refer to the “Non-IFRS Measures” section of the September 30, 2017 MD&A.