Absolute Reports Fiscal 2019 Fourth Quarter and Annual Financial Results
Fiscal 2019 Net Income Increases 144% Over Prior Year on Continued Enterprise Market Growth
VANCOUVER, British Columbia – August 13, 2019–Absolute(TSX: ABT) (“Absolute” or the “Company”), the leader in endpoint resilience, today announced its financial results for the three months and year ended June 30, 2019. All dollar figures are stated in U.S. dollars, unless otherwise indicated.
Fourth Quarter Fiscal 2019 Financial Highlights
Total revenue in Q4-F2019 was $25.3 million, representing a year-over-year increase of 5%.
The Annual Contract Value Base (“ACV Base”) at June 30, 2019 was $98.0 million, a sequential increase of $2.8 million, or 3%, over Q3-F2019.
The Enterprise(1) sector portion of the ACV Base increased 5% sequentially.
The Government(1) sector portion of the ACV Base increased 3% sequentially.
The Education(1) sector portion of the ACV Base was relatively unchanged sequentially.
Incremental ACV from New Customers was $2.1M in Q4-F2019, compared to $0.8 million in Q4-F2018.
Net ACV Retention from existing customers was 101% in Q4-F2019, consistent with 101% in Q4-F2018.
Adjusted EBITDA in Q4-F2019 was $4.9 million, or 19% of revenue, up from $3.1 million, or 13% of revenue, in Q4-F2018.
Cash generated from operating activities in Q4-F2019 was $3.5 million, compared with $5.0 million in Q4-F2018.
Absolute paid a quarterly dividend of CAD$0.08 per common share during Q4-F2019.
Annual Fiscal 2019 Financial Highlights
Total revenue in F2019 was $98.9 million, representing an increase of 6% over the prior fiscal year.
The ACV Base of $98.0 million at June 30, 2019 was up $6.5 million, or 7%, over the prior year.
The Enterprise(1) sector portion of the ACV Base increased 11% year-over-year. Enterprise customers represented 55% of the ACV Base at June 30, 2019.
The Government(1) sector portion of the ACV Base increased 15% year-over-year. Government customers represented 12% of the ACV Base at June 30, 2019.
The Education(1) sector portion of the ACV Base decreased 1% from the prior year. Education customers represented 33% of the ACV Base at June 30, 2019.
Incremental ACV from New Customers was $5.2 million in F2019, compared to $3.4 million in F2018.
Adjusted EBITDA in F2019 was $19.3 million, or 20% of revenue, up from $9.2 million, or 10% of revenue, in the prior fiscal year.
Cash generated from operating activities in F2019 was $10.3 million, compared with $12.5 million in the prior fiscal year.
Absolute paid quarterly dividends totaling CAD$0.32 per common share during F2019.
“Absolute delivered an impressive quarter in Q4 with strong sales performance across all key industry verticals, finishing a solid fiscal 2019 marked by significant transformation and achievement,” said Christy Wyatt, chief executive officer at Absolute. “During fiscal 2019, we delivered differentiated, new functionality to our customers that contributed to top-line growth while we managed investment into the company, leading to a significant expansion in profit margins. As we close my first fiscal year as CEO, I am proud of our positioning in the market and I am looking forward to fiscal 2020.”
In April 2019, we released the 2019 Global Endpoint Security Trends Report, revealing that endpoint security tools and agents fail, reliably and predictably. The study analyzed data from six million devices and one billion change events over the course of a year. The findings from the report demonstrate that the complexity of endpoint device controls creates a false sense of security among organizations while, in reality, causing security gaps and significant risks due to regular and reliable tool failure.
During Q4-F2019, we released version 7.7 of our product which included several new key capabilities, such as enhanced user interface, supportability, and manageability components. Over the year, we added a total of 84 out-of-the-box scripts in the Absolute Reach Library, enabling customers to further automate their endpoint management, hygiene, and vulnerability remediation across every endpoint, on and off the corporate network.
In June 2019, Forbes included Absolute as one of the Top 10 Cybersecurity Companies to Watch in 2019.
In June 2019, we expanded our North American footprint with the opening of our San Jose, California office to support our go-to-market functions and increase our brand awareness in the U.S.A.
During Q4-F2019, we announced several key leadership appointments:
In April 2019, Karen Reynolds was appointed as Chief Communications Officer.
In May 2019, John Robinson was appointed as Chief Human Resources Officer.
In June 2019, Sandra Toms was appointed as Chief Marketing Officer.
Summary of Key Financial Metrics
In Q1-F2019, we modified the allocation of some customer accounts between industry verticals, primarily the allocation of some quasi-governmental organizations from the Enterprise vertical to the Government vertical, which was previously included in the Public vertical. This reallocation was applied retrospectively, and has resulted in a revision to previously reported ACV Base and ACV Base growth figures for those verticals in historical periods. Please refer to the “Annual Contract Value Base” section of the Company’s June 30, 2019 MD&A for further discussion on this measure.
Commercial recurring revenue represents revenue derived from Cloud Services (as defined below) and recurring managed professional services, both of which are included as part of our ACV Base. Other revenue represents revenue derived from non-recurring professional services and ancillary product lines, including consumer products.
“Adjusted EBITDA” is used as a profitability measure. Please refer to the “Non-IFRS Measures” section of the Company’s June 30, 2019 MD&A for further discussion on this measure.
F2020 Corporate Outlook
The Company’s outlook for F2020 is as follows:
Revenue is expected to be between $103 million and $106 million, representing 4% to 7% annual growth.
Adjusted EBITDA is expected to be between 18% and 22% of revenue.
Cash from operating activities is expected to be between 16% and 22% of revenue.
Capital expenditures are expected to be between $3.5 million and $4.0 million.
The Company’s forecast for Adjusted EBITDA and cash from operating activities incorporates the expected impact of IFRS 16, “Leases”, which will be implemented commencing F2020. IFRS 16 is expected to positively impact both F2020 Adjusted EBITDA and cash from operating activities by $2.0 million to $2.5 million as a result of amortization of a lease asset and from increased interest expense. See “Future Accounting Standards” in our F2019 MD&A.
The foregoing expectations constitute forward-looking information and financial outlook and are qualified in their entirety by the cautionary statement below.
On July 19, 2019, the Company declared a quarterly dividend of CAD$0.08 per share on its common shares, payable in cash on August 29, 2019 to shareholders of record at the close of business on August 8, 2019.
Management’s Discussion and Analysis (“MD&A”) and Consolidated Financial Statements and the notes thereto for the fiscal year ended June 30, 2019 can be obtained today from Absolute’s corporate website at www.absolute.com. The documents will also be available under Absolute’s profile atwww.sedar.com.
Notice of Conference Call
Absolute will hold a conference call to discuss its Q4-F2019 and fiscal 2019 results on Tuesday, August 13, 2019, at 5:00 p.m. ET (2:00 p.m. PT). All interested parties can join the call by dialing 647-427-7450 or 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, August 20, 2019, at midnight ET. To access the archived conference call, please dial 416-849-0833 or 1-855-859-2056 and enter the reservation code 3569406.
A live audio webcast of the conference call will be available at www.absolute.com and http://bit.ly/2O9ow3X. 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 that the Company believes are meaningful in the assessment of the Company’s performance. All these metrics are nonstandard 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 F2019 MD&A.
These measures, as well as their method of calculation or reconciliation to IFRS measures, are as follows:
ACV Base, Net ACV Retention and ACV from New Customers
As the majority of the Company’s customer contracts are sold under multiyear 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, as an indicator of its future revenues.
The 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 made up 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 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.
Management believes that analyzing operating results exclusive of significant noncash 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 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 intangibles, amortization of property and equipment, and restructuring and reorganization charges and certain post-retirement benefits.
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 at www.absolute.comand follow us at@absolutecorp.
This press release contains certain forward-looking statements and forward-looking information (collectively, “forward-looking statements”) which relate to future events or Absolute’s future business, operations, and financial performance and condition. Forward-looking statements normally contain words like “will”, “intend”, “anticipate”, “could”, “should”, “may”, “might”, “expect”, “estimate”, “forecast”, “plan”, “potential”, “project”, “assume”, “contemplate”, “believe”, “shall”, “scheduled”, and similar terms and, within this press release, include, without limitation, the information under the heading “F2020 Corporate Outlook” and any statements (express or implied) respecting: Absolute’s future plans, strategies, and objectives; projected growth, revenues, margins, Adjusted EBITDA, profitability, expenses, cash from operating activities, capital expenditures, and earnings; existing and new product functionality and suitability; and expectations for the size of the IT security industry. Forward-looking statements, including the F2020 Corporate Outlook, are provided for the purpose of presenting information about management’s current expectations and plans relating to the future and allowing investors and others to get a better understanding of our anticipated financial position, results of operations, and operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Forward-looking statements are not guarantees of future performance, actions, or developments and are based on expectations, assumptions and other factors that management currently believes are relevant, reasonable, and appropriate in the circumstances. The material expectations, assumptions, and other factors used in developing the forward-looking statements set out herein include or relate to the following, without limitation: Absolute will be able to successfully execute its plans, strategies, and objectives; Absolute will be able to successfully manage cash flow, operating expenses, interest expenses, capital expenditures, and working capital and credit, liquidity, and market risks; Absolute will be able to leverage its past investments to support growth and increase profitability; the size of the IT security industry will be in line with industry experts’ and Absolute’s expectations; Absolute will maintain and enhance its competitive advantages within its industry and certain markets; Absolute will keep pace with or outpace the growth, direction, and technological advancement in its industry; Absolute will be able to adapt its technology to be compatible with changes to existing, and new, operating systems such as Microsoft Windows; Absolute will be able to maintain and develop its partner and reseller network; Absolute’s current and future (if any) OEM partners will continue to provide embedded firmware and distribution and resale support; Absolute’s existing and new products will function as intended and will be suitable for the intended end users; Absolute will be able to design, develop, and release new products, features, and services and enhance its existing products and services; Absolute will be able to protect against the improper disclosure of data it may process, store, and/or manage; Absolute’s revenues will not become subject to increased seasonality; future financing will be available to Absolute on favourable terms if and when required; Absolute will be in a financial position to buy back some of its shares and/or issue dividends in the future; fluctuations in applicable tax rates, foreign exchange rates, and interest rates will not have a material impact on Absolute; certain tax credits will remain or become available to Absolute; Absolute will be able to attract and retain key personnel; Absolute will be successful in its brand awareness and other marketing initiatives; Absolute will be able to successfully integrate businesses, intellectual property, products, personnel, and/or technologies that it may acquire (if any); Absolute will be able to maintain and enhance its intellectual property portfolio; Absolute’s protection of its intellectual property will be sufficient and its technology does not and will not materially infringe third party intellectual property rights; Absolute will be able to obtain any necessary third party licenses on favourable terms; Absolute will not become involved in material litigation; Absolute will not face any material unexpected costs related to product liability or warranties; foreign jurisdictions will not impose unexpected risks; and Absolute will maintain or enhance its accounting policies and standards and internal controls over financial reporting.
Although management believes that the forward-looking statements herein are reasonable, actual results could be substantially different due to the risks and uncertainties associated with and inherent to Absolute’s business, as more particularly described in the “Risk and Uncertainties” section of Absolute’s most recently filed Management’s Discussion and Analysis, which is available at www.absolute.com and under Absolute’s profile on www.sedar.com. Additional material risks and uncertainties applicable to the forward-looking statements herein include, without limitation, unforeseen events, developments, or factors causing any of the aforesaid expectations, assumptions, and other factors ultimately being inaccurate or irrelevant. Many of these factors are beyond the control of Absolute.
All forward-looking statements included in this press release are expressly qualified in their entirety by these cautionary statements. The forward-looking statements contained in this press release are made as at the date hereof and Absolute undertakes no obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by applicable securities laws.