Absolute Reports Fiscal 2020 Third Quarter Financial Results

VANCOUVER, British Columbia – May 11, 2020 – Absolute (TSX: ABT) (“Absolute” or the “Company”), the leader in Endpoint Resilience™, today announced its financial results for the three and nine months ended March 31, 2020. All dollar figures are stated in U.S. dollars, unless otherwise indicated.

“Amidst the impact of COVID-19, Absolute remains focused on ensuring the health and safety of our employees, helping our customers quickly mobilize their endpoint strategies to remote work and distance learning programs, and swiftly responding to our customers’ other needs,” said Christy Wyatt, President and CEO of Absolute. “We continued to see steady growth, while exceeding our expectations on EBITDA in the third quarter. Whether it’s hybrid remote work or the evolution of learning environments, there’s never been a more critical time for the undeletable endpoint defense that only Absolute can provide.”

• Total revenue in Q3-F2020 was $26.1 million, representing a year-over-year increase of 5%. Year-to-date total revenue was $77.5 million, representing an increase of 5% over the prior year-to-date period.
• The Annual Contract Value Base (“ACV Base”) at March 31, 2020 was $101.4 million, representing an increase of 7% over the prior year balance and a sequential increase of 1% over Q2-F2020.
• The Enterprise & Government portions of the ACV Base, combined, increased by 13% annually and by 2% sequentially. Enterprise & Government sector customers represented 70% of the ACV Base at March 31, 2020.
• The Education sector portion of the ACV Base decreased by 7% annually and was flat sequentially. Education sector customers represented 30% of the ACV Base at March 31, 2020.
• Incremental ACV from New Customers was $1.0 million in Q3-F2020, compared to $1.1 million in Q3-F2019.
• Net ACV Retention from existing customers was 100% in Q3-F2020, compared with 99% in Q3-F2019.
• Adjusted EBITDA in Q3-F2020 was $6.1 million, or 23% of revenue. Adjusted EBITDA – pre-IFRS 16 was $5.5 million, or 21% of revenue, compared to $5.8 million, or 23% of revenue, in Q3-F2019. Year-to-date Adjusted EBITDA was $19.3 million, or 25% of revenue. Year-to-date Adjusted EBITDA – pre-IFRS 16 was $17.9 million, or 23% of revenue, compared with $14.4 million, or 20% of revenue, in the prior year-to-date period.
• Cash generated from operating activities in Q3-F2020 was $3.7 million. Cash from operating activities – pre-IFRS 16 in Q3-F2020 was $3.3 million, compared to $0.9 million in Q3-F2019. Year-to-date cash from operating activities was $13.4 million. Year-to-date cash from operating activities – pre-IFRS 16 was $12.1 million, compared with $6.8 million in the prior year-to-date period.
• Absolute paid a quarterly dividend of CAD$0.08 per common share during Q3-F2020.

• In January 2020, we announced the appointment of Dianne Lapierre as Chief Information Officer.
• In January 2020, we enhanced our customers’ license management workflow within the Absolute console for easier and simplified license expiration visibility.
• In January 2020, we added historical event capabilities, enabling IT and security administrators with greater visibility and audit historical information on device events.
• In January 2020, we made available Absolute Secure Channel, delivering secure and remote access to the firmware layer across endpoint devices and strengthening the foundation of firmware-level protections.
• In January 2020, Forbes Magazine recognized Absolute as a Top 10 Cybersecurity Company to Watch in 2020 for the second year in a row.
• In February, during RSA® Conference 2020, Absolute previewed new research from our upcoming 2nd Annual State of Endpoint Resilience Report that highlighted Windows 10 as dominant the Enterprise OS, but revealed 80% of Windows 10 devices are running on a version more than one year old.
• In March 2020, we took significant measures to assist our existing customers in the face of the global COVID-19 outbreak, providing access to certain critical capabilities at no additional charge:
  • We provided certain customers with premium features to ‘persist,’ or proactively repair and reinstall, their existing virtual private network (VPN) applications, ensuring uninterrupted remote access to corporate and school networks, business and education applications as well as data for remote workers.
  • We provided certain customers with free access to a comprehensive library of automated, custom workflows, accelerating their ability to proactively pinpoint vulnerabilities and quickly take remedial action, whether a device is on or off the corporate network.
• In March 2020, Absolute was featured in Lenovo’s ‘Partner Stimulus Package,’ offering a new Device-as-a-Service solution aimed at work-from-home.

The Company is updating its outlook for F2020 as follows:

• The Company is maintaining its outlook on revenue, continuing to expect revenue to be between $103 million and $106 million, representing 4% to 7% annual growth.
• The Company is increasing its expectation for Adjusted EBITDA from between 18% and 22% of revenue to between 21% and 25% of revenue.
• The Company continues to expect cash from operating activities to be between 16% and 22% of revenue.
• The Company is decreasing its expectation for capital expenditures from between $3.5 million and $4.0 million to between $3.0 million and $4.0 million.

The Company’s forecast for Adjusted EBITDA and cash from operating activities incorporates the impact of IFRS 16, “Leases”, which was adopted July 1, 2019. IFRS 16 is expected to positively impact both F2020 Adjusted EBITDA and cash from operating activities by approximately $2.0 million as a result of amortization of right of use assets and from increased interest expense. See “New Accounting Pronouncements” in our March 31, 2020 MD&A.

The foregoing expectations constitute forward-looking statements and financial outlook and are qualified in their entirety by the cautionary statement set out at the beginning of this MD&A.

Quarterly Dividend

On April 20, 2020, the Company declared a quarterly dividend of CAD$0.08 per share on its common shares, payable in cash on May 29, 2020 to shareholders of record at the close of business on May 8, 2020.

Share Buyback Program

As a measure of prudence while we monitor developing market conditions, the Company will temporarily suspend repurchases of its common shares under its current normal course issuer bid (the “Bid”). The Bid was initially announced by press release on September 27, 2019 and is set to expire on September 30, 2020. Except as set out in this press release, the Company is not in possession of any material non-public information at this time.

Quarterly Filings

Management’s Discussion and Analysis and Interim Condensed Consolidated Financial Statements and the notes thereto for the fiscal period ended March 31, 2020 can be obtained today from Absolute’s corporate website at www.absolute.com. The documents will also be available under Absolute’s profile at www.sedar.com.

Notice of Conference Call

Absolute will hold a conference call to discuss its Q3-F2020 financial results on Monday, May 11, 2020, at 5:00 p.m. ET (2:00 p.m. PT). 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, May 18, 2020 at midnight. To access the archived conference call, please dial 416-849-0833 or 1-855-859-2056 and enter the reservation code 8335599.

A live webcast and replay will be accessible from Absolute's Investor Relations website here. 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 MD&A for the period ended June 30, 2019.

These measures, as well as their method of calculation or reconciliation to IFRS measures, are as follows:

1. 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.

2. Adjusted EBITDA and Adjusted EBITDA – pre-IFRS 16

   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 property and equipment and right of use assets, 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 property and equipment and right of use assets, and restructuring and reorganization charges and certain post-retirement benefits.

   Management believes that presenting F2020 Adjusted EBITDA on a pre-IFRS 16 basis will provide a meaningful comparative to F2019 Adjusted EBITDA.