Absolute Software Reports Fiscal 2012 Third Quarter Results

Vancouver, Canada: May  7, 2012 – Absolute® Software Corporation (“Absolute” or the “Company”) (TSX: ABT), the leading provider of firmware-embedded endpoint security and management solutions, today announced its financial results for the three- and nine-month periods ended March 31, 2012. All financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and reported in U.S. dollars.

• Achieved 8% growth in Sales Contracts year-over-year and 15% growth for the YTD period compared to F2011.
• Commercial Sales Contracts increased by 14% and increased by 24% for the YTD period compared to F2011. 
• Reported cash from operating activities of $2.6 million for the quarter, down from Q3 last year due to an increase in accounts receivable. For the YTD period, cash from operating activities increased 46% to $14.2 million as a result of sales contract growth and cost management.  
• Adjusted Operating Income was $3.2 million, a 55% improvement from $2.1 million in Q3-F2011.  For the year to date period Adjusted Operating Income improved 243% compared to the prior year period.
• Placed in the Visionaries Quadrant of Gartner Inc.’s Client Management Tools Magic Quadrant.
• Expanded product platform to include theft recovery for Android Tablets, an industry first, and Mobile Device Management (“MDM”) support for Microsoft Windows Phone 7.
• Announced the expansion of Absolute Manage MDM functionality to include AbsoluteSafe, an industry first solution enabling IT to support mobile and Bring Your Own Device (“BYOD”) requirements.  AbsoluteSafe enables IT administrators to securely distribute sensitive or confidential files to iOS devices and to set security options to password protect files and to block them from being copied, printed or emailed. 
• Repurchased 231,800 common shares under the Company’s Normal Course Issuer Bid for a total cost of $969,000.

“The BYOD trend is becoming more prevalent in the commercial market, creating a critical and challenging pain point for IT,” said John Livingston, Chief Executive Officer of Absolute. “This is a significant opportunity for Absolute as BYOD, which started as a mobile device phenomena, is now extending to laptops with Macs and the new Ultrabook PC’s.   We are the only company that offers a native solution to manage these multiple devices and platforms, whether they are PCs, Macs, tablets or smart phones, and whether they are company or individual owned devices.  We are committed to remain at the forefront of the market by helping IT departments overcome the challenge of managing, tracking and securing a large number of different devices across their organizations. We demonstrated this in the quarter, announcing AbsoluteSafe for secure document distribution, theft recovery for Android tablets and Absolute Manage support for Microsoft Windows Phone 7.  Importantly, our unique capabilities are being recognized by leading analyst firms such as Gartner, who placed Absolute in the Visionaries Quadrant in the Client Management Tools Magic Quadrant.”

Absolute’s Q3-F2012 results are the Company’s third set of consolidated financial statements prepared in U.S. dollars and under IFRS. For more detailed information regarding the Company’s transition to IFRS, including a reconciliation of the Company’s Q3-F2011 results as originally reported in Canadian Generally Accepted Accounting Principles (CGAAP) to IFRS, please refer to the Company’s financial statements and MD&A filings on SEDAR at www.sedar.com. 

Q3-F2012 Sales Contracts grew 8% to $18.9 million compared to $17.5 million in Q3-F2011. For the nine month period (YTD), Sales Contracts were $64.9 million, up 15% from $56.3 million for YTD-F2011. The growth rate in Q3-F2012 was lower than the year to date growth rate primarily due to a 28% decline in international sales, which can be expected to fluctuate quarterly due to the formative stage of our international expansion. Conversely, for the year to date period, the international growth trend remains strong at a 31% increase over the prior year to date period.

Commercial sales for Q3-F2012 grew 14% to $17.1 million and for YTD-F2012 were $58.8 million, up 24% from $47.3 million in YTD-F2011.   Commercial Sales Contracts for Absolute’s flagship theft management (previously referred to as “theft recovery”) products⁽⁵⁾  in Q3-F2012 were $12.8 million. This was up 17% year-over-year, demonstrating that demand for the Company’s unique theft management and investigative response services remains strong. For YTD-F2012, Commercial Sales Contracts for theft management products were $41.8 million, up 9% from YTD-F2011.

Commercial Sales Contracts from Absolute’s device management and data security (previously referred to as “non-theft management”) products⁽⁶⁾  were $4.4 million, up 5% over Q3-F2011 as a result of robust demand, particularly for Absolute Manage and Mobile Device Management offerings. For YTD-F2012, Commercial Sales Contracts from Absolute’s device management and data security products were $17.0 million, up 89% from YTD-F2011.

For Q3-F2012, Sales Contracts for consumer solutions were $1.7 million, or 9% of Sales Contracts, compared to $2.4 million, or 14% of Sales Contracts, in Q3-F2011. The year-over-year decline was primarily due to the planned reduction of a low margin high volume OEM bundle program. For YTD-F2012, Sales Contracts for consumer solutions were $6.1 million, or 9% of Sales Contracts, compared to $9.0 million, or 16% of Sales Contracts in YTD F-2011.

Revenue for Q3-F2012 was $18.4 million, an increase of 9% from $16.9 million in Q3-F2011. For YTD-F2012, revenue was $55.0 million, up 10% from $50.0 million. 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. During YTD-F2012, 83% of revenue was related to the drawdown of deferred revenue balances accumulated to the end of the prior fiscal year.

Adjusted Operating Expenses⁽³⁾ for Q3-F2012 were $15.2 million. This was up 2% from $14.9 million in Q3- F2011. Adjusted Operating Expenses for YTD-F2012 were $46.3 million, down 3% from $47.5 million for YTD-F2011.

Given the Company’s revenue growth and its ongoing focus on cost control, Absolute generated Adjusted Operating Income⁽⁴⁾ of $3.2 million in Q3-F2012, up 55% from an Adjusted Operating Income of  $2.1 million in Q3-F2011. For YTD-F2012, Adjusted Operating Income was $8.8 million compared to $2.6 million for YTD-F2011.

Absolute recorded net income of $1.4 million in Q3-F2012, compared to $1.6 million in Q3-F2011. The Company generated net income of $1.0 million for YTD-F2012 compared to $0.9 million for YTD-F2011. The results were impacted by foreign exchange gains and losses, with last year benefiting from a $3.6 million gain YTD compared to a $641,000 loss YTD-F2012.

Cash from operating activities was $2.6 million, down 14% from $3.0 million.  The year over year decline was primarily due to a delay in payments from an OEM partner and which were received subsequent quarter end. Cash from operating activities for YTD-F2012 increased 46% to $14.2 million from $9.7 million in YTD-F2011, reflecting the Company’s improved operational performance.

At March 31, 2012, Absolute had cash, cash equivalents and short-term investments of $66.0 million compared to $55.7 million at June 30, 2011.

Management’s discussion and analysis (“MD&A”), consolidated financial statements and notes thereto for Q3-F2012 can be obtained today from Absolute’s corporate website at www.absolute.com. The documents will also be available at www.sedar.com.

Absolute Software will hold a conference call to discuss the Company’s Q3-F2012 results on Monday, May 7, 2012 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, May 14, 2012 at midnight. 

A live audio webcast of the conference call will be available at www.absolute.com and www.newswire.ca.  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. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 73730214.

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 Third Quarter 2012 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 9 of the Notes to the Interim Condensed 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 and amortization of acquired intangible assets. For a description of the reasons these items are adjusted, please refer to the Third Quarter Fiscal 2012 MD&A.

4) Adjusted Operating Income (Loss)

Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company’s performance. Adjusted Operating Income (Loss) refers to IFRS operating income excluding charges for share-based compensation and amortization of acquired intangible assets.

5) Theft Management products(previously referred to as “theft recovery” products)

Management defines the Company’s theft management product line as all products that include a theft recovery component.

6) Device Management and Data Security products (previously categorized to as “Non-Theft recovery” products)

Management defines the Company’s device management and data security product line as its Absolute Manage, Absolute Track, Computrace Data Delete and Absolute Secure Drive products.