Absolute Software Reports Fiscal 2013 Third Quarter Results

Extension of Absolute's persistent technology to Samsung smartphones and tablets sets stage for long-term growth

VANCOUVER, May 8, 2013 /PRNewswire/ - Absolute® Software Corporation (TSX: ABT), the industry standard for persistent endpoint security and management solutions for computers, laptops and ultra-portable devices, today announced its financial results for the three and nine months ended March 31, 2013. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in U.S. dollars.

Key Financial Metrics Q3
F2013
Q3
F2012
%
change
YTD
F2013
YTD
F2012
%
change
Sales Contracts(1) $19.0M $18.9M +1% $62.1M $64.9M (4)%
Cash from operating activities $4.8M $2.6M +83% $14.4M $14.2M +1%
Operating cash per share(2)
(basic)
(diluted)
$0.12
$0.11
$0.06
$0.06
+100%
+83%
$0.34
$0.34
$0.33
$0.32
+3%
+6%
Revenue $20.9M $18.4M +13% $61.2M $55.0M +11%
Adjusted Operating Income(3) $2.6M $3.2M (19)% $7.5M $8.8M (14)%
Net income (loss) $(0.5)M $1.4M nm $1.3M $1.0M +31%
Net income (loss) per share
        (basic and diluted)
$(0.01) $0.03 nm $0.03 $0.02 +50%
Cash, cash equivalents and
investments
$61.3M $66.0M (7)% $61.3M $66.0M (7)%
Deferred revenue $126.5M $120.9M +5% $126.5M $120.9M +5%
(1)(2)(3) - Please refer to "Non-IFRS Measures and Definitions"

Q3 F2013 and Subsequent Highlights

  • Announced global partnership with Samsung Electronics to provide enterprise mobility management and theft protection for flagship GALAXY smartphones and tablets.
  • Extended Absolute's persistent technology to Samsung's smartphone and tablet platforms, and to Dell, HP, Lenovo, Panasonic and Fujitsu tablet platforms (Android and Windows x86).
  • Sales Contracts increased 1% to $19.0 million from $18.9 million in Q3 F2012.
  • Commercial Sales Contracts increased 4% to $17.8 million from $17.1 million in Q3 F2012, driven by strong corporate and healthcare sales.
  • Sales of Device Management and Data Security products were up 45% compared to Q3 F2012 and grew to 36% of total sales, up from 26% in Q3 F2012.
  • Cash From Operating Activities was $4.8 million, up from $2.6 million in Q3 F2012.
  • Adjusted Operating Income was $2.6 million, compared to $3.2 million in Q3 F2012.
  • Launched Absolute Manage 6.1.5 with a number of enhancements to the Company's Mobile Device Management solution including a new web-based user interface, certificate-based authentication, Mobile Content Management capabilities for Android devices, and integration with SharePoint for content access from mobile devices.
  • Expanded alliance with Panasonic for its Toughbook® line of laptops to Latin America.
  • Announced the appointment of Thomas Kenny to the role of Executive Vice President and General Manager of Global Sales and Marketing.
  • Paid first quarterly dividend and declared second dividend of CAD$0.05 per common share.
  • Announced renewal of the Company's Normal Course Issuer Bid.
  • Awarded a new patent for a "Persistent Servicing Agent" that includes services such as remote data deletion.
  • Announced positive movement in the Visionaries Quadrant of the Gartner Magic Quadrant for Client Management Tools.

"We have set the stage for future growth with our Samsung persistence win," said John Livingston, CEO of Absolute. "The agreement crystallizes our mobile cross-platform strategy, and provides our customers with a level of enterprise grade security that no other vendor can match.  In the near-term, we expect to see increased education opportunities for Computrace Mobile as customers adopt Android and Windows x86 tablets where Absolute's persistence is supported.  We are also working with Samsung on global go-to-market opportunities to accelerate our smartphone and tablet security services growth in fiscal 2014 and beyond."

"In addition, our corporate vision of 'Many Devices, One Solution' is resonating with customers, and Absolute is winning business against key competitors in the Client Management Tools (CMT) and Mobile Device Management (MDM) markets," continued Mr. Livingston. "Commercial sales grew 4% over Q3 last year, despite a 14% decline in PC shipments. This growth demonstrates market acceptance of our Governance, Risk management and Compliance (GRC) solutions in the corporate and healthcare verticals, and the continued diversification of our cross-platform security and management."

Q3 F2013 and F2013 YTD Financial Review
Q3 F2013 Sales Contracts were $19.0 million, up 1% from $18.9 million in Q3 F2012. The year-over-year increase was driven by strength in the corporate and healthcare verticals, which offset weakness in the education vertical. F2013 year-to-date ("YTD") Sales Contracts were $62.1 million, down 4% from $64.9 million for the same period in F2012.

Commercial Sales Contracts for Absolute's Theft Management products(5)  were $11.5 million for Q3 F2013. This was down 10% from $12.8 million in Q3 F2012. YTD Commercial Sales Contracts for Theft Management products were $36.0 million, down 14% from $41.8 million in YTD F2012. Demand for these products is highly correlated to PC sales in the education market, which led to the year-over-year declines. However, the softness in the education sector continued to be partially offset by advances in the corporate, healthcare and government verticals. In addition, the Company expects the extension of its persistence technology to additional Android tablets, including Samsung, and to Microsoft x86 tablets offered by its OEM partners to enable it to improve its sales in the education sector in future quarters.

Q3 F2013 Commercial Sales Contracts from Absolute's Device Management and Data Security products(6), which also includes Absolute Service, were $6.3 million, up 45% from $4.4 million in Q3 F2012. For the YTD period, Commercial Sales Contracts from Device Management and Data Security products were $21.4 million, up 26% from $17.0 million for the same period in F2012.

International Sales Contracts were $2.9 million in Q3 F2013 (15% of total Sales Contracts) up 38% from $2.1 million in Q3 F2012 (11% of total Sales Contracts). YTD International Sales Contracts were $8.1 million (13% of total Sales Contracts), down 7% from $8.7 million (13% of total Sales Contracts) for the same period in F2012. The third quarter growth reflects strong gains in the APAC (Asia-Pacific) and LATAM (Latin American) regions, while the YTD reduction reflects a large one-time sale in the second quarter last year.

For Q3 F2013, Sales Contracts for consumer solutions were $1.2 million (6% of total Sales Contracts), down 29% from $1.7 million (9% of total Sales Contracts), in Q3 F2012. YTD consumer Sales Contracts were $4.7 million (8% of total Sales Contracts), down 23% from $6.1 million (9% of total Sales Contracts) for the same period in F2012.

Revenue for Q3 F2013 was $20.9 million, a 13% increase from $18.4 million in Q3 F2012. 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. YTD revenue was $61.2 million, an 11% increase from $55.0 million for the same period in F2012. As a result of the SaaS business model, a majority of revenue (82% for the YTD period) was from the drawdown of deferred revenue balances accumulated to the end of the prior fiscal year. 

Adjusted Operating Expenses(3) for Q3 F2013 were $18.2 million, up 20% from $15.2 million in Q3 F2012. The year-over-year change was primarily due to increased investment levels that the Company initiated near the end of F2012 to support its long-term strategic growth initiatives. Adjusted Operating Expenses(3) for Q3 F2013 were also up 7% sequentially from $17.1 million in Q2 F2013, primarily because the prior quarter included the positive impact from a doubtful debt reversal. YTD Adjusted Operating Expenses were $53.7 million, up 16% from $46.3 million for the same period in F2012.

Absolute generated Adjusted Operating Income(4) of $2.6 million in Q3 F2013. This was down 19% from $3.2 million in Q3 F2012, reflecting the increased investment in the business. YTD Adjusted Operating Income was $7.5 million, down 14% from $8.8 million for the same period in F2012.

Absolute recorded a net loss of $(0.5) million, or $(0.01) per share, in Q3 F2013, compared to net income of $1.4 million, or $0.03 per share, in Q3 F2012. YTD net income was $1.3 million, or $0.03 per share, compared to $1.0 million, or $0.02 per share, for the same period in F2012.

Cash from operating activities was $4.8 million for Q3 F2013, up 83% from $2.6 million in Q3 F2012. YTD cash from operating activities was $14.4 million, up 1% from $14.2 million for the same period in F2012.

At March 31, 2013, Absolute had cash, cash equivalents and investments of $61.3 million compared to $69.9 million at June 30, 2012. Significant uses of cash in the quarter included a dividend payment of CAD$0.05 per common share as per the Company's new policy.

F2013 Outlook
The Company's F2013 outlook is unchanged. Management believes that the Company will continue to face improving, yet still challenging market conditions through the remainder of F2013. While management expects the Company to return to growth in F2014, they continue to expect Sales Contracts for F2013 to be slightly below F2012 levels. Management remains committed to taking a balanced approach to operational investments, but also expects cash generated from operating activities to decline modestly compared to F2012.

Quarterly Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q3 F2013 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 Q3 F2013 results on Wednesday, May 8, 2013 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 Wednesday, May 15, 2013 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 33539909.

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 2013 Q3 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 8 of the Notes to the Interim Condensed Consolidated Financial Statements), and result from invoiced sales of the Company's products and services.
     
2)    Basic and diluted Cash from Operating Activities per share
     
    As a result of the nature of the Company's 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 the Company's 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 Fiscal 2013 Q3 MD&A.
     
4)    Adjusted Operating Income
     
    Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company's performance. Adjusted Operating Income refers to IFRS operating (loss) income excluding charges for share-based compensation and amortization of acquired intangible assets.
     
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 are defined as the Coimpany's Absolute Manage, Absolute Secure Drive and Absolute Service offerings, as well as Computrace products that do not include an investigations and recovery services component (for example, Absolute Track and Computrace Data Protection).

About Absolute Software

Absolute Software Corporation (TSX: ABT) is the industry standard in persistent endpoint security and management for computers, laptops and ultra-portable devices. The Company, a leader in device security and management tracking for 20 years, has over 30,000 commercial customers worldwide. Positioned as a Visionary vendor in Gartner, Inc.'s Magic Quadrant for Client Management Tools, Absolute's solutions - Computrace, Absolute Manage®, Absolute Service, Absolute Secure Drive, and Computrace LoJack for Laptops - provide organizations with actionable intelligence to prove compliance, securely manage BYOD,  and deliver comprehensive visibility and control over all of their devices and data. The Company's Computrace persistence technology is embedded in the firmware of computers, netbooks, and tablets by global leaders, including Acer, ASUS, Dell, Fujitsu, HP, Lenovo, Motion, Panasonic, Samsung, and Toshiba, and the Company has reselling partnerships with these OEMs and others, including Apple. For more information about Absolute Software, visit www.absolute.com.

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, the expected performance, functionality and availability of our services and products, and other expectations, intentions and plans contained in this press release that are not historical fact. When used in this press release, the words "plan," "expect," "believe," and similar expressions generally identify forward-looking statements. These statements reflect our 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 you should understand that we cannot assure you that the forward-looking statements contained in this press release will be realized.

©2013 Absolute Software Corporation. All rights reserved. Computrace and Absolute are registered trademarks of Absolute Software Corporation. LoJack is a registered trademark of LoJack Corporation, used under license by Absolute Software Corporation. LoJack Corporation is not responsible for any content herein. U.S. patents # 5,715,174, # 5,764,892, # 5,802,280, # 5,896,497, # 6,087,937, # 6,244,758, # 6,269,392, # 6,300,863, # 6,507,914, # 7,818,557, # 7,818,803, # 7,945,709, # 8,062,380, # 8,234,359, # 8,241,369, # 8,307,055 and # 8,332,953, # 8,346,234 and # 8,418,226. Canadian patents # 2,211,735, # 2,284,806, and # 2,205,370. U.K. patents # EP0793823, # GB2298302, and # GB2338101. German patent # 69512534. Australian patent # 699045. Japanese patent # JP4067035. The Toronto Stock Exchange has neither approved nor disapproved of the information contained in this news release.


ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Financial Position
(Expressed in United States dollars) (Unaudited)



      March 31, 2013 June 30, 2012
         
ASSETS        
         
CURRENT        
  Cash and cash equivalents     $   29,606,280 $   45,412,147
  Short-term investments     19,299,343 8,642,435
  Trade and other receivables     13,183,952 18,105,369
  Prepaid expenses and other     1,636,877 2,010,165
      63,726,452 74,170,116
INVESTMENTS     12,439,395 15,875,256
PROPERTY AND EQUIPMENT     1,295,245 1,561,495
DEFERRED INCOME TAX ASSETS     20,889,397 19,848,221
INTANGIBLE ASSETS AND GOODWILL     22,158,911 18,256,872
      $ 120,509,400 $ 129,711,960
         
LIABILITIES        
         
CURRENT        
Trade and other payables     $     7,667,501 $     7,016,921
Acquisition payable - LANrev     - 1,657,949
Accrued warranty     476,000 590,000
Deferred revenue - current     66,685,990 63,173,264
      74,829,491 72,438,134
DEFERRED REVENUE     59,768,575 62,038,434
      134,598,066 134,476,568
CONTINGENCIES        
         
SHAREHOLDERS' DEFICIENCY        
Share capital     39,458,375 38,625,463
Equity reserve     36,687,130 35,751,185
Deficit     (90,234,171) (79,141,256)
      (14,088,666) (4,764,608)
      $ 120,509,400 $ 129,711,960

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive (Loss) Income
Three and nine months ended March 31, 2013 and 2012
(Expressed in United States dollars) (Unaudited)


      Three months ended
March 31,
Nine months ended
March 31,
      2013 2012 2013 2012
             
             
REVENUE       $ 20,856,826   $ 18,438,405   $ 61,193,945   $ 55,035,517
             
COST OF REVENUE     5,386,853 4,847,410 15,030,679 14,928,594
             
GROSS MARGIN     15,469,973 13,590,995 46,163,266 40,106,923
             
OPERATING EXPENSES            
  Sales and marketing     9,616,885 8,097,043 28,646,857 23,828,817
  Research and development     3,106,200 2,771,788 9,572,356 8,368,594
  General and administration     2,303,024 1,850,172 6,219,470 5,314,844
  Investment tax credits     (451,569) (982,000) (1,151,569) (2,132,000)
  Share-based compensation     594,203 559,501 1,741,125 1,883,257
      15,168,743 12,296,504 45,028,239 37,263,512
             
OPERATING INCOME     301,230 1,294,491 1,135,027 2,843,411
             
OTHER (EXPENSE) INCOME            
  Interest income, net     22,072 116,326 148,335 413,652
  Foreign exchange (loss) gain     (395,583) 531,661 147,185 (641,365)
  (Loss) gain on investments     - (83,797) (29,627) 108,819
      (373,511) 564,190 265,893 (118,894)
             
NET (LOSS) INCOME BEFORE
  INCOME TAXES
    (72,281) 1,858,681 1,400,920 2,724,517
             
INCOME TAX EXPENSE     (380,880) (479,842) (110,393) (1,739,939)
             
NET (LOSS) INCOME AND
  COMPREHENSIVE (LOSS) INCOME
    $   (453,161) $   1,378,839 $   1,290,527 $   984,578
             
BASIC AND DILUTED (LOSS) INCOME
  PER SHARE
      $   (0.01) $   0.03          $   0.03 $   0.02
             
WEIGHTED AVERAGE NUMBER
  OF COMMON SHARES
  OUTSTANDING, BASIC
    41,353,659 43,405,413 42,515,841 43,336,770

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in United States dollars) (Unaudited)


    Share Capital                  
      Number
of
Common
shares
    Amount     Equity
reserve
    Deficit     Total
                               
BALANCE, JUNE 30, 2011     43,680,498     $ 34,640,517     $ 34,431,802     $ (74,766,754)     $ (5,694,435)
Shares issued on options exercised     643,812     3,330,018     (1,038,920)     -     2,291,098
Shares issued under Employee Share
  Purchase Plan
    175,102     597,531     -     -     597,531
Shares repurchased and cancelled
  under the Normal Course Issuer Bid
    (1,003,500)     (1,153,451)     -     (2,958,616)     (4,112,067)
Shares issued on acquisition payable     166,666     827,434     -     -     827,434
Share-based compensation     -     -     1,883,257     -     1,883,257
Net income and total comprehensive
  income
    -     -     -     984,578     984,578
BALANCE, MARCH 31, 2012     43,691,778     $ 38,242,049     $ 35,276,139     $ (76,740,792)     $ (3,222,604)
Shares issued on options exercised     95,225     383,414     (119,875)     -     263,539
Share-based compensation     -     -     594,921     -     594,921
Net loss and total comprehensive loss     -     -     -     (2,400,464)     (2,400,464)
BALANCE, JUNE 30, 2012     43,757,803     $ 38,625,463     $ 35,751,185     $ (79,141,256)     $ (4,764,608)
Shares issued on options exercised     439,400     2,584,503     (805,180)     -     1,779,323
Shares issued under Employee Share
  Purchase Plan
    144,046     612,121     -     -     612,121
Shares repurchased and cancelled
  under the Normal Course Issuer Bid
    (2,812,900)     (3,191,146)     -     (10,314,109)     (13,505,255)
Shares issued on acquisition payable     166,668     827,434     -     -     827,434
Share-based compensation     -     -     1,741,125     -     1,741,125
Dividends paid     -     -     -     (2,069,333)     (2,069,333)
Net income and total comprehensive
  income
    -     -     -     1,290,527     1,290,527
BALANCE, MARCH 31, 2013     41,695,017     $ 39,458,375     $ 36,687,130     $ (90,234,171)     $(14,088,666)

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows
Three and nine months ended March 31, 2013 and 2012
(Expressed in United States dollars) (Unaudited)


    Three months ended
March 31,
    Nine months ended
March 31,
      2013     2012     2013     2012
                         
OPERATING ACTIVITIES                        
  Net (loss) income     $   (453,161)     $  1,378,839     $  1,290,527     $  984,578
  Items not involving cash                        
    Amortization of property and equipment     334,548     302,289     1,006,323     924,327
    Amortization of acquired intangible assets     1,716,307     1,355,607     4,661,384     4,041,819
    Amortization of intangible assets - contract costs and brand     1,528,874     1,363,716     4,435,065     4,172,425
    Share-based compensation     594,203     559,501     1,741,125     1,883,257
    Deferred income taxes     (70,689)     (502,158)     (1,041,176)     (392,061)
    Loss (gain) on investments     -     83,797     29,627     (108,818)
    Unrealized foreign exchange loss (gain)     -     (350,677)     (277,892)     985,227
    Non-cash interest and amortization
  of investment premium
    77,045     2,773     270,332     143,030
  Change in non-cash working capital                        
    Trade and other receivables     3,602,449     (532,244)     5,077,121     (1,126,911)
    Prepaid expenses and other     32,224     (256,305)     373,288     (297,301)
    Intangible assets - contract costs and brand additions     (1,557,643)     (1,493,777)     (4,793,488)     (4,716,276)
    Trade and other payables     857,929     431,352     752,337     (1,837,580)
    Accrued warranty     (44,000)     (140,000)     (114,000)     (250,000)
    Deferred revenue     (1,822,773)     413,570     957,866     9,752,721
                         
CASH FROM OPERATING ACTIVITIES     4,795,313     2,616,283     14,368,439     14,158,437
INVESTING ACTIVITIES                        
  Purchase of property and equipment     (181,778)     (227,863)     (726,598)     (491,430)
  Acquisition of LiveTime     -     -     (8,000,000)     -
  Purchase of intangible assets     -     -     (25,000)     (300,069)
  Acquisition payable (LANrev)     -     -     (833,333)     (833,333)
  Purchase of short-term investments     (15,280,000)     (230,752)     (15,280,000)     (230,752)
  Proceeds from sales and maturities of short-term   investments     -     4,181,567     8,039,727     6,033,181
                         
CASH (USED IN) FROM INVESTING ACTIVITIES     (15,461,778)     3,722,952     (16,825,204)     4,177,597
FINANCING ACTIVITIES                        
  Repurchase of common shares for cancellation     (88,920)     (969,355)     (13,504,414)     (3,983,136)
  Dividends paid     (2,069,333)     -     (2,069,333)     -
  Issuance of common shares     1,936,455     2,116,129     2,390,581     2,902,045
                         
CASH (USED IN) FROM FINANCING ACTIVITIES     (221,798)     1,146,774     (13,183,166)     (1,081,091)
                         
FOREIGN EXCHANGE EFFECT ON CASH     (83,737)     13,519     (165,936)     (66,613)
                         
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (10,972,000)     7,449,528     (15,805,867)     17,188,330
                         
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     40,578,280     39,555,543     45,412,147     29,866,741
                         
CASH AND CASH EQUIVALENTS, END OF PERIOD     $  29,606,280     $ 47,055,071     $ 29,606,280     $ 47,055,071

 

 

 

SOURCE Absolute Software Corporation



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