Absolute Software Reports Fiscal 2014 Third Quarter Results - WLOX.com - The News for South Mississippi

Absolute Software Reports Fiscal 2014 Third Quarter Results

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SOURCE Absolute Software Corporation

Growth Driven by Strength in North American Education and Corporate Markets

VANCOUVER, May 12, 2014 /PRNewswire/ - Absolute® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the industry standard for persistent endpoint security and management solutions for computers, laptops and ultra-portable devices and the data they contain, today announced its financial results for the three- and nine-month periods ended March 31, 2014. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in U.S. dollars.

Key Financial Metrics Q3
F2014
Q3
F2013
%
change
YTD
F2014
YTD
F2013
%
change
Sales Contracts(1) $20.5M $19.0M +8% $66.5M $62.1M +7%
Cash from operating activities $3.8 M $4.8M (22%) $13.5M $14.4M (6%)
Operating cash per share(2)
    (basic)
    (diluted)
 
$0.09
$0.08
 
$0.12
$0.11
 
(25%)
(27%)
 
$0.32
$0.31
 
$0.34
$0.34
 
(6%)
(9%)
Revenue $24.1M $20.9M +15% $67.6M $61.2M +11%
Adjusted EBITDA(3) $5.2M $2.9M 76% $12.0M $8.5M +41%
Net income (loss) $1.4M $(0.5)M nm $2.8M $1.3M 114%
Net income (loss) per share
    (basic and diluted)
$0.03 $(0.01) nm $0.06 $0.03 100%
Dividends paid $2.4M $2.1M nm $6.9M $2.1M nm
Cash, cash equivalents  and investments $74.3M $61.3M +21% $74.3M $61.3M +21%
Deferred revenue $129.5M $126.5M +2% $129.5M $126.5M +2%

(1)(2)(3) - Please refer to "Non-IFRS Measures and Definitions"

Q3-F2014 Highlights:

  • Sales Contracts increased by 8% to $20.5 million compared to $19.0 million in Q3-F2013.
  • Driven by strong growth in education and corporate verticals, Commercial Sales Contracts increased by 10% to $19.6 million compared to $17.8 million in Q3-F2013.
  • Sales of Theft Management products increased by 2% compared to Q3-F2013, while sales of Device Management and Data Security products increased by 24% over the same period.
  • International Sales Contracts increased by 5% compared to Q3-F2013.
  • Cash from Operating Activities was $3.8 million compared to $4.8 million in Q3-F2013.
  • Paid a quarterly dividend of $2.4 million, or CAD$0.06 per common share.
  • Achieved inclusion for the first time in Gartner, Inc.'s Magic Quadrant for Content-Aware Data Loss Prevention.
  • Expanded embedded persistence technology into the firmware of additional Samsung Galaxy mobile devices including the Galaxy S5, NotePRO, and TabPRO.
  • Released Absolute Manage 6.4.2, which included support for Apple's streamlined Device Enrollment Program.
  • Appointed Sal Visca, an experienced technology executive, to the Company's Board of Directors.

"Strong performance in the North American education and corporate verticals drove our top-line growth in the quarter," said Errol Olsen, interim CEO of Absolute. "Our device management and data security solutions delivered strong growth, led by sales of Absolute Manage and record performance of our MDM product. Looking forward, against the backdrop of a continued shift toward mobile computing, increasing requirements for data security and growing demand for simplified IT management, our product portfolio is uniquely positioned to address today's top priorities for IT and security managers."

Q3-F2014 and F2014 YTD Financial Review
Q3-F2014 Sales Contracts were $20.5 million, up 8% from $19.0 million in Q3-F2013. Sales Contract growth in Q3-F2014 reflected strength in the education and corporate vertical markets. F2014 year-to-date ("YTD") Sales Contracts were $66.5 million, up 7% from $62.1 million for the same period in F2013. Of note, Q2-F2013 included a $3.5 million deal with a Fortune 100 healthcare customer. Excluding this significant sale, the underlying year over year growth rate for Sales Contracts was 14% compared to the prior YTD period.

Invoiced sales to commercial customers increased 10% in Q3-F2014 compared to Q3-F2013, and increased 9% for the YTD period.  Commercial Sales Contracts for Absolute's Theft Management products(5)  were $11.7 million for Q3-F2014, representing an increase of 2% from $11.5 million in Q3-F2013. YTD Commercial Sales Contracts for theft management products were $39.5 million, up 10% from $36.0 million in YTD F2013.

Q3-F2014 Commercial Sales Contracts from Absolute's Device Management and Data Security products(6) were $7.9 million, up 24% from $6.3 million in Q3-F2013. For the YTD period, Commercial Sales Contracts from device management and data security products were $22.9 million, up 7% from $21.3 million for the same period in F2013. Growth in this category during the quarter was driven by strong sales of Absolute Manage and Mobile Device Management ("MDM") products.

International Sales Contracts were $3.1 million in Q3-F2014 (15% of total Sales Contracts), up 5% from $2.9 million in Q3-F2013 (15% of total Sales Contracts). YTD International Sales Contracts were $10.4 million (16% of total Sales Contracts), up 25% from $8.3 million (13% of total Sales Contracts) for the same period in F2013. The lower growth rate in Q3-F2014 relative to the first half of the year reflects the absence of any large individual sales in the quarter.

Sales Contracts for consumer solutions were $0.9 million (5% of total Sales Contracts), down 23% from $1.2 million (6% of total Sales Contracts), in Q3-F2013. YTD consumer Sales Contracts were $4.1 million (6% of total Sales Contracts), down 14% from $4.7 million (8% of total Sales Contracts), for the same period in F2013.

Revenue for Q3-F2014 was $24.1 million, a 15% increase from $20.9 million in Q3-F2013. 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 $67.6 million, an 11% increase from $61.2 million for the same period in F2013.

Adjusted Operating Expenses(3) for Q3-F2014 were $18.9 million, up 6% from $17.9 million in Q3-F2013. The increase was primarily attributable to additional sales and marketing and research and development headcount in F2014, which was partially offset by a decline in the Canadian dollar. YTD Adjusted Operating Expenses were $55.6 million, up 6% from $52.6 million for the same period in F2013.

Absolute generated Adjusted EBITDA(4) of $5.2 million in Q3-F2014, up 76% from $2.9 million in Q3-F2013. YTD Adjusted EBITDA was $12.0 million, up 41% from $8.5 million for the same period in F2013.

Absolute recorded net income of $1.4 million, or $0.03 per share, in Q3-F2014, compared to a net loss of $0.5 million, or $(0.01) per share, in Q3-F2013. YTD net income was $2.8 million, or $0.06 per share, compared to net income of $1.3M or $0.03 per share for the same period in F2013. The current YTD net income reflects the impact of higher IFRS operating income, less the impact of a reduction in the foreign exchange gain and income tax expense.

Cash from operating activities was $3.8 million for Q3-F2014, down 21% from $4.8 million in Q3-F2013.  YTD cash from operating activities was $13.5 million, down 6% from $14.4 million for the same period in F2013. Cash from operating activities reflects the payment of $1.4 million of post-retirement benefits during Q3-F2014.

At March 31, 2014, Absolute had cash, cash equivalents and investments of $74.3 million compared to $62.9 million at June 30, 2013.

Corporate Outlook
Absolute remains confident in the market opportunity for its solutions. For F2014, management expects Sales Contracts to increase over F2013 levels and for cash generated from operating activities, excluding payments related to post-retirement benefits, to approximate F2013 levels.

The Company's Board of Directors has initiated a process to recruit a permanent chief executive officer for the Company and has engaged an executive search firm to assist in its search.

Quarterly Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q3-F2014 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 F2014 results on Monday, May 12, 2014 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 19, 2014 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 40677510.

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 Q4 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 7 of the Notes to the Interim 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 weighted average number of shares outstanding for the period (basic), or the fully diluted number of shares using the treasury stock method (diluted).

3) Adjusted Operating Expenses
A number of significant non-cash or non-recurring expenses are reported in our 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 charges and certain post-retirement benefits. For a description of the reasons these items are adjusted, please refer to the Fiscal 2013 and Q3-Fiscal 2014 MD&A.

4) Adjusted EBITDA
Management believes that analyzing operating results exclusive of significant non-cash items 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 charges and post-retirement benefits.  The non-cash items excluded in the determination of Adjusted EBITDA include share-based compensation, amortization of acquired intangibles, and amortization of property and equipment.

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 our Absolute Manage and Absolute Secure Drive products, 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, tablets and smartphones. The Company, a leader in device security and management tracking for 20 years, has over 30,000 commercial customers worldwide. Absolute's solutions - Computrace®, Absolute Manage®, Absolute Service and Absolute LoJack® - provide organizations with actionable intelligence to prove compliance, securely manage BYOD, and deliver comprehensive visibility and control over all of their devices and data. Absolute is positioned on three Gartner, Inc. Magic Quadrants - the Magic Quadrant for Client Management Tools ("CMT"), the Magic Quadrant for Mobile Device Management ("MDM") Software, and the Magic Quadrant for Content-Aware Data Loss Prevention. Absolute is one of only four vendors to be recognized on both the CMT and MDM Magic Quadrants based on providing customers with the ability to secure and manage many different types of devices using a single solution. Absolute persistence technology is embedded in the firmware of computers, netbooks, tablets and smartphones 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. Furthermore, the forward-looking statements contained in this press release are made as at the date hereof and the Company does not undertake any 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.

©2014 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 No. 5,715,174, No. 5,764,892, No. 5,802,280, No. 5,896,497, No. 6,087,937, No. 6,244,758, No. 6,269,392, No. 6,300,863, No. 6,507,914, No. 7,818,557, No. 7,818,803, No. 7,945,709, No. 8,062,380, No. 8,234,359, No. 8,241,369, No. 8,307,055, No. 8,332,953, No. 8,346,234, No. 8,362,901, No. 8,418,226, No. 8,419,806, No. 8,441,348, No. 8,510,825, No. 8,556,991, No. 8,566,961, No. 8,606,971 and No. 8,625,799. Canadian patents No. 2,211,735, No. 2,284,806, No. 2,205,370, No. 2,771,208 and No. 2,733,222. U.K. patents No. EP0793823, No. GB2298302, and No. GB2338101. German patent No. 69512534. Australian patent No. 699045. Japanese patents No. 4067035, No. 5220924 and No. 5363305. Mexican patents No. 297,406 and No. 306,287. Russian patent No. 2,460,220. 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, 2014     June 30, 2013
     
ASSETS    
     
CURRENT    
  Cash and cash equivalents $    44,327,397   $     31,114,998
  Short-term investments   20,503,772     13,165,606
  Trade and other receivables   14,708,432     18,196,955
  Prepaid expenses and other   1,879,696     1,712,988
    81,419,297     64,190,547
INVESTMENTS    9,430,378     18,639,550
PROPERTY AND EQUIPMENT   2,068,544     1,294,249
DEFERRED INCOME TAX ASSETS   19,313,447     20,340,047
INTANGIBLE ASSETS AND GOODWILL   19,049,327     21,933,959
  $ 131,280,993   $   126,398,352
     
LIABILITIES    
     
CURRENT    
  Trade and other payables $      10,670,126   $      8,943,682
  Accrued warranty   420,000     420,000
  Deferred revenue - current   69,263,758     68,093,937
    80,353,884     77,457,619
DEFERRED REVENUE   60,231,759     62,542,619
    140,585,643     140,000,238
COMMITMENTS    
CONTINGENCIES    
     
SHAREHOLDERS' DEFICIENCY    
  Share capital   51,502,044     41,690,749
  Equity reserve   35,111,134     36,542,921
  Deficit   (95,917,828)     (91,835,556)
    (9,304,650)     (13,601,886)
  $ 131,280,993   $ 126,398,352

 

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive Income
Three and nine months ended March 31, 2014 and 2013
(Expressed in United States dollars) (Unaudited)
             
    Three months ended
March 31,
    Nine months ended
March 31,
    2014     2013     2014     2013
                       
                       
REVENUE $   24,085,504   $ 20,856,826   $   67,635,422   $   61,193,945
                       
COST OF REVENUE   5,038,026     5,386,853     14,455,184     15,030,679
                       
GROSS MARGIN   19,047,478     15,469,973     53,180,238     46,163,266
                       
OPERATING EXPENSES                      
  Sales and marketing   10,206,925     9,616,885     30,351,683     28,646,857
  Research and development   2,848,813     2,654,631     8,910,518     8,420,787
  General and administration   2,392,085     2,303,024     7,885,325     6,219,470
  Share-based compensation   462,257     594,203     1,546,409     1,741,125
    15,910,080     15,168,743     48,693,935     45,028,239
                       
OPERATING INCOME   3,137,398     301,230     4,486,303     1,135,027
                       
OTHER (EXPENSE) INCOME                      
  Interest income, net   75,255     22,072     170,962     148,335
  Foreign exchange gain   (265,923)     (395,583)     3,200     147,185
  Loss on investments   -     -     -     (29,627)
    (190,668)     (373,511)     174,162     265,893
                       
NET INCOME (LOSS) BEFORE INCOME
 TAXES
  2,946,730     (72,281)     4,660,465     1,400,920
                       
INCOME TAX EXPENSE   (1,541,500)     (380,880)     (1,898,700)     (110,393)
                       
NET INCOME (LOSS) AND
 COMPREHENSIVE INCOME (LOSS)
$   1,405,230   $    (453,161)   $    2,761,765   $    1,290,527
                       
BASIC AND DILUTED INCOME (LOSS)
 PER SHARE
$ 0.03   $ (0.01)    $ 0.06   $ 0.03
                         
WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING,
 BASIC
  43,403,638     41,353,659     42,849,883     42,515,841

 

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, 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)
Shares issued on options exercised 357,236     2,232,374     (698,135)     -     1,534,239
Share-based compensation -     -     553,926     -     553,926
Dividends paid -     -     -     (2,049,310)     (2,049,310)
Net income and total comprehensive
  income
-     -     -     447,925     447,925
BALANCE, JUNE 30, 2013 42,052,253   $ 41,690,749   $ 36,542,921   $ (91,835,556)   $ (13,601,886)
Shares issued on employee options
  exercised
1,006,987     5,819,348     (1,866,196)     -     3,953,152
Shares issued on non-standard options
  exercised
447,750     3,297,658     (1,112,000)     -     2,185,658
Shares issued under Employee Share
  Purchase Plan
148,061     694,289     -     -     694,289
Share-based compensation -     -     1,546,409     -     1,546,409
Dividends paid -     -     -     (6,844,037)     (6,844,037)
Net income and total comprehensive
  income
-     -     -     2,761,765     2,761,765
BALANCE, MARCH 31, 2014 43,655,051   $ 51,502,044   $ 35,111,134   $ (95,917,828)   $ (9,304,650)

 

ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of Cash Flows
Three and nine months ended March 31, 2014 and 2013
(Expressed in United States dollars) (Unaudited)
                     
         
    Three months ended
March 31,
  Nine months ended
March 31,
    2014     2013     2014     2013
         
OPERATING ACTIVITIES        
  Net income (loss) $   1,405,230   $     (453,161)   $   2,761,765   $   1,290,527
  Items not involving cash        
    Amortization of property and equipment   371,281     334,548     984,200     1,006,323
    Amortization of acquired intangible assets   1,211,243     1,716,307     3,613,345     4,661,384
    Amortization of intangible assets - contract costs and brand   1,823,298     1,528,874     4,943,392     4,435,065
    Share-based compensation   462,257     594,203     1,546,409     1,741,125
    Deferred income taxes   1,249,200     (70,689)     1,026,600     (1,041,176)
    Loss on investments   -     -     -     29,627
    Unrealized foreign exchange gain   -     -     -     (277,892)
    Non-cash interest and amortization
of investment premium
  110,508     77,045     399,374     270,332
  Change in non-cash working capital        
    Trade and other receivables   2,539,925     3,602,449     3,508,703     5,077,121
    Prepaid expenses and other   (192,298)     32,224     (166,708)     373,288
    Intangible assets - contract costs and brand additions   (1,524,514)     (1,557,643)     (5,182,528)     (4,793,488)
    Trade and other payables   (194,771)     857,929     1,227,685     752,337
    Accrued warranty   70,000     (44,000)     -     (114,000)
    Deferred revenue   (3,578,704)     (1,822,773)     (1,141,039)     957,866
         
CASH FROM OPERATING ACTIVITIES   3,752,655     4,795,313     13,521,198     14,368,439
INVESTING ACTIVITIES        
  Purchase of property and equipment   (548,815)     (181,778)     (1,204,316)     (726,598)
  Acquisition of LiveTime   -     -     -     (8,000,000)
  Purchase of intangible assets   -     -     (363,381)     (25,000)
  Acquisition payable (LANrev)   -     -     -     (833,333)
  Proceeds from sales and maturities of short-term investments   -     (15,280,000)     5,203,925     (15,280,000)
  Purchase of investments   -     -     (3,732,293)     8,039,727
           
CASH USED IN INVESTING ACTIVITIES   (548,815)     (15,461,778)     (96,065)     (16,825,204)
FINANCING ACTIVITIES        
  Repurchase of common shares for cancellation   -     (88,920)     -     (13,504,414)
  Issuance of common shares   2,030,299     1,936,455     6,833,099     2,390,581
  Dividends paid   (2,350,387)     (2,069,333)     (6,844,037)     (2,069,333)
         
CASH USED IN FINANCING ACTIVITIES   (320,088)     (221,798)     (10,938)     (13,183,166)
         
FOREIGN EXCHANGE EFFECT ON CASH   (188,880)     (83,737)     (201,796)     (165,936)
         
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   2,694,872     (10,972,000)     13,212,399     (15,805,867)
         
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   41,632,525     40,578,280     31,114,998     45,412,147
         
CASH AND CASH EQUIVALENTS, END OF PERIOD $   44,327,397   $   29,606,280   $   44,327,397   $   29,606,280

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