Absolute Software Reports First Quarter F2014 Results

Sales Contracts rise 15% with growth in all market verticals

VANCOUVER, Nov. 6, 2013 /CNW/ - Absolute® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the industry standard for persistent endpoint security and management solutions for computers, laptops, tablets and smartphones, today announced its financial results for the three months ended September 30, 2013. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and reported in U.S. dollars.

Key Financial Metrics	Q1-F2014	Q1-F2013	% change
Sales Contracts^(1)	$23.8	$20.6M	+15%
Cash from operating activities	$5.4M	$5.3M	+1%
Operating cash per share^(2) (basic) (diluted)	$0.13 $0.12	$0.12 $0.12	+8% -
Revenue	$21.7	$19.8M	+10%
Adjusted EBITDA^(3)	$3.3M	$1.7M	+89%
Net income	$1.1M	$0.5M	+140%
Net income per share (basic) (diluted)	$0.03 $0.03	$0.01 $0.01	+200% +200%
Dividends paid    Per share (CAD)	$2.0M $0.05	- -	nm nm
Cash, cash equivalents  and investments	$68.5M	$72.5M	(6%)
Deferred revenue	$132.7M	$126.0M	+5%

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

Q1 F2014 Highlights:

• Achieved Sales Contracts of $23.8 million, a year-over-year increase of 15% compared to $20.6 million in Q1-F2103
• Sales Contracts grew in each of the education, corporate, healthcare and government verticals
• Commercial Sales Contracts increased by 16% to $21.7 million compared to $18.6 million in Q1-F2013
• Sales of Device Management and Data Security products were up 15% compared to Q1-F2013, while sales of Theft Management products increased 17% over the same period
• International Sales Contracts increased by 32%, which included a significant Computrace Data Protection sale in the Asia Pacific region
• Generated $5.4 million in Cash from Operating Activities compared to $5.3 million in Q1-F2013
• Paid a quarterly dividend of $2.0 million, or CAD$0.05 per common share. Subsequent to quarter-end, announced a 20% dividend increase to CAD$0.06 per common share
• Announced first to market theft recovery solution for Android smartphones, available on Samsung Galaxy S4 mobile devices
• Released Absolute Service version 8.0, an ITIL 2011 Certified IT Service Management solution

"Strong momentum with our core Computrace products has continued into fiscal 2014, helping to deliver 15% overall growth in sales contracts for Q1," said John Livingston, CEO of Absolute. "Our vision of 'Many Devices One Solution' is resonating well with customers across all of our target markets. We believe that managing governance, risk and compliance will continue to become increasingly important for all types of organizations as they work to manage the potential liabilities associated with the growing adoption of mobile computing."

"Our focus in fiscal 2014 remains on execution," added Mr. Livingston. "In particular we are focusing on sales and product development. On the sales side, we have modified our sales incentive programs and we are working to enhance our opportunity with value-added resellers. On the product side, we will focus our efforts on adding new features to our existing products, and delivering an integrated web console for our Computrace and Absolute Manage products. We believe the impact of these initiatives will help to drive growth through the second half of the year and into fiscal 2015."

F2013 Q1 Financial Review
Q1-F2014 Sales Contracts increased 15% to $23.8 million compared to $20.6 million in Q1-F2013. This stronger sales performance was driven by strength in all industry verticals and associated growth in both the device management and data security and the theft management product lines.

Commercial Sales Contracts for Absolute's flagship theft management products were $15.0 million for Q1-F2014. This represents a 17% increase from $12.8 million in Q1-F2013.

Q1-F2014 commercial Sales Contracts from Absolute's device management and data security products were $6.7 million. This was up 15% compared to $5.8 million in Q1-F2013.

International Sales Contracts increased 32% over Q1-F2013 from $2.7 million to $3.5 million. The growth in our international business included the impact of a large Computrace sale in the Asia Pacific region.

For Q1-F2014, Sales Contracts for consumer solutions were $2.1 million, or 9% of Sales Contracts, compared to $2.0 million, or 10% of Sales Contracts in Q1-F2013.

Revenue for Q1-F2014 was $21.7M million, a 10% increase from $19.8 million in Q1-F2013. Indicative of the Company's Software-as-a-Service Model ("SaaS") business model, revenue primarily represents the amortization of deferred revenue balances from recurring term license sales.

Adjusted Operating Expenses for Q1-F2014 were $18.4 million, up 2% from $18.0 million in Q1-F2013. The year-over-year increase was primarily attributable to additional sales and marketing headcount and increased use of contract staff within our research and development department.

Absolute generated Adjusted EBITDA of $3.3 million in Q1-F2014, up 89% from $1.7 million in Q1-F2013. The increase reflects a greater increase in revenue relative to expenses.

Absolute recorded net income of $1.1 million, or $0.03 per share, in Q1-F2014, compared to net income of $0.5 million or $0.01 per share in Q1-F2013.

Cash from operating activities was $5.4 million for Q1-F2014, compared to $5.3 million in Q1-F2013.

In F2013, Absolute initiated a dividend policy of CAD$0.05 per common share paid quarterly. During Q1-F2014, Absolute paid total dividends of $2.0 million, or CAD$0.05 per common share, compared to nil in the same period in F2013. Subsequent to quarter-end, the Board of Directors announced a 20% increase in the dividend to CAD$0.06 per common share paid quarterly.

At September 30, 2013, Absolute had cash, cash equivalents and investments of $68.5 million compared to $72.5 million at September 30, 2012.

Fiscal 2014 Outlook
We remain confident in the market opportunity for our solutions and intend to make continued investments, particularly in the key areas of sales and marketing and research and development, in order to fully capitalize on this opportunity. For F2014, we expect Sales Contracts to increase over F2013 levels and for cash generated from operating activities to grow modestly from F2013 levels.

Quarterly Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q1-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 Q1-F2014 results on Wednesday, November 6, 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.

To access the archived conference call, please dial 416-849-0833 or 1-855-859-2056 enter the reservation code 90965516.The conference call will be archived for replay until Wednesday, November 13, 2013 at midnight.

A live audio webcast of the conference call will be available at www.absolute.com and http://bit.ly/161d1gE.  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 http://bit.ly/161d1gE.

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 11 of the Notes to the 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, amortization of acquired intangible assets, and amortization of property and equipment. For a description of the reasons these items are adjusted, please refer to the Fiscal 2013 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 asset and property and equipment, foreign exchange gain or loss, and share-based compensation.  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, 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. Absolute is positioned on two Gartner, Inc. Magic Quadrants - the Magic Quadrant for Client Management Tools and the Magic Quadrant for Mobile Device Management Software. Absolute is one of only four vendors to be recognized on both 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.

©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 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 and No. 8,566,961. Canadian patents No. 2,211,735, No. 2,284,806, No. 2,205,370 and No. 2,771,208. U.K. patents No. EP0793823, No. GB2298302, and No. GB2338101. German patent No. 69512534. Australian patent No. 699045. Japanese patent No. 4067035. Mexican patent No. 297,406. 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)
			September 30, 2013	June 30, 2013
ASSETS
CURRENT
	Cash and cash equivalents		$   36,774,884	$  31,114,998
	Short-term investments		12,711,286	13,165,606
	Trade and other receivables		16,031,205	18,196,955
	Prepaid expenses and other		1,897,422	1,712,988
			67,414,797	64,190,547
INVESTMENTS			19,048,517	18,639,550
PROPERTY AND EQUIPMENT			1,990,665	1,294,249
DEFERRED INCOME TAX ASSETS			20,273,647	20,340,047
INTANGIBLE ASSETS AND GOODWILL			21,114,366	21,933,959
			$ 129,841,992	$  126,398,352
LIABILITIES
CURRENT
	Trade and other payables		$     8,068,380	$     8,943,682
	Accrued warranty		340,000	420,000
	Deferred revenue - current		69,663,631	68,093,937
			78,072,011	77,457,619
DEFERRED REVENUE			63,045,649	62,542,619
			141,117,660	140,000,238
CONTINGENCIES
SHAREHOLDERS' DEFICIENCY
	Share capital		45,454,400	41,690,749
	Equity reserve		36,011,067	36,542,921
	Deficit		(92,741,135)	(91,835,556)
			(11,275,668)	(13,601,886)
			$ 129,841,992	$ 126,398,352

ABSOLUTE SOFTWARE CORPORATION Consolidated Statements of Operations and Comprehensive Income Three months ended September 30, 2013 and 2012 (Expressed in United States dollars) (Unaudited)
			2013	2012
REVENUE			$ 21,688,096	$ 19,766,920
COST OF REVENUE			4,894,016	4,870,689
GROSS MARGIN			16,794,080	14,896,231
OPERATING EXPENSES
	Sales and marketing		9,852,424	9,501,541
	Research and development		3,127,388	2,756,569
	General and administration		2,053,420	2,638,116
	Share-based compensation		544,216	576,285
			15,577,448	15,472,511
OPERATING INCOME (LOSS)			1,216,632	(576,280)
OTHER INCOME
	Interest income, net		53,589	84,906
	Foreign exchange gain		224,966	497,318
	Loss on investments		-	(29,627)
			278,555	552,597
NET INCOME (LOSS) BEFORE INCOME TAXES			1,495,187	(23,683)
INCOME TAX (EXPENSE) RECOVERY			(363,200)	494,451
NET INCOME AND TOTAL COMPREHENSIVE INCOME			$  1,131,987	$    470,768
BASIC AND DILUTED INCOME PER SHARE			$           0.03	$          0.01
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC			42,277,767	43,643,501

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			6,825			26,363			(10,288)			-			16,075
Shares issued under Employee Share Purchase Plan			77,610			321,493			-			-			321,493
Shares repurchased and cancelled under the Normal Course Issuer Bid			(608,100)			(690,847)			-			(2,112,293)			(2,803,140)
Shares committed to be repurchased under the Normal Course Issuer Bid			-			(246,811)			-			(770,276)			(1,017,087)
Share-based compensation			-			-			576,285			-			576,285
Net loss and total comprehensive loss			-			-			-			470,768			470,768
BALANCE, SEPTEMBER 30, 2012			43,234,138		$	38,035,661		$	36,317,182		$	(81,553,057)		$	(7,200,214)
Shares issued on options exercised			789,811			4,790,514			(1,493,027)			-			3,297,487
Shares issued under Employee Share Purchase Plan			66,436			290,628			-			-			290,628
Shares repurchased and cancelled under the Normal Course Issuer Bid			(2,204,800)			(2,253,488)			-			(7,431,540)			(9,685,028)
Shares issued on acquisition			166,668			827,434			-			-			827,434
Share-based compensation			-			-			1,718,766			-			1,718,766
Dividends paid			-			-			-			(4,118,643)			(4,118,643)
Net income and total comprehensive income			-			-			-			1,267,684			1,267,684
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			355,300			2,015,896			(624,138)			-			1,391,758
Shares issued on non-standard options exercised			191,866			1,395,828			(451,932)			-			943,896
Shares issued under Employee Share Purchase Plan			85,387			351,927			-			-			351,927
Share-based compensation			-			-			544,216			-			544,216
Dividends paid			-			-			-			(2,037,566)			(2,037,566)
Net income and total comprehensive income			-			-			-			1,131,987			1,131,987
BALANCE, SEPTEMBER 30, 2013			42,684,806		$	45,454,400		$	36,011,067		$	(92,741,135)		$	(11,275,668)

ABSOLUTE SOFTWARE CORPORATION Consolidated Statements of Cash Flows Three months ended September 30, 2013 and 2012 (Expressed in United States dollars) (Unaudited)
			2013	2012
OPERATING ACTIVITIES
Net income			$    1,131,987	$    470,768
Items not involving cash
	Amortization of property and equipment		323,000	330,919
	Amortization of acquired intangible assets		1,211,436	1,409,845
	Amortization of intangible assets - contract costs and brand		1,476,264	1,420,175
	Share-based compensation		544,216	576,285
	Deferred income taxes		66,400	(894,451)
	Loss on investments		-	29,627
	Unrealized foreign exchange (gain) loss		-	(277,892)
	Non-cash interest and amortization of investment premium		83,721	202,101
Change in non-cash working capital
	Trade and other receivables		2,162,750	2,905,954
	Prepaid expenses and other		(184,434)	52,268
	Intangible assets - contract costs and brand additions		(1,723,232)	(1,390,435)
	Trade and other payables		(1,715,562)	(330,731)
	Accrued warranty		(80,000)	(10,000)
	Deferred revenue		2,072,724	832,264
CASH FROM OPERATING ACTIVITIES			5,369,270	5,326,697
INVESTING ACTIVITIES
	Purchase of property and equipment		(206,160)	(310,605)
	Purchase of intangible assets		(144,875)	(25,000)
	Proceeds from maturities of short-term investments		3,693,925	8,039,727
	Purchases of short-term investments		(409,951)	-
	Purchases of investments		(3,322,342)	-
CASH (USED IN) FROM INVESTING ACTIVITIES			(389,403)	7,704,122
FINANCING ACTIVITIES
	Dividends paid		(2,037,566)	-
	Issuance of common shares		2,687,581	337,568
	Repurchase of common shares for cancellation		-	(2,803,140)
CASH FROM (USED IN) FINANCING ACTIVITIES			650,015	(2,465,572)
FOREIGN EXCHANGE EFFECT ON CASH			30,004	30,706
INCREASE IN CASH AND CASH EQUIVALENTS			5,659,886	10,595,953
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			31,114,998	45,412,147
CASH AND CASH EQUIVALENTS, END OF PERIOD			$ 36,774,884	$  56,008,100

  

SOURCE: Absolute Software Corporation

Public Relations:
Allison Keller, HORN Group
[email protected] or 415.905.4006
or
Marina Guy, Absolute Software
[email protected] or 604.730.9851 x107

Investor Relations:
Dave Mason, CFA, TMX|Equicom
[email protected] or 416.815.0700 x237