Absolute Software Reports Fiscal 2012 Second Quarter Results

Second quarter sales contracts increase 17% as focused innovation and execution deliver sixth consecutive quarter of double-digit year-on-year growth

VANCOUVER, Feb. 8, 2012 /CNW/ - Absolute^® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the global leader in firmware-embedded endpoint security and management solutions, today announced its financial results for the three- and six-month periods ended December 31, 2011. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and reported in U.S. dollars.

Key Financial Metrics	Q2-F2012	Q2-F2011	%  change	H1-F2012	H1-F2011	%  change
Sales Contracts^(1)	$20.7M	$17.7M	+17%	$46.1M	$38.8M	+19%
Cash from operating activities	$6.0M	$3.2M	+87%	$11.5M	$6.7M	+73%
Operating cash per share^(2) (basic and diluted)	$0.14	$0.07	+100%	$0.27	$0.15	+80%
Revenue	$18.4M	$16.8M	+9%	$36.6M	$33.1M	+11%
Adjusted Operating Income^(3)	$2.9M	$0.8M	+254%	$5.6M	$0.5M	+1043%
Net income (loss) Net income (loss) per share (basic and diluted)	$1.5M $0.03	$(0.8)M $(0.02)	nm nm	$(0.4)M $(0.01)	$(0.7)M $(0.02)	nm nm
Cash, cash equivalents, and investments	$62.2M	$53.6M
Deferred revenue	$120.5M	$105.9M

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

Q2 Fiscal 2012 Highlights

• Achieved 17% growth in Sales Contracts year-over-year while maintaining flat operating expenses.
• Generated $6.0 million in cash from operating activities, representing an 87% increase over Q2-F2011.
• Increased commercial Sales Contracts by 22% compared to Q2-F2011.
• Adjusted Operating Income was $2.9 million, a significant improvement from an Adjusted Operating Income of $0.8 million in Q2-F2011.
• International sales increased 98% to 21% of total Sales Contracts, compared to 13% of total Sales Contracts in Q2-F2011.
• Launched Absolute Manage 6.0, a major release with significant new features including:
• Windows imaging;
• Mobile Device Management (MDM) for Android; and
• AbsoluteSafe, a solution for document control on iOS devices.
• Announced a Computrace® SaaS license sale covering more than 60,000 student laptops with the Queensland Government's Department of Education and Training (DET) in Australia.
• Renewed Company's Normal Course Issuer bid and repurchased 59,500 common shares in the quarter for a total cost of $0.2 million.
• Subsequent to quarter end, added to the Visionaries Quadrant of Gartner Inc.'s Client Management Tools Magic Quadrant.

"Our dedication to delivering market-leading solutions for tracking, managing and securing endpoint devices is translating into solid financial results," said John Livingston, Chief Executive Officer of Absolute. "With innovative solutions that enable customers to easily and reliably manage and secure multiple devices, we are fulfilling an urgent market need and are driving demand for our entire suite of solutions. This unique approach is strengthening our overall competitive positioning and has led to Absolute being positioned as a Visionary in Gartner's CMT Magic Quadrant. "

Q2 F2012 Financial Review
Absolute's Q2-F2012 results are the Company's second 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 Q2-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.

Q2-F2012 Sales Contracts grew 17% to $20.7 million from $17.7 million in Q2-F2011. The increase was driven by strong commercial sales across all of the Company's target market verticals - education, corporate, government and healthcare. Q2-F2012 Commercial sales were $18.7 million, up 22% over Q2-F2011. For H1-F2012, Sales Contracts were $46.1 million, up 19% from $38.8 million in H1-F2011. Commercial sales for H1-F2012 were $41.6 million, up 30% from $32.1 million in H1-F2011.

Commercial Sales Contracts for Absolute's flagship theft recovery products⁽⁵⁾  in Q2-F2012 were $11.9 million, down 7% year-over-year, as Q2-F2011 benefited from atypically strong education sales in North America.  For H1-F2012, Commercial Sales Contracts for theft recovery products were $29.0 million, up 6% from H1-F2011, demonstrating that long-term demand for the Company's unique theft recovery and theft management services remains strong.

Commercial Sales Contracts from Absolute's non-theft recovery products⁽⁶⁾ (i.e. management, tracking and data protection) grew 181% to $6.8 million over Q2-F2011, as demand, particularly for Absolute Manage, MDM and the Company's Computrace Data Protection offering,  gained momentum. The Company believes this continues to serve as an indication of its success in diversifying sales and developing new product lines with long-term growth potential. For H1-F2012 Commercial Sales Contracts from Absolute's non-theft recovery products were $12.6 million, up 162% from H1-F2011.

For Q2-F2012, Sales Contracts for consumer solutions were $2.1 million, or 10% of Sales Contracts, compared to $2.5 million, or 14% of Sales Contracts, in Q2-F2011. The year-over-year decline was primarily due to the planned reduction of a low margin high volume OEM bundle program. For H1-F2012, Sales Contracts for consumer solutions were $4.4 million, or 10% of Sales Contracts, compared to $6.7 million, or 17% of Sales Contracts.

On the international front, driven by strong commercial sales in all of the Company's target regions outside of North America, Sales Contracts increased 98% to $4.4 million in Q2-F2012, or 21% of sales, up from $2.2 million, or 13% of sales, in Q2-F2011. International Sales Contracts were $6.6 million for H1-F2012, up 79% from $3.7 million in H1-F2011.

Revenue for Q2-F2012 was $18.4 million, an increase of 9% from $16.8 million in Q2-F2011. For H1-F2012, revenue was $36.6 million, up 11% from $33.1 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 H1-F2012, 89% 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 Q2-F2012 were $15.5 million, a decrease of 3% from $16.0 million in Q2 F2011, predominantly reflecting the Company's continued focus on driving growth while tightly managing expenses. Adjusted Operating Expenses for H1-F2012 were $31.0 million, down 5% from $32.6 million for H1-F2011.

Given the Company's revenue growth and its ongoing focus on cost control, Absolute generated Adjusted Operating Income⁽⁴⁾ of $2.9 million in Q2-F2012, up from an Adjusted Operating Income of  $0.8 million in Q2-F2011. For H1-F2012, Adjusted Operating Income was $5.6 million compared to $0.5 million for H1-F2011.

Absolute recorded net income of $1.5 million in Q2-F2012, compared to a net loss of $0.8 million in Q2-F2011. The Company generated a net loss of $0.4 million for H1-F2012 compared to a net loss of $0.7 million for H1-F2011.

Cash from operating activities increased 87% year-over-year to $6.0 million compared to $3.2 million in Q2-F2011.  Cash from operating activities for H1-F2012 increased 73% to $11.5 million from $6.7 million in H1-F2011. The increased cash flow reflects the Company's improved operational performance, which produced growing sales contracts and reduced operating expenses.

Quarterly Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q2-F2012 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 Q2 F2012 results on Wednesday, February 8, 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 Wednesday, February 15, 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 47688192.

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 Second 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 Second 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 recovery products
	Management defines the Company's theft recovery product line as all products that include a theft recovery component.
6)	Non-theft recovery products
	Management defines the Company's non-theft recovery product line as its Absolute Manage, Absolute Track, Computrace Data Delete and Absolute Secure Drive products.

About Absolute Software
Absolute Software Corporation (TSX: ABT) is the world leader in firmware-embedded endpoint security and management for computers and ultra-portable devices. Positioned in the Visionaries quadrant of Gartner, Inc.'s Magic Quadrant for Client Management Tools in 2012, Absolute's solutions - Computrace, Absolute Manage, Absolute Secure Drive, and LoJack for Laptops - provide organizations with actionable intelligence to prove compliance, generate fast ROI, reduce overhead, and deliver comprehensive visibility and control over all of their endpoints, anywhere, anytime. The Company's software agent 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 and http://blog.absolute.com.

Forward-Looking Statements
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.

©2012 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 and No. 8,062,380. Canadian patents No. 2,211,735, No. 2,284,806, and No. 2,205,370. U.K. patents No. EP0793823, No. GB2298302, and No. GB2338101. German patent No. 69512534. Australian patent No. 699045. Japanese patent No. 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)

---

							December 31, 2011				June 30, 2011				July 1, 2010
ASSETS
CURRENT
	Cash and cash equivalents						$	39,555,543			$	29,866,741			$	26,375,048
	Short-term investments							22,654,008				6,964,589				6,030,609
	Trade and other receivables							16,788,826				16,174,126				13,051,372
	Prepaid expenses and other							1,639,011				1,598,015				1,079,872
								80,637,388				54,603,471				46,536,901
INVESTMENTS								-				18,905,433				22,099,547
PROPERTY AND EQUIPMENT								1,482,353				1,840,824				2,417,005
DEFERRED INCOME TAX ASSETS								20,743,709				20,845,469				18,240,815
INTANGIBLE ASSETS								20,351,389				22,323,743				26,750,552
							$	123,214,839			$	118,518,940			$	116,044,820
LIABILITIES
CURRENT
	Trade and other payables						$	7,400,101			$	8,768,886			$	7,688,207
	Income tax payable							-				-				1,479,398
	Acquisition payable - current							1,652,367				1,762,611				1,623,681
	Accrued warranty							770,000				880,000				1,020,000
	Deferred revenue - current							60,182,269				55,923,312				51,507,198
								70,004,737				67,334,809				63,318,484
ACQUISITION PAYABLE								-				1,623,041				3,278,822
DEFERRED REVENUE								60,335,719				55,255,525				48,680,689
								130,340,456				124,213,375				115,277,995
CONTINGENCIES
SHAREHOLDERS' (DEFICIENCY) EQUITY
	Share Capital							35,443,562				34,640,517				34,306,576
	Equity reserve							35,533,500				34,431,802				31,113,973
	Deficit							(78,102,679)				(74,766,754)				(64,653,724)
								(7,125,617)				(5,694,435)				766,825
							$	123,214,839			$	118,518,940			$	116,044,820

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive Income (Loss)
Three and six months ended December 31, 2011 and 2010
(Expressed in United States dollars) (Unaudited)

---

						Three months ended December 31,								Six months ended December 31,
							2011				2010				2011				2010
REVENUE						$	18,350,606			$	16,763,762			$	36,597,113			$	33,090,317
COST OF REVENUE							5,024,860				4,699,664				10,081,185				9,687,681
GROSS MARGIN							13,325,746				12,064,098				26,515,928				23,402,636
OPERATING EXPENSES
	Sales and marketing						7,947,965				7,918,600				15,731,775				16,802,789
	Research and development						2,799,391				2,929,074				5,596,806				5,849,768
	General and administration						1,649,845				2,153,817				3,464,671				3,718,585
	Investment tax credits						(575,000)				(406,884)				(1,150,000)				(790,252)
	Share-based compensation						626,943				1,496,752				1,323,756				2,258,679
							12,449,144				14,091,359				24,967,008				27,839,569
OPERATING INCOME (LOSS)							876,602				(2,027,261)				1,548,920				(4,436,933)
OTHER INCOME (EXPENSE)
	Interest income, net						150,842				151,786				297,325				333,539
	Foreign exchange gain (loss)						689,724				1,097,695				(1,173,024)				2,724,801
	Gain on investments						192,615				282,038				192,615				283,354
							1,033,181				1,531,519				(683,084)				3,341,694
NET INCOME (LOSS) BEFORE INCOME TAXES							1,909,783				(495,742)				865,836				(1,095,239)
INCOME TAX (EXPENSE) RECOVERY							(420,097)				(259,188)				(1,260,097)				405,642
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)						$	1,489,686			$	(754,930)			$	(394,261)			$	(689,597)
BASIC AND DILUTED INCOME (LOSS) PER SHARE						$	0.03			$	(0.02)			$	(0.01)			$	(0.02)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC							43,199,412				45,136,675				43,302,821				45,915,853

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, 2010						46,829,090			$	34,306,576			$	31,113,973			$	(64,653,724)			$	766,825
Shares issued on options exercised						142,300				328,864				(110,899)				-				217,965
Shares issued under Employee Share Purchase Plan						94,864				323,917				-				-				323,917
Shares repurchased and cancelled under the Normal Course Issuer Bid						(2,549,950)				(1,374,689)				-				(8,082,203)				(9,456,892)
Shares issued on acquisition						166,666				869,968				-				-				869,968
Share-based compensation expense						-				-				2,258,679				-				2,258,679
Net loss and total comprehensive loss						-				-				-				(689,597)				(689,597)
BALANCE, DECEMBER 31, 2010						44,682,970			$	34,454,636			$	33,261,753			$	(73,425,524)			$	(5,709,135)
Shares issued on options exercised						154,475				355,831				(115,480)				-				240,351
Shares issued under Employee Share Purchase Plan						90,123				296,017				-				-				296,017
Shares repurchased and cancelled under the Normal Course Issuer Bid						(1,247,070)				(465,967)				-				(4,177,130)				(4,643,097)
Share-based compensation expense						-				-				1,285,529				-				1,285,529
Net income and total comprehensive income						-				-				-				2,835,900				2,835,900
BALANCE, JUNE 30, 2011						43,680,498			$	34,640,517			$	34,431,802			$	(74,766,754)			$	(5,694,435)
Shares issued on options exercised						203,125				699,661				(222,058)				-				477,603
Shares issued under Employee Share Purchase Plan						93,502				308,313				-				-				308,313
Shares repurchased and cancelled under the Normal Course Issuer Bid						(742,500)				(795,829)				-				(2,212,465)				(3,008,294)
Shares repurchased subsequent to December 31, 2011						-				(236,534)				-				(729,199)				(965,733)
Shares issued on acquisition						166,666				827,434				-				-				827,434
Share-based compensation expense						-				-				1,323,756				-				1,323,756
Net loss and total comprehensive loss						-				-				-				(394,261)				(394,261)
BALANCE, DECEMBER 31, 2011						43,401,291			$	35,443,562			$	35,533,500			$	(78,102,679)			$	(7,125,617)

ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows
Three and six months ended December 31, 2011 and 2010
(Expressed in U.S. dollars) (Unaudited)

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						Three months ended December 31,								Six months ended December 31,
						2011				2010				2011				2010
OPERATING ACTIVITIES
Net income (loss)						$	1,489,686			$	(754,930)			$	(394,261)			$	(689,597)
Items not involving cash
	Amortization of property and equipment						305,531				397,435				622,038				772,845
	Amortization of acquired intangible assets						1,349,357				1,336,856				2,686,213				2,664,685
	Amortization of intangible assets - contract costs and brand						1,339,807				1,301,483				2,808,710				2,526,900
	Share-based compensation						626,943				1,496,752				1,323,756				2,258,679
	Deferred income taxes						(154,903)				(713,364)				110,097				(1,445,961)
	Gain on investments						(192,615)				(282,038)				(192,615)				(283,354)
	Unrealized foreign exchange loss (gain)						(622,135)				(841,155)				1,335,904				(1,715,054)
	Non-cash interest and amortization of investment premium						126,428				106,682				140,257				243,611
Change in non-cash working capital
	Trade and other receivables						1,982,233				445,908				(594,667)				(720,160)
	Prepaid expenses and other						71,225				(143,482)				(40,996)				(104,346)
	Intangible assets - contract costs and brand additions						(1,562,115)				(1,322,536)				(3,222,499)				(2,921,011)
	Trade and other payables						(999,035)				659,922				(2,268,932)				139,706
	Income tax payable						-				615,045				-				349,425
	Accrued warranty						(80,000)				(30,000)				(110,000)				(60,000)
	Deferred revenue						2,366,944				966,439				9,339,150				5,666,221
CASH FROM OPERATING ACTIVITIES							6,047,351				3,239,017				11,542,155				6,682,589
INVESTING ACTIVITIES
	Purchase of property and equipment						(140,037)				(180,354)				(263,568)				(447,346)
	Purchase of intangible assets						(300,069)				(159,488)				(300,069)				(159,488)
	Acquisition payable						(833,333)				(833,333)				(833,333)				(833,333)
	Proceeds from sales and maturities of short-term investments						1,851,614				1,168,672				1,851,614				6,159,549
	Purchase of short-term investments						-				(131,623)				-				(506,880)
	Purchase of investments						-				(125,586)				-				(496,484)
CASH FROM (USED IN) INVESTING ACTIVITIES							578,175				(261,712)				454,644				3,716,018
FINANCING ACTIVITIES
	Repurchase of common shares for cancellation						(236,216)				(6,180,696)				(3,013,781)				(9,456,893)
	Issuance of common shares						366,695				61,172				785,916				535,184
CASH FROM (USED IN) FINANCING ACTIVITIES							130,479				(6,119,524)				(2,227,865)				(8,921,709)
FOREIGN EXCHANGE EFFECT ON CASH							157,973				375,852				(80,132)				966,192
INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS							6,913,978				(2,766,367)				9,688,802				2,443,090
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD							32,641,565				31,584,505				29,866,741				26,375,048
CASH AND CASH EQUIVALENTS, END OF PERIOD						$	39,555,543			$	28,818,138			$	39,555,543			$	28,818,138

 

 

 

Public Relations:
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[email protected] or 212.398.9680

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

or

Kristen Dickson, TMX|Equicom
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