Absolute Software Reports Fiscal 2012 Year-End and Fourth Quarter Results

Strong demand for expanded product suite across all target commercial market verticals drove double-digit fiscal 2012 Sales Contract growth

VANCOUVER, Aug. 13, 2012 /CNW/ - Absolute^® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the leading provider of persistent endpoint security and management solutions for PC's, Macs, iOS, Android, Windows and Blackberry devices, today announced its financial results for the three months and year ended June  30, 2012. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and reported in U.S. dollars.

Key Financial Metrics	Q4 F2012	Q4 F2011	% change	F2012	F2011	% change
Sales Contracts^(1)	$23.8M	$22.8M	+5%	$88.7M	$79.1M	+12%
Cash from operating activities	$4.7M	$3.1M	+52%	$18.9M	$12.8M	+47%
Operating cash per share^(2)      (basic)      (diluted)	$0.11 $0.11	$0.07 $0.07	+57% +43%	$0.44 $0.43	$0.29 $0.28	+52% +54%
Revenue	$19.5M	$18.0M	+9%	$74.6M	$68.0M	+10%
Adjusted Operating Income^(3)	$1.7M	$3.0M	(44)%	$10.4M	$5.5M	+89%
Net (loss) income	$(2.4)M	$1.3M	nm	$(1.4)M	$2.1M	nm
Net (loss) income per share      (basic)      (diluted)	$(0.05) $(0.05)	$0.03 $0.03	nm nm	$(0.03) $(0.03)	$0.05 $0.05	nm nm
Cash, cash equivalents and investments	$69.9M	$55.7M	+25%
Deferred revenue	$125.2M	$111.2M	+13%

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

Fiscal 2012 Highlights

• Achieved 12% growth in Sales Contracts compared to F2011.
• Commercial Sales Contracts increased by 19% compared to F2011.
• Cash from operating activities was up 47% compared to F2011.
• Adjusted Operating Income increased 89% over F2011.
• Sales of Device Management and Security products⁽⁶⁾ increased 67% and accounted for 30% of F2012 commercial sales contracts.
• Placed in the Visionaries Quadrant of Gartner Inc.'s Client Management Tools Magic Quadrant.
• Expanded the product platform to include new market-leading features such as:
• Absolute Manage: Windows imaging, support for Mac OS X Lion and detailed encryption status reporting;
• Absolute Manage Mobile Device Management (MDM): Support for Android and Microsoft Windows Phone 7, Absolute Safe for secure document distribution to iOS devices and automated enrolment and policy-based app installation for employee-owned devices;
• Computrace:  Integration of Computrace persistence technology into the firmware of the Lenovo Thinkpad tablet, theft recovery for Android devices and ability to generate End-of-Life Data Delete Certificates.
• Partnered with InComm to sell LoJack for Laptops through major U.S. retailers.
• LoJack for Laptops named Editors' Choice by PC Magazine.
• Received the Lenovo Top Supplier Award.
• Repurchased 1,003,500 shares for a total of $4.1 million under Company's Normal Course Issuer Bids.

"We are pleased with the 19% commercial sales growth we delivered in fiscal 2012," said John Livingston, CEO of Absolute. "During the year, we made good progress in all of our expansion markets: healthcare, government, corporate and international. Computrace now is becoming a recognized layer of best practice for governance, risk management and compliance. Absolute Manage is now positioned as a visionary in the Gartner Magic Quadrant and our innovative Mobile Device solutions have entered a rapid growth phase. Correspondingly, we delivered 32% growth in international sales, a 7% sales increase for our theft management offerings and a 67% improvement in sales for our device management and data security solutions."

Mr. Livingston continued: "Over the past three years, we have built a solid sales foundation that is highly productive. We believe that increased sales capacity and continued product innovation will allow us to fully capitalize on the large market opportunity in front of us. Accordingly, in the fourth quarter of fiscal 2012 we increased our spend levels in sales and marketing and research and development, and we expect to maintain this spending level with further modest increases through fiscal 2013. This positions us to increase growth in the second half of fiscal 2013 and into fiscal 2014, as we bring these teams up to speed. We are confident that we have entered fiscal 2013 with the right products, strategy and resources in place to deliver another year of growth." 

F2012 Year-End and Q4 Financial Review
Absolute's F2012 year-end and Q4 results are the Company's fourth 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 F2011 year-end and Q4 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.

F2012 Sales Contracts grew 12% to $88.7 million from $79.1 million in F2011. The year-over-year increase reflects strong Commercial sales, which grew 19% to $81.5 million from $68.3 million in F2011.

For Q4-F2012, Sales Contracts were $23.8 million, up 5% from $22.8 million for Q4-F2011. Q4-F2012 commercial sales were $22.7 million, up 8% from $21.1 million in Q4-F2011.

Commercial Sales Contracts for Absolute's flagship theft management products⁽⁵⁾  (previously referred to as "theft recovery") were $57.4 million for F2012. This was up 7% from $53.8 million in F2011, demonstrating continued demand for the Company's unique theft management and investigative response services. For Q4-F2012, Commercial Sales Contracts for theft management products were $15.6 million, in line with Q4-F2011.

F2012 Commercial Sales Contracts from Absolute's device management and data security products⁽⁶⁾  (previously referred to as "non-theft management") were $24.1 million.  This was up 67% compared to $14.5 million for F2011 as a result of robust demand, particularly for Absolute Manage and Mobile Device Management offerings. For Q4-F2012, Commercial Sales Contracts from Absolute's device management and data security products were $7.1 million, up 30% from $5.5 million for Q4-F2011.

Driven by strong commercial sales in all of the Company's target regions outside of North America, international Sales Contracts increased 32% to $10.6 million in F2012, up from $8.0 million in F2011. International Sales Contracts were $1.9 million for Q4-F2012, up 37% from $1.4 million in Q4-F2011.

For F2012, Sales Contracts for consumer solutions were $7.2 million, or 8% of Sales Contracts, compared to $10.8 million, or 14% of Sales Contracts, in F2011. The year-over-year decrease was primarily due to two factors, one: the planned reduction of a low margin, high volume OEM bundle program; two: a decline in retail sales in Q4-F2012 as the Company transitioned to new in-store gift card programs, which it launched subsequent to year-end. For Q4-F2012, Sales Contracts for consumer solutions were $1.1 million, or 5% of Sales Contracts, compared to $1.7 million, or 7% of Sales Contracts, in Q4-F2011.

Revenue for F2012 was $74.6 million, a 10% increase from $68.0 million in F2011.  For Q4-F2012, revenue was $19.5 million, up 9% from $18.0 million in Q4-F2011. 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. For F2012, 78% 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 F2012 were $64.1 million. This was up 3% from $62.5 million in F2011, as the Company made strategic investments in the business, particularly in Research and Development and Sales and Marketing to support high-growth areas of the business, the majority of which were reflected in Q4-F2012.  Adjusted Operating Expenses for Q4-F2012 were $17.9 million, up 19% from $15.0 million for Q4-F2011.

Absolute generated Adjusted Operating Income⁽⁴⁾ of $10.4 million in F2012, up 89% from an Adjusted Operating Income of  $5.5 million in F2011. For Q4-F2012, Adjusted Operating Income was $1.7 million, down 44% from $3.0 million for Q4-F2011, reflecting the Company's increased investments in the quarter.

Absolute recorded a net loss of $1.4 million in F2012, compared to net income of $2.1 million in F2011. The Company's annual net income results were significantly affected by foreign exchange gains and losses and income tax charges, with the Company recording a combined $4.6 million charge for foreign exchange losses and income taxes in F2012 compared to a combined net gain of $4.5 million in F2011. Absolute generated a net loss of $2.4 million for Q4-F2012 compared to net income of $1.3 million for Q4-F2011.

Cash from operating activities was $18.9 million for F2012, up 47% from $12.8 million in F2011.  Cash from operating activities for Q4-F2012 increased 52% to $4.7 million from $3.1 million in Q4-F2011.

At June 30, 2012, Absolute had cash, cash equivalents and investments of $69.9 million compared to $55.7 million at June 30, 2011.

Annual Filings
Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for 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 F2012 Year-End and Q4 results on Monday, August 13, 2012 at 2:00 p.m. PT (5:00 p.m. ET). All interested parties can join the call by dialing 647-427-7450, or 1-888-231-8191. Please dial-in 15 minutes prior to the call to secure a line.  The conference call will be archived for replay until Monday, August 20, 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 15665192.

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 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 10 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 and amortization of acquired intangible assets. For a description of the reasons these items are adjusted, please refer to the Fiscal 2012 MD&A.
4)		Adjusted Operating Income (Loss)
		Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company's performance. Adjusted Operating Income (Loss) refers to IFRS operating income excluding charges for share-based compensation and amortization of acquired intangible assets.
5)		Theft Management products (previously referred to as "theft recovery" products)
		Management defines the Company's theft management product line as Computrace products that include an investigations and recovery services component.
6)		Device Management and Data Security products (previously referred to as "Non-Theft recovery" 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 world leader in persistent endpoint security and management solutions for computers and ultra-portable devices and the data they contain. Positioned as a Visionary vendor in Gartner, Inc.'s Magic Quadrant for Client Management Tools in 2012, Absolute's solutions -  Absolute Computrace, Absolute Manage, Absolute Secure Drive, and Computrace LoJack for Laptops -  provide organizations with actionable intelligence to track, manage and secure both employee and corporate liable devices accessing their network and restore trust, visibility and control over all of their devices and data, ensuring best practices for governance, risk mitigation and compliance. The Company's persistence technology is pre-built into the firmware of laptop, Ultrabook, desktop, netbook, and tablet computers 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)
			June 30, 2012			June 30, 2011			July 1, 2010
ASSETS
CURRENT
	Cash and cash equivalents		$	45,412,147		$	29,866,741		$	26,375,048
	Short-term investments			8,642,435			6,964,589			6,030,609
	Trade and other receivables			18,105,369			16,174,126			13,051,372
	Prepaid expenses and other			2,010,165			1,598,015			1,079,872
				74,170,116			54,603,471			46,536,901
INVESTMENTS				15,875,256			18,905,433			22,099,547
PROPERTY AND EQUIPMENT				1,561,495			1,840,824			2,417,005
DEFERRED INCOME TAX ASSETS				19,848,221			20,845,469			18,240,815
INTANGIBLE ASSETS				18,256,872			22,323,743			26,750,552
			$	129,711,960		$	118,518,940		$	116,044,820
LIABILITIES
CURRENT
	Trade and other payables		$	7,016,921		$	8,768,886		$	7,688,207
	Income tax payable			-			-			1,479,398
	Acquisition payable - current			1,657,949			1,762,611			1,623,681
	Accrued warranty			590,000			880,000			1,020,000
	Deferred revenue - current			63,173,264			55,923,312			51,507,198
				72,438,134			67,334,809			63,318,484
ACQUISITION PAYABLE				-			1,623,041			3,278,822
DEFERRED REVENUE				62,038,434			55,255,525			48,680,689
				134,476,568			124,213,375			115,277,995
SHAREHOLDERS' (DEFICIENCY) EQUITY
	Share capital			38,625,463			34,640,517			34,306,576
	Equity reserve			35,751,185			34,431,802			31,113,973
	Deficit			(79,141,256)			(74,766,754)			(64,653,724)
				(4,764,608)			(5,694,435)			766,825
			$	129,711,960		$	118,518,940		$	116,044,820

ABSOLUTE SOFTWARE CORPORATION Consolidated Statements of Operations and Comprehensive (Loss) Income Three months and years ended June 30, 2012 and 2011 (Expressed in United States dollars) (Unaudited)
			Three months ended June 30,							Year ended June 30,
			2012			2011				2012			2011
REVENUE			$	19,529,188		$		17,966,026		$	74,564,704		$	67,986,371
COST OF REVENUE				4,772,790				4,523,699			19,701,385			19,280,638
GROSS MARGIN				14,765,398				13,442,327			54,863,319			48,705,733
OPERATING EXPENSES
	Sales and marketing			9,384,732				7,263,009			33,213,549			32,263,394
	Research and development			3,375,099				2,819,404			11,743,694			11,623,475
	General and administration			1,889,564				2,164,446			7,204,407			7,872,901
	Investment tax credits			(240,000)				(441,298)			(2,372,000)			(3,234,728)
	Share-based compensation			594,921				622,343			2,478,178			3,544,208
				15,004,316				12,427,904			52,267,828			52,069,250
OPERATING (LOSS) INCOME				(247,918)				1,014,423			2,595,491			(3,363,517)
OTHER (EXPENSE) INCOME
	Interest income, net			177,714				249,702			591,365			743,395
	Foreign exchange (loss) gain			(622,210)				(129,271)			(1,263,571)			3,514,259
	Gain on investments			(78,740)				-			30,078			283,354
				(523,236)				120,431			(642,128)			4,541,008
NET (LOSS) INCOME BEFORE INCOME TAXES				(771,154)				1,134,854			1,953,363			1,177,491
INCOME TAX (EXPENSE) RECOVERY				(1,629,310)				128,472			(3,369,249)			968,812
NET (LOSS) INCOME AND TOTAL COMPREHENSIVE (LOSS) INCOME			$	(2,400,464)		$		1,263,326		$	(1,415,886)		$	2,146,303
BASIC AND DILUTED (LOSS) INCOME PER SHARE			$	(0.05)		$		0.03		$	(0.03)		$	0.05
WEIGHTED AVERAGE NUMBER OF      COMMON SHARES OUTSTANDING, BASIC				43,707,358				44,007,119			43,428,911			44,983,784

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				296,775			696,733			(226,379)			-			470,354
Shares issued under Employee Share Purchase Plan				184,987			607,896			-			-			607,896
Shares repurchased and cancelled under the Normal Course Issuer Bid				(3,797,020)			(1,840,656)			-			(12,259,333)			(14,099,989)
Shares issued on acquisition				166,666			869,968			-			-			869,968
Share-based compensation expense				-			-			3,544,208			-			3,544,208
Net income and total comprehensive income				-			-			-			2,146,303			2,146,303
BALANCE, JUNE 30, 2011				43,680,498		$	34,640,517		$	34,431,802		$	(74,766,754)		$	(5,694,435)
Shares issued on options exercised				739,037			3,713,432			(1,158,795)			-			2,554,637
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				166,666			827,434			-			-			827,434
Share-based compensation expense				-			-			2,478,178			-			2,478,178
Net loss and total comprehensive loss				-			-			-			(1,415,886)			(1,415,886)
BALANCE, JUNE 30, 2012				43,757,803		$	38,625,463		$	35,751,185		$	(79,141,256)		$	(4,764,608)

ABSOLUTE SOFTWARE CORPORATION Consolidated Statements of Cash Flows Three months and years ended June 30, 2012 and 2011 (Expressed in United States dollars) (Unaudited)
				Three months ended June 30,						Year ended June 30,
				2012			2011			2012			2011
OPERATING ACTIVITIES
	Net (loss) income			$	(2,400,464)		$	1,263,326		$	(1,415,886)		$	2,146,303
	Items not involving cash
		Amortization of property and equipment			345,367			458,734			1,269,694			1,669,966
		Amortization of acquired intangible assets			1,328,350			1,336,857			5,370,169			5,348,174
		Amortization of intangible assets - contract costs and brand			1,446,251			1,376,155			5,618,676			5,224,273
		Share-based compensation			594,921			622,343			2,478,178			3,544,208
		Deferred income taxes			1,389,310			(48,112)			997,249			(2,604,654)
		Loss (gain) on investments			78,740			-			(30,078)			(283,354)
		Unrealized foreign exchange loss (gain)			252,084			(60,312)			1,237,311			(2,442,459)
		Non-cash interest and amortization of investment premium			236,356			81,244			379,386			474,960
	Change in non-cash working capital
		Trade and other receivables			(774,615)			(3,259,972)			(1,901,526)			(3,122,754)
		Prepaid expenses and other			(272,498)			(63,667)			(569,799)			(518,143)
		Intangible assets - contract costs and brand additions			(1,697,980)			(1,740,396)			(6,414,256)			(5,986,150)
		Trade and other payables			(28,907)			(1,022,092)			(1,866,485)			19,019
		Income tax payable			-			(542,355)			-			(1,479,398)
		Accrued warranty			(40,000)			(30,000)			(290,000)			(140,000)
		Deferred revenue			(4,280,140)			4,752,128			14,032,861			10,990,950
CASH FROM OPERATING ACTIVITIES					4,737,055			3,123,881			18,895,494			12,840,941
INVESTING ACTIVITIES
	Purchase of property and equipment				(437,608)			(176,123)			(929,040)			(1,060,399)
	Purchase of intangible assets				(50,000)			-			(350,069)			(159,488)
	Acquisition payable				-			-			(833,333)			(833,333)
	Proceeds from sales and maturities of short-term investments				10,067,870			-			16,101,051			6,220,405
	Purchase of short-term investments				(125,000)			(133,858)			(355,752)			(701,594)
	Purchase of investments				(16,046,523)			(103,208)			(16,046,523)			(901,128)
CASH (USED IN) FROM INVESTING ACTIVITIES					(6,591,261)			(413,189)			(2,413,666)			2,564,463
FINANCING ACTIVITIES
	Repurchase of common shares for cancellation				-			(2,504,497)			(3,983,136)			(14,099,989)
	Issuance of common shares				263,539			186,219			3,165,584			1,036,007
CASH FROM (USED IN) FINANCING ACTIVITIES					263,539			(2,318,278)			(817,552)			(13,063,982)
FOREIGN EXCHANGE EFFECT ON CASH					(52,257)			67,505			(118,870)			1,150,271
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(1,642,924)			459,919			15,545,406			3,491,693
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					47,055,071			29,406,822			29,866,741			26,375,048
CASH AND CASH EQUIVALENTS, END OF PERIOD				$	45,412,147		$	29,866,741		$	45,412,147		$	29,866,741

 

 

SOURCE: Absolute Software Corporation

Public Relations:
Chris Michaels, HORN Group
[email protected]
415.905.4030
805.390.0819

Investor Relations:
Kristen Dickson, MSc, TMX|Equicom
[email protected] or 416.815.0700 x273
or
Dave Mason, CFA, TMX|Equicom
[email protected] or 416.815.0700 x237