Absolute Software Reports Fiscal 2015 First Quarter Results

Commercial Sales Contracts increase 14%, and cash from operations increases 63%

VANCOUVER, Nov. 3, 2014 /CNW/ - Absolute® Software Corporation (TSX: ABT), the industry standard for persistent endpoint security and management solutions for desktops, laptops, tablets and smartphones, today announced its financial results for the three months ended September 30, 2014. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in U.S. dollars.

Key Financial Metrics		Q1 F2015	Q1 F2014	% change
Sales Contracts^(1)		$26.1M	$23.8M	10%
Cash from operating activities		$8.7M	$5.4M	63%
Operating cash per share^(2)
	(basic)	$0.20	$0.13	54%
	(diluted)	$0.20	$0.12	67%
Revenue		$23.2M	$21.7M	7%
Adjusted EBITDA^(3)		$4.3M	$3.3M	29%
Net income		$0.3M	$1.1M	(73%)
Net income per share
	(basic and diluted)	$0.01	$0.03	(67%)
Dividends paid		$2.4M	$2.0M	20%
Cash and investments		$80.3M	$68.5M	17%
Deferred revenue		$139.8M	$132.7M	5%
(1)(2)(3) - Please refer to "Non-IFRS Measures and Definitions"

Q1-F2015 Highlights:

Sales Contracts

• Total Sales Contracts of $26.1 million, representing 10% year-over-year growth
• Commercial Sales Contracts of $24.8 million, representing 14% year-over-year growth
• 13% year-over-year growth in Device Management and Data Security product sales
• 15% year-over-year growth in Theft Management product sales

Operations and Corporate

• $8.7 million in Cash from Operations compared to $5.4 million in Q1-F2014
• $2.4 million (CAD$0.06 per common share) dividend paid during the quarter
• Normal Course Issuer Bid approved to enable up to 3.8 million common shares to be repurchased

Technology

• Achieved the highest rating in cross-platform support in Gartner, Inc.'s Critical Capabilities for Client Management Tools report
• Released Computrace Event Calling, which allows customers to receive immediate alerts based on user-defined criteria
• Released Absolute Manage 6.6, which provided zero-day support for iOS 8
• Absolute Manage recognized as a Strong Performer in the Forrester Wave™: Enterprise Mobile Management

"A comprehensive device and information security plan is becoming a critical requirement for organizations of all types. In the first quarter of fiscal 2015, this growing priority contributed to solid sales growth in our commercial markets. We continue to make significant gains within highly regulated industries, as well as in the education vertical, where we are fortifying and expanding a very strong market position," said Geoff Haydon, CEO of Absolute. "Our 63% increase in cash from operations reflects the strength of our business model; providing us with the resources required to execute against our growth opportunities, while still returning capital to shareholders through our continued dividend and share buyback programs."

"Operationally, we're executing on our committed fiscal 2015 course of action, and tightening our focus throughout the business," continued Mr. Haydon. "We have narrowed our sights on select industry vertical markets and geographic regions. As part of this focus, we will be launching an initiative to drive increased awareness in those chosen target verticals. Within our sales organization, we have taken steps to focus incentives and align our structure to unlock further potential and to drive more productive new business development. Looking forward, we believe we are on track to achieve our financial and operational goals for fiscal 2015."

Q1-F2015 Financial Review
Invoiced sales to commercial customers increased 14% in Q1-F2015 compared to Q1-F2014.  Invoiced sales in Q1-F2015 were positively impacted by significant growth in the education and healthcare verticals, which were partially offset by declines in the corporate and government verticals.   The decline in the corporate vertical was largely due to a seasonal focus on education opportunities, as the growth in this vertical was exceptionally strong in the previous quarter. The combined education and government verticals increased 27% year over year, while the combined corporate and healthcare verticals decreased 2% year over year.

Commercial Sales Contracts for Absolute's Theft Management products⁽⁵⁾ were $17.3 million in Q1-F2015, representing an increase of 15% from $15.0 million in Q1-F2014.  Q1-F2015 Commercial Sales Contracts from Absolute's Device Management and Data Security products⁽⁶⁾  were $7.5 million, up 13% from $6.6 million in Q1-F2014. Growth in this latter category during the quarter was primarily driven by increased sales of Computrace Data Protection.

Sales Contracts for consumer solutions were $1.3 million (5% of total Sales Contracts), down from $2.1 million (9% of total Sales Contracts), in Q1-F2014.

Q1-F2015 Sales Contracts for North America increased 12% as compared to the same period in F2014 and represented 87% of total Sales Contracts, compared to 85% of total Sales Contacts in the prior year.  International sales decreased 4% over Q1-F2014 and represented 13% of total Sales Contracts. The decrease from the prior year reflects a large Computrace sale in the Asia Pacific region in Q1-F2014.

Revenue in Q1-F2015 was $23.2 million, a 7% increase from $21.7 million in Q1-F2014. 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.

Adjusted Operating Expenses⁽³⁾ for Q1-F2015 were $18.9 million, up 3% from $18.4 million in Q1-F2014. The change reflects an increase to sales and marketing and general and administrative expenditures, which were offset in part by lower cost of revenue.

Absolute generated Adjusted EBITDA⁽⁴⁾ of $4.3 million in Q1-F2015, up 29% from $3.3 million in Q1-F2014.

Absolute recorded net income of $0.3 million, or $0.01 per share, in Q1-F2015, compared to net income of $1.1 million, or $0.03 per share, in Q1-F2014. On a year-over-year comparison basis, the Company's net income was impacted in Q1-F2015 by a foreign exchange loss of $0.3 million, compared to a foreign exchange gain of $0.2 million in Q1-F2014, and income tax expense of $1.5 million, compared to income tax expense of $0.4 million in Q1-2014.

Quarterly Dividend
Given the Company's strong financial position, the Board of Directors approved a change in the Company's dividend policy. The quarterly dividend will increase from $0.06 to $0.07 per common share. The $0.07 per share dividend is scheduled to be paid on November 28, 2014 to those persons who were shareholders of record at the close of business on November 7, 2014.

Corporate Outlook
Management remains confident in Absolute's market opportunity. For F2015, management expects Sales Contracts and cash from operating activities to increase over F2014 levels.

Quarterly Filings
Management's discussion and analysis ("MD&A"), condensed consolidated financial statements and the notes thereto for Q1-F2015 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-F2015 results on Monday, November 3, 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, November 10, 2014 at midnight.  To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 23269140.

A live audio webcast of the conference call will be available at www.absolute.com and http://bit.ly/1onfAp7.  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.

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 Q1 Fiscal 2015 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 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 Q1 Fiscal 2015 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, amortization of property and equipment, and restructuring charges and certain post-retirement benefits.

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 Absolute Manage and Absolute Service 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 desktops, 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 Enterprise Mobility Management (EMM) 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 EMM Magic Quadrants. Absolute persistence technology is embedded in the firmware of computers, netbooks, tablets and smartphones by global leaders, including Acer, ASUS, Dell, Fujitsu, HP, Lenovo, Microsoft, 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, No. 8,625,799, No. 8,669,870, No. 8,701,013, No. 8,712,432, No. 8,717,172, No. 8,734,529, No. 8,745,383, and No. 8,800,061. 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, No. 2009279430, No. 2009279431, No. 2010315412, No. 2010324789, and No. 2010321633. Japanese patents No. 4067035, No. 5220924 and No. 5363305. Korean patents No. 10-1372986 and No. 10-1408746. Mexican patents No. 297,406 and No. 306,287. Russian patent No. 2,460,220 and 2,506,704. The Toronto Stock Exchange has neither approved nor disapproved of the information contained in this news release.

ABSOLUTE SOFTWARE CORPORATION Condensed Consolidated Statements of Financial Position (Expressed in United States dollars) (Unaudited)
			September 30, 2014	June 30, 2014
ASSETS
CURRENT
	Cash and cash equivalents		$   50,523,230	$    40,928,539
	Short-term investments		14,650,521	17,537,492
	Trade and other receivables		17,315,697	21,979,235
	Prepaid expenses and other		2,328,613	1,917,665
			84,818,061	82,362,931
INVESTMENTS			15,087,463	15,115,005
PROPERTY AND EQUIPMENT			1,969,013	1,987,544
DEFERRED INCOME TAX ASSETS			18,889,047	19,801,047
INTANGIBLE ASSETS AND GOODWILL			17,675,224	18,535,582
			$ 138,438,808	$  137,802,109
LIABILITIES
CURRENT
	Trade and other payables		$     10,124,954	$    10,455,510
	Income taxes payable		210,000	-
	Accrued warranty		310,000	360,000
	Deferred revenue - current		71,946,417	71,144,393
			82,591,371	81,959,903
DEFERRED REVENUE			67,865,165	65,818,337
			150,456,536	147,778,240
CONTINGENCIES
SHAREHOLDERS' DEFICIENCY
	Share capital		54,454,129	52,403,258
	Equity reserve		34,939,699	35,141,530
	Deficit		(101,411,556)	(97,520,919)
			(12,017,728)	(9,976,131)
			$ 138,438,808	$ 137,802,109

ABSOLUTE SOFTWARE CORPORATION Consolidated Statements of Operations and Comprehensive Income Three months ended September 30, 2014 and 2013 (Expressed in United States dollars) (Unaudited)
			2014	2013
REVENUE			$  23,196,515	$  21,688,096
COST OF REVENUE			4,663,087	4,894,016
GROSS MARGIN			18,533,428	16,794,080
OPERATING EXPENSES
	Sales and marketing		10,409,376	9,852,424
	Research and development		3,159,971	3,127,388
	General and administration		2,474,910	2,053,420
	Share-based compensation		483,184	544,216
			16,527,441	15,577,448
OPERATING INCOME			2,005,987	1,216,632
OTHER (EXPENSE) INCOME
	Interest income, net		42,967	53,589
	Foreign exchange (loss) gain		(273,785)	224,966
			(230,818)	278,555
NET INCOME BEFORE INCOME TAXES			1,775,169	1,495,187
INCOME TAX EXPENSE			(1,470,000)	(363,200)
NET INCOME AND TOTAL COMPREHENSIVE
	INCOME		$     305,169	$     1,131,987
BASIC AND DILUTED INCOME PER SHARE			$            0.01	$            0.03
WEIGHTED AVERAGE NUMBER OF COMMON
	SHARES OUTSTANDING, BASIC		43,947,400	42,277,767

ABSOLUTE SOFTWARE CORPORATION Consolidated Statement 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, 2013		42,052,253	$ 41,690,749	$ 36,542,921	$ (91,835,556)	$ (13,601,886)
Shares issued on 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)
Shares issued on options exercised		792,851	4,704,666	(1,562,258)	-	3,142,408
Shares issued on non-standard options
	exercised	255,884	1,901,830	(660,068)	-	1,241,762
Shares issued under Employee Share
	Purchase Plan	62,674	342,362	-	-	342,362
Share-based compensation		-	-	1,352,789	-	1,352,789
Dividends paid		-	-	-	(7,219,649)	(7,219,649)
Net income and total comprehensive
	income	-	-	-	2,439,865	2,439,865
BALANCE, JUNE 30, 2014		43,796,215	$ 52,403,258	$ 35,141,530	$ (97,520,919)	$ (9,976,131)
Shares issued on employee options
	exercised	302,875	1,780,289	(544,627)	-	1,235,662
Shares issued on non-standard options
	exercised	52,250	385,290	(140,388)	-	244,902
Shares issued under Employee Share
	Purchase Plan	70,480	379,906	-	-	379,906
Shares repurchased and cancelled
	under the Normal Course Issuer Bid	(32,400)	(42,195)	-	(161,092)	(203,287)
Shares committed to be repurchased
	under the Normal Course Issuer Bid	-	(452,419)	-	(1,628,483)	(2,080,902)
Share-based compensation		-	-	483,184	-	483,184
Dividends paid		-	-	-	(2,406,231)	(2,406,231)
Net income and total comprehensive
	income	-	-	-	305,169	305,169
BALANCE, SEPTEMBER 30, 2014		44,189,420	$ 54,454,129	$  34,939,699	$ (101,411,556)	$ (12,017,728)

ABSOLUTE SOFTWARE CORPORATION Consolidated Statements of Cash Flows Three months ended September 30, 2014 and 2013 (Expressed in United States dollars) (Unaudited)
					2014	2013
OPERATING ACTIVITIES
	Net income				$    305,169	$    1,131,987
	Items not involving cash
		Amortization of property and equipment			455,109	323,000
		Amortization of acquired intangible assets			1,314,551	1,211,436
		Amortization of intangible assets - contract costs and brand			1,644,928	1,476,264
		Share-based compensation			483,184	544,216
		Deferred income taxes			912,000	66,400
		Non-cash interest and amortization
			of investment premium		164,513	83,721
	Change in non-cash working capital
		Trade and other receivables			4,677,898	2,162,750
		Prepaid expenses and other			(410,948)	(184,434)
		Intangible assets - contract costs and brand additions			(2,024,665)	(1,723,232)
		Trade and other payables			(1,782,236)	(1,715,562)
		Income taxes payable			210,000	-
		Accrued warranty			(50,000)	(80,000)
		Deferred revenue			2,848,852	2,072,724
CASH FROM OPERATING ACTIVITIES					8,748,355	5,369,270
INVESTING ACTIVITIES
	Purchase of property and equipment				(895,239)	(206,160)
	Purchase of intangible assets				-	(144,875)
	Proceeds from maturities of short-term investments				2,750,000	3,693,925
	Purchases of short-term investments				-	(409,951)
	Purchases of investments				-	(3,322,342)
CASH FROM (USED IN) INVESTING ACTIVITIES					1,854,761	(389,403)
FINANCING ACTIVITIES
	Dividends paid				(2,406,231)	(2,037,566)
	Issuance of common shares				1,744,684	2,687,581
	Repurchase of common shares for cancellation				(203,287)	-
CASH (USED IN) FROM FINANCING ACTIVITIES					(864,834)	650,015
FOREIGN EXCHANGE EFFECT ON CASH					(143,591)	30,004
INCREASE IN CASH AND CASH EQUIVALENTS					9,594,691	5,659,886
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					40,928,539	31,114,998
CASH AND CASH EQUIVALENTS, END OF PERIOD					$  50,523,230	$  36,774,884

 

SOURCE: Absolute Software Corporation

Public Relations:
Becky Obbema, Interprose
[email protected] or 408.778.2024

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