Absolute Software Reports Second Quarter Fiscal 2010 Results
Q2 Q2 % YTD YTD %
Key Financial Metrics F2010 F2009 change F2010 F2009 change
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Sales Contracts
reported(1.a) $16.1M $16.5M -3% $35.3M $34.7M 2%
Sales Contracts in
constant currency(1.b) $18.5M $16.5M +12% $36.8M $34.7M 6%
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Cash from Operating
Activities(1.a) $1.6M $3.1M -48% $5.9M $12.2M -51%
Operating cash per
share(1.a)
Basic $0.04 $0.06 -33% $0.13 $0.25 -48%
Diluted $0.03 $0.06 -50% $0.12 $0.24 -50%
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Revenue 15.8M $13.1M +21% $30.9M $25.2M +22%
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Net loss $(2.3M) $(15.5M) +85% $(4.3M) ($17.6M) +76%
Loss per share
(diluted) $(0.05) $(0.32) +84% $(0.09) $(0.37) +76%
Q2-F2010 Highlights:
- Grew contracted subscription base by 24% to 5.0 million, from
4.0 million in Q2-F2009
- Deferred revenue was $100.5 million at December 31, 2009, compared to
$99.6 million at September 30, 2009
- Cash, cash equivalents & investments (including long-term) were
$65.0 million at December 31, 2009, compared to $73.9 million at
September 30, 2009 due to the use of $10.3 million in the acquisition
of LANrev
- Acquired LANrev, a comprehensive asset management product, began
rebranding it as Absolute Manage, and achieved its first sales
- Launched a new Device Freeze feature for Computrace(R)
- Expanded availability of Computrace solutions for HP Care Pack
Services
- Introduced Lenovo Lost & Found for ThinkPad laptops
- Announced Normal Course Issuer Bid ("NCIB") for up to 3,337,617
common shares
- Subsequent to quarter end, launched Computrace LoJack(R) for Laptops
product that incorporates Intel(R) Anti-Theft Technology for the
consumer market
"Q2 sales contracts were down 3% in Canadian dollars, but were up 12% in constant currency over last year despite the continued weakness in commercial market spending," said
Financial Review
Sales Contracts for Q2-F2010 were
Despite weak commercial market spending, commercial sales were up 14% year-over-year in constant currency. This was driven by a 52% (constant currency) increase in education vertical sales in the U.S., a 149% (constant currency) increase in rest-of-world sales and the introduction of Absolute Manage. Commercial sales to existing customers continued to show strength, generating sales of
Absolute deploys its services through a software-as-a-service ("SaaS") model. A feature of the SaaS model is its ability to generate operating cash flows. Absolute's cash from Operating Activities for Q2-F2010 totaled
Revenue for Q2-F2010 was
Absolute is in a strong financial position, with no debt and the financial resources necessary to fund its operating and capital requirements and to execute on its growth strategies. At
Guidance
In
- Sales contracts of $76-82 million (was $80 - $86 million)
- Cash from Operating Activities of $8-11 million (was $12 -
$15 million)
Management's discussion and analysis (MD&A), consolidated financial statements and notes thereto for the second quarter 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 contents of this release on
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.
1.a Absolute refers to "Sales Contracts" (invoiced sales) as a revenue
measure, "Cash from Operating Activities" as a profitability measure,
and "Basic and Diluted Operating Cash per Share" (Cash from Operating
Activities divided by the average shares outstanding for the period;
diluted calculated using the treasury stock method) as an earnings
per share measure. With the exception of Cash from Operating
Activities, these are non-standard measures under Canadian Generally
Accepted Accounting Principals. Absolute considers these measures to
be key performance metrics as substantially all Sales Contracts in
each quarter are deferred on the balance sheet, while the related
costs are expensed in that same quarter. Refer to the Business Model
section in our Management Discussion and Analysis for more details.
1.b Sales Contracts in constant currency refers to the Canadian dollar
sales that would have been reported had the U.S. dollar exchange rate
been unchanged from the rate in the prior year. With approximately
95% of Sales Contracts in U.S. dollars management believes this to be
a more meaningful evaluation of the underlying performance of the
business.
About Absolute
Absolute Software Corporation (TSX: ABT) is the leader in computer theft recovery, data protection and IT asset management solutions. Absolute Software provides organizations and consumers with solutions in the areas of regulatory compliance, data protection and theft recovery. The company's Computrace software is embedded in the firmware of computers by global leaders, including Acer, ASUS, Dell, Fujitsu, Fujitsu-Siemens, GammaTech, General Dynamics Itronix, HP, Lenovo, Motion, Panasonic and Toshiba, and the Company has reselling partnerships with these OEMs and others, including Apple. For more information about Absolute Software and Computrace, visit www.absolute.com or 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, a continuing, or increased need for data protection and theft recovery services in difficult economic times, the attainment of certain subscription targets and company performance, the increased adoption of the Company's data protection and theft deterrence products, the ability of the Company to achieve its $76-82 million Sales Contracts and $8-11 million Cash from Operating Activities FY 2010 targets, the ability of the Company to successfully execute on its growth strategies, including attracting new retail partners, the demand for its products continuing to increase, stable currency valuations and a sufficiently stable and healthy global economic and business environment, 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 Absolute's 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 Absolute cannot assure you that the forward-looking statements contained in this press release will be realized.
The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with increased competition from other producers, the impact of general, economic conditions in
(C) 2010 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. All other trademarks are property of their respective owners. Computrace U.S. patents No. 5,715,174, No. 5,764,892, No. 5,802,280, No. 5,896,497, No. 6,244,758, No. 6,269,392, No. 6,300,863, and No. 6,507,914. Canadian patents No. 2,284,806 and No. 2,205,370. U.K. patents No. EP793823 and No. GB2338101. German patent No. 695 125 34.6-08. Australian patent No. 699045.
ABSOLUTE SOFTWARE CORPORATION
Consolidated Balance Sheets
(Expressed in Canadian dollars) (Unaudited)
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As At
December 31, June 30,
2009 2009
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ASSETS
CURRENT
Cash and cash equivalents $ 31,926,285 $ 56,078,004
Short-term investments 8,705,768 8,743,861
Accounts receivable, net of allowance
for doubtful accounts of $2,164,000
(2009 - $2,387,000) 11,420,690 15,570,780
Prepaid expenses and other 1,409,532 974,564
Current portion of deferred contract
costs 3,894,761 3,609,944
Current portion of future income tax
assets 10,662,417 10,646,521
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68,019,453 95,623,674
INVESTMENTS 24,337,763 4,076,211
DEFERRED CONTRACT COSTS 3,716,314 3,765,717
PROPERTY AND EQUIPMENT 2,775,823 2,644,275
FUTURE INCOME TAX ASSETS 11,636,321 11,081,073
INTANGIBLE ASSETS 16,994,499 127,775
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$127,480,173 $117,318,725
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LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 6,592,154 $ 6,775,466
Income tax payable 3,545,000 1,575,000
Current portion of purchase price payable 1,708,113 -
Current portion of accrued warranty 5,524,067 5,288,520
Current portion of deferred revenue, net 50,996,667 46,577,880
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68,366,001 60,216,866
PURCHASE PRICE PAYABLE 3,416,227 -
ACCRUED WARRANTY 6,229,266 5,963,650
DEFERRED REVENUE, NET 49,456,729 49,278,726
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127,468,223 115,459,242
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SHAREHOLDERS' EQUITY
Share capital 43,845,884 41,988,977
Contributed surplus 27,515,987 26,822,975
Deficit (71,349,921) (66,952,469)
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11,950 1,859,483
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$127,480,173 $117,318,725
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Loss and Comprehensive Loss
Three and six months ended December 31, 2009 and 2008
(Expressed in Canadian dollars) (Unaudited)
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Three Months Six Months
2009 2008 2009 2008
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REVENUE 15,837,648 13,127,441 30,884,706 25,236,489
COST OF REVENUE 3,802,066 3,600,744 7,556,479 6,924,429
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GROSS MARGIN 12,035,582 9,526,697 23,328,227 18,312,060
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EXPENSES
Sales and
marketing 9,152,200 6,996,446 17,321,967 13,920,664
Research and
development 2,027,910 1,740,668 3,657,018 3,443,656
General and
administration 1,945,225 1,989,333 3,862,223 3,709,096
Investment tax
credits (250,000) (675,000) (500,000) (675,000)
Stock-based
compensation 582,217 13,110,373 1,168,678 14,670,700
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13,457,552 23,161,820 25,509,886 35,069,116
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OPERATING LOSS (1,421,970) (13,635,123) (2,181,659) (16,757,056)
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OTHER INCOME (EXPENSE)
Interest and
bank charges,
net 195,152 512,432 352,860 964,577
Foreign exchange
(loss) gain (487,210) 1,049,534 (1,886,456) 1,965,682
Gain (loss) on
foreign exchange
contracts - (1,226,120) - (1,226,120)
Restructuring
charges - (989,132) - (989,132)
Unrealized loss
on investment (282,898) (493,815) (147,329) (917,904)
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(574,956) (1,147,101) (1,680,925) (202,897)
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LOSS FOR PERIOD
BEFORE INCOME
TAXES (1,996,926) (14,782,224) (3,862,584) (16,959,953)
INCOME TAX EXPENSE (280,000) (675,000) (450,000) (675,000)
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NET LOSS AND
COMPREHENSIVE LOSS
FOR THE PERIOD (2,276,926) (15,457,224) (4,312,584) (17,634,953)
DEFICIT, BEGINNING
OF PERIOD (68,988,127) (58,930,347) (66,952,469) (56,752,618)
ADJUSTMENT ON
SHARE REPURCHASE (84,868) (1,604,524) (84,868) (1,604,524)
DEFICIT, END OF
PERIOD $(71,349,921) $(75,992,095) $(71,349,921) $(75,992,095)
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BASIC AND
DILUTED LOSS
PER SHARE $ (0.05) $ (0.32) $ (0.09) $ (0.37)
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WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING,
BASIC AND
DILUTED 46,228,164 48,105,228 46,074,434 48,027,394
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows
Three and six months ended December 31, 2009 and 2008
(Expressed in Canadian dollars) (Unaudited)
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Three Months Six Months
2009 2008 2009 2008
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OPERATING ACTIVITIES
Net loss for the
period $ (2,276,926) $(15,457,224) $(4,312,584) $(17,634,953)
Items not
involving cash
Amortization of
property and
equipment 334,527 265,341 637,165 495,149
Amortization of
intangible
assets 318,904 31,944 350,848 63,888
Stock-based
compensation 582,217 13,110,373 1,168,678 14,670,700
Future income
taxes (480,000) (1,300,000) (2,020,000) (1,300,000)
Unrealized loss
on investment 282,898 493,815 147,329 917,904
Realized loss
on foreign
exchange
contract - 416,500 - 416,500
Change in
non-cash
operating
working capital
Accounts
receivable 329,984 387,126 4,150,090 6,202,940
Prepaid expenses
and other (409,763) 25,571 (434,968) 108,558
Deferred
contract costs (68,245) (36,115) (235,414) (259,364)
Accounts payable
and accrued
liabilities 2,017,551 (50,138) (210,113) (326,924)
Income tax
payable 510,000 1,300,000 1,970,000 1,300,000
Accrued warranty 32,487 954,661 501,163 1,814,619
Deferred revenue 444,721 2,942,025 4,216,474 5,707,597
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CASH FROM OPERATING
ACTIVITIES 1,618,355 3,083,879 5,928,668 12,176,614
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INVESTING ACTIVITIES
Property and
equipment
purchased (480,793) (249,660) (751,717) (955,559)
Acquisition of
LANrev (10,254,256) - (10,254,256) -
Other asset - (725,374) - (725,374)
Realized loss
on foreign
exchange
contract - (416,500) - (416,500)
Proceeds from
maturities of
short term
investments 5,006 6,661,000 7,311,464 8,231,571
Purchases of
short term
investments (7,420,699) (1,190,081) (7,420,699) (2,211,157)
Proceeds from
maturities of
investments - 961,000 - 961,000
Purchases of
investments (152,898) (1,780,704) (20,261,552) (3,903,058)
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CASH (USED IN)
FROM INVESTING
ACTIVITIES (18,303,640) 3,259,681 (31,376,760) 980,923
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FINANCING ACTIVITIES
Repurchase of
common shares
for
cancellation (101,250) (2,272,154) (101,250) (2,272,154)
Issuance of
common shares 545,401 173,171 1,397,623 1,066,833
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CASH FROM (USED
IN) FINANCING
ACTIVITIES 444,151 (2,098,983) 1,296,373 (1,205,321)
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NET CASH
(OUTFLOW) INFLOW (16,241,134) 4,244,577 (24,151,719) 11,952,216
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 48,167,419 54,167,938 56,078,004 46,460,299
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CASH AND CASH
EQUIVALENTS, END
OF PERIOD $ 31,926,285 $ 58,412,515 $ 31,926,285 $ 58,412,515
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%SEDAR: 00013849E
For further information: Rob Chase, Chief Financial Officer ([email protected]) or Phone: (604) 730-9851; Dave Mason, Investor Relations ([email protected]) or Phone: (416) 815-0700 x237; Website: http://www.absolute.com
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