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Press release from CNW Group

Absolute Software Reports Third Quarter Fiscal 2011 Results

Monday, May 09, 2011

Absolute Software Reports Third Quarter Fiscal 2011 Results16:00 EDT Monday, May 09, 2011Company Continues Year-over-year Sales Growth Trend VANCOUVER, May 9 /CNW/ - Absolute® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the leading provider of firmware-based, patented, computer theft recovery, data protection and secure computer lifecycle management solutions thatreduce IT costs, prove regulatory compliance, respond to computer theft, and optimize productivity, today announcedits financial results for the three- and nine-month periods ended March 31, 2011. All figures are in Canadian dollars unless otherwise stated.Key Financial Metrics Q3-F2011  Q3-F2010 %change  YTD2011  YTD2010 %changeSales contracts reported(2) $17.2M  $15.0M +15%  $57.1M  $50.3M +13%Sales contracts in constant currency(3) $18.1M  $15.0M +21%  $60.0M  $50.3M +19%Cash from operating activities $2.7M  $0.6M +361%  $9.1M  $7.1M +27%Operating cash per share(1) (basicand diluted) $0.06  $0.01 +500%  $0.20  $0.15 +33%Revenue $18.0M  $16.6M +9%  $53.2M  $47.5M +12%Net income (loss) $1.1M  $0.0M nm  $(1.7M)  $(4.3M) +62%Net income (loss) per share (basic and diluted) $0.03  $0.00 nm  $(0.04)  $(0.09) +56%Adjusted operating income(5) $3.4M  $1.9M +83%  $5.4M  $1.2M +347%Cash, cash equivalents, and investments $53.3M  $65.5M (19%)        Deferred revenue $106.4M  $99.6M +7%        (1)(2)(3)(5) - Please refer to "Non-GAAP Measures"Q3-F2011 HighlightsRecorded record third quarter sales contracts of $17.2 million ($18.1 million in constant currency), representing an increase of 15% (21% in constant currency) over Q3-F2010Closed the quarter with a subscription base of 6.1 million, up 11% from 5.5 million at March 31, 2010Announced availability of endpoint security and management solutions for Verizon Wireless enterprise customersLaunched closed beta trial of Computrace® Mobile for the Android platform, with general availability as of May 3, 2011Extended data and device protection capabilities with launch of Absolute Secure Drive to manage self-encrypted drivesExpanded LoJack for Laptops distribution to major online, B2B and retail outlets through partnership with SYX Distribution, a company that is an affiliate of and distributor for TigerDirect, CompUSA and CircuitCity.comRepurchased 572,470 shares in the quarter under the Company's Normal Course Issuer BidSubsequent to quarter end, theCompany's Board of Directors appointed Ian Reid as Lead Director"We entered fiscal 2011 focused on growing sales contracts, controlling costs and increasing cash from operations, and as evidenced by our year-to-date results, we are beginning to deliver on these fronts," said John Livingston, Chairman and CEO of Absolute. "Recent investment in the business and favorable trends in the computer refresh cycle are fueling commercial sales in our Computrace business and driving momentum for Absolute Manage. In addition, our new offerings for mobile device and self-encrypting drive management are creating new opportunities for our businesses."Mr. Livingston continued, "I am also pleased to report that we are strengthening our corporate governance at the board level with the establishment of a lead director position.  Absolute's board of directors has appointed Ian Reid to assume this important role."Financial ReviewSales Contracts for Q3-F2011 were $17.2 million ($18.1 million in constant currency), an increase of 15% (21% in constant currency) from $15.0 million in Q3-F2010. The increase was driven by strong results in both the Company's commercial and consumer businesses, which saw year-over-year growth of 13% and 29%, respectively (19% and 35% in constant currency). Sales Contracts for the nine-month period ("year-to-date" or "YTD") in F2011 were $57.1 million ($60.0 million in constant currency) an increase of 13% (19% in constant currency) compared to $50.3 million in the same period of F2010. For the YTD period, the Company's commercial and consumer businesses increased 11% and 25%, respectively (17% and 31%, in constant currency) from the same period of F2010.Within the consumer segment, non-bundled sales increased by 39% (48% in constant currency) in Q3-F2011, compared to Q3-F2010 and increased by 41% (50% in constant currency) for the comparative YTD period.  Consumer solutions were 14% of Q3-F2011 sales, compared to 12% of Q3-F2010 sales and were 16% of sales for the YTD period, compared to 15% for the same period in F2010.Existing commercial customers continued to produce a majority of Absolute's sales, generating 75% of Q3-F2011 Sales Contracts (73% in Q3-F2010). For the YTD period, existing commercial customers generated 73% of Sales Contracts (71% in the same period of F2010).Sales to new commercial customers were $1.9 million in Q3-F2011 ($2.0 million in constant currency) compared to $2.2 million in Q3-F2010, representing a decrease of 13% (9% in constant currency) and were $6.1 million for the YTD period ($6.4 million in constant currency) compared to $6.9 million for the prior year period, representing a decrease of 13% (9% in constant currency).  The year-over-year decrease in new customer sales reflects a lower number of large deals recorded in the fiscal 2011 periods in spite of the fact that there have been more new customers acquired in the 2011 periods as compared to the 2010 periods.International sales increased 136% to 17% of Q3-F2011 sales, up from 8% of sales in Q3-F2010 and increased to 12% of sales for the F2011 YTD period, up from 7% in the same period of F2010.Revenue for Q3-F2011 was $18.0 million, an increase of 9% from $16.6 million in Q3-F2010. Revenue is typically a lagging performance indicator as it is a function of deferred revenue as opposed to invoiced sales in the quarter. For the YTD period, revenue was $53.2 million in F2011, an increase of 12% from $47.5 million in the same period of F2010. The majority of the revenue from Q3-F2011 Sales Contracts is included in the deferred revenue on the balance sheet at March 31, 2010, which was $106.4 million, compared to $102.8 million at June 30, 2010.Adjusted Operating Expenses(4) for Q3-F2011 were $14.6 million, a decrease of 1% from $14.7 million in Q3-F2010.  Adjusted Operating Expenses for Q3-F2011 are net of a $1.6 million positive adjustment for investment tax credits, and the Q3-F2010 figure is net of a $1.1 million positive adjustment to warranty accruals.  Adjusted Operating Expenses for the YTD period were $47.9 million, up 3% from $46.3 million for the same period in F2010. The Company expects Adjusted Operating Expenses for the fourth quarter of F2011 to remain within the range experienced in the first three quarters the fiscal year.Reflecting the Company's 9% increase in revenue, its ongoing focus on cost control, as well as the adjustment for investment tax credits, Absolute generated Adjusted Operating Income(5) of $3.4 million in Q3-F2011, an increase of 83% from $1.9 million in Q3-F2010. For the YTD period, Adjusted Operating Income was $5.4 million, compared to $1.2 million in the prior year.Absolute generated net income of $1.1 million in Q3-F2011 compared to break-even results in Q3-F2010. YTD the Company recorded a net loss of $1.7 million compared to a net loss of $4.3 million for the same period in F2010.Quarterly FilingsManagement's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q3-F2011 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 CallAbsolute Software will hold a conference call to discuss the contents of this release on Monday, May 9, 2011 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, May 16, 2011 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.newsire.ca. To access the archived conference call, please dial 416-849-0833 or 1-800-642-1687 and enter the reservation code 50657141.Non-GAAP MeasuresThroughout 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 Canadian Generally Accepted Accounting Principles ("GAAP"), and may not be identical 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 Canadian GAAP.  For a discussion of the purpose of these non-GAAP measures, please refer to the Company's Third Quarter MD&A on SEDAR at www.SEDAR.com.These measures, as well as their method of calculation or reconciliation to GAAP measures, are as follows:1)     Basic and diluted Cash from Operating Activities per shareAs 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).2)     Sales ContractsSee the "Subscription Business Model" section of the MD&A for a detailed discussion of why we believe Sales Contracts ("bookings") provide a meaningful performance metric.  Sales Contracts are a component of deferred revenue (see Note 3 of the Notes to the Interim Consolidated Financial Statements), and result from invoiced sales of our products and services.3)     Sales Contracts in constant currencyApproximately 95% of our Sales Contracts are denominated in U.S. dollars, and we believe this is important to consider when evaluating underlying sales performance. Sales Contracts in "constant currency" refers to the Canadian dollar sales that would have been reported had the average U.S. dollar foreign exchange rate been unchanged from the rate in the comparable period(s) of F2010, and is calculated by applying the appropriate U.S. dollar foreign exchange rate from the comparable period to the current period sales denominated in U.S. dollars.The average U.S. dollar to Canadian dollar exchange rate on sales was $0.984 in Q3-F2011 compared to $1.036 in Q3-F2010.4)     Adjusted Operating ExpensesA 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 stock-based compensation and amortization of acquired intangible assets. For a description of the reasons these items are adjusted, please refer to the Third Quarter MD&A.5)     Adjusted Operating Income (Loss)Management believes that analyzing operating results exclusive of the significant non-cash items noted above provides a useful measure of Company's performance. Adjusted Operating Income (Loss) refers to GAAP operating income excluding charges for stock-based compensation and amortization of acquired intangible assets.About Absolute SoftwareAbsolute Software Corporation (TSX: ABT) is the leader in tracking, managing and protecting computers and mobile devices. The Company's Computrace, Absolute Manage and LoJack for Laptops solutions provide theft recovery, data protection and computer lifecycle management capabilities to organizations and consumers. The Company's software agent is embedded in the firmware of computers by global leaders, including Acer, ASUS, Dell, Fujitsu, 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, visit www.absolute.com and http://blog.absolute.com.Forward-Looking StatementsThis 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.©2011 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. 7818557, No. 7818803. Canadian patents No. 2.211.735, No. 2,284,806 and No. 2,205,370. U.K. patents No. EP793823, No. GB2298302 and No. GB2338101. German patent No. 695 125 34.6-08. 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 CORPORATIONConsolidated Balance Sheets(Expressed in Canadian dollars) (Unaudited)      March 31,2011June 30,2010ASSETS       CURRENT    Cash and cash equivalents $  28,512,072$  28,078,851 Short-term investments 810,2616,420,210 Accounts receivable, net of allowance for doubtful accounts of $1,884,000(2010 - $1,935,000) 12,528,64213,888,239 Prepaid expenses and other 1,487,9781,149,428 Current portion of deferred contract costs 4,215,4944,038,159 Current portion of future income tax assets 10,861,6799,904,709  58,416,12663,479,596INVESTMENTS 23,990,76023,527,677DEFERRED CONTRACT COSTS 3,613,3003,744,051PROPERTY AND EQUIPMENT 2,484,5572,754,271FUTURE INCOME TAX ASSETS 11,305,01310,308,983INTANGIBLE ASSETS 16,455,60320,477,801  $ 116,265,359$ 124,292,379    LIABILITIES       CURRENT    Accounts payable and accrued liabilities $   9,481,157$   8,183,219 Income tax payable 504,0001,575,000 Current portion of acquisition payable 1,668,4071,728,607 Current portion of accrued warranty 4,063,6204,702,888 Current portion of deferred revenue, net 55,276,77652,411,595  70,993,96068,601,309ACQUISITION PAYABLE 1,679,0243,457,214ACCRUED WARRANTY 4,480,7334,518,461DEFERRED REVENUE, NET 51,136,43450,346,988  128,290,151126,923,972CONTINGENCIES           SHAREHOLDERS' DEFICIENCY   Share Capital 44,207,13744,888,407Contributed Surplus 30,491,96028,393,491Deficit (86,723,889)(75,913,491)  (12,024,792)(2,631,593)  $  116,265,359$ 124,292,379    ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Operations and Comprehensive Income (Loss)Three and nine months ended March 31, 2011 and 2010(Expressed in Canadian dollars) (Unaudited)      Three months endedMarch 31,Nine months endedMarch 31,  2011201020112010      REVENUE $  18,014,234$  16,591,201$  53,246,806$  47,475,908      COST OF REVENUE 4,911,5392,947,13314,470,3179,314,375      GROSS MARGIN 13,102,69513,644,06838,776,48938,161,533      OPERATING EXPENSES      Sales and marketing 8,169,4298,005,60925,558,10625,327,575 Research and development 2,911,3422,675,5638,913,6037,521,818 General and administration 1,987,3672,235,8115,876,6316,098,036 Investment tax credits (1,975,000)(250,000)(2,781,000)(750,000) Stock-based compensation 530,710494,7472,255,2101,663,425  11,623,84813,161,73039,822,55039,860,854      OPERATING INCOME (LOSS) 1,478,847482,338(1,046,061)(1,699,321)      OTHER EXPENSE      Interest income, net 157,572172,087500,232524,947 Foreign exchange loss (730,402)(484,407)(1,655,837)(2,370,864) (Loss) gain on investments - (11,935)287,499(159,263)  (572,830)(324,255)(868,106)(2,005,180)      NET INCOME (LOSS) BEFORE INCOME TAXES 906,017158,083(1,914,167)(3,704,501)      INCOME TAX RECOVERY (EXPENSE) 240,000(190,000)243,000(640,000)      NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) $   1,146,017$   (31,917)$   (1,671,167)$   (4,344,501)      BASIC AND DILUTED INCOME (LOSS) PER SHARE          $  0.03$  (0.00)         $ (0.04)$  (0.09)      WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC 44,561,82446,467,20345,471,09946,203,446      ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Changes in Shareholders' Deficiency(Expressed in Canadian dollars) (Unaudited)    Share Capital    Number ofCommonsharesAmountContributedSurplusDeficitTotal      BALANCE, JUNE 30, 200945,694,350$  41,988,977$  26,822,975$ (66,952,469)$  1,859,483Shares issued on options exercised741,5521,659,071(259,911)-1,399,160Shares issued under Employee Share Purchase Plan231,188786,895--786,895Shares repurchased and cancelled under NormalCourse Issuer Bid(238,000)(202,086)-(807,141)(1,009,227)Shares issued on warrants exercised400,000655,550(255,550)-400,000Stock-based compensation expense--2,085,977-2,085,977Net loss---(8,153,881)(8,153,881)BALANCE, JUNE 30, 201046,829,090$  44,888,407$  28,393,491$ (75,913,491)$ (2,631,593)Shares issued on options exercised178,330446,190(156,741)-289,449Shares issued under Employee Share Purchase Plan184,457619,934--619,934Shares issued for acquisition payable166,666876,667--876,667Shares repurchased and cancelled under NormalCourse Issuer Bid(3,122,420)(2,624,061)-(9,139,231)(11,763,292)Stock-based compensation expense--2,255,210-2,255,210Net loss---(1,671,167)(1,671,167)BALANCE, MARCH 31, 201144,236,123$  44,207,137$  30,491,960$ (86,723,889)$ (12,024,792)      ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Cash FlowsThree and nine months ended March 31, 2011 and 2010(Expressed in Canadian dollars) (Unaudited)        Three months endedMarch 31,Nine months endedMarch 31,  2011201020112010OPERATING ACTIVITIES      Net income (loss) $  1,146,017$  (31,917)$  (1,671,167)$  (4,344,501) Items not involving cash       Amortization of property and equipment 432,155355,4651,224,742992,630  Amortization of intangible assets 1,404,577892,8234,184,5411,243,670  Stock-based compensation 530,710494,7472,255,2101,663,425  Future income taxes (900,000)(40,000)(1,953,000)(2,060,000)  Loss (gain) on investments -11,935(287,499)159,263  Unrealized foreign exchange (72,533)-(126,938)-  Non-cash interest expense 5,637-37,549- Change in non-cash working capital       Accounts receivable 1,530,461720,9262,164,1865,218,980  Prepaid expenses and other (308,380)163,803(338,550)(271,165)  Deferred contract costs 264,2146,496(46,584)(228,918)  Accounts payable and accrued liabilities 925,038418,0911,735,773468,235  Income tax payable (1,315,000)(20,000)(1,071,000)1,950,000  Accrued warranty (375,332)(1,534,029)(676,996)(1,032,866)  Deferred revenue (541,140)(846,636)3,654,6293,369,839      CASH FROM OPERATING ACTIVITIES 2,726,424591,7049,084,8967,128,592INVESTING ACTIVITIES      Purchase of property and equipment (441,759)(353,239)(955,033)(1,104,956) Purchase of intangible assets --(162,342)- Acquisition payable -(30,000)(872,333)(10,284,256) Proceeds from sales and maturities of short-term investments 60,000-6,428,9867,311,464 Purchase of short-term investments (54,022)(84,207)(531,538)(7,504,905) Purchase of investments (155,180)(54,854)(463,083)(20,316,406)      CASH (USED IN) FROM INVESTING ACTIVITIES (590,961)(522,300)3,444,657(31,899,059)FINANCING ACTIVITIES      Repurchase of common shares for cancellation (2,137,498)-(11,798,834)(101,250) Issuance of common shares 347,213660,482909,3832,058,105      CASH (USED IN) FROM FINANCING ACTIVITIES (1,790,285)660,482(10,889,451)1,956,855      FOREIGN EXCHANGE EFFECT ON CASH (499,977)(350,661)(1,206,881)(958,882)      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (154,799)379,225433,221(23,772,494)      CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,666,87131,926,28528,078,85156,078,004      CASH AND CASH EQUIVALENTS, END OF PERIOD $  28,512,072$ 32,305,510$  28,512,072$ 32,305,510   For further information: Public Relations: Kate Ryan, Affect Strategies kryan@affectstrategies.com or 212.398.9680 Investor Relations: Dave Mason, CFA, TMX|Equicom dmason@equicomgroup.com or 416.815.0700 x237