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Press release from CNW Group

Absolute Software Reports Fiscal 2011 Year-End and Fourth Quarter Results

Thursday, August 18, 2011

Absolute Software Reports Fiscal 2011 Year-End and Fourth Quarter Results16:00 EDT Thursday, August 18, 2011Growth trend continues as Absolute generates record fourth quarter and fiscal year Sales Contracts and Adjusted Operating IncomeVANCOUVER, Aug. 18, 2011 /CNW/ - Absolute® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the leading provider of firmware-based endpoint security and management solutions that reduce IT costs, prove regulatory compliance, respond to computer theft, and optimize productivity, today announced its financial results for the three month period and year ended June 30, 2011. All figures are in Canadian dollars unless otherwise stated.Key Financial Metrics     Q4-F2011  Q4-F2010  %change  F2011  F2010  %changeSales Contracts reported(1)     $22.1M  $19.3M  +14%  $79.1M  $69.7M  +14%Sales Contracts in constant currency(2)     $23.4M  $19.3M  +21%  $83.4M  $69.7M  +20%Cash from operating activities     $3.0M  $0.2M  +1778%  $12.5M  $6.4M  +94%Operating cash per share(3)(basic and diluted) $0.07 $0.00 nm $0.28 $0.14 +100%Revenue     $18.9M  $16.6M  +14%  $72.2M  $64.1M  +13%Net income (loss)     $0.5M  $(3.8)M  +114%  $(1.1)M  $(8.2)M  +86%Net income (loss) per share(basic and diluted)     $0.01  $(0.08)  +113%  $(0.03)  $(0.18)  +86%Adjusted Operating Income(4)     $4.0M  $(0.8)M  +608%  $9.4M  $0.4M  +2177%Cash, cash equivalents, and investments     $53.8M  $58.0M  (7%)         Deferred revenue     $109.4M  $102.8M  +6%         (1)(2)(3)(4) - Please refer to "Non-GAAP Measures and Definitions"Fiscal Year 2011 HighlightsDelivered 20% constant currency growth in Sales Contracts(1) while maintaining costs in line with the prior year.Generated $12.5 million in cash from operating activities, representing an increase of 94% over F2010.Achieved record Adjusted Operating Income(4) of $9.4 million, an increase of 2,177% over $0.4 million last year.Launched Computrace® Mobile for the Android platform, and Absolute Manage Mobile Device Management for Apple® iOS 4 devices (iPhone®, iPad™ and iPod touch®).Extended data and device protection capabilities with the launch of Absolute Secure Drive to manage self-encrypted drives.Introduced Remote File Retrieval, a data leakage prevention feature, for Computrace®.Integrated Computrace® persistence technology with Absolute Manage to create the world's only self-healing lifecycle management solution.Appointed seasoned technology executive, Daniel P. Ryan, to Company's Board of Directors.Repurchased 3,797,020 shares (674,600 in the fourth quarter) for a total of $14.2 million under Company's Normal Course Issuer Bids.Subsequent to year end, announced persistence support for Lenovo tablet devices."In fiscal 2011 we significantly grew sales contracts and nearly doubled our cash from operations by capitalizing on the leverage available in our business model," said John Livingston, Chairman and CEO of Absolute. "We saw robust global sales for Computrace, and we continued to gain momentum for Absolute Manage, with an exceptionally strong fourth quarter. In addition, we further expanded our product offering and partner relationships to target opportunities in the emerging Mobile Device Management and Self Encrypting Drive markets."Mr. Livingston continued: "Heading into fiscal 2012, we remain committed to driving top line growth while carefully managing our expenses. We plan to continue to expand the business by growing our core anti-theft offering, diversifying revenue by accelerating growth in our non-theft recovery product lines, maximizing existing customer and channel relationships and expanding our distribution network."F2011 Year-End and Q4 Financial ReviewReflecting Absolute's success in increasing sales productivity through resource alignment, growing sales of its anti-theft product line and diversifying sales through the introduction of new products, F2011 Sales Contracts(1) grew 14% (20% in constant currency) to $79.1 million ($83.4 million in constant currency) from $69.7 million in F2010. The increase was driven by strong results in both the Company's commercial and consumer verticals, which saw year-over-year growth of 12% and 21%, respectively (18% and 28% in constant currency). Sales Contracts for Q4-F2011 were $22.1 million ($23.4 million in constant currency), an increase of 14% (21% in constant currency) compared to $19.3 million in Q4-F2010. For Q4-F2011, the Company's commercial and consumer verticals increased 15% and 4%, respectively, (22% and 11%, in constant currency) from Q4-F2010.F2011 commercial Sales Contracts from Absolute's theft recovery products(5) grew 16%  in constant currency over F2010, demonstrating that theft recovery services continue to be valued in the market.  Commercial Sales Contracts from the Company's non-theft recovery products(6) (i.e. management, tracking and data protection) grew 31% in constant currency over F2010, as Absolute continued to expand its product portfolio in both management and security.  For F2011, Absolute's non-theft recovery products represented 21% of commercial Sales Contracts. For Q4-F2011, Sales Contracts from Absolute's theft recovery products grew 13% in constant currency over Q4-F2010. Q4-F2011 Sales Contracts from the Company's non-theft recovery products grew 57% in constant currency over Q4-F2010.  For Q4-F2011, Absolute's non-theft recovery products represented 26% of commercial Sales Contracts.Consistent with prior years, 80-85% of Absolute's commercial sales are from existing customers, as the Company maintains a high customer retention rate and continues to expand its footprint within its existing customer base.  During F2011, Absolute also continued to add new customers, which the Company expects will generate continued growth as Absolute further develops its relationships with these new customers.Within the consumer segment, F2011 non-bundled sales increased by 43% in constant currency compared to F2010 and increased by 26% in constant currency for Q4-F2011 compared to Q4-F2010.  Consumer solutions were 14% of F2011 sales compared to 13% of F2010 sales and were 7% of sales for Q4-F2011 compared to 8% for Q4-F2010. This is a result of Absolute's strategic initiatives to diversify its consumer business, leverage the Company's leadership position and continue to evangelize the importance of managed theft recovery.International sales increased 84% (93% in constant currency) to $8.0 million in F2011 (10% of sales), up from $4.3 million in F2010 (6% of sales). For Q4-F2011, international sales were $1.3 million (6% of sales), up from $0.9 million in Q4-F2010 (5% of sales).Revenue for F2011 was $72.2 million, an increase of 13% from $64.1 million in 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 Q4-F2011, revenue was $18.9 million, an increase of 14% from $16.6 million in Q4-F2010. The majority of the revenue from Q4-F2011 Sales Contracts is included in the deferred revenue on the balance sheet at June 30, 2011, which was $109.4 million, compared to $102.8 million at June 30, 2010.Adjusted Operating Expenses(4) for F2011 were $62.8 million, a decrease of 1% from $63.7 million in F2010. Adjusted Operating Expenses for Q4-F2011 were $14.9 million, down 14% from $17.4 million for the same period in F2010, largely due to a reduction in partner marketing programs.Reflecting the Company's 13% increase in revenue and its ongoing focus on cost control, Absolute generated Adjusted Operating Income(4) of $9.4 million in F2011, a significant increase from $0.4 million in F2010. For Q4-F2011, Adjusted Operating Income was $4.0 million, compared to $(0.8) million in Q4-F2010.Absolute generated a net loss of $1.1 million in F2011 compared to $8.2 million in F2010. For Q4-F2011, the Company recorded net income of $0.5 million compared to a net loss of $3.8 million for Q4-F2010.OutlookIn F2012, Absolute expects to grow Sales Contracts and Cash from Operating Activities above F2011 levels.Annual FilingsManagement's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for 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 Thursday, August 18, 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 Thursday, August 25, 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.newswire.ca. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056and enter the reservation code 90670734.Non-GAAP Measures and DefinitionsThroughout 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 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 Canadian GAAP.  For a discussion of the purpose of these non-GAAP measures, please refer to the Company's Fiscal 2011 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)  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 a component of deferred revenue (see Note 10 of the Notes to the Consolidated Financial Statements), and result from invoiced sales of our products and services.    2)  Sales Contracts in constant currency       Approximately 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 $1.001 in F2011 compared to $1.055 in F2010. The average U.S. dollar to Canadian dollar exchange rate on sales was $0.970 in Q4-F2011 compared to $1.030 in Q4-F2010.    3)  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).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 GAAP operating income excluding charges for stock-based compensation and amortization of acquired intangible assets.    4)  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 stock-based compensation and amortization of acquired intangible assets. For a description of the reasons these items are adjusted, please refer to the Fiscal 2011 MD&A.    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 SoftwareAbsolute Software Corporation (TSX: ABT) is the world leader in firmware-embedded endpoint security and management for computers and mobile devices. The Company's Computrace, Absolute Manage and LoJack for Laptops solutions 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 and tablets 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. 7,818,557, No. 7,818,803 and No. 7,945,709. 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. 4067035. 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)                    June 30,2011   June 30,2010 ASSETS                         CURRENT             Cash and cash equivalents      $  28,805,213   $  28,078,851  Short-term investments      6,717,387   6,420,210  Accounts receivable, net of allowance for doubtful accountsof $1,409,000 (2010 - $1,935,000)      15,599,349   13,888,239  Prepaid expenses and other      1,541,225   1,149,428  Current portion of deferred contract costs      4,392,364   4,038,159  Current portion of future income tax assets      9,973,479   9,904,709        67,029,017   63,479,596 INVESTMENTS      18,234,407   23,527,677 DEFERRED CONTRACT COSTS      3,840,284   3,744,051 PROPERTY AND EQUIPMENT      2,114,704   2,754,271 FUTURE INCOME TAX ASSETS      10,387,213   10,308,983 INTANGIBLE ASSETS      15,061,026   20,477,801        $  116,666,651   $ 124,292,379              LIABILITIES                         CURRENT             Accounts payable and accrued liabilities      $   8,456,941   $   8,183,219  Income tax payable      -   1,575,000  Current portion of acquisition payable      1,666,916   1,728,607  Current portion of accrued warranty      4,457,446   4,702,888  Current portion of deferred revenue, net      55,355,122   52,411,595        69,936,425   68,601,309 ACQUISITION PAYABLE      1,677,698   3,457,214 ACCRUED WARRANTY      4,282,644   4,518,461 DEFERRED REVENUE, NET      53,995,248   50,346,988        129,892,015   126,923,972 COMMITMENTS            CONTINGENCIES                         SHAREHOLDERS' DEFICIENCY            Share Capital      45,245,075   44,888,407 Contributed Surplus      30,925,971   28,393,491 Deficit      (89,396,410)   (75,913,491)        (13,225,364)   (2,631,593)        $ 116,666,651   $  124,292,379                 ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Operations and Comprehensive Income (Loss)Three months and year ended June 30, 2011 and 2010(Expressed in Canadian dollars) (Unaudited)                  Three months endedJune 30, Year endedJune 30,     2011 2010 2011 2010             REVENUE   $  18,951,927 $  16,599,980 $  72,198,733 $  64,075,789             COST OF REVENUE   4,421,157 4,445,011 18,891,474 14,903,452 GROSS MARGIN   14,530,770 12,154,869 53,307,259 49,172,337             OPERATING EXPENSES            Sales and marketing   7,486,740 10,485,682 33,044,846 34,669,371  Research and development   2,727,412 2,852,726 11,641,015 10,374,545  General and administration   2,104,301 1,608,982 7,980,932 7,707,016  Investment tax credits   (427,000) (505,000) (3,208,000) (1,255,000)  Stock-based compensation   528,690 422,552 2,783,899 2,085,977     12,420,143 14,865,122 52,242,692 53,581,909 OPERATING INCOME (LOSS)   2,110,627 (2,710,523) 1,064,567 (4,409,572)             OTHER INCOME (EXPENSE)            Interest income, net   242,341 174,294 742,573 699,239  Foreign exchange (loss) gain   (100,241) 598,084 (1,756,078) (1,772,780)  Gain on investments   -  257,397 287,499 98,134     142,100 1,029,775 (726,006) (975,407)             NET INCOME (LOSS) BEFORE INCOME TAXES   2,252,727 (1,680,478) 338,561 (5,384,979)             INCOME TAX EXPENSE   (1,729,000) (2,128,902) (1,486,000) (2,768,902)             NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)   $   523,727 $   (3,809,380) $   (1,147,439) $   (8,153,881)             BASIC AND DILUTED LOSS PER SHARE   $       0.01 $      (0.08) $        (0.03)         $  (0.18)             WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC   44,007,119 46,714,398 44,983,784 46,346,964                                ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Changes in Shareholders' Deficiency(Expressed in Canadian dollars) (Unaudited)                       Share Capital              Number ofCommonshares  Amount  ContributedSurplus  Deficit  Total                   BALANCE, JUNE 30, 2009   45,694,350  $  41,988,977  $  26,822,975  $ (66,952,469)  $  1,859,483  Shares issued on options exercised   741,552  1,659,071  (259,911)  -  1,399,160 Shares issued under Employee SharePurchase Plan   231,188  786,895  -  -  786,895 Shares repurchased and cancelled underNormal Course Issuer Bid   (238,000)  (202,086)  -  (807,141)  (1,009,227) Shares issued on warrants exercised   400,000  655,550  (255,550)  -  400,000 Stock-based compensation expense   -  -  2,085,977  -  2,085,977 Net loss   -  -  -  (8,153,881)  (8,153,881) BALANCE, JUNE 30, 2010   46,829,090  $  44,888,407  $  28,393,491  $ (75,913,491)  $  (2,631,593)  Shares issued on options exercised   296,775  715,889  (251,419)  -  464,470 Shares issued under Employee SharePurchase Plan   184,987  619,934  -  -  619,934 Shares repurchased and cancelled underthe Normal Course Issuer Bid   (3,797,020)  (1,855,822)  -  (12,335,480)  (14,191,302) Shares issued on acquisition   166,667  876,667  -  -  876,667 Stock-based compensation expense   -  -  2,783,899  -  2,783,899 Net loss   -  -  -  (1,147,439)  (1,147,439) BALANCE, JUNE 30, 2011   43,680,498  $  45,245,075  $  30,925,971  $ (89,396,410)  $ (13,225,364)                            ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Cash FlowsThree months and year ended June 30, 2011 and 2010(Expressed in Canadian dollars) (Unaudited)                 Three months endedJune 30, Year endedJune 30,     2011 2010 2011 2010 OPERATING ACTIVITIES           Net loss   $  523,727 $  (3,809,380) $  (1,147,439) $  (8,153,881) Items not involving cash            Amortization of property and equipment   443,875 374,170 1,668,617 1,366,800  Amortization of intangible assets   1,394,577 1,493,931 5,579,118 2,737,602  Stock-based compensation   528,690 422,552 2,783,899 2,085,977  Future income taxes   1,806,000 3,573,902 (147,000) 1,513,902  Gain on investments   - (257,397) (287,499) (98,134)  Unrealized foreign exchange gain   (8,199) - (135,137) -  Non-cash interest expense and amortization ofinvestment premium   83,994 106,729 519,551 (670,295) Change in non-cash working capital            Accounts receivable   (2,983,593) (3,104,574) (819,407) 2,114,406  Prepaid expenses and other   (53,247) 96,301 (391,797) (174,864)  Deferred contract costs   (403,854) (177,631) (450,438) (406,549)  Accounts payable and accrued liabilities   (927,592) 1,239,069 808,181 1,636,073  Income tax payable   (504,000) (1,950,000) (1,575,000) -  Accrued warranty   195,737 (997,955) (481,259) (2,030,821)  Deferred revenue   2,937,160 3,151,818 6,591,789 6,521,658             CASH FROM OPERATING ACTIVITIES   3,033,275 161,535 12,516,179 6,441,874 INVESTING ACTIVITIES            Purchase of property and equipment   (127,090) (354,839) (1,082,123) (1,388,566)  Acquisition of LANrev   - (4,144) (872,333) (10,288,400)  Purchase of intangible assets   - (7,223,287) (162,342) (7,223,287)  Proceeds from maturities of short-term investments   - 2,350,000 6,428,986 8,685,644  Purchase of short-term investments   (127,521) (89,697) (712,708) (5,468,009)  Proceeds from maturities of investments   - 1,304,228 - 1,304,228  Purchase of investments   (99,864) (191,093) (909,306) (20,881,249)             CASH (USED IN) FROM INVESTING ACTIVITIES   (356,475) (4,208,832) 2,690,174 (35,259,639) FINANCING ACTIVITIES            Repurchase of common shares for cancellation   (2,428,010) (900,288) (14,226,844) (1,009,227)  Issuance of common shares   175,022 520,261 1,084,405 2,586,055             CASH (USED IN) FROM FINANCING ACTIVITIES   (2,252,988) (380,027) (13,142,439) 1,576,828             FOREIGN EXCHANGE EFFECT ON CASH   (130,671) 200,665 (1,337,552) (758,216)             INCREASE (DECREASE) IN CASH ANDCASH EQUIVALENTS   293,141 (4,226,659) 726,362 (27,999,153)             CASH AND CASH EQUIVALENTS,BEGINNING OF PERIOD   28,512,072 32,305,510 28,078,851 56,078,004             CASH AND CASH EQUIVALENTS, END OF PERIOD   $  28,805,213 $  28,078,851 $  28,805,213 $  28,078,851         For further information: Public Relations: Kate Ryan, Affect Strategies kryan@affectstrategies.com or 212.398.9680Investor Relations: Dave Mason, CFA, TMX|Equicom dmason@equicomgroup.com or 416.815.0700 x237