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Press release from CNW Group

Absolute Software Reports Fiscal 2013 Second Quarter Results

Tuesday, February 12, 2013

Absolute Software Reports Fiscal 2013 Second Quarter Results16:00 EST Tuesday, February 12, 2013Device Management and Data Security products fueling top line growthVANCOUVER, Feb. 12, 2013 /CNW/ - Absolute® Software Corporation ("Absolute" or the "Company") (TSX: ABT), the industry standard for persistent endpoint security and management solutions for computers, laptops and ultra-portable devices - and the data they contain, today announced its financial results for the three and six months ended December 31, 2012. All financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in U.S. dollars.Key Financial MetricsQ2F2013Q2F2012% change YTDF2013YTDF2012% change Sales Contracts(1)$22.5M$20.7M+8%$43.1M$46.1M(6)%Cash from operating activities$4.2M$6.0M(30)%$9.6M$11.5M(17)%Operating cash per share(2)         (basic)   (diluted)$0.10$0.10$0.14$0.14(29)%(29)%$0.22$0.22$0.27$0.26(19)%(15)%Revenue$20.6M$18.4M+12%$40.3M$36.6M+10%Adjusted Operating Income(3)$3.5M$2.9M+23%$4.9M$5.6M(11)%Net income (loss)$1.3M$1.5M(15)%$1.7M$(0.4)MnmNet income (loss) per share    (basic and diluted)$0.03$0.03-$0.04$(0.01)nmCash, cash equivalents  and investments $57.1M$62.2M(8)%$57.1M$62.2M(8)%Deferred revenue $128.3M $120.5M+6% $128.3M $120.5M+6%(1)(2)(3) - Please refer to "Non-IFRS Measures and Definitions"Q2 F2013 HighlightsSales Contracts increased 8% to $22.5 million from $20.7 million in Q2 F2012.Commercial Sales Contracts increased 12% to $20.9 million from $18.7 million in Q2 F2012, driven primarily by strong healthcare and corporate sales activity.Sales of Device Management and Data Security products were up 36% compared to Q2 F2012, growing to 44% of total sales.Cash from Operating Activities was $4.2 million compared to $6.0 million in Q2 F2012.Adjusted Operating Income increased 23% to $3.5 million from $2.9 million in Q2 F2012.Signed a $3.5 million Computrace contract with a Fortune 100 healthcare customer.Announced expanded data protection capabilities with new Absolute Secure Drive features.Broadened management product line with the acquisition of LiveTime Software, a SaaS and on-premise IT Service Management provider for $8.0 million cash plus contingent consideration.Repurchased 2,186,600 common shares under the Company's Normal Course Issuer Bid ("NCIB") for a total cost of $10,612,000. Subsequent to quarter end, announced the renewal of Company's NCIB for the period of January 25, 2013 to January 24, 2014.Subsequent to quarter end, declared a quarterly dividend of CAD$0.05 per common share."We continue to gain sales traction with corporate and healthcare customers, as they increasingly realize the benefits our offerings provide for governance, risk management and regulatory compliance," said John Livingston, CEO of Absolute. "This trend fueled our Sales Contract growth in the quarter, including the signing of the largest contract in our history with a Fortune 100 healthcare company. More broadly, the marketplace continues to go mobile. From inception, Absolute has focused on solving mobile computing security and management challenges. With the addition of Absolute Service and continuing wins for our persistence technology on Windows and Android tablets, we continue to expand our offerings to manage and protect any device on any platform. This remains unique in the new mobile IT paradigm.""Looking toward the remainder of fiscal 2013, while we are encouraged by our second quarter Device Management and Data Security growth, we believe the challenges we experienced in the education vertical in the first half of the year, mainly due to reduced PC shipments for one-to-one student programs, will persist. As such, our expectation for a slight year-over-year decline in Sales Contracts and cash from operations remains unchanged. However, as evidenced by our declaration of a quarterly dividend, we are confident in our strategic positioning and prospects for continued growth over the long-term."Q2 F2013 and F2013 YTD Financial ReviewQ2 F2013 Sales Contracts were $22.5 million, up 8% from $20.7 million in Q2 F2012. The year-over-year increase was largely driven by strength in the corporate and healthcare verticals, with Absolute closing a multi-million deal with a major healthcare customer in the quarter. F2013 Year-to-date ("YTD") Sales Contracts were $43.1 million, down 6% from $46.1 million for the same period in F2012, reflecting a challenging PC industry environment during the first half of the fiscal year, particularly in the education vertical.Commercial Sales Contracts for Absolute's flagship Theft Management products(5)  were $11.7 million for Q2 F2013. This was down 2% from $11.9 million in Q2 F2012. YTD Commercial Sales Contracts for theft management products were $24.6 million, down 15% from $29.0 million in YTD F2012. Demand for these products is correlated with PC sales in the education market, which led to the year-over-year declines. However, the softness in the education sector was partially offset by advances in the Corporate and Healthcare verticals, which Absolute has targeted as expansion opportunities.Q2 F2013 Commercial Sales Contracts from Absolute's Device Management and Data Security products(6)  were $9.2 million, up 36% from $6.8 million in Q2 F2012. For the YTD period, Commercial Sales Contracts from device management and data security products were $15.0 million, up 19% from $12.6 million for the same period in F2012. The year-over-year improvements for the quarter and the YTD period reflect an increase in sales across all of the Company's Device management and Security products, including the Company's multi-million dollar contract win in the healthcare space.International Sales Contracts were $2.5 million in Q2 F2013 (11% of total Sales Contracts) down 43% from $4.4 million in Q2 F2012 (21% of total Sales Contracts). YTD International Sales Contracts were $5.2 million (12% of total Sales Contracts), down 21% from $6.6 million (14% of total Sales Contracts)  for the same period in F2012. The Q2 and YTD year-over-year reductions relate to a significant sale in Australia that was included in the Company's Q2 F2012 results.For Q2 F2013, Sales Contracts for consumer solutions were $1.6 million (7% of total Sales Contracts), down 24% from $2.1 million (10% of total Sales Contracts), in Q2 F2012. YTD consumer Sales Contracts were $3.5 million (8% of total Sales Contracts), down 20% from $4.4 million (10% of total Sales Contracts), for the same period in F2012.Revenue for Q2 F2013 was $20.6 million, a 12% increase from $18.4 million in Q2 F2012. 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. YTD revenue was $40.3 million, a 10% increase from $36.6 million for the same period in F2012. As a result of the SaaS business model, a majority of revenue (88% for the YTD period) was from the drawdown of deferred revenue balances accumulated to the end of the prior fiscal year. Adjusted Operating Expenses(3) for Q2 F2013 were $17.1 million. This was up 10% from $15.5 million in Q2 F2012. The year-over-year change was due to increased investment levels, particularly in sales, marketing, and research and development. The Company initiated these increased spending levels near the end of F2012. YTD Adjusted Operating Expenses were $35.4 million, up 14% from $31.0 million for the same period in F2012.Absolute generated Adjusted Operating Income(4) of $3.5 million in Q2 F2013. This was up 23% from $2.9 million in Q2 F2012 due to higher revenue, which was offset in part by increased investment in the business. YTD Adjusted Operating Income was $4.9 million, down 11% from $5.6 million for the same period in F2012, reflecting the net impact of higher YTD F2013 revenue and the Company's increased investment in the business.Absolute recorded net income of $1.3 million, or $0.03 per share, in Q2 F2013, compared to $1.5 million, or $0.03 per share, in Q2 F2012. YTD net income was $1.7 million, or $0.04 per share, compared to a net loss of $(0.4) million or $(0.01) per share for the same period in F2012. YTD net income included a foreign exchange gain of $0.5 million compared to a foreign exchange loss of $1.2 million for the same period in F2012.Cash from operating activities was $4.2 million for Q2 F2013, down 30% from $6.0 million in Q2 F2012.  YTD cash from operating activities was $9.6 million, down 17% from $11.5 million for the same period in F2012.At December 31, 2012, Absolute had cash, cash equivalents and investments of $57.1 million compared to $69.9 million at June 30, 2012. Significant uses of cash in the quarter included the acquisition of LiveTime and the repurchase of stock under the Company's NCIB.OutlookThe Company's F2013 outlook remains unchanged. Management believes that the Company will continue to face challenging market conditions through the remainder of F2013. As a result, management continues to expect sales contracts for F2013 to be slightly below F2012 levels. Management remains committed to taking a balanced approach to operational investments, but also expects cash generated from operating activities to decline modestly compared to F2012.Quarterly FilingsManagement's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for Q2 F2013 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 Company's Q2 F2013 results on Tuesday, February 12, 2013 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 Tuesday, February 19, 2013 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 93075560.Non-IFRS 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 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 2013 Q2 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 8 of the Notes to the Interim Condensed 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 2013 Q2 MD&A.  4)     Adjusted Operating Income  Management believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company's performance. Adjusted Operating Income refers to IFRS operating (loss) income excluding charges for share-based compensation and amortization of acquired intangible assets.  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 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 SoftwareAbsolute Software Corporation (TSX: ABT) is the industry standard in persistent endpoint security and management for computers, laptops and ultra-portable devices. The Company, a leader in device security and management tracking for more than 18 years, has over 30,000 customers worldwide. Positioned as a Visionary vendor in Gartner, Inc.'s Magic Quadrant for Client Management Tools, Absolute's solutions - Computrace, Absolute Manage, Absolute Secure Drive, and Computrace LoJack for Laptops - provide organizations with actionable intelligence to prove compliance, securely manage BYOD,  and deliver comprehensive visibility and control over all of their devices and data. The Company's Computrace persistence technology is embedded in the firmware of computers, netbooks, and tablets 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.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.©2013 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 and No. 8,332,953. 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 CORPORATIONConsolidated Statements of Financial Position(Expressed in United States dollars) (Unaudited)                  December 31, 2012   June 30, 2012           ASSETS                     CURRENT           Cash and cash equivalents    $40,578,280  $45,412,147 Short-term investments     4,048,559   8,642,435 Trade and other receivables     16,778,027   18,105,369 Prepaid expenses and other     1,669,101   2,010,165      63,073,967   74,170,116INVESTMENTS     12,487,224   15,875,256PROPERTY AND EQUIPMENT     1,493,486   1,561,495DEFERRED INCOME TAX ASSETS     20,818,708   19,848,221INTANGIBLE ASSETS AND GOODWILL     23,846,449   18,256,872     $121,719,834  $129,711,960           LIABILITIES                     CURRENT           Trade and other payables    $6,930,406  $7,016,921 Acquisition payable - LANrev     -   1,657,949 Accrued warranty     520,000   590,000 Deferred revenue - current     66,900,135   63,173,264      74,350,541   72,438,134DEFERRED REVENUE     61,377,203   62,038,434      135,727,744   134,476,568CONTINGENCIES                     SHAREHOLDERS' DEFICIENCY           Share capital     36,870,729   38,625,463 Equity reserve     36,833,038   35,751,185 Deficit     (87,711,677)   (79,141,256)      (14,007,910)   (4,764,608)     $121,719,834  $129,711,960                      ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Operations and Comprehensive Income (Loss)Three and six months ended December 31, 2012 and 2011(Expressed in United States dollars) (Unaudited)                          Three months endedDecember 31,  Six months endedDecember 31,     2012  2011  2012  2011                                      REVENUE    $20,570,200  $18,350,606  $40,337,120  $36,597,113                   COST OF REVENUE     4,773,136   5,024,860   9,643,826   10,081,185                   GROSS MARGIN     15,797,064   13,325,746   30,693,294   26,515,928                   OPERATING EXPENSES                   Sales and marketing     9,528,431   7,947,965   19,029,972   15,731,775 Research and development     3,309,587   2,799,391   6,466,156   5,596,806 General and administration     1,278,330   1,649,845   3,916,446   3,464,671 Investment tax credits     (300,000)   (575,000)   (700,000)   (1,150,000) Share-based compensation     570,637   626,943   1,146,922   1,323,756      14,386,985   12,449,144   29,859,496   24,967,008                   OPERATING INCOME     1,410,079   876,602   833,798   1,548,920                   OTHER INCOME (EXPENSE)                   Interest income, net     41,355   150,842   126,262   297,325 Foreign exchange (loss) gain     45,450   689,724   542,768   (1,173,024) (Loss) gain on investments     -   192,615   (29,627)   192,615      86,805   1,033,181   639,403   (683,084)                   NET INCOME BEFORE INCOME TAXES     1,496,884   1,909,783   1,473,201   865,836                   INCOME TAX (EXPENSE) RECOVERY     (223,964)   (420,097)   270,487   (1,260,097)                   NET INCOME (LOSS) AND COMPREHENSIVE    INCOME (LOSS)    $1,272,920  $1,489,686  $1,743,688  $(394,261)                   BASIC AND DILUTED INCOME (LOSS)    PER SHARE    $0.03  $0.03  $0.04  $(0.01)                   WEIGHTED AVERAGE NUMBER OF COMMON    SHARES OUTSTANDING, BASIC     42,525,098   43,199,412   43,084,300   43,302,821                                      ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Changes in Shareholders' Deficiency(Expressed in United States dollars) (Unaudited)                         Share Capital                Number ofCommonshares  Amount  Equityreserve  Deficit  Total                     BALANCE, JUNE 30, 2011   43,680,498  $34,640,517  $34,431,802  $(74,766,754)  $(5,694,435)Shares issued on options exercised   203,125   699,661   (222,058)   -   477,603Shares issued under Employee Share Purchase Plan   93,502   308,313   -   -   308,313Shares repurchased and cancelled under the   Normal Course Issuer Bid   (742,500)   (795,829)   -   (2,212,465)   (3,008,294)Shares committed to be repurchased under the   Normal Course Issuer Bid   -   (236,534)   -   (729,199)   (965,733)Shares issued on acquisition payable   166,666   827,434   -          -   827,434Share-based compensation   -   -   1,323,756   -   1,323,756Net loss and total comprehensive loss   -   -   -   (394,261)   (394,261)BALANCE, DECEMBER 31, 2011   43,401,291  $35,443,562  $35,533,500  $(78,102,679)  $(7,125,617)Shares issued on options exercised   535,912   3,013,771   (936,737)   -   2,077,034Shares issued under Employee Share Purchase Plan   81,600   289,218   -   -   289,218Shares repurchased and cancelled under the   Normal Course Issuer Bid   (261,000)   (121,088)   -   (16,952)   (138,040)Share-based compensation   -   -   1,154,422   -   1,154,422Net loss and total comprehensive loss   -   -   -   (1,021,625)   (1,021,625)BALANCE, JUNE 30, 2012   43,757,803  $38,625,463  $35,751,185  $(79,141,256)  $(4,764,608)Shares issued on options exercised   36,075   197,724   (65,069)   -   132,655Shares issued under Employee Share Purchase Plan   77,610   321,493   -   -   321,493Shares repurchased and cancelled under the   Normal Course Issuer Bid   (2,794,700)   (3,101,385)   -   (10,314,109)   (13,415,494)Shares issued on acquisition payable   166,668   827,434   -          -   827,434Share-based compensation   -   -   1,146,922   -   1,146,922Net income and total comprehensive income   -   -   -   1,743,688   1,743,688BALANCE, DECEMBER 31, 2012   41,243,456  $36,870,729  $36,833,038  $(87,711,677)  $(14,007,910)                                         ABSOLUTE SOFTWARE CORPORATIONConsolidated Statements of Cash FlowsThree and six months ended December 31, 2012 and 2011(Expressed in United States dollars) (Unaudited)                    Three months endedDecember 31,  Six months endedDecember 31,   2012  2011  2012  2011                 OPERATING ACTIVITIES                 Net income (loss)  $1,272,920  $1,489,686  $1,743,688  $(394,261) Items not involving cash                  Amortization of property and equipment   340,856   305,531   671,775   622,038  Amortization of acquired intangible assets   1,535,230   1,349,357   2,945,075   2,686,213  Amortization of intangible assets - contract costs and brand   1,486,016   1,339,807   2,906,191   2,808,710  Share-based compensation   570,637   626,943   1,146,922   1,323,756  Deferred income taxes   (76,036)   (154,903)   (970,487)   110,097  Loss (gain) on investments   -   (192,615)   29,627   (192,615)  Unrealized foreign exchange loss (gain)   -   (622,135)   (277,892)   1,335,904  Non-cash interest and amortization   of investment premium   (8,814)   126,428   193,287   140,257 Change in non-cash working capital                  Trade and other receivables   (1,431,282)   1,982,233   1,474,672   (594,667)  Prepaid expenses and other   288,796   71,225   341,064   (40,996)  Intangible assets - contract costs and brand additions   (1,845,410)   (1,562,115)   (3,235,845)   (3,222,499)  Trade and other payables   225,139   (999,035)   (105,592)   (2,268,932)  Accrued warranty   (60,000)   (80,000)   (70,000)   (110,000)  Deferred revenue   1,948,375   2,366,944   2,780,639   9,339,150                 CASH FROM OPERATING ACTIVITIES   4,246,429   6,047,351   9,573,126   11,542,155INVESTING ACTIVITIES                 Purchase of property and equipment   (234,215)   (140,037)   (544,820)   (263,568) Acquisition of LiveTime   (8,000,000)   -   (8,000,000)   - Purchase of intangible assets   -   (300,069)   (25,000)   (300,069) Acquisition payable (LANrev)   (833,333)   (833,333)   (833,333)   (833,333) Proceeds from sales and maturities of short-term investments   -   1,851,614   8,039,727   1,851,614                 CASH (USED IN) FROM INVESTING ACTIVITIES   (9,067,548)   578,175   (1,363,426)   454,644FINANCING ACTIVITIES                 Repurchase of common shares for cancellation   (10,612,354)   (236,216)   (13,415,494)   (3,013,781) Issuance of common shares   116,558   366,695   454,126   785,916                 CASH (USED IN) FROM FINANCING ACTIVITIES   (10,495,796)   130,479   (12,961,368)   (2,227,865)                 FOREIGN EXCHANGE EFFECT ON CASH   (112,905)   157,973   (82,199)   (80,132)                 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (15,429,820)   6,913,978   (4,833,867)   9,688,802                 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   56,008,100   32,641,565   45,412,147   29,866,741                 CASH AND CASH EQUIVALENTS, END OF PERIOD  $40,578,280  $39,555,543  $40,578,280  $39,555,543                 SOURCE: Absolute Software CorporationFor further information: Public Relations: Andrea Holland, HORN Group andrea.holland@horngroup.com  or 415-905-4009 or Marina Guy, Absolute Software mguy@absolute.com or 604.730.9851 x107 Investor Relations: Kristen Dickson, MSc, TMX | Equicom kdickson@equicomgroup.com or 416.815.0700 x273 or Dave Mason, CFA, TMX | Equicom dmason@equicomgroup.com or 416.815.0700 x237