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Absolute Software Reports Fiscal 2015 Second Quarter Results
Thursday, February 12, 2015Company Profile | Follow Company
Strong corporate and education sales drive a 15% increase in total Commercial Sales Contracts and a 44% growth in cash from operating activities
Vancouver, BC, February 12, 2015--(T-Net)--Absolute® Software Corporation (ABT.TO), a provider of persistent endpoint security and management solutions for desktops, laptops, tablets and smartphones, today announced its financial results for the three and six months ended December 31, 2014.
All financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and are reported in U.S. dollars.
Q2-F2015 Highlights:
Sales Contracts
Operations and Corporate
Technology
“Customers across all of Absolute's strategic focus areas contributed to our strong results,” said Geoff Haydon, CEO of Absolute. “This includes North America, and the education and corporate markets, where Sales Contracts were up significantly. Our revenue growth outpaced the increased level of strategic investments we made internally, translating into year-over-year improvements in both Adjusted EBITDA and cash from operating activities.”
“We are confident we are on track to achieve the objectives we set for ourselves at the beginning of the year,” said Mr. Haydon. “Our customers continue to deploy new form factors, and require innovative, effective ways to ensure the security and compliance of their deployments. We will keep pace with these requirements through the aggressive expansion of our persistence technology solutions.”
Mr. Haydon added, “We will continue to focus on strengthening our position in education, while investing for accelerated growth in the corporate and healthcare market segments. We will increase the awareness of Absolute within new customer segments and different geographies. Finally, we will continue to optimize direct sales and partner productivity in key geographic and vertical markets, with the clear objective of delivering a superior customer experience and sustainable long-term growth.”
Q2-F2015 and YTD F2015 Financial Review
Q2-F2015 Sales Contracts of $25.2 million represented an increase of 13% compared to Q2-F2014, while year to date Sales Contracts of $51.2 million represented an increase of 11% over the prior year period.
Sales Contracts to commercial customers increased 15% in Q2-F2015 compared to Q2-F2014 and also increased 15% for the year to date period. The combined education and government verticals increased 16% in Q2-F2015 compared to the prior year and increased 22% for the year to date period. The combined corporate and healthcare verticals increased 13% for the quarter and increased 6% for the year to date period.
Commercial Sales Contracts for North America increased 24% in Q2-F2015 and increased 21% for the year to date period. Commercial Sales Contracts outside North America were down 30% for the quarter and down 18% for the year to date period. The year-over-year decrease in the Company's international sales reflect lower sales in the Asia Pacific and Latin America regions attributable to large deals recorded in the prior year that were not replicated in the current year periods. International sales represented 11% of total Sales Contracts for the quarter and 12% of total sales contracts year to date.
Q2-F2015 Commercial Sales Contracts for Absolute's Device Management and Data Security products(6) were $10.2 million, up 21% from $8.4 million in Q2-F2014, and were $17.7 million for YTD F2015, a 17% improvement over $15.1 million for YTD F2014. The year-over-year growth for the Q2 and YTD F2015 periods was primarily driven by increased sales of Computrace Data Protection.
Commercial Sales Contracts for Absolute's Theft Management products(5) were $14.2 million in Q2-F2015, representing an increase of 11% from $12.8 million in Q2-F2014. YTD F2015 Commercial Sales Contracts for Absolute's Theft Management products(5) were $31.4 million, up 13% from $27.8 million for the same period in F2014.
Sales Contracts for consumer solutions for Q2-F2015 were $0.8 million (3% of total Sales Contracts), down from $1.0 million (5% of total Sales Contracts) in Q2-F2014. YTD F2015 Sales Contracts for consumer solutions were $2.1 million (4% of total Sales Contracts) down from $3.1 million (7% of total Sales Contracts) for the same period in F2014.
Revenue in Q2-F2015 was $23.1 million, a 5% increase from $21.9 million in Q2-F2014. YTD F2015 revenue was $46.3 million, up 6% compared to the same period in F2014. Indicative of the Company's prepaid Software-as-a-Service (SaaS) business model, revenue primarily represents the amortization of deferred revenue balances from recurring term license sales from both the current and prior periods.
Adjusted Operating Expenses(3) for Q2-F2015 were $19.1 million, up 4% from $18.3 million in Q2-F2014. For YTD F2015, Adjusted Operating Expenses were $38.0 million, a 4% increase over $36.7 million for the same period in F2014. The year-over-year increase primarily reflects an increase in sales and marketing as well as research and development.
These increases were offset, in part, by benefits the Company realized as a result of a weakened Canadian dollar, which reduced the costs of the Company's Canadian-based expenditures. As a percentage of revenue, Adjusted Operating Expenses decreased to 83% in Q2-F2015 from 84% in Q2-F2014 and 82% for YTD F2015 compared to 84% for the same period in F2014.
Absolute generated Adjusted EBITDA(4) of $4.0 million in Q2-F2015, up 13% from $3.5 million in Q2-F2014. For YTD F2015, Adjusted EBITDA was $8.2 million, a 21% increase over YTD F2014.
Absolute recorded net income of $2.2 million, or $0.05 per share, in Q2-F2015, compared to net income of $0.2 million, or $0.01 per share, in Q2-F2014. YTD F2015 net income was $2.5 million, or $0.06 per share, up from $1.4 million, or $0.03 per share, for the same period in F2014. The year-over-year improvement for the Q2 and YTD F2015 periods reflect revenue growth that outpaced the increase in the Company's Adjusted Operating Expenses, which was partially offset by foreign exchange losses versus foreign exchange gains for the same periods in F2014 as well a year-over-year increase in income taxes.
Quarterly Dividend
The Company's Board of Directors declared a dividend of $0.07 per common share on January 19, 2015. The $0.07 per share dividend is scheduled to be paid on February 27, 2015 to shareholders of record at the close of business on February 6, 2015.
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 Q2-F2015 can be obtained today from Absolute's corporate website at www.absolute.com. The documents will also be available at www.sedar.com.
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 Q2 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:
About Absolute Software
Absolute Software Corporation (TSX: ABT) is the industry standard in persistent endpoint security and management for computers, 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.
Forward-Looking Statements
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.
©2015 Absolute Software Corporation. All rights reserved. Computrace and Absolute are registered trademarks of Absolute Software Corporation. For patent information, visit www.absolute.com/patents. LoJack is a registered trademark of LoJack Corporation, used under license by Absolute Software Corporation. LoJack Corporation is not responsible for any content herein. The Toronto Stock Exchange has neither approved nor disapproved of the information contained in this news release.
For more information, please contact:
Public Relations:
Becky Obbema, Interprose
becky.obbema@interprosepr.com or 1 408 778 2024
or
Toru Levinson, Absolute Software
tlevinson@absolute.com or 1 604 730 9851 x208
Investor Relations:
Kristen Dickson, CFA, TMX|Equicom
kdickson@equicomgroup.com or 1 416 815 0700 x273
ABSOLUTE SOFTWARE CORPORATION |
||||
Condensed Consolidated Statements of Financial Position |
||||
(Expressed in United States dollars) (Unaudited) |
||||
December 31, 2014 |
June 30, 2014 |
|||
ASSETS |
||||
CURRENT |
||||
Cash and cash equivalents |
$ 41,993,421 |
$ 40,928,539 |
||
Short-term investments |
19,699,526 |
17,537,492 |
||
Trade and other receivables |
15,248,526 |
21,979,235 |
||
Prepaid expenses and other |
2,175,509 |
1,917,665 |
||
79,116,982 |
82,362,931 |
|||
INVESTMENTS |
19,962,710 |
15,115,005 |
||
PROPERTY AND EQUIPMENT |
2,290,107 |
1,987,544 |
||
DEFERRED INCOME TAX ASSETS |
19,949,047 |
19,801,047 |
||
INTANGIBLE ASSETS AND GOODWILL |
17,247,545 |
18,535,582 |
||
$ 138,566,391 |
$ 137,802,109 |
|||
LIABILITIES |
||||
CURRENT |
||||
Trade and other payables |
$ 7,087,743 |
$ 10,455,510 |
||
Income taxes payable |
265,347 |
- |
||
Accrued warranty |
280,000 |
360,000 |
||
Deferred revenue - current |
73,849,367 |
71,144,393 |
||
81,482,457 |
81,959,903 |
|||
DEFERRED REVENUE |
68,067,942 |
65,818,337 |
||
149,550,399 |
147,778,240 |
|||
SHAREHOLDERS' DEFICIENCY |
||||
Share capital |
55,821,186 |
52,403,258 |
||
Equity reserve |
35,082,984 |
35,141,530 |
||
Deficit |
(101,888,178) |
(97,520,919) |
||
(10,984,008) |
(9,976,131) |
|||
$ 138,566,391 |
$ 137,802,109 |
ABSOLUTE SOFTWARE CORPORATION Consolidated Statements of Operations and Comprehensive Income Three and six months ended December 31, 2014 and 2013 (Expressed in United States dollars) (Unaudited) |
|||||
Three months ended |
Six months ended December 31, |
||||
2014 |
2013 |
2014 |
2013 |
||
REVENUE |
$ 23,060,268 |
$ 21,861,822 |
$ 46,256,783 |
$ 43,549,918 |
|
COST OF REVENUE |
4,461,507 |
4,523,142 |
9,124,594 |
9,417,158 |
|
GROSS MARGIN |
18,598,761 |
17,338,680 |
37,132,189 |
34,132,760 |
|
OPERATING EXPENSES |
|||||
Sales and marketing |
10,239,272 |
10,292,334 |
20,648,648 |
20,144,758 |
|
Research and development |
3,139,975 |
2,934,317 |
6,299,946 |
6,061,705 |
|
General and administration |
2,655,518 |
3,439,820 |
5,130,428 |
5,493,240 |
|
Share-based compensation |
603,585 |
539,936 |
1,086,769 |
1,084,152 |
|
16,638,350 |
17,206,407 |
33,165,791 |
32,783,855 |
||
OPERATING INCOME |
1,960,411 |
132,273 |
3,966,398 |
1,348,905 |
|
OTHER (EXPENSE) INCOME |
|||||
Interest income, net |
20,898 |
42,118 |
63,864 |
95,708 |
|
Foreign exchange (loss) gain |
(84,194) |
44,158 |
(357,979) |
269,123 |
|
(63,296) |
86,276 |
(294,115) |
364,831 |
||
NET INCOME BEFORE INCOME TAXES |
1,897,115 |
218,549 |
3,672,283 |
1,713,736 |
|
INCOME TAX RECOVERY (EXPENSE) |
345,000 |
6,000 |
(1,125,000) |
(357,200) |
|
NET INCOME AND COMPREHENSIVE INCOME |
$ 2,242,115 |
$ 224,549 |
$ 2,547,283 |
$ 1,356,536 |
|
BASIC AND DILUTED INCOME PER SHARE |
$ 0.05 |
$ 0.01 |
$ 0.06 |
$ 0.03 |
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC |
43,992,815 |
42,895,732 |
43,970,107 |
42,524,146 |
ABSOLUTE SOFTWARE CORPORATION |
|||||
Consolidated Statement of Changes in Shareholders' Deficiency |
|||||
(Expressed in United States dollars) (Unaudited) |
|||||
Share Capital |
|||||
Number of |
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 employee options exercised |
656,287 |
3,789,331 |
(1,202,289) |
- |
2,587,042 |
Shares issued on non-standard options exercised |
447,750 |
3,297,658 |
(1,112,000) |
- |
2,185,658 |
Shares issued under Employee Share Purchase Plan |
85,387 |
351,927 |
- |
- |
351,927 |
Share-based compensation |
- |
- |
1,084,152 |
- |
1,084,152 |
Dividends paid |
- |
- |
- |
(4,493,650) |
(4,493,650) |
Net income and total comprehensive income |
- |
- |
- |
1,356,536 |
1,356,536 |
BALANCE, DECEMBER 31, 2013 |
43,241,677 |
$ 49,129,665 |
$ 35,312,784 |
$ (94,972,670) |
$ (10,530,221) |
Shares issued on options exercised |
491,864 |
2,931,231 |
(984,107) |
- |
1,947,124 |
Shares issued under Employee Share Purchase Plan |
62,674 |
342,362 |
- |
- |
342,362 |
Share-based compensation |
- |
- |
812,853 |
- |
812,853 |
Dividends paid |
- |
- |
- |
(4,763,565) |
(4,763,565) |
Net income and total comprehensive income |
- |
- |
- |
2,215,316 |
2,215,316 |
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 |
532,887 |
3,139,018 |
(1,004,927) |
- |
2,134,091 |
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 |
(381,762) |
(486,286) |
- |
(1,780,319) |
(2,266,605) |
Share-based compensation |
- |
- |
1,086,769 |
- |
1,086,769 |
Dividends paid |
- |
- |
- |
(5,134,223) |
(5,134,223) |
Net income and total comprehensive income |
- |
- |
- |
2,547,283 |
2,547,283 |
BALANCE, DECEMBER 31, 2014 |
44,070,070 |
$ 55,821,186 |
$ 35,082,984 |
$ (101,888,178) |
$ (10,984,008) |
ABSOLUTE SOFTWARE CORPORATION |
|||||||
Consolidated Statements of Cash Flows |
|||||||
Three and six months ended December 31, 2014 and 2013 |
|||||||
(Expressed in United States dollars) (Unaudited) |
|||||||
Three months ended |
Six months ended |
||||||
2014 |
2013 |
2014 |
2013 |
||||
OPERATING ACTIVITIES |
|||||||
Net income |
$ 2,242,115 |
$ 224,549 |
$ 2,547,283 |
$ 1,356,536 |
|||
Items not involving cash |
|||||||
Amortization of property and equipment |
365,915 |
289,919 |
821,024 |
612,919 |
|||
Amortization of acquired intangible assets |
1,053,943 |
1,190,666 |
2,368,494 |
2,402,103 |
|||
Amortization of intangible assets - contract costs and brand |
1,766,620 |
1,643,830 |
3,411,548 |
3,120,094 |
|||
Share-based compensation |
603,585 |
539,936 |
1,086,769 |
1,084,152 |
|||
Deferred income taxes |
(1,060,000) |
(289,000) |
(148,000) |
(222,600) |
|||
Non-cash interest and amortization of investment premium |
113,608 |
205,145 |
278,121 |
288,866 |
|||
Change in non-cash working capital |
|||||||
Trade and other receivables |
2,073,714 |
(1,193,972) |
6,751,611 |
968,778 |
|||
Prepaid expenses and other |
153,104 |
210,024 |
(257,844) |
25,590 |
|||
Intangible assets - contract costs and brand additions |
(2,125,247) |
(1,934,782) |
(4,149,912) |
(3,658,014) |
|||
Trade and other payables |
(989,694) |
3,138,017 |
(2,771,928) |
1,422,454 |
|||
Income taxes payable |
55,347 |
- |
265,347 |
- |
|||
Accrued warranty |
(30,000) |
10,000 |
(80,000) |
(70,000) |
|||
Deferred revenue |
2,105,727 |
364,941 |
4,954,579 |
2,437,665 |
|||
CASH FROM OPERATING ACTIVITIES |
6,328,737 |
4,399,273 |
15,077,092 |
9,768,543 |
|||
INVESTING ACTIVITIES |
|||||||
Purchase of property and equipment |
(660,377) |
(449,341) |
(1,555,616) |
(655,501) |
|||
Purchase of intangible assets |
(202,000) |
(218,506) |
(202,000) |
(363,381) |
|||
Proceeds from sales and maturities of short-term investments |
3,550,000 |
1,510,000 |
6,300,000 |
5,203,925 |
|||
Purchase of short-term investments |
(5,122,700) |
- |
(5,122,700) |
- |
|||
Purchase of investments |
(8,465,160) |
- |
(8,465,160) |
(3,732,293) |
|||
CASH (USED IN) FROM INVESTING ACTIVITIES |
(10,900,237) |
842,153 |
(9,045,476) |
452,750 |
|||
FINANCING ACTIVITIES |
|||||||
Issuance of common shares |
898,429 |
2,115,219 |
2,643,113 |
4,802,800 |
|||
Dividends paid |
(2,727,992) |
(2,456,084) |
(5,134,223) |
(4,493,650) |
|||
Repurchase of common shares for cancellation |
(2,063,318) |
- |
(2,266,605) |
- |
|||
CASH (USED IN) FROM FINANCING ACTIVITIES |
(3,892,881) |
(340,865) |
(4,757,715) |
309,150 |
|||
FOREIGN EXCHANGE EFFECT ON CASH |
(65,428) |
(42,920) |
(209,019) |
(12,916) |
|||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(8,529,809) |
4,857,641 |
1,064,882 |
10,517,527 |
|||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
50,523,230 |
36,774,884 |
40,928,539 |
31,114,998 |
|||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ 41,993,421 |
$ 41,632,525 |
$ 41,993,421 |
$ 41,632,525 |
SOURCE Absolute Software Corporation
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.Contact:Public Relations: Becky Obbema, Interprose, Becky.Obbema@interprosepr.com or 408.778.2024 or Toru Levinson, Absolute Software, tlevinson@absolute.com or 1 604 730 9851 x208; Investor Relations: Kristen Dickson, TMX Equicom, kdickson@tmxequicom.comor 416.815.0700 x273
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