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Absolute Software Reports First Quarter Fiscal 2009 Results
Tuesday, November 4, 2008
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Vancouver, BC, November 4, 2008--(T-Net)--Absolute Software (TSX: ABT), the leading provider of firmware-based, patented Computer Theft Recovery, Data Protection and Secure Asset Tracking(TM) solutions, announces its financial results for the three-month period ended September 30, 2008. All dollar amounts are in Canadian dollars unless otherwise stated.
Q1-F2009 Highlights:
- Increased contracted subscription base by 84% to 3.8 million, from 2.1 million in Q1-F2008
- Deferred revenue is net of a $2.1 million adjustment on the reversal of a Sales Contract that was originally reported at June 30, 2008
- Increased consumer distribution channels by adding Digital River, Costco.com and Future Shop to its partner ecosystem
- Announced its first private label program with one of the world's largest PC OEMs
- Launched new services, including GPS mapping for computers and post-theft file retrieval
- Extended the number of PC OEMs providing embedded firmware support for its Computrace solutions with the addition of Gamma Tech and ASUS
- Named Carter McCrary, a seasoned high tech executive, as Absolute's Chief Operating Officer
"As stated in our October 9th earnings pre-announcement, Q1-F2009 was a difficult quarter with a number of contracts put on hold due to the unprecedented turbulence in capital markets and the spillover-effect onto certain customer's purchasing abilities," said John Livingston, Chairman and CEO of Absolute. "Nevertheless, looking forward we remain excited and optimistic about our prospects. The fundamental condition of our business and finances, and the caliber of our leadership team have never been stronger. Over the past year we have built new partnerships, developed new technology, expanded our customer focus, enhanced the team, and rolled-out a global customer service strategy. With more than $72 million in cash and investments, no debt, and strong cash flow margins, we have the foundation in place to execute on our strategic growth plan."
Financial Review
Sales Contracts for Q1-F2009 were $18.2 million compared to $21.0 million in Q1-F2008. A majority of Absolute's sales are denominated in U.S. dollars and therefore periodic fluctuations in the US/Canadian exchange rate can impact reported Sales Contract levels. For the Q1-F2009 versus Q1-F2008 comparison period, currency fluctuations did not have an impact on reported Sales Contract levels. As discussed below, Sales Contracts are a non-standard measure under Canadian Generally Accepted Accounting Principals ("GAAP").
Deferred revenue increased 3% over June 30, 2008 to $90.7 million at September 30, 2008 on Sales Contracts of $18.2 million, less revenue of $12.1 million and other adjustments of $3.2 million. The other adjustments include approximately $1.0 million of bad debt provisions and a $2.1 million reversal of a Sales Contract that was included in results for Q4-F2008. The bad debt provisions are primarily due to a second tier PC OEM that has ceased making payments on overdue balances, and has recently had action brought by other creditors. In addition, given the current economic climate, management has increased its general provision for bad debts.
The $2.1 million reversal relates to a Q4-F2008 Sales Contract made to a reseller for a government-sector customer, which was included in accounts receivable and deferred revenue at June 30, 2008. Subsequent to the fiscal 2008 year end, the reseller was advised it would be unable to complete its purchasing process with the end customer, and as a result the reseller was required to cancel its original order with Absolute. The reversal adjustment affects the balance sheet only; no revenue was recorded in income for either Q1-F2009 or Q4-F2008, and the adjustment had no impact on the reported cash from operations. Management, with assistance from outside counsel, is reviewing its procedures in light of this reversal, and in light of the current economic climate, to minimize the risk of bad debts, returns and reversals as it pertains to the Canadian non-GAAP measure of Sales Contracts.
Absolute deploys its services through a software-as-a-service ("SaaS") model. A feature of the SaaS model is its ability to generate significant operating cash flows. Accordingly, Absolute's cash from operations for Q1-F2009 totaled $9.1 million compared to $8.9 million in Q1-F2008. Cash from operations on a diluted share basis was $0.18 in Q1-F2009, compared to $0.18 in Q1-F2008.
Net loss for Q1-F2009 was $2.2 million, or ($0.05) per share, compared to $2.9 million, or ($0.06) per share, in Q1-F2008. Excluding stock-based compensation, the net loss for Q1-2009 was $0.6 million compared to net loss excluding stock-based compensation of $2.0 million in Q1-F2008. The net loss excluding stock-based compensation has been declining primarily due to growing revenue levels and foreign exchange gains on the strengthening of the U.S. dollar.
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 September 30, 2008, Absolute's cash, cash equivalents, short-term investments and investments were $72.8 million, compared to $64.0 million at June 30, 2008.
Guidance
In its October 9th corporate update, Absolute issued the following financial guidance for fiscal 2009:
- Sales Contracts of $82-90 million
- Cash from operations of $27-33 million
"Although we expect second quarter cash flow to be below first quarter results, with strong repeat business expected from existing customers, we believe we remain on track to reach these financial targets for the year," said Rob Chase Chief Financial Officer at Absolute. "While we will continue to invest in marketing and product development throughout the year, in light of the current economic environment we are investing at a more conservative and cautious level than previously anticipated."
Management's discussion and analysis (MD&A), consolidated financial statements and notes thereto for the first 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 Tuesday November 4, 2008 at 8:30 a.m. ET (5:30 a.m. PT). All interested parties can join the call by dialing 416-644-3427 or 1-800-796-7558. Please dial-in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Tuesday November 11, 2008 at midnight. To access the archived conference call, please dial 416-640-1917 or 1-877-289-8525 and enter the reservation code 21285441 followed by number sign.
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.
About Absolute
Absolute Software Corporation (TSX: ABT) is the leader in Computer Theft Recovery, Data Protection and Secure Asset Tracking(TM) solutions. Absolute Software provides organizations and consumers with solutions in the areas of regulatory compliance, data protection and theft recovery. The Company's Computrace(R) software is embedded in the BIOS of computers by global leaders, including Dell, Fujitsu, HP, Lenovo, Motion, MPC, Panasonic and Toshiba. 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 $82-90 million Sales Contracts and $27-33 million Cash from Operations FY 2009 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.
(C)2008 Absolute Software Corporation. All rights reserved. Computrace and Absolute are registered trademarks of Absolute Software Corporation. 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. Japan patent No. JP4067035. The Toronto Stock Exchange has neither approved nor disapproved of the information contained in this news release.
For further information
John Livingston, Chief Executive Officer, jliving@absolute.com or Phone: (604) 730-9851
Rob Chase, Chief Financial Officer, rchase@absolute.com or Phone: (604) 730-9851
Dave Mason, Investor Relations, dmason@equicomgroup.com or Phone: (416) 815-0700 x237, Website: http://www.absolute.com
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