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Absolute Reports Fiscal 2016 Third Quarter Results
Tuesday, May 10, 2016Company Profile | Follow Company
Corporate and Healthcare represent 80% of New Customer ACV
Vancouver, BC, May 10, 2016--(T-Net)--Absolute® Software Corporation (TSX: ABT), developers of persistent endpoint security and data risk management solutions, today announced its financial results for the three and nine months ended March 31, 2016.
All dollar figures are unaudited and stated in U.S. dollars, unless otherwise indicated.
Q3-F2016 Overview
Key Financial Metrics
Operations and Corporate
Technology and Products
YTD F2016 Overview
Key Financial Metrics
Operations and Corporate
Technology and Products
“In Q3 we delivered quarter-over-quarter growth, led by strong performance in our targeted Corporate and Healthcare markets,” stated Mr. Geoff Haydon, Chief Executive Officer, Absolute.
“Additionally, we substantially advanced our product strategy,” Haydon said. “Most notably, we unveiled an important phase of our Persistence Platform strategy; extending our patented technology to third-party endpoint software solutions. We believe this initiative will open up substantial new revenue opportunities for Absolute, directly with enterprises, and through prospective new partnerships with independent software vendors.”
Q3-F2016 and Year-to-Date Financial Review
Revenue
Total revenue in Q3-F2016 was $21.7 million, representing a 10% decrease from total revenue of $24.1 million in Q3-F2015, with the decrease being attributable to the divestiture of the Endpoint and Service Management segment on October 5, 2015. Absolute DDS and Consumer revenue in Q3-F2016 was $21.7 million, compared to $21.2 million in Q3-F2015, representing a 2% year-over-year increase. DDS segment revenue from recurring licenses was 99% in Q3-F2016 compared to 95% in Q3-F2015 and was 98% for the F2016 year-to-date period compared to 96% in the prior year period.
For the F2016 year-to-date period, total revenue was $66.8 million, representing a decrease of 5% compared to $70.3 million in the prior year period. Absolute DDS and Consumer revenue for the year-to-date period was $63.9 million, representing a 3% increase over $61.8 million in the prior year period.
Indicative of the Company's prepaid multi-year term license model, revenue primarily represents the amortization of deferred revenue balances from recurring term license sales from both the current and prior periods. As a result, the Company views changes in the Commercial Annual Contract Value (“ACV”) Base(1) as more representative of near-term sales performance.
Annual Contract Value
The DDS ACV Base increased by 2% in both the Q3-F2016 and F2016 year-to-date periods. For North America, the DDS ACV Base increased by 2% in Q3-F2016 and increased by 4% in the F2016 year-to-date period.
Net ACV Retention(1) from existing DDS commercial customers was 101% in Q3-F2016 and was 99% in the year-to-date period of F2016. Incremental ACV under contract from new DDS commercial customers in Q3-F2016 was $1.0 million and was $2.6 million in the year-to-date period of F2016. During Q3-F2016, 80% of new customer ACV was attributable to customers from the corporate and healthcare verticals.
Billings(4)
Absolute DDS and Consumer Billings were $20.1 million in Q3-F2016, representing a 9% increase compared to $18.4 million in the prior year period. For the F2016 year-to-date period, Absolute DDS and Consumer Billings were $58.5 million, down 9% from $64.1 million in the prior year period. Billings to commercial customers represented 96% of Q3-F2016 total Billings and 95% of year-to-date total Billings.
Billings for the combined corporate and healthcare verticals increased 25% in Q3-F2016 and decreased 1% for F2016 year-to-date compared to the prior year period. Q3-F2016 Billings for the combined education and government verticals decreased 7% compared to the prior year and decreased 17% for F2016 year-to-date compared to the prior year period.
North American commercial DDS Billings were $17.2 million in Q3-F2016, representing a 9% increase from $15.8 million in Q3-F2015 and were $49.0 million for the F2016 year-to-date period, representing a 10% decrease from $54.3 million in the prior year-to-date period. Commercial Billings outside North America increased 13% year-over-year to $2.0 million in Q3-F2016 compared to $1.8 million in Q3-F2015 and decreased 7% to $6.3 million for the F2016 year-to-date period compared to $6.9 million in the prior year-to-date period. International DDS Billings represented 10% of total Billings for Q3-F2016 and represented 11% of total Billings for the F2016 year-to-date period.
Adjusted Operating Expenses(3)
Adjusted Operating Expenses for Q3-F2016 were $18.8 million, which represented an increase of 9% compared to $17.3 million in Q3-F2015. The year-over-year increase reflected an increased investment in sales personnel in late F2015 as well as higher marketing expenditures and an increase in research and development personnel during F2016. Additionally, Q3-F2015 expenses were net of a $0.8 million positive adjustment to recorded estimates of Canadian Scientific Research and Experimental Development Investment Tax Credits as a result of acceptance of certain of our historical claims in that period. The current year expense increases were partially offset by the lower Canadian dollar.
For the year-to-date period of F2016, Adjusted Operating Expenses were $57.6 million compared to $55.3 million in the prior year period, representing a 4% increase. Total headcount was 427 at March 31, 2016 compared to 444 at June 30, 2015 and 425 at March 31, 2015.
Adjusted EBITDA(2) & Net Income
Absolute generated Adjusted EBITDA of $2.8 million in Q3-F2016 and $9.2 million in the F2016 year-to-date period, down from $6.8 million and $15.1 million in the respective prior year periods. Adjusted EBITDA represented 13% of Q3-F2016 revenue and 14% of F2016 year-to-date revenue compared to 28% and 21% for the comparable prior year periods.
The Company recorded net income of $1.2 million, or $0.03 per basic share, in Q3-F2016, compared to net income of $2.8 million, or $0.06 per basic share, in Q3-F2015. For the F2016 year-to-date period the Company recorded net income of $10.9 million, or $0.27 per basic share, compared to $5.3 million, or $0.12 per basic share, in the prior year period.
Corporate Outlook
The Company expects F2016 revenue for the Absolute DDS and Consumer businesses to increase over F2015 levels. Total revenue for F2016 is expected to decrease from F2015 levels, reflecting the divestiture of the Absolute Manage and Absolute Service product lines in Q2-F2016.
Adjusted EBITDA for F2016 is expected to decrease from F2015 levels, reflecting lower total revenue and increased investments in research and development and sales and marketing.
The Company expects Absolute DDS Billings for Q4-F2016 to increase over Q4-F2015 levels and for F2016 Absolute DDS Billings to be roughly in-line with F2015 levels. Cash from operating activities for Q4-F2016 and for F2016 are expected to be below comparable F2015 levels reflecting the previously described changes and working capital fluctuations.
Capital expenditures in Q4-F2016 are expected to be $2.0 - $2.5 million reflecting investments in the company's hosted infrastructure and Vancouver office expansion.
Quarterly Dividend
On April 20, 2016, Absolute declared a quarterly dividend of CAD$0.08 per share on the Company's common shares. The dividend is payable in cash on May 27, 2016 to shareholders of record at the close of business on May 6, 2016.
Quarterly Filings
Management's discussion and analysis (“MD&A”) and consolidated financial statements and the notes thereto for Q3-F2016 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 Q3-F2016 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
Absolute Software Corporation (TSX: ABT) is the industry standard in persistent endpoint security and data risk management solutions. Persistence® technology from Absolute provides organizations with visibility and control over all of their devices, regardless of user or location. If an Absolute client is removed from an endpoint, it will automatically reinstall so IT can secure each device and the sensitive data it contains. No other technology can do this. Persistence technology is embedded in the firmware of computers, netbooks, tablets and smartphones by global leaders, including Acer, ASUS, Dell, Fujitsu, HP, Lenovo, Microsoft, Panasonic, Samsung, and Toshiba, and the Company has reselling partnerships with these OEMs and others, including Apple. For more information about Absolute, visitwww.absolute.com.
Forward-Looking Statements
This press release contains forward-looking statements and financial outlook that involve risks and uncertainties. These forward-looking statements and financial outlook 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 facts. 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 and financial outlook contained in this press release will be realized. Furthermore, the forward-looking statements and financial outlook 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 or financial outlook, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
©2016 Absolute Software Corporation. All rights reserved. Absolute and Persistence are registered trademarks of Absolute Software Corporation. For patent information, visit www.absolute.com/patents. 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
tlevinson@absolute.com or 1 604 730 9851 x208
Investor Relations:
Kristen Dickson, NATIONAL Equicom
kdickson@national.ca or 1 416 848 1429
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of Financial Position
(Expressed in United States dollars) (Unaudited)
ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Comprehensive Income
Three and nine months ended March 31, 2016 and 2015
(Expressed in United States dollars) (Unaudited)
ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in United States dollars) (Unaudited)
ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows
Three and nine months ended March 31, 2016 and 2015
(Expressed in United States dollars) (Unaudited)
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