Subscriber base doubles in the last twelve months from 590,000 to
1.2 million
VANCOUVER, May 1 /CNW/ - Absolute(R) Software (TSX: ABT), the leading provider of Computer Theft Recovery, Data Protection and Secure Asset Tracking(TM) solutions, announces its financial results for the three- and nine-month periods ended March 31, 2007. All dollar amounts are in Canadian dollars unless otherwise stated.
Key Financial Q3- Q3- % YTD- YTD- %
Metrics F2007 F2006 change F2007 F2006 change
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Sales
contracts(x) $ 10.6M $ 4.7M + 126% $ 31.0M $ 14.1M + 120%
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Cash from
operations $ 3.5M $ 0.8M + 322% $ 12.4M $ 2.9M + 323%
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Revenue $ 5.3M $ 3.0M + 77% $ 13.8M $ 8.3M + 66%
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Net loss $ 1.2M $ 1.0M + 15% $ 3.5M $ 2.6M + 33%
(x) Sales contracts are not a standard GAAP measure and are calculated as
the sum of the GAAP revenue and the change in deferred revenue.
Operational highlights:
- Increased sales contracts by 126% to $10.6 million for Q3-F2007 and
by 120% to $31.0 million for the year to date ("YTD")
- Increased cash from operations by 322% to $3.5 million for Q3-F2007
and by 323% to $12.4 million for the YTD
- Grew subscriptions under contract at March 31, 2007 to approximately
1.2 million, up from 940,000 at December 31, 2006 and 590,000 at
March 31, 2006
- Dell launched broad-based Computrace(R) LoJack(R) for Laptops
bundling program on certain of its retail consumer sales
- Added Panasonic and Motion Computing to list of partners with
embedded firmware support for Computrace, and expanded embedded
support agreement with Lenovo
- Launched Computrace(R)One in the European market
- Exited the quarter with cash and short-term investment balances of
$30.0 million, up from $16.7 million at June 30, 2006.
"The investment we are making across our business and toward penetrating the corporate, education, government and consumer market verticals in the U.S. is delivering strong sales results and momentum," said John Livingston, Chairman and CEO of Absolute. "This in turn, is delivering substantial year-over-year growth in our key financial metrics, and is setting the stage for continued growth. In particular, our Dell bundle with Computrace LoJack for Laptops in the consumer market validates the emergence of the computer theft recovery market, reinforces our position as the market leader, strengthens our partner relationship, and may significantly increase our subscriber base in the coming year. In all four market verticals there is increased customer demand for asset and data security products which creates partner opportunities to increase attach rates both in the U.S. and in International markets."
Financial Review
Sales contracts for Q3-2007 were $10.6 million, increasing 126% from Q3-2006. Sales contracts for the nine months ended March 31, 2007 were $31.0 million, up 120% from the same period last year. The current year growth is a result of the Company's growth strategies, the embedded BIOS support from seven of the world's leading PC OEMs, marketing programs with the PC OEMs, and a general market trend toward protecting laptops and the data stored on them from loss and theft.
Sales contracts are a non-standard GAAP measure calculated as the sum of revenue plus the change in deferred revenue for the period. Management focuses on sales contracts and cash flow as Absolute's key operational indicators, which is consistent with the Company's software-as-a-service business model. The full sales contracts value for the subscription term of service purchased is invoiced up-front with non-refundable payment due on standard invoice terms. The sales contracts invoiced are then deferred on the balance sheet and recognized as revenue ratably over the term. With the service terms averaging approximately 30 months, this creates a significant lag between the transactional sale and the revenue. In turn, this creates a significant discrepancy between cash from operations and GAAP profitability as a majority of period operating expenses relate to generating the period sales contracts as opposed to the revenue. As a result, management believes cash from operations to be the most accurate measure of the Company's overall performance and sales contracts to be the key indicator for growth.
During the quarter, Absolute announced a bundle program with Dell for the automatic inclusion of a subscription to Computrace LoJack for Laptops with every unit of CompleteCare accidental damage service sold by Dell to its consumer customers, and with certain laptop bundles, at no additional charge to the customer. Absolute provided Dell with a limited exclusivity amongst other PC OEMs for certain bundle programs, and with favourable pricing as incentive for Dell if they continue with the bundle and generate an annual run rate of one million subscriptions per year through the program.
While only in its initial rollout phase during the quarter, the program helped grow Q3-F2007 consumer sales to $2.0 million, a 213% increase over last year, and a 40% increase over Q2-F2007, despite Q2 being seasonally stronger for the consumer vertical. During Q3-F2007 the program was only applied to CompleteCare sales, and in April 2007, it was expanded to include certain laptop bundles. This is expected to result in Q4-F2007 consumer sales contracts above the $2.0 million achieved in Q3-F2007.
Absolute sold 265,000 new and renewal subscriptions to its security and asset tracking services during the quarter, with an average term of 30 months and an average selling price of $39.93. The average price reduced from traditional levels due to the Dell bundle program. While having lower pricing, the Dell bundle is expected to generate strong margins due to reduced acquisition and support economies.
Q3-F2007 revenue of $5.3 million increased 77% from $3.0 million in Q3-F2006. For the YTD period, revenue was $13.8 million, up 66% from last year. As a lagging indicator, the increase in revenue is a result of sales contract growth over the last three years. Substantially all of the revenue from Q3-F2007 sales contracts is included in deferred revenue on the balance sheet at March 31, 2007, which climbed to $44.3 million at quarter end.
Total operating expenses have increased to generate and support the sales contract growth. For Q3-F2007, total operating expenses of $6.6 million increased 55% over Q3-F2006. YTD, total operating expenses increased 58% to $18.4 million. Since sales contracts grew at a faster rate, the ratio of operating expenses to sales contracts improved to 62% in Q3-F2007 compared to 90% in Q3-F2006, and to 59% YTD compared to 82% in the comparable period last year. Management believes this performance highlights the leverage inherent in the Company's business model.
The Company reported a net loss of $1.2 million, or $0.05 per share, in Q3-F2007 compared to a net loss of $1.0 million, or $0.05 per share, in Q3-F2006. Net loss for the YTD period was $3.5 million, or $0.16 per share, compared to $2.6 million, or $0.12 per share in the same period last year. Increased losses are generally expected during periods of accelerated sales growth as the related revenue is recorded on the balance sheet while most of the related costs are expensed in the period.
In Q3-F2007, Absolute generated cash from operations of $3.5 million (basic cash per share of $0.15), a 322% increase from $0.8 million (basic cash per share of $0.04) generated in Q3-F2006. YTD, Absolute generated cash from operations of $12.4 million (basic cash per share of $0.56), a 323% increase from $2.9 million (basic cash per share of $0.14) generated in the prior year period. Basic cash per share is not a standard term under GAAP, and is calculated by dividing the GAAP measures of cash from operations by the basic weighted average number of common shares outstanding.
"Solid growth in sales contracts and improved timing of collections due to sales being spread more evenly through the quarter resulted in stronger than expected cash from operations," said Rob Chase, CFO of Absolute. "This resulted in a 40% 'cash margin' (cash from operations as a percent of sales contracts) for the YTD period, up from 21% and 12% respectively for the same periods of fiscal 2006 and fiscal 2005. As a result, we are revising upward our guidance for fiscal 2007 cash margins from 20-25% to 30-35%, which takes into account historic collection trends and an increase in our operating expenses as we increase our level of investment for our fiscal 2008 growth plans."
Absolute is in a strong financial position with the necessary resources to fund its operating and capital requirements and to execute on its growth strategies. At March 31, 2007, the Company held cash, cash equivalents and short-term investments of $30.0 million, up from $16.7 million at June 30, 2006.
Management's discussion and analysis, consolidated financial statements and notes thereto for the second 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 May 1, 2007, at 7:00AM PST / 10:00AM EST. The dial-in numbers for participants are 416-644-3422 or 1-800-731-6941. A taped replay will be available until May 8, 2007, by calling 416-640-1917 or 1-877-289-8525 and entering the replay PIN number: 21227373.
A live audio webcast will be available at www.absolute.com and www.newswire.ca. The webcast will be archived for 365 days at the Company's website and 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, Gateway, HP, Lenovo, Motion and Panasonic, and the Company has reselling partnerships with these OEMs and others, including Apple and Toshiba. For more information about Absolute Software and Computrace, 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 raised awareness of our services and products, the attainment of certain subscriber thresholds, the consummation of further bundling arrangements, the ability of the Company to successfully execute on its growth strategies, 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.
(C)2007 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
patent No. 2,305,370. U.K. patents No. EP793823 and No. GB2338101. German
patent No. 695 125 34.6-08. Australian patent No. 699045. The Toronto
Stock Exchange has neither approved nor disapproved of the information
contained in this news release.
ABSOLUTE SOFTWARE CORPORATION
Consolidated Balance Sheets (Unaudited)
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
As At
March 31, June 30,
2007 2006
------------ ------------
ASSETS
CURRENT
Cash and cash equivalents $ 6,007,099 $ 3,981,681
Short-term investments 24,016,580 12,705,454
Accounts receivable 7,961,933 6,175,169
Prepaid expenses and deposits 431,023 338,969
Current portion of deferred contract costs 4,086,636 2,686,334
Current portion of future income tax assets 1,477,516 1,358,888
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43,980,787 27,246,495
DEFERRED CONTRACT COSTS 4,404,013 3,153,159
PROPERTY AND EQUIPMENT 1,204,343 715,346
FUTURE INCOME TAX ASSETS 1,377,145 1,415,080
INTANGIBLE ASSET 415,267 511,098
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$51,381,555 $33,041,178
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 1,427,258 $ 2,025,391
Current portion of accrued warranty 3,478,457 1,368,174
Current portion of deferred revenue 20,570,185 12,676,472
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25,475,900 16,070,037
ACCRUED WARRANTY 2,246,237 1,552,521
DEFERRED REVENUE 23,748,558 14,321,172
-------------------------------------------------------------------------
51,470,695 31,943,730
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SHAREHOLDERS' (DEFICIENCY) EQUITY
Share capital and other equity 37,908,069 36,792,277
Contributed surplus 8,510,039 7,899,061
Loans to directors and employees (498,461) (644,220)
Deficit (46,008,787) (42,949,670)
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(89,140) 1,097,448
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$51,381,555 $33,041,178
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Deficit (Unaudited)
Three and nine months ended March 31, 2007 and 2006
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
Three Months Nine Months
2007 2006 2007 2006
------------ ------------ ------------ -------------
REVENUE
Monitoring
revenue $ 5,260,242 $ 2,972,603 $ 13,721,212 $ 8,174,812
Installation
services,
licensing fees
and other
revenues 43,980 20,454 116,876 161,214
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5,304,222 2,993,057 13,838,088 8,336,026
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COST OF GOODS SOLD
Monitoring, support
and recovery 1,526,088 787,910 3,890,490 2,043,010
Technical support
and product
maintenance 283,737 230,726 809,228 706,490
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1,809,825 1,018,636 4,699,718 2,749,500
-------------------------------------------------------------------------
GROSS MARGIN 3,494,397 1,974,421 9,138,370 5,586,526
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EXPENSES
Sales and
marketing 2,570,744 1,810,701 7,062,954 4,787,212
Research and
development 831,300 608,061 2,405,527 1,493,069
General and
administration 1,131,267 693,927 3,596,515 2,273,419
Stock-based
compensation 256,858 115,216 610,978 307,628
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4,790,169 3,227,905 13,675,974 8,861,328
-------------------------------------------------------------------------
OPERATING LOSS (1,295,772) (1,253,484) (4,537,604) (3,274,802)
-------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest and other
income 272,291 85,373 690,524 262,329
Interest and bank
charges (12,976) (9,427) (43,724) (23,268)
Foreign exchange
gain (loss) (137,930) (20,529) 291,003 (81,225)
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121,385 55,417 937,803 157,836
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LOSS FOR PERIOD
BEFORE INCOME
TAXES (1,174,387) (1,198,067) (3,599,801) (3,116,966)
FUTURE INCOME TAX
RECOVERY - 179,710 80,693 467,544
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NET LOSS FOR
THE PERIOD (1,174,387) (1,018,357) (3,519,108) (2,649,422)
DEFICIT, BEGINNING
OF PERIOD (44,838,937) (40,650,337) (42,949,670) (39,022,766)
INTEREST AND
EXCHANGE ON LOANS
TO DIRECTORS AND
EMPLOYEES 4,537 5,071 22,213 8,565
WRITE-UP OF LOANS
TO DIRECTORS AND
EMPLOYEES - - 437,778 -
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DEFICIT, END OF
PERIOD $(46,008,787) $(41,663,623) $(46,008,787) $(41,663,623)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BASIC AND
DILUTED LOSS
PER SHARE $ (0.05) $ (0.05) $ (0.16) $ (0.12)
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-------------------------------------------------------------------------
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING 22,557,623 21,641,810 22,341,738 21,310,590
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ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
Three and nine months ended March 31, 2007 and 2006
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
Three Months Nine Months
2007 2006 2007 2006
------------ ------------ ------------ -------------
OPERATING
ACTIVITIES
Net loss for the
period $ (1,174,387) $ (1,018,357) $ (3,519,108) $ (2,649,422)
Items not
involving
cash
Amortization of
property and
equipment 125,717 76,631 331,069 252,103
Stock-based
compensation 256,858 115,216 610,978 307,628
Amortization of
intangible
asset 31,944 31,944 95,831 95,831
Future income
taxes - (179,710) (80,693) (467,544)
Change in non-cash
operating working
capital
Accounts
receivable (1,069,481) (116,828) (1,786,764) 418,285
Prepaid expenses
and deposits (13,758) (115,663) (92,054) (174,892)
Deferred contract
costs (742,674) (557,042) (2,651,156) (1,547,132)
Accounts payable
and accrued
liabilities 54,365 453,549 (598,133) 41,805
Accrued warranty 692,731 444,184 2,803,999 983,324
Deferred
revenue 5,302,514 1,686,640 17,321,099 5,680,279
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CASH FROM OPERATING
ACTIVITIES 3,463,829 820,564 12,435,068 2,940,265
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and
equipment
purchased (282,047) (50,645) (820,068) (142,174)
Short-term
investments
(acquisition)
disposal, net (1,737,558) 2,732,328 (11,311,126) (8,729,681)
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CASH (USED IN) FROM
INVESTING
ACTIVITIES (2,019,605) 2,681,683 (12,131,194) (8,871,855)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Loans to directors
and employees
collected 605,752 - 605,752 -
Common shares issued
on share purchase
plan and exercises
of options and
warrants 697,051 145,966 1,115,792 688,587
-------------------------------------------------------------------------
CASH FROM FINANCING
ACTIVITIES 1,302,803 145,966 1,721,544 688,587
-------------------------------------------------------------------------
NET CASH INFLOW
(OUTFLOW) 2,747,027 3,648,213 2,025,418 (5,243,003)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 3,260,072 2,887,196 3,981,681 11,778,412
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CASH AND CASH
EQUIVALENTS, END
OF PERIOD $ 6,007,099 $ 6,535,409 $ 6,007,099 $ 6,535,409
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%SEDAR: 00013849E
