- Increases subscriber target to 6 million, up from 4 million, by
June 30, 2009
- Increases fiscal 2008 Cash Margin guidance to 35-40%, up from 30-35%
VANCOUVER, Feb. 7 /CNW/ - Absolute(R) 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-and six-month periods ended December 31, 2007. All dollar amounts are in Canadian dollars unless otherwise stated.
Key Financial Metrics Q2- Q2- % YTD YTD %
F2008 F2007 change F2008 F2007 change
-------------------------------------------------------------------------
Sales Contracts
reported(x) $15.0M $9.3M +61% $36.0M $20.4M +76%
-------------------------------------------------------------------------
Sales Contracts in
constant currency(xx) $17.4M $9.3M +86% $39.9M $20.4M +95%
-------------------------------------------------------------------------
Cash from Operations(x) $9.1M $4.3M +111% $18.0M $9.0M +101%
-------------------------------------------------------------------------
Operating Cash per
Share(x) (xxx) $0.19 $0.10 +90% $0.39 $0.20 +90%
-------------------------------------------------------------------------
Revenue $8.9M $4.6M +94% $16.5M $8.5M +94%
-------------------------------------------------------------------------
Net Profit (Loss) $(1.9M) $(1.0M) +84% $(4.7M) $(2.3M) +102%
-------------------------------------------------------------------------
Loss per Share(xxx) $(0.04) $(0.02) +100% $(0.10) $(0.05) +100%
-------------------------------------------------------------------------
Deferred Revenue $73.7M $39.0M 89%
-------------------------------------------------------------------------
(x) Absolute refers to "Sales Contracts" (invoiced sales added to
deferred revenue) as a revenue measure, "Cash from Operations" as a
profitability measure, and "Operating Cash per Share (Basic)" (Cash from
Operations divided by the average shares outstanding for the period) as
an earnings per share measure. With the exception of Cash from
Operations, these are non-standard measures under Generally Accepted
Accounting Principals ("GAAP"). Absolute considers these measures to be
key performance metrics as substantially all sales in each period are
deferred on the balance sheet, while the related costs are expensed in
the period. Refer to the Business Model section in our Management
Discussion and Analysis for more details.
(xx) Sales Contracts in constant currency refers to the Canadian dollar
sales that would have been reported had the U.S. dollar exchange rate
been unchanged from the rate in the prior year periods. With
approximately 95% of Sales Contracts in U.S. dollars management believes
this to be a more meaningful evaluation of the underlying performance of
the business. The average U.S. dollar exchange rate on Absolute's sales
fell from $1.1204 in Q1-F2007 and $1.1428 in Q2-F2007, to $1.0409 in
Q1-F2008 and $0.9875 in Q2-F2008.
(xxx) On December 14, 2007, shareholders approved a two-for-one share
split for its common shares effective as of the close of business on
January 4, 2008. All share and per share information included in this
MD&A has been adjusted to reflect this share split for all periods
presented.
Q2-F2008 Highlights:
- Sales Contracts increased 61% (86% in U.S. dollars) to $15.0 million
for the quarter, and 76% (95% in U.S. dollars) to $36.0 million for
the year-to-date ("YTD") period
- Cash from operations grew 111% to $9.1 million in Q2-F2008, and 101%
to $18.0 million for the YTD period
- Operating loss excluding stock-based compensation declined 58% to
$635,000 for Q2-F2008 and declined 35% to $1.9 million for the YTD
period
- Announced Computrace(R) Professional bundle with HP's Care Pack
Services Program
- Expanded BIOS footprint with Computrace embedded support in Lenovo's
ThinkCentre(R) line of business desktops, and announced embedded BIOS
support in General Dynamics' Itronix' GoBook(R) XR-1 military-grade
laptops
- Launched retail initiative with Best Buy Canada to offer Computrace
LoJack(R) for Laptops(TM) both in-store and through Best Buy's Geek
Squad at-home service division
- Expanded partner ecosystem by attaining Gold Certified Partner status
in the Microsoft Partner Program
- Announced our 5,000th computer recovery and are now recovering an
average of 60-70 per week
"Our financial performance in the quarter reflected another period of substantial growth, with overall quarterly and year-to-date exchange adjusted results in-line with our expectations," said John Livingston, Chairman and CEO of Absolute. "We continue to see strength in all of our vertical markets, and are also seeing an increasing number of collaborative opportunities with industry leaders. In particular, we have seen an increase in partner demand for consumer and commercial bundle programs such as the ones we currently have with Dell and HP. From a technology perspective, we are making good progress on our wireless broadband initiatives to both enhance our current product offerings and enable our solutions for handheld devices. We are expecting to have product announcements in this area during calendar 2008. Based on our current results and outlook, I am pleased to announce an increase to our June 30, 2009 subscriber base target to six million subscribers, up from our previous target of four million."
Financial Review
Sales Contracts were $36.0 million YTD, up 76% from $20.4 million in the same period last year. Sales Contracts for Q2-F2008 were $15.0 million, up 61% from $9.3 million in Q2-F2007. The increase over the prior year was driven by growth in the consumer, corporate, government and education verticals. Absolute has now achieved year-over-year Sales Contract growth of more than 50% in thirteen consecutive quarters.
A majority of Absolute's sales are denominated in U.S. dollars and therefore the decline in the U.S. dollar relative to the Canadian dollar has impacted Sales Contract growth rates. In U.S. dollar terms, Q2-F2008 Sales Contracts increased 86% to US$15.2 million from US$8.1 million in Q2-F2007. On a F2008 YTD basis, in U.S. dollar terms, Sales Contracts were up 95% to $35.3 million. Had the U.S. dollar exchange rate been unchanged from the rates experienced in the prior year periods, the reported Canadian dollar sales would have been $39.9 million YTD and $17.4 million for Q2-F2008.
At December 31, 2007 Absolute's subscriber base was approximately 2.5 million, up 169% from 940,000 at December 31, 2006. Year-to-date, Absolute has sold 1.1 million new and renewal subscriptions, with an average term of 31 months and an average selling price of $33.41, compared to 354,000, 32 months and $57.71, respectively, in the same period last year. The average price decreased from F2007 to F2008 due to volume pricing for certain consumer bundle programs, an increased proportion of sales coming from Absolute's lower priced asset tracking solutions, and a 15% year-on-year reduction in the U.S.-Canadian dollar exchange rate.
Driven by strong Sales Contract growth in the first two quarters of F2008, cash from operations for the YTD period increased 101% to $18.0 million, compared to $9.0 million in the same period last year. Cash from operations for Q2-F2008 totaled $9.1 million, up 111% from $4.3 million in Q2-F2007. Absolute's "CashMargin" (a non-GAAP measure equal to Cash from Operations divided by Sales Contracts) was 50% in the first half of F2008, up from 44% in the same period in fiscal 2007, reflecting the Sales Contract growth and increasing leverage in the business.
"We are pleased with our Sales Contract and cash generation performance so far in fiscal 2008," said Rob Chase, CFO at Absolute. "With Cash Margins at 50% year-to-date, we are now increasing our fiscal 2008 guidance to 35-40% from 30-35% previously. This reflects our planned operating expense increases for the second half of this fiscal year in support of our fiscal 2009 growth strategies."
Revenue was $16.5 million YTD, up 94% from the same period last year. Revenue in Q2-F2008 increased 94% to $8.9 million from $4.6 million in Q2-F2007. Revenue is considered a lagging indicator for business operations as it is a function of deferred revenue as opposed to sales in the quarter. Substantially all of the revenue from Q2-F2008 Sales Contracts is included in deferred revenue on the balance sheet at December 31, 2007, which climbed to $73.7 million, compared to $54.2 million at June 30, 2007.
Total operating expenses excluding stock-based compensation were $18.4 million YTD, or 51% of Sales Contracts, compared to $11.4 million, or 56% of Sales Contracts in the same period last year. For Q2-F2008, total operating expenses excluding stock-based compensation were $9.5 million, or 63% of Sales Contracts, compared to $6.1 million, or 65% of Sales Contracts in Q2-F2007. Management considers a majority of total operating expenses to relate to current period Sales Contracts rather than recognized revenue. Accordingly, management focuses on total expenses as a percentage of Sales Contracts to measure the efficiency and effectiveness of the business, and expects this percentage to remain lower in F2008 than in F2007.
Absolute reported an operating loss of $3.8 million ($1.9 million, excluding stock-based compensation) for the YTD period, compared to $3.2 million ($2.9 million, excluding stock-based compensation) for the same period in the prior year. The decrease in the operating loss excluding stock-based compensation is due to higher revenue levels driven by the strong growth in sales contracts during the past three years.
For the year-to-date period, Absolute's net loss increased to $4.7 million, or ($0.10) per share, compared to $2.3 million, or ($0.05) per share, in the same period last year. Net loss for Q2-F2008 was $1.9 million, or ($0.04) per share, compared to $1.0 million, or ($0.02) per share, in Q2-F2007. The increased losses in the year-over-year periods are due to foreign exchange losses from the devalued U.S. dollar and increased stock-based compensation expense. Excluding these items, the net loss has declined significantly from the prior year. In addition, while the devaluation of the U.S. dollar has impacted the rate of Sales Contract growth, it has not had a negative impact on Absolute's Cash Margin.
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 December 31, 2007, Absolute's cash, cash equivalents and short-term investments was $52.9 million, compared to $34.9 million at June 30, 2007.
The management discussion and analysis (MD&A), consolidated financial statements and notes there to 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 Thursday, February 7, 2008 at 7:00 a.m. PT (10:00am ET). The dial-in numbers for participants are 416-644-3420 or 1-800-731-6941. Please dial-in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Thursday, February 14, 2008 at midnight. To access the archived conference call, please dial 416-640-1917 or 1-877-289-8525 and enter the reservation code 21259750 followed by the number sign.
A live audio webcast will be available at www.absolute.com and www.newswire.ca. The webcast will be archived for 360 days.
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, 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, the attainment of certain subscriber thresholds, the adoption by PC OEMs of certain technological standards that may be complementary to our success, the ability of the Company to successfully execute on its growth strategies including international expansion, the demand for our products continuing to increase, 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)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. 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
December 31, June 30,
2007 2007
------------- -------------
ASSETS
CURRENT
Cash and cash equivalents $ 26,896,665 $ 7,779,505
Short-term investments 25,998,946 27,116,968
Accounts receivable 12,021,668 11,656,260
Prepaid expenses and deposits 372,340 785,737
Current portion of deferred
contract costs 6,447,556 5,253,390
Current portion of future
income tax assets 1,477,516 1,477,516
-------------------------------------------------------------------------
73,214,691 54,069,376
DEFERRED CONTRACT COSTS 6,673,473 5,935,111
PROPERTY AND EQUIPMENT 1,763,577 1,204,017
FUTURE INCOME TAX ASSETS 1,377,145 1,377,145
INTANGIBLE ASSET 319,436 383,324
-------------------------------------------------------------------------
$ 83,348,322 $ 62,968,973
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 2,421,922 $ 2,171,844
Current portion of accrued warranty 6,541,083 4,586,738
Current portion of deferred revenue 34,351,813 25,483,198
-------------------------------------------------------------------------
43,314,818 32,241,780
ACCRUED WARRANTY 3,766,113 3,418,312
DEFERRED REVENUE 39,344,652 28,760,618
-------------------------------------------------------------------------
86,425,583 64,420,710
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital and other equity 40,739,724 39,094,936
Contributed surplus 9,285,500 7,814,428
Deficit (53,102,485) (48,361,101)
-------------------------------------------------------------------------
(3,077,261) (1,451,737)
-------------------------------------------------------------------------
$ 83,348,322 $ 62,968,973
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Operations and Deficit (Unaudited)
Three and six months ended December 31, 2007 and 2006
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
Three Months ended Dec. 31, Six Months ended Dec. 31,
2007 2006 2007 2006
------------- ------------- ------------- -------------
REVENUE $ 8,866,149 $ 4,558,652 $ 16,518,155 $ 8,533,866
COST OF GOODS SOLD 2,981,969 1,535,624 5,734,233 2,889,893
-------------------------------------------------------------------------
GROSS MARGIN 5,884,180 3,023,028 10,783,922 5,643,973
-------------------------------------------------------------------------
EXPENSES
Sales and
marketing 4,010,106 2,374,990 7,704,213 4,649,305
Research and
development 962,951 812,570 1,847,044 1,417,132
General and
administration 1,546,295 1,344,280 3,119,567 2,465,248
Stock-based
compensation 1,087,194 183,791 1,926,547 354,120
-------------------------------------------------------------------------
7,606,546 4,715,631 14,597,371 8,885,805
-------------------------------------------------------------------------
OPERATING LOSS (1,722,366) (1,692,603) (3,813,449) (3,241,832)
-------------------------------------------------------------------------
OTHER INCOME
(EXPENSE)
Interest and
other income 510,219 255,385 871,233 418,233
Interest and
bank charges (25,731) (20,440) (48,462) (30,748)
Foreign exchange
gain (loss) (648,401) 435,251 (1,434,506) 428,933
Write-down of
short-term
investments - - (316,200) -
-------------------------------------------------------------------------
(163,913) 670,196 (927,935) 816,418
-------------------------------------------------------------------------
LOSS FOR PERIOD
BEFORE INCOME
TAXES (1,886,279) (1,022,407) (4,741,384) (2,425,414)
FUTURE INCOME
TAX RECOVERY - - - 80,693
-------------------------------------------------------------------------
NET LOSS FOR
THE PERIOD (1,886,279) (1,022,407) (4,741,384) (2,344,721)
DEFICIT,
BEGINNING OF
PERIOD (51,216,206) (43,816,530) (48,361,101) (42,494,216)
-------------------------------------------------------------------------
DEFICIT, END
OF PERIOD $(53,102,485) $(44,838,937) $(53,102,485) $(44,838,937)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BASIC AND
DILUTED LOSS
PER SHARE $ (0.04) $ (0.02) $ (0.10) $ (0.05)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING 47,067,720 44,659,102 46,829,564 44,472,284
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ABSOLUTE SOFTWARE CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
Three and six months ended December 31, 2007 and 2006
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
Three Months ended Dec. 31, Six Months ended Dec. 31,
2007 2006 2007 2006
------------- ------------- ------------- -------------
OPERATING
ACTIVITIES
Net loss for
the period $ (1,886,279) $ (1,022,407) $ (4,741,384) $ (2,344,721)
Items not
involving cash
Amortization
of property
and equipment 188,383 109,665 346,132 205,352
Stock-based
compensation 1,087,194 183,791 1,926,547 354,120
Amortization
of intangible
asset 31,944 31,944 63,888 63,887
Future income
taxes - - - (80,693)
Write-down of
short term
investments - - 316,200 -
Change in
non-cash
operating
working capital
Accounts
receivable 2,774,057 51,570 (365,408) (717,283)
Prepaid
expenses and
deposits 32,809 (77,959) 413,397 (78,296)
Deferred
contract costs (228,457) (581,308) (1,932,527) (1,908,482)
Accounts payable
and accrued
liabilities 62,016 20,339 250,078 (652,498)
Accrued warranty 837,828 773,380 2,302,145 2,111,268
Deferred revenue 6,207,385 4,831,512 19,452,648 12,018,585
-------------------------------------------------------------------------
CASH FROM OPERATING
ACTIVITIES 9,106,880 4,320,527 18,031,716 8,971,239
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and
equipment
purchased (466,291) (356,483) (905,691) (538,021)
Proceeds from
maturities of
short term
investments 8,006,180 7,904,731 16,149,106 17,055,731
Purchases of
short term
investments (2,593,525) (17,593,114) (15,347,284) (26,629,299)
-------------------------------------------------------------------------
CASH (USED IN)
FROM INVESTING
ACTIVITIES 4,946,364 (10,044,866) (103,869) (10,111,589)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of
common shares 249,994 83,548 1,189,313 418,741
-------------------------------------------------------------------------
CASH FROM FINANCING
ACTIVITIES 249,994 83,548 1,189,313 418,741
-------------------------------------------------------------------------
NET CASH INFLOW
(OUTFLOW) 14,303,238 (5,640,791) 19,117,160 (721,609)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 12,593,427 8,900,863 7,779,505 3,981,681
-------------------------------------------------------------------------
CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 26,896,665 $ 3,260,072 $ 26,896,665 $ 3,260,072
-------------------------------------------------------------------------
-------------------------------------------------------------------------
%SEDAR: 00013849E
