(TSX: ABT), the self-healing endpoint security company, today announced
its financial results for the three and six months ended December 31,
2016. All dollar figures are unaudited and stated in U.S. dollars,
unless otherwise indicated.
(1) As a result of the divestiture of the Absolute Manage and
Absolute Service business unit on October 5, 2015, the Data and Device
Security operating segment solely comprises Absolute's ongoing
operations. This measure is specifically related to our DDS operating
segment.(2) Please refer to "Non-IFRS Measures and
Definitions".(3) Adjusted EBITDA in the year to date
period of F2016 included a $1.0 million contribution from the Absolute
Manage and Absolute Service business unit. This business unit was
disposed in Q2-F2016.
Q2-F2017 and YTD OverviewKey Financial Metrics
Technology and Products
Operations and Corporate
"During Q2, we continued on our trajectory of accelerating ACV and
revenue growth, driven by both new customer acquisitions and existing
customer expansions, with increasingly strong growth coming from the
targeted enterprise and healthcare verticals," said Geoff Haydon, Chief
Executive Officer, Absolute. "The new DDS features and capabilities that
we have introduced over the past nine months, combined with an
increasingly strong go-to-market capability, are translating into
measureable top line results."
"Our R&D investment plan remains on track, with our new Vietnam facility
now open and hiring in both Vancouver and Vietnam beginning to
accelerate," continued Mr. Haydon. "We are very excited to be in a
position to execute on our product roadmap and vision, which leverages
our unique persistence technology and distinguishes Absolute as the
leader in the self-healing endpoint security market."
Q2-F2017 and Year-to-Date Financial Review
Absolute DDS segment revenue in Q2-F2017 was $22.5 million compared to
$21.0 million in Q2-F2016, representing a 7% year-over-year increase.
For the F2017 year-to-date period, DDS segment revenue was $44.9
million, representing a 6% increase over DDS segment revenues of $42.2
million in the prior year period. DDS segment revenue from recurring
licenses was 99% in Q2-F2017 in line with Q2-F2016, and was 99% in the
year-to-date period of F2017 compared to 98% in the prior year period.
Total revenue in Q2-F2017 was $22.5 million, representing a 6% increase
from total revenue of $21.1 million in Q2-F2016. For the year-to-date
period of F2017, total revenue was $44.9 million, which was in-line with
$45.1 million in the prior year period. The year-over-year comparison
was impacted by the divestiture of the Company's Endpoint and Service
Management segment on October 5, 2015.
Annual Contract Value(1)
The Q2-F2017 closing DDS Commercial ACV Base of $86.2 million increased
8% over the prior year and increased 2% over the Q1-F2017 closing
From a market vertical perspective, the enterprise and healthcare DDS
Commercial ACV Base increased by 12% year-over-year and increased by 4%
over the Q1-F2017 closing balance. The education and government DDS ACV
Base increased by 5% year-over-year and increased by 1% over the
Q1-F2017 balance. At December 31, 2016, enterprise and healthcare
customers represented 48% of the DDS Commercial ACV Base and education
and government customers represented 52%.
For North America, the DDS Commercial ACV Base increased 8%
year-over-year and increased 3% over the Q1-F2017 closing balance.
Internationally, the DDS ACV Base increased 9% year-over-year and
decreased by 3% compared to the Q1-F2017 closing balance. At December
31, 2016, North American customers accounted for 90% of the Company's
DDS Commercial ACV Base and international customers accounted for 10% of
Net ACV Retention(1) from existing DDS commercial customers
was 100% in Q2-F2017 and was 101% in the trailing four quarter period,
compared to 100% and 100%, respectively, in the prior year periods.
Incremental ACV from New DDS Customers(1) was $2.1 million in
Q2-F2017 compared to $0.9 million in Q2-F2016. For the year-to-date
period of F2017, incremental ACV from new DDS customers was $3.1 million
compared to $1.6 million in the prior year-to-date period. Enterprise
and healthcare customers represented 80% of ACV from New DDS Customers
in Q2-F2017 and 76% for the year-to-date period
Adjusted Operating Expenses(3)
Adjusted Operating Expenses for Q2-F2017 were $20.7 million,
which represented an increase of 8% over $19.1 million in Q2-F2016. For
the year-to-date period of F2017, Adjusted Operating Expenses were $41.3
million, an increase of 6% over $38.8 million in the prior year period.
The year-over-year increase primarily reflected increased investment in
research and development headcount and contractor costs, in line with
the Company's F2017 investment plans. These increases were partially
offset by lower marketing program expenditures in the quarter.
Adjusted EBITDA(2) and Net Income
Absolute generated Adjusted EBITDA of $1.7 million, or 8% of
revenue, in Q2-F2017 compared to $2.0 million, or 9% of revenue, in
Q2-F2016. For the year-to-date period of F2017, Adjusted EBITDA was $3.6
million, or 8% of revenue, compared to $6.3 million, or 15% of revenue,
in the prior year period. Adjusted EBITDA during F2017 was impacted by
the increased investment in research and development, as well as the
fact that Q1-F2016 included a $1.0 million Adjusted EBITDA contribution
from the Absolute Manage and Absolute Service business unit.
The Company recorded a net loss of $1.8 million, or ($0.05) per basic
share, in Q2-F2017, compared to net income of $8.7 million, or $0.22 per
basic share, in Q2-F2016. For the year-to-date period of F2017, the
Company recorded a net loss of $2.6 million compared to net income of
$9.8 million in the prior year period. The F2016 results included the
impact of a pre-tax gain of $14.1 million on the sale of the Endpoint
and Service Management segment.
Billings(4) and Cash
from Operating Activities
Absolute DDS and Consumer Billings were $21.0 million in Q2-F2017,
representing an 11% increase compared to $19.0 million in Q2-F2016. For
the year-to-date period of F2017, DDS and Consumer Billings were $40.7
million, representing an increase of 6% over $38.5 million in the prior
year period. The year-over-year change in Billings was influenced by a
lower expiring contract opportunity in the first quarter, which was
partially offset by a slightly higher expiring contract opportunity in
the second quarter, as compared to the prior year periods.
The average prepaid contract term in Q2-F2017 was 33 months, which was
lower than the Company's historical average of 36 months and was
impacted by a significant one-year renewable enterprise license
agreement with a large healthcare organization.
Cash used in operating activities during Q2-F2017 was $1.2 million and,
for the year-to-date period of F2017, cash generated from operating
activities was $0.7 million, compared to cash generated from operating
activities of $1.4 million and $6.3 million for the comparable prior
year periods. In Q2-F2017, cash used in operating activities is net of
$0.8 million of reorganization payments, and in the year to date period
of F2017, cash from operating activities is net of $3.2 million of
income tax payments and $1.6 million in reorganization payments. In
Q2-F2016, cash from operating activities was net of $1.3 million of
transaction fees, and in the year to date period of F2016, cash from
operating activities was net of $2.1 million of income tax payments,
$0.7 million in reorganization payments and $1.3 million of transaction
F2017 Corporate Outlook
The Company's outlook for F2017 is unchanged.
The Company expects total F2017 revenue between $92.0 million and $94.6
million, representing 7% to 10% annual DDS segment revenue growth.
Revenue is expected to grow at an accelerating rate through the year,
driven by new customer acquisition, existing customer expansion and
continuing sales productivity improvements.
The Company expects Adjusted EBITDA margins ranging from 5% to 8%,
reflecting relatively stable spending across most departments and
increased investment in research and development.
Investment in research and development will accelerate product
innovation, as well as the migration of all product offerings to
Absolute's next-generation service platform. These investments will
facilitate greater scalability and operating efficiency, support the
rapid deployment of new services across Absolute's customer base and
liberate resources currently required to support two platforms.
Cash from Operations
The Company expects cash from operations, prior to payments for income
taxes and reorganization charges, as a percentage of revenue to be
between 8% and 12%, reflecting a double-digit year-over-year increase in
Capital expenditures are expected to be between $3.9 million and $4.4
million, with the spending largely related to upgrades and expansion of
the Company's hosted data centres, office expansion and ongoing hardware
Quarterly DividendOn January 20, 2017, Absolute declared a
quarterly dividend of CAD$0.08 per share on the Company's common shares.
The dividend is payable in cash on February 24, 2017 to shareholders of
record at the close of business on February 3, 2017.
Quarterly FilingsManagement's discussion and analysis
("MD&A") and consolidated financial statements and the notes thereto for
the fiscal quarter ended December 31, 2016 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 CallAbsolute will hold a conference
call to discuss the Company's Q2-F2017 results on Monday, February 6,
2017 at 5:00 p.m. ET. All interested parties can join the call by
dialing 647-427-7450, or 1-888-231-8191. Please dial-in 15 minutes prior
to the call to secure a line. The conference call will be archived for
replay until Monday, February 13, 2017 at midnight ET. To access the
archived conference call, please dial 416-849-0833 or 1-855-859-2056 and
enter the reservation code 51718060.
A live audio webcast of the conference call will be available at www.absolute.com
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 on
the Company's website for 90 days.
Non-IFRS Measures and DefinitionsThroughout this press
release, the Company refers to a number of measures which the Company
believes 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
December 31, 2016 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:
1) Commercial ACV Base, Net ACV Retention, and ACV from New CustomersAs
the majority of the Company's customer contracts are sold under
multi-year term licenses, there is a significant lag between the timing
of the Billing and the associated revenue recognition. As a result, the
Company focuses on the aggregate annualized value of its subscriptions
under contract, measured by Annual Contract Value ("ACV"), as an
indicator of its future revenues.
Commercial ACV Base measures the amount of recurring annual revenue
Absolute will receive from its commercial customers under contract at a
point in time, and therefore is an indicator of the Company's future
revenue streams. Net ACV Retention measures the percentage increase or
decrease in the Commercial ACV Base at the end of a period for the
customers that comprised the Commercial ACV Base at the beginning of the
same period. This metric provides insight into the effectiveness of
Absolute's customer retention and expansion functions. ACV from New
Customers measures the addition to the Commercial ACV base from sales to
new commercial DDS customers during the quarter.
We believe that increases in the amount of ACV from New Customers, and
improvement in the Company's Net ACV Retention, will grow our Commercial
ACV Base and, in turn, our future revenues.
2) Adjusted EBITDAManagement believes that analyzing
operating results exclusive of significant non-cash items or items not
controllable in the period provides a useful measure of the Company's
performance. The term Adjusted EBITDA refers to earnings before
deducting interest and investment gains (losses), income taxes,
amortization of acquired intangible assets and property and equipment,
foreign exchange gain or loss, share-based compensation, and
restructuring and reorganization charges and post-retirement benefits.
The items excluded in the determination of Adjusted EBITDA are
share-based compensation, amortization of acquired intangibles,
amortization of property and equipment, and restructuring and
reorganization charges and certain post-retirement benefits.
3) Adjusted Operating ExpensesA number of significant
non-cash or non-recurring expenses are reported in the Company's Cost of
Revenue and Operating Expenses. Management believes that analyzing these
expenses exclusive of these non-cash or non-recurring items provides a
useful measure of the cash invested in the operations of its
business. The items excluded in the determination of Adjusted Operating
Expenses are share-based compensation, amortization of acquired
intangible assets, amortization of property and equipment, and
restructuring and reorganization charges and certain post-retirement
benefits. For a description of the reasons these items are adjusted,
please refer to the "Non-IFRS Measures" section of the December 31, 2016
4) BillingsSee the "Non-IFRS Measures" section of the
December 31, 2016 MD&A for a detailed discussion of why the Company
believes Cash from Operating Activities is a meaningful performance
metric, and the material impact that Billings has on this measure.
Billings are included in deferred revenue (see Note 7 of the Notes to
the Condensed Consolidated Financial Statements), and result from
invoiced sales of the Company's products and services.
Absolute takes a new approach to cybersecurity with the first
self-healing endpoint security solution that delivers uncompromised
visibility and offers real-time remediation of breaches at the source.
Absolute's cloud-based platform puts IT and security professionals in
total command of devices, data and applications -- whether on or off the
network -- to enhance IT asset management, protect sensitive data,
reduce insider threats, and ensure compliance. Absolute's patented
Persistence technology is embedded in the firmware of more than one
billion PC and mobile devices from global manufacturers including Acer,
ASUS, Dell, Fujitsu, HP, Lenovo, Microsoft, Panasonic, Samsung, and
Toshiba. Absolute is headquartered in Vancouver, Canada, and has offices
around the world. For more information, visit www.absolute.com.
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 the Company's
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 the Company'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 readers of the press release should
understand that Absolute cannot assure them 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 and financial
outlook, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws.
©2017 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.
ABSOLUTE SOFTWARE CORPORATIONCondensed Consolidated
Statements of Financial Position(Expressed in United States
ABSOLUTE SOFTWARE CORPORATIONCondensed Consolidated
Statements of Operations and Comprehensive IncomeThree and
six months ended December 31, 2016 and 2015(Expressed in
United States dollars) (Unaudited)
Three months endedDecember 31,
COMPREHENSIVE (LOSS) INCOME
WEIGHTED AVERAGE NUMBER OF COMMONSHARES
ABSOLUTE SOFTWARE CORPORATIONCondensed Consolidated
Statement of Changes in Shareholders' Deficiency(Expressed
in United States dollars) (Unaudited)
Shares issued under Employee SharePurchase Plan
Shares issued under Performance ShareUnit Plan
Shares repurchased and cancelledunder the Normal Course
Shares repurchased and cancelledunder the Substantial Issuer
Net income and total comprehensiveincome
Shares issued under Phantom ShareUnit plan
Shares issued under Phantom ShareUnit Plan
Shares committed to be repurchasedunder the Normal Course
Treasury shares repurchased under theNormal Course Issuer Bid
ABSOLUTE SOFTWARE CORPORATIONCondensed Consolidated
Statements of Cash FlowsThree and six months ended December
31, 2016 and 2015(Expressed in United States dollars)
Amortization of intangible assets - contract costs andbrand
Non-cash interest and amortizationof investment premium
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