Company posts strong ARR growth in Enterprise
and Government, raises Revenue and Adjusted EBITDA guidance
Absolute Software Corporation (Nasdaq: ABST) (TSX: ABST), a
leader in self-healing Zero Trust solutions, today announced its
financial results for its first quarter fiscal 2022 ended September
30, 2021. All dollar figures are stated in U.S. dollars, unless
otherwise indicated.
“Since the acquisition of NetMotion, we have been able to make
significant progress on our product integration milestones, while
also delivering continued innovation to our customers and recording
some of our strongest growth numbers in several quarters,” said
Christy Wyatt, Absolute Software’s President and CEO. “In the
work-from-anywhere world we now live in, we’re seeing strong demand
for our products and services. There is meaningful opportunity
ahead for us as we bring our unique offerings to the high-growth
SASE and Zero Trust markets, as organizations navigate the
challenges of enabling and securing their entire workforce. We are
well-positioned to deliver the resiliency, connectivity, and
intelligence they need to succeed in this new environment.”
The company also announced today the launch of Absolute
Application-Persistence-as-Service (APaaS), empowering Independent
Software Vendors (ISVs) and system manufacturers to leverage
Absolute’s firmware-embedded, self-healing device connection to
strengthen the health and resiliency of their mission-critical
applications. Read the press release here.
First Quarter (“Q1”) Fiscal 2022 (“F2022”) Financial
Highlights
- Revenue in Q1 F2022 was $43.7 million, representing an increase
of 53% compared to Q1 of fiscal year 2021 (“Q1 F2021”). 76% of the
total increase from Q1 F2021 was attributed to NetMotion and 24%
was attributed to Absolute’s existing business.
- Adjusted Revenue(1) in Q1 F2022 was $49.0 million, representing
an increase of 72% compared to Q1 F2021 reported revenue, and an
increase of 15% compared to Q1 F2021 revenue on an as-if combined
basis without factoring in acquisition related adjustments(2).
- Net loss in Q1 F2022 was $7.6 million, compared to net income
of $2.6 million in Q1 F2021.
- Total ARR(4) at September 30, 2021 was $187.4 million,
representing an increase of 68% over the prior year reported ARR,
and increase of 17% compared to an as-if combined basis for Q1
F2021(3).
- The Enterprise & Government portions of Total ARR increased
by 92% over the prior year, and 17% compared to an as-if combined
basis for Q1 F2021(3). The Enterprise & Government portion
represented 77% of Total ARR at September 30, 2021.
- The Education sector portion of Total ARR increased by 19% year
over year, and 18% compared to an as-if combined basis for Q1
F2021(3). The Education sector portion represented 23% of Total ARR
at September 30, 2021.
- New Logo ARR(4)(5) was $4.7 million in Q1 F2022, compared to
$1.8 million in Q1 F2021. New Logo ARR increased by 98% compared to
an as-if combined basis for Q1 F2021.
- Net Dollar Retention(4)(6) was 109% in Q1 F2022, compared to
105% in Q1 F2021.
- Adjusted EBITDA(1) in Q1 F2022 was $12.8 million or 26% of
Adjusted Revenue(1), compared to $8.1 million or 29% of Adjusted
Revenue in Q1 F2021.
- Cash used in operating activities was $0.6 million in Q1 F2022
compared to cash from operating activities of $14.7 million in Q1
F2021. Decrease in cash is primarily due to $8.7 million of
acquisition and integration costs, and approximately $5 million
relating to shorter average contract terms compared to the prior
year.
- A quarterly dividend of CAD$0.08 per outstanding common share
was paid during Q1 F2022.
Notes:
(1)
Adjusted Revenue, Adjusted EBITDA, and Adjusted EBITDA as
percentage of Adjusted Revenue are non-IFRS measures. Refer to the
“Use of non-IFRS measures and key metrics” section of the Q1 F22
MD&A for further discussion of these measures.
(2)
Q1 F21 revenue on an as-if combined basis includes the combined
revenue of Absolute and NetMotion for Q1 F21. Revenue attributable
to Absolute is reported under IFRS and revenue attributable to
NetMotion is reported under US GAAP. The amount does not include US
GAAP to IFRS adjustments, which are deemed immaterial.
(3)
Q1 F2021 ARR on an as-if combined basis combines the historical ARR
of Absolute Software and NetMotion at September 30, 2020, as if the
acquisition of NetMotion occurred on July 1, 2020.
(4)
Total ARR, New Logo ARR and Net Dollar Retention are key metrics.
Refer to the “Use of non-IFRS measures and key metrics” section of
the Q1 F22 MD&A for further discussion of these measures.
(5)
Beginning in Q2 F2021, we changed the nomenclature of Total ARR
from sales to new customers during a period from “ARR from New
Customers” to “New Logo ARR”. There has been no change in the
methods by which these measures are calculated.
(6)
Beginning in Q2 F2021, we have changed the nomenclature of the
percentage increase or decrease in Total ARR from existing
customers for a given period from “Net ARR Retention” to “Net
Dollar Retention” and changed the measurement period from quarterly
to annual, as we believe the annual metric is more aligned with
business performance measures and industry norms.
Selected Quarterly Information
USD millions, except percentages, number of shares, and per
share amounts
Q1 F2022
Q1 F2021
Change
Revenue
Cloud and subscription services
$
41.4
$
26.4
57
%
Managed professional services
1.0
1.2
(17
%)
Recurring revenue(1)
$
42.4
$
27.6
54
%
Other(1)
1.3
0.9
44
%
Total revenue
$
43.7
$
28.5
53
%
Adjusted Revenue(2)
$
49.0
$
28.5
72
%
Total annual recurring revenue
(“ARR”)(3)
$
187.4
$
111.7
68
%
Net income (loss)
$
(7.6)
$
2.6
(392
%)
Per share – basic
(0.15)
0.06
Per share – diluted
(0.15)
0.06
As a percentage of revenue
(17
%)
9
%
Adjusted EBITDA(2)
$
12.8
$
8.1
58
%
As a percentage of Adjusted Revenue
26
%
29
%
Cash from operating activities
$
(0.6)
$
14.7
(104
%)
Dividends paid
$
3.2
$
2.6
23
%
Per share (CAD)
0.08
0.08
As at
September 30, 2021
June 30, 2021
Change
Cash, cash equivalents, and short-term
investments
$
55.9
$
140.5
(60
%)
Total assets
528.7
232.6
127
%
Deferred revenue(4)
179.1
160.2
12
%
Total non-current financial
liabilities(5)
275.1
9.0
2957
%
Common shares outstanding (millions)
49.8
49.6
Notes:
(1)
Recurring revenue represents revenue derived from cloud services,
term-based subscription licenses, maintenance services and
recurring managed professional services. Other revenue represents
revenue derived from perpetual software licenses, non-recurring
professional services and ancillary product lines, including
consumer products.
(2)
Adjusted Revenue, Adjusted EBITDA, and Adjusted EBITDA as a
percentage of Adjusted Revenue are non-IFRS measures. Refer to the
“Use of non-IFRS measures and key metrics” section of the Q1 F22
MD&A for further discussion of these measures.
(3)
Total ARR is a key metric. Refer to the “Use of non-IFRS measures
and key metrics” section of the Q1 F22 MD&A for further
discussion of this measure.
(4)
Deferred revenue includes current and non-current amounts.
(5)
Total non-current financial liabilities include non-current portion
of lease liabilities and long-term debt.
Q1 F2022 Business Highlights
Business and organizational developments:
- In July, we completed the acquisition of 100% of NetMotion
Software, a leading provider of connectivity and security
solutions.
- In August, Andre Mintz, a seasoned technology and cyber risk
management executive, joined Absolute's Board of Directors.
- In September, we announced strategic leadership changes to help
drive Absolute’s next phase of innovation and growth following our
acquisition of NetMotion – including the appointment of John
Herrema as Executive Vice President of Product and Strategy, and
the promotion of Joel Windels to Chief Marketing Officer.
Product and service highlights:
- In Q1 F2022, we extended the power of Absolute’s Application
Persistence™ capabilities to more mission-critical applications,
including BeyondTrust™, VMware® Horizon Client, McAfee® Drive
Encryption, and SmartDeploy® as well as updated versions of McAfee®
ePolicy Orchestrator and F5® BIG-IP® Edge Client®. This fiscal
year, to date, we have added more than a dozen new applications and
updates to our Application Persistence catalog, including
Microsoft® Endpoint Manager (Intune) and Defender for Endpoint,
Zscaler, and Palo Alto® Cortex™ XDR.
- In August, we announced key findings from our third annual
Absolute Endpoint Risk Report: Education Edition, which revealed
the significant management and security challenges faced by K-12
education IT teams with the rise in digital learning and the
widespread adoption of 1:1 device programs.
- In August, we introduced the Absolute DataExplorer™ tool,
enabling organizations to capture critical data points from their
endpoint environment and align Absolute’s expansive, on-demand
endpoint telemetry with their evolving business requirements.
- In September, we delivered enhanced geolocation capabilities,
enabling organizations to strengthen device and data protections in
today’s work and learn-from-anywhere environments, and balance the
need for increased security with end user privacy.
- In September, Absolute’s NetMotion® solution was named a Leader
in the Fall 2021 Grid® Report for Zero Trust Networking published
by G2, the world’s leading business solutions review website.
Partner and other highlights:
- In Q1 F2022, we added 18 new reseller partners to our global
partner program - reaching 1700 total active partners.
- In July, AT&T named NetMotion by Absolute as a key solution
helping to power FirstNet®, the only nationwide network built with
and for America’s first responders - enabling a seamless user
experience by providing resilient connectivity both inside and
outside coverage areas.
- In September, Lenovo named Absolute as a strategic security
partner in the launch of their global ‘Everything-as-a-Service’
strategy.
- In September, Cloud Distribution, a Nuvias Group Company, was
appointed as UK distributor for NetMotion by Absolute as part of a
strategic shift to a two-tier channel model – enabling us to
increase end user reach and recruit new cybersecurity
partners.
F2022 Financial Outlook
The Company’s updated financial outlook for its 2022 fiscal year
(July 1, 2021 – June 30, 2022) is as follows(1):
- Increased full-year F2022 adjusted revenue(2) to be in the
range of $204.5 million to $207.5 million; this equates to a
full-year F2022 adjusted revenue growth of approximately 12% to
13.5%(3).
- Increased full-year F2022 Adjusted EBITDA(2) margin, calculated
on adjusted revenue, to be in the range of 19% to 21%.
Notes:
(1)
The Company does not provide a reconciliation of forward-looking
non-IFRS financial measures to the most directly comparable IFRS
financial measure because it is unable to predict certain items
contained in the IFRS measures without unreasonable efforts.
(2)
Adjusted revenue and adjusted EBITDA are non-IFRS measures. Please
refer to “Use of non-IFRS measures and key metrics” section in this
earnings release or our most recent MD&A for further discussion
of these measures.
(3)
Adjusted revenue growth rate guidance for F2022 is based on an
as-if combined basis without factoring in acquisition related
adjustments and includes the combined revenue of Absolute and
NetMotion for F2021. Revenue attributable to Absolute is reported
under IFRS and revenue attributable to NetMotion is reported under
US GAAP. The amount does not include US GAAP to IFRS adjustments,
which are deemed immaterial.
The foregoing outlook and expectations constitute
forward-looking statements and financial outlook and are qualified
in their entirety by the “Forward-Looking Statements” cautionary
statement below. The purpose of this financial outlook is to
provide readers with disclosure regarding management’s current
reasonable expectations and plans for F2022. Readers are cautioned
that this financial outlook may not be appropriate for other
purposes.
Quarterly Dividend
On October 20, 2021, we declared a quarterly dividend of
CAD$0.08 per share on our common shares, payable in cash on
November 29, 2021 to shareholders of record at the close of
business on November 17, 2021.
Quarterly Filings and Related Quarterly Financial
Information
Management’s Discussion and Analysis (“MD&A”) and
Consolidated Financial Statements and the notes thereto for the
fiscal period ended September 30, 2021 can be obtained today from
Absolute’s corporate website at www.absolute.com. The documents
will also be available under Absolute’s SEDAR profile
at www.sedar.com and on EDGAR at www.sec.gov. Additionally, the
Company today will publish on the Investor Relations section of its
website (www.absolute.com/company/investors/) a Q1 F2022 Earnings
Presentation and a dashboard of Selected Operating and Financial
Metrics.
Conference Call
Absolute Software will host a conference call on Tuesday,
November 9, 2021 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time)
to discuss its results and business outlook. The call will be
accessible by dialing 1-844-763-8274 or 1-412-717-9224;
participants should ask to join the Absolute Software call. A live
audio webcast of the conference call will also be available via the
Absolute Investor Relations website.
The conference call will be archived for replay until Tuesday,
November 16, 2021. To access the archived conference call, please
dial 855-669-9658 or 1-877-344-7529 and enter the reservation code
10160913. To access the replay using an international dial-in
number, please use this link. An archived replay of the webcast
will be available for one year.
About Absolute Software
Absolute Software (NASDAQ: ABST) (TSX: ABST) accelerates
customers’ shift to work-from-anywhere through the industry’s first
self-healing Zero Trust platform, ensuring maximum security
and uncompromised productivity. Only Absolute is embedded in more
than half a billion devices, offering a permanent digital
connection that intelligently and dynamically applies visibility,
control and self-healing capabilities to endpoints, applications,
and network access to ensure their cyber resilience tailored for
distributed workforces. Trusted by nearly 16,000 customers, G2
recognized Absolute as a leader in Zero Trust Networking in the
Fall of 2021.
©2021 Absolute Software Corporation. All rights reserved.
ABSOLUTE, the ABSOLUTE logo, ABSOLUTE SOFTWARE, NETMOTION, and
ENDPOINT RESILIENCE are trademarks of Absolute Software Corporation
or its subsidiaries. Other names or logos mentioned herein may be
the trademarks of Absolute or their respective owners. The absence
of the symbols ™ and ® in proximity to each trademark, or at all,
herein is not a disclaimer of ownership of the related
trademark.
Use of non-IFRS measures and key metrics
Throughout this press release we refer to a number of measures
and metrics which we believe are meaningful in the assessment of
the Company’s performance. Many of these measures and metrics do
not have any standardized meaning under International Financial
Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board 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.
The purpose of these non-IFRS measures and key metrics is to
provide supplemental information that may prove useful to readers
who wish to consider the impact of certain non-cash or
non-recurring items on the Company’s operating performance, and
assist in comparison of our operating results over historical
periods. Supplementing IFRS disclosures with non-IFRS measures
outlined below provides management with an additional view of
operational performance by excluding expenses that are not directly
related to performance in any particular period. Management uses
both IFRS and non-IFRS measures when planning, monitoring and
evaluating the Company’s performance.
These measures and metrics are as follows.
Key Metrics
a) Total ARR, Net Dollar Retention, and New Logo ARR
As the majority of our customer contracts are sold under prepaid
multi-year term licenses, there is typically a significant lag
between the timing of the invoice and the associated revenue
recognition. As a result, we focus on the annualized recurring
value of all active contracts, measured by Annual Recurring Revenue
(“ARR”), as an indicator of our future recurring revenues. ARR
includes multi-year and short-term subscriptions for cloud-based
services, as well as, managed professional services and
professional services with terms greater than one year. Both
multi-year contracts and contracts with terms less than one year
are annualized by dividing the total committed contract value by
the number of months in the subscription term and then multiplying
by twelve. We believe that increases in the amount of New Logo ARR,
and improvement in our Net Dollar Retention, will accelerate the
growth of Total ARR and, in turn, our future revenues. We provide
these metrics as they are used to manage the business, however we
believe there is no similar measure under IFRS to which these
measures can be reconciled.
Total ARR is a key metric and measures the aggregate annualized
recurring revenues of all active contracts at the end of a
reporting period. This measure has historically been a good
indicator of our future revenue streams. Total ARR will change over
a period through the retention, attrition and expansion of existing
customers and the acquisition of new customers.
Net Dollar Retention (previously “Net ARR Retention”) is a key
metric and measures the percentage increase or decrease in Total
ARR at the end of a year for customers that comprised Total ARR at
the beginning of the year. We believe this metric provides useful
insight into the effectiveness of our activities to retain and
expand the ARR of our existing customers.
New Logo ARR (previously “ARR from New Customers”) is a key
metric and measures the addition to Total ARR from sales to new
customers during a period. We believe this metric provides useful
insight into the effectiveness of our efforts to secure revenue
from new customers.
Non-IFRS Measures
a) Adjusted Revenue
Adjusted Revenue is a non-IFRS measure that we defined as
revenue, excluding fair value adjustments relating to acquired
deferred revenue. In connection with the acquisition of NetMotion,
NetMotion’s deferred revenue was written down to its fair value at
the acquisition date. As a result, related revenue in the post
acquisition period does not reflect the full amount of revenue that
would otherwise be recognized. We believe excluding fair value
adjustments relating to deferred revenue provides a useful measure
of the Company’s performance as it allows for comparability across
future periods, where revenue recognized would reflect the
transaction price, without acquisition-related fair value
adjustments.
b) Adjusted Gross Margin and Gross Margin %
Adjusted Gross Margin is a non-IFRS measure that we defined as
gross margin, adjusted for depreciation and amortization,
share-based compensation expense, fair value adjustments relating
to acquired deferred revenue, and non-recurring items. Adjusted
Gross Margin % is defined as Adjusted Gross Margin, as a percentage
of Adjusted Revenue.
c) Adjusted Operating Expenses
Adjusted Operating Expenses is a non-IFRS measure that we
defined as sales and marketing expense, research and development
expense, and general and administrative expense, excluding
depreciation and amortization, share-based compensation expense,
fair value adjustments relating to acquired deferred commission
expense, restructuring or reorganization charges and
post-retirement benefits, and non-recurring items.
d) Adjusted Earnings before Interest, Taxes, Depreciation
and Amortization (“Adjusted EBITDA”)
Adjusted EBITDA is a non-IFRS measure that we defined as net
income before interest income or expense, income taxes,
depreciation and amortization, foreign exchange gains or losses,
share-based compensation expense, fair value adjustments relating
to acquired deferred revenue, fair value adjustments relating to
acquired deferred commission expense, restructuring or
reorganization charges and post-retirement benefits, and
non-recurring items.
We believe Adjusted EBITDA provides a useful measure of the
Company’s performance, as it helps illustrate underlying trends in
our business that could otherwise be masked by the effect of the
income or expenses that are not indicative of the core operating
performance of our business.
Adjusted EBITDA has limitations as an analytical tool, and it
should not be considered in isolation or as a substitute for
analysis of other IFRS financial measures. Some of the limitations
of Adjusted EBITDA are that it excludes recurring expenses for
interest payments, does not reflect the dilution that results from
share-based compensation, and does not reflect the cost to replace
amortized property and equipment and right-of-use assets. It may be
calculated differently by other companies in our industry, limiting
its usefulness as a comparative measure.
Reconciliation of non-IFRS measures from IFRS measures are
presented below.
Adjusted Revenue
(USD millions)
Q1 F2022
Q1 F2021
Revenue
$
43.7
$
28.5
Adjustments:
Fair value adjustments relating to
acquired deferred revenue
5.3
—
Adjusted Revenue
$
49.0
$
28.5
Adjusted Gross Margin
(USD millions)
Q1 F2022
Q1 F2021
Gross margin
$
35.2
$
25.1
Adjustments:
Depreciation and amortization(1)
2.8
0.1
Share-based compensation
0.6
0.3
Fair value adjustments relating to
acquired deferred revenue
5.3
—
Adjusted Gross Margin
$
43.9
$
25.5
Adjusted Gross Margin %
90
%
90
%
Adjusted Operating Expenses
(USD millions)
Q1 F2022
Q1 F2021
Total Operating Expense
$
40.1
$
20.9
Adjustments:
Depreciation and amortization(1)
(3.6)
(1.3)
Share-based compensation
(2.7)
(2.3)
Fair value adjustments relating to
acquired deferred commission
0.7
—
Non-recurring items(2)
(3.4)
—
Adjusted Operating Expense
$
31.1
$
17.3
(1)
Depreciation and amortization includes depreciation of property and
equipment, amortization of right-of-use assets, and amortization of
acquired intangible assets.
(2)
Non-recurring items in Q1 F2022 includes professional fees and
other costs relating to the acquisition of NetMotion, and
integration related costs.
Adjusted EBITDA
(USD millions)
Q1 F2022
Q1 F2021
Net income
$
(7.6)
$
2.6
Adjustments:
Depreciation and amortization(1)
6.4
1.4
Share-based compensation
3.3
2.6
Interest expense
5.1
0.1
Foreign exchange (gain) loss
—
0.1
Income tax (recovery) expense
(2.4)
1.3
Fair value adjustments relating to
acquired deferred revenue
5.3
—
Fair value adjustments relating to
acquired deferred commission
(0.7)
—
Non-recurring items(2)
3.4
—
Adjusted EBITDA
$
12.8
$
8.1
(1)
Depreciation and amortization includes depreciation of property and
equipment, amortization of right-of-use assets, and amortization of
acquired intangible assets.
(2)
Non-recurring items in Q1 F2022 includes professional fees and
other costs relating to the acquisition of NetMotion, and
integration related costs.
Forward-Looking Statements
This press release contains certain forward-looking statements
and forward-looking information, as defined under applicable
securities laws, including, without limitation, the U.S. Private
Securities Litigation Reform Act of 1995 (collectively,
“forward-looking statements”), which relate to future events or
Absolute’s future business, operations, and financial performance
and condition. Forward-looking statements normally contain words
like “will”, “intend”, “anticipate”, “could”, “should”, “may”,
“might”, “expect”, “estimate”, “forecast”, “plan”, “potential”,
“project”, “assume”, “contemplate”, “believe”, “shall”,
“scheduled”, and similar terms and, within this press release,
include, without limitation: the information under the heading
“F2022 Financial Outlook”, statements regarding the NetMotion
acquisition and integration, statements regarding Absolute’s market
opportunity and ability to accelerate growth, and any statements
(express or implied) respecting: Absolute’s future plans,
strategies, and objectives, including plans, strategies, and
objectives arising out of the COVID-19 pandemic and the NetMotion
acquisition; projected revenues, expenses, margins, and
profitability; anticipated strategic, operational, and financial
benefits and synergies of the NetMotion acquisition and
integration; future trends, opportunities, challenges, and growth
in Absolute’s industry; the impacts of the COVID-19 pandemic on
Absolute’s business, operations, prospects, and financial results;
Absolute’s ability to grow revenue by selling to new customers and
increasing subscriptions with existing customers; Absolute’s
ability to renew customers’ subscriptions; Absolute’s ability to
maintain and enhance its competitive advantages within its industry
and in certain markets; the maintenance and development of
Absolute’s PC OEM and other partner networks; existing and new
product functionality and suitability; Absolute’s product and
research and development strategies and plans; increases to brand
awareness and market penetration; foreign operations and growth;
and other aspects of Absolute’s operations or operating results.
Forward-looking statements, including the F2022 Financial Outlook,
are provided as of the date hereof for the purpose of presenting
information about management’s current expectations and plans
relating to the future and allowing investors and others to get a
better understanding of our anticipated financial position, results
of operations, and operating environment. Readers are cautioned
that such information may not be appropriate for other
purposes.
Forward-looking statements are not guarantees of future
performance, actions, or developments and are based on
expectations, assumptions and other factors that management
currently believes are relevant, reasonable, and appropriate in the
circumstances. The material expectations, assumptions, and other
factors used in developing the forward-looking statements set out
herein include or relate to the following, without limitation:
Absolute will be able to successfully execute its plans,
strategies, and objectives; Absolute will be able to successfully
manage cash flow, operating expenses, interest expenses, capital
expenditures, and working capital and credit, liquidity, and market
risks; Absolute will be able to leverage its past, current, and
planned investments to support growth and increase profitability;
Absolute will be able to successfully integrate NetMotion’s
operations and realize the expected benefits to and synergies from
Absolute from the acquisition; the Absolute-NetMotion combined
company’s financial profile will align with Absolute’s forecasts;
Absolute will be able to implement its plans, forecasts, and other
expectations with respect to the NetMotion acquisition and realize
expected synergies; Absolute will be able to successfully manage
the impacts of COVID-19 on its business, operations, prospects, and
financial results; there will continue to be a trend toward mobile
computing and remote working and/or distance learning, in the
short, medium, and/or long-term, and resulting demand for
Absolute’s solutions; Absolute will be able to grow revenue by
selling to new customers and increasing subscriptions with existing
customers at or above the rates currently anticipated; Absolute
will be able to renew customers’ subscriptions efficiently and cost
effectively; Absolute will maintain and enhance its competitive
advantages within its industry and certain markets; Absolute will
keep pace with or outpace the growth, direction, and technological
advancement in its industry; industry data and projections are
accurate and reliable; Absolute will be able to adapt its
technology to be compatible with changes to existing and new PC and
other device operating systems; Absolute will be able to maintain
and develop its PC OEM and other channel partner networks;
Absolute’s current and future (if any) PC OEM partners will
continue to permit embedding of its firmware technology and/or
provide distribution and resale support; Absolute’s business
development strategies and plans will be successful as currently
expected; Absolute will be able to maintain or grow its sales to
education customers; Absolute’s existing and new products will
function as intended and will be suitable for the intended end
users; Absolute will be able to design, develop, and release new
products, features, and services and enhance its existing products
and services; Absolute will be able to protect against the improper
disclosure of data it may process, store, and/or manage; Absolute’s
revenues will not become subject to increased seasonality; Absolute
will meet its commitments under and remain in compliance with its
term loan facility; future financing will be available to Absolute
on favourable terms, if and when required; Absolute will be in a
financial position to issue dividends in the future; fluctuations
in applicable tax rates, foreign exchange rates, and interest rates
will not have a material impact on Absolute; certain tax credits
will remain or become available to Absolute; Absolute will be able
to attract and retain key personnel; Absolute will be successful in
its brand awareness and other marketing initiatives; Absolute will
be able to maintain and enhance its intellectual property
portfolio; Absolute’s protection of its intellectual property is
and will be sufficient and its technology does not and will not
materially infringe third-party intellectual property rights;
Absolute will be able to obtain any necessary third-party licenses
on favourable terms; Absolute will not become involved in material
litigation or subject to material adverse judgments, damages
awards, or regulatory sanctions; Absolute will be able to
successfully manage the additional expenses, regulatory
obligations, and legal exposures resulting from its recent SEC
registration and Nasdaq listing; Absolute will not face any
material unexpected costs related to product liability or
warranties; foreign jurisdictions will not impose unexpected risks;
and economic and market conditions (including, without limitation,
as affected by the COVID-19 pandemic) will not impose unexpected
risks or challenges.
Although management believes that the forward-looking statements
herein are reasonable, actual results could be substantially
different due to the risks and uncertainties associated with and
inherent to Absolute’s business, including the following risks (as
more particularly described and referred to in the “Risk and
Uncertainties” section of Absolute’s Q1 F2022 MD&A: that
Absolute may not be able to accurately predict its rate of growth
and profitability; Absolute’s dependence on PC OEMs for embedding
its firmware technology; Absolute’s reliance on its PC OEM and
other distribution, resale, and other channels; risks related to
the COVID-19 pandemic and its impact on Absolute; that Absolute may
not be able to successfully integrate NetMotion’s operations; that
Absolute may be unable implement its plans, forecasts, and other
expectations for the NetMotion acquisition as anticipated, or at
all, to realize the expected synergies from the NetMotion
acquisition; that the Absolute-NetMotion combined company will not
have the projected financial profile and will not experience the
expected financial benefits and synergies; that the NetMotion
acquisition and integration will disrupt Absolute’s business; that
Absolute may be unable to attract new customers or maintain its
existing customer base or grow or upgrade the services provided to
these customers; that customers may not renew or expand their
existing commercial relationship with Absolute; that Absolute may
be unable to adapt its technology to be compatible with new
operating systems; that Absolute’s business development activities
will not advance and deliver the benefits as currently anticipated;
that changing buying patterns in the education vertical may
adversely impact Absolute’s business; that changing contracting or
fiscal policies of government organization may adversely affect
Absolute’s business and operations; risks relating to the evolving
nature of the market for Absolute’s products; that Absolute’s
software services may contain errors, vulnerabilities, or defects;
that Absolute could suffer security breaches impacting the data
that Absolute processes and otherwise handles; other risks
associated with data security, privacy controls, and hacking; that
Absolute’s reputation may be damaged, and its financial results
negatively affected, if its internal networks, systems, or data are
perceived to have been compromised; that customers may expose
Absolute to potential violations of applicable privacy laws; that
Absolute’s focus on larger enterprise customers could result in
greater costs, less favourable commercial terms, and other adverse
impacts to Absolute; risks associated with any failure by Absolute
to successfully promote and protect its brands; risks associated
with cyclical business impacts on Absolute; Absolute may fail to
meet its commitments under or remain in compliance with its term
loan facility, which could allow the lenders to accelerate the
repayment of the debt; future financing that may be required may
not be available on favourable terms; risks associated with the
competition Absolute faces within its industry; that industry data
and projections are inaccurate and unreliable; that Absolute’s
research and development efforts may not be successful; risks
resulting from interruptions or delays from third-party hosting
facilities; that Absolute’s business may suffer if it cannot
continue to protect its intellectual property rights; that Absolute
may be unable to obtain patent or other proprietary or statutory
protection for new or improved technologies or products; risks
related to Absolute’s technology incorporating certain “open
source” software; that Absolute may be unable to maintain
technology licenses from third parties; risks related to
fluctuating foreign exchange rates; that the price of Absolute’s
common shares may be subject to wide fluctuations; risks related to
Absolute’s recent SEC registration and Nasdaq listing; that
Absolute is reliant on its key personnel; that Absolute may be
subject to litigation or other dispute resolution from
time-to-time; that Absolute may become subject to material adverse
judgments, damages awards, or regulatory sanctions; risks related
to Absolute’s foreign operations; risks related to Absolute’s
amortization of revenue over the term of its customer
subscriptions; risks related to Absolute’s reliance on its reseller
and other partners for billings; that Absolute may reduce or
eliminate its periodic dividend payments in the future; income tax
related risks; that Absolute may not currently have or maintain
adequate insurance coverages for the risks associated with its
business; that Absolute may become subject to product liability
claims; and risks related to economic and political uncertainty.
Additional material risks and uncertainties applicable to the
forward-looking statements herein include, without limitation,
unforeseen events, developments, or factors causing any of the
aforesaid expectations, assumptions, and other factors ultimately
being inaccurate or irrelevant. Many of these factors are beyond
the control of Absolute.
All forward-looking statements included in this press release
are expressly qualified in their entirety by these cautionary
statements. The forward-looking statements contained in this press
release are made as at the date hereof and Absolute undertakes no
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events, or otherwise, except as may be required by
applicable securities laws.
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of
Financial Position
(Unaudited)
(Expressed in thousands of United
States dollars, except number of shares)
September 30, 2021
June 30, 2021
Assets
Current assets:
Cash and cash equivalents
$
55,509
$
140,166
Short-term investments
360
360
Trade and other receivables
33,232
24,113
Income tax receivable
1,148
628
Prepaid expenses and other
6,456
5,802
Contract acquisition assets – current
8,544
8,253
105,249
179,322
Property and equipment
6,039
4,629
Right-of-use assets
11,497
9,967
Deferred income tax assets
31,157
31,339
Contract acquisition assets
6,655
6,271
Intangible assets
131,009
—
Goodwill
236,402
1,100
Other assets
650
—
$
528,658
$
232,628
Liabilities
Current liabilities:
Trade and other payables
$
27,796
$
34,116
Income tax payable
206
20
Lease liabilities – current
3,728
2,908
Long-term debt – current
1,671
—
Deferred revenue – current
108,642
93,303
142,043
130,347
Lease liabilities
9,638
8,960
Long-term debt
265,443
—
Deferred revenue
70,444
66,879
Deferred income tax liability
23,547
—
511,115
206,186
Shareholders’ Deficiency
Share capital
153,530
151,521
Equity reserve
46,705
46,489
Treasury shares
(264)
(264)
Accumulated other comprehensive income
(218)
188
Deficit
(182,210)
(171,492)
17,543
26,442
$
528,658
$
232,628
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of
Operations and Comprehensive (Loss) Income
(Unaudited)
(Expressed in thousands of United
States dollars, except number of shares and per share
amounts)
Three months ended September
30,
2021
2020
Revenue
$
43,749
$
28,496
Cost of revenue
8,515
3,400
Gross margin
35,234
25,096
Operating expenses
Sales and marketing
20,563
10,923
Research and development
10,273
5,448
General and administration
9,252
4,526
40,088
20,897
Operating (loss) income
(4,854)
4,199
Other (expense) income
Interest income
1
25
Interest expense
(5,146)
(142)
Foreign exchange gain (loss)
14
(186)
(5,131)
(303)
Net (loss) income before income
taxes
(9,985)
3,896
Income tax recovery (expense)
2,417
(1,294)
Net (loss) income
$
(7,568)
$
2,602
Items that may be reclassified
subsequently to profit or loss:
Unrealized (loss) gain on derivatives, net
of tax
(355)
30
Foreign currency translation, net of
tax
$
(51)
$
—
Total comprehensive (loss)
income
$
(7,974)
$
2,632
Basic net (loss) income per common
share
$
(0.15)
$
0.06
Diluted net (loss) income per common
share
$
(0.15)
$
0.06
Weighted average number of common shares
outstanding
Basic
49,672,518
42,626,572
Diluted
49,672,518
45,831,759
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of
Changes in Shareholders’ Deficiency
(Unaudited)
(Expressed in thousands of United
States dollars, except number of shares)
Share Capital
Number of
Common
shares
Amount
Equity
reserve
Treasury
shares
Accumulated
Other
Comprehensive
Income
Deficit
Total
Balance, June 30, 2020
42,535,495
$
81,890
$
38,524
$
(264)
$
—
$
(163,212)
$
(43,062)
Shares issued on stock option exercise
49,682
362
(66)
—
—
—
296
Shares issued under Employee Stock
Ownership Plan ("ESOP")
30,508
166
—
—
—
—
166
Shares issued under Performance and
Restricted Share Unit plan ("PRSU")
113,960
625
(625)
—
—
—
—
Share-based compensation
—
—
2,061
—
—
—
2,061
Cash dividends
—
—
—
—
—
(2,580)
(2,580)
Unrealized gain on derivatives, net
—
—
—
—
30
—
30
Net income
—
—
—
—
—
2,602
2,602
Balance, September 30, 2020
42,729,645
$
83,043
$
39,894
$
(264)
$
30
$
(163,190)
$
(40,487)
Shares issued for cash
6,272,727
69,000
—
—
—
—
69,000
Share issuance cost
—
(4,228)
—
—
—
—
(4,228)
Shares issued on stock option exercise
57,162
443
(83)
—
—
—
360
Shares issued under ESOP
37,581
347
—
—
—
—
347
Shares issued under PRSU
476,714
2,916
(4,156)
—
—
—
(1,240)
Share-based compensation
—
—
6,478
—
—
—
6,478
Cash dividends
—
—
—
—
—
(9,432)
(9,432)
Unrealized gain on derivatives, net
—
—
—
—
158
—
158
Tax deduction on share based
compensation
—
—
4,356
—
—
—
4,356
Net income
—
—
—
—
—
1,130
1,130
Balance, June 30, 2021
49,573,829
$
151,521
$
46,489
$
(264)
$
188
$
(171,492)
$
26,442
Shares issued on stock option exercise
21,050
143
(21)
—
—
—
122
Shares issued under ESOP
42,164
438
—
—
—
—
438
Shares issued under PRSU
183,528
1,496
(1,686)
—
—
—
(190)
Share-based compensation
—
—
3,937
—
—
—
3,937
Cash dividends
—
—
—
—
—
(3,150)
(3,150)
Unrealized loss on derivatives, net
—
—
—
—
(355)
—
(355)
Tax deduction on share issuance costs
—
(68)
—
—
—
—
(68)
Tax deduction on share based
compensation
—
—
(2,014)
—
—
—
(2,014)
Foreign currency translation, net
—
—
—
(51)
—
(51)
Net loss
—
—
—
—
—
(7,568)
(7,568)
Balance, September 30, 2021
49,820,571
$
153,530
$
46,705
$
(264)
$
(218)
$
(182,210)
$
17,543
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(Expressed in thousands of United
States dollars)
Three months ended September
30,
2021
2020
Cash from (used in):
Operating activities:
Net income (loss)
$
(7,568)
$
2,602
Items not involving cash:
Depreciation of property and equipment
877
866
Amortization of right-of-use assets
954
490
Amortization of acquired intangible
assets
4,591
—
Amortization of contract acquisition
assets
3,507
2,540
Share-based compensation
3,296
2,593
Deferred income taxes
(3,259)
516
Unrealized gain on short-term
investments
—
(28)
Interest expense
5,081
—
Unrealized foreign exchange (gain)
loss
(91)
157
Changes in non-cash operating working
capital:
Trade and other receivables
2,391
5,045
Income tax receivable
(337)
(24)
Prepaid expenses and other
(931)
(1,530)
Contract acquisition assets
(4,183)
(2,840)
Trade and other payables
(8,454)
(1,296)
Income tax payable
74
(224)
Deferred revenue
3,415
5,840
Cash from (used in) operating
activities
(637)
14,707
Investing activities:
Purchase of property and equipment
(198)
(946)
Proceeds from maturities of short-term
investments
—
10,433
Acquisition of NetMotion
(341,699)
—
Cash from (used in) investing
activities
(341,897)
9,487
Financing activities:
Dividends paid
(3,150)
(2,580)
Proceeds from exercise of stock options
and ESOP
122
376
Tax remittances on share based
compensation
(190)
—
Payment of lease liabilities
(963)
(461)
Proceeds from long-term debt, net of
transaction costs
267,543
—
Principal repayment of long-term debt
(688)
—
Interest payment on long-term debt
(4,692)
—
Cash from (used in) financing
activities
257,982
(2,665)
Foreign exchange effect on cash
(105)
40
(Decrease) increase in cash and cash
equivalents
(84,657)
21,569
Cash and cash equivalents, beginning of
period
140,166
29,727
Cash and cash equivalents, end of
period
$
55,509
$
51,296
Selected Operating & Financial
Metrics | Q1 F2022
USD Thousands, except per share data
Q1 F2022 *
F2021
Q4 F2021
Q3 F2021
Q2 F2021
Q1 F2021
ARR
Total ARR
187,445
123,411
123,411
120,412
117,471
111,748
yoy growth
17.1
%
13.9
%
13.9
%
18.7
%
17.1
%
12.7
%
New Logo ARR
4,732
8,516
2,707
2,554
1,466
1,790
yoy growth
97.9
%
25.8
%
(22.3
%)
168.2
%
14.5
%
69.7
%
Net Dollar Retention
109
%
106
%
106
%
110
%
109
%
105
%
# of Active Endpoints
12,506
11,577
11,577
11,570
11,463
10,599
yoy growth
18.0
%
16.8
%
16.8
%
18.3
%
18.3
%
10.2
%
TOTAL ARR BY VERTICAL
Enterprise & Government
143,877
81,982
81,982
78,748
77,561
75,013
yoy growth
16.9
%
10.7
%
10.7
%
11.5
%
11.5
%
11.9
%
Education
43,569
41,429
41,429
41,664
39,910
36,736
yoy growth
17.8
%
20.9
%
20.9
%
35.3
%
29.8
%
14.4
%
TOTAL ARR BY GEOGRAPHY
North America
150,916
102,656
102,656
100,893
98,930
95,069
yoy growth
11.1
%
9.7
%
9.7
%
14.9
%
13.2
%
9.7
%
International
36,530
20,755
20,755
19,519
18,541
16,679
yoy growth
51.0
%
40.5
%
40.5
%
42.8
%
43.4
%
34.1
%
REVENUE
Total Adjusted Revenue
49,014
yoy growth
14.7
%
Total Revenue
43,749
120,784
31,777
30,654
29,857
28,496
yoy growth
53.5
%
15.4
%
17.0
%
17.6
%
15.7
%
11.1
%
Recurring Revenue
42,383
117,048
30,838
29,696
28,924
27,591
% of revenue
96.9
%
96.9
%
97.0
%
96.9
%
96.9
%
96.8
%
yoy growth
53.6
%
16.5
%
19.0
%
18.2
%
16.3
%
12.1
%
Cloud Services
41,377
112,440
29,813
28,579
27,668
26,380
yoy growth
56.9
%
16.7
%
20.1
%
18.7
%
16.0
%
11.8
%
Managed Services
1,006
4,609
1,025
1,117
1,256
1,211
yoy growth
(16.9
%)
10.4
%
(7.3
%)
16.5
%
23.9
%
21.0
%
Other Revenue
1,366
3,736
940
958
933
905
% of revenue
3.1
%
3.1
%
3.0
%
3.1
%
3.1
%
3.2
%
yoy growth
50.8
%
(10.2
%)
(24.0
%)
2.0
%
(0.5
%)
(13.7
%)
Software License
176
yoy growth
100.0
%
Other
1,190
3,736
940
958
933
905
yoy growth
31.5
%
(10.2)
%
(24.0)
%
2.0
%
(0.5)
%
(13.7)
%
OTHER METRICS
Adj. Gross Margin (non-IFRS)
43,908
106,863
27,781
26,918
26,646
25,518
Margin % **
90
%
88
%
87
%
88
%
89
%
90
%
Adj. EBITDA (non-IFRS)
12,801
31,867
7,977
7,693
8,049
8,148
Margin % **
26.1
%
26.4
%
25.1
%
25.1
%
27.0
%
28.6
%
Adj. EPS (non-IFRS) ***
0.09
0.46
0.12
0.11
0.11
0.13
Weighted avg # of shares outstanding -
basic
49,673
47,132
49,534
49,334
48,983
42,627
Weighted avg # of shares outstanding -
diluted
49,673
49,917
49,534
52,358
52,246
45,832
Effective Tax Rate
24.2
%
14.3
%
41.4
%
24.4
%
27.9
%
33.2
%
Cash From Operating Activities
(637)
46,836
11,443
7,276
13,410
14,707
yoy growth
(104
%)
88
%
(1
%)
95
%
517
%
97
%
Cash and Short Term Equivalents
55,869
140,526
140,526
132,730
131,984
58,241
yoy growth
(4
%)
198
%
198
%
242
%
242
%
50
%
Total Deferred Revenue
179,086
160,182
160,182
156,691
154,089
148,444
yoy growth
21
%
12
%
12
%
23
%
20
%
14
%
* Year over year growth for ARR metrics and Total Adjusted Revenue
for Q1 F22 is calculated compared to an as-if combined basis for Q1
F21. ** Margin % is calculated as a percentage of Adjusted Revenue.
*** In Q1 F2022, we updated our definition of Adjusted EPS. Refer
to reconciliation of Adjusted EPS for details. Adjusted EPS in
comparative periods have been calculated based on the updated
definition.
We define Non-IFRS earnings per share ("Adjusted EPS") as
diluted earnings (loss) per share adjusted for foreign exchange
gain or loss, depreciation and amortization, share-based
compensation expense, fair value adjustments relating to acquired
deferred revenue, fair value adjustments relating to acquired
deferred commission, restructuring or reorganization charges and
post-retirement benefits and non-recurring items, and income tax
effects related to the non-GAAP adjustments.
Adjusted EPS is not a standardized financial measure under IFRS
and therefore it may not be comparable to similar measures
presented by other issuers. We believe this metric provides useful
information to investors and others in understanding and evaluating
our operating results as it helps illustrate underlying trends in
our business that could otherwise be masked by the effect of the
income or expenses that are not indicative of the core operating
performance of our business.
Adjusted EPS (Non-IFRS) Reconciliation
Q1 F2022
F2021
Q4 F2021
Q3 F2021
Q2 F2021
Q1 F2021
Diluted (loss) earnings per
share
$
(0.15)
$
0.07
$
(0.06)
$
0.04
$
0.04
$
0.06
Adjustments:
Share-based compensation
0.06
0.21
0.04
0.06
0.05
0.06
Depreciation and amortization(1)
0.12
0.12
0.03
0.03
0.03
0.03
Fair value adjustments relating to
acquired deferred revenue
0.10
—
—
—
—
—
Fair value adjustments relating to
acquired deferred commission
(0.01)
—
—
—
—
—
Non-recurring items(2)
0.06
0.20
0.18
—
0.02
—
Income tax effects related to non-GAAP
adjustments(3)
(0.09)
(0.14)
(0.07)
(0.02)
(0.03)
(0.02)
Adjusted EPS
$
0.09
$
0.46
$
0.12
$
0.11
$
0.11
$
0.13
(1)
Depreciation and amortization includes depreciation of property and
equipment, amortization of right-of-use assets, and amortization of
acquired intangible assets.
(2)
Non-recurring items in Q1 F2022 includes professional fees and
other costs relating to the acquisition of NetMotion, and
integration related costs.
(3)
Income tax effects related to non-GAAP adjustments is calculated
based on the Company’s statutory tax rate of 27%.
Diluted weighted average number of Common Shares outstanding for
Adjusted EPS for Q1 F2022 and Q1 F2021 is presented below.
Q1 F2022
Q1 F2021
Basic weighted average number of common
shares outstanding
49,672,518
42,626,572
Effect of dilutive securities:
Stock Option
337,796
352,108
PSU
1,139,978
756,368
RSU
1,732,989
2,096,712
Diluted weighted average number of common
shares outstanding
52,883,281
45,831,759
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211109006538/en/
Investor Relations Joo-Hun Kim, MKR Group IR@absolute.com
212-868-6760
Media Relations Becki Levine, Absolute Software
press@absolute.com 858-524-9443
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