ARR Growth of 15% year over year Driven by
Strong Enterprise and Government ARR Growth of 18% year over
year
Absolute Software Corporation (Nasdaq: ABST) (TSX: ABST) (the
“Company”), the only provider of self-healing, intelligent security
solutions, today announced its financial results for its second
quarter fiscal 2023 ended December 31, 2022. All dollar figures are
stated in U.S. dollars, unless otherwise indicated.
“We posted a solid performance this quarter against a
challenging macro backdrop,” said Christy Wyatt, President and CEO
of Absolute Software. “We continue to drive market penetration of
our self-healing, intelligent security solutions as we build
awareness of the critical role Absolute’s platform plays in making
businesses more resilient. We are confident in our long-term plan
to deliver balanced growth and profitability consistent with our
Rule of 40 framework.”
“One of the company’s hallmarks is our ability to provide
attractive growth with strong margins,” said Jim Lejeal, Chief
Financial Officer. “While we are not immune to the macro
environment, we remain confident in our ARR growth outlook, and are
taking measures to ensure that we maintain strong margins while
continuing to invest in our go-to-market initiatives that position
the company for long-term success.”
SECOND QUARTER FISCAL 2023 (“Q2 F2023”) OVERVIEW
Key Financial Metrics
- Revenue was $57.2 million for Q2 F2023, an increase of 17%
compared to Q2 of fiscal year 2022 (“Q2 F2022”).
- Adjusted Revenue(1) was $57.7 million for Q2 F2023, an increase
of 9% compared to Q2 F2022.
- Net loss was $7.0 million for Q2 F2023, an increase of 37%
compared to Q2 F2022.
- Adjusted EBITDA(1) was $12.8 million or 22% of Adjusted
Revenue(1) for Q2 F2023, a decrease from $13.8 million or 26% of
Adjusted Revenue for Q2 F2022.
- Total ARR(2) at December 31, 2022 was $225.0 million, an
increase of 15% compared to Q2 F2022.
- Enterprise & Government Total ARR increased by 18% year
over year, and represented 79% of Total ARR at December 31,
2022.
- Education Total ARR increased by 6% year over year, and
represented 21% of Total ARR at December 31, 2022.
- New Logo ARR(2) was $4.1 million for Q2 F2023, an increase from
$3.7 million for Q2 F2022.
- Net Dollar Retention(2) was 107% for Q2 F2023, consistent with
Q2 F2022.
- Cash from operating activities was $0.9 million for Q2 F2023, a
decrease of 94% from $14.7 million for Q2 F2022.
- A quarterly dividend of CAD$0.08 per outstanding common share
was paid during Q2 F2023.
Notes:
(1)
Adjusted Revenue and Adjusted
EBITDA are non-IFRS measures. Refer to the “Use of non-IFRS
measures and key metrics” section of the Q2 F2023 MD&A for
further discussion of these measures and the “Results of
Operations” section of this MD&A for reconciliation to the
nearest IFRS measure.
(2)
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 Q2 F2023 MD&A for
further discussion of these measures.
FINANCIAL HIGHLIGHTS USD millions, except percentages,
number of shares, and per share amounts
Q2 F2023
Q2 F2022
Change
YTD F2023
YTD F2022
Change
Revenue
Cloud and subscription services
$
55.2
$
46.6
18
%
$
106.2
$
88.0
21
%
Managed professional services
1.0
1.0
—
%
1.9
2.0
(5
%)
Recurring revenue(1)
56.2
47.6
18
%
108.1
90.0
20
%
Other(1)
1.0
1.4
(29
%)
2.7
2.8
(4
%)
Total revenue
$
57.2
$
49.0
17
%
$
110.8
$
92.8
19
%
Adjusted Revenue(2)
$
57.7
$
52.9
9
%
$
111.9
$
102.0
10
%
Total annual recurring revenue
(“ARR”)(3)
$
225.0
$
195.6
15
%
Net loss
$
(7.0
)
$
(5.1
)
37
%
$
(16.5
)
$
(12.7
)
30
%
Per share – basic
(0.13
)
(0.10
)
(0.32
)
(0.25
)
Per share – diluted
(0.13
)
(0.10
)
(0.32
)
(0.25
)
As a percentage of revenue
(12
%)
(10
%)
(15
%)
(14
%)
Adjusted EBITDA(2)
$
12.8
$
13.8
(7
%)
$
24.3
$
26.6
(9
%)
As a percentage of Adjusted Revenue
22
%
26
%
22
%
26
%
Cash from operating activities
$
0.9
$
14.7
(94
%)
$
16.1
$
14.1
14
%
Dividends paid
$
3.1
$
3.2
(3
%)
$
6.3
$
6.4
(2
%)
Per share (CAD)
0.08
0.08
0.16
0.16
As at
December
31, 2022
June 30,
2022
Change
Cash, cash equivalents, and short-term
investments
$
49.9
$
64.0
(22
%)
Total assets
533.6
555.6
(4
%)
Deferred revenue(4)
208.4
210.5
(1
%)
Total non-current financial
liabilities(5)
264.0
271.4
(3
%)
Common shares outstanding (millions)
52.7
51.1
3
%
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 Q2 F2023 MD&A for further discussion of
these measures and the “Results of Operations” section of the Q2
F2023 MD&A for reconciliation to the nearest IFRS measure.
(3)
Total ARR is a key metric. Refer
to the “Use of non-IFRS measures and key metrics” section of the Q2
F2023 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.
Q2 F2023 Business Highlights
- Added nearly 2,000 new customers in Q2 for a total of almost
20,000 as of December 31, 2022.
- Bolstered our Application Resilience™ ecosystem by adding eight
mission-critical applications, including Dell™ Trusted Device, Deep
Instinct™, and Norton 360™ – enabling joint Absolute Resilience®
customers to ensure these apps remain healthy and undeletable.
- Expanded partnership with Lenovo to add Absolute Secure Access
solution to their Thinkshield suite of products, reflecting growing
customer interest for always-on, self-healing network
connections.
Q2 Industry Awareness
- Named a Leader for the twelfth consecutive quarter in the G2
Winter 2022 Grid® Report for Endpoint Management and as a Leader
for the second consecutive quarter in the G2 Grid Report for Zero
Trust Networking.
- Recognized by IDC as a Leader in "European End User Experience
Management," citing our strength in ensuring resilient network and
access performance.
- Highlighted by Omdia as an Endpoint Security ‘Vendor to Watch’
for our unique product capabilities and ability to ensure
resilience for millions of remote endpoints.
F2023 Financial Outlook
The Company updated its financial outlook for fiscal 2023 (July
1, 2022 – June 30, 2023) as follows(1):
- Adjusted Revenue(2) for F2023 is now expected to be in the
range of $231.0 million to $235.0 million, equating to full-year
growth of approximately 10% to 12%.
- Tightened range, increasing midpoint of full-year F2023
Adjusted EBITDA(2), with Adjusted EBITDA margin on Adjusted Revenue
now expected to be to be in the range of 23% to 25%.
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.
Quarterly Dividend
On January 18, 2023, we declared a quarterly dividend of
CAD$0.08 per share on our common shares, payable in cash on
February 23, 2023 to shareholders of record at the close of
business on February 9, 2023.
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 December 31, 2022 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 Q2 F2023 Earnings
Presentation and a dashboard of Selected Operating and Financial
Metrics.
Conference Call
Absolute Software will host a conference call on Tuesday,
February 14, 2023 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 1-844-282-4856 or 1-412-317-5627;
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,
February 21, 2023. To access the archived conference call, please
dial 855-669-9658 or 1-877-344-7529 and enter the reservation code
8089698. To access using an international dial-in number, please
use this link. An archived replay of the audio webcast will be
available for one year.
About Absolute Software
Absolute Software (NASDAQ: ABST) (TSX: ABST) is the only
provider of self-healing, intelligent security solutions. Embedded
in more than 600 million devices, Absolute is the only platform
offering a permanent digital connection that intelligently and
dynamically applies visibility, control and self-healing
capabilities to endpoints, applications, and network connections -
helping customers to strengthen cyber resilience against the
escalating threat of ransomware and malicious attacks. Trusted by
nearly 20,000 customers, G2 recognized Absolute as a Leader for the
twelfth consecutive quarter in the Winter 2023 Grid® Report for
Endpoint Management and for the second consecutive quarter in the
G2 Grid Report for Zero Trust Networking.
©2023 Absolute Software Corporation. All rights reserved.
ABSOLUTE, the ABSOLUTE logo, and NETMOTION are registered
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 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. 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 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 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 define 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 defined as gross margin, adjusted for
depreciation and amortization, share-based compensation expense,
fair value adjustments relating to acquired deferred revenue,
acquisition and integration costs, 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 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, acquisition
and integration costs, litigation costs, impairment losses, and
non-recurring items.
d)
Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization (“Adjusted EBITDA”)
Adjusted EBITDA is a non-IFRS measure that we define 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, acquisition
and integration costs, litigation costs, impairment losses, and
non-recurring items.
Reconciliation of non-IFRS measures from IFRS measures are
presented below.
Adjusted Revenue
(USD millions)
Q2 F2023
Q2 F2022
YTD F2023
YTD F2022
Revenue
$
57.2
$
49.0
$
110.8
$
92.8
Adjustments:
Fair value adjustments relating to
acquired deferred revenue
0.5
3.9
1.1
9.2
Adjusted Revenue
$
57.7
$
52.9
$
111.9
$
102.0
Adjusted Gross Margin
(USD millions)
Q2 F2023
Q2 F2022
YTD F2023
YTD F2022
Gross margin
$
46.5
$
39.6
$
89.8
$
74.9
Adjustments:
Depreciation and amortization(1)
2.8
2.8
5.6
5.6
Share-based compensation
1.0
0.7
2.0
1.3
Fair value adjustments relating to
acquired deferred revenue
0.5
3.9
1.1
9.2
Adjusted Gross Margin
$
50.8
$
47.0
$
98.5
$
91.0
Adjusted Gross Margin %
88
%
89
%
88
%
89
%
Adjusted Operating Expenses
(USD millions)
Q2 F2023
Q2 F2022
YTD F2023
YTD F2022
Total Operating Expense
$
47.1
$
42.2
$
96.3
$
82.4
Adjustments:
Depreciation and amortization(1)
(3.3
)
(3.5
)
(6.7
)
(7.2
)
Share-based compensation
(4.4
)
(4.0
)
(12.8
)
(6.8
)
Fair value adjustments relating to
acquired deferred commission
—
0.5
0.1
1.3
Acquisition and integration costs
(1.1
)
(1.5
)
(2.4
)
(4.9
)
Litigation costs
(0.3
)
(0.4
)
(0.3
)
(0.4
)
Adjusted Operating Expense
$
38.0
$
33.3
$
74.2
$
64.4
(1)
Depreciation and amortization includes depreciation of property
and equipment, amortization of right-of-use assets, and
amortization of acquired intangible assets.
Adjusted EBITDA
(USD millions)
Q2 F2023
Q2 F2022
YTD F2023
YTD F2022
Net loss
$
(7.0
)
$
(5.1
)
$
(16.5
)
$
(12.7
)
Adjustments:
Depreciation and amortization(1)
6.1
6.4
12.3
12.8
Share-based compensation
5.4
4.7
14.8
8.0
Interest income
(0.1
)
—
(0.3
)
—
Interest expense
7.1
5.2
13.3
10.4
Foreign exchange loss
—
0.2
—
0.2
Income tax recovery
(0.6
)
(2.9
)
(3.0
)
(5.3
)
Fair value adjustments relating to
acquired deferred revenue
0.5
3.9
1.1
9.2
Fair value adjustments relating to
acquired deferred commission
—
(0.5
)
(0.1
)
(1.3
)
Acquisition and integration costs
1.1
1.5
2.4
4.9
Litigation costs
0.3
0.4
0.3
0.4
Adjusted EBITDA
$
12.8
$
13.8
$
24.3
$
26.6
(1)
Depreciation and amortization
includes depreciation of property and equipment, amortization of
right-of-use assets, and amortization of acquired intangible
assets.
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
“F2023 Financial Outlook,” statements regarding the NetMotion
acquisition and integration, statements regarding Absolute’s market
opportunity and ability to accelerate growth and expectations of
ARR, 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 or
related to the NetMotion (as defined below) acquisition; projected
revenues, expenses, margins, and profitability; 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 (including, without
limitation, greater/continued remote working and/or distance
learning); the increase in volume and range of data breaches and
cyber threats; the anticipated operational, financial, and
competitive benefits, and synergies of the NetMotion acquisition;
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; Absolute’s ability to remain compatible
with existing and new PC and other device operating systems; the
maintenance and development of Absolute’s PC OEM and other channel
partner networks; existing and new product functionality and
suitability; Absolute’s product and research and development
strategies and plans; Absolute’s business development strategies
and plans; Absolute’s privacy and data security controls; the
seasonality of future revenues and expenses; Absolute’s ability to
meet its commitments under and remain in compliance with its Term
Loan Facility (as defined below); the future availability of
working capital and any required financing; future dividend
issuances or increases; the addition and retention of key
personnel; increases to brand awareness and market penetration;
future corporate, asset, or technology acquisitions; strategies
respecting intellectual property protection and licensing; active
and potential future litigation or product liability; future
dividend issuances or increases; future fluctuations in applicable
tax rates, foreign exchange rates, and/or interest rates; the
future availability of tax credits; Absolute’s foreign operations;
expenses, regulatory obligations, and/or legal exposures as a
result of its SEC registration and Nasdaq listing; changes and
planned changes to accounting policies and standards and their
respective impact on Absolute’s financial reporting; Absolute’s
environmental, social, and governance initiatives; macroeconomic
uncertainty, including inflationary pressures and risks of economic
recession; foreign exchange fluctuations macroeconomic uncertainty,
including inflationary pressures and risks of economic recession;
foreign exchange fluctuations; the continued effectiveness of
Absolute’s accounting policies and internal controls over financial
reporting; and other aspects of Absolute’s strategies, operations
or operating results. Forward-looking statements are provided for
the purpose of presenting information about management’s current
expectations and plans relating to the future and to allow
investors and others to get a better understanding of Absolute’s
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, ARR 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 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 successfully
integrate NetMotion’s operations and realize the expected benefits
to Absolute and synergies from the acquisition; Absolute will
transition the NetMotion customer agreements to recurring cloud
subscriptions; 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 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; 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 (including, without limitation,
enhanced data intelligence, Application Persistence™, and APaaS (as
defined below)) 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 obtain prioritization by the United States Federal Risk and
Authorization Management Program (“FedRAMP”) certification and
achieve greater penetration into government markets; 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 successfully integrate businesses, intellectual
property, products, personnel, and/or technologies that it may
acquire (if any other than NetMotion); 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 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; Absolute’s environmental, social, and
governance initiatives will deliver positive outcomes; economic and
market conditions, as well as macroeconomic uncertainty (including,
without limitation, as affected by the COVID-19 pandemic) will not
impose unexpected risks or challenges; and Absolute will maintain
or enhance its accounting policies and standards and internal
controls over financial reporting.
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 Q2 F2023 MD&A: that
Absolute may not be able to accurately predict its rate of growth
and profitability; ARR provides no assurance that actual events
will meet the Company’s or management’s expectations; 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; that changes in macroeconomic conditions may harm
our growth strategies and business prospects; that Absolute will
not achieve FedRAMP certification, on the timeline currently
expected or at all, which may hinder its ability to achieve greater
penetration into government markets; 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 or seek other remedies under the Term Loan
Facility; 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 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; that Absolute may be unable to successfully
manage and/or integrate any future acquisitions; risks related to
Absolute’s amortization of revenue over the term of its customer
subscriptions including future ARR impact indicating future
potential annualized revenue impact; 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; risks related to Absolute’s
reliance on copyrights, trademarks, trade secrets, and
confidentiality procedures and similar contractual provisions;
risks related to economic and political uncertainty; and Absolute
will not be able to maintain or enhance its accounting policies and
standards and internal controls over financial reporting..
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)
December 31, 2022
June 30, 2022
Assets
Current assets:
Cash and cash equivalents
$
49,490
$
63,669
Short-term investments
360
360
Trade and other receivables
44,210
52,722
Income tax receivable
1,300
1,029
Prepaid expenses and other
9,658
9,086
Contract acquisition assets – current
9,971
9,518
114,989
136,384
Property and equipment
4,622
5,195
Right-of-use assets
7,957
9,456
Deferred income tax assets
49,011
39,428
Contract acquisition assets
6,952
6,213
Intangible assets
108,655
117,537
Goodwill
240,755
240,755
Other assets
650
650
$
533,591
$
555,618
Liabilities
Current liabilities:
Trade and other payables
$
34,435
$
32,544
Derivative liabilities
827
83
Income tax payable
823
2,143
Lease liabilities – current
4,119
4,069
Long-term debt – current
1,556
1,632
Deferred revenue – current
135,983
133,852
177,743
174,323
Lease liabilities
5,364
7,210
Long-term debt
258,608
264,230
Deferred revenue
72,455
76,619
Deferred income tax liability
28,172
30,037
542,342
552,419
Shareholders’ (Deficiency)
Equity
Share capital
175,858
160,951
Equity reserve
47,785
51,333
Treasury shares
(264
)
(264
)
Accumulated other comprehensive loss
(749
)
(207
)
Deficit
(231,381
)
(208,614
)
(8,751
)
3,199
$
533,591
$
555,618
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of
Operations and Comprehensive Loss
(Unaudited)
(Expressed in thousands of United
States dollars, except number of shares and per share
amounts)
Three months ended
December 31,
Six months ended
December 31,
2022
2021
2022
2021
Revenue
$
57,194
$
49,050
$
110,758
$
92,799
Cost of revenue
10,699
9,413
20,991
17,928
Gross margin
46,495
39,637
89,767
74,871
Operating expenses
Sales and marketing
22,730
19,998
45,539
40,561
Research and development
13,759
11,243
27,403
21,515
General and administration
10,659
11,023
23,369
20,276
47,148
42,264
96,311
82,352
Operating loss
(653
)
(2,627
)
(6,544
)
(7,481
)
Other (expense) income
Interest income
138
—
386
1
Interest expense
(7,133
)
(5,211
)
(13,327
)
(10,357
)
Foreign exchange (loss) gain
24
(167
)
(33
)
(154
)
(6,971
)
(5,378
)
(12,974
)
(10,510
)
Net loss before income taxes
(7,624
)
(8,005
)
(19,518
)
(17,991
)
Income tax recovery
625
2,882
3,033
5,299
Net loss
$
(6,999
)
$
(5,123
)
$
(16,485
)
$
(12,692
)
Items that may be reclassified
subsequently to profit or loss:
Unrealized gain (loss) on derivatives, net
of tax
611
44
(542
)
(311
)
Foreign currency translation
—
33
—
(18
)
Total comprehensive loss
$
(6,388
)
$
(5,046
)
$
(17,027
)
$
(13,021
)
Basic net loss per common share
$
(0.13
)
$
(0.10
)
$
(0.32
)
$
(0.25
)
Diluted net loss per common share
$
(0.13
)
$
(0.10
)
$
(0.32
)
$
(0.25
)
Weighted average number of common shares
outstanding
Basic
52,408,347
50,072,631
51,914,431
49,872,574
Diluted
52,408,347
50,072,631
51,914,431
49,872,574
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of
Changes in Shareholders’ (Deficiency) Equity
(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, 2021
49,573,829
$
151,521
$
46,489
$
(264
)
$
188
$
(171,492
)
$
26,442
Shares issued on stock option exercise
273,398
1,572
(194
)
—
—
—
1,378
Shares issued under Employee Stock
Ownership Plan ("ESOP")
42,164
438
—
—
—
—
438
Shares issued under Performance and
Restricted Share Unit plan ("PRSU")
573,264
4,798
(5,152
)
—
—
—
(354
)
Share-based compensation
—
—
9,104
—
—
—
9,104
Cash dividends
—
—
—
—
—
(6,375
)
(6,375
)
Unrealized loss on derivatives, net
—
—
—
—
(311
)
—
(311
)
Tax deduction on share issuance costs
—
(136
)
—
—
—
—
(136
)
Tax deduction on share based
compensation
—
—
(2,875
)
—
—
—
(2,875
)
Foreign currency translation
—
—
—
—
(18
)
—
(18
)
Net loss
—
—
—
—
—
(12,692
)
(12,692
)
Balance, December 31, 2021
50,462,655
$
158,193
$
47,372
$
(264
)
$
(141
)
$
(190,559
)
$
14,601
Balance, June 30, 2022
51,111,769
$
160,951
$
51,333
$
(264
)
$
(207
)
$
(208,614
)
$
3,199
Shares issued under PRSU and Omnibus
Equity Incentive Plan
1,626,367
15,050
(18,649
)
—
—
—
(3,599
)
Share-based compensation
—
—
13,734
—
—
—
13,734
Cash dividends
—
—
—
—
—
(6,282
)
(6,282
)
Unrealized loss on derivatives, net
—
—
—
—
(542
)
—
(542
)
Tax deduction on share issuance costs
—
(143
)
—
—
—
—
(143
)
Tax deduction on share based
compensation
—
—
1,367
—
—
—
1,367
Net loss
—
—
—
—
—
(16,485
)
(16,485
)
Balance, December 31, 2022
52,738,136
$
175,858
$
47,785
$
(264
)
$
(749
)
$
(231,381
)
$
(8,751
)
ABSOLUTE SOFTWARE CORPORATION
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(Expressed in thousands of United
States dollars)
Three months ended December
31,
Six months ended December
31,
2022
2021
2022
2021
Cash from (used in):
Operating activities:
Net loss
$
(6,999
)
$
(5,123
)
$
(16,485
)
$
(12,692
)
Items not involving cash:
Depreciation of property and equipment
732
851
1,489
1,728
Amortization of right-of-use assets
965
984
1,925
1,939
Amortization of intangible assets
4,441
4,591
8,882
9,182
Amortization of contract acquisition
assets
3,767
4,006
6,678
7,514
Share-based compensation
5,439
4,731
14,755
8,026
Current and deferred income taxes
(4,134
)
(3,968
)
(10,071
)
(7,228
)
Interest expense
7,141
5,117
13,173
10,198
Unrealized foreign exchange (gain)
loss
172
(6
)
(10
)
(98
)
Changes in non-cash operating working
capital:
Trade and other receivables
(7,616
)
(7,611
)
8,512
(5,221
)
Income tax receivable
128
(25
)
(271
)
(362
)
Prepaid expenses and other
(462
)
(248
)
(570
)
(1,179
)
Contract acquisition assets
(4,473
)
(4,400
)
(7,870
)
(8,583
)
Trade and other payables
(1,441
)
7,068
(702
)
(1,386
)
Income tax payable
(1,126
)
(3
)
(1,320
)
71
Deferred revenue
4,370
8,767
(2,033
)
12,182
Cash from operating activities
904
14,731
16,082
14,091
Investing activities:
Purchase of property and equipment
(145
)
(425
)
(956
)
(623
)
Acquisition of NetMotion
—
—
—
(341,699
)
Cash used in investing activities
(145
)
(425
)
(956
)
(342,322
)
Financing activities:
Dividends paid
(3,118
)
(3,226
)
(6,282
)
(6,375
)
Proceeds from exercise of stock options
and ESOP
—
1,256
—
1,378
Tax remittances on share-based
compensation
(1,947
)
(164
)
(1,984
)
(354
)
Payment of lease liabilities
(1,114
)
(1,047
)
(2,180
)
(2,010
)
Proceeds from long-term debt
—
—
—
269,500
Transaction costs on long-term debt
—
—
—
(1,957
)
Principal repayment of long-term debt
(5,675
)
(688
)
(6,362
)
(1,375
)
Interest payment on long-term debt
(6,566
)
(4,732
)
(12,306
)
(9,424
)
Cash (used in) from financing
activities
(18,420
)
(8,601
)
(29,114
)
249,383
Foreign exchange effect on cash
(98
)
22
(191
)
(82
)
Increase (decrease) in cash and cash
equivalents
(17,759
)
5,727
(14,179
)
(78,930
)
Cash and cash equivalents, beginning of
period
67,249
55,509
63,669
140,166
Cash and cash equivalents, end of
period
$
49,490
$
61,236
$
49,490
$
61,236
Selected Operating & Financial Metrics | Q2 F2023 USD
Thousands, except per share data
Q2 F2023
Q1 F2023
F2022
Q4 F2022
Q3 F2022
Q2 F2022
Q1 F2022
ARR
Total ARR
225,049
215,741
209,546
209,546
202,890
195,577
187,445
yoy growth*
15.1
%
15.1
%
16.0
%
16.0
%
15.7
%
15.4
%
17.1
%
New Logo ARR
4,143
4,032
14,485
2,846
3,244
3,663
4,732
yoy growth*
13.1
%
(14.8
%)
33.5
%
(13.7
%)
5.3
%
76.2
%
97.9
%
Net Dollar Retention
107
%
108
%
108
%
108
%
107
%
107
%
109
%
# of Active Endpoints
13,888
14,129
13,615
13,615
13,565
13,336
12,506
yoy growth
4.1
%
13.0
%
17.6
%
17.6
%
17.2
%
16.3
%
18.0
%
TOTAL ARR BY VERTICAL
Enterprise & Government
177,414
169,097
162,957
162,957
158,068
150,632
143,877
yoy growth*
17.8
%
17.5
%
17.3
%
17.3
%
18.5
%
16.5
%
16.9
%
Education
47,635
46,644
46,589
46,589
44,822
44,945
43,569
yoy growth*
6.0
%
7.1
%
11.7
%
11.7
%
6.9
%
11.9
%
17.8
%
TOTAL ARR BY GEOGRAPHY
North America
172,890
167,163
163,791
163,791
159,220
155,334
150,916
yoy growth*
11.3
%
10.8
%
9.8
%
9.8
%
9.5
%
9.4
%
11.1
%
International
52,159
48,578
45,755
45,755
43,670
40,243
36,530
yoy growth*
29.6
%
33.0
%
45.0
%
45.0
%
46.1
%
46.8
%
51.0
%
REVENUE
Total Adjusted Revenue
57,695
54,205
210,431
54,001
54,477
52,939
49,014
yoy growth*
9.0
%
10.6
%
15.4
%
12.7
%
17.7
%
16.7
%
14.7
%
Total Revenue
57,194
53,564
197,311
52,527
51,985
49,050
43,749
yoy growth
16.6
%
22.4
%
63.4
%
65.3
%
69.6
%
64.3
%
53.5
%
Recurring Revenue
56,203
51,918
191,555
51,025
50,505
47,642
42,383
% of revenue
98.3
%
96.9
%
97.1
%
97.1
%
97.2
%
97.1
%
96.9
%
yoy growth
18.0
%
22.5
%
63.7
%
65.5
%
70.1
%
64.7
%
53.6
%
Cloud Services
55,223
50,984
187,552
50,033
49,503
46,639
41,377
yoy growth
18.4
%
23.2
%
66.8
%
67.8
%
73.2
%
68.6
%
56.9
%
Managed Services
980
934
4,003
992
1,002
1,003
1,006
yoy growth
(2.3
%)
(7.2
%)
(13.1
%)
(3.2
%)
(10.3
%)
(20.1
%)
(16.9
%)
Other Revenue
991
1,646
5,756
1,502
1,480
1,408
1,366
% of revenue
1.7
%
3.1
%
2.9
%
2.9
%
2.8
%
2.9
%
3.1
%
yoy growth
(29.6
%)
20.5
%
54.1
%
59.9
%
54.5
%
50.9
%
50.8
%
Software License
113
74
746
203
173
194
176
yoy growth
(41.8
%)
(58.0
%)
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Other
878
1,572
5,010
1,299
1,307
1,214
1,190
yoy growth
(27.7
%)
32.1
%
34.1
%
38.2
%
36.5
%
30.1
%
31.5
%
OTHER METRICS
Adj. Gross Margin (non-IFRS)
50,796
47,709
187,005
47,668
48,385
47,045
43,908
Margin % **
88
%
88
%
89
%
88
%
89
%
89
%
90
%
Adj. EBITDA (non-IFRS)
12,810
11,473
55,791
15,420
13,785
13,785
12,801
Margin % **
22.2
%
21.2
%
26.5
%
28.6
%
25.3
%
26.0
%
26.1
%
Adj. EPS (non-IFRS)
0.05
0.06
0.41
0.08
0.10
0.13
0.09
Weighted avg # of shares outstanding -
basic
52,408
51,421
50,381
51,067
50,728
50,073
49,673
Weighted avg # of shares outstanding -
diluted ***
54,645
53,764
53,063
53,192
52,556
53,008
52,883
Cash From Operating Activities
904
15,179
39,792
8,653
17,046
14,731
(637
)
yoy growth
(94
%)
(2483
%)
(15
%)
(24
%)
134
%
10
%
(104
%)
Cash, cash equivalents, and short-term
investments
49,850
67,609
64,029
64,029
69,075
61,596
55,869
yoy growth
(19
%)
21
%
(54
%)
(54
%)
(48
%)
(53
%)
(4
%)
Total Deferred Revenue
208,438
204,068
210,471
210,471
194,326
187,852
179,086
yoy growth
11
%
14
%
31
%
31
%
24
%
22
%
21
%
* Year over year growth for ARR metrics
and Total Adjusted Revenue for F22 is calculated compared to an
as-if combined basis for F21..
** Margin % is calculated as a percentage
of Adjusted Revenue.
*** Diluted weighted average number of
common shares outstanding includes the dilutive effects of stock
options, PSUs, and RSUs, for the purposes of determining Adjusted
EPS. The amount may differ from diluted weighted average number of
common shares outstanding disclosed in the Company’s financial
statements, which excludes such dilutive securities when their
effects are antidilutive.
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, acquisition and integration costs,
litigation costs, impairment losses, 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
Q2 F2023
Q2 F2022
Diluted loss per share
$
(0.13
)
$
(0.10
)
Adjustments:
Depreciation and amortization(1)
0.11
0.12
Share-based compensation
0.10
0.09
Fair value adjustments relating to
acquired deferred revenue
0.01
0.07
Fair value adjustments relating to
acquired deferred commission
—
(0.01
)
Acquisition and integration costs
0.02
0.03
Litigation costs
0.01
0.01
Income tax effects related to non-GAAP
adjustments(2)
(0.07
)
(0.08
)
Adjusted EPS
$
0.05
$
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)
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 Q2 F2023 and Q2 F2022 is presented below.
Q2 F2023
Q2 F2022
Basic weighted average number of common
shares outstanding
52,408,347
50,072,631
Effect of dilutive securities:
Stock Option
151,687
269,561
PSU
807,602
1,191,388
RSU
1,277,745
1,474,795
Diluted weighted average number of common
shares outstanding(1)
54,645,381
53,008,375
(1)
Diluted weighted average number
of common shares outstanding for Adjusted EPS may differ from
diluted weighted average number of common shares outstanding
disclosed in the Company’s financial statements, which excludes the
impact of dilutive securities when their effects are
antidilutive.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230214005711/en/
Investor Relations Joo-Hun Kim IR@absolute.com
212-868-6760
Media Relations Becki Levine press@absolute.com
858-524-9443
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