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Absolute Software Reports Second Quarter Fiscal 2023 Financial Results

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.

 

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