Absolute Reports Fiscal 2019 Third Quarter Financial Results

Absolute (TSX:
ABT) (“Absolute” or the “Company”), the leader in endpoint resilience,
today announced its financial results for the three and nine month
periods ended March 31, 2019. All dollar figures are unaudited and
stated in U.S. dollars, unless otherwise indicated.

“Enterprises are expected to spend over $124 billion on IT security this
year⁽²⁾, much of it on endpoint controls, and yet, 70 percent
of all breaches occur on the endpoint⁽³⁾. The layering of
multiple agents, the fragmentation, complexity and scale, can result in
the vulnerability or decay of endpoint controls,” said Christy Wyatt,
Chief Executive Officer at Absolute. “Absolute’s opportunity is
tremendous, being uniquely positioned to help the modern enterprise with
our persistence and resilience offerings which fill a critical gap in
healing endpoints and maintaining compliance.”

Key Financial Metrics

• Total revenue in Q3-F2019 was $24.9 million, representing a
  year-over-year increase of 7%. Year-to-date total revenue was $73.6
  million, representing an increase of 6% over the prior year-to-date
  period.
• Commercial recurring revenue in Q3-F2019 was $24.0 million,
  representing a year-over-year increase of 8%. Year-to-date commercial
  recurring revenue was $70.5 million, representing an increase of 7%
  over the prior year-to-date period.
• Adjusted EBITDA in Q3-F2019 was $5.8 million, up 139% from $2.4
  million in Q3-F2018. Adjusted EBITDA margin expanded to 23% in
  Q3-F2019 compared to 10% in the prior year period. Year-to-date
  Adjusted EBITDA was $14.4 million, representing an increase of 136%
  from $6.1 million in the prior year-to-date period. Year-to-date
  Adjusted EBITDA margin of 20% compares to 9% in the prior year-to-date
  period.
• Cash generated from operating activities in Q3-F2019 was $0.8 million,
  compared with $2.3 million in Q3-F2018. Year-to-date cash from
  operating activities was $6.8 million, compared with $7.6 million in
  the prior year-to-date period.
• The Annual Contract Value (“ACV”) Base at March 31, 2019 was $95.2
  million, an increase of 5% year-over-year and relatively unchanged
  from the prior quarter. This performance was driven by a combination
  of incremental ACV from new customers of $1.1 million in Q3-F2019,
  compared to $0.8 million in Q3-F2018, and Net ACV Retention from
  existing customers of 99%, compared to 100% a year ago.
• The Enterprise⁽⁴⁾ sector portion of the ACV Base increased
  9% year-over-year and was relatively unchanged sequentially.
  Enterprise customers represented 53% of the ACV Base at March 31, 2019.
• The Government⁽⁴⁾ sector portion of the ACV Base increased
  19% year-over-year and was up 2% sequentially. Government customers
  represented 12% of the ACV Base at March 31, 2019.
• The Education⁽⁴⁾ sector portion of the ACV Base decreased
  3% from the prior year and decreased 1% sequentially. Education
  customers represented 35% of the ACV Base at March 31, 2019.
• Absolute paid a quarterly dividend of CAD$0.08 per common share during
  Q3-F2019.

Organizational Developments

• In March 2019, Absolute announced the appointment of Dr. Nicko van
  Someren as the Company’s new Chief Technology Officer. Dr. van Someren
  has more than two decades of experience leading, developing and
  bringing to market disruptive security technologies. He previously
  served as Chief Security Officer and Chief Information Officer at
  nanopay, a financial services technology company where he was
  responsible for all security and IT operations. Dr. van Someren has
  also served as Chief Technology Officer at the Linux Foundation, Good
  Technology (now a part of BlackBerry) and nCipher (recently acquired
  by Entrust Datacard), as well as the Chief Security Architect at
  Juniper Networks, and also serves as an advisor to numerous startups
  and security businesses.
• In February 2019, Absolute was recognized as a leader in the G2
  Crowd Grid® Winter 2019 Report for Endpoint Management. The report
  spotlights top-reviewed endpoint management solutions that enable
  companies to manage and secure endpoint infrastructure and ensure
  their endpoint protection software is present and healthy. All
  reviewers gave either four-star or five-star ratings for the Absolute
  platform, recognizing Absolute for Best Overall Endpoint Management
  Software, Best Mid-Market Endpoint Management Software and Best
  Customer Relationships. The rankings for Absolute indicate very high
  customer satisfaction with 97% of reviewers providing an average
  rating of 4.6 out of 5 stars and 91% confirming they would recommend
  Absolute.
• In February 2019, Absolute was again selected for the British
  Columbia’s Top Employers of the Year list. The BC’s Top Employers
  of the Year annual ranking recognizes those organizations that serve
  as an example within their industry, offering exceptional benefits and
  professional development opportunities for staff while achieving and
  sustaining business growth. Absolute was also selected as a BC Top
  Employer in 2018.

Notes:

1. “Adjusted EBITDA” is used as a profitability measure. Please refer to
the “Non-IFRS Measures” section of our Q3-F2019 MD&A for further
discussion on this measure.

2. Gartner
forecasts worldwide information security spending to exceed 124 billion
in 2019.

3. IDC
says 70% of breaches originate on the endpoint.

4. In Q1-F2019, we modified the allocation of some customer accounts
between industry verticals, primarily the allocation of some
quasi-governmental organizations from the Enterprise vertical to the
Government vertical, which was previously included in a “Public”
vertical. This reallocation was applied retrospectively, and has
resulted in a revision to previously reported ACV Base and ACV Base
growth figures for those verticals in historical periods. Please refer
to the “Annual Contract Value Base” section of our Q3-F2019 MD&A.

5. Commercial recurring revenue represents revenue derived from Cloud
Services (as defined in our Q3-F2019 MD&A) and recurring managed
professional services, both of which are included as part of our ACV
Base. Other revenue represents revenue derived from non-recurring
professional services and ancillary product lines, including consumer
products.

F2019 Corporate Outlook

The Company is updating its outlook for F2019 as follows:

• The Company is narrowing its expectation for revenue from between
  $96.0 million and $99.0 million to between $97.5 million and $99.0
  million;
• The Company is increasing its expectation for Adjusted EBITDA from
  between 16% and 19% of revenue to between 18% and 20% of revenue;
• The Company is decreasing its expectation for cash from operating
  activities from between 10% and 14% of revenue to between 8% and 12%
  of revenue; and
• The Company is decreasing its expectation for F2019 capital
  expenditures from between $3.5 million and $4.0 million to between
  $3.0 million and $3.5 million.

The foregoing expectations constitute forward-looking information and
financial outlook and are qualified in their entirety by the cautionary
statement below.

Quarterly Dividend
On April 19, 2019, the Company declared a
quarterly dividend of CAD$0.08 per share on its common shares, payable
in cash on May 29, 2019 to shareholders of record at the close of
business on May 8, 2019.

Quarterly Filings
Management’s Discussion and Analysis
(“MD&A”) and Interim Condensed Consolidated Financial Statements and the
notes thereto for Q3-F2019 can be obtained today from Absolute’s
corporate website at www.absolute.com.
The documents will also be available under Absolute’s profile at www.sedar.com.

Notice of Conference Call
Absolute will hold a conference
call to discuss its Q3-F2019 results on Monday, May 6, 2019, at 5:00
p.m. ET (2:00 p.m. PT). All interested parties can join the call by
dialing 647-427-7450 or 888-231-8191. Please dial in 15 minutes prior to
the call to secure a line. The conference call will be archived for
replay until Monday, May 13, 2019, at midnight ET. To access the
archived conference call, please dial 416-849-0833 or 1-855-859-2056 and
enter the reservation code 4608779.

A live audio webcast of the conference call will be available at www.absolute.com
and https://bit.ly/2UopV4B.
Please connect at least 15 minutes prior to the conference call to
ensure adequate time for any software download that may be required to
join the webcast. An archived replay of the webcast will be available on
the Company’s website for 90 days.

Non-IFRS Measures and Definitions
Throughout this press
release, the Company refers to a number of measures that the Company
believes are meaningful in the assessment of the Company’s performance.
All these metrics are nonstandard measures under International Financial
Reporting Standards (“IFRS”), and are unlikely to be comparable to
similarly titled measures reported by other companies. Readers are
cautioned that the disclosure of these items is meant to add to, and not
replace, the discussion of financial results or cash flows from
operations as determined in accordance with IFRS. For a discussion of
the purpose of these non-IFRS measures, please refer to the Company’s
Q3-F2019 MD&A.

These measures, as well as their method of calculation or reconciliation
to IFRS measures, are as follows:

1) ACV Base, Net ACV Retention and ACV from New Customers
As
the majority of the Company’s customer contracts are sold under
multiyear term licenses, there is a significant lag between the timing
of the billing and the associated revenue recognition. As a result, the
Company focuses on the aggregate annualized value of its subscriptions
under contract, measured by Annual Contract Value, as an indicator of
its future revenues.

The ACV Base measures the amount of recurring annual revenue Absolute
will receive from its commercial customers under contract at a point in
time, and therefore is an indicator of the Company’s future revenue
streams. Net ACV Retention measures the percentage increase or decrease
in the Commercial ACV Base at the end of a period for the customers that
made up the Commercial ACV Base at the beginning of the same period.
This metric provides insight into the effectiveness of Absolute’s
customer retention and expansion functions. ACV from New Customers
measures the addition to the Commercial ACV Base from sales to new
commercial customers during the quarter.

We believe that increases in the amount of ACV from New Customers, and
improvement in the Company’s Net ACV Retention, will grow our Commercial
ACV Base and, in turn, our future revenues.

2) Adjusted EBITDA
Management believes that analyzing
operating results exclusive of significant noncash items or items not
controllable in the period provides a useful measure of the Company’s
performance. The term “Adjusted EBITDA” refers to earnings before
deducting interest and investment gains (losses), income taxes,
amortization of intangible assets and property and equipment, foreign
exchange gain or loss, share-based compensation, and restructuring and
reorganization charges and post-retirement benefits. The items excluded
in the determination of Adjusted EBITDA are share-based compensation,
amortization of intangibles, amortization of property and equipment, and
restructuring and reorganization charges and certain post-retirement
benefits.

3) Adjusted Operating Expenses
A number of significant
noncash or nonrecurring expenses are reported in the Company’s Cost of
Revenue and Operating Expenses. Management believes that analyzing these
expenses exclusive of these noncash or nonrecurring items provides a
useful measure of the cash invested in the operations of its
business. The items excluded in the determination of Adjusted Operating
Expenses are share-based compensation, amortization of intangible
assets, amortization of property and equipment, and restructuring and
reorganization charges and certain post-retirement benefits. For a
description of the reasons these items are adjusted, please refer to the “Non-IFRS
Measures” section of the Q3-F2019 MD&A.

About Absolute
Absolute empowers more than 12,000 customers
worldwide to protect devices, data, applications, and users against
theft or attack—both on and off the corporate network. With the
industry’s only tamper-proof endpoint visibility and control solution,
Absolute allows IT organizations to enforce asset management, security
hygiene, and data compliance for today’s remote digital workforces.
Absolute’s patented Persistence® technology is embedded in the firmware
of Dell, HP, Lenovo, and 22 other leading manufacturers’ devices for
vendor-agnostic coverage, tamper-proof resilience, and ease of
deployment. See how it works at www.absolute.com
and follow us on Twitter at @absolutecorp.

©2019 Absolute Software Corporation. All rights reserved. ABSOLUTE and
PERSISTENCE are registered trademarks of Absolute Software Corporation.
Other names or logos mentioned herein may be the trademarks of their
respective owners. For patent information, visit www.absolute.com/patents.
The Toronto Stock Exchange has neither approved nor disapproved of the
information contained in this press release.

Forward-Looking Statements
This press release contains
certain forward-looking statements and forward-looking information
(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 “F2019 Corporate Outlook”
and any statements (express or implied) respecting: Absolute’s future
plans, strategies, and objectives; projected growth, revenues, margins,
Adjusted EBITDA, profitability, expenses, cash from operating
activities, capital expenditures, and earnings; existing and new product
functionality and suitability; and expectations for the size of the IT
security industry. Forward-looking statements, including the F2019
Corporate Outlook, are provided for the purpose of presenting
information about management’s current expectations and plans relating
to the future and allowing investors and others to get a better
understanding of our anticipated financial position, results of
operations, and operating environment. Readers are cautioned that such
information may not be appropriate for other purposes.

Forward-looking statements are not guarantees of future performance,
actions, or developments and are based on expectations, assumptions and
other factors that management currently believes are relevant,
reasonable, and appropriate in the circumstances. The material
expectations, assumptions, and other factors used in developing the
forward-looking statements set out herein include or relate to the
following, without limitation: Absolute will be able to successfully
execute its plans, strategies, and objectives; Absolute will be able to
successfully manage cash flow, operating expenses, interest expenses,
capital expenditures, and working capital and credit, liquidity, and
market risks; Absolute will be able to leverage its past investments to
support growth and increase profitability; the size of the IT security
industry will be in line with industry experts’ and Absolute’s
expectations; 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, operating
systems such as Microsoft Windows; Absolute will be able to maintain and
develop its partner and reseller network; Absolute’s current and future
OEM partners (if any) will continue to provide embedded firmware and
distribution and resale support; Absolute’s existing and new products
will function as intended and will be suitable for the intended end
users; Absolute will be able to design, develop, and release new
products, features, and services and enhance its existing products and
services; Absolute will be able to protect against the improper
disclosure of data we may process, store, and/or manage; Absolute’s
revenues will not become subject to increased seasonality; future
financing will be available to Absolute on favourable terms when and if
required; Absolute will be in a financial position to buy back some of
its shares and/or 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); Absolute will be able to
maintain and enhance its intellectual property portfolio; Absolute’s
protection of its intellectual property is 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; Absolute will not face any material unexpected
costs related to product liability or warranties; foreign jurisdictions
will not impose unexpected risks; and Absolute will maintain or enhance
its accounting policies and standards and internal controls and 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, as more particularly described in the “Risk
Factors” sections of Absolute’s most recently filed Management’s
Discussion and Analysis and Annual Information Form, both of which are
available at www.absolute.com
and under Absolute’s profile on www.sedar.com.
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.

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