Absolute software reports fourth quarter and full-year fiscal 2022 financial results
Vancouver, british columbia & san jose, calif.--(business wire)--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 fourth quarter and full-year fiscal 2022 ended june 30, 2022. all dollar figures are stated in u.s. dollars, unless otherwise indicated. “this year was the strongest in recent history – driven by the strong customer demand and our team’s continued focus and execution we are ending the year with our successful integration of netmotion almost complete and very well positioned for success in fy23,” said christy wyatt, president and ceo of absolute software. “security and it teams are increasingly acknowledging the need for both cyber defense as well as cyber resilience and as a result the industry is increasingly aware of the value in our unique intelligent, self-healing security solutions. we intend to continue investing in growth through fy2023, while maintaining focus on meeting the rule of 40 for the year.” fourth quarter (“q4”) and full-year fiscal 2022 (“f2022”) financial highlights revenue was $52.5 million for q4 f2022 and $197.3 million for f2022, an increase of 65% and 63% respectively, compared to the same period of the previous fiscal year. adjusted revenue(1) was $54.0 million for q4 f2022 and $210.4 million for f2022, an increase of 70% and 74% respectively, compared to the same period of the previous fiscal year. adjusted revenue(1) for q4 f2022 and f2022 increased by 13% and 15% respectively, compared to q4 f2021 and f2021 revenue on an as-if combined basis without factoring in acquisition related adjustments(2). net loss was $5.3 million for q4 f2022 and $24.5 million for f2022, compared to net loss of $3.0 million for q4 f2021 and net income of $3.7 million for f2021. adjusted ebitda(1) for q4 f2022 was $15.4 million or 29% of adjusted revenue(1), compared to $8.0 million or 25% of adjusted revenue for q4 f2021. adjusted ebitda(1) for f2022 was $55.8 million or 27% of adjusted revenue(1), compared to $31.9 million or 26% of adjusted revenue for f2021. total annual recurring revenue (“arr”)(4) as of june 30, 2022 was $209.5 million, representing an increase of 70% over the prior year reported arr, and an increase of 16% compared to an as-if combined basis for june 30, 2021(3). the enterprise & government portions of total arr increased by 99% year over year, and by 17% compared to an as-if combined basis for june 30, 2021(3). the enterprise & government portion represented 78% of total arr as of june 30, 2022. the education sector portion of total arr increased by 12% year over year, and by 12% compared to an as-if combined basis for june 30, 2021(3). the education sector portion represented 22% of total arr as of june 30, 2022. net dollar retention(4) was 108% for q4 f2022, an increase from 106% for q4 f2021. cash from operating activities was $8.7 million for q4 f2022 and $39.8 million for f2022, a decrease of 24% and 15% respectively from $11.4 million for q4 f2021 and $46.8 million for f2021. cash was negatively impacted as a result of one of our largest partners having a one-time migration of their payment system, which caused a delay in payment and pushed it into the following quarter. this payment has been subsequently received. had it not been for that, our cash balance would have been approximately $72 million. a quarterly dividend of cad$0.08 per outstanding common share was paid in q4 f2022. notes: adjusted revenue and adjusted ebitda are non-ifrs measures. refer to the “use of non-ifrs measures and key metrics” section of the f2022 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. q4 f2021 and f2021 revenue on an as-if combined basis includes the combined revenue of absolute and netmotion for q4 f2021 and f2021, as if the acquisition of netmotion occurred on july 1, 2020. revenue attributable to absolute software is reported under ifrs and revenue attributable to netmotion is reported under us gaap. the amount does not include us gaap to ifrs adjustments, which are deemed immaterial. june 30, 2021 arr on an as-if combined basis combines the historical arr of absolute and netmotion at june 30, 2021, as if the acquisition of netmotion occurred on july 1, 2020. total arr and net dollar retention are key metrics. refer to the “use of non-ifrs measures and key metrics” section of this md&a for further discussion of these measures. selected quarterly information usd millions, except percentages, number of shares, and per share amounts q4 f2022 q4 f2021 change ytd f2022 ytd f2021 change revenue cloud and subscription services $ 50.0 $ 29.9 67 % $ 187.5 $ 112.5 67 % managed professional services 1.0 1.0 — % 4.0 4.6 (13 %) recurring revenue(1) $ 51.0 $ 30.9 65 % $ 191.5 $ 117.1 64 % other(1) 1.5 0.9 67 % 5.8 3.7 57 % total revenue $ 52.5 $ 31.8 65 % $ 197.3 $ 120.8 63 % adjusted revenue(2) $ 54.0 $ 31.8 70 % $ 210.4 $ 120.8 74 % total annual recurring revenue (“arr”)(3) $ 209.5 $ 123.4 70 % net (loss) income $ (5.3 ) $ (3.0 ) 77 % $ (24.5 ) $ 3.7 (762 %) per share – basic (0.10 ) (0.06 ) (0.49 ) 0.08 per share – diluted (0.10 ) (0.06 ) (0.49 ) 0.07 as a percentage of revenue (10 %) (9 %) (12 %) 3 % adjusted ebitda(2) $ 15.4 $ 8.0 93 % $ 55.8 $ 31.9 75 % as a percentage of adjusted revenue 29 % 25 % 27 % 26 % cash from operating activities $ 8.7 $ 11.4 (24 %) $ 39.8 $ 46.8 (15 %) dividends paid $ 3.1 $ 3.3 (6 %) $ 12.6 $ 12.0 5 % per share (cad) 0.08 0.08 0.32 0.32 as at june 30, 2022 june 30, 2021 change cash, cash equivalents, and short-term investments $ 64.0 $ 140.5 (54 %) total assets 555.6 232.6 139 % deferred revenue(4) 210.5 160.2 31 % total non-current financial liabilities(5) 271.4 9.0 2916 % common shares outstanding (millions) 51.1 49.6 3 % notes: 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. 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 f2022 md&a for further discussion of these measures. total arr is a key metric. refer to the “use of non-ifrs measures and key metrics” section of the f2022 md&a for further discussion of this measure. deferred revenue includes current and non-current amounts. total non-current financial liabilities include non-current portion of lease liabilities and long-term debt. q4 f2022 business highlights business and organizational developments: in april, we launched operations in australia and new zealand, as well as expanded operations across europe, the middle east and africa (emea), as a result of continued demand for our intelligent, self-healing security solutions. in may, we were named the winner of a bronze stevie® award, part of the 20th annual american business awards®, in the category of company of the year - computer software. in june, we were named the winner of two global infosec awards by cyber defense magazine (cdm) for ‘most comprehensive endpoint security’ and ‘market leader - zero trust at rsac.’ in june, absolute completed a reorganization to consolidate and integrate netmotion software, inc. (“netmotion”) into absolute creating a more efficient operating structure going forward. product and service highlights: in q4, we reached 13.6 million active endpoints across our global customer base – an increase of 18% year over year. in q4, we added 11 mission-critical applications to our application persistence™ ecosystem, including blackberry cylanceprotect® and ivanti neurons for unified endpoint management (uem), enabling joint absolute resilience™ customers to ensure they remain healthy and undeletable. in april, we delivered enhancements to our secure access product portfolio, including self-healing zero trust network access (ztna); a resilient deployment architecture; and expanded network and ztna policy intelligence. in april, we launched absolute ransomware response, enabling customers with the capabilities and services needed to strengthen ransomware preparedness and accelerate endpoint recovery. partner and other highlights: in q4, we partnered with lenovo to launch lenovo smart lock services, powered by absolute, and the lenovo commercial vantage program. in april, we named orca tech as australia and new zealand distributor, as well as appointed new sales leadership, to accelerate growth and awareness in the region. in june, we announced ericom, utopic, and winmagic® as new partners leveraging absolute application persistence-as-a-service (apaas) to strengthen resiliency of their endpoint applications. in june, we published ‘the value of zero trust in a work-from-anywhere world’ report, revealing the increased risk exposure organizations face amid the shift to distributed and hybrid work. f2022 business highlights business and organizational developments: in july 2021, we completed the acquisition of netmotion. in f2022, we made key executive appointments, including ron fior as interim chief financial officer (cfo), peter chess as general counsel and john herrema as executive vice president of product and strategy. in addition, andre mintz joined our board of directors. in f2022, we were featured as a representative vendor in the gartner "market guide for zero trust network access” (ztna) report. in f2022, we were recognized as a winner or finalist in 13 award programs - including bc tech’s ‘technology impact awards,’ g2’s 2022 best software awards, the crn® 2022 partner program guide, and the gartner peer insights customer choice awards - and were named a leader in the g2 summer 20022 grid® report for endpoint management for the 10th consecutive quarter. product and service highlights: in f2022, we grew the total number of mission-critical applications in our application resilience library to more than 60. in f2022, we launched application persistence-as-a-service (apaas) – empowering isvs and system manufacturers to leverage absolute’s firmware-embedded, self-healing device connection to strengthen the resiliency of their mission-critical applications. we also announced apaas partnerships with leading isvs including plurilock, smart eye technology, ericom, winmagic, and utopic software. in f2022, we continued to deliver a steady cadence of product innovations, including: the first combined product milestone following our acquisition of netmotion, with the launch of the industry’s first self-healing zero trust platform. absolute insights™ for endpoints and networks, enabling customers to analyze critical performance metrics spanning endpoints, users, applications, and network connections. enhancements to our secure endpoint product portfolio, including the absolute dataexplorer™ tool and enhanced geolocation capabilities. critical certifications for our secure access product line, including common criteria evaluation assurance level (eal) 4+ - the highest certification level recognized under the common criteria program for software products - and the completion of a system and organizational controls (soc 2) type i audit. a new k-12 offering, absolute resilience for student devices, enabling education it teams with critical capabilities to better manage and secure 1:1 device programs. the first combined product milestone following our acquisition of netmotion, with the launch of the industry’s first self-healing zero trust platform. absolute insights™ for endpoints and networks, enabling customers to analyze critical performance metrics spanning endpoints, users, applications, and network connections. enhancements to our secure endpoint product portfolio, including the absolute dataexplorer™ tool and enhanced geolocation capabilities. critical certifications for our secure access product line, including common criteria evaluation assurance level (eal) 4+ - the highest certification level recognized under the common criteria program for software products - and the completion of a system and organizational controls (soc 2) type i audit. a new k-12 offering, absolute resilience for student devices, enabling education it teams with critical capabilities to better manage and secure 1:1 device programs. partner and other highlights: in f2022, absolute continued to be included as a key component in the global security portfolios of dell, lenovo, and hp. named as a strategic security partner by lenovo in the launch of their global ‘everything-as-a-service’ strategy and lenovo smart lock services. partnered with hp to launch a successful retail bundle on qvc in north america and turn on factory activation for consumer devices in emea. named as a strategic security partner by lenovo in the launch of their global ‘everything-as-a-service’ strategy and lenovo smart lock services. partnered with hp to launch a successful retail bundle on qvc in north america and turn on factory activation for consumer devices in emea. in f2022, we continued to scale our business in international markets, appointing the nuvias group as distributor in the dach region, expanding on the previous distribution agreements in the uk and benelux. in f2022, at&t named our secure access platform as a key solution helping to power firstnet®, the only nationwide network built for america’s first responders. f2023 financial outlook the company’s financial outlook for its 2023 fiscal year (july 1, 2022 – june 30, 2023) is as follows(1): full-year f2023 adjusted revenue(2) is expected to be in the range of $241.5 million to $246.5 million; this equates to a full-year f2023 adjusted revenue growth of approximately 14.8% to 17.1% (3). full-year f2023 adjusted ebitda(2) margin, calculated on adjusted revenue, is expected to be in the range of 21.0% to 24.0%. notes: the foregoing outlook and expectations constitute forward-looking statements and financial outlook and are qualified in their entirety by the “forward-looking statements” cautionary statement below. the purpose of this financial outlook is to provide readers with disclosure regarding management’s current reasonable expectations and plans for f2023. readers are cautioned that this financial outlook may not be appropriate for other purposes. quarterly dividend on july 20, 2022, we declared a quarterly dividend of cad$0.08 per share on our common shares, payable in cash on august 26, 2022 to shareholders of record at the close of business on august 11, 2022. 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 june 30, 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 q4 f2022 earnings presentation and a dashboard of selected operating and financial metrics. conference call absolute software will host a conference call on tuesday, august 23, 2022 at 5:00 p.m. eastern time (2:00 p.m. pacific time) to discuss its results and business outlook. the call will be accessible by dialing 1-844-763-8274 or 1-412-717-9224; participants should ask to join the absolute software call. a live audio webcast of the conference call will also be available via the absolute investor relations website. the conference call will be archived for replay until tuesday, august 30, 2022. to access the archived conference call, please dial 855-669-9658 or 1-877-344-7529 and enter the reservation code 4165976. to access the replay 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 half a billion 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 more than 17,000 customers, g2 recognized absolute as a leader for the tenth consecutive quarter in the summer 20022 grid® report for endpoint management and as a high performer in the g2 grid report for zero trust networking. ©2022 absolute ©2022 absolute software corporation. all rights reserved. absolute, the absolute logo, and netmotion are registered trademarks of absolute software corporation. other names or logos mentioned herein may be the trademarks of absolute or their respective owners. the absence of the symbols ™️ and ® in proximity to each trademark, or at all, herein is not a disclaimer of ownership of the related trademark. use of non-ifrs measures and key metrics throughout this press release we refer to a number of measures and metrics which we believe are meaningful in the assessment of the company’s performance. many of these measures and metrics do not have any standardized meaning under international financial reporting standards (“ifrs”) as issued by the international accounting standards board and are unlikely to be comparable to similarly titled measures reported by other companies. readers are cautioned that the disclosure of these items is meant to add to, and not replace, the discussion of financial results or cash flows from operations as determined in accordance with ifrs. the purpose of these non-ifrs measures and key metrics is to provide supplemental information that may prove useful to readers who wish to consider the impact of certain non-cash or non-recurring items on the company’s operating performance, and assist in comparison of our operating results over historical periods. supplementing ifrs disclosures with non-ifrs measures outlined below provides management with an additional view of operational performance by excluding expenses that are not directly related to performance in any particular period. management uses both ifrs and non-ifrs measures when planning, monitoring and evaluating the company’s performance. these measures and metrics are as follows: key metrics a) total arr, net dollar retention, and new logo arr as the majority of our customer contracts are sold under prepaid multi-year term licenses, there is typically a significant lag between the timing of the invoice and the associated revenue recognition. as a result, we focus on the annualized recurring value of all active contracts, measured by annual recurring revenue (“arr”), as an indicator of our future recurring revenues. arr includes multi-year and short-term subscriptions for cloud-based services, as well as managed professional services and professional services with terms greater than one year. both multi-year contracts and contracts with terms less than one year are annualized by dividing the total committed contract value by the number of months in the subscription term and then multiplying by twelve. we believe that increases in the amount of new logo arr, and improvement in our net dollar retention, will accelerate the growth of total arr and, in turn, our future revenues. we provide these metrics as they are used to manage the business, however we believe there is no similar measure under ifrs to which they would 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, and therefore is an indicator of our future revenue streams. total arr will change over a period through the retention, attrition and expansion of existing customers and the acquisition of new customers. net dollar retention (previously “net arr retention”) is a key metric and measures the percentage increase or decrease in total arr at the end of a year for customers that comprised total arr at the beginning of the year. this metric provides insight into the effectiveness of our activities to retain and expand the arr of our existing customers. new logo arr (previously “arr from new customers”) is a key metric and measures the addition to total arr from sales to new customers during a period. non-ifrs measures a) adjusted revenue adjusted revenue is defined as revenue, excluding fair value adjustments relating to acquired deferred revenue. in connection with the acquisition of netmotion, netmotion’s deferred revenue was written down to its fair value at the acquisition date. as a result, related revenue in the post acquisition period does not reflect the full amount of revenue that would otherwise be recognized. we believe excluding fair value adjustments relating to deferred revenue provides a useful measure of the company’s performance as it allows for comparability across future periods, where revenue recognized would reflect the transaction price, without acquisition-related fair value adjustments. b) adjusted gross margin and gross margin % adjusted gross margin is defined as gross margin, adjusted for depreciation and amortization, share-based compensation expense, fair value adjustments relating to acquired deferred revenue, and non-recurring items. adjusted gross margin % is defined as adjusted gross margin, as a percentage of adjusted revenue. c) adjusted operating expenses adjusted operating expenses is defined as sales and marketing expense, research and development expense, and general and administrative expense, excluding depreciation and amortization, share-based compensation expense, fair value adjustments relating to acquired deferred commission expense, restructuring or reorganization charges and post-retirement benefits, and non-recurring items. d) adjusted earnings before interest, taxes, depreciation and amortization (“adjusted ebitda”) as of june 30, 2022, we have updated our definition of adjusted ebitda to separately identify adjustments for acquisition and integration costs, litigation costs and impairment losses. in prior periods, adjustments for acquisition, integration and litigation costs were included within ‘non-recurring items’. this change was made to provide users with more relevant, disaggregated information for certain costs which we believe to be outside of our core business activities. we believe this change will result in improved period over period comparability. there were no changes to our adjusted ebitda for the current period and comparative periods as a result of this change in definition. adjusted ebitda is defined as net income before interest income or expense, income taxes, depreciation and amortization, foreign exchange gains or losses, share-based compensation expense, fair value adjustments relating to acquired deferred revenue, fair value adjustments relating to acquired deferred commission expense, restructuring or reorganization charges and post-retirement benefits, acquisition and integration costs, litigation costs, impairment losses, and non-recurring items. we believe adjusted ebitda provides a useful measure of the company’s performance, as it helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business. adjusted ebitda has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other ifrs financial measures. some of the limitations of adjusted ebitda are that it excludes recurring expenses for interest payments, does not reflect the dilution that results from share-based compensation, and does not reflect the cost to replace amortized property and equipment and right-of-use assets. it may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure. reconciliation of non-ifrs measures from ifrs measures are presented below. adjusted revenue (usd millions) q4 f2022 q4 f2021 f2022 f2021 revenue $ 52.5 $ 31.8 $ 197.3 $ 120.8 adjustments: fair value adjustments relating to acquired deferred revenue 1.5 — 13.1 — adjusted revenue $ 54.0 $ 31.8 $ 210.4 $ 120.8 adjusted gross margin (usd millions) q4 f2022 q4 f2021 f2022 f2021 gross margin $ 42.8 $ 27.3 $ 160.5 $ 104.9 adjustments: depreciation and amortization(1) 2.8 0.2 11.3 0.7 share-based compensation 0.6 0.3 2.1 1.3 fair value adjustments relating to acquired deferred revenue 1.5 — 13.1 — adjusted gross margin $ 47.7 $ 27.8 $ 187.0 $ 106.9 adjusted gross margin % 88 % 87 % 89 % 88 % adjusted operating expenses (usd millions) q4 f2022 q4 f2021 f2022 f2021 total operating expense $ 40.7 $ 32.1 $ 167.7 $ 99.3 adjustments: depreciation and amortization(1) (3.4 ) (1.2 ) (13.9 ) (5.1 ) share-based compensation (3.5 ) (2.1 ) (14.6 ) (9.1 ) fair value adjustments relating to acquired deferred commission 0.2 — 1.8 — acquisition and integration costs (1.6 ) (9.0 ) (8.2 ) (9.0 ) litigation costs (0.2 ) — (1.6 ) (1.1 ) adjusted operating expense $ 32.2 $ 19.8 $ 131.2 $ 75.0 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) q4 f2022 q4 f2021 f2022 f2021 net (loss) income $ (5.3 ) $ (3.0 ) $ (24.5 ) $ 3.7 adjustments: depreciation and amortization(1) 6.2 1.4 25.2 5.7 share-based compensation 4.1 2.4 16.7 10.5 interest expense 5.2 0.1 20.7 0.6 foreign exchange (gain) loss (0.1 ) 0.1 0.3 0.7 income tax (recovery) expense 2.2 (2.0 ) (3.7 ) 0.6 fair value adjustments relating to acquired deferred revenue 1.5 — 13.1 — fair value adjustments relating to acquired deferred commission (0.2 ) — (1.8 ) — acquisition and integration costs 1.6 9.0 8.2 9.0 litigation costs 0.2 — 1.6 1.1 adjusted ebitda $ 15.4 $ 8.0 $ 55.8 $ 31.9 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 “f2022 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 (a 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 fedramp (as defined below) 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; 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 (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 q4 f2022 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, market, and political volatility and 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. consolidated statements of financial position (unaudited) (expressed in thousands of united states dollars, except number of shares) june 30, 2022 june 30, 2021 assets current assets: cash and cash equivalents $ 63,669 $ 140,166 short-term investments 360 360 trade and other receivables 52,722 24,113 income tax receivable 1,029 628 prepaid expenses and other 9,086 5,802 contract acquisition assets – current 9,518 8,253 136,384 179,322 property and equipment 5,195 4,629 right-of-use assets 9,456 9,967 deferred income tax assets 39,428 31,339 contract acquisition assets 6,213 6,271 intangible assets 117,537 — goodwill 240,755 1,100 other assets 650 — $ 555,618 $ 232,628 liabilities current liabilities: trade and other payables $ 32,627 $ 34,116 income tax payable 2,143 20 lease liabilities – current 4,069 2,908 long-term debt – current 1,632 — deferred revenue – current 133,852 93,303 174,323 130,347 lease liabilities 7,210 8,960 long-term debt 264,230 — deferred revenue 76,619 66,879 deferred income tax liabilities 30,037 — 552,419 206,186 shareholders’ equity share capital 160,951 151,521 equity reserve 51,333 46,489 treasury shares (264 ) (264 ) accumulated other comprehensive (loss) income (207 ) 188 deficit (208,614 ) (171,492 ) 3,199 26,442 $ 555,618 $ 232,628 consolidated statements of operations and comprehensive (loss) income (unaudited) (expressed in thousands of united states dollars, except number of shares and per share amounts) three months ended june 30, years ended june 30, 2022 2021 2022 2021 revenue $ 52,527 $ 31,777 $ 197,311 $ 120,784 cost of revenue 9,749 4,480 36,775 15,869 gross margin 42,778 27,297 160,536 104,915 operating expenses sales and marketing 19,325 11,812 79,164 45,584 research and development 10,826 5,935 44,775 23,264 general and administration 10,618 14,423 43,742 30,438 40,769 32,170 167,681 99,286 operating (loss) income 2,009 (4,873 ) (7,145 ) 5,629 other (expense) income interest income 5 2 8 50 interest expense (5,260 ) (156 ) (20,703 ) (632 ) foreign exchange gain (loss) 144 (103 ) (333 ) (690 ) (5,111 ) (257 ) (21,028 ) (1,272 ) net (loss) income before income taxes (3,102 ) (5,130 ) (28,173 ) 4,357 income tax recovery (expense) (2,235 ) 2,124 3,688 (625 ) net (loss) income $ (5,337 ) $ (3,006 ) $ (24,485 ) $ 3,732 items that may be reclassified subsequently to profit or loss unrealized (loss) gain on derivatives, net of tax (8 ) (273 ) (211 ) 188 foreign currency translation (121 ) — (184 ) — total comprehensive (loss) income $ (5,466 ) $ (3,279 ) $ (24,880 ) $ 3,920 basic net (loss) income per common share $ (0.10 ) $ (0.06 ) $ (0.49 ) $ 0.08 diluted net (loss) income per common share $ (0.10 ) $ (0.06 ) $ (0.49 ) $ 0.07 weighted average number of common shares outstanding basic 51,067,421 49,533,517 50,381,336 47,131,785 diluted 51,067,421 49,533,517 50,381,336 49,916,511 consolidated statements of changes in shareholders’ 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 (loss) income deficit total balance, june 30, 2020 42,535,495 $ 81,890 $ 38,524 $ (264 ) $ — $ (163,212 ) $ (43,062 ) shares issued for cash 6,272,727 69,000 — — — — 69,000 share issuance cost — (4,228 ) — — — — (4,228 ) shares issued on stock option exercise 106,844 805 (149 ) — — — 656 shares issued under employee share ownership plan ("esop") 68,089 512 — — — — 512 shares issued under performance and restricted share unit plan ("prsu") 590,674 3,542 (4,781 ) — — — (1,239 ) share-based compensation — — 8,539 — — — 8,539 cash dividends — — — — — (12,012 ) (12,012 ) unrealized gain on derivatives, net of tax — — — — 188 — 188 tax deduction on share-based compensation — — 4,356 — — — 4,356 net income — — — — — 3,732 3,732 balance, june 30, 2021 49,573,829 $ 151,521 $ 46,489 $ (264 ) $ 188 $ (171,492 ) $ 26,442 shares issued on stock option exercise 253,702 1,572 (198 ) — — — 1,374 shares issued under esop 94,697 853 — — — — 853 shares issued under prsu 1,189,541 7,441 (10,678 ) — — — (3,237 ) share-based compensation — — 17,555 — — — 17,555 cash dividends — — — — — (12,637 ) (12,637 ) unrealized loss on derivatives, net of tax — — — — (211 ) — (211 ) tax deduction on share issuance costs — (436 ) — — — — (436 ) tax deduction on share based compensation — — (1,835 ) — — — (1,835 ) foreign currency translation — — — — (184 ) — (184 ) net loss — — — — — (24,485 ) (24,485 ) balance, june 30, 2022 51,111,769 $ 160,951 $ 51,333 $ (264 ) $ (207 ) $ (208,614 ) $ 3,199 consolidated statements of cash flows (unaudited) (expressed in thousands of united states dollars) three months ended june 30, years ended june 30, 2022 2021 2022 2021 cash from (used in): operating activities: net (loss) income $ (5,337 ) $ (3,006 ) $ (24,485 ) $ 3,732 items not involving cash: depreciation of property and equipment 823 740 3,398 3,220 amortization of right-of-use assets 928 727 3,692 2,486 amortization of acquired intangible assets 4,441 — 18,063 — amortization of contract acquisition assets 2,649 2,912 13,804 10,980 share-based compensation 4,097 2,406 16,677 10,359 current and deferred income taxes (1,738 ) (3,542 ) (10,241 ) (3,679 ) gain on early termination of operating leases — (26 ) — (26 ) interest 5,188 117 20,385 515 unrealized foreign exchange (gain) loss (106 ) 90 (41 ) 654 changes in non-cash operating working capital: trade and other receivables (13,552 ) 1,308 (17,100 ) 4,877 income tax receivable 1,078 175 738 (516 ) prepaid expenses and other (407 ) (279 ) (3,562 ) (1,692 ) contract acquisition assets (3,125 ) (3,018 ) (15,011 ) (12,159 ) trade and other payables (4,262 ) 9,348 (3,337 ) 10,869 income tax payable 1,832 — 2,011 (363 ) deferred revenue 16,144 3,491 34,801 17,579 cash from operating activities 8,653 11,443 39,792 46,836 investing activities: purchase of property and equipment (960 ) 39 (1,829 ) (2,834 ) lease incentive received — — — 68 proceeds from maturities of short-term investments — — — 17,027 acquisition of netmotion — — (342,008 ) — cash (used in) from investing activities (960 ) 39 (343,837 ) 14,261 financing activities: proceeds from public offering — — — 69,000 share issue costs — 175 — (5,323 ) dividends paid (3,109 ) (3,280 ) (12,637 ) (12,012 ) proceeds from exercise of stock options and esop — 220 1,793 1,606 tax remittances on share based compensation (2,819 ) — (3,174 ) (1,239 ) payment of lease liabilities (1,117 ) (787 ) (3,991 ) (2,788 ) proceeds from long-term debt — — 269,500 — transaction costs on long-term debt — — (1,957 ) — principal repayment of long-term debt (688 ) — (2,750 ) — interest payment of long-term debt (4,834 ) — (18,875 ) — cash (used in) from financing activities (12,567 ) (3,672 ) 227,909 49,244 foreign exchange effect on cash (172 ) (14 ) (361 ) 98 (decrease) increase in cash and cash equivalents (5,046 ) 7,796 (76,497 ) 110,439 cash and cash equivalents, beginning of period 68,715 132,370 140,166 29,727 cash and cash equivalents, end of period $ 63,669 $ 140,166 $ 63,669 $ 140,166 selected operating & financial metrics | q4 f2022 usd thousands, except per share data f2022 * q4 f2022 * q3 f2022 * q2 f2022 * q1 f2022 * f2021 arr total arr 209,546 209,546 202,890 195,577 187,445 123,411 yoy growth 16.0 % 16.0 % 15.7 % 15.4 % 17.1 % 13.9 % new logo arr 14,485 2,846 3,244 3,663 4,732 8,516 yoy growth * 33.5 % (13.7 %) 5.3 % 76.2 % 97.9 % 25.8 % yoy growth 70.1 5.1 27.0 149.9 164.4 25.8 net dollar retention 108 % 108 % 107 % 107 % 109 % 106 % # of active endpoints 13,615 13,615 13,565 13,336 12,506 11,577 yoy growth 17.6 % 17.6 % 17.2 % 16.3 % 18.0 % 16.8 % total arr by vertical enterprise & government 162,957 162,957 158,068 150,632 143,877 81,982 yoy growth 17.3 % 17.3 % 18.5 % 16.5 % 16.9 % 10.7 % education 46,589 46,589 44,822 44,945 43,569 41,429 yoy growth 11.7 % 11.7 % 6.9 % 11.9 % 17.8 % 20.9 % total arr by geography north america 163,791 163,791 159,220 155,334 150,916 102,656 yoy growth 9.8 % 9.8 % 9.5 % 9.4 % 11.1 % 9.7 % international 45,755 45,755 43,670 40,243 36,530 20,755 yoy growth 45.0 % 45.0 % 46.1 % 46.8 % 51.0 % 40.5 % revenue total adjusted revenue 210,431 54,001 54,477 52,939 49,014 yoy growth 15.4 % 12.7 % 17.7 % 16.7 % 14.7 % total revenue 197,311 52,527 51,985 49,050 43,749 120,784 yoy growth 63.4 % 65.3 % 69.6 % 64.3 % 53.5 % 15.4 % recurring revenue 191,555 51,025 50,505 47,642 42,383 117,048 % of revenue 97.1 % 97.1 % 97.2 % 97.1 % 96.9 % 96.9 % yoy growth 63.7 % 65.5 % 70.1 % 64.7 % 53.6 % 16.5 % cloud services 187,552 50,033 49,503 46,639 41,377 112,440 yoy growth 66.8 % 67.8 % 73.2 % 68.6 % 56.9 % 16.7 % managed services 4,003 992 1,002 1,003 1,006 4,609 yoy growth (13.1 %) (3.2 %) (10.3 %) (20.1 %) (16.9 %) 10.4 % other revenue 5,756 1,502 1,480 1,408 1,366 3,736 % of revenue 2.9 % 2.9 % 2.8 % 2.9 % 3.1 % 3.1 % yoy growth 54.1 % 59.9 % 54.5 % 50.9 % 50.8 % (10.2 %) software license 746 203 173 194 176 yoy growth 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % other 5,010 1,299 1,307 1,214 1,190 3,736 yoy growth 34.1 % 38.2 % 36.5 % 30.1 % 31.5 % (10.2 )% other metrics adj. gross margin (non-ifrs) 187,005 47,668 48,385 47,045 43,908 106,863 margin % ** 89 % 88 % 89 % 89 % 90 % 88 % adj. ebitda (non-ifrs) 55,791 15,420 13,785 13,785 12,801 31,867 margin % ** 26.5 % 28.6 % 25.3 % 26.0 % 26.1 % 26.4 % adj. eps (non-ifrs) 0.41 0.08 0.10 0.13 0.09 0.46 weighted avg # of shares outstanding - basic 50,381 51,067 50,728 50,073 49,673 47,132 weighted avg # of shares outstanding - diluted *** 53,063 53,192 52,556 53,008 52,883 49,917 cash from operating activities 39,792 8,653 17,046 14,731 (637 ) 46,836 yoy growth (15 %) (24 %) 134 % 10 % (104 %) 88 % cash, cash equivalents, and short-term investments 64,029 64,029 69,075 61,596 55,869 140,526 yoy growth (54 %) (54 %) (48 %) (53 %) (4 %) 198 % total deferred revenue 210,471 210,471 194,326 187,852 179,086 160,182 yoy growth 31 % 31 % 24 % 22 % 21 % 12 % * year over year growth for fiscal 2022 is calculated compared to an as-if combined basis for the same periods of the previous fiscal year. ** 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 and non-recurring items, and income tax effects related to the non-gaap adjustments. adjusted eps is not a standardized financial measure under ifrs and therefore it may not be comparable to similar measures presented by other issuers. we believe this metric provides useful information to investors and others in understanding and evaluating our operating results as it helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business. adjusted eps (non-ifrs) reconciliation q4 f2022 f2022 diluted (loss) income per share $ (0.10 ) $ (0.49 ) adjustments: depreciation and amortization(1) 0.12 0.48 share-based compensation 0.08 0.31 foreign exchange (gain) loss — 0.01 fair value adjustments relating to acquired deferred revenue 0.03 0.25 fair value adjustments relating to acquired deferred commission — (0.03 ) acquisition and integration costs 0.03 0.16 litigation costs — 0.03 income tax effects related to non-gaap adjustments(2) (0.08 ) (0.31 ) adjusted eps $ 0.08 $ 0.41 depreciation and amortization includes depreciation of property and equipment, amortization of right-of-use assets, and amortization of acquired intangible assets. 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 is presented below. q4 f2022 f2022 basic weighted average number of common shares outstanding 51,067,421 50,381,336 effect of dilutive securities: stock option 69,017 219,098 psu 759,620 759,620 rsu 1,295,535 1,702,842 diluted weighted average number of common shares outstanding(1) 53,191,593 53,062,896 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.
