Absolute Software Corp (ABST) 2011 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Absolute Software Corporation First Quarter Conference Call.

(Operator Instructions). Before beginning its formal remarks, Absolute would like to remind listeners that certain portions of today's discussions may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. For more information on the Company's risks and uncertainties relating to these forward-looking statements, please refer to the section of annual MD&A.

(Operator Instructions). I would like to remind everyone that this conference call is being recorded today, Monday, November 1st, 2010, at 5 p.m. Eastern Time.

I would now like to turn the conference over to Mr. John Livingston, Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us to discuss our fiscal 2011 first quarter results. If you've not already seen it, today's press release can be found on website at absolute.com, along with our MD&A and financial statements.

With me today is Rob Chase, our Chief Operating Officer, and Errol Olsen, our Chief Financial Officer. I'll begin today's call with a business overview. Rob will then our operational performance and finally, Errol will discuss our financial results, after which we will open your call-- the call for your questions.

Our primary focus for fiscal 2011 is executing our sales plan and so far we're pleased with the results. We kicked off fiscal 2011 with record quarterly sales contracts of CAD 21.9 million or CAD 23.1 million in constant currency, up 20% from CAD 19.2 million for the same quarter last year. As well, as increased our customer base to 6.3 million subscribers, up from 6 million last quarter and up from 4.3 million Q1 last year.

Historically, Absolute has been viewed as a computer theft recovery company, a niche player in the broader end point security and lifecycle management industry, where, with Computrace, we created and dominated the anti-theft segment of the market.

Now, through the internal enhancement of our Computrace product suite and the addition and integration of Absolute Manage, we have expanded the breadth of our service offering to deliver comprehensive, multi-platform end-point security and lifecycle management solutions and in the process we believe we have significantly strengthened our overall customer value proposition.

Our goal at Absolute is to provide enterprise customers the ability to manage and secure all of their end-point devices -- any device, any platform, anywhere. With our expanded offering, we believe we will continue to dominate the anti-theft market segment, while now being able to compete aggressively in the broader segments of a multi-billion-dollar industry where comprehensive real-time asset tracking, data protection, and lifecycle management solutions are required.

And we are competing with a unique platform. Leveraging our persistent Computrace technology, our solutions are self-healing, our remote data delete and lock capabilities are second to none and we are the only lifecycle management solution providers that enables organizations to manage multi-platforms supporting PCs, Macs and other mobile devices, all from a single console. As a result, we are very well positioned in this broader, billion-dollar market.

While the end-point security and computer lifecycle management industry is an established market, it is being-- it is converging and being highly disrupted by the mega shifts towards mobile devices. This is creating significant new opportunities as the incumbent technology leaders are not well equipped to address the new mobile paradigm. This is where Absolute has a meaningful advantage, as our off-network, cloud-based persistent solutions were designed for this mobile world.

As a result, we have been able to move quickly to fill in the mobility and cross-platform gaps. We already support Windows, Symbian and BlackBerry mobile platforms and we recently announced our plans to provide enterprise-caliber management capabilities for Apple iOS 4 devices, as a core component of Absolute Manage. With our current capabilities to track, manage, secure and protect multiple devices, we believe our Absolute Manage solution should quickly earn a leadership position in this exciting new mobile device management market.

Finally, despite our strong first quarter sales, a cautious outlook for fiscal 2011 remains prudent as economic indicators continue to send mixed signals. However, we are encouraged by the current trends in our business and believe that are keeping pace with the current state of the refresh cycle.

On that note, I'll turn it over to Rob to talk us through the operational results. Rob?

Thanks, John, and good afternoon, everyone. One of our key fiscal 2011 initiatives is to monetize the investments we've made over the last couple years and to improve our overall operational efficiency in order to grow our sales and cash margins.

With constant currency sales contract growth of 20% over Q1 last year, we have begun to see progress on monetizing our investments. At the same time, our operational efficiency improved in Q1 with adjusted operating costs at 78% of first-quarter sales, down from 79% in Q1 last year and from 90% in Q4 last year. We think this is a positive step in the right direction, particularly Q1 this year includes additional operational costs associated with our acquisition of Absolute Manage in December of last year.

A key component of our operational efficiency is our sales and marketing costs, which were unchanged at 42% of Q1 sales. However, they are down significantly from 56% of sales in Q4 last year and 52% of sales for fiscal 2010.

We believe this shows progress toward our goal of bringing sales and marketing costs as a percentage of sales in line with industry standards. We plan to accomplish this through a combination of sales growth and cost control.

From a sales vertical perspective, our Q1 commercial sales grew 12% to CAD 17.5 million, driven by sales growth of 25% to 28% in our corporate, healthcare and government verticals, which were offset by flat educational sales. We are encouraged to see corporate and government making a comeback. We believe this reflects the increased renewal opportunity, improvements in our sales strategies and, ultimately, having the right products in the market at the right time.

Sales to existing commercial customers were up 17% in constant currency, generating 72% of first-quarter sales contracts compared to 74% last year. The expiring subscription ratio remains consistent with Q1 last year at 1.6 times and we are encouraged to see the ratio holding strong, despite the higher levels of penetration into our existing customer base.

As anticipated, the average selling price for sales to existing commercial customers declined 16% to $41.84 US compared to $48.69 US in Q1 last year. The decline reflects the change in commercial sales mix and trends within education. The non-education commercial verticals, growing 25% to 29%, the product mix has shifted toward our locate, delete and lock type technologies, which exclude theft recovery and have a lower ASP.

At the same time, some education customers are adopting lower-cost computing alternatives. As a result, we've seen an increase in our education customer sales uptake for our netbook offerings.

We believe that both of these shifts are positive for Absolute as they translate to higher-volume opportunities and as these product offerings are margin neutral and are more scalable. This also ties into our overall product strategies, as discussed by John.

First quarter sales to new commercial customers were CAD 1.8 million compared to CAD 2.4 million in last year. We believe this to be a timing issue, as our pipeline continues to show robust growth over last year and much of our current quarter focus was on expansion and upsell into existing commercial customers.

Looking at the consumer side of our business, sales contracts were CAD 4.4 million, up significantly from CAD 2.6 million in Q1 last year. About two-thirds of the growth is due to the increased bundle sales, with the remainder due to an exceptional back-to-school season and strategies to diversify consumer business.

We are expecting quarterly consumer sales for the rest of the year to be below those of Q1 due to consumer seasonality and an expected reduction in bundle sales. Ultimately, we'd continue to expect annual consumer sales at or above the CAD 9 million level achieved last year.

On the international front, sales increased 46% to 7% of Q1 sales contracts, up from 6% of sales in Q1, fiscal 2010. The growth was driven in large part by the launch of our consumer offering in EMEA in Q4, fiscal 2010, and by continued growth in our commercial verticals. We are continuing to invest in our international expansion at a measured rate.

We are confident that we have the scale, products and teams to continue our growth trend and to achieve operational efficiencies in 2011 and believe that we have the potential to accelerate this growth as the economy and PC refresh cycle strengthens.

At this point, I'll turn it over to Errol Olsen, our CFO, to provide an update on the financial results and fiscal 2011 outlook. Errol?

Thanks, Rob, and good afternoon, everyone. I'll now dive into more detail around key financial metrics and results for the quarter.

As you know, we consider cash from operating activities to be our primary financial and valuation metric. In the quarter, we generated CAD 3 million in cash from operations compared to CAD 4.3 million for the same period last year. However, when working capital changes are excluded, in Q1 of this year we actually achieved greater cash generation from core operations than we did in the prior year period. This further highlights some of the year-over-year improvement in the business that we have seen.

Our gross margin in Q1 was 72% compared to 79% in Q1 of fiscal 2010. This decrease was primarily due to the amortization of intangible assets from our LANrev and FailSafe acquisitions. Excluding the amortization charges, our gross margin increased to 80% in Q1 of this year.

Total cash operating costs or what we refer to as adjusted operating expenses, which is cost of sales plus operating expenses, but excluding stock-based compensation and amortization of acquired intangibles, were CAD 17.1 million, compared to CAD 15.2 million in Q1 of fiscal 2010 and down from CAD 17.4 million in Q4 of fiscal 2010.

The adjusted OpEx was in line with our expectation for the quarter and reflects our objective to control costs and to manage spending changes through reallocations within the overall spending envelope. Our focus is on maximizing our return in all spending areas, and, as Rob mentioned, moving toward industry-standard OpEx ratios.

The foreign exchange loss in Q1 was CAD 177,000, compared to a loss of CAD 1.4 million in Q1 of fiscal 2010. This highlights the less volatile exchange rates experienced in Q1 of this year, compared to last year, and the impact of changes in the US dollar value on our US dollar sales, receivables and cash balances.

Income taxes are also worth noting. The majority of taxes on our income statement are non-cash accruals for future tax assets or liabilities. Last year, we acquired tax deductible assets through the purchase of LANrev and FailSafe, both of which are deductible in the current and future years against income.

The bottom line for fiscal 2011 is that we do not expect to pay cash income taxes during the year. However, we currently do expect to transition into a fully taxable position over the next two fiscal years.

From a balance sheet perspective, we are well positioned. We have no debt and sufficient resources to fund our capital requirements and our future growth. At September 30th, 2010, our cash, cash equivalents and investments remained steady from June 30th at roughly CAD 58 million. This reflects the cash generated from operations, offset by the use of CAD 3.4 million for our share buy-back program under our normal course issuer bid. During the quarter, we repurchased 830,100 shares and we purchased an additional 1,244,000 subsequent to the end of the quarter.

As mentioned by John, our guidance remains unchanged for this fiscal year. We are confident in our ability to achieve our goals, particularly as in Q1 we achieved strong year-over-year growth in sales contracts and our cash flow from operations and adjusted operating expenses for Q1 were on pace with our expectations for the year.

At this point, I'll turn it back over to you, John, to conclude the call.

Thanks, Errol. Looking at the remainder of fiscal 2011, we will be focused on executing our sales plan and improving operational efficiency.

With a CAD 1 billion market opportunity in front of us, there is plenty of room for us to grow. To do so, we remain committed to our three-pronged long-term strategy -- one, growing our core anti-theft business and extending our dominant leadership position through leveraging our proven cloud delivery framework and adding new, exciting data protection features; two, aggressively growing our lifecycle management business through leveraging our unique persistence and cross-platform functionality; and three, providing customers world-class mobile device management and security capabilities.

This concludes our prepared remarks. Operator, at this time, we'd like to open up the call for questions.

(Operator Instructions). Your first question comes from the line of Glenn Jamieson with Macquarie. Your line is open.

John, I had a question about Absolute Manage. You've had that product now for a few quarters and been able to do some enhancements to it. I think last quarter you were talking about a good sales pipeline that has been developing for that product. So I'm wondering if you can tell us if you've seen further improvement in that sales pipeline? And I'm also wondering if that product is now kind of fully embraced by your direct sales team in the US? It would have taken some time to get that group up to speed on the product and have them actively selling it. Is that now in place?

Glenn, it is. It has taken us a few quarters, as you pointed out, to get everybody trained and selling the Absolute Manage technology and platform, but we think we're there now. So that's really exciting. The pipeline is growing for Absolute Manage and I think we're seeing it as a very nice entry point into enterprises that are requiring, as you know, Mac management solutions.

Now, with the Apple iOS 4 platform, supported by Absolute Manage and with netbooks soon to adopt iOS 4, I think you'll see even more a rapid set of opportunities for Absolute Manage, going forward.

Okay. And I had a question in terms of expense management. Because we've heard some concerns from investors about expenditures and the buildup of operating expense in the last several quarters. But this quarter you're talking more about managing those expenses, staying within an envelope as the top line starts to grow and we're starting to see those results. So can you just walk through what your objectives are with respect to headcount operating expense through the remainder of this year?

Sure. Glenn, this is Errol. I'll tell you our objective is, first of all, just to maintain the overall spending level. And you're right. As we mentioned, to do some reallocations within that envelope.

So, on the headcount side, we are intending to make some changes to headcount over the next six months or so. We are-- I think we finished the quarter somewhere around 350 employees, roughly, and we're planning to bring that up somewhere between 350 and 400 within the next six months. But those expenditures are offset by reductions in other program areas, specifically some marketing and partner programs.

So while headcount can still be bumped up this year, as you say, the spending envelope shouldn't change, because you had some heavy promotional marketing, I guess, last year. I remember some programs support Intel and what-have-you. Is that the offset?

That's exactly it, Glenn.

Okay. A quick question about the consumer business. You mentioned that it was quite strong and that maybe we won't see sales at the same level for the remainder of the year, but you'd hope to have sales above the CAD 9 million that we saw last year.

I'm wondering from a profitability perspective, how does that business unit shape up? I know you've done a fair bit of investing in trying to broaden the reach of that business. How is the profitability of that business if it's doing, say, CAD 10 million or CAD 11 million of sales?

Glenn, it's-- at CAD 10 or CAD 12 million it's not exactly where we want it from a profitability perspective yet, but it's making good strides toward it. So I would say that on the same level of sales or slightly above last year, the cost base will be lower than what it was last year. So we've made a good step forward there, but call it just over halfway to where we ultimately want to be.

Okay.

And so it is a phased program that we've taken to ensure that we get that healthy, as opposed to making a quick, drastic change, right?

Right. Okay. And one last question. You had mentioned the activity you've had under your normal course activity bid. I believe it's up for renewal in November. Given where the stock's trading and the cash that you have on the balance sheet and the cash you're generating, is there any reason to think that that program won't be renewed?

It is our intention to renew it when it expires-- it expires November 6th.

Okay, thank you.

Thank you.

Thanks, Glenn.

Your next question comes from the line of Tom Liston, Versant Partners. Your line is open.

All right, thank you. Good afternoon. I apologize if I missed it somehow. I didn't see it in the notes, but did you give any specific commentary around how the Manage product did this quarter and, if not, can you? And certainly, as importantly, give us a sense of what your pipeline looks at Manage versus other technologies?

So the Absolute Manage, it continues to be under CAD 1 million in sales a quarter at the moment, with one exception, our fourth quarter was strong as we did have a CAD 1 million deal in that quarter. So I would say characterize it as still lumpy while we build out the pipeline.

It's now at about getting close or approaching the 20% of pipeline mark, which is good to see. So we're having more and more of the sales teams actually start embracing it and being able to sell it. We still have the Absolute Manage sales team as a subject matter expert team that's assisting those sales through, so while we complete the training of our existing sales staff, if you will.

So I think that overall we're happy with where it's at and confident that we'll see it continue to grow. We continue to see that it's a great market opportunity for us.

And just a pretty broad question. You've obviously posted the best growth in eight or nine quarters here and consumer was quite strong. Industry commentary is pretty universal that they see the consumer weakening, yet, business performing quite strong throughout the next quarter or two.

So is that-- are you seeing something similar? Are you prepared for that pickup? How are you going to react to consumer, since you do have a high degree of renewals potentially coming this year? Could you-- a broad question. Could you answer all those pieces?

Well, Tom, on the consumer side, first of all, it's interesting Microsoft announced just the other day, as well, and they saw exceptionally strong consumer sales this back-to-school season. So I think we're no different there. If there is an expectation that that consumer sales side of the market is, indeed, softening, it just hasn't appeared yet. And, indeed, of course, we see the uptake of all these consumers devices still running rampant.

So no idea as to if and when that slows down. When we look myopically into our own business, as I mentioned on the call, we do expect it to be lower sales levels in the remainder of the year, as a result of general seasonality, plus reduced bundle sales.

On the commercial side, I think we're very confident in the commercial side of the business. We're seeing our pipeline hang in there at levels well above what they were last year. We did see strong corporate healthcare and government turnout this quarter. Education hung in there, as well, and, ultimately I think we're seeing the same as what you're hearing in the market, that it seems the commercial side of the business is coming back.

So, I think we're prepared on both fronts and, indeed, our guidance levels, if you will, allow room for either one being, perhaps, softer in any way.

And just related, you talked about especially non-education commercial side of things, looking more at some locate delete, et cetera, where ASPs might be lower, the comment being you said they were margin neutral. So I assume that means, because of the higher touch of that recovery, you're fine with selling them a lower SP product, because the contribution's going to be on an absolute level, the same number.

Exactly. And, at the same time, we're not seeing-- as those lower-cost products get adopted, we're seeing the average deal size not to be impacted. So, actually, we're seeing large deals increasing at the moment over last year, so it's a good sign that there's more volume opportunity with these, as mobility gets greater adopted and the price point is essential for that to happen.

Great. Okay, thanks. I'll pass the line.

Your next question comes from the line of Scott Penner with TD Newcrest. Your line is open.

Thanks. Just a first question on the existing commercial ASP. Last quarter, I think, Errol, you mentioned that it should be between $30 and $35 for the year this year and it's substantially above that for Q1. I'm just wondering whether you still think it'll be in that range for the year?

Yes, Scott, we still do expect that over the course of the fiscal year that the ASP will trend downward. Whether it gets as low as $30, it's hard to say, but I think we do expect it to come down to the mid $30s.

Okay. And then, just to confirm, you guys are still looking for 1.2 million commercial subs expiring for this fiscal year?

That's right.

Okay. And are you still tracking for-- I think Rob made the comment last quarter, 1.45 million or so in 2012?

It's-- yes, I think that 1.45 million was an estimate--

No, no. I said on the call, 1.25 million.

Yes, and then you added--

It probably will grow by-- yes.

Okay.

Yes, that's where it was at. So, yes, definitely.

Okay and then the timing for your encryption product, is that still by the end of this calendar year?

It is, Scott. We'll be delivering a volume-based encryption service through the Computrace side of the business by the end of this year and then we'll also be adopting and delivering an Opal-based, self-encrypting-drive solution in the first quarter of next year.

So we've got, actually, two encrypting services coming out. One is volume-based and the other one is supporting the self-encrypting-drive mechanisms built into some of the hard drive manufacturers' hard drives.

Okay, excellent. And then just lastly here, you made the comments on the operating expenses. Last quarter the-- I can recall the CAD 17 million a quarter at the time you said was consistent with kind of the growth exiting Q4. If-- and if we continue to see 15%, 20% constant currency growth through the year, does that-- should we look for CAD 17 million, then, to start creeping higher?

Yes, not at this-- I don't think so at this point. We do have some capacity built in to our existing cost structure and I think that we can actually handle a good uptick in sales through the course of the year. If anything, I think we might reassess maybe towards the end of the third quarter, but at this point we expect it to be flat on the cost side.

Okay. And lastly, John, on the visibility of your Absolute Manager lifecycle products in the marketplace, any update on just the reception with some of the industry analysts in promoting the product or just your general feel of the visibility that you're getting?

Yes. No, that's a great question, Scott. We have been working with a bunch of the analysts, as you know, and our marketing team has been doing a good job on that front. And we are actually getting mentioned by some of those players to customers. In fact, we had an inquiry today with a large manufacturer that was recommended to us by one of those analysts.

So that is definitely working. There's no question that our cross-platform functionality is really key. It's a great differentiator and I think the one thing that I want to underline is that Absolute Manage is an awesome vehicle for mobile device management.

So, as you see, we're rolling out the Apple iOS 4 compatibility and support capability, but also we'll be able to support all of the other mobile devices through our Absolute Manage console. So I think that's really important.

When you look at the excitement in the industry today, it's all around the support for these mobile devices. And Absolute is just way, way out in front with respect to that. And I think we are going to surprise a lot of folks in terms of our ability to deliver in that market and we'll be a leader there.

What's the timing for full iOS 4 support?

Well, we actually have announced it and we'll be launching it here in a couple of weeks, fully launching it.

Okay. Thanks, guys.

Yes.

Your next question comes from the line of Thanos Moschopoulos. Your line is now open.

Hi, good afternoon. As far as the strength that you saw in the corporate healthcare and government side, were there any very large deals that helped drive that this quarter?

No, those were just all consistent types of deals.

Yes, overall the large deal side of the business, because we track everything over CAD 100,000, was about 17%, but nothing alarming that stands out in there. There's just a lot of solid deals being done.

Okay. And then as far as education being flat, does it have to do with ASP compression as some of your customers move to netbooks or is it more of a budget issue with school districts being challenged for funding these days?

I think there is some ASP compression there, for sure, as you mentioned with the netbooks and we've seen our netbook uptake increase, as a result. But at the same time, a large portion of it was also due to international where we did have some large educational business running through in Q1 last year and some more will come in next quarter. As you know, the Trinidad Tobago deal is coming along that was announced earlier in September by Trinidad Tobago school district.

So I think you'll see that bounce back a little bit. But certainly in the quarter a lot of that was outside of North America.

Okay. Now, regarding your comments about the consumer segment weakening going forward, is that just strictly because of the strong back-to-school seasonality we had or are there specific OEM promotions that took place this quarter that are sort of one-time, specific to back to school?

I'd say that, overall, we feel that our consumer business has strengthened. The lower quarters in absolute dollar value versus Q1 here, a lot of it is the bundle deal that we've had in place. As we mentioned at the end of last year, we expect that to start going away. It was actually quite strong in this quarter.

And, also, we had exceptionally strong seasonal performance and I think that mirrors what Microsoft saw, as well, in consumer. So we've had great retail and online experience that is indicative of a strong seasonal back-to-school quarter, but it was even more so than, perhaps, in the past. A lot of that is because we've strengthened that consumer business overall, made it more diversified.

Yes, the consumer team has done a great job, I think, of selling our consumer product Lojack for Laptops.com over the website. Those sales are up and we're doing a little bit more with search engine optimization, et cetera. So that's all working for us, plus we've got our Notifier working now, so we're actually able to build a relationship with a Lojack consumer customer online, which is important.

So there's a number of factors there that are enhancing the relationship with the consumer customer and helping us with that renewal.

Okay. And then, finally, on the OpEx side, you mentioned that you expect OpEx to remain sort of flattish going forward. You mean relative to the levels we saw this quarter?

Yes, that's right.

Okay. All right. I'll pass the line. Thank you.

Thanks, Thanos.

Thanks, Thanos.

Your next question comes from the line of Pardeep Sangha with PI Financial. Your line is open.

Thank you. Just with regards to your subscribers that are coming up for renewal here. You've got 960,000 commercial subscriptions and 1.5 million consumer subscriptions for the remainder of the year. Can you add any color with regards to what quarters, how this is going to break down in terms of the next three quarters, in terms of which quarters would be stronger than others?

Yes. It's a little more heavily weighted towards the fourth quarter. The next two quarters are relatively flat and then it picks up about-- probably about 35% more in the fourth quarter.

Okay. With regards to Q2, can you just give a sense of how Q2 has been going? I mean, should we expect the same kind of seasonality, the same kind of drop from last year's Q2 to Q1? Should we expect that same sort of drop this year from Q2 from Q1?

Yes. You can expect the same seasonal pattern.

Okay. In terms of-- you still have a lot of cash on hand. It's been a while since you've done an acquisition now. Any sort of plans in terms of acquisition on the horizon? Is that something you're looking at right now?

We're just continuing to grow the core business here, Pardeep, but we're always looking for small things that would be tuck-ins that would build our mobile device management capability and our cross-platform-type lifecycle management capability.

So, sure, we're keep an eye out. But anything that we'd pick up would be very small, less than CAD 10 million acquisition size.

Okay. That's it for me today. Good luck with everything.

Thank you.

Thanks, Pardeep.

Your next question comes from the line of Sera Kim with GMP Securities. Your line is open.

Hi, good evening. I just wanted to clarify. Earlier, when you were talking about encryption products, the self-encrypting offering that's going to be coming out early next year, you said support for the hard-disk manufacturers. Could you just explain how that would work, like in relationship with the hard-disk-drive OEMs that are coming out with self-encrypting hard drives?

Sure. For example, Seagate has a self-encrypting drive on the market today that they sell through Dell, as an example. So we have a technology that we've been working with that will enable us to have a control and management of that Seagate self-encrypting drive so that we can actually offer that as a service to customer. So they can encrypt their drive and manage the drive and the key encryption through our management console.

And that'll be a SKU. It'll be SKU'd up at Dell and other OEMs. And we'll be selling that as part of our Computrace data protection suite of products.

Okay, great. So this would be kind of an-- it'll be a way for you to add ASPs to your customer base?

That's correct. It'll be a separate product that will be SKU'd up.

Okay. So-- and then, when you talk about ASPs, would this product be incorporated into it, or would that be separate? I'm just trying to under--

We'll have a separate product SKU with this product, but we'll also have a bundle product SKU, as well. So if folks are buying Computrace Complete it's something they can tuck in within that product SKU, but also we'll have a separate SKU, as well.

Okay. And do you have an idea of what the ASPs for this type of offering will be?

I would-- we haven't published it yet, Sera, so when we publish it, we'll let you know.

Okay, sure.

Okay?

Okay, sure. And also I'm just wondering about-- if you can provide some color in terms of monthly sales performance by region. I know in the past there was one particular area that had a bit of an issue and I'm just wondering, has that region ramped back up to levels more in line with the other regions?

We do have one region that's a little less-- performing at a slightly less level than the other regions, but we're doing everything we can to ensure that that region is brought back in line with everybody else. But the other regions performed very well during the year.

Okay.

Or during the quarter.

Okay, great. In terms of what you're doing in that one specific region, has-- have you done the necessary hiring or is that still-- does that still need to be done or is it more of a training exercise that needs to be done at this point?

No. We've just hired a Regional Director for that region who's got a lot of experience in IT and in IT solution sets. And she's started with us, so we're very optimistic with that particular individual and she'll be reviewing the team and strengthening the team, as required, to hit their quarterly numbers.

Okay, great. Thanks a lot.

Thanks, Sera.

Your next question comes from the line of Paul Steep with Scotia Capital. Your line is open.

Hey, Paul?

Paul Steep, your line is open. If you have muted your line, would you please unmute it? We'll move on to the next question. Your next question comes from the line of Blair Abernathy with Stifel Nicolaus. Your line is open.

Thanks very much. Rob, I'm just wondering if you can walk us through some of the progress you've made on the consumer renewals, given you've got so many coming towards the end of this year and you were looking at sort of improving, I guess, your direct touch to those customers. How are things looking at this point for you? And what kind of renewal rates are you hoping to achieve?

Well, overall, Blair, we have increased our ability to go and communicate with those customers, which, from what we've seen so far, has been well received by those customers. Online business-wise, it has grown fairly nicely, about in the 30% range over last year, so we're definitely happy with that.

The consumer renewal opportunity, obviously, is larger than that, so we're not capturing all of it, but I would say we've made progress and certainly happy with the way it's heading at the moment. What that will tell you for exactly where it lands next quarter, I can't say, but, indeed, I think we've seen an overall improvement there and in time for that big renewal opportunity.

We are looking to that, coupled with the retail work we've done, to offset the reduction in bundle business that we've anticipated. So we're feeling confident at this stage.

Okay. And, Errol, you mentioned in your prepared remarks about adding 50 or so bodies towards the back half of this year or later this year. What areas are you guys looking at adding in?

Well, the answer-- they're weighted towards the sales area, where there have been some budgets shifts, as we talked about a little bit earlier, right, reducing the budget for some program expenditures and replacing it with some internal headcount.

And I would say adding another-- 50 is probably the high end of the range. It's probably somewhere close to 380 where we might end the year if we fire on all cylinders on the sales side.

And that's an important piece there, Blair, it's if we're firing on all cylinders on the sales side. So, we are tempering things and making sure that the sales in those regions or the opportunity is there before we do the adds.

Got you. Okay. That's great. Thanks, guys.

Thank you.

Thanks, Blair.

Your next question comes from the line of Gabriel Leung with Paradigm Capital. Your line is open.

Thanks. Just a quick question on cash flow seasonality, I guess either for Rob or Errol. Can you talk about what your expectations are in terms of how that's going to play out over the course of this year, if it's going to be any different than what you've seen in the past?

It should be-- it should follow the average historical seasonality. Q1 and Q2 generally we see a higher cash from ops, just because Q4 and Q1 are our highest periods for sales contracts, and then it's generally lower in Q3 and Q4.

Okay. That's great. Thanks.

(Operator Instructions). And your next question comes from the line of Madhu Kodali with Yaksha Capital.

All right, thank you. Good afternoon, John. John, a question on the-- I don't know if you have seen this, Juniper's new product called Junos Pulse, mobile security suite. I was wondering if-- what you think about it and how does it play in the market in the mobile secure pack and remote data management side of things.

Sure. We're really pleased with a lot of the attention that the market's getting right now, particularly in the consumer world. There's a lot of attention being paid to delete functionality for phones and that just-- that's really good for Absolute, because it raises the awareness in the whole category of the ability to lock a device remotely, delete the device.

And when enterprise customers want a enterprise-class solution to do that type of functionality, there's really one player to turn to and that's Absolute. And you're going to see this more and more. So I think we're thrilled to have some competition out there in the mobile space for lock and delete.

Because if people that they have a lot more information on their PCs and their laptops and their netbooks and their desktops than they do on their phones, in many cases, or just as much. So as soon as the CIO has made the mental leap that he needs a lock and delete capability for his phone, we're also, of course, the only-- really the only organization that can have an enterprise-class solution to protect data in that capacity for the PCs, the Apple devices and the mobile devices that are out there today. ' So, that's all good for us. We're very excited to have other players in the phone deletion capability business and we think that not only can be beat them there at the enterprise level, but we can also extend that back into the computing side of their business.

So we're excited to see other folks evangelizing the category.

Right. And in the same regard, how is the progress in terms of you folks actually partnering with one of the wireless operators?

Yes. We do have an initiative, ongoing initiative, where we are partnering with a number of wireless operators and you'll be hearing more about that, here shortly, as we roll those programs out.

Okay, good. Thank you. That's it for me.

Thank you, Madhu.

We have no further questions in queue. I turn the call back over to our presenters.

Thank you, operator. Thank you, everybody. We appreciate you attending today's call and for your continued support. We look forward to updating you on our progress in the coming quarters.

This concludes today's conference call. You may now disconnect.