Absolute Software Corp (ABST) 2011 Q2 法說會逐字稿

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Absolute Software Corporation second quarter conference call.

At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

Before beginning with formal remarks, Absolute would like to remind listeners that certain portions of today's discussion 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 its annual MD&A.

(Operator Instructions). I would like to remind everyone that this conference call is being recorded today, Monday, January 31, 2011 at 5 PM 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 thanks for joining us to discuss our fiscal 2011 second-quarter results. If you have not already seen it, today's press release can be found on our website at Absolute.com along with our MD&A and financial statements.

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

Absolute's business strategy is threefold. One, to grow our core anti-theft business and extend their leadership position by adding new data protection features; two, to expand our lifecycle management business by leveraging our unique persistence and cross-platform functionality; and three, to extend our must-have solutions across multiple device form factors such as tablets and smartphones and become a leader in the emerging mobile device management market.

In 2011, more mobile device form factors will shift than ever before. Amazingly, more than 100 manufacturers demonstrated a smart device at the consumer electronics show last month in Las Vegas.

Apple, [iOS] and Android devices are accelerating and will soon make up the majority of the growing smartphone and tablet market. For example, Apple expects to ship an unprecedented 45 million iPads to consumers and corporations this year.

A recent report issued by Gartner outlines how IT departments are working to integrate these various devices into their organizations. And according to the study, almost 90% of organizations support some form of mobile device today and between 50 to 75% of organizations have requested support for the iPad.

Customers are looking for MDM solutions now. With ComputraceMobile and Absolute Manage, we are well positioned at the forefront of this exciting multibillion dollar market.

Our mission is to provide enterprise customers the ability to manage and secure all of their endpoint devices; any device, any platform, anywhere. And we are well on our way.

We already support Windows, Symbian and BlackBerry mobile platforms today. In the quarter, we launched Absolute Manage support for Apple iOS 4 devices such as the iPhone, iTouch and iPad. We will soon be commencing an Android beta program with the full product release expected this fiscal year.

The transformation of the mobile computing landscape is creating an era for new excitement across the industry. For Absolute specifically, it's creating a pipeline of new opportunities and channels while also invigorating our core anti-theft and lifecycle management businesses.

Earlier today, the first of these new channels was announced with Verizon who is now offering Absolute's commercial solutions as part of their monthly billing programs. As CIOs seek solutions to manage and protect this new wave of mobile devices being brought into the work environment, their increasing the reminder of the importance of securing and managing their existing PC netbook and laptop populations.

Sensitive information now resides on many of these devices. Even with the promised emergence of cloud computing, most often a local replication of data remains on the majority of the hard drives and that requires protection.

So while mobile device management is a key to growth driver, we remain committed to further extending the dominant leadership position of our core persistent tracking and anti-theft business while aggressively growing our lifecycle management business. Looking ahead given our strong results for the first half of the fiscal year, and the encouraging trends we are seeing within the business, we're optimistic about our growth prospects. On that note, I will turn it over to Rob to walk us through the operational results. Rob?

Thanks, John, good afternoon, everyone. We entered fiscal 2011 with stated goals of harvesting our investments over the last couple of years, improving our operational efficiency and executing on our long-term strategy to become a leader in the overall endpoint security and management space with the three goals as outlined by John.

We're happy to report that we have made progress on all of these fronts. Sales are up 18% year to date in constant currency. Adjusted operating expenses are down 1% in Q2 and up only 5% year-to-date and we have strategically positioned our Computrace security offerings and Absolute Manage lifecycle solutions with the addition of new channels, features and products across multiple devices.

Our constant currency sales growth of 18% year-to-date and 16% in the quarter is primarily a function of our efforts to optimize our sales teams through training and organizational changes. At the same time, our new product and feature development has armed us with more to sell and with unique offerings to break into new accounts and expand within those accounts both in volume and products.

From a vertical sales perspective, Q2 commercial sales grew 22% in constant currency to CAD16.1 million, showing increased momentum compared to the 12% commercial sales growth reported in our first quarter of this year. All four verticals -- corporate, education, healthcare and government -- performed well during the quarter.

Healthcare showed the most strength growing 70% over Q2 last year and 49% year-to-date. Given our strategy to support multiple devices, it's important to note that we are seeing traction on lower-priced network devices for our Computrace solutions.

Sales on netbook devices have grown 104% year to date over last year and included a second-quarter sale for CAD650,000 to secure notebooks for a US K-12 educational institution. Sales to existing commercial customers continue to be strong and were up 29% in constant currency compared to Q2 last year, representing 75% of second-quarter sales contracts compared to 67% last year.

The expiring subscription ratio for the year to date is 1.5 times compared to 1.7 times last year. We consider this to be relatively strong considering the high levels of penetration into our existing customer base.

The average US dollar selling price for sales to existing commercial customers was up slightly to $41.33 in Q2 from $39.95 in Q2 last year and down slightly at $41.60 year-to-date compared to $44.39 this year. The increase in Q2 reflects a longer average term and heavier weighting towards products that include theft recovery both in sales and expiries in the quarter.

Heading into the back half of the year, we have a higher proportion of expiries for non-recovery products which will likely change the product mix and result in a reduced ASP. However, based on year-to-date results, the decline is not likely to be as significant as anticipated at the beginning of this fiscal year.

Sales to new commercial customers for the first half of fiscal 2011 are down 17% in constant currency. We believe this to be a timing issue as our pipeline continues to show robust growth over last year. In addition, keep in mind that we often break into new accounts with a small initial sale and then expand into those customers as shown by our existing customer sales ratio.

Looking at the consumer side of our business, second-quarter sales contracts decreased 10% in constant currency to CAD2.6 million. The decline was driven entirely by bundled sales which declined 49% due to our stated strategy to phase out a major PC OEM bundle program.

Conversely, our non-bundled consumer sales grew 81% reflecting our consumer diversification strategies into retail, online and other non-bundled OEM programs. In the back half of fiscal 2011, we will be launching 60 and 90-day free trial programs with a number of PC OEMs similar to the approach used by the major anti-virus vendors. We expect these free trials to ship on millions of laptops in calendar 2011 and believe they will enable us to continue growing our non-bundled sales.

On the international front, sales increased 107% to 13% of Q2 sales contracts, up from 7% of sales in Q2 last year. The growth was driven in part by a large education sale in Trinidad Tobago.

Excluding this sale, our international sales were still up 50% to 9% of Q2 sales and are at 8% of sales year-to-date which is more indicative of the current state of our international business. This performance is encouraging as we continue to invest in our international expansion at a measured rate.

I would like to conclude my remarks by saying that we are excited about the opportunities in front of us. We are confident that we have the scale, products and team to continue our growth trend and to achieve improved operational efficiencies in 2011. At this point, I'll turn it over to Errol Olsen, our CFO, to provide update on the financial results and fiscal 2011 outlook. Errol?

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

As you all know, we consider cash from operating activities to be our primary financial and valuation metric. In the second quarter we generated CAD3.1 million in cash from operations, up 77% from CAD1.8 million for the same period last year.

This year-over-year improvement is a reflection of the leverage that we're beginning to achieve in the business as the rate of growth in our sales has outpaced the rate of growth in our cost base. Our gross margin for Q2 was 74% compared to 80% in Q2 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 gross margin increased to 82% in Q2 of this year.

Our adjusted operating expenses which is cost of sales plus operating expenses but excluding non-cash charges for amortization of acquired intangibles and stock-based compensation were CAD16.2 million for the quarter compared to CAD16.4 million in Q2 of last fiscal year and CAD17.1 million last quarter.

The sequential decrease in our adjusted OpEx reflects our planned redirection of spending away from certain partner marketing activities. However the overall adjusted OpEx for the quarter did come in slightly below our original expectations largely due to delays in filling some open headcount positions.

We are also pleased to report that we achieved an adjusted operating income that is GAAP revenue less adjusted OpEx of CAD1.7 million in Q2 compared to an adjusted operating loss of CAD500,000 in Q2 of last year. This improvement is the result of a 13% year-over-year increase in GAAP revenue while our adjusted OpEx for the quarter decreased by only 1%.

From a balance sheet perspective, we continue to be well positioned with a healthy cash position and no debt. At December 31, 2010 our cash, cash equivalents and investments were CAD53.3 million compared to CAD58 million at September 30. This reflects the cash generated from operations offset by the use of CAD6.3 million for our share buyback program under our normal course issuer bid.

During the quarter we repurchased 1.7 million shares under the (inaudible). As announced at the start of this fiscal year, we are no longer providing sales or cash flow guidance beyond the fact that we expect sales contracts and annual cash from operating activities to grow from the levels achieved in fiscal 2010.

In terms of our cost structure, we continually review and assess our current and planned spending throughout the organization in order to drive productivity and maximize return on operational spending. For the final two quarters of fiscal 2011, we expect that our adjusted operating expenses will remain within the range experienced in the first two quarters of this fiscal year.

We're confident in our ability to achieve our goals, particularly as we have achieved strong year-over-year growth in sales contracts and generated solid cash from operations to date while also keeping our adjusted OpEx under control. At this point, I will turn it over to you, John, to conclude the call.

Thanks, Errol. For the remainder of fiscal 2011, we will continue to focus on executing our sales plan and improving our operational efficiency.

With the opportunity to win market share in a multibillion dollar endpoint management and security market in front of us, there is significant room for us to grow. To do so, we will continue to follow the three-pronged strategy discussed earlier. Grow our anti-theft and data protection business, expand our PC lifecycle management business and extend our unique competencies to become a leader in the mobile device management and security business.

And we believe with the new exciting customer requirements hitting the marketplace, there is enhanced opportunity in front of us and we've got the right strategy, products and team in place to successfully execute and drive continued growth.

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

Tom Liston, Versant Partners.

Thank you, and good afternoon. First on the Verizon contract, how much is it -- their team selling versus your team? Just overall describe the go-to-market.

And do you anticipate maybe user take-up given it's a simple monthly plan? And the third question, I assume the revenue recognition happens immediately if -- like per month type of situation. Can you answer those three topics?

Sure, Tom, so on the revenue recognition, yes, that will obviously take place in the month the service is delivered. Obviously we're excited about Verizon.

We have worked hard with Verizon to get in a number of their marketing programs and to be integrated in their [bill on behalf of] model is very important. I think -- look at that as a signal of the fact that we're trying to get more of our services aligned in the telco industry.

And you will see us announce hopefully further developments on that path. At this point in time, Tom, it's working closely with the Verizon sales organization and making sure that they are trained on Computrace and getting them to take it out to their customers as they will; very similar model to how we would approach a PC OEM partner.

Okay, you alluded to some of the trends a lot with the iPad obviously and the Android tablet and everything else that's coming out. Is it starting to -- at least we are hearing CIOs starting to say hey, getting a little more afraid of data leaving the shop so to speak and a little bit -- the security piece has obviously been heightened as you kind of bring your own device.

Has that helped also pull some laptop type deals through with the initial sort of scare factor of many devices coming and going out of the organization and helped you have a more broad discussion with your customers?

Definitely, Tom. I mean, I think what this is doing is this is providing -- there's a big customer requirement happening and that is to track and protect these devices. And what we are seeing is a whole new layer of device entering the market.

So now you've got this whole tablet layer and smart device layer coming in. I think people will still have their notebooks, they'll still have their phones and now they're going to add tablets or smartphones.

And we're going to see lots of players in this market. Dell has a great product out called the [streak] that they are bringing to the market with an Android operating system. Obviously the iPad is extremely well represented, and you're going to see a lot more Android devices coming to market.

So, yes, CIOs need to know and understand how these devices are operating inside their organizations, what information they have access to and what information if any is actually on the devices that leaves the organization; and balancing of course these devices that are issued by the corporation and devices that are coming in from the consumers that consumers have purchased. So it's a whole new world out there.

The great thing for Absolute is it's providing a venue for us to get in front of the CIO to talk about their strategy on how they're going to secure all of their mobile devices whether it be a notebook, a netbook or a new tablet that they are integrating into as part of their program. And I can assure you we're having a lot of conversations today across all different segments regarding this issue. There's a lot of folks struggling out there with how to do that, so we're helping them.

Fair enough. Rob, outside of North America, I think revenue was up 78% overall but excluding the one big customer, it was 53-ish? Was that the number?

It was up 104% year to date but, yes, it's 50% up excluding the large customer.

Okay and can you characterize the other deals? Are they mainly a few key relationships with some of your OEM partners? Is there certain regions that you have been more strategic about that are doing well? Are they initial small deals for the most part that look like good opportunities? Can you characterize activity there?

Yes, I would say if you chop it up by region, go to the EMEA region, and that is a little bit more of a replication of our North American approach where we have a sales team in place, we are partnering with the OEMs, we're selling alongside, selling with those OEMs in the field and starting to get some good traction.

It's a function of being there for long enough to build a pipeline and consistently working with the OEMs. So we are starting to see some of that work paying off now.

On the rest of the world with Latin America and Asia-Pacific, we're approaching a bit more in a partnership way and again, we're having some good traction in certain areas, as we mentioned, Trinidad Tobago, but of course we have had a lot of activity in Australia and we would expect to see a bit more in the Latin American countries as well. So I think we're making progress in all those fronts.

There is always going to be some lumps as larger deals come through just by virtue of the smaller base. But called out the 50% growth, sort of 8% range year to date of overall sales. That's sort of where it feels like the steady state is currently.

Blair Abernethy, Stifel Nicolaus.

Just, John, back on the Verizon deal, a little more color there if you will. Just what is the marketing cost or investment you think you're going to have to make there over the next year with these guys? And how leverageable is that against other potential partners?

Well it is leverageable, Blair, as you point out. So what we will be doing is we'll be taking our existing sales force and marketing organization and applying some of those capabilities and budgets to Verizon.

And that is how we'll be going to market with Verizon. So it's just -- it's a fishing license is what it is.

We are [skewed] up at Verizon. Obviously they have a very large commercial sales organization.

We're tying in with that sales organization across the country and we will grow at very similar -- as we would grow with a traditional OEM, PC OEM. So we will provide budget as the opportunities present themselves and we have a number of opportunities that Verizon has presented us and we're going through them as we speak.

When you look at these new potential commercial customers, is your sale going to be tied to the sale of new devices do you find? Or do you know at this point or could it be looking into the existing base of business?

Well it's both. It's always been both, as you know.

With the PC OEMs, we like to get on the device when if you like or get on the image which is a very important piece of the puzzle. With the wireless operators, I think it will be a combination of both, getting into the new devices but also looking at any devices that have cellular modules or cellular cards enabled.

So for a few dollars a month, a Verizon customer can add Computrace services to their portfolio. So we think it's going to be a nice new go-to-market angle for Absolute Software.

I would say the Verizon reps stay engaged with their customer at a different level after the purchase of the hardware than what the OEM reps do. So we likely have more opportunity to get into the installed base than we do in the OEM.

Okay, great. Second question for me is around -- on the consumer side, Rob. I'm just wondering if you can give us a sense of how you're doing there with the expiring subscriptions and your attempts in the last year to sort of go after those renewals.

Yes, I would say that's part of -- we've stated that we want to move away from the one year free of LoJack type of bundle. A big part of it is because we found that the renewal rate on those particular units was much lower than it was on customers that actually buy the product in the first place.

And so that's now phasing out and indeed the biggest bulk of those free one-year units now has just come out in this quarter and we will start to see the overall renewal rates on consumer go well into the double digits now that that sort of free year program is behind us.

Thanos Moschopoulos, BMO Capital Markets.

Just to follow up on the last point on the consumer markets, when should the year over year drag from the bundle going away, when should that start to come to an end?

It's sort of with us through the year, but in the back half here, it was much lower last year in the back half of fiscal 2010. So it's not as impactful this year, in the back half of this year.

So in other words, by the time we get to Q1 2012, we should start to have positive year-over-year consumer growth you figure?

Q1 it was still pretty strong.

Okay.

In bundles, so what happened was it actually phased -- it got lower in Q3 and Q4 and then in our Q1, it was fairly strong and came off significantly in Q2 here and it will by the end of this year, it's off. So next year you really have Q1 to climb over still, but we won't have as much to climb over in Q3, Q4 this year. Does that make sense?

Yes, that does make sense. Thank you.

Okay.

And then remind us what the expiration numbers look like for the remainder of the year and into 2012.

Sure, Tom, this is Errol. So on the commercial side, we've got 725,000 subscriptions expiring over the back half. And those are weighted a little more heavily towards Q4 than they are Q3. It's probably like 60% Q4, 40% Q3.

On the consumer side, there's about 715,000 remaining which are fairly evenly spread. And then just in terms of product mix on the commercial, it's also worth pointing out especially in Q3 but even in the back half altogether on the commercial side, there is a heavier weighting towards the non-theft recovery products. So it's a good thing for you to keep in mind when you are doing your modeling.

And I believe your comment there was that we'll see some decline in ASP relative to what we saw in the first half, although maybe not as pronounced as you thought initially, but there will be some decline relative to Q1 and Q2?

Exactly.

And then what about expiration number for 2012. Can we have those at this point?

Yes, well obviously the 2012 number is building up as we move our way through 2011. But right now for 2012, we are looking at somewhere around CAD1.4 million.

And that is commercial and consumer combined?

Sorry, that is commercial. Consumer side is somewhere about CAD1.1 million.

Great. Okay and then turning to Absolute Manage, can you talk about how that's performed in the quarter and what sort of progress you are seeing there in terms of starting to close on some of the pipeline that you have been building in the past few months?

Sure, Thanos. We were a little disappointed with the Absolute Manage business this quarter. It probably wasn't what we thought it was going to be.

However, I can say that the pipeline is building dramatically for that product. So it continues to build.

I think this quarter we will see an uptick in Absolute Manage business and we're certainly seeing longer-term uptick in the business. So we didn't do what we wanted to this quarter in Absolute Manage, but I think that is turning around going forward.

And again, is the strategy primarily to focus on selling into your existing installed base on the Computrace side?

That has been a successful strategy. There's no question that we have brought it to a number of our existing customers, but it's also to develop a little bit more of a slightly different channel for Absolute Manage than Computrace.

It's similar but one of our best and biggest partners has their own product in that space which has been a bit of a challenge for us. Of course they sort of acquired that product right after we acquired Absolute Manage.

So that's been a bit challenging. But put that aside, there's a large opportunity for Absolute Manage and we're just continuing to develop the channel for it.

Last quarter we mentioned it's at about 20% of our pipeline and it continues to hold sort of in that level. So we are happy with that.

It's just in Q2 timing-wise we didn't close as much of that pipe as we thought -- as we would've liked to, as John mentioned. But in Q1 it was stronger and of course last year, we had some good quarters. So overall happy with that business.

And the mobile device management for iOS 4, that aligns very well with Absolute Manage as you know. So that certainly is getting us in a lot of conversations, and a lot of discussions and meetings around how to go ahead and secure those devices.

So we're going to see good things from Absolute Manage. I think it's a very little -- temporary setback this past quarter but going forward, there's no question that we see it growing into a full business.

Okay, appreciate the color. Thanks, guys.

Scott Penner, TD Newcrest.

Just first question, your commercial renewals seem much heavier weighted to the back half, at least from what I had expected. Just looking for a little bit more color on why the ASP is now not expected to trend back down to that sort of [CAD35] level and whether that number is still something that we will start to approach heading into next year.

Scott, really what's caused us to reconsider where the ASP is going to land is more based on our experience in the first half of the year. We thought it would be dropping.

That hasn't been the case. The theft recovery products are still selling well and the relative proportion of the theft recovery products is actually higher than what we were expecting.

But going into the back half of the year and even into the second half of fiscal 2012, the non-theft recovery does pick up a higher proportion than it has in the last sort of 12, 18 months. So we are expecting the ASP to go down but it just doesn't look based on experience as though it's going to go down into the low 30s. It looks like the lowest it might come down is probably somewhere in the mid 30s.

Okay, and just on the Absolute Manage, further on that, and I think you started to allude to this, you're really saying that there's no loss of deals. Are these sales cycles just taking a little bit longer than you originally expected?

I think part the length of the deal and part that the mobile device management piece is now in place for Absolute Manage for the Apple devices. So that's helping us get into a lot of conversations.

When we're able to sit down with a customer and talk about how they want to support their iPad population, it's very often that extends into a conversation about well what are you doing for your PC population, what have you currently got? Are you happy with the toolset?

Here is what Absolute Manage does, and we give a much broader perspective of the fact that we can handle full lifecycle management for the PC environment, full lifecycle management for the Mac environment and the MDM environment. When we get into that broader conversation, the customer looks at it and says hey, Absolute has a single pane of glass that I can use as a console to see all of my devices -- PCs, Macs, and my MDM devices. And that's a very, very strong statement and a very strong product position. And customers are enjoying -- they're liking that and I think that is going to help us drive the sales of Absolute Manage going forward.

And I mean I asked about this last quarter, and maybe just a qualitative update here, and that is just on the industry analyst front, what are you seeing in terms of I guess your visibility with the Gartners of the world?

Sure, well we just recently we got a very nice quote from Gartner to say that we were best in class for anybody that has basically cross-platform needs. So for customers that need both PC and Mac management and lifecycle management, software deployment etc. that we were best in class for that functionality. So that was very nice to see.

And the headcount targeting, you're still looking at somewhere around 380, 400 for the year?

Probably not, Scott. We finished the year at I think 362 employees. And over the next five, six months, I would expect that number is not going to change by more than about a dozen or so.

Okay, lastly for me, and that is, John, just on the telco front, where do you stand with some of the European telcos as far as delinquent sub management or other opportunities there?

Well, we are definitely engaged with them on that topic and we are in discussions, and that's really the best I can do other than just to say that we're aggressively looking for those kinds of opportunities and they do exist. So obviously this is a very important announcement we made today with Verizon, a very large carrier in the US that [skewed] up our product for the commercial segment. So obviously our services fit well with the telco model and I think folks can see that as really a tipping point for us as we move into other telco situations.

Pardeep Sangha, PI Financial.

If you can just give me a bit of an update with regards to the encryption product status, where you guys are at on that?

Sure, we're not really discussing that in a lot of detail at the moment. I think you can look to something here shortly on those lines. But as we talked about on the call, we are extending the Computrace functionality into a broader data protection grouping of functionality. So that's obviously what we're doing and you will see that coming out shortly.

Okay, so within the next couple of months here kind of thing?

Somewhere in that range, yes.

Okay. Just with regards to the consumer sort of -- the makeup of consumer versus commercial, given the less consumer bundling sort of happening, looking forward maybe one to two years out, what do you anticipate would be sort of that percent breakdown of commercial versus consumer? Would it be substantially different from the 85%/15% that we see today?

I don't think so, Pardeep. party. I think 85/15 is about the right split going forward.

Okay, just with regards to the new commercial sales numbers and getting into the new customers there, do you feel that the the sales issues that you had previously have all been kind of resolved in the US market?

I think we have got a really strong sales organization. I'm very proud of the sales organization.

It's got great leadership, and we just had our global sales meeting two weeks ago in Palm Springs, and I can tell you that the entire sales organization is well trained on our products and services. They're highly capable and I think they're functioning on all cylinders. So they will continue to do that throughout the year.

Sera Kim, GMP Securities.

You were talking about Absolute Manage MDM for Apple iOS devices. It's been out for a couple of months now. I'm just wondering, is there any commentary you can provide in terms of feedback or any kind of reception you have been getting from customers? And secondly, is it too early or do you have opportunities in the pipeline for this offering?

Yes, we just closed a major news organization for about 4,000 units I believe, and we are winning deals in that space today. So absolutely, that's working for us.

As we talked about, there is a very nice pipeline shaping up in that area and we're getting invited to a lot of meetings and conversations around folks looking at putting together an MDM strategy going forward.

And I guess if I look at -- well I don't know if this is information that you're willing to provide, but if you look at your pipeline, what percentage of your pipeline would be for this MDM type opportunities?

Don't have that figure handy at the moment. We'll get back to you on that, Sera.

Okay, no problem. Also earlier you mentioned about how you're involved in coming up out with an Android beta program.

Can you just provide some more clarity in terms of timing? And I guess given the rapid take-up of the Android devices, is time-to-market a consideration? I guess any more color around that would be helpful. Thanks.

Sure, you should know that we do have an Android product today that we are showing to our partners and now we're just putting that through its paces in a beta program. You'll hear -- know more about that shortly and as we mentioned, we expect to be able to release that -- launch it as a commercial product within this fiscal year, so before June 30 or earlier.

Okay, great. I just wanted to clarify if it's this fiscal or calendar year. And just lastly, historically if I look at the sales contract trends, the second half of each fiscal year has been stronger than the first half. Given that the pipeline has been building and you've got some exciting products that are starting to build some traction, do you see that trend to play out this fiscal year?

Yes, that is generally the trend and we don't see any reason why that wouldn't be happening in this year. Seasonality-wise like the actual percentage of it might vary slightly as we did have such a strong consumer turnout in Q1. But nonetheless, it will be stronger.

Perfect, thank you.

Blair Abernethy, Stifel Nicolaus.

John, I wonder if you could touch on your thoughts on M&A from your standpoint with -- given your cash balance and your cash flow?

You know, we're obviously -- we're always an eye out for things that would fit into Absolute's game plan. Right now we've got our head down.

We're just building the business on our own at the moment. We did obviously the Absolute Manage acquisition approximately a year ago.

We're still working through integration items on that acquisition, even though I think it's been very, very successful for the Company and has given -- has really broadened our solution set. So there's really nothing on the horizon at the moment that is imminent or anything like that. It's just building the business that we have. We're really excited about the Computrace business.

It's resuming the growth which is great. We're adding new features and functionality. Obviously we just added the new file retrieval feature which is one that customers really love.

We've got more features and functionalities coming out in this current quarter for that product line. So we're just going to continue to grow that business.

Absolute Manage as we talked about, big pipeline, growing pipeline, MDM getting a lot of traction in the market, a lot of customer requests coming in. Almost probably 50% of Corporate America is looking at some type of MDM solution over the next 12 to 18 months, deploying something.

We are in a lot of meetings. We are seen as a leader in the space. It's a pretty exciting time for Absolute Software. I feel like things are aligning again and we are excited about that.

Okay, great, thanks very much.

There are no further questions at this time.

Okay, well, ladies and gentlemen, if you would like to ask a question -- sorry, that concludes our prepared remarks, operator. I think were done for now. Thank you.

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