Absolute Software Corp (ABST) 2015 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Absolute Software Corporation's first-quarter fiscal 2015 conference call. (Operator Instructions).

Before beginning its 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 quarterly MD&A. (Operator Instructions).

I would like to remind everyone that this conference call is being recorded today, Monday, November 3, at 5 PM Eastern Time. I'd like to turn the call over now to Mr. Geoff Haydon, Chief Executive Officer. Please go ahead, sir.

Thank you, operator, and good afternoon everyone. Welcome to our Q1 fiscal 2015 conference call. Joining me on the call today is Errol Olsen, our Chief Financial Officer. I will begin today's call with a high level recap of the quarter, then I will provide an update on the strategic priorities I outlined last call, including some insights and observations after nearly five months in the CEO role. After that I will pass it over to Errol who will take a more detailed look at our financials and we'll conclude with Q&A.

In summary, our financial results for the first quarter were solid with $26.1 million in headline sales contracts, up 10% from Q1 of last year. Cash from operating activities was $8.7 million, up 63% from Q1 last year. These results are being driven by continued and above average growth in key areas of strategic focus. These include our commercial business, which was up 14% in the quarter, driven by strong growth in education and highly regulated market segments such as healthcare.

We remain confident in our ability to achieve the growth expectations we have set for ourselves this year as we continue to effectively capitalize on the opportunity that mobility and information security represents. This confidence is reflected in our prior announcement to increase our next quarterly dividend to be paid in November from $0.06 to $0.07 per common share.

Errol will provide more detail on our Q1 results later on the call. I would like to conclude my comments on Q1 by saying thank you to the Absolute employees and our valued partners around the world for their continued professional support, their hard work, their Q1 results and for their total dedication to finding new and innovative ways to bring value to our customers.

The strong growth we continue to experience reflects a profound challenge confronted by businesses today: enabling the new mobile reality while overcoming the security, compliance and management challenges associated with doing so.

Today Chief Executive Officers, Chief Information Officers and Chief Information Security Officers are highly accountable for the security of valuable business information. This information is growing exponentially and stored increasingly on highly mobile devices which are constantly in motion, often well beyond the bounds of the corporate network.

The traditional approaches used to secure these endpoints are no longer sufficient. These products rely heavily on installed software agents that can be easily removed, corrupted or compromised, rendering them entirely ineffective. A persistent connection to an endpoint device is often the only practical way of detecting or responding to a mobile event. This is the exclusive domain of Absolute Software.

Persistence technology was invented by Absolute, is heavily patent protected and continues to have no direct competition. We have spent the last 20 years building productive relationships with OEMs to extend Absolute persistence technology into as many computing devices as possible.

We now have a community of the largest OEM partners in the world who have embedded Absolute's persistence technology in an estimated half 1 billion devices in use today. This persistence installed base provides Absolute with a very unique and broad technology platform from which to drive adoption of our management, security and compliance solutions.

Our OEM partnership community also continues to grow, positioning Absolute to further extend its persistence platform into entirely new devices and markets. This past quarter I have engaged personally with a variety of customers, partners and industry leaders in Europe, Asia and North America. These conversations have reinforced my initial impressions regarding the importance of the work Absolute is doing and the magnitude of our growth opportunity.

I confirm that endpoint information security has become a consuming global concern. This is being driven by the growth of enterprise information; the concentration of this information on endpoint devices; the extent to which this information is unprotected; and the increasing financial, reputational and regulatory consequences associated with a data compromise.

Several of these dynamics were confirmed recently in a Forbes article that stated: Enterprise information is doubling every 18 months with almost a third of this data residing exclusively on endpoint devices. 70% of this endpoint data, according to Forbes, is unencrypted.

The attack factor associated with missing mobile devices specifically continues to grow in prominence. A recent Forrester study estimated that 78% of publicly reported data breaches within healthcare for example occur as a result of a lost or stolen device. Never before has the endpoint represented such a crucial point of potential exposure.

The mobility and security Nexus continues to represent one of the most compelling areas of opportunity in information technology. Absolute is uniquely positioned to lead the development of this important market.

During our last call I introduced my areas of focus for fiscal year 2015. These included product strategy, market focus, brand awareness and sales productivity. The overarching theme was a commitment to bring a greater focus to Absolute's business.

This would involve narrowing the scope of the technologies we sell, reducing the broad portfolio of geographic vertical and horizontal markets where we are active and accelerating growth by concentrating investments on high return on investment opportunities. I would like to spend a few minutes reviewing these key priorities and the progress we made against each of them in our first-quarter.

Our 2015 product strategy is centered on monetizing our current product portfolio. This involves first and foremost strengthening the market position for Computrace. With a compelling data security value proposition enabled by Absolute's widely embedded persistence technology and with no direct competitor, Computrace represents a singularly compelling growth opportunity.

Our focus on Computrace growth involves expanding the Absolute persistence technology device base and increasing activation rates within this device population. I am pleased to report we made progress on both fronts in Q1. The 14% growth in our commercial bookings was led by strong Computrace sales.

Additionally, a broad variety of new mobile devices were announced in Q1 embedding Absolute persistence technology. These include the Microsoft Surface Pro 3 and the next-generation Samsung Galaxy smartphones including Alpha, Ace 4, Mega and note devices and the Samsung Tab and Note Galaxy tablet devices. We are also expecting to announce some substantial new international OEM partner agreements in Q2.

Our product strategy also involves leveraging Computrace technology and our customer base as a platform for up-selling and cross-selling other adjacent solutions including Absolute Manage and Absolute Service. In Q1 we targeted a very specific subset of our existing customer base for Manage and Service cross-selling and incented field achievements in this area. Our strong growth result in education reflects the early results of this effort.

Absolute's investment in product innovation will align with this product strategy and will focus on three primary areas: elevating the functionality of the current Absolute Solution set; creating a more unified user experience across Absolute Technology Solutions; and upgrading both our software as a service and on premise delivery platforms to enable scale, agility and our next-generation of information security solutions like DLP. Our product management function was strengthened in Q1 to ensure the timely delivery of these initiatives.

The second 2015 priority I introduced was to concentrate our investment in a more targeted set of product markets prioritized by return on investments. The foundation for this exercise was a Gartner study we commissioned that defined the construct of Absolute's growth opportunity and how it is distributed among geographic vertical and horizontal markets.

This understanding drove, first of all, a set of geographic coverage decisions that shifted sales and marketing resources towards major metropolitan centers here in North America. It also led to a very specific international growth focus on Brazil in Latin America, the UK, Germany and the Nordics in Europe and Japan and Australia in the Asia-Pacific region.

We are also concentrating execution against specific vertical markets like healthcare and financial services. These are information rich markets where regulatory pressures require mobility and security to tightly coexist. They are also substantially underpenetrated by Absolute.

Our execution in this area in Q1 involved educating our field organization on the key opportunity drivers and use cases within these vertical segments; introducing incentives designed to reward progress in these key markets; working with OEMs and VAR partners on go-to-market initiatives that target accounts in these verticals specifically; and expanding our direct sales capacity focused on these markets.

We are doing this while continuing to build on our tremendous strength in the education sector where significant growth opportunity continues to exist both in North America and internationally as evidenced by our performance in Q1.

The third key initiative I introduced in Q1 focused on elevating the prominence of Absolute's brand beyond the US education market. In Q1 we executed two significant changes to affect this. First of all, we consolidated a marketing budget that has been spread thinly across a myriad of product market segments and brands and concentrated the spend on those specific geographic and vertical markets we are targeting for growth.

Additionally, we appointed a prominent branding firm to help us reposition the Absolute storyline around areas of maximum customer value. These include securing information, ensuring compliance and enabling mobility. The objective of this initiative is to allow our sales organization to spend less time educating markets and more time identifying, developing and closing opportunities. I look forward to providing you with more details regarding progress on our branding initiative at the end of Q2.

Elevating sales productivity also remains a top 2015 strategic priority. In Q1 this involved an intensive training and education initiative designed to elevate sales team effectiveness around positioning Computrace as a solution to address information security and compliance requirements in non-education verticals, including financial services and healthcare.

The Q1 initiatives I described earlier that tightly align our sales resources with high return on investment technology use cases and concentrated areas of geographic and vertical opportunity are also designed to positively impact sales productivity. We also modified our compensation plan in Q1 to focus effort on new business development in our prioritized target markets.

Finally, we introduce changes to our sales organization in Q1 to elevate effectiveness around our four critical sales activities. These include optimizing our substantial renewal base; expanding the business of existing customers; increasing the annual contract value per existing customer; and acquiring new business.

This involved the reassignment of the bottom 15% of our customer base based on business volume and opportunity from our outside field organization to a more cost-effective inside sales organization. This inside sales team is specifically focused on expanding and renewing Absolute's business with these smaller customers.

This change has liberated the outside field organization from managing these smaller contracts and enables them to focus on more productive new business development activities within the market segments we are targeting. A focus on unlocking sales potential through similar evolutionary initiatives will continue.

Go-to-market partnerships also continue to represent a priority in both elevating sales productivity and accelerating growth. In Q1 we intensified coverage of our key global OEM partners, focusing both on fortifying our embedded persistence relationships and on monetizing these relationships more productively. This included concentrating go-to-market program investment with these OEM partners on the key geographies and vertical markets I referenced earlier.

Our VAR program continues to contribute more productively. In 2014 over 80% of our total bookings involved a VAR partner, reflecting an active reseller partner community. The objective in 2015 is to enable our VAR community to operate more self sufficiently, both in identifying new business opportunities and in doing business development work around these opportunities independently of the Absolute direct sales team.

I am pleased to report that the volume of this type of incremental VAR business in Q1 exceeded the volume of similar incremental VAR business in the entire second half of 2014. Elevating the performance of our partner community will continue to be a priority in Q2.

Finally, we have been busy elevating operational effectiveness. In Q1 this involved investing in key system improvements and putting structure and process in place to clarify performance expectations, elevate accountability around these and drive tighter cross functional alignment around key strategic initiatives.

The changes we made in Q1 represented significant and positive steps towards achieving two primary objectives -- the achievement of more aggressive growth target and realizing our objective of distinguishing Absolute Software is a global information technology security leader. We are committed to continued progress in Q2.

With that I would like to turn the call over to Errol to discuss our financial results in more detail. Errol?

Thanks, Geoff. Good afternoon, everyone. I will now spend a few minutes discussing the key financial metrics in the quarter. Total sales contracts were $26.1 million, up 10% from Q1 of last year. But more impressively, commercial sales contracts in Q1 were up 14% over Q1 of last year while consumer sales were down 39%.

The commercial strength in the quarter was driven by strong growth in the education and healthcare verticals and within North America specifically. While Q1 is traditionally a strong quarter for education, we were very pleased to see the combined education and government vertical drive a sales contract increase of 27% over Q1 of last year.

This increase reflected the resurgence of Windows-based tablets and laptops in the US K-12 sector, increased market penetration and continued selling and cross-selling of our managed and service solutions.

The combined corporate and healthcare vertical was down 2% year-over-year in the quarter reflecting an opportunistic focus by our sales teams on education opportunities as well as a lower average deal size. The number of deals in corporate and healthcare was actually higher than last year, reflecting continued opportunity through our land and expand selling model.

This increase in deal activity, combined with the 36% increase in corporate and healthcare that we experienced in Q4, supports our continued confidence in corporate and healthcare as a key drive for our business going forward.

From a regional perspective North America continued to lead our overall growth. Total North American sales contracts were up 12% in Q1 compared to the prior year. But when looking solely at North American commercial markets, our sales contracts were up 18% over the prior year. Our international business declined 4% year-over-year largely as a result of a nearly $1 million corporate sale in Japan in Q1 of last year that was not repeated in Q1 of this year.

Looking at deal composition, we closed four deals over $500,000 in the quarter, all of it which were with North American education customers. This compares to three deals in Q1 of last year of which only one was in North America and which were split between education, corporate and government.

Existing customer sales in Q1 were higher than average at approximately 85% of commercial sales compared to 80% in Q1 of last year. The higher proportion of existing customer sales in the quarter reflected substantial renewal, expansion and cross-selling of our managed and service solutions.

From a product perspective, our device management and data security product category was up 13% year-over-year in Q1. The increase in the quarter was driven by strength of Computrace data protection and Absolute Manage. Our Computrace best management offering grew 15% year-over-year in Q1 reflecting the strength in education sales.

Now let's take a quick look at our cash from operations. Cash from operating activities was up sharply at $8.7 million in Q1, up 63% compared to $5.4 million in Q1 of last year. This increase reflected collections from our record Q4 as well as strong sales in the current quarter.

Adjusted operating expenses, which include cost of sales and operating expenses but exclude non-cash charges for depreciation, amortization, stock-based compensation as well as postretirement benefits, increased 3% over Q1 of last year and represented 73% of sales contracts, down from 77% in Q1 of last year.

Our Q1 adjusted EBITDA increased 29% to $4.3 million compared to $3.3 million in Q1 of last year. And as a percentage of revenue, adjusted EBITDA improved to 18% compared to 15% in Q1 of last year. We believe that opportunities exist to further expand our EBITDA margins through a combination of an increasing proportion of sales coming from our higher-margin device management and data security products as well as continued sales productivity improvements, as Geoff has discussed.

From an income tax perspective we are moving into a cash taxable position in our Canadian operations. We had a current tax expense of $860,000 in the quarter which was significantly offset by SR&ED investment tax credits resulting in estimated cash taxes payable of $210,000.

Part of this is related to operating profit, but the majority of the current tax expense was related to foreign exchange gains in our Canadian company which are eliminated for accounting purposes. Going forward we do expect to remain in a cash taxable position in Canada, which will likely lead to cash taxes payable of less than 10% of our net income before taxes.

We ended Q1 with cash and investments of $80.3 million compared to $73.6 million at June 30, 2014. Our cash and investment position improved largely due to cash generated from the operations of the business. The primary non-cash use -- non-operational use of cash during the quarter was for our dividend.

In Q1 we paid $2.4 million in dividends. We also resumed activity under our normal course issuer bid, which gives us the option to acquire up to 10% of our public float over the period of a year. We bought back 32,000 shares during the quarter, utilizing $200,000 of cash, and have bought back a further 348,000 shares subsequent to quarter end at a cost of $2.1 million.

In summary our financial results continue to reflect the strength inherent at Absolute. Growing sales, strong free cash flow, unique and compelling technology, talented and passionate employees, strategic industry partnerships and a diverse and will customer base.

We remain confident in our strategy and excited by the market opportunity and our future potential. We believe that we have the right strategy, product portfolio and team for success and our outlook for fiscal 2015 remains robust and on track.

This concludes our prepared remarks for today. Operator, please open up the call for questions.

(Operator Instructions). Thanos Moschopoulos, BMO Capital Markets.

Good afternoon. Geoff, you highlighted the progress that you've made on the VAR channel. You made a statement which I don't think I quite grasped regarding your traction there and how you have more traction than you did all of last year. Could you just repeat that and clarify that?

Sure. Thank you, Thanos, for asking. We define an incremental VAR opportunity as an opportunity a VAR discovers independently of the Absolute sales organization. And it was the volume of that type of incremental business that I was referencing.

Okay. So as far as independent opportunities without any of your sales guys being involved?

Correct.

Okay, did they skew towards any particular vertical or was that pretty diverse as far as what the VARs brought in?

It was quite diverse. I will say that if we take a look at some of the more recent activity it tended to center around non-education verticals, but it was quite diverse just in terms of the deals that I referenced.

Would that be more on the Computrace side or other products as well?

No, primarily on the Computrace side.

Okay. You also said that you expect to be announcing substantial new OEM partner agreements. I imagine probably not much more color you could add until you actually make those announcements?

That is correct.

Okay. Maybe a question for Errol. On the receivables it seems that you had some good collections there. (Inaudible) sustainable at this level or what should we think about DSOs going forward?

Sure. I would expect our receivables to be fairly stable going forward. Certainly if you work off the DSO, we are at what I would characterize as a standard DSO ratio for our business. It is a little bit lower than what it was in Q4.

Okay, but bottom line we shouldn't see any significant changes there?

No.

Okay. And maybe just one last one for me. With respect to the corporate and healthcare being down 2%, so I guess the message is that was just a function of the sales guys being focused on the education opportunity, maybe some quarterly lumpiness? Maybe could you characterize how the corporate and healthcare pipeline is looking?

And in particular, we've heard some companies talk about acceleration in enterprise software spending over the past quarter. Are you seeing any of that or how would you characterize the spending environment right now for your products?

So I think your interpretation was a good one. It was an anomalous quarter in terms of the booking performance in those segments. Errol referenced the fact that our order volume was up. We expanded the number of corporate and healthcare customers which will provide a good platform for future growth in terms of our ability to expand and upsell and cross sell and renew those new relationships. But we just didn't have the big deals this quarter.

And to your point, what we saw was a very strong growth position in education and we've got a substantial percentage of our sales organization whose charter combines education and healthcare and corporate. And obviously they gravitated towards a very unique growth opportunity around education.

But keep in mind, that was a segment that grew 36% last quarter. And certainly, based on our analysis of how our opportunity is distributed, we expect that corporate and healthcare will play a very important role in realizing our next-generation of growth.

Okay and no specific changes to the spending environment since last quarter that you would call out?

The spending environment wasn't an obstacle to growth for us. So yes, we have seen an increased level of confidence and activity, but I would suggest that that will only expand what is already a very substantial under realized opportunity for us.

Okay, great.

Scott Penner, TD Securities.

Thanks. Geoff, first of all, on the renewal of the existing customers, can you give us just some sense I guess first of all on a dollar per dollar basis whether you are able to grow these renewals in aggregate? And then on the individual products whether pricing has remained pretty constant?

Yes, to the second question. And the renewable volume was up. We haven't got a specific percentage that we are in a position to share with you, but it represented an increase year on year.

Yes, I think a great way to look at that, Scott, is in terms of where the renewal opportunity is tracking it just looking back over the last couple of years at our average growth. We grew 12% in fiscal 2012 and we were flat in fiscal 2013 and then up 10% in 2014. And I think when you look at the averages through that, that is fairly reflective of the increase in our renewal opportunity this year versus last year.

Okay. On the product side, Geoff, just going back a couple of quarters there was a lot of discussion about the unified Web console and then the single sign-on capability. I wonder if you could just sort of -- whether you have a sense of the availability for -- specifically on the single sign-on stuff and whether it is affecting any deal cycles.

It is a good question, Scott. What I will say very frankly is that we have not executed as quickly as we expected against that. One of the things I referenced that we did in Q1 was strengthen our product management function. And as part of that exercise we defined the minimum viable product for that integrated solution.

And we also reassigned some development resources from our consumer business to help accelerate progress. And we are hoping moving into the second year to be able to provide a high level of confidence prediction in terms of when that is going to be available.

What I will say though is that not having that functionality has not inhibited our ability to cross and upsell in any substantial way. In fact, the vast majority of our managed and service activity was off the Computrace install base. But we do believe when we've got a more integrated unified common look and feel console that that will help us accelerate the productivity around cross sell and upsell opportunities.

Okay. Have you ever given out exactly the split when we are looking at the commercial business, how much the education and healthcare -- or sorry, corporate and healthcare is and how much the education and government sector is?

Sure. We have given that out on occasion in the past and I can tell you, just looking at fiscal 2014 as an example, as a proportion of our overall commercial business the combined education and government was about 55%, that was for the year as a whole. In the most recent quarter in Q1 education and government combined were just under 65%.

Okay. This last question is, Geoff, you have laid out a bunch of growth opportunities and areas where you are refocusing some of the investment. What would you think are maybe the one or two top bites in terms of low hanging fruit where you would really expect to get the torque over the next couple years?

Well, I think just in terms of product market opportunities Computrace obviously a central focus. I referenced the geographic markets that we are going also to focus on. We are determined to maintain our strength in education and to realize growth opportunities in that segment. But the big unrealized thing for me, Scott, is the corporate and healthcare market.

If we take a look at our Gartner data, it is an exponentially greater market opportunity than our traditional education market. And we need to combine a strong education focus with a much more productive business development effort around healthcare and corporate which we are singularly focused on.

Excellent. Thank you.

Pardeep Sangha, PI Financial.

You mentioned I think that you are expecting EBITDA margins to start increasing a little bit here. Can you just add a bit more color again in terms of some of the drivers? You went through pretty quickly on that. And just again really sort of gross margin and EBITDA margin and the drivers there for increased margins?

Sure. First of all, one of the drivers of that expanded margin was just the composition of our sales between the two categories. The device management and data security product category is a higher-margin, higher gross margin, product than the theft management and the difference being just simply the fact that we don't have that service -- the investigative services organization overlay on there.

So there will be a natural expansion in gross margins because we are seeing a higher growth rate in device management and data security than we are in theft management. And certainly as we push deeper and deeper into corporate and healthcare our expectation is that there is going to be a parallel increase in device management and data security sales.

And then the second piece in there though is just really driving productivity throughout the organization. And the focus on productivity is largely within the sales organization through a lot of the changes that Geoff had discussed earlier.

Okay. And with regards to productivity and efficiency I guess, what was your headcount at the end of the quarter compared to the total headcount at the prior quarter? It seems like your headcount hasn't increased much or hasn't decreased much. There seems to be some rationalization, but are you moving people back and forth? Have you had to let people go? So just give us some understanding of how that dynamic has rolled out.

You are right. The headcount was relatively flat between September 30 and June, right at around 415. But we are making some changes within that envelope. And certainly over the course of the year we do expect some expansions in headcount.

But what we are really focused on right now is a lot of repositioning largely within the sales organization, just concentrating resources on those high concentrations of opportunity that Geoff talked about in the large metropolitan centers, internationally within areas like the UK, Germany, Japan, Australia, Brazil. It is a movement of resources into those areas.

You guys have been working on some of these areas in a while -- Brazil, Japan, etc. I mean some of these geographies you've been working on for a while. What is going to be different this time around?

Well, Pardeep, we've been working on them in conjunction with a lot of other geographies in those same theaters without any concentrated effort around business developments. In Asia-Pacific -- we have got customers I might have mentioned to you at one point during our conversation 133 different countries.

So it is not that we haven't been doing business in these countries, but what we are looking to do is take our resource base, our investment base in the theaters and really center them on those specific countries with an effort to penetrate them in a much more meaningful way.

They're high return on investment targets and, again, the context of the overall theater and we expect that by concentrating our investment in a much more discreet set of high ROI targets that we will see an increase in performance.

Okay. And lastly, I mean you have mentioned in the past that you don't expect to be pursuing acquisitions at this point, is that still the strategy right now?

Well, listen, I mentioned that we are focused on monetizing our existing technology portfolio. My sense right now is that our capacity to grow is not inhibited by not having access to enough technology.

But listen, we are mindful of our cash position, we are mindful of the fact that there are some very interesting innovative companies in the information security space that may intersect with our growth strategy and we are certainly considering potential candidates. But the primary focus right now in this year is simply on monetizing our current portfolio more productively.

Okay, thank you.

Richard Tse, Cormark Securities.

Thank you. So it is a bit of a follow-up to Scott's question. You went through a number of initiatives at the beginning and I am not sure I've even got them all down. But maybe you can kind of go through those initiatives and give us a sense of when do you expect the timing of these things to kind of hit their full stride over the course of the next 12 to 24 months?

Yes, so the summary is leading with Computrace, up selling and cross-selling our other solutions including manage and service, focusing on a very discreet set of high return on investment geographic and vertical targets, elevating awareness, doing some market education and creation work in those target markets and elevating sales productivity through a number of programs.

So those are the key programs that we focused on in Q1. We will continue to. We do expect they will impact performance and productivity over time. It is not clear to us how quickly or how materially that will happen a quarter into many of these initiatives, in fact less than a quarter around some of them.

And that is why we have been conservative in terms of our outlook this year. But certainly we expect. as we move into next year and beyond, that we will see an increase in performance and productivity, that is the objective.

So really you are kind of banking on these things to hit their full stride at the end of next fiscal year, is that how I should look at it or --?

Yes, the end of this fiscal year. Moving into the next fiscal year, that is the objective.

Okay. And I guess on a question of headcount, there is really no change that is required either up or down to execute on those initiatives, is that correct?

Well, there will be expansion, as Errol mentioned. The primary focus to date has been repurposing, so moving headcount away from lower return on investment technologies and market opportunities and concentrating them in the targets that I described. But we are well-positioned we feel and there is still some work that we have to do in terms of optimizing the existing headcount. But as we start to move through Q2 we will look at expansion in key areas.

Okay. And Errol, I know you had talked about taxes, but did you provide a tax rate that we should be looking at using going forward here in our models?

Yes, I have a bit of a range for you. It is anywhere from zero to 10% and it is a little bit hard for us to estimate just because it is country specific and it really depends on where our sales land. But right now if you want to pick somewhere -- I mean arguably the midpoint in there around 5% to 6% is probably the best number to use in your model.

Okay great, thank you.

Michael Kim.

You talked a little about expansion in Windows tablets specifically in the education vertical. I'm curious if you are seeing similar opportunities in corporate and healthcare -- maybe a broader diversification of mobile platforms?

Yes, I would say that we are generally. I would say that the adoption affected our results most materially in education just because replacing other devices that we haven't been able to monetize in some cases. But I would say that we are seeing a shift -- maybe not as quickly, but we are certainly seeing a shift occurring around the tablets in the broader healthcare and corporate markets as well.

And then talking about broader perspective, are you seeing any change in the competitive environment for manage and more specifically any change in the pricing environment?

No.

Great, thank you very much.

(Operator Instructions). There are no further questions at this time. I will turn the call back over to the presenters.

Well listen, in closing I want to thank everybody for their time today and for their interest and for their support of Absolute Software. Thank you and thank you, operator.

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