Absolute Software gets price target raise at PI

Absolute Software CEO Geoff Haydon.

The first quarterly earnings call under new Absolute Software (TSX:ABT) CEO Geoff Haydon was a picture of a company with a promising outlook, says PI analyst Pardeep Sangha.

Yesterday, Absolute reported its Q4 and fiscal 2014 results. In the fourth quarter, the company earned $800,000 on sales contracts of $30.7-million, an 18% bump over last year’s Q4 topline. For the year, Absolute posted sales contracts of $97.3M in FY14, up 10% from 2013’s $88.3-million total.

Haydon, a rookie CEO with an extensive background in IT and security experience from his two decades at the likes of EMC and RSA, said he was looking forward to the coming fiscal year.

“Looking forward, fiscal 2015 will be an exciting year for Absolute. We’ve sharpened our focus and will deliver on key initiatives,” he said. “This includes concentrating on the growth of Computrace, which is perfectly positioned to provide a persistent and effective response to the data and security risks inherent to a mobile work force. This will also involve leveraging our persistence technology — and existing customer base — to cross-sell our Absolute Manage and Absolute Service offerings. We will invest selectively in product market segments that provide optimum return on investment. We will execute tightly against the renewal and expansion of existing customer relationships and the development of new ones. The entire Absolute team is energized as we head into the new fiscal year.”

Sangha notes that despite the fact that Absolute missed on annual cash flow estimates, the company did beat the street consensus on topline. The analyst was pleased with the growth of the company’s sales contracts in the fourth quarter, as he says these tend to be a leading indicator of future performance. In fiscal 2015, Sangha is forecasting EBITDA of $19.7-million on sales contracts of $108.9-million, with cash flow from operations coming in at $21.1-million.

In a research update to clients this morning, Sangha maintained his “Buy” recommendation on Absolute Software, but raised his one-year target price on the stock from $8.60 to $9.00, to reflect, he says, the strong growth in sales contracts in Q4.