Absolute Software’s Q2 sets the stage for improved growth, says Paradigm

Paradigm Capital analyst Kevin Krishnaratne says Absolute Software’s (Absolute Software Stock Quote, Chart, News: TX:ABT) second quarter results were more evidence confirming his bullish take on the company.

On Monday, Absolute Software reported its Q2, 2017 results. The company lost (US) $1.84-million on revenue of $22.5-million, a topline that was seven per cent better than the same period last year.

“During Q2, we continued on our trajectory of accelerating ACV and revenue growth, driven by both new customer acquisitions and existing customer expansions, with increasingly strong growth coming from the targeted enterprise and health care verticals,” said CEO Geoff Haydon. “The new DDS features and capabilities that we have introduced over the past nine months, combined with an increasingly strong go-to-market capability, are translating into measureable topline results. Our R&D investment plan remains on track, with our new Vietnam facility now open and hiring in both Vancouver and Vietnam beginning to accelerate. We are very excited to be in a position to execute on our product roadmap and vision, which leverages our unique persistence technology and distinguishes Absolute as the leader in the self-healing end point security market.”

Krishnaratne, who says Absolute Software’s second quarter results met his expectations, points out that the company is addressing huge markets with a penetration rate that is still quite low. Because of that he likes management’s decision to step up R&D spending in order to capture a larger shares of these markets.

“We agree with management’s plan to capitalize on emerging information security trends to drive double-digit top-line gains,” says the analyst. “Billings and revenue growth trends are forecast to accelerate as FY17 progresses, particularly in Q4, on the back of new customer wins, greater expansion opportunities, and innovative product launches.”

In a research update to clients yesterday, Krishnaratne maintained his “Buy” rating and one-year price target of $9.00 on Absolute Software, implying a return of 33.7 per cent at the time of publication.

Krishnaratne believes Absolute Software will generate EBITDA of $6.8-million on revenue of $93.4-million in fiscal 2017. He expects these numbers will improve to EBITDA of $13.6-million on a topline of $101.7-million the following year.