Absolute Software Corporation

Geoff Haydon - Chief Executive Officer Errol Olsen - Chief Financial Officer

Douglas Taylor - Canaccord Genuity Group Inc Thanos Moschopoulos - BMO Capital Markets Paul Steep - Scotia Capital Richard Tse - Cormark Securities Inc Michael Kim - Imperial Capital, LLC Ralph Garcea - Cantor Fitzgerald

Thank you, operator and good afternoon, everyone. Welcome to our Q1 fiscal 2016 conference call.

Joining me on the call today is Errol Olsen, our Chief Financial Officer. I’ll start the call with a brief review of our Q1 results and an update on the progress we’re making and executing against key strategic initiatives.

These initiatives include a singular focus on our core data and device security business, the reorganization of our North American sales force, the rationalization of our targeted markets, with the objective of concentrating investment on those geographies and vertical markets that represent the greatest opportunity for Absolute. Our Q1 results are consistent with the update we provided to the market on October 5, revenue of $24 million grew 3% from Q1 fiscal 2015, EBITDA of $4.3 million was up 2% year-over-year existing customer net ACV retention was consistent with the prior year and we experienced growth in the new customer ACV or Annual Contract Value, which was up 18%.

We also generated $5 million in cash flow for the quarter. Errol will provide more details on our financials later on the call.

I’ll now focus on some of our key strategic priorities. The first being sales productivity, the changes made to our sales organization are beginning to generate positive results.

A particular note where the performances of the inside S&B or small and medium size business and enterprise sales teams. These teams were established earlier on fiscal 2015 to focus on the renewal expansion of about of our existing customers.

These two teams performed well in Q1, virtually eliminating the ACV churn that existed in our S&B and enterprise accounts. These teams will focus on expanding our ACV performance within these accounts, as we move through the year.

The final stage of a sales transformation was completed in July, this involve the transition of the remaining 50% of our existing accounts to a field based strategic accounts team. This team is focused on the renewal and expansion of our largest accounts, as well as new business development within the state and local government and education verticals or SLET.

We expect this new organization to stabilize in Q2 with the objective of eliminating ACV churn and ultimately expanding Absolute’s position within the accounts that they manage. In July, we also formalized our newly created customer acquisition team, this team continues its productivity ramp with a singular focus on expanding Absolute’s base of annual contract value business for new customers, 70% of these new customer acquisition reps were hired within the last four months.

Despite this we’re seeing some very positive indicators of progress. Most notably in Q1, we saw their pipeline increased by seven times since the beginning of August; we expect the contribution of this team to materialize later in the second half of this fiscal year.

We were pleased to see our Q1 pipeline additions and our new customer wins evenly distributed across our core vertical markets. These included financial services, healthcare, corporate, utilities, as well as education.

This result is consistent with our goal of expanding our presence across a broad set of targeted vertical markets. Although we did experience some performance disruption in Q1 related to the sales reorganization and the fact that almost half of our sales team joined Absolute within the last six months, Q1 included some significant sales achievements, in North America almost 40% of the team achieved or exceeded their quotas.

On to our product strategy. With a singular focus on the security of endpoint devices and the information that resides on them we’re able to start thinking much more innovatively and ambitiously about how we apply our broadly embedded Persistence Technology to help customers overcome their most consequential security challenges.

This includes increasingly understanding and remediating the security risks resulting from accidental and deliberate actions by an end user. Our strategic directions is being actively informed by our interaction with our largest and most sophisticated customers and partners.

Additionally, we’ve been working closely with industry analysts, our board of directors, the Absolute advisory board and recognized IT and security leaders within key targeted education healthcare and corporate accounts. As a result of this work, we’ve identified the human factor or the end user as a chronic point of failure when it comes to data breaches and other IT security incidents.

Analyst estimate this type of insider threat whether due to negligence or to malicious intent accounts for over half the data security breaches that occur today. With our Persistence platform embedded on hundreds of millions of devices, Absolute as uniquely positioned to enabled our customers to analyze and understand user behavior.

By applying this insight, customers can determine the risk profile across a wide range of scenarios and ensure they are properly protected before serious security incident can occur whether this user behavior occurs on or off the corporate network. Applying Absolute’s unique technology capabilities to help customers confront this insider threat has emerged as one of most compelling growth opportunities and product strategy priorities.

In support this effort, we’ve recently made several noteworthy leadership additions to the Absolute product and development teams. Todd Wakerley has join Absolute as Senior Vice President of Product Development.

Todd come to us from Symantec, where he was the Senior Director of Mobile Software Development specializing in both software-as-a-service and on-premise security solutions. This experience will be instrumental in the evolution of our strategic and tactical product plans allowing Absolute to deliver innovative and creative ideas from concept through to product development.

We’re also pleased to have Eric Aarrestad join Absolute as Senior Vice President of Portfolio Management. Eric worked previously as Vice President and General Manager of unified endpoint management at HEAT Software.

He also held leadership roles at Microsoft and WatchGuard Technologies. Eric has worked in enterprise IT product management for more than 20 years with extensive expertise once again in SaaS and information security.

He will be responsible for the continued improvement of our technology platform and will liaise directly with the field, customers and partners to understand the market opportunities and to translate these in the future product plans. Eugene Khoruzhenko has also join Absolute as a Chief Product Architect, Eugene was formally the principle software architect at Phoenix Technologies where he led teams focused on unified extensible firmware interfaces and other bios technologies.

Eugene will lead our Persistence development efforts as we expand our embedded Persistence platform through new partnerships and onto new device form factors. These appointments are significant to Absolute, they substantially elevate our capacity to define and execute a compelling absolute technology vision.

This will include the continued expansion of our embedded Persistence device populations through partnerships and into new device types and form factors and enriching the endpoint security functionality we deliver through our unique Persistence platform. On the innovation front in Q1, we announced a new partnership with Advanced Micro Devices or AMD to incorporate Persistence Technology into AMD chip designs.

In the initial phase of our partnership, we’ve integrated a unique identifier into the AMD chipset as a Persistence means to identify an endpoint. Future phases will include integration of Persistence Technology into the chipset allowing us to reach a wider set of platforms across a broader range of OEM partners.

We see this type of chipset manufacture partnership as an important component of our strategy to expand our Persistence platform r into entirely new device domains. We also expanded our ongoing partnership with Microsoft with the announced that our Persistence Technology will be better into the Microsoft surface Pro 4 and Microsoft Surface book devices.

A singular focus on a DDS product offering has also enabled us to accelerate innovative feature delivery. In Q1, we announced our Microsoft SCCM health check feature, which allows our customers to monitor the status of the SCCM software agent on each endpoint.

As one of the world’s most broadly adopted endpoint technologies SCCM is used by many of our customers to properly manage policies and software on their endpoints. If the SCCM agent is disabled or improperly installed a business is unable to assess potential endpoint risks and take appropriate action to safeguard these endpoints, the network and the infrastructure.

We can now alert customers to this vulnerability. The SCCM health check feature, which launched in early August is experiencing tremendous adoption.

They are already over 800,000 devices activated with thousands more enrolling each week. This is one of the fastest adoption rates we’ve experienced with new product feature.

In addition to activating this feature and existing mobile endpoint licensees, we have several customers looking to expand their DDS investment to incorporate desktop devices simply so they can monitor SCCM across the entire endpoint population. As a next step with this technology, we are currently an open beta within SCCM repair capability an extension of the health check feature, this allows our customers to remotely repair a damaged or disabled SCCM software agent.

We hope to launch this feature in December and anticipate once again strong adoption by our customer base. We also launched the open beta program for Endpoint Data Detection or EDD functionality.

This is the feature of DDS that allows our customers to identify sensitive data on an endpoint whether it’s on or off a corporate network. EDD represents a significant competitive differentiated differentiator relative to other data detection technologies which are network dependent.

This means our customers can determined a nature of the data on an endpoint regardless of user or location. Once the sensitivity of the data is no one, our customers can respond to a potential security incident appropriately through a broad set of Absolute enabled remediation options.

The Q1 product announcements and the product in development leadership appointments reflect an increased commitment by absolute to deliver marketable innovation. Innovation that increases existing customer featured adoption thereby increasing stickiness in renewability, innovation that expands the deployment of DDS within existing customer accounts, and innovation which enriches the DDS value proposition to new customers.

Finally I’ll make some remarks in our branding campaign. Absolute completed its brand redesign in Q1, do align with our new strategy.

The campaign we launched in July to support our new brand is well underway. The volume of leads generated as a result of a campaign has exceeded expectations with the year-over-year increasing leads of 240%.

Corporate and healthcare leads in particular are up 150% year-over-year. The intention of the demand generation campaign remains to elevate Absolute’s profile in key targeted, geographic and vertical markets and to elevate the productivity of our new customer acquisition efforts.

This campaign will be ongoing. In summary, we entered the remainder of fiscal 2016 with a substantially strengthened platform for growth.

This includes the enrichment of our product and development teams, the reorganization of our sales team, the expansion of our presence within key vertical markets and the delivery of innovative product features that enable customers to understand and overcome their most critical data and by security challenges. On that note, I’ll turn the call over to Errol to discuss our financial results in more detail.

Errol.

Thanks Geoff. Good afternoon everyone.

Total revenue for Q1 was $24.0 million a 3% increase year-over-year for our Absolute DDS and consumer products, Q1 revenue was $21.3 million a 4% increase over the prior year. Within our Absolute DDS business, our net ACV retention from existing customers was 99%, which was consistent with a prior year performance.

Our goal is to retain and grow our existing customer base. Overtime, we expect net ACV retention to be consistent with this objective.

In terms of new customer performance, we added $700,000 of incremental ACV from new customers. An 18% increase over approximately $600,000 in Q1 of fiscal 2015.

We expect that this metric will continue to improve as we move through the fiscal year. Our adjusted EBITDA for the quarter was $4.3 million this was up 2% compared to the prior year as our 3% increase in total revenue was largely offset by a 4% increase in adjusted operating expenses.

Adjusted operating expenses for the quarter, which are defined in our press release and MD&A benefited from the decline in the Canadian dollar as approximately half of our expenditures are denominated in Canadian dollars. However, those benefits were offset primarily by year-over-year increase in sales and marketing expenses.

Sales and marketing expense was up because of higher personnel cost and additional consulting fees for sales training, we also encourage $750,000 in employees severance charges related to our sales team reorganization. These severance costs are excluded from our adjusted EBITDA.

Our total headcount in September 30, was 432, up from 415 in the prior year, but down from 444 at June 30. In early October headcount was further reduced as 26 individuals transferred with Manage and Service business.

Turning now to cash flow, cash from operating activities was $5.0 million down from $8.7 million in Q1 of last year reflecting lower billings and higher OpEx in the quarter. Absolute DDS billings were $18.1 million and 18% decrease from Q1 of fiscal 2015.

The year-over-year decrease was attributable to three main factors. First, a significantly lower renewal or expiring contract opportunity compared to the prior year, our average contract term is 36 months, so our renewal opportunity in the quarter corresponded to a weak billing performance in Q1 of fiscal 2013.

Secondly, some disruptions in the sales force as we implemented the final stage of our North American sales team reorganization and worked through the divestiture of Absolute manage and service. And thirdly, under performance by our international businesses.

North American commercial billing, which represented 88% of total commercial billings for the quarter were $17.5 million down 18% year-over-year. International billings, which accounted for 12% of commercial billings in the quarter were $2.5 million down 26% year-over-year.

We appointed new sales leads in APJ and EMEA toward the end of Q4 and we are confident we’ll bring these businesses back to growth over the medium term. From a market vertical perspective the combined education in government vertical was down 23% year-over-year.

The combined corporate and healthcare vertical was down 14% year-over-year. Corporate and healthcare represented 40% of total commercial billings for the quarter.

Turning now to corporate activities, we completed the divestiture of Absolute Manage and Service on October 5. Gross proceeds from the sale were $11 million and we expect associated costs to be approximately $750,000.

As we have substantially amortize these assets or both the accounting and tax purposes. We expect an accounting gain on the sale of approximately $15 million and for taxes payable of $2.5 million to $3 million.

As these tax is relate to fiscal 2016, they will be paid in fiscal 2017. We also completed our substantial issuer bid on October 20.

We repurchased $6.3 million shares under the bid or 14% of our common shares outstanding. This represented 94% of the shares tendered at $8 and below.

Immediately following the buyback, we had $38.1 million common shares outstanding and approximately $55 million cash on hand. Looking now to our outlook for fiscal 2016, we remain confident in the market opportunity or Absolute DDS and our long-term strategic plan.

We except that fiscal 2016 revenue for the Absolute DDS and consumer businesses will increase over fiscal 2015 level. However, we expected total recorded revenue for fiscal 2016 to decrease year-over-year, reflecting our divestiture of the Absolute Manage and Absolute Service product lines in Q2.

We expect adjusted EBITDA for fiscal 2016 to decrease from fiscal 2015 levels reflecting lower total revenue modestly higher sales and marketing expenses and increase investment in research and development. We have adjusted our expectation for fiscal 2016 cash flow.

We now expect cash from operating activities to decrease from fiscal 2015 levels due to slightly higher adjusted operating expenses compared to the prior year and relatively flat Absolute DDS billing. The change in our outlook to cash flow, also reflects the renewal of a single $3.5 million, three year deal that was booked in Q2 of fiscal 2013.

The renewal is expect dot be booked in Q3 of this fiscal year with amended payment terms based on annual payment rather than a three year prepay. This approach is consistent with our goal of maximizing, customer lifetime value and the change tot this customer contract has no impact on expected annual contract value.

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

Thanks, good evening. We’re now almost half way through your Q2.

I think the primary question everyone is trying to answer here. How are the changes you’ve made starting the translating to what we will see as measurable financial performance rolling up into the Absolute as a whole?

Hey Doug, it’s great question. We’ve said consistently that we expect that a lot of the changes that we made are going to start to materialize in terms of an elevated level of performance in the second half for the year.

The reality is that in Q1, we saw some disruption associated with the Manage and Service divestiture and the final stage of our sales transformational. We also confronted substantially diminished expiry days of renewal opportunity year-on-year, we’re seeing similar circumstances in Q2.

We did see once again in Q1 some indicators of strength those initial renewal teams, those insight sales functions the S&B and enterprise teams performed well. We saw strong performance in one out of three of our strategic account businesses, there was some disruption within some of the renewal activity of our largest accounts once again imposed by the hand off of those accounts to the new renewal and expansion team and we continue to see that new customer acquisition team on-board from quarter-to-quarter.

We did see some very positive indicator this last quarter, as I mentioned the pipeline increasing seven times since August. In Q1, we saw new customer ACB 14%, we saw new customer billings up to 12% of total billings relative to 8% in the previous quarter.

We saw the average transaction size within new customers double from Q1 of last year to Q1 of this year. So we’re starting to see some good indicators of progress and we expect as we continue to progress through Q3 and most notably Q4, we’ll start to see those manifest more substantially in the form of an elevated level of performance.

Okay. You generated very strong gross margin performance this quarter.

I just wondered Errol or Geoff, if you could comment on what within your product mix is driving that and how you expect that to see that evolve going forward particularly after the divestiture?

Sure Doug, this is Errol. The increase in gross margin was actually purely reflection of amortization expense from acquired intangibles.

So the acquisitions that we made in specifically Manage and Service are now fully amortized well of course they are off the books now, but that was the reason for the increase in gross margin. So we expected what we saw in Q1 should be similar indicative of what we should expect going forward.

Okay. And the last question for me your headcount declined a bit quarter-over-quarter or ahead of the divestiture, you talked about 15% headcount addition, I believe on the last call is being call as being sort of your goal for the year, can you reconcile the difference in Q1 and is that still your target?

It is, so what we saw that decrease over the course of the quarter was really just a positioning of the Manage and Service businesses as part of the divestiture. Going forward, our target for the year is still an overall headcount of in the high 400s probably close to 500.

Having said that that's all dependant on our ability to hire - the lion’s share of those increases in our development team. I expect that we will be filing headcount over the course of the year and might hit the high 400s towards the end of the year.

So average headcount for the year certainly is not going to be 500.

Okay. I’ll pass the line.

Thank you.

Thanks Doug.

Thanks Doug.

Hi good afternoon, Geoff at this point, do you have all the headcount that you need in place on a North American sales team, or do you slots some open positions that need to be filled?

We’ve got a handful Thanos, but we are largely staffed throughout the sales organization in North America.

Okay. And then internationally I know that's work in progress, what would be your objective as far as a timeframe to get that sales team in place in up in running.

So the objective there was to - once again as I mentioned last quarter to replicate the go-to-market structure that we have developed and evolved here in North America to establish local leadership, which we've done in both theatres and then to replicate other elements of the go-to-market model. That includes covering the OEM community key partners like DELL, HP, Samsung, Lenovo most notably covering the borrowing distribution community, establishing an insight sales functions and expanding our field sales capacity.

We’ve completed almost all of those steps in Europe, so the focus is we move into Q2 in the second half is to start to operationalize that new structure at a higher performance level, we’re at the beginning of that curve in Asia. We have appointed a leader, but now we’re starting to build some of the other go-to-market capabilities that I described, but we really view that as kind of a medium term payback.

I’m thinking that we should see some accretion in terms of growth in Q4, but most notably next fiscal year.

Okay. And just to clarify a point about your commentary around the SCCM capability is interesting, it sounds like some good traction there.

And just to be clear that's not a feature that you are charging incrementally for, but the broader implication is that it makes your product more useful and expands the addressable market for deployment, is that correct way to think about it?

It is. I mean it does represent an up-sell opportunity, because it is available through a premium version of our DDS offering, but the objective really is as you’ve mentioned to make the technology more broadly adopted and sticky to an existing customer and to really sharpen our value preposition to a prospect and increase our win rate around new customer conversations.

Great, thanks. I’ll pass the line.

Thanks, Thanos.

Great thanks. Just following up, maybe you could talk a little bit about the opportunity or the focus to go back to the base and try to inform them of the new features with the upcoming SCCM version.

It's a great point. I mean it’s an extension of sales strategy that really drove some of the reorganization decisions that we made earlier in the year Paul.

And that was to go back to our existing customers to ensure that we were across not just renewal opportunity, but the expansion opportunity. Traditionally as you know, our business has done in the back of a new development of endpoint devices through an OEM relationship.

Typically, we are licensed on a very small percentage of the total available device opportunity within an enterprise and so one of the charters of this renewal and expansion team is to go back to those enterprises and to look for opportunities to activate a broader set of device licenses after point of sale if you will. And by introducing innovative features like the SCCM health check and Endpoint Data Discovery, it really enhances our value proposition, because in order for an enterprise to take full advantage of the SCCM health check for example, they really need to have it deployed across a broad variety of devices.

And so it is our intention to use that as a means of accelerating adoption within our existing account base.

Great, thanks. I guess just more for Errol or yourself.

How should we think about that cadence of the build in headcount over the year and then sort of the ramp down, is it going to be fairly linear across the period?

I expect it will be a little more heavily weighted towards the back end of the year.

Okay. Thanks guys.

Thanks Paul.

Thank you.

Thanks. Errol just wondering what the sort of the run rate target would be for OpEx and I know headcount obviously is a part of it, but can you give us a sense of what that target would be and when you guys would expect to be there?

Sure. So when you take everything into account the divestiture and headcount and everything else, the best way to look at it is just to compare it year-over-year.

We expect our adjusted OpEx for this fiscal year to be in sort of the mid single-digits percentage increase over our total adjusted OpEx for fiscal 2015. And that increase is coming from two areas, one is that ramp in headcount and as I mentioned, its heavily weighted towards development headcount, some of that development headcount will be offshore, we do have a development center in Vietnam as well as in Vancouver.

And in the secondary of increase is in the sales and marketing line, it’s largely related to the headcount, a full year impact of the headcount increase is that we saw in sales and marketing towards the back end of last year, but net it all, it’s roughly a 5% increase as our expectation give or take over our total adjusted OpEx from last year.

Okay. And Geoff you guys have done a lot obviously in terms of products and management and sales changes.

Are you guys pretty much complete all the changes that you want to make and it’s the matter of execution now, are there something that are still outstanding there?

No, it’s a good question. Structurally, our work is completed, I mean we believe we now have a field organization that is organized the way that we need in order to drive to kind of outcomes that we aspire to.

There will be tweaking and tuning in terms of personnel, or coverage models, or how we engage customers, but structurally from a staffing perspective, the heavy lifting is completed.

Okay. And you talk about a lot of really interesting initiatives both with Microsoft and I understand you are trying to make product that’s stickier but when it comes to partnership with AMD what is the sort of incremental revenue opportunity that you would sort of give those opportunities going forward, is there a...

It’s a good question, I can’t give you a specific outlook, because it’s going to be largely dependent on how AMD chooses to go-to-market with the Bristol Ridge chipset which we’re embedded in and we’ve got certain amount of visibility to those plans. I mean we’re certainly excited about some of the new OEM computing platforms, it’s going to be embedded, which will extend Persistence, but in terms of how we monetize it, in terms of timeframe and at what scale it’s just it’s too early Richard to estimate based on the information that we’ve got on the plans for that technology.

Okay. And then just one last question on the outlook.

You talked about DDS increasing over 2015 levels. Can you care to give us sort of an order of magnitude there, is it like sort of low single-digit or high single-digit?

No. We actually - the outlook that Errol mentioned was that we expect our DDS billing performance this year to be aligned with the performance last year.

We’re expecting to see increases in revenue. We saw ACV flat recently and we will expect ACV to increase from quarter-to-quarter as we move through the year as well as revenue.

We also expect the DDS billing performance to increase as we move through the year, as we move into the second half, we do have expanded expiry base renewal opportunity. We’re also expecting to see some of the changes and investments that we’ve made in the sales reorganization start to materialize in a more substantial.

We really expect to hit or stride around that as we move into Q4 and certainly as we setup for the New Year, but we do expect a ramp key financial metrics as we move through the year, but the net effect in terms of DDS billings will be a result that is in line with our DDS performance last year.

Okay. And just one last quick one, you talked about the pipeline increasing seven times, speaking of August and then you talked about a number 240% brand leads.

I wasn’t clear on that later point, was it from the marketing campaign that’s addressed those leads or…

Yes. It’s the number of leads that we saw as a result of the branding effort.

So the year-over-year increase in the volume of leads is a result of the branding effort in the campaign and we executed. We’re just trying to be increasingly transparent just with some indicators of progress around lead generation in terms of the growth of the pipeline, in terms of the new customer ACV performance in Q1, the expansion of new customer billing performance from Q4 to Q1.

I mean this is early days in terms of the new customer acquisition efforts, but we’re looking for indicators of progress and we’re trying to share as many of those as possible with analysts and investor community.

That’s very helpful. Okay.

I appreciate that. Thank you.

Thank you.

Hi, good afternoon guys. With the plan expansion in R&D spent this year.

Can you talk a little about the product roadmap, whether we should expect enhancement in existing DDS line-up or adjacencies and then from a timing perspective should we expect to see some announcements around RSA?

Good question. So in terms of kind of short-term 2016 product roadmap deliverables, I talked about a few of them.

One is to get this new user interface through open beta and into production that’s something we’ve been building for years in response to demand from our users to have a more contemporary intuitive users interface. The fast platform that will fuel that user interface, is also going to be more performance available and scalable platform that’s really going to enable us to deliver our next generation of information security functionality.

So that’s important deliverable. Endpoint data discovery for example, which is a feature that I referenced earlier is we’re only able to deliver that based on the new SaaS platform that we’re completing and moving into production in the second half of this year.

So the new user interface endpoint data discovery, the SCCM repair those are three marketable deliveries that we are really focused on this year in terms of technology features that are going to sharpen our capacity to expand existing customer relationships and increase our win rate for new customers pursuits.

Yes, let me just talk about RSA for a minute. It’s hard for us to measure the impact of RSA right now.

And what we’re enabling is customers with an RSA security analytics platform to consume our DDS endpoint intelligence through their RSA analytics platform, but also to be able to correlate our intelligence against other security fees that they also inject through that analytics platform. So once again, once we connect DDS to an RSA analytics platform at an enterprise that’s using that technology, we really become hardwired into their security operating structure, which makes us much more sticky.

Once again when they are consuming our intelligence through that platform it’s much more valuable if its connected to a broad device population. So we’re hopeful that it’s going to result in a broader adoption rate within existing accounts.

The other reality is that our large enterprise customers the ones that use RSA has been requesting this functionality for years and I would suggest that there is a large customers that didn’t adopt DDS because they couldn’t consume it through their RSA analytics platform and so what it’s doing is its giving us an opportunity to go back to those customers with a very different value proposition and we’re certainly expecting to see that manifested itself in the form of unincreased win rate, but it’s hard for me to comment on this point to what extent that is happening or going to happen.

And just to clarify beyond RSA, is there a plan to integrate or have integrations with pretty all the majors end platforms?

Yes, absolutely you know HP, IBM, MacAfee all of them and we’re doing that initially through custom work like the one that we did to extent connectivity to the RSA analytics platform, but ultimately what we are looking to do is expose APIs that allow a customer to consume that endpoint intelligence through any means that they desire.

Well, great and thank you very much.

Thank you, Michael.

Good afternoon gentlemen. Just a couple of questions on the product development side, if you saw a small tactical team that you could hire from an [indiscernible] hire perspective, would you do that first versus sort of this slow and steady development on the product road map side?

I think an acquisition decision that we would make would certainly consider the development capabilities and go-to-market capabilities and the customer base et cetera, it will largely be driven I think by technology consideration. So we’re thinking a great deal right now about the materiality of our delivery platform, the fact that we have technology embedded in hundreds of millions of devices, the fact that we’ve got an incredibly muscular go-to-market capability that sounded on the OEM partnerships that we’ve got that’s founded on an increasingly productivity VAR community that’s founded on a increasingly strengthened new customer acquisition capability.

We’re thinking a lot about the ability to layer additional functionality on top of that delivery platform to really enhance the value that we can deliver to a customer around this endpoint security challenge, or insider threat. That's what is driving a lot of the accelerated innovation organically that would really also be the primary consideration in terms of on acquisition target.

And from a distribution perspective, I mean where do you see the bigger leverage or where are your better relationships I guess, would it be somewhere like Herjavec Group on the reseller side or can you really turn on Ingram Micro or Tech Data?

No, it's a good question, well we do have relationships with some of the large distributors like Ingram Micro and Tech Data. The leverage points for us today exist primarily around the OEM relationships just given their maturity and the strength of their go-to-market capabilities.

Over the last few years we have activated their distribution into our community as extensions of those OEM relationships, they’ve become increasingly productivity in terms of quarter-to-quarter and the extent to which they are delivering incremental business. The next leverage point in our view are the specialized information security resellers, Optive is one we’ve just signed an agreement with them which well be announcing shortly.

We have done several transactions with embedded terms elevating the productivity of a partnership like that that would be focus. The Herjavec Group is another great example, there is quite a number of them, but that community of information security VARs is something that we’re increasingly focused on as we move into the second half of our year.

And where do you see sort of revenue from that channel, let say two to three years out. Can you get to 10% to 15% of your overall revenue from that channel?

Yes, I’m reluctant to provide about level of guidance around those partnerships, but I do expect them to emerge through my experience in working with all of them in previous lives to be a very productivity road to market for us.

Okay. Thank you.

Thank you.

All right. We listen on that note, I want to thank everybody for their time and for their interest and support of Absolute and we look forward to continuing our dialogue with you through the course of the quarter.

Thank you.