The Holy Grail Metric for Recurring Revenue Businesses

HToday, I’m digging into Absolute Software (ABST).

Absolute Software sells endpoint resilience software. My question was likely similar to what you're thinking now. What is endpoint resilience software?!

In layman's terms, they sell software that sits on laptops and other devices and stays there, even if someone tries to delete it, wipe the machine, or mess with the operating system. The product gives IT teams the ability to track, lock, recover, and re-secure devices.

This report is really about why this company was able to get taken private at a solid valuation, and the short answer is Net Revenue Retention. This is a topic anyone interested in business should thoroughly understand.

Here’s the quick setup.

Net Revenue Retention (NRR) measures how much revenue a company keeps from its existing customers year over year, including upgrades and expansions, after churn.

• 100% NRR means the company replaced every dollar it lost from customers leaving.

• 100%+ NRR means the existing customer base spent more this year than last year, without needing new customers.

• Absolute was running at 107% NRR before the take-private.

That matters more than almost anything else in software.

A few more things that stood out in this report:

• The product is deeply embedded in customer workflows, which makes it sticky.

• OEM distribution puts the software on devices before buyers even go shopping.

• They were taken private at a valuation of $870M in 2023.

A 100% + net revenue retention is something that any recurring revenue business should shoot for. It's a great north star metric.

With that, I'll see you tomorrow!

Nick

TL;DR

• Absolute Software sells endpoint resilience software that remains persistent on devices even if users or attackers try to remove it.

• Its biggest advantage is distribution: deep OEM embedding relationships that place Absolute on devices before IT teams make buying decisions.

• The business is overwhelmingly subscription-based with gross margins above 80%, but operating profits have been pressured by leverage and operating complexity.

• Entrepreneurs can learn how default distribution and switching costs can outperform flashy feature differentiation.

• The warning sign: elite gross margins do not matter if debt and operating costs eat the spread.

The 30,000-Foot View

Absolute Software provides endpoint security, visibility, and control software focused on “resilience”, meaning the ability for security controls to self-heal and persist even after tampering. The core value proposition is durability: if the agent cannot be removed, the device cannot be fully compromised.

The company operates a subscription-first SaaS model, selling primarily to enterprises, governments, and education customers managing large device fleets. Contracts are often multi-year and prepaid, resulting in large deferred revenue balances and predictable cash flow.

Absolute’s defining edge is distribution. Through long-standing OEM partnerships, its technology is embedded at the firmware level on hundreds of millions of devices. This embedded presence acts as a built-in funnel, lowering customer acquisition costs and increasing switching costs.

Revenue mix

• Recurring revenue: ~97%

• Cloud services: ~95%

• Managed services and other: ~5%

Key stats (last public period before going private)

• TTM Revenue: ~$222M

• TTM Gross Margin: ~81%

• Industry: Endpoint security and device management software

• Status: Taken private in July 2023 (**$870M enterprise value @ take-private)

Company History

• 1993: Absolute Software founded in Vancouver, Canada.

• 2000s: Develops persistence-based security technology and OEM embedding relationships.

• 2010s: Expands into endpoint visibility, theft recovery, and compliance solutions.

• 2020–2021: SaaS transition accelerates, recurring revenue mix rises materially.

• 2021: Raises capital via public markets to fund expansion.

• 2022: Acquires NetMotion, expanding secure remote access capabilities and enterprise exposure.

• 2022: Expands internationally across EMEA and APAC.

• May 2023: Announces acquisition by Crosspoint Capital at $11.50 per share.

• July 2023: Transaction closes, company goes private.

• 2024: Acquires Syxsense, continuing a roll-up strategy in endpoint management.

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 2.9/5 - Areal but narrow moat driven primarily by distribution and switching costs

Memorable Marketing

Absolute’s marketing is credibility-first and distribution-led, emphasizing trust, compliance, and embedded presence over loud brand advertising.

Key Campaigns and Tactics

• Embedded in 600M+ Devices

  • Core idea: default presence beats best-in-class positioning.

  • Channels: OEM partnerships, enterprise sales, channel resellers.

  • Why it worked: reduced friction and shorter sales cycles.

• Self-Healing Endpoint Resilience

  • Core idea: persistence and recovery matter more than detection alone.

  • Channels: webinars, analyst briefings, security conferences.

  • Why it worked: reframed the endpoint security category.

• Partner Program Expansion

  • Core idea: make Absolute easier to sell than alternatives.

  • Channels: MSPs and VAR enablement.

  • Why it worked: trust transfer and lower CAC.

Tactical Takeaways

1. Make distribution a core product feature.

2. Sell the job-to-be-done, not the feature list.

3. Anchor marketing on one repeatable proof point.

4. Treat partners as force multipliers.

5. Use compliance as a growth lever.

AI Uses & Opportunities

Current uses

• AI-driven threat insights and anomaly detection across endpoint data.

• Automation for alert prioritization and risk scoring.

Future opportunities

• Predictive device-risk scoring across fleets.

• AI-generated remediation playbooks.

• Executive-level security summaries in plain language.

• AI-driven support deflection to reduce service costs.

• Outcome-based pricing tied to AI insights.

Bumps in the Road

• Heavy reliance on OEM and channel partners creates concentration risk.

• Debt meaningfully reduced flexibility and pressured profitability.

• Operating losses persisted despite elite gross margins.

• Highly competitive endpoint security landscape.

• Reduced transparency after going private.

Your Swipe File

• 100%+ NRR is the holy grail metric for recurring revenue businesses.

• Distribution often beats differentiation.

• Acquisitions add complexity, approach cautiously.