Critical Path Announces Second Quarter 2007 Results
Tuesday, 14 August 2007 09:00
Revenue and Gross Margins Improved Year Over Year
SAN FRANCISCO--(BUSINESS WIRE)--Aug. 14, 2007--Critical Path, Inc. (OTC: CPTH), a leading provider of messaging software and services, today announced unaudited financial results for the fiscal second quarter ended June 30, 2007.
Revenue and Gross Margins
For the second quarter of 2007, revenues were $12.1 million, compared to $12.0 million in the same period last year and $12.2 million in the first quarter of 2007. Gross margins, based upon U.S. Generally Accepted Accounting Principles (U.S. GAAP), for the second quarter of 2007 were 58%, compared to 56% in the same period last year and 53% in the first quarter of 2007. On an adjusted EBITDA basis, gross margins in the second quarter of 2007 were 60%, compared to 58% in the same period last year and 55% in the first quarter of 2007.
Adjusted EBITDA is a non-GAAP metric used by management to measure the company's operating performance and its earnings before net interest expense, benefit from (provision for) income taxes, depreciation and amortization adjusted to exclude other items, such as gain on sale of assets, write-off of capitalized legal costs, restructuring expense, other income (expense), stock-based expenses and dividends and accretion on redeemable preferred stock.
Net Results
Net loss on a U.S. GAAP basis, which excludes the dividends and accretion of redeemable preferred stock (a non-cash item related to outstanding preferred stock), for the second quarter of 2007, was $2.4 million, compared to a net loss of $2.6 million in the same period last year and a net loss of $3.0 million in the first quarter of 2007. For the second quarter of 2007, total cost of net revenues and operating expenses, on a U.S. GAAP basis, was $13.2 million, compared to $14.3 million in the same period last year and $14.2 million in the first quarter of 2007.
Net loss attributable to common shareholders based on U.S. GAAP, which includes dividends and accretion of redeemable preferred stock, for the second quarter of 2007, was $6.2 million or $0.17 per share, compared to a net loss of $6.1 million or $0.17 per share in the same period last year and a net loss of $6.6 million or $0.18 per share in the first quarter of 2007.
Net loss on an adjusted EBITDA basis for the second quarter of 2007, was $0.4 million, or $0.01 per share, compared to a net loss of $1.5 million, or $0.04 per share, in the same period last year and a net loss of $1.2 million, or $0.03 per share, in the first quarter of 2007. For the second quarter of 2007, total cost of net revenues and operating expenses on an adjusted EBITDA basis was $12.5 million, compared to $13.5 million for the same period last year and $13.4 million for the first quarter of 2007.
"Q2 proved to be another solid quarter for Critical Path," said Mark Palomba, CEO, Critical Path, Inc. "Year over year, we continued to grow revenue and improve gross margins. During the quarter, we had new customer wins and expanded our community-oriented messaging solutions at existing customers. In addition, we saw the market opportunity for consumer mobile email and messaging continue to grow, along with the value of our Memova Mobile solutions. We look forward to further capitalizing on this opportunity, while staying focused on improved financial results."
Cash and Cash Equivalents
As of June 30, 2007, the company's cash and cash equivalents totaled $7.8 million, compared to $12.2 million at March 31, 2007. The decrease in cash and cash equivalents is primarily due to timing differences in the collection of the company's accounts receivables which, at June 30, 2007, totaled $19.0 million compared to accounts receivables of $16.1 million at March 31, 2007.
Second Quarter 2007 Highlights
-- Memova(R) Mobile - Critical Path continued to gain traction in
its mobile business in Q2, announcing yet another operator
launch of consumer mobile email services. One of Europe's
largest operators - Telecom Italia - launched a new Memova
Mobile service under its ALICE brand, making mobile email
accessible for use by 98% of its mobile phone subscribers.
-- Memova(R) Messaging - Critical Path continued to work with
service providers around the globe to expand their messaging
platforms and provide new community-oriented services with the
latest version of the Memova Messaging platform - Version 8.0.
One such customer, Wind Telecomunicazioni S.p.A (WIND), rolled
out the new platform in the second quarter, launching new
email and value-added services on its portal Libero.it -
Italy's largest Internet community with more than 12 million
active members.
-- Continued Financial Improvements - For the three- and
six-month periods ended June 30, 2007, total revenue and
overall gross margins improved compared to the same periods
last year. Notably, software license revenues for the second
quarter of 2007 were up 10% year over year, and for the first
six months of 2007, they increased 25% compared to the same
period last year.
Regulation G
The Company uses both GAAP and non-GAAP metrics to measure its financial results. The non-GAAP metrics used are: income (loss) on an adjusted EBITDA basis and both cost of revenues and operating expenses on an adjusted EBITDA basis. The most directly comparable GAAP measures are the net loss attributable to common shareholders and cost of net revenues and operating expenses, respectively. The adjusted EBITDA results exclude net interest expense, benefit from (provision for) income taxes, depreciation and amortization as well as other items such as gain on sale of assets, write-off of capitalized legal costs, restructuring expense, other income (expense), stock-based expenses and dividends and accretion on redeemable preferred stock. There is no difference between adjusted EBITDA and GAAP revenues. Management believes that, in addition to GAAP metrics, these non-GAAP metrics assist the company in measuring its cash-based performance. In addition, management believes these non-GAAP metrics are useful to investors because they remove unusual and nonrecurring charges that occur in the affected period and provide a basis for measuring the company's financial condition against other quarters. Since the company has historically reported non-GAAP results to the investment community, management also believes the inclusion of non-GAAP measures provides consistency in its financial reporting. However, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The calculations for these non-GAAP metrics are in the alternative measurement reconciliation table below.
More Information
Critical Path will not conduct a conference call for the fiscal quarter ended June 30, 2007. Questions about the quarter and the company's financial results may be submitted to This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Any questions regarding the quarterly results that are submitted by 6 PM Eastern time, Friday, August 17, 2007 may be publicly responded to by the company on the Investor Relations section of the company's Web site (http://www.criticalpath.net/investors). The company does not undertake to publicly respond to all such questions submitted.
About Critical Path, Inc.
Critical Path's Memova(R) solutions provide a new and improved email experience for millions of consumers worldwide, helping mobile operators, broadband and fixed-line service providers unlock the potential of email in the mass market. Memova(R) Mobile gives consumers instant, on-the-go access to the messages that matter most. Featuring industry-leading anti-spam and anti-virus technology, Memova(R) Anti-Abuse is designed to protect consumers against viruses and spam. Memova(R) Messaging provides consumers with a rich email experience, enabling service providers to develop customized offerings for high-speed subscribers. Headquartered in San Francisco with offices around the globe, Critical Path's solutions are deployed by service providers throughout the world. More information is available at www.criticalpath.net.
Cautionary Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements by the Company and its executives regarding the growing market acceptance of our product and service offerings, our plans and ability to capitalize on the market opportunity for consumer email and messaging, and our ability to minimize costs and improve financial performance. The words and expressions "look forward to," "will," "expect," "plan," "believe," "seek," "strive for," "anticipate," "hope," "estimate" and similar expressions are intended to identify the Company's forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks include, but are not limited to, completion of the company's year-end close and audit procedures, our evolving business strategy and the emerging and changing nature of the market for our products and services, our ability to deliver on our sales objectives, the ability of our technology and our competitors' technologies to address customer demands, changes in economic and market conditions, and software and service design defects. These and other risks and uncertainties are described in more detail in the Company's filings with the U.S. Securities and Exchange Commission (www.sec.gov) made from time to time including Critical Path, Inc.'s Form 10-Q for the three months ended June 30, 2007 and all subsequent filings with the United States Securities and Exchange Commission (www.sec.gov). The Company makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made.
Note to Editors: Critical Path and the Critical Path logo, Memova and the Memova logo and Messages that Matter are the trademarks of Critical Path, Inc., some of which are registered in various jurisdictions. All other trademarks are the property of their respective holders.
Critical Path, Inc.
Condensed Consolidated Balance Sheets
June 30, December 31, June 30,
2007 2006 2006
--------------------------------
ASSETS (in thousands; unaudited)
Current assets
Cash and cash equivalents $ 7,830 $ 14,542 $ 20,054
Accounts receivable, net 19,020 10,283 14,545
Other current assets 2,954 2,427 2,094
--------------------------------
Total current assets 29,804 27,252 36,693
Property and equipment, net 2,496 2,612 2,784
Goodwill 7,544 7,460 7,313
Other assets 452 679 905
--------------------------------
Total assets $ 40,296 $ 38,003 $ 47,695
--------------------------------
LIABILITIES, REDEEMABLE PREFERRED
STOCK AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 4,397 $ 3,995 $ 4,616
Accrued expenses 13,912 16,837 19,548
Deferred revenue 10,417 6,848 11,483
Notes payable, short-term 24,516 -
Capital lease and other obligations,
current 12 24 62
--------------------------------
Total current liabilities 53,254 27,704 35,709
Deferred revenue, long-term 592 229 640
Notes payable, long-term - 22,396 20,374
Income and other tax liabilities,
long-term 3,764 - -
Embedded derivative liability 470 612 1,020
--------------------------------
Total liabilities 58,080 50,941 57,743
--------------------------------
Redeemable preferred stock 141,111 134,406 127,260
--------------------------------
Total shareholders' deficit (158,895) (147,344) (137,308)
--------------------------------
Total liabilities, redeemable
preferred stock and shareholders'
deficit $ 40,296 $ 38,003 $ 47,695
--------------------------------
Critical Path, Inc.
Condensed Consolidated Statement of Operations on an United States
GAAP Basis
Three months ended
---------------------------
Six months ended
June 30, March 31, June 30, June 30,
------------------
2007 2007 2006 2007 2006
--------------------------- ------------------
(in thousands, except per share amounts;
unaudited)
NET REVENUE
Software licensing $ 3,820 $ 4,181 $ 3,481 $ 8,001 $ 6,409
Hosted services 1,001 1,508 1,167 2,509 2,389
Professional
services 2,741 2,082 2,828 4,823 5,403
Maintenance and
support 4,577 4,453 4,548 9,030 8,837
--------------------------- ------------------
Total net revenue 12,139 12,224 12,024 24,363 23,038
COST OF NET REVENUE
Software licensing 923 1,546 1,060 2,469 2,366
Hosted services 713 767 758 1,480 1,535
Professional
services 1,997 2,017 2,220 4,014 4,196
Maintenance and
support 1,415 1,369 1,224 2,784 2,518
--------------------------- ------------------
Total cost of net
revenue 5,048 5,699 5,262 10,747 10,615
--------------------------- ------------------
GROSS PROFIT 7,091 6,525 6,762 13,616 12,423
OPERATING EXPENSES
Selling and
marketing 3,102 3,154 3,326 6,256 6,816
Research and
development 2,486 2,233 2,525 4,719 4,845
General and
administrative 2,503 3,218 3,019 5,721 6,288
Restructuring
expense 81 48 126 129 1,041
Gain on sale of
assets (2) (127) - (129) (1,971)
--------------------------- ------------------
Total operating
expenses 8,170 8,526 8,996 16,696 17,019
--------------------------- ------------------
OPERATING LOSS (1,079) (2,001) (2,234) (3,080) (4,596)
Other income
(expense), net 168 (109) 537 59 78
Interest expense, net (1,041) (1,021) (900) (2,062) (1,753)
--------------------------- ------------------
Loss before provision
for income taxes (1,952) (3,131) (2,597) (5,083) (6,271)
Benefit from
(provision for)
income taxes (410) 146 (45) (264) (313)
--------------------------- ------------------
NET LOSS (2,362) (2,985) (2,642) (5,347) (6,584)
Dividends and
accretion on
redeemable preferred
stock (3,798) (3,649) (3,505) (7,447) (6,967)
--------------------------- ------------------
NET LOSS ATTRIBUTABLE
TO COMMON
SHAREHOLDERS $ (6,160)$ (6,634)$(6,147) $(12,794)$(13,551)
--------------------------- ------------------
Net loss per share
attributable to
common shareholders -
basic and diluted $ (0.17)$ (0.18)$ (0.17) $ (0.35)$ (0.37)
--------------------------- ------------------
Weighted average
shares - basic and
diluted 36,807 36,696 36,085 36,751 36,183
--------------------------- ------------------
Critical Path, Inc.
Condensed Consolidated Statement of Operations on a Non-GAAP (Adjusted
EBITDA(1)) Basis
Three months ended
-----------------------------
Six months ended
June 30, March 31, June 30, June 30,
----------------
2007 2007 2006 2007 2006
----------------------------- ----------------
(in thousands, except per share amounts;
unaudited)
NET REVENUE
Software licensing $ 3,820 $ 4,181 $ 3,481 $ 8,001 $ 6,409
Hosted services 1,001 1,508 1,167 2,509 2,389
Professional services 2,741 2,082 2,828 4,823 5,403
Maintenance and
support 4,577 4,453 4,548 9,030 8,837
----------------------------- ----------------
Total net revenue 12,139 12,224 12,024 24,363 23,038
COST OF NET REVENUE
Software licensing 923 1,546 1,060 2,469 2,366
Hosted services 550 610 680 1,160 1,242
Professional services 1,993 2,014 2,167 4,007 4,113
Maintenance and
support 1,414 1,366 1,202 2,780 2,486
----------------------------- ----------------
Total cost of net
revenue 4,880 5,536 5,109 10,416 10,207
----------------------------- ----------------
GROSS PROFIT 7,259 6,688 6,915 13,947 12,831
OPERATING EXPENSES
Selling and marketing 3,098 3,148 3,249 6,246 6,671
Research and
development 2,474 2,217 2,391 4,691 4,619
General and
administrative 2,080 2,507 2,729 4,587 5,778
----------------------------- ----------------
Total operating
expenses 7,652 7,872 8,369 15,524 17,068
----------------------------- ----------------
ADJUSTED EBITDA LOSS $ (393) $(1,184)$(1,454) $(1,577)$(4,237)
----------------------------- ----------------
Adjusted EBITDA loss
per share $ (0.01) $ (0.03)$ (0.04) $ (0.04)$ (0.12)
----------------------------- ----------------
Weighted average shares 36,807 36,696 36,085 36,751 36,183
----------------------------- ----------------
(1) Excludes interest expense, net, benefit from (provision for)
income taxes, depreciation and amortization adjusted to exclude other
items such as restructure expense, gain on sale of assets, write-off
of capitalized legal costs, stock-based expenses, other income
(expense), net and dividends and accretion on redeemable preferred
stock.
Critical Path, Inc.
Alternative Measurements Reconciliation
The following table provides a reconciliation between the Company's
Non-GAAP results and Adjusted EBITDA Loss to the Company's Condensed
Consolidated Statement of Operations on a United States GAAP basis.
Three months ended
---------------------------
Six months ended
June 30, March 31,June 30, June 30,
------------------
2007 2007 2006 2007 2006
--------------------------- ------------------
(in thousands, except per share amounts;
unaudited)
Adjusted EBITDA loss $ (393)$ (1,184)$ (1,454) $ (1,577)$ (4,237)
Interest expense, net (1,041) (1,021) (900) (2,062) (1,753)
Benefit from
(provision for)
income taxes (410) 146 (45) (264) (313)
Depreciation and
amortization (491) (445) (364) (935) (854)
Other income
(expense), net 168 (109) 537 59 78
Gain on sale of
assets 2 127 - 129 1,971
Restructuring
expenses (81) (48) (126) (129) (1,041)
Stock-based expenses (116) (30) (290) (147) (435)
Write-off of
capitalized legal
costs - (421) - (421) -
--------------------------- ------------------
Net loss (2,362) (2,985) (2,642) (5,347) (6,584)
Dividends and
accretion on
redeemable preferred
stock 3,798 3,649 3,505 7,447 6,967
--------------------------- ------------------
Net loss
attributable to
common
shareholders $ (6,160)$ (6,634)$ (6,147) $(12,794)$(13,551)
--------------------------- ------------------
Net loss per share
attributable to common
shareholders - basic
and diluted $ (0.17)$ (0.18)$ (0.17) $ (0.35)$ (0.37)
--------------------------- ------------------
Weighted average shares
- basic and diluted 36,807 36,696 36,085 36,751 36,183
--------------------------- ------------------
The following table provides a reconciliation between the total cost
of net revenues and operating expenses on an Adjusted EBITDA basis to
the Company's cost of revenues and operating expenses on a United
States GAAP basis.
Three months ended
---------------------------
Six months ended
June 30, March 31,June 30, June 30,
------------------
2007 2007 2006 2007 2006
--------------------------- ------------------
(in thousands; unaudited)
Total cost of net
revenues and operating
expenses on an adjusted
EBITDA basis $ 12,532 $ 13,408 $ 13,478 $ 25,940 $ 27,275
Depreciation and
amortization (491) (445) (364) (935) (854)
Gain on sale of
assets 2 127 - 129 1,971
Restructuring
expenses (81) (48) (126) (129) (1,041)
Stock-based expenses (116) (30) (290) (147) (435)
Write-off of
capitalized legal
costs - (421) - (421) -
--------------------------- ------------------
Total cost of net
revenues and operating
expenses on a United
States GAAP basis $ 13,218 $ 14,225 $ 14,258 $ 27,443 $ 27,634
--------------------------- ------------------
CONTACT: Critical Path, Inc.
For Reporters and Editors:
Michelle Weber, 415-541-2575
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
For Investors:
Investor Relations, 415-541-2619
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SOURCE: Critical Path, Inc.
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