Critical Path Announces First Quarter 2002 Results; Financial Results In Line with Guidance.Business Editors/High-Tech Writers SAN FRANCISCO--(BUSINESS WIRE)--May 8, 2002 Critical Path, Inc. (Nasdaq:CPTH) a global leader in Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the communications, today announced financial results for the first quarter ended March 31, 2002. Revenue for the quarter was $23.7 million, up from $23.2 million reported in the fourth quarter of 2001. Earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ), excluding special charges, amounted to a loss of $3.8 million for the quarter, compared to an EBITDA loss of $2.9 million in the fourth quarter of 2001. Based on Generally Accepted Accounting Principals (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), net loss for the first quarter was $26.0 million, or $0.34 per share compared to a net loss of $15.6 million, or $0.21 per share, in the fourth quarter of 2001. GAAP net loss for the first quarter, excluding extraordinary gains and losses, was $26.0 million, or $0.34 per share, compared with a net loss of $53.5 million, or $0.71 per share in the prior quarter. "We're we're Contraction of we are. we're we are pleased to report results that are in line with our previous guidance despite a very tough environment for the communications sector," said William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack McGlashan, Jr., chief executive officer. "The first quarter marked a noticeable increase in our sales activity, and we closed several significant wins in which Critical Path displaced displaced see displacement. or beat competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. at key accounts. Our best-in-class See best-of-class. products continue to improve, and the strengths of our technology and services are leading customers to expand adoption of the Critical Path Communications Platform. We have now firmly moved beyond the financial turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. stage and our results this quarter demonstrate that we are laying the groundwork for future success." Customers During the first quarter, Critical Path signed new contracts in its target markets of enterprise and carrier/service provider. Significant contracts signed this quarter include State Farm Insurance, PricewaterhouseCoopers, Bull France, Royal Mail's Viacode, a division of TelecomItalia, and T-Systems T-Systems is a worldwide operating ICT provider. It belongs to Deutsche Telekom AG and is located in Frankfurt, Germany. Within Deutsche Telekom AG it is responsible for its business customers. It operates in 24 countries and employs about 56,000 people (2006). CSM CSM - ["CSM - A Distributed Programming Language", S. Zhongxiu et al, IEEE Trans Soft Eng SE-13(4):497-500 (Apr 1987)]. (a division of Deutsche Telekom Deutsche Telekom AG (ISIN: DE0005557508, FWB: DTE, NYSE: DT, LSE: DEU, TYO: 9496 ) (abbreviated DTAG) is a telecommunications company headquartered in Bonn, Germany. It is the largest telecommunications company in Germany and in the EU. ). Guidance The Company expects that overall market conditions will remain challenging, especially in the U.S., limiting its ability to forecast financial results. Therefore, for the second quarter of 2002 Critical Path expects to report revenues that are generally flat sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and expenses that are in line with prior guidance. Conference Call Critical Path will hold a conference call to discuss results for the first quarter on Wednesday Wednesday: see week. May 8, 2002 at 5 PM ET. Those who would like to participate in the conference call should dial 877/231-3543 or 706/634-1329 (international) prior to 4:50 PM ET on the day of the call. The conference call will also be Web cast and is accessible from the Company's Web site, www.cp.net. A replay of the conference call will be available for seven days following the call. To access the replay, please dial 800/642-1687 or 706/645-9291 (international), passcode 3798201. About Critical Path, Inc. Critical Path, Inc. (Nasdaq: CPTH) delivers software and services that power the most advanced digital communications Transmitting text, voice and video in binary form. See communications. services in the world. A leader in Internet communications, the company provides messaging solutions -- from wireless, secure and unified messaging Having access to e-mail, voice mail and faxes via a common computer application or by telephone. For example, unified messaging may send faxes and digitized voice mail to a mail server that turns them into e-mail attachments. to integrated email and personal information management -- as well as identity management solutions that provide the ability to manage users' digital identities. The standards-based Critical Path Communications Platform, built for high performance and reliability even at the scale of public networks, delivers the industry's lowest total cost of ownership for messaging solutions and lays a solid foundation for next-generation communications services. Critical Path's customers include more than 40 major telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. carriers, 190 service providers, eight national postal authorities A postal authority organises collection and delivery of domestic mail (US), or post (UK), within its area of control, or in the case of foreign mail, delivery to or receipt of mail from other postal authorities. Payment for the service has been performed in many ways. , 35 government agencies and 750 enterprises. More than 500 organizations also outsource outsource verb To assign specific work to a 3rd party for a specific length of time at an set price and service level Managed care To use outside labor to perform functions–billing and collections, accounting, janitorial services, ER messaging services to Critical Path. The company is headquartered in San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden with offices throughout North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Asia and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . More information on Critical Path can be
found at www.cp.net
Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. - This press release contains forward-looking statements, including the Company's statements regarding, anticipated or projected revenue, expenses and operational growth, markets and potential customers for Critical Path products and services. The words "anticipate," "expect," "intend," "plan," "believe," "seek," and "estimate" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, difficulties of forecasting future results due to our limited operating history, failure to meet sales and revenue forecasts and earnings guidance, our evolving business strategies and the emerging nature of the market for our products and services, the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of settlement on pending shareholder litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and other issues related to the SEC investigation of former executive officers, turnover within and integration of senior management, board of directors members and other key personnel, difficulties in delivering and marketing our product and service offerings, protection of our intellectual property, failure to expand our sales and marketing activities, potential difficulties associated with strategic relationships, investments and uncollected bills, general economic conditions in markets in which the Company does business, volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in the market for stock, risks associated with our international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , foreign currency fluctuations, unplanned system interruptions and capacity constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. , software defects, and those discussed elsewhere in this announcement. These and other risks and uncertainties are described in more detail in Critical Path's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December December: see month. 31, 2001, as may be amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. from time to time, and all subsequent filings with the Securities and Exchange Commission (www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ).
CRITICAL PATH, INC.
Condensed Consolidated Balance Sheet
(In thousands)
December 31, March 31,
2001 2002
------------ -----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 59,463 $ 52,257
Short-term investments 9,702 11,272
Accounts receivable, net 26,692 27,114
Other current assets 5,367 8,588
--------- ---------
Total current assets 101,224 99,231
Long-term investments 7,215 6,247
Property and equipment, net 36,285 29,584
Intangible assets, net 48,641 37,879
Restricted cash 2,674 2,670
Other assets 3,913 3,671
--------- ---------
Total assets $ 199,952 $ 179,282
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 25,955 $ 31,318
Accrued expenses 6,232 6,251
Deferred revenue 10,297 8,809
Capital lease and other
obligations, current 3,431 661
--------- ---------
Total current liabilities 45,915 47,039
Convertible subordinated notes payable 38,360 38,360
Capital lease and other obligations,
long-term 1,149 865
--------- ---------
Total liabilities 85,424 86,264
--------- ---------
Commitments and contingencies
Mandatorily redeemable preferred stock 5,373 8,442
Shareholders' equity 109,155 84,576
--------- ---------
Total liabilities and
shareholders' equity $ 199,952 $ 179,282
========= =========
CRITICAL PATH, INC.
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands, except per-share amounts)
Three Months Ended
------------------------
March 31, March 31,
2001 2002
--------- ---------
(Unaudited)
Net revenues
Software license $ 5,550 $ 10,911
Hosted messaging 14,440 6,964
Professional services 3,416 1,937
Maintenance and support 3,737 3,877
--------- ---------
Total net revenues 27,143 23,689
--------- ---------
Cost of net revenues
Software license 291 287
Hosted messaging 17,938 7,817
Professional services 2,966 2,443
Maintenance and support 2,586 2,103
Amortization of purchased technology 5,672 4,630
Stock-based expense 1,303 417
--------- ---------
Total cost of net revenues 30,756 17,697
--------- ---------
Gross profit (loss) (3,613) 5,992
--------- ---------
Operating expenses
Sales and marketing 18,712 10,943
Research and development 9,934 5,002
General and administrative 13,293 6,678
Amortization of intangible assets 4,133 6,131
Acquisition-related retention bonuses 170 10
Stock-based expense 16,430 3,255
--------- ---------
Total operating expenses 62,672 32,019
--------- ---------
Loss from operations (66,285) (26,027)
Interest and other income
(expense), net 2,425 629
Interest expense (5,067) (783)
Equity in net loss of joint venture (776) (403)
--------- ---------
Loss before income taxes (69,703) (26,584)
Provision for income taxes (343) 573
--------- ---------
Net loss (70,046) (26,011)
Accretion on redeemable
convertible preferred shares -- (3,206)
--------- ---------
Net loss attributable to common shares $ (70,046) $ (29,217)
========= =========
Net loss per share--basic and diluted $ (0.97) $ (0.34)
========= =========
Weighted average shares outstanding 72,137 76,514
The following supplemental alternative measurement financial
information presents Critical Path's condensed consolidated results of
operations during the three-month periods of 2001 and 2002, excluding
the impact of certain special charges consisting of (i) amortization
of intangible assets associated with purchase business combinations
and financing transactions, (ii) accruals for employee retention
bonuses associated with purchase business combinations, (iii)
stock-based compensation associated with outstanding options and
warrants, (iv) one-time charges related to restructuring initiatives,
(v) write-down of investments, (vi) gain on adjustment to market of
the preferred stock instrument, and (vii) accretion on redeemable
convertible preferred shares. This supplemental presentation is for
informational purposes only, and is not intended to replace the
consolidated operating results prepared and presented in accordance
with generally accepted accounting principles.
CRITICAL PATH, INC.
Condensed Consolidated Statement of Operations Data
Excluding Certain Special Charges
(Unaudited)
(In thousands, except per-share amounts)
Three Months Ended
------------------------
March 31, March 31,
2001 2002
--------- ---------
(Unaudited)
Net revenues
Software license $ 5,550 $ 10,911
Hosted messaging 14,440 6,964
Professional services 3,416 1,937
Maintenance and support 3,737 3,877
--------- ---------
Total net revenues 27,143 23,689
--------- ---------
Cost of net revenues
Software license 291 287
Hosted messaging 17,938 7,817
Professional services 2,966 2,443
Maintenance and support 2,586 2,103
--------- ---------
Total cost of net revenues 23,781 12,650
--------- ---------
Gross profit (loss) 3,362 11,039
--------- ---------
Operating expenses
Sales and marketing 18,712 10,943
Research and development 9,934 5,002
General and administrative 13,293 6,678
--------- ---------
Total operating expenses 41,939 22,623
--------- ---------
Loss from operations (38,577) (11,584)
Interest and other income (expense), net 2,425 533
Interest expense (5,051) (570)
Equity in net loss of joint venture (776) (403)
--------- ---------
Loss before income taxes (41,979) (12,024)
Provision for income taxes (343) 573
--------- ---------
Net loss $ (42,322) $ (11,451)
========= =========
Net loss per share - basic
and diluted $ (0.59) $ (0.15)
========= =========
Weighted average shares - basic
and diluted 72,137 76,514
EBITDA (1) ($ 27,393) ($ 3,784)
========= =========
(1) Earnings before interest, taxes, depreciation and amortization,
equity in net loss of joint venture and one-time charges
identified in the following table.
The following table reconciles the alternative measurement financial
data presented above to the consolidated operating results prepared
and presented in accordance with generally accepted accounting
principles ("GAAP").
Three Months Ended
------------------------
March 31, March 31,
2001 2002
--------- ---------
(Unaudited)
Supplemental alternative measurement
net loss $ (42,322) $ (11,451)
Amortization of purchased technology (5,672) (4,630)
Amortization of intangible assets (4,133) (6,131)
Acquisition-related retention bonuses
in operating expenses (170) (10)
Stock-based expense in cost of revenue (1,303) (417)
Stock-based expense in
operating expenses (16,430) (3,255)
Amortization of debt issuance costs
in non-operating expense (16) (213)
Loss on investments in non-operating
expense -- (104)
Preferred stock instrument marked
to market -- 200
--------- ---------
Subtotal of amounts excluded from
pro forma net loss (27,724) (14,560)
--------- ---------
GAAP net loss (70,046) (26,011)
Accretion on redeemable convertible
preferred shares -- (3,206)
--------- ---------
GAAP net loss attributable to
common shares $ (70,046) $ (29,217)
========= =========
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