Critical Path Announces Fourth Quarter 2001 Results; Continued Sequential Core Revenue Growth; Expenses Lower Than Expected.Business Editors SAN FRANCISCO--(BUSINESS WIRE)--Feb. 5, 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 fourth quarter and fiscal year ended December December: see month. 31, 2001. Total net revenue for the quarter was $23.2 million compared with $26.8 million reported in the third quarter. Core revenue for the quarter increased $0.4 million to $22.4 million from $22.0 million in the third quarter of 2001. Non-core revenue for the quarter was $0.8 million compared to $4.8 million for the third quarter of 2001. The following table presents details of revenue by category on a quarterly basis for 2001 and annual revenue for 2001 and 2000 (in millions):
Fiscal Year 2001 By Quarter Annual Revenue
----------------------------- --------------
Core Net Revenues Fourth Third Second First 2001 2000
Software licensing $ 8.3 $ 7.1 $ 8.4 $ 4.3 $ 28.1 $ 47.1
Hosted messaging 8.2 7.6 6.7 7.7 30.2 31.6
Professional services 2.3 4.1 2.5 2.0 10.9 11.6
Maintenance & support 3.6 3.2 3.1 3.1 13.0 9.9
----------------------------- --------------
Total core revenues $ 22.4 $ 22.0 $ 20.7 $ 17.1 $ 82.2 $100.2
Non-Core Net Revenues $ 0.8 $ 4.8 $ 6.4 $ 10.0 $ 22.0 $ 35.5
----------------------------- --------------
Total Net Revenues $ 23.2 $ 26.8 $ 27.1 $ 27.1 $104.2 $135.7
----------------------------- --------------
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 $2.9 million for the quarter, an improvement of $8.7 million compared to the EBITDA loss, excluding special charges, of $11.6 million for the third 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 attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to common shares for the fourth quarter was $15.6 million, or $0.21 per share, compared to net income of $86.9 million, or $1.17 per share for the third quarter of 2001. The third and fourth quarters of 2001 included extraordinary gains of $137.2 million and $38.2 million, respectively, from the retirement of the Company's convertible subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes. Excluding these extraordinary gains, the net loss for the fourth quarter was $53.5 million, or $0.71 per share, compared to a net loss of $50.3 million, or $0.68 per share for the third quarter of 2001. Revenue for the year was $104.2 million, compared with $135.7 million in the prior year. Core revenue for the year decreased $18.0 million to $82.2 million from $100.2 million in the prior year. Non-core revenue for the year was $22.0 million compared to $35.5 million for the prior year. EBITDA, excluding special charges, for the year was a loss of $65.0 million compared with a loss of $31.8 million for the prior year. GAAP net loss and net loss per share for the year, were $79.8 million and $1.08 per share, respectively, compared with a net loss and net loss per share of $1,852.5 million and $30.67 per share for the prior year. During the quarter, Critical Path completed implementation of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan announced earlier in the year. The restructuring plan included the sale or discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of all non-core products and services, a significant reduction in headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. and a consolidation of company facilities. The Company's quarterly operating cost structure, excluding special charges, has been reduced by nearly $30 million, or better than one-half, since the first quarter of 2001. During the quarter, the Company recorded an additional restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $6.0 million, of which $5.7 million related to the restructuring of facilities and $0.3 million related to the sale or discontinuance Cessation; ending; giving up. The discontinuance of a lawsuit, also known as a dismissal or a non-suit, is the voluntary or involuntary termination of an action. DISCONTINUANCE, pleading. A chasm or interruption in the pleading. 2. of products and services. Cash charges in the quarter included $0.8 million of the $6.0 million restructuring charge. A summary of the year to date restructuring charge is illustrated in the chart below (in millions):
Total Noncash Cash Liabilities at
Charge Charges Payments December 31, 2001
Workforce reduction $ 10.3 $ 1.3 $ 8.9 $ 0.1
Facility and operations
consolidation and other
charges 9.0 5.1 2.1 1.8
Non-core product and
service sales and
divestitures (1.0) 1.1 (2.3) 0.2
------- ------- ------- --------------
Total $ 18.3 $ 7.5 $ 8.7 $ 2.1
During the quarter, the Company took an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $12.4 million related to the impairment of long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets from its core business. This charge resulted from an analysis of the core business and a determination that it had surplus capacity and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. equipment related to certain core products and services. "The fourth quarter was pivotal for Critical Path as we completed our restructuring and are now focused on implementing our new sales strategy to address the enormous global opportunities for our Internet communications products and services," 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. "We had both new customer wins and sales to existing customers drive our fourth quarter revenue. We have begun to implement a solid sales strategy that includes re-aligning our global sales effort to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the substantial revenue opportunities presented by our target markets of enterprises, governments and service providers and carriers." "Our fourth quarter results demonstrate our continued focus and ability to execute on cost control and expense reductions, as we reported lower-than-expected total cash operating costs operating costs npl → gastos mpl operacionales for the fourth quarter. We are very pleased to report that we completed our restructuring efforts during the fourth quarter. Additionally, we completed a critical $95 million financial transaction that significantly improved our financial position as it brought in $30 million in gross cash proceeds and retired approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $65 million in debt. With $69.2 million in cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments as of December 31, 2001 Critical Path is now on solid footing from a financial perspective and we have created a foundation on which we can now execute our sales strategy," commented Laureen DeBuono, chief financial officer. Customers During the fourth quarter, Critical Path signed new contracts in each of its target markets: Enterprise, government, and carrier/service provider. New customers include the U.S. Department of Labor and San Paolo Pa´o`lo n. 1. An old Italian silver coin, worth about ten cents. Bank, Italy's third largest bank. The Company also expanded a number of important existing customer relationships, with customers augmenting their existing services with new applications or purchasing additional products to support business expansions or integrate recent acquisitions. These customers include BNP Paribas BNP Paribas (Euronext: BNP, TYO: 8665 ) is one of the main banks in Europe and France. It was created on 23 May 2000 through the merger of Banque Nationale de Paris (BNP) and Paribas. and Texas Instruments See TI. (company) Texas Instruments - (TI) A US electronics company. A TI engineer, Jack Kilby invented the integrated circuit in 1958. Three TI employees left the company in 1982 to start Compaq. . The Company noted continued leadership in supplying the identity management infrastructure for its customers' security and e-business (Electronic-BUSINESS) Doing business online. The term is often used synonymously with e-commerce, but e-business is more of an umbrella term for having a presence on the Web. initiatives. Critical Path saw evidence of growing demand for hosted messaging in small to medium enterprises. It signed new contracts with Worldcom The former name of MCI. Based in Jackson, MS, WorldCom, Inc. was a major, international telecommunications carrier. It was founded in 1983 by Bernard Ebbers as Long Distance Discount Service (LDDS), a reseller of AT&T WATS lines to small businesses. and Qwest (Qwest Communications International Inc., Denver, CO, www.qwest.com) A telecommunications company that offers services to telecom carriers, businesses and homes using an extensive fiber-optic network throughout the U.S. and Mexico. and one with British Telecom The telephone and communications carrier that provides services in Great Britain and Northern Ireland. It used to be a division of the British Post Office, but was privatized in 1984 under Margaret Thatcher's administration. to provide email to schoolchildren schoolchildren school npl → écoliers mpl; (at secondary school) → collégiens mpl; lycéens mpl schoolchildren school in the United Kingdom. Recent Highlights During the fourth quarter, Critical Path: -- Completed a $95 million financial transaction that reduced debt by approximately $65 million and raised $30 million in gross cash proceeds -- Signed binding agreements to settle shareholder class action lawsuit -- Hired an experienced managing director for EMEA and professional services -- Was ranked by the Radicati Group as the lowest overall cost provider of messaging solutions to large service providers In 2002, the Company has: -- Named William McGlashan, Jr. chief executive officer -- Named Laureen DeBuono chief financial officer -- Named Bernard Ber·nard , Claude 1813-1878. French physiologist noted for his study of the digestive and nervous systems. Harguindeguy chief marketing officer -- Hired an industry veteran to expand partnership and channel programs -- Hired a successful, experienced general manager to drive sales in the Americas A·mer·i·cas , the See America. -- Resolved the SEC investigation against the Company with no fines or penalties against the Company Guidance The following statements represent management best estimates based on current market conditions. These are forward looking statements and actual results may differ materially due to the factors noted below, among others. For the first quarter of 2002 Critical Path expects to report revenues of approximately $22.5 to $24.0 million on cash operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of $29.0 to $31.0 million. For the full fiscal year 2002, revenues are expected to be in the range of $118.0 million to $128.0 million, and total cash operating expenses for the year are expected to be in the range of $116.0 million to $126.0 million. Based on these projections, Critical Path expects to achieve positive EBITDA (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Conference Call Critical Path will hold a conference call to discuss results for the fourth quarter on Tuesday Tuesday: see week. February February: see month. 5, 2002 at 11 AM EST EST electroshock therapy. EST abbr. electroshock therapy . Those who would like to participate in the conference call should dial 800/583-7549 or 706/679-0679 (international) prior to 10:50 a.m. EST 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 3014688. About Critical Path, Inc. Critical Path, Inc. (Nasdaq:CPTH) delivers software and services that maximize the value of Internet communications. The company provides messaging and collaboration Working together on a project. See collaborative software. 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 basic email and personal information management -- as well as identity management solutions that simplify user profile management and strengthen information security. The standards-based Critical Path Communications Platform, built to perform reliably 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 700 enterprises, 180 carriers and 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. and 40 government agencies. Critical Path 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, plans related to sales strategies and global sales efforts, plans to strategically exit certain products and services, plans to reduced operating costs through continued expense reduction, anticipated effects of restructuring and retirement of debt, anticipated charges and cost savings as a result of these plans and our belief as to our ability to successfully emerge from the restructuring and refocusing Noun 1. refocusing - focusing again focalisation, focalization, focusing - the act of bringing into focus of our operations. 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, evolving business strategy and the emerging nature of the market for our products and services, pending 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 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 the SEC investigation, turnover within and integration of senior management, board of directors members and other key personnel, difficulties in our strategic plans to exit certain products and services offerings, 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, 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 31, 2000, as 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. , and the quarterly report on Form 10-Q Form 10-Q See 10-Q. for the period ended September September: see month. 30, 2001, as may be amended 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. ). Note to Editors: Critical Path and the Critical Path logo are the trademarks of Critical Path, Inc. All other trademarks are the property of their holders.
CRITICAL PATH, INC.
Condensed Consolidated Balance Sheet
(In thousands)
December 31, December 31,
2000 2001
ASSETS
Current assets
Cash, cash equivalents
and short-term investments $216,542 $ 69,165
Restricted cash 215 2,674
Accounts receivable, net 38,938 26,692
Other current assets 10,252 5,367
-------- --------
Total current assets 265,947 103,898
Long-term investments 10,610 7,215
Property and equipment, net 85,304 36,285
Intangible assets, net 124,094 48,641
Other assets 11,655 3,913
-------- --------
Total assets $497,610 $199,952
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 43,710 $ 25,955
Accrued expenses 10,377 6,232
Deferred revenue 15,720 10,297
Capital lease and other
obligations, current 9,363 3,431
-------- --------
Total current liabilities 79,170 45,915
Convertible subordinated
notes payable 300,000 38,360
Capital lease and other
obligations, long-term 4,687 1,149
-------- --------
Total liabilities 383,857 85,424
Commitments and contingencies
Minority interest in
consolidated subsidiary 649 --
Mandatorily redeemable
preferred stock -- 5,373
Shareholders' Equity 113,104 109,155
-------- --------
Total liabilities and
shareholders' equity $497,610 $199,952
CRITICAL PATH, INC.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2000 2001 2000 2001
--------- ---------- --------- ----------
(Unaudited)
Net revenues
Software
license $ 14,275 $ 8,773 $ 51,607 $ 30,960
Hosted
messaging 18,479 8,241 58,553 43,821
Professional
service 5,395 2,050 14,527 12,573
Maintenance
and support 4,114 4,094 10,966 16,819
Total net
revenues 42,263 23,158 135,653 104,173
Cost of net
revenues
Software license 353 599 2,731 1,533
Hosted
messaging 18,134 9,764 59,104 59,124
Professional
service 2,184 2,190 5,945 10,315
Maintenance
and support 2,637 2,244 8,060 10,081
Amortization
of purchased
technology 7,171 4,970 18,140 21,284
Acquisition-
related
retention
bonuses -- -- 1,040 --
Stock-based
expense 329 647 1,586 4,050
Impairment of
long-lived
assets 25,315 12,447 25,315 16,654
Total cost
of net
revenues 56,123 32,861 121,921 123,041
Gross profit
(loss) (13,860) (9,703) 13,732 (18,868)
Operating
expenses
Sales and
marketing 19,050 7,932 66,125 53,356
Research and
development 7,633 5,155 31,022 30,744
General and
administrative 9,778 7,775 30,444 42,260
Amortization
of intangible
assets 125,223 2,486 359,568 13,216
Acquisition
-related
retention
bonuses 894 326 8,294 1,381
Stock-based
expense 18,118 11,655 47,151 53,615
Restructuring
expense -- 6,007 6,695 18,267
Impairment of
long-lived
assets 1,282,150 -- 1,282,150 9,991
Total
operating
expenses 1,462,846 41,336 1,831,449 222,830
Loss from
operations (1,476,706) (51,039) (1,817,717) (241,698)
Interest and
other
income
(expense), net 2,110 342 12,970 5,138
Interest expense (5,200) (503) (15,948) (14,714)
Loss on
investments (23,589) -- (23,589) --
Minority
interest in
net income of
consolidated
subsidiary (123) -- (649) --
Equity in net
loss of joint
venture (379) (347) (1,019) (1,866)
Loss before
extraordinary
item and
income taxes (1,503,887) (51,547) (1,845,952) (253,140)
Provision for
income taxes (2,180) (1,933) (6,513) (5,606)
Loss before
extraordinary
item (1,506,067) (53,480) (1,852,465) (258,746)
Gain on
retirement of
convertible
subordinated
notes, net -- 38,242 -- 179,282
Net loss $(1,506,067) $ (15,238) $(1,852,465) $ (79,464)
Accretion on
redeemable
convertible
preferred
shares -- (356) -- (356)
Net loss
attributable
to common
shares $(1,506,067) $ (15,594) $(1,852,465) $ (79,820)
Net loss per
common share
Basic and
diluted $ (21.27) $ (0.21) $ (30.67) $ (1.08)
Weighted average
common shares
outstanding
Basic and
diluted 70,820 75,500 60,399 73,981
The following supplemental pro forma financial information
presents Critical Path's condensed consolidated results of operations
during the three- and twelve-month periods of 2001 and 2000, excluding
the impact of certain special charges consisting of (i) amortization
of intangible assets associated with purchase business combinations,
(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 our
restructuring initiative, (v) impairment of long-lived assets, (vi)
write-down of investments, (vii) gain on the retirement of convertible
subordinated debt, and (viii) 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.
Pro Forma Condensed Consolidated Statement of Operations
Excluding Special Charges
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2000 2001 2000 2001
--------- ---------- ---------- ----------
(Unaudited)
Net revenues
Software license $14,275 $8,773 $51,607 $30,960
Hosted messaging 18,479 8,241 58,553 43,821
Professional service 5,395 2,050 14,527 12,573
Maintenance and
support 4,114 4,094 10,966 16,819
------- ------- ------- -------
Total net revenues 42,263 23,158 135,653 104,173
------- ------- ------- -------
Cost of net revenues
Software license 353 599 2,731 1,533
Hosted messaging 18,134 9,764 59,104 59,124
Professional service 2,184 2,190 5,945 10,315
Maintenance and
support 2,637 2,244 8,060 10,081
------- ------- ------- -------
Total cost of
net revenues 23,308 14,797 75,840 81,053
------- ------- ------- -------
Gross profit (loss) 18,955 8,361 59,813 23,120
------- ------- ------- -------
Operating expenses
Sales and marketing 19,050 7,932 66,125 53,356
Research and
development 7,633 5,155 31,022 30,744
General and
administrative 9,778 7,775 30,444 42,260
------- ------- ------- -------
Total operating
expenses 36,461 20,862 127,591 126,360
------- ------- ------- -------
Loss from operations (17,506) (12,501) (67,778) (103,240)
Interest and other
income (expense), net 2,111 342 12,970 5,138
Interest expense (5,185) (503) (15,884) (14,714)
Minority interest in
net income of
consolidated
subsidiary (123) -- (649) --
Equity in net loss of
joint venture (379) (347) (1,019) (1,866)
------- ------- ------- -------
Loss before income
taxes (21,082) (13,009) (72,360) (114,682)
Provision for income
taxes (2,180) (1,933) (6,513) (5,606)
------- ------- ------- -------
Net loss $(23,262) $(14,942) $(78,873) $(120,288)
======== ======== ======== =========
Net loss per common
share
Basic and diluted $(0.33) $(0.20) $(1.31) $(1.63)
======== ======== ======== =========
Weighted average common
shares outstanding
Basic and diluted 70,820 75,500 60,399 73,981
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