Critical Path Announces Fourth Quarter and Year-End 2006 Results.

Financial Improvement Trend Continues

SAN FRANCISCO -- Critical Path, Inc. (OTC:CPTH), a leading provider of messaging software and services, today announced financial results for the fourth quarter and fiscal year ended December 31, 2006.

Fourth Quarter 2006 Results

Revenue and Gross Margins

For the fourth quarter of 2006, revenues were $12.5 million, compared to $10.9 million in the third quarter of 2006 and $15.2 million in the fourth quarter of 2005.

Based upon U.S. generally accepted accounting principles (GAAP), gross margins for the fourth quarter of 2006 were 58%, compared to 53% in the third quarter of 2006 and 47% in the fourth quarter of 2005. On an adjusted EBITDA basis, gross margins in the fourth quarter of 2006 were 60%, compared to 55% in the third quarter of 2006 and 52% in the fourth quarter of 2005.

Adjusted EBITDA is a non-GAAP metric used by management to measure the Company's operating performance and is earnings before interest income (expense), provision for income taxes, depreciation and amortization adjusted to exclude other items, such as other income (expense), restructuring and other expenses, stock-based expenses, loss on extinguishment of debt and accretion on redeemable preferred stock.

Net Results

Net loss on a GAAP basis, which excludes the accretion of redeemable preferred stock (a non-cash item related to outstanding preferred stock), for the fourth quarter of 2006, was $2.3 million or $0.06 per share, compared to a net loss of $2.0 million or $0.06 per share in the third quarter of 2006 and a net loss of $3.7 million or $0.10 per share in the fourth quarter of 2005. For the fourth quarter of 2006, total cost of net revenues and operating expenses, on a GAAP basis, was $13.5 million, compared to $12.2 million in the third quarter of 2006 and $18.9 million in the fourth quarter of 2005.

Net loss attributable to common shareholders based on GAAP, which includes the accretion of redeemable preferred stock, for the fourth quarter of 2006, was $5.9 million or $0.16 per share, compared to a net loss of $5.6 million or $0.15 per share in the third quarter of 2006 and a net loss of $7.1 million or $0.20 per share in the fourth quarter of 2005.

Net loss on an adjusted EBITDA basis for the fourth quarter of 2006, was $0.3 million, or $0.01 per share, compared to net loss of $1.7 million or $0.05 per share in the third quarter of 2006 and a loss of $1.7 million or $0.05 per share in the fourth quarter of 2005. For the fourth quarter of 2006, total cost of net revenues and operating expenses on an adjusted EBITDA basis was $12.8 million, compared to $12.5 million for the third quarter of 2006 and $16.9 million for the fourth quarter of 2005.

Cash and Cash Equivalents

As of December 31, 2006, the Company's cash and cash equivalents totaled $14.5 million, compared to $19.4 million at September 30, 2006 and $18.7 million at December 31, 2005. Cash decreased sequentially primarily as a result of the timing of the Company's billing for maintenance and support, as well as increased accounts receivable balances.

2006 Year-End Results

Revenue and Gross Margins

For the fiscal year 2006, revenues were $46.4 million, compared to $66.8 million for the 2005 fiscal year. A substantial portion of the year-over-year decline in revenue resulted from the sale of the company's hosted assets.

Gross margins, based upon GAAP, for the year were 55%, an improvement of 8 points, up from 47% in 2005. Gross margins, on an adjusted EBITDA basis, for the year were 57%, an improvement of 5 points, up from 52% in 2005.

Net Results

Net loss on a GAAP basis, which excludes accretion of redeemable preferred stock (a non-cash item related to outstanding preferred stock), for the fiscal year 2006 was $10.9 million or $0.30 per share, a reduction of $2.7 million from a net loss of $13.6 million or $0.43 per share in the 2005 fiscal year.

For the 2006 fiscal year, total cost of net revenues and operating expenses, on a GAAP basis, was $53.3 million, a reduction of $29.5 million from $82.8 million in the 2005 fiscal year.

Net loss attributable to common shareholders based on GAAP, which includes the accretion of redeemable preferred stock, for the 2006 fiscal year, was $25 million or $0.69 per share, a reduction of $7.3 million from a net loss of $32.4 million or $1.01 per share in the 2005 fiscal year.

Adjusted EBITDA loss for the 2006 fiscal year was $6.2 million or $0.17 per share, a reduction of $1.0 million from an adjusted EBITDA loss of $5.2 million or $0.16 per share in the 2005 fiscal year. For the 2006 fiscal year, total cost of net revenues and operating expenses on an adjusted EBITDA basis was $52.6 million, a reduction of $19.4 million from $72.0 million in the 2005 fiscal year.

"Looking back at 2006, it can be viewed in two halves. In the first half, we continued to build awareness around consumer mobile messaging and defined a new messaging solution paradigm that enables our customers to effectively compete in today's community-centric, social networking world," said Mark Ferrer, CEO and Chairman, Critical Path. "In the second half, we built momentum for 2007 with operator launches of new consumer mobile push email services, delivering our first release of community-centric messaging, adding new customers in all of our brands, some of which were taken from competitors, and by closing the year nearly reaching break-even on an adjusted EBITDA basis for the fourth quarter."

2006 Highlights

* New Customer Deployments - Critical Path continued to grow its blue-chip customer base in 2006. Recent announcements across all product lines include new deployments at Telefonica Moviles in Spain, WIND in Italy, O2 in the UK, Hutch Indonesia, IDEA Cellular in India and VDC in Vietnam. In 2006, Critical Path added six new Memova[R] Mobile customers. Critical Path also continued to acquire new Memova[R] Messaging and Memova[R] Anti-Abuse customers, while expanding the deployment of these platforms at existing customers.

* Continued Improvement in Financial Performance - In 2006, Critical Path increased gross margins by 8 points to 55% and narrowed its net loss by 2.7 million. In addition, revenue increased sequentially, growing from $10.9 million in Q3 to $12.5 million in Q4, 2006.

* New Product Offerings - During the past year, Critical Path introduced new solutions that enhance mobility and enable consumers to easily and safely participate in today's growing social networks. For example, Memova[R] Mobile moved beyond email to provide new mobile content solutions that make it easier for consumers to access email, blogs, popular social networks and Internet content from virtually any consumer mobile phone. Complementing this, Critical Path also expanded its Memova[R] Messaging platform to bring messaging and communications services together with multimedia albums and blogs for a rich consumer experience oriented around personalized communities. Additionally, Critical Path delivered a premium Memova[R] Anti-Abuse appliance, the C-2000, and a base offering, the A-1200, both of which provide enhanced protection and price performance for service providers.

"As we enter 2007, our new solutions put the people we interact with ahead of the form of communication we use," said Donald Dew, CTO, Critical Path. "This contact-centric approach gives consumers a simple, integrated means of creating their own personal communities and accessing the social networks in which they already participate. This enables operators to deliver these capabilities within their existing portals, strengthening their subscriber experience and opening new revenue-generating opportunities."

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, both cost of revenues and operating expenses on an adjusted EBITDA basis and Memova Anti-Abuse sales bookings. The most directly comparable GAAP measures are the net loss attributable to common shareholders, cost of net revenues and operating expenses and net revenues, respectively. The adjusted EBITDA results exclude interest income (expense), provision for income taxes, depreciation and amortization as well as other items such as other income (expense), net, restructuring and other expenses, stock-based expenses, loss on extinguishment of debt and accrued dividends and accretion on redeemable preferred stock. Memova Anti-Abuse sales bookings are the billable value of contracts for such products closed in the period. 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.

Pre-Recorded Conference Call

Critical Path provides pre-recorded reviews of its financial results. The pre-recorded review discussing financial results for the fourth quarter and fiscal year ended December 31, 2006 will be available via Webcast or telephone. The Webcast will be available on Critical Path's Web site at http://www.criticalpath.net/en/31/webcasts/ as of Monday, April 16, 2007, immediately following the distribution of this press release. Additionally, telephone access to the pre-recorded review will be available beginning Monday, April 16 through Monday, April 30, 2007 by dialing [phone] (within the U.S. and Canada) or [phone] (from outside the U.S. and Canada) and using conference ID 3656141.

Questions about the company's financial results may be submitted to [e-mail]. Any questions regarding the results that are submitted by 6 PM Eastern time, Wednesday, April 18, 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[TM] most. Featuring industry-leading anti-spam and anti-virus technology, Memova[R] Anti-Abuse protects 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 messaging 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 performance of our product and service offerings, the ability of our customers to achieve cost savings and improve revenues in the provision of services, industry trends, market and customer requirements and the ability of our products and services to meet the business needs of our customers and compete favorably in the marketplace. 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's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 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.

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