Critical Path Announces Third Quarter 2004 Results; Results In Line With Guidance; Revenues Increase Sequentially and Year-Over-Year.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 -- Critical Path, Inc. (Nasdaq:CPTH), a global provider of digital communications Transmitting text, voice and video in binary form. See communications. software and services, today announced financial results for the third quarter ended September September: see month. 30, 2004. Revenues for the third quarter of 2004 were $17.5 million, compared to $17.0 million in the second quarter of 2004 and $16.2 million in the third quarter of 2003. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Results Net loss attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to common shareholders, based on United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP), for the third quarter of 2004 was $29.0 million, or $1.37 per share, compared to a net loss of $12.4 million, or $0.59 per share, in the second quarter of 2004 and a net loss of $18.6 million, or $0.92 per share, in the third quarter of 2003. Total cost of net revenues and 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. , based on GAAP, were $27.7 million in the third quarter of 2004, compared to $30.3 million in the second quarter of 2004 and $26.7 million in the third quarter of 2003. Adjusted 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 Results 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.
Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, non-cash severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when , gain on investments and accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the on mandatorily Adv. 1. mandatorily - in a manner that cannot be evaded; "the ministry considers that contributions to such a fund should be met from voluntary donations rather than from rates compulsorily levied." compulsorily, obligatorily redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , or adjusted EBITDA (a non-GAAP measure), for the third quarter was a loss of $4.9 million, or $0.23 per share, compared to a loss of $7.9 million or $0.37 per share in the second quarter of 2004 and a loss of $5.6 million, or $0.28 per share in the third quarter of 2003. Total cost of net revenues and operating expenses on an adjusted EBITDA basis were $22.4 million in the third quarter of 2004, compared to $24.9 million in the second quarter of 2004 and $21.8 million in the third quarter of 2003. "We are pleased that revenues as well as our operating expenses on an adjusted EBITDA basis improved in the third quarter, in line with guidance," said Mark Ferrer Ferrer is a surname known in many countries. The name itself is a mutation of the Latin word Ferrarius, meaning iron-worker or smith; for this reason, the crests of the various branches of Ferrer nobles and knights always include horse shoes. , chief executive officer of Critical Path. "We are focused and executing on our strategy to provide messaging solutions to the fixed-line Refers to wired devices. For example, a fixed-line phone is a standard phone with the handset wired to the base unit in contrast to a portable phone or cellphone. , broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). and mobile markets." As of September 30, 2004, the Company's cash and cash equivalents totaled $20.2 million, compared to its June June: see month. 30, 2004 balance of $23.6 million and its September 30, 2003 balance of $18.2 million. Guidance The Company currently expects revenue for the fourth quarter to be in the range of $17.0 million to $20.0 million. The following guidance is on an adjusted EBITDA (non-GAAP) basis as described above. If the Company is successful in delivering the middle to high end of its revenue range, it expects total gross margins in the fourth quarter to increase to a range of 44% to 49% and for the first quarter of 2005, the Company expects gross margins to be between 48% and 53%. Additionally, the Company expects its operating expenses to decrease from $12.0 million in the third quarter to between $10.0 million to $11.0 million in the fourth quarter and expects its operating expenses in the first quarter of 2005 to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. consistent with the fourth quarter of 2004. Regulation G Due to the forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. nature of the projections of gross margins and operating expenses on an adjusted EBITDA basis given directly above, information to reconcile such non-GAAP financial measures to the most directly comparable GAAP measures is not available without unreasonable effort. The Company believes that the information necessary to reconcile the non-GAAP financial measures to GAAP, such as future restructuring costs, are not reasonably estimable es·ti·ma·ble adj. 1. Possible to estimate: estimable assets; an estimable distance. 2. Deserving of esteem; admirable: an estimable young professor. or predictable. In addition, the amount of future restructuring costs could be significant to the Company's results in any given period. The Company uses both GAAP and non-GAAP metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. to measure its financial results. It utilizes two primary non-GAAP metrics: income (loss) on an adjusted EBITDA basis and operating costs operating costs npl → gastos mpl operacionales on an adjusted EBITDA basis. The most directly comparable GAAP measures are the net loss attributable to common shareholders and the total of cost of net revenues and operating expenses, respectively. 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 Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". 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 Consistency can refer to:
As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. The calculations for these non-GAAP metrics are in the alternative measurement reconciliation table below. Conference Call Critical Path will host a conference call on Thursday Thursday: see week. , October October: see month. 28, 2004, at 8:30 a.m. Eastern Time to discuss the financial results for the third quarter of 2004. The conference call is scheduled to last up to one hour. Those who would like to participate should dial +1 877-231-3543 (domestic) or +1 706-634-1329 (international) five to ten minutes prior to the scheduled start time. In addition, the conference call and a subsequent replay will be available via Web cast from the Company's Web site, www.criticalpath.net. A replay of the conference call will also be available by telephone for two weeks following the call; to access the telephone replay, please dial +1 800-642-1687 (domestic) or +1 706-645-9291 (international), passcode 1541757. The Web cast and this earnings release will be available on the Company's Web site for twelve months following the conference call. About Critical Path, Inc. Critical Path, Inc. (Nasdaq:CPTH) is a global provider of digital communications software and services, headquartered in San Francisco, California “San Francisco” redirects here. For other uses, see San Francisco (disambiguation). The City and County of San Francisco (EN IPA: [sænfrənˈsɪskoʊ] . More information is available at www.criticalpath.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 by the Company and its executives regarding the Company's future 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, 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, 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 and service design defects. These and other risks and uncertainties are described in more detail in the Company's filings with the United States Securities and Exchange Commission (www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ) made from time to time, including 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, 2003, Forms 10-Q for the three months ended March 31 and June 30, 2004 and Current Reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. , 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 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date any such statement is made. 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 Sheets
Dec. 31, June 30, Sept. 30,
2003 2004 2004
-------- --------- ---------
ASSETS (in thousands; unaudited)
Current assets
Cash and cash equivalents $18,984 $23,550 $20,152
Accounts receivable, net 16,880 21,624 15,730
Other current assets 4,664 5,846 5,919
-------- --------- ---------
Total current assets 40,528 51,020 41,801
Property and equipment, net 14,821 11,587 10,086
Goodwill 6,613 6,613 6,613
Other assets 5,763 7,520 6,300
-------- --------- ---------
Total assets $67,725 $76,740 $64,800
-------- --------- ---------
LIABILITIES, MANDATORY REDEEMABLE PREFERRED
STOCK AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable $5,022 $4,704 $4,877
Accrued expenses 20,755 24,094 22,676
Deferred revenue 8,856 11,849 9,925
Loan line of credit 2,298 - -
Capital lease and other obligations,
current 1,721 926 1,310
Convertible notes payable, current - 5,610 5,565
-------- --------- ---------
Total current liabilities 38,652 47,183 44,353
Deferred revenue long-term 1,343 1,304 1,249
Convertible notes payable, long-term 48,375 76,356 -
Capital lease and other obligations,
long-term 1,295 706 385
Embedded derivative liability 24,890 15,330 2,092
-------- --------- ---------
Total liabilities 114,555 140,879 48,079
-------- --------- ---------
Mandatorily redeemable preferred stock 30,411 36,906 117,381
-------- --------- ---------
Total shareholders' equity (77,241) (101,045) (100,660)
-------- --------- ---------
Total liabilities and shareholders'
equity $67,725 $76,740 $64,800
-------- --------- ---------
Critical Path, Inc.
Condensed Consolidated Statement of Operations
on a United States GAAP Basis
Three Months Ended Nine Months Ended
------------------------------ --------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2003 2004 2004 2003 2004
---------- --------- --------- ---------- ---------
(in thousands, except per share amounts; unaudited)
NET REVENUE
SW licensing $4,264 $5,407 $4,744 $14,903 $14,402
Hosted messaging 4,583 3,711 4,621 14,825 12,675
Professional
services 2,574 2,936 3,092 8,949 8,687
Maintenance and
support 4,744 4,962 5,038 13,658 15,825
---------- --------- --------- ---------- ---------
Total net
revenue 16,165 17,016 17,495 52,335 51,589
COST OF NET
REVENUE
SW licensing 541 1,708 1,322 3,060 3,941
Hosted messaging 6,196 6,570 5,995 19,562 18,946
Professional
services 2,734 3,034 2,667 9,094 8,795
Maintenance and
support 1,263 1,322 1,422 4,579 4,193
Stock-based
expense -
Hosted
messaging - - - 8 5
Stock-based
expense -
Professional
services - - - 3 -
Stock-based
expense -
Maintenance and
support - - - 6 -
Restructuring
expense - 175 - - 175
---------- --------- --------- ---------- ---------
Total cost of
net revenue 10,734 12,809 11,406 36,312 36,055
---------- --------- --------- ---------- ---------
GROSS PROFIT 5,431 4,207 6,089 16,023 15,534
OPERATING EXPENSES
Selling and
marketing 7,150 6,035 5,242 24,390 18,216
Research and
development 4,608 5,344 5,260 14,044 16,383
General and
administrative 3,228 3,771 2,854 9,774 9,747
Stock-based
expense - Sales
and marketing - 30 - 18 44
Stock-based
expense -
Research and
development - - - 15 18
Stock-based
expense -
General and
administrative - 1,182 308 9 1,499
Restructuring
expense 953 1,144 2,590 5,034 4,799
---------- --------- --------- ---------- ---------
Total
operating
expenses 15,939 17,506 16,254 53,284 50,706
---------- --------- --------- ---------- ---------
OPERATING LOSS (10,508) (13,299) (10,165) (37,261) (35,172)
Interest and other
income (expense),
net (4,796) 4,668 (3,123) (9,249) 3,632
Loss on
extinguishment of
debt - - (12,783) - (12,783)
Gain on
investments - - - 349 -
---------- --------- --------- ---------- ---------
Loss before
provision for
income taxes (15,304) (8,631) (26,071) (46,161) (44,323)
Provision for
income taxes (273) (445) (88) (754) (899)
---------- --------- --------- ---------- ---------
NET LOSS (15,577) (9,076) (26,159) (46,915) (45,222)
Accretion on
mandatorily
redeemable
preferred stock (3,025) (3,348) (2,886) (9,529) (9,381)
---------- --------- --------- ---------- ---------
NET LOSS
ATTRIBUTABLE TO
COMMON
SHAREHOLDERS $(18,602) $(12,424) $(29,045) $(56,444) $(54,603)
---------- --------- --------- ---------- ---------
Net loss per share $(0.77) $(0.43) $(1.24) $(2.36) $(2.15)
---------- --------- --------- ---------- ---------
Net loss per share
attributable to
common $(0.92) $(0.59) $(1.37) $(2.84) $(2.59)
---------- --------- --------- ---------- ---------
Shares used in the
per share
calculations 20,126 21,157 21,171 19,889 21,075
---------- --------- --------- ---------- ---------
Critical Path, Inc.
Condensed Consolidated Statement of Operations on a Non-GAAP
(Adjusted EBITDA(1)) Basis
Three Months Ended Nine Months Ended
---------------------------- -------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2003 2004 2004 2003 2004
--------- -------- --------- --------- ---------
(in thousands, except per share amounts; unaudited)
NET REVENUE
SW licensing $4,264 $5,407 $4,744 $14,903 $14,402
Hosted messaging 4,583 3,711 4,621 14,825 12,675
Professional
services 2,574 2,936 3,092 8,949 8,687
Maintenance and
support 4,744 4,962 5,038 13,658 15,825
--------- -------- --------- --------- ---------
Total net revenue 16,165 17,016 17,495 52,335 51,589
COST OF NET REVENUE
SW licensing 541 1,708 1,321 3,060 3,940
Hosted messaging 4,190 5,494 5,034 12,445 15,726
Professional
services 2,581 2,994 2,637 8,594 8,668
Maintenance and
support 1,063 1,302 1,403 3,879 4,132
--------- -------- --------- --------- ---------
Total cost of net
revenue 8,375 11,498 10,395 27,978 32,466
--------- -------- --------- --------- ---------
GROSS PROFIT 7,790 5,518 7,100 24,357 19,123
OPERATING EXPENSES
Selling and
marketing 6,654 5,854 5,093 22,570 17,616
Research and
development 3,833 4,513 4,125 12,064 13,488
General and
administrative 2,941 3,061 2,781 8,744 8,769
--------- -------- --------- --------- ---------
Total operating
expenses 13,428 13,428 11,999 43,378 39,873
--------- -------- --------- --------- ---------
ADJUSTED EBITDA LOSS (5,638) (7,910) (4,899) (19,021) (20,750)
--------- -------- --------- --------- ---------
Adjusted EBITDA loss
per share $(0.28) $(0.37) $(0.23) $(0.96) $(0.98)
--------- -------- --------- --------- ---------
Shares used in the
per share
calculations 20,126 21,157 21,171 19,889 21,075
--------- -------- --------- --------- ---------
(1) Excludes interest, taxes, depreciation and amortization as well as
other items such as restructure expense, stock-based expense, gain
on investments, non-cash severance and accretion on mandatorily
redeemable preferred stock.
Critical Path, Inc.
Alternative Measurements Reconciliation
The following table provides a reconcilation between the Company's
Non-GAAP results, Adjusted EBITDA Loss, to the Company's Condensed
Consolidated Statement of Operations on a United States GAAP basis.
Three Months Ended Nine Months Ended
------------------------------ ---------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2003 2004 2004 2003 2004
---------- --------- --------- ---------- ----------
(in thousands, except per share amounts; unaudited)
Adjusted EBITDA
loss $(5,638) $(7,910) $(4,899) $(19,021) $(20,750)
Interest and
other income
(expense), net (4,796) 4,668 (3,123) (9,249) 3,632
Loss on
extinguishment
of debt - - (12,783) - (12,783)
Gain on
investment - - - 349 -
Provision for
income taxes (273) (445) (88) (754) (899)
Depreciation
and
amortization (3,917) (2,282) (2,368) (13,147) (7,306)
Non-cash
severance - (576) - - (576)
Restructuring
expenses (953) (1,319) (2,590) (5,034) (4,974)
Stock-based
expenses - (1,212) (308) (59) (1,566)
---------- --------- --------- ---------- ----------
Net loss (15,577) (9,076) (26,159) (46,915) (45,222)
Accretion on
mandatorily
redeemable
preferred
stock 3,025 3,348 2,886 9,529 9,381
---------- --------- --------- ---------- ----------
Net loss
attributable
to common
shareholders $(18,602) $(12,424) $(29,045) $(56,444) $(54,603)
---------- --------- --------- ---------- ----------
Net loss per
share $(0.77) $(0.43) $(1.24) $(2.36) $(2.15)
---------- --------- --------- ---------- ----------
Net loss per
share
attributable to
common $(0.92) $(0.59) $(1.37) $(2.84) $(2.59)
---------- --------- --------- ---------- ----------
Shares used in
the per share
calculations 20,126 21,157 21,171 19,889 21,075
---------- --------- --------- ---------- ----------
The following table provides a reconcilation between the total
cost of net revenues and operating expenses on an Adjusted EBITDA
basis to the Company's cost of revenues and operating expense on a
United States GAAP basis.
Three Months Ended Nine Months Ended
------------------------------ ---------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2003 2004 2004 2003 2004
---------- --------- --------- ---------- ----------
(in thousands, except per share amounts; unaudited)
Total cost of net
revenues and
operating expenses
on an Adjusted
EBITDA basis $21,803 $24,926 $22,394 $71,356 $72,339
Depreciation
and
amortization (3,917) (2,282) (2,368) (13,147) (7,306)
Non-cash
severance - (576) - - (576)
Restructuring
expenses (953) (1,319) (2,590) (5,034) (4,974)
Stock-based
expenses - (1,212) (308) (59) (1,566)
---------- --------- -------------------- ----------
Total cost of net
revenues and
operating expenses
on a United
States GAAP basis $26,673 $30,315 $27,660 $89,596 $86,761
---------- --------- -------------------- ----------
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