Critical Path Provides Financial Guidance for Anticipated Fourth Quarter 2000 and Full Year 2001.Business Editors SAN FRANCISCO--(BUSINESS WIRE)--Nov. 2, 2000 Company Capitalizes on Infrastructure Opportunity to Drive to Profitability and Join Elite Group of Profitable New Economy Companies Critical Path, Inc. (Nasdaq:CPTH) today provided financial guidance for the fourth quarter 2000 and the full year 2001, incorporating the expected contribution from the recent acquisition of PeerLogic. This guidance, which was provided in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. in a meeting with over 100 investors and analysts, is intended to provide all investors with information the Company believes is important in evaluating Critical Path's business. Citing the broad market opportunity, the Company expects revenue for the fourth quarter ending December December: see month. 31, 2000 of between $54 million and $56 million, which represents growth of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 22 percent over the third quarter of 2000. The Company expects pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per share for the period to improve from a loss of $0.14 to a gain of approximately $0.01 per share. For the year 2001, revenue is expected to grow approximately 95 percent over 2000, to between $300 million and $310 million, with pro forma earnings per share growing to a level ranging between $0.39 and $0.41. These pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma per share estimates exclude special charges related to the amortization of goodwill and purchased technology, acquisition-related retention bonuses and stock-based charges. "The fourth quarter of 2000 is a pivotal one for Critical Path, one in which we join an elite group of profitable `new economy' companies. Critical Path is executing across all product segments and target markets," said Doug DOUG Dumb Old Utility Guy Hickey, Critical Path's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "We anticipate continued high demand for our product and service offerings, and leverage in our operations to deliver initial profitability in Q4 2000 and increases in our profitability in 2001." Business Outlook The Company provided guidance on the following key 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. underlying the revenue and net earnings estimates: -- Gross margins for license revenues are expected to range between 95 percent and 97 percent for the fourth quarter and 2001. As Critical Path continues to penetrate the enterprise market and operating efficiencies are realized, gross margins for services are expected to grow from 17 percent in the third quarter to between 29 and 31 percent in the fourth quarter, and they are expected to continue to increase to 36 percent to 38 percent for 2001. "It's our long-term goal to see the company's total gross margin reach 70 percent, aided significantly by our ability to increase the service margin consistently," Hickey stated. -- Operating margins are expected to grow to a range between 8 percent to 10 percent in the fourth quarter 2000, and 18 percent to 20 percent for 2001. Hickey added, "As top line growth scales, we take advantage of our leveraged business model and channel strategy to grow this margin, again toward a long-term goal in excess of 30 percent." -- Net margins are expected to be approximately 1 percent in the fourth quarter 2000, and 11 percent to 13 percent for 2001. "This shows significant progress toward our long term goal of 20 percent," said Hickey Critical Path's financial guidance is summarized in tables following the text of this release. The Company cautioned that these estimates are based on current plans and expectations, and that a number of factors could cause the actual results for these periods to differ materially from the guidance given at this time. These factors are described in the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. statement below. The estimates are based on the Company's objective of providing a full range of 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 messaging infrastructure solutions to four broad markets, including corporate enterprises, Internet-centric firms such as ISPs and portals, wireless communications wireless communications System using radio-frequency, infrared, microwave, or other types of electromagnetic or acoustic waves in place of wires, cables, or fibre optics to transmit signals or data. providers, and telecommunications companies See telecom company. . "As we work toward our goal to touch every user on the Internet through these broad target markets, we expect Critical Path's financial results will see the benefits of our highly leverageable business model," Hickey continued. In an earlier press release dated October October: see month. 19, 2000, Critical Path reported financial results for the quarter ended September September: see month. 30, 2000, including revenue of $45.0 million and a net loss, excluding special charges, of $8.7 million, or $0.14 per share. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Hickey, 16 securities analysts currently publish reports on the Company, which include their own financial forecasts. Critical Path Specifies Financial Guidance Publication Procedures In connection with the recent adoption of new SEC rules on corporate disclosure, Critical Path is changing its procedure for publishing and updating its financial 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. and risk factors statements. Following the publication of guidance in its quarterly earnings release, Critical Path will continue its current practice of having corporate representatives meet privately during the quarter with investors, the media, investment analysts and others, but the Company will not provide material information in these meetings unless the Company provides the public as a whole with this same information. At these meetings, Critical Path may refer to the guidance published in its earnings release, as well as other public disclosures. Critical Path anticipates that it will keep its earnings release, including any guidance, publicly available on its Web site (www.cp.net). Please note that Critical Path does not have a duty to update this information, and does not expect to update this information before it issues subsequent earnings announcements. About Critical Path, Inc. Critical Path Inc. (Nasdaq:CPTH) ignites the power of information for eBusiness See e-business. by providing the Internet messaging infrastructure upon which the new economy is built. The Company is a single resource that powers the flow of mission-critical information through an integrated portfolio of secure messaging, directory, data integration and collaboration Working together on a project. See collaborative software. solutions. Critical Path's technology strengthens all aspects of the eBusiness value chain by providing the messaging infrastructure that fuels customers' new and existing eBusiness initiatives. 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 worldwide. More information on Critical Path can be found at www.cp.net. 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. This press release contains forward-looking statements regarding the Company and its expectations, which involve certain risks and uncertainties. Specifically, the Company's expectations regarding revenues, gross margins, operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , net margins, profitability, market size, and ability to host additional mailboxes and domains are forward-looking statements that are based on the Company's expectations of future results. In addition, these forward-looking statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after September 30, 2000. Factors that could cause the Company's results to differ materially from its expectations include: failure to maintain or reduce operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. levels; delays in customer orders; recognition of revenue from customers; problems related to managing the Company's expected growth, including the ability to maintain or improve upon cost efficiencies; failure to expand our sales and marketing activities; 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)]. that could reduce our ability to provide messaging services and harm our business and our reputation; potential difficulties associated with strategic relationships; ability to respond to rapid technological change of the Internet messaging industry; competition; foreign currency fluctuations; and the failure to realize savings due to perceived per·ceive tr.v. per·ceived, per·ceiv·ing, per·ceives 1. To become aware of directly through any of the senses, especially sight or hearing. 2. To achieve understanding of; apprehend. synergies of acquired businesses, including PeerLogic. These and other risks and uncertainties are described in more detail in the Company's Annual Report on Form 10-K/A filed March 29, 2000 and in 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.
Anticipated Pro Forma Financial Performance
(In millions, except per share and percent amounts)
Q4 2000 2001
Net revenues $ 54.0 - $ 56.0 $300.0 - $310.0
Percent of total revenue
Revenue
License 47% - 49% 48% - 50%
Service 51% - 53% 50% - 52%
Cost of net revenues
License 1% - 2% 2% - 3%
Service 35% - 37% 31% - 33%
Special charges 13% - 14% 9% - 10%
------ ------ ------ ------
Gross income 48% - 50% 55% - 57%
------ ------ ------ ------
Operating expenses
Sales & marketing 28% - 30% 22% - 24%
Research & development 13% - 15% 12% - 14%
General & administrative 10% - 12% 10% - 12%
Special charges 252% - 253% 179% - 180%
Operating income (258%) - (256%) (171%) - (169%)
------ ------ ------ ------
Income before taxes (261%) - (259%) (173%) - (171%)
------ ------ ------ ------
Net income (266%) - (264%) (178%) - (176%)
------ ------ ------ ------
Net income per share ($2.07) - ($2.05) ($7.24) - ($7.22)
====== ====== ====== ======
Capital Expenditures $ 14.0 - $ 16.0 $ 55.0 - $ 60.0
Depreciation $ 9.0 - $ 11.0 $ 44.0 - $ 46.0
CRITICAL PATH, INC.
Anticipated Pro Forma Financial Performance
Excluding Special Charges
(In millions, except per share and percent amounts)
Q4 2000 2001
Net revenues $ 54.0 - $ 56.0 $300.0 - $310.0
Percent of total revenue
Revenue
License 47% - 49% 48% - 50%
Service 51% - 53% 50% - 52%
Cost of net revenues
License 1% - 2% 2% - 3%
Service 35% - 37% 31% - 33%
------ ------ ------ ------
Gross income 62% - 64% 65% - 67%
------ ------ ------ ------
Operating expenses
Sales & marketing 28% - 30% 22% - 24%
Research & development 13% - 15% 12% - 14%
General & administrative 10% - 12% 10% - 12%
------ ------ ------ ------
Operating income 8% - 10% 18% - 20%
------ ------ ------ ------
Income before taxes 5% - 7% 16% - 18%
------ ------ ------ ------
Net income 1% - 2% 11% - 13%
------ ------ ------ ------
Net income per share $ 0.01 $ 0.39 - $ 0.41
====== ====== ======
Capital Expenditures $ 14.0 - $ 16.0 $ 55.0 - $ 60.0
Depreciation $ 9.0 - $ 11.0 $ 44.0 - $ 46.0
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