Exhibit 99.1
![]() | Critical Path, Inc. | 415.541.2500 (Main) | ||||
350 The Embarcadero | 415.541.2300 (Fax) | |||||
San Francisco, CA 94105-1204 | www.criticalpath.net |
Critical Path Announces Third Quarter 2004 Results
Results In Line With Guidance
Revenues Increase Sequentially and Year-Over-Year
SAN FRANCISCO, Calif. (October 28, 2004) –Critical Path, Inc. (Nasdaq: CPTH), a global provider of digital communications software and services, today announced financial results for the third quarter ended September 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 Results
Net loss attributable to common shareholders, based on United States generally accepted accounting principles (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, 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 Results
Earnings before interest, taxes, depreciation and amortization, adjusted to exclude other items such as restructuring expenses, stock-based compensation expenses, other income (expense), loss on extinguishment of debt, non-cash severance, gain on investments and accretion on mandatorily redeemable preferred stock, 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, chief executive officer of Critical Path. “We are focused and executing on our strategy to provide messaging solutions to the fixed line, broadband and mobile markets.”
As of September 30, 2004, the Company’s cash and cash equivalents totaled $20.2 million, compared to its June 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.
Critical Path Announces Third Quarter 2004 Results
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 consistent with the fourth quarter of 2004.
Regulation G
Due to the forward-looking 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 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 to measure its financial results. It utilizes two primary non-GAAP metrics: income (loss) on an adjusted EBITDA basis and operating costs 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 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.
Conference Call
Critical Path will host a conference call on Thursday, October 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. More information is available atwww.criticalpath.net.
Critical Path Announces Third Quarter 2004 Results
Forward-Looking Statements:
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, 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) made from time to time, including Critical Path’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, Forms 10-Q for the three months ended March 31 and June 30, 2004 and Current Reports on Form 8-K, as may be amended 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 after the date any such statement is made.
Note to Editors: See attached tables.
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.
# # #
Contact Information
For Reporters and Editors:
Critical Path, Inc. Michelle Weber 415.541.2575 pr@criticalpath.net www.criticalpath.net | For Investors:
Critical Path, Inc. Investor Relations 415.541.2619 ir@criticalpath.net www.criticalpath.net |
Critical Path, Inc.
Condensed Consolidated Balance Sheets
December 31, 2003 | June 30, 2004 | September 30, 2004 | ||||||||||
(in thousands; unaudited) | ||||||||||||
ASSETS | ||||||||||||
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 | |||||||||||||||||||
September 30, 2003 | June 30, 2004 | September 30, 2004 | September 30, 2003 | September 30, 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*) Basis
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, 2003 | June 30, 2004 | September 30, 2004 | September 30, 2003 | September 30, 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 | |||||||||||||||
* | 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 | |||||||||||||||||||
September 30, 2003 | June 30, 2004 | September 30, 2004 | September 30, 2003 | September 30, 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 expenes on a United States GAAP basis.
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, 2003 | June 30, 2004 | September 30, 2004 | September 30, 2003 | September 30, 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 | ||||||||||