Industry
Critical Path Announces 2005 Third Quarter Results; Record Results -- Cash Flow Positive; Continued Improvement in GAAP Results; Profitable on Adjusted EBITDA Basis
Du : 01/11/2005
SAN FRANCISCO--(BUSINESS WIRE)--Oct. 31, 2005--Critical Path, Inc. (Nasdaq:CPTH), a leading provider of messaging software and services, today announced unaudited financial results for the third quarter ended September 30, 2005.
For the third quarter of 2005 the net loss, based on U.S. generally accepted accounting principles (GAAP), which excludes accretion of mandatorily redeemable preferred stock (a non-cash item related to our outstanding preferred stock), for the third quarter of 2005 was $1.0 million or $0.03 per share, compared to a net loss of $1.5 million or $0.05 per share in the second quarter of 2005 and a net loss of $26.2 million or $1.24 per share in the third quarter of 2004. For the third quarter of 2005, total cost of net revenues and operating expenses, based on GAAP, were $18.2 million, compared to $20.0 million in the second quarter of 2005 and a 34% decline from $27.7 million in the third quarter of 2004.
For the third quarter of 2005, net loss attributable to common shareholders, based on GAAP, which includes accretion of mandatorily redeemable preferred stock (a non-cash item related to our outstanding preferred stock), was $4.5 million or $0.13 per share, compared to a net loss of $8.1 million or $0.27 per share in the second quarter of 2005 and a net loss of $30.4 million or $1.43 per share in the third quarter of 2004.
Adjusted EBITDA Results
For the third quarter of 2005, net income, on an adjusted EBITDA basis, was $0.3 million, or $0.01 per share, compared to a loss of $0.7 million or $0.02 per share in the second quarter of 2005 and a loss of $4.9 million or $0.23 per share in the third quarter of 2004. For the third quarter of 2005, total cost of net revenues and operating expenses on an adjusted EBITDA basis was $16.7 million, compared to $17.8 million for the second quarter of 2005 and $22.4 million for the third quarter of 2004. Adjusted EBITDA results, a non-GAAP metric we use to measure the performance of our business, 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 mandatorily redeemable preferred stock.
"Adjusted EBITDA results are a good measure of the company's operating performance, and on this basis, our operations were profitable in Q3," said Jim Clark, CFO, Critical Path. "We have achieved these results through our significant improvement in gross margins, continuous cost containment, stable revenues and our focus on consumer messaging. Results have been in line with guidance for the fifth quarter in a row, and we look forward to maintaining this credible track record."
As of September 30, 2005, the Company's cash and cash equivalents totaled $20.5 million, compared to $16.9 million at June 30, 2005 -- a $3.6 million improvement driven from operations.
"Of course, cash flow is one of the cleanest indicators of performance, and we are particularly proud to have achieved an increase in our cash position during the quarter," said Jim Clark.
Third Quarter 2005 Highlights
-- Profitability Achieved: Third quarter 2005 results turned the Company profitable on an adjusted EBITDA basis.
-- Cash Flow Positive: Net cash increased $3.6 million sequentially, driven from operations.
-- Memova(TM) Momentum: Revenue from licensed software, including the Company's Memova(TM) consumer messaging solutions, continues to grow. Q3 was the second quarter in a row, and the third out the last four quarters, that licensed revenue increased sequentially. In the quarter, Indosat launched Memova Mobile to the Indonesian mass market, and Critical Path signed a new Memova Mobile deal with a European service provider.
Guidance
The Company currently expects revenue for the fourth quarter of 2005 to be in the range of $16.0 to $18.0 million. This 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 be in the range of 52% to 57%. Additionally, the Company expects its operating expenses to be in the range of $9.0 to $9.5 million in the fourth quarter of 2005.
The Company currently expects cash balances at December 31, 2005 to decline slightly from balances at September 30, 2005 primarily due to European corporate income tax payments in the fourth quarter.
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, if any, other income (expense), interest income and expense, stock-based expenses and accretion on mandatorily redeemable preferred stock, are not reasonably estimable or predictable.
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 accretion on mandatorily 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.
For the third quarter of 2005 the net loss, based on U.S. generally accepted accounting principles (GAAP), which excludes accretion of mandatorily redeemable preferred stock (a non-cash item related to our outstanding preferred stock), for the third quarter of 2005 was $1.0 million or $0.03 per share, compared to a net loss of $1.5 million or $0.05 per share in the second quarter of 2005 and a net loss of $26.2 million or $1.24 per share in the third quarter of 2004. For the third quarter of 2005, total cost of net revenues and operating expenses, based on GAAP, were $18.2 million, compared to $20.0 million in the second quarter of 2005 and a 34% decline from $27.7 million in the third quarter of 2004.
For the third quarter of 2005, net loss attributable to common shareholders, based on GAAP, which includes accretion of mandatorily redeemable preferred stock (a non-cash item related to our outstanding preferred stock), was $4.5 million or $0.13 per share, compared to a net loss of $8.1 million or $0.27 per share in the second quarter of 2005 and a net loss of $30.4 million or $1.43 per share in the third quarter of 2004.
Adjusted EBITDA Results
For the third quarter of 2005, net income, on an adjusted EBITDA basis, was $0.3 million, or $0.01 per share, compared to a loss of $0.7 million or $0.02 per share in the second quarter of 2005 and a loss of $4.9 million or $0.23 per share in the third quarter of 2004. For the third quarter of 2005, total cost of net revenues and operating expenses on an adjusted EBITDA basis was $16.7 million, compared to $17.8 million for the second quarter of 2005 and $22.4 million for the third quarter of 2004. Adjusted EBITDA results, a non-GAAP metric we use to measure the performance of our business, 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 mandatorily redeemable preferred stock.
"Adjusted EBITDA results are a good measure of the company's operating performance, and on this basis, our operations were profitable in Q3," said Jim Clark, CFO, Critical Path. "We have achieved these results through our significant improvement in gross margins, continuous cost containment, stable revenues and our focus on consumer messaging. Results have been in line with guidance for the fifth quarter in a row, and we look forward to maintaining this credible track record."
As of September 30, 2005, the Company's cash and cash equivalents totaled $20.5 million, compared to $16.9 million at June 30, 2005 -- a $3.6 million improvement driven from operations.
"Of course, cash flow is one of the cleanest indicators of performance, and we are particularly proud to have achieved an increase in our cash position during the quarter," said Jim Clark.
Third Quarter 2005 Highlights
-- Profitability Achieved: Third quarter 2005 results turned the Company profitable on an adjusted EBITDA basis.
-- Cash Flow Positive: Net cash increased $3.6 million sequentially, driven from operations.
-- Memova(TM) Momentum: Revenue from licensed software, including the Company's Memova(TM) consumer messaging solutions, continues to grow. Q3 was the second quarter in a row, and the third out the last four quarters, that licensed revenue increased sequentially. In the quarter, Indosat launched Memova Mobile to the Indonesian mass market, and Critical Path signed a new Memova Mobile deal with a European service provider.
Guidance
The Company currently expects revenue for the fourth quarter of 2005 to be in the range of $16.0 to $18.0 million. This 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 be in the range of 52% to 57%. Additionally, the Company expects its operating expenses to be in the range of $9.0 to $9.5 million in the fourth quarter of 2005.
The Company currently expects cash balances at December 31, 2005 to decline slightly from balances at September 30, 2005 primarily due to European corporate income tax payments in the fourth quarter.
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, if any, other income (expense), interest income and expense, stock-based expenses and accretion on mandatorily redeemable preferred stock, are not reasonably estimable or predictable.
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 accretion on mandatorily 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.