Critical Path Reports Fourth Quarter Revenue of $52 Million
PR Newswire - January 18, 2001 16:02
Company Revises Guidance for 2001
SAN FRANCISCO, Jan. 18 /PRNewswire/ -- Critical Path, Inc. (Nasdaq: CPTH) the dominant global provider of business-to-business Internet messaging infrastructure solutions, today announced record financial results for the quarter and year ended December 31, 2000.
Revenue for the quarter reached $52.0 million, a 16 percent sequential increase over revenue of $45.0 million in the third quarter of 2000, and a 534 percent increase over revenue of $8.2 million in the fourth quarter of 1999. The net loss for the quarter, excluding special charges, was $11.5 million, or $0.16 per share, compared with a net loss, excluding special charges, of $8.7 million, or $0.14 per share, in the third quarter of 2000, and a net loss of $11.0 million, or $0.26 per share, in the fourth quarter of 1999. The Company also reported gross profit, excluding special charges, of $29.1 million, a 15 percent increase over gross profit of $25.3 million in the third quarter of 2000.
The reported revenues for the quarter do not include $7.0 million related to a large enterprise license agreement that was executed during the quarter. Due to complex and evolving rules governing revenue recognition for software license arrangements, the Company, in consultation with its outside auditors, determined that the revenue from this transaction required deferral as of December 31, 2000. The Company anticipates recognizing the revenue from this transaction on a "sell-through" basis in the future rather than as an up-front license fee in the fourth quarter of 2000, as anticipated.
"Despite a difficult economic environment, Critical Path achieved solid revenue growth and improved gross margins, while adding over 200 new customers and further solidifying our category leadership position," said Doug Hickey, Critical Path's CEO.
According to Chief Financial Officer Larry Reinhold, other factors in addition to the deferred revenue mentioned previously had an impact on results in the fourth quarter of 2000. These factors included a non-operating foreign exchange loss due primarily to currency fluctuations in U.S. dollar-denominated European revenues, higher than expected operating expenses in the recently acquired PeerLogic business as full synergies have not yet been achieved, and the provision of a significant allowance for doubtful accounts.
"While we are disappointed with the bottom-line impact of these charges, we are evaluating and will be taking concrete steps to control the underlying factors impacting these areas," said Reinhold.
Hickey stated, "Taking into account economic indicators that seem to be affecting the technology sector across the board, we are also reevaluating our guidance for 2001 and taking a very conservative stance toward the Company's financial expectations. The Company expects revenue for the first quarter 2001 of between $54 million and $56 million, and a loss per share, excluding special charges, estimated between $0.15 and $0.16. For the full year 2001, revenue is expected between $255 million and $260 million, with the Company becoming profitable in the third quarter.
"It's disappointing to lower the expectations for Critical Path, but macroeconomic forecasts and reports from leaders in the technology space lead us to believe it is prudent to be conservative at this time," said Hickey. "It is our strategy to make this move now and position the Company to execute effectively throughout the year."
Hickey went on to discuss the positive indications for the quarter and the year. "Regardless of near term uncertainty, I continue to be excited at the size and potential of the Internet messaging solutions market, and my confidence is bolstered by our success in addressing that market. We have the best and broadest suite of messaging solutions, the most flexible delivery capability and the unique ability to scale to meet the demands of the largest customers," he said.
Enterprise Customers
The Company has stated that penetrating the enterprise market is a major goal. During the quarter, Critical Path signed long-term contracts with more than 200 customers and partners. According to Hickey, approximately 62 percent of those contracts were with corporate enterprises, including Applied Materials, Wells Fargo, Farmers Insurance and Concentra Health.
"As enterprises continue to maximize the value of their IT resources and reduce costs, they are turning to Critical Path as the single organization uniquely positioned to help them reap value from their assets. Choosing our Internet messaging infrastructure solution solves a number of problems relating to cost, security and reliability, particularly for enterprises with widely distributed operations and offices," he said.
Messaging Reach and Scale
Critical Path has stated as its goal to "touch every user" on the Internet, with a messaging infrastructure that, through the Company's directory and meta-directory capabilities, scales to magnitudes unequalled in the industry. At the close of the quarter, Critical Path powered a total of approximately 178 million mailboxes and wireless devices, including approximately 125 million licensed boxes, 27 million outsourced email boxes, and 26 million wireless devices worldwide.
"Our messaging infrastructure, including the directory products from PeerLogic, delivers mega-scalability not only to large service providers and enterprises, but also to major Internet business exchanges and many of the postal services worldwide," said Hickey. "These customers are building their eBusiness offering on our ability to manage tens of millions of messages and transactions simultaneously in a secure environment. We are the only provider who can do that, and only we are prepared to scale our customers to even greater capacity in the future."
Wireless Partners and Services
Critical Path continued to make progress and achieve significant customer wins in the emerging wireless sector. During the quarter, the Company announced relationships with Logica for 2-way short messaging services, with Verizon to host email for its paging customers, and with SK Telecom, Korea's largest wireless provider.
"Our strategy of offering a variety of services that support any wireless protocol on any type of device presents us with a greater market opportunity than is available to other providers," said Hickey.
International Business
Enabling international enterprises and service providers with Internet messaging infrastructure solutions is intrinsic to Critical Path's strategy to "touch every user" on the Internet. Hickey noted that approximately 33 percent of the revenue in the fourth quarter came from international customers. "Because Europe, Latin America and Asia are at an earlier stage of Internet adoption than the U.S., there are tremendous opportunities to penetrate new markets," said Hickey.
During the quarter, Critical Path announced contracts with ZipMail and Diveo in Latin America, and BT CellNet in Europe.
Full Year Results
The Company reported revenue for 2000 of $155.0 million, compared with revenue of $16.2 million in 1999. The net loss for the year, excluding special charges, was $57.2 million, or $0.95 per share, compared with a net loss, excluding special charges, of $29.4 million, or $0.99 per share, in 1999.
"Our balance sheet remains very strong and our financial resources are a strategic advantage by which we can continue to pursue profitable business and investment opportunities," said Hickey. The Company reported that as of December 31, 2000, its cash and cash equivalents totaled $216.5 million. During the fourth quarter of 2000, the Company used $25.9 million in cash.
About Critical Path, Inc.
Critical Path Inc. (Nasdaq: CPTH) ignites the power of information for eBusiness 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 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, with offices worldwide. More information on Critical Path can be found at www.cp.net .
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, 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 December 31, 2000. Factors that could cause the Company's results to differ materially from its expectations include: failure to maintain or reduce operating expense 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 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 synergies of acquired businesses, including PeerLogic. These and other risks and uncertainties are described in more detail in the company's Critical Path's Annual Report on Form 10-K/A filed March 29, 2000 and with subsequent filings with the Securities and Exchange Commission ( www.sec.gov ). |
