7/19....CPTH Reports Record Second Quarter Revenue of $33.5 Million, Up More Than 1500 Percent From Prior Year
Net Revenue, Gross Margin and EPS Significantly Exceed First Call Estimates
SAN FRANCISCO, July 19 /PRNewswire/ -- Critical Path, Inc. (Nasdaq: CPTH - news) the dominant global provider of business-to-business messaging solutions, today announced record financial results for the quarter and six months ended June 30, 2000.
Revenue for the quarter reached $33.5 million, a 36 percent sequential increase over revenue of $24.6 million in the first quarter, and more than a 1,500 percent increase over revenue of $2.0 million in the same quarter of the prior year. The net loss for the quarter, excluding special charges, was $20.2 million, or $0.34 per share, compared with a net loss, excluding special charges, of $16.8 million, or $0.33 per share, in the first quarter this year, and a net loss of $6.9 million, or $0.21 per share, in the same quarter a year ago. The Company also reported gross margin of $16.0 million, a 74 percent increase over gross margin of $9.2 million in the quarter ended March 31, 2000.
``We are extremely pleased with our operating performance and the strength of our business across geographic regions, customers and product lines,'' said Doug Hickey, Critical Path's CEO. ``Through increased penetration of the enterprise market and the market acceptance of key value-added products and services, we remain firmly on a path to profitability.''
At the close of the quarter, Critical Path supported a total of over 125 million mailboxes, including 78 million licensed boxes, up from 70 million licensed boxes in the first quarter, 22 million outsourced email boxes, an increase from 15.5 million outsourced email boxes at the close of the first quarter, and approximately 25 million wireless devices worldwide.
During the quarter, Critical Path signed long-term contracts with more than 200 customers and partners, including BNP Paribas, SAP SI, Yahoo!, eBay, Dell, Bechtel and Federal Express. According to Hickey, approximately 35 percent of those contracts were with corporate enterprises. ``The continued explosive growth and increasing complexity of messaging is leading more and more companies to recognize the reliability, security and financial benefits of selecting Critical Path to provide their messaging solutions. The ability to provide the full spectrum of messaging services uniquely positions Critical Path against any competitor,'' he said.
The Company also reported that approximately 30 percent of the new customers in the second quarter purchased two or more of Critical Path's value-added products and services, such as calendaring, IP fax, secure message delivery and collaborative messaging in addition to basic email. ``This metric reflects the power of our 'Allsource' strategy, an approach that gives Critical Path the opportunity to participate in more messaging opportunities than anyone in the marketplace. Adding new customers and selling deeper into existing and new accounts is strong validation of our model,'' said Hickey.
``Critical Path's position as the only single-source provider of end-to-end messaging services is the product of an acquisition strategy carried out over the past four quarters,'' said Hickey. ``Our stated goal at the outset was to leverage the combined strengths and resources of the acquired companies to optimize our future growth and profitability. The integration of those companies has been very successful. We have taken the time to carefully evaluate all the technology expertise, marketing capabilities and support functions, and developed a plan to achieve synergies in those areas. As part of the integration and realization of synergies, we will be reducing our employee count, resulting in one-time charges for severance and stock-based compensation totaling approximately $5.1 million and $2.1 million, respectively, in the third quarter of this year. Going forward, we expect to realize cost savings of approximately $14 to $16 million a year resulting from these actions.''
Hickey also noted that approximately 40 percent of the revenue in the second quarter came from international customers. ``We saw significant growth in both Europe and Latin America, and our Critical Path Pacific joint venture with Mitsui, NTT, and NEC will accelerate our penetration of the rapidly growing Asian market.''
``Our strong position in the wireless market was enhanced during the quarter as Aether Systems selected Critical Path as a strategic partner in the development of next-generation wireless services, which complements our similar announcement last quarter with Comverse Network Systems,'' said Hickey. ``Experts predict that by 2002, more people will connect to the Internet through wireless devices than through personal computers, and the integration of Critical Path messaging capabilities into those devices will be an important force driving that trend.''
Revenue for the six months ended June 30, 2000, was $58.0 million, compared with revenue of $3.1 million in the same period of 1999. The net loss for the six months, excluding special charges, was $37.0 million, or $0.68 per share, compared with a net loss of $12.3 million, or $0.62 per share, in the same period a year ago.
``Our balance sheet remains very strong and our financial resources provide a competitive advantage in the current market,'' said Hickey. The Company reported that as of June 30, 2000, its cash and cash equivalents totaled $291 million.
About Critical Path, Inc.
Critical Path, Inc. (Nasdaq: CPTH - news) is the dominant global provider of complete end-to-end Internet messaging and collaboration solutions for wireless, Internet-centric, telecommunication and corporate businesses. Through its ``Allsourcing'' strategy, Critical Path is the only advanced messaging provider to offer businesses the flexibility to outsource, midsource or insource all or part of their messaging and collaboration applications. Critical Path has built an industry-leading global infrastructure with data centers connected to key Internet exchange points. Critical Path's technology currently reaches more than 125 million end-users through its customer relationships including more than 25 million wireless devices. Critical Path provides reliable, secure, and scalable email and a flexible suite of enhanced messaging services to partners such as E*TRADE, CompuServe, Network Solutions, US West, Sprint, France Telecom, British Telecommunications, and ICQ. Critical Path is headquartered in San Francisco, with offices in locations nationwide and in Canada, Germany, England, Ireland, France, Italy, Switzerland, Japan, Brazil and Argentina. 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. Factors that could cause the company's results to differ materially from its expectations include: inability to convert available mailboxes to real revenue; failure to expand our sales and marketing activities; unplanned system interruptions and capacity constraints that could reduce our ability to provide email 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; and problems related to managing the company's expected growth, including the ability to maintain or improve upon cost efficiencies, and the ability to realize savings due to perceived synergies of acquired businesses. These and other risks and uncertainties are described in more detail in the company's Critical Path's Annual of From 10K filed March 29, 2000 and with subsequent filings with the Securities and Exchange Commission ( www.sec.gov ).
CRITICAL PATH, INC.
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 2000 1999 2000
Net revenues
Licenses $- $13,897 $- $24,967
Services 2,006 19,598 3,055 33,081
Total net revenues 2,006 33,495 3,055 58,048
Cost of net revenues
Licenses - 737 - 1,744
Services 3,234 16,738 5,148 31,078
Amortization of
purchased technology - 4,421 - 6,535
Acquisition-related
retention bonuses - 390 - 780
Stock-based expenses 743 383 1,189 876
Total cost of
net revenues 3,977 22,669 6,337 41,013
Gross profit (loss) (1,971) 10,826 (3,282) 17,035
Operating expenses
Sales and marketing 3,219 17,342 5,203 30,947
Research and development 1,430 9,213 2,809 15,536
General and administrative 2,691 7,332 4,241 14,098
Amortization of
intangible assets 550 88,986 550 136,685
Acquisition-related
retention bonuses - 3,693 - 6,372
Stock-based expenses 8,162 11,942 19,819 18,645
Total operating
expenses 16,052 138,508 32,622 222,283
Loss from operations (18,023) (127,682) (35,904) (205,248)
Minority interest in net
income of subsidiary - (325) - (325)
Interest and other
income (expense), net 1,702 (563) 1,989 421
Loss before income taxes (16,321) (128,570) (33,915) (205,152)
Provision for
income taxes - (1,439) - (1,799)
Net Loss $(16,321) $(130,009) $(33,915) $(206,951)
Net loss per share
- basic and diluted $(0.49) $(2.22) $(1.70) $(3.79)
Weighted average
shares - basic
and diluted 32,977 58,592 19,994 54,581
The following supplemental pro forma financial information presents
the Company's condensed consolidated results of operations for the
three- and six-month periods ended June 30,1999 and 2000, excluding the
impact of certain special charges consisting of (i) amortization of
intangible assets associated with purchase business combinations, (ii)
accruals for employee retention bonuses associated with purchase business
combinations, and (iii) stock-based compensation associated with
outstanding options and warrants. This supplemental presentation is for
informational purposes only, and is not intended to replace the condensed
consolidated operating results prepared and presented in accordance with
generally accepted accounting principles.
CRITICAL PATH, INC.
Pro Forma Condensed Consolidated Statement of Operations
Excluding Special Charges
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 2000 1999 2000
Net revenues
Licenses $- $13,897 $- $24,967
Services 2,006 19,598 3,055 33,081
Total net revenues 2,006 33,495 3,055 58,048
Cost of net revenues
Licenses - 737 - 1,744
Services 3,234 16,738 5,148 31,078
Total cost of
net revenues 3,234 17,475 5,148 32,822
Gross profit (loss) (1,228) 16,020 (2,093) 25,226
Operating expenses
Sales and marketing 3,219 17,342 5,203 30,947
Research and development 1,430 9,213 2,809 15,536
General and administrative 2,691 7,332 4,241 14,098
Total operating expenses 7,340 33,887 12,253 60,581
Loss from operations (8,568) (17,867) (14,346) (35,355)
Minority interest in net
income of subsidiary - (325) - (325)
Interest and other income
(expense), net 1,718 (547) 2,021 453
Loss before income taxes (6,850) (18,739) (12,325) (35,227)
Provision for income taxes - (1,439) - (1,799)
Net Loss $(6,850) $(20,178) $(12,325) $(37,026)
Net loss per share
- basic and diluted $(0.21) $(0.34) $(0.62) $(0.68)
Weighted average shares
- basic and diluted 32,977 58,592 19,994 54,581
CRITICAL PATH, INC.
Condensed Consolidated Balance Sheet
(Unaudited)
(In thousands)
December 31, June 30,
1999 2000
ASSETS
Current assets
Cash and cash equivalents $75,932 $291,309
Restricted cash 325 325
Accounts receivable, net 10,147 33,306
Other current assets 40,800 7,706
Total current assets 127,204 332,646
Investments 18,426 26,326
Notes receivable from officers 669 977
Property and equipment, net 52,517 73,555
Intangible assets, net 474,297 1,159,083
Other assets 692 9,260
Total assets $673,805 $1,601,847
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $35,621 $30,714
Accrued expenses 7,120 16,496
Deferred revenue 1,818 14,552
Capital lease and other
obligations, current 6,585 9,637
Total current liabilities 51,144 71,399
Convertible subordinated notes payable - 300,000
Capital lease and other obligations,
long-term 5,669 8,198
Total liabilities 56,813 379,597
Commitments and contingencies
Minority interest in subsidiary - 325
Shareholders' Equity 616,992 1,221,925
Total liabilities and
shareholders' equity $673,805 $1,601,847
SOURCE: Critical Path, Inc.
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