CounterPath Corporation
NASDAQ : CPAH
TSX : CCV

CounterPath Corporation

December 12, 2013 08:45 ET

CounterPath Reports Second Quarter Fiscal 2014 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Dec. 12, 2013) - CounterPath Corporation ("CounterPath" or the "Company") (NASDAQ:CPAH)(TSX:CCV), an award-winning provider of desktop and mobile VoIP software products and solutions, today announced the financial and operating results for its second quarter ended October 31, 2013 of fiscal 2014.

Second Quarter Financial Highlights

  • Quarterly revenue of $2.5 million.
  • GAAP and non-GAAP gross margin of 78%.
  • Loss from operations of $1.8 million, non-GAAP loss from operations of $1.5 million.
  • Net loss of $0.05 per share, non-GAAP net loss of $0.04 per share.
  • Cash of $9.4 million as of October 31, 2013.

Results for the three months ended October 31, 2013

Revenue was $2.5 million compared to revenue of $3.6 million for the second quarter of fiscal 2013.

Net loss was $2.1 million or $0.05 per share compared to net loss of $0.3 million or $0.01 per share for the second quarter of fiscal 2013.

Non-GAAP net loss was $1.8 million or $0.04 per share compared to non-GAAP net loss of $0.3 million or $0.01 per share for the second quarter of fiscal 2013. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary

"We built on our strong foundation during the quarter, achieving many milestones that positioned the company for future growth, which didn't necessarily translate into immediate revenue," said Donovan Jones, President and Chief Executive Officer. "Our customer, Rogers Communications, made the Rogers One Number mobile client available to its subscribers, further validating our products and providing us with millions of potential users. Our direct sales force also completed a deal with a large call center enterprise, providing another proof-point in this high growth vertical. We also trained and supported our channel partners as they ramped-up efforts to sell our cloud based offerings to small and medium sized enterprises under our Master Distribution Program. These achievements, combined with our strong balance sheet and the growing market for unified communications services, leave CounterPath well positioned in a large and growing market."

Recent Business Highlights

  • Launch by Rogers Communications of the CounterPath mobile applications for iOS and Android smartphones, expanding their One Number offering beyond desktop and tablet.
  • Announced that Cablemás, Mexico's second largest cable operator, has added a Bria-based desktop and mobile softphone solution to its residential offering and has begun deploying the applications to customers across Mexico.
  • Launch by CenturyLink of the IP Communicator for its hosted VoIP services based on Bria desktop, tablet and mobile clients.
  • Announced updates for Bria, including an updated desktop, tablet and smartphone solution for the Broadworks platform, integration with Microsoft's Outlook and a desktop screen sharing feature - addressing the demand for collaboration tools.
  • Launched a Master distribution program with three new partners - Interwork Technologies, TeleDynamics and World Telecom Group - exposing CounterPath's products and services to a network of over ten thousand resellers.
  • Bria showcased at the Oracle OpenWorld 2013 event enabling Oracle's WebRTC, SBC and UCS offerings.
  • Awarded a US patent for the enabling of Multimedia Interactive Telephony Services. This patent outlines techniques to include a visual user interface in an audio-based voicemail or interactive voice response system, thereby eliminating the need to listen-and-wait before making directory selections.

Financial Outlook

CounterPath experiences quarter-to-quarter fluctuations in revenue based largely on seasonality and the timing of larger customer deployments. During the first six months of fiscal 2014, a number of these deployments were delayed, and as a result, although the Company remains optimistic for revenue growth in future quarters, it is unlikely that CounterPath will increase revenue in fiscal 2014 over the prior year. The Company plans to continue increasing its sales and marketing resources to support sales growth in all of its key markets.

Conference Call Information

CounterPath will host an investor conference call and live webcast today at 11:00 a.m. ET to discuss its financial results for the second quarter ended October 31, 2013. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. A question and answer session for analysts and institutional investors will follow management's presentation.

A live audio webcast of the conference call will be available at www.cnw.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived for 30 days.

A taped rebroadcast will be available to listeners until 12 a.m. ET on December 19, 2013. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 19809489, followed by the number sign.

Forward-Looking Statements

This news release contains "forward-looking statements". Statements in this news release which are not purely historical, are forward-looking statements and include any statements regarding beliefs, plans, outlook, expectations or intentions regarding the future such as the following: (1) although the Company remains optimistic for revenue growth in future quarters, it is unlikely that CounterPath will increase revenue in fiscal 2014 over the prior year; and (2) The Company plans to continue increasing its sales and marketing resources to support sales growth in all of its key markets.

It is important to note that actual outcomes and the Company's actual results could differ materially from those in such forward-looking statements. Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others: (1) general economic conditions as they affect CounterPath and its current and prospective customers, including a continued downturn in general economic conditions internationally, (2) the variability in CounterPath's sales from reporting period to reporting period due to extended sales cycles as a result of selling CounterPath's products through channel partners or the length of time of deployment of CounterPath's products by its customers, (3) the Company's ability to manage its operating expenses, which may adversely affect its financial condition, (4) a decline in the Company's stock price or insufficient investor interest in the Company's securities which may impact on the Company's ability to raise additional financing as required, (5) the Company's ability to remain competitive as other better financed competitors develop and release competitive products, (6) the impact of intellectual property litigation that could materially and adversely affect CounterPath's business, (7) the success by the Company of the sales of its current and new products, (8) the impact of technology changes on the Company's products and industry, (9) the failure to develop new and innovative products using the Company's technologies, and (10) the potential dilution to shareholders or overhang on the Company's share price of its outstanding stock options and warrants. Readers should also refer to the risk disclosures outlined in the Company's quarterly reports on Form 10-Q or Form 10-Q/A, or in the annual reports on Form 10-K or Form 10-K/A, and the Company's other disclosure documents filed from time-to-time with the Securities and Exchange Commission at www.sec.gov and the Company's interim and annual filings and other disclosure documents filed from time-to-time on SEDAR at www.sedar.com.

About CounterPath

CounterPath's SIP-based VoIP softphones are changing the face of telecommunications. An industry and user favorite, Bria softphones for desktop and mobile devices, together with the company's server applications and Fixed Mobile Convergence (FMC) solutions, enable service providers, OEMs and enterprises large and small around the globe to offer a seamless and unified communications experience across both fixed and mobile networks. Standards-based, cost-effective and reliable, CounterPath's award-winning solutions power the voice and video calling, messaging, and presence offerings of customers such as Alcatel-Lucent, AT&T, Verizon, BT, Mobilkom Austria, Rogers, Avaya, BroadSoft, Cisco Systems, GENBAND, Metaswitch Networks, Mitel, NTT and NEC.

(TABLES TO FOLLOW)

COUNTERPATH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
October 31, April 30,
2013 2013
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 9,423,773 $ 11,229,595
Accounts receivable (net of allowance for doubtful accounts of $330,905 and $456,051, respectively) 3,585,191 4,640,620
Prepaid expenses and deposits 103,770 139,591
Total current assets 13,112,734 16,009,806
Deposits 127,770 125,160
Equipment 120,709 167,986
Derivative instruments 9,830
Goodwill 8,398,158 8,660,930
Other assets 98,090 82,165
Total Assets $ 21,857,461 $ 25,055,877
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 2,262,103 $ 2,363,311
Derivative instruments 9,814 93,057
Unearned revenue 1,533,841 1,442,511
Customer deposits 9,553 9,553
Accrued warranty 77,221 91,151
Total current liabilities 3,892,532 3,999,583
Deferred lease inducements 14,570 30,110
Unrecognized tax benefit 98,575 98,575
Total liabilities 4,005,677 4,128,268
Stockholders' equity:
Preferred stock, $0.001 par value
Authorized: 100,000,000
Issued and outstanding: October 31, 2013 - nil; April 30, 2013 - 1 - -
Common stock, $0.001 par value
Authorized: 100,000,000
Issued:
October 31, 2013 - 42,080,937; April 30, 2013 - 41,958,350 42,081 41,959
Treasury stock (25 ) (79 )
Additional paid-in capital 66,735,885 66,191,140
Accumulated deficit (48,311,010 ) (44,974,491 )
Accumulated other comprehensive income (loss) - currency translation adjustment (615,147 ) (330,920 )
Total stockholders' equity 17,851,784 20,927,609
Liabilities and Stockholders' Equity $ 21,857,461 $ 25,055,877
COUNTERPATH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
(Unaudited)
Three Months Ended Six Months Ended
October 31, October 31,
2013 2012 2013 2012
Revenue:
Software $ 1,451,475 $ 1,811,815 $ 3,098,995 $ 4,339,871
Service 1,095,335 1,750,972 2,307,302 3,610,684
Total revenue 2,546,810 3,562,787 5,406,297 7,950,555
Operating expenses:
Cost of sales (includes depreciation of $45,598 (2012 - $22,071) and amortization of intangible assets of $nil (2012 - $19,591)) 571,857 626,006 1,129,312 1,185,799
Sales and marketing 1,315,421 1,028,217 2,528,904 2,083,252
Research and development 1,324,308 1,284,594 2,737,383 2,645,606
General and administrative 1,101,457 1,164,092 2,114,987 2,543,411
Total operating expenses 4,313,043 4,102,909 8,510,586 8,458,068
Income (loss) from operations (1,766,233 ) (540,122 ) (3,104,289 ) (507,513 )
Interest and other income (expense), net:
Interest and other income 56,989 18,090 84,474 61,943
Interest expense (161 ) (154 ) (932 ) (624 )
Fair value adjustment on derivative instruments (12,574 ) 208,036 73,413 993,164
Foreign exchange gain (loss) (389,249 ) (10,955 ) (389,185 ) (4,537 )
Net income (loss) for the period $ (2,111,228 ) $ (325,105 ) $ (3,336,519 ) $ 542,433
Net income (loss) per share:
Basic and diluted $ (0.05 ) $ (0.01 ) $ (0.08 ) $ 0.01
Weighted average common shares outstanding:
Basic and diluted 42,007,439 41,592,776 41,971,160 41,159,949

Non-GAAP Financial Measures

This news release contains "non-GAAP financial measures". The non-GAAP financial measures in this news release may include non-GAAP gross margin and non-GAAP income (loss) from operations which exclude non-cash stock-based compensation and amortization of intangible asset charges relative to gross profit and income (loss) from operations calculated in accordance with GAAP. The non-GAAP financial measures may also include non-GAAP net income (loss) which excludes non-cash stock-based compensation, amortization of intangible assets and fair value adjustment on derivative instruments charges relative to income (loss) calculated in accordance with GAAP. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. CounterPath utilizes both GAAP and non-GAAP financial measures to assess what it believes to be its core operating performance and to evaluate and manage its internal business and assist in making financial operating decisions. CounterPath believes that the inclusion of non-GAAP financial measures, together with GAAP measures, provides investors with an alternative presentation useful to investors' understanding of CounterPath's core operating results and trends.

Reconciliation to GAAP
(Unaudited)
Non-GAAP gross margin: Three Months Ended Six Months Ended
October 31, October 31,
2013 2012 2013 2012
Revenue 2,546,810 3,562,787 $ 5,406,297 $ 7,950,555
Less:
Cost of sales 571,857 626,006 1,129,312 1,185,799
GAAP gross profit 1,974,953 2,936,781 $ 4,276,985 $ 6,764,756
Percentage of revenue (GAAP gross margin) 78 % 82 % 79 % 85 %
GAAP gross profit 1,974,953 2,936,781 $ 4,276,985 $ 6,764,756
Plus:
Stock-based compensation 18,285 8,797 26,838 17,636
Amortization of intangible assets - 9,683 - 19,591
Non-GAAP gross profit 1,993,238 2,955,261 $ 4,303,823 $ 6,801,983
Percentage of revenue (non-GAAP gross margin) 78 % 83 % 80 % 86 %
Non-GAAP income (loss) from operations: Three Months Ended Six Months Ended
October 31, October 31,
2013 2012 2013 2012
GAAP income (loss) from operations $ (1,766,233 ) $ (540,122 ) $ (3,104,289 ) $ (507,513 )
Plus:
Stock-based compensation 262,493 214,605 637,043 611,375
Amortization of intangible assets - 9,683 - 19,591
Non-GAAP income (loss) from operations $ (1,503,740 ) $ (315,834 ) (2,467,246 ) $ 123,453
Non-GAAP net income (loss): Three Months Ended Six Months Ended
October 31, October 31,
2013 2012 2013 2012
GAAP net income (loss) $ (2,111,228 ) $ (325,105 ) $ (3,336,519 ) $ 542,433
Plus:
Stock-based compensation 262,493 214,605 637,043 611,375
Amortization of intangible assets - 9,683 - 19,591
Fair value adjustment on derivative instruments 12,574 (208,036 ) (73,413 ) (993,164 )
Non-GAAP net income (loss) $ (1,836,161 ) $ (308,853 ) $ (2,772,889 ) $ 180,235
GAAP net income (loss) per share - basic and diluted $ (0.05 ) $ (0.01 ) $ (0.08 ) $ 0.01
Non-GAAP net Income (loss) per share - basic and diluted $ (0.04 ) $ (0.01 ) $ (0.07 ) $ 0.00

Contact Information