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TMCNet:  CounterPath Reports Fourth Quarter and Fiscal 2014 Financial Results

[July 10, 2014]

CounterPath Reports Fourth Quarter and Fiscal 2014 Financial Results

(Marketwire (Canada) Via Acquire Media NewsEdge) VANCOUVER, BRITISH COLUMBIA--(Marketwired - July 10, 2014) - 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 fourth quarter and fiscal year ended April 30, 2014.


Fourth Quarter Financial Highlights -- Quarterly revenue of $3.7 million, compared to revenue of $2.6 million for the previous quarter and $4.0 million for the fourth quarter of fiscal year 2013.

-- GAAP gross margin of 84%. Non-GAAP gross margin of 85%.

-- Non-GAAP loss from operations of $0.3 million compared to Non-GAAP income from operations of $0.04 million for the fourth quarter of fiscal year 2013.

-- Net loss of $0.4 million, or $0.01 per share, compared to a net income of $0.1 million, or $0.00 per share, for the fourth quarter of fiscal year 2013.

-- Non-GAAP net loss of $0.03 million, or $0.00 per share, compared to non- GAAP net income of $0.05 million, or $0.00 per share, for the fourth quarter of fiscal year 2013.

-- Cash of $7.2 million as of April 30, 2014.

Fiscal 2014 Financial Highlights -- Annual revenue of $11.7 million, compared to $15.2 million for fiscal 2013.

-- GAAP and non-GAAP gross margin of 81%.

-- Non-GAAP loss from operations of $4.1 million compared to a non-GAAP loss from operations of $0.4 million last fiscal year.

-- Net loss of $5.9 million, or $0.14 per share, compared to a net income of $0.5 million, $0.01 per share, last fiscal year.

-- Non-GAAP net loss of $4.8 million or $0.11 per share, compared to a non- GAAP net loss of $0.3 million or $0.01 per share last fiscal year.

Management Commentary "We posted strong sequential revenue growth in the fourth quarter as we leveraged our market position and refined our sales strategy," said Donovan Jones, President and Chief Executive Officer. "This year, we increased our focus on enterprise sales by expanding our direct sales force, by launching our Master Distribution Program with a network of over 30,000 Value Added Resellers and by entering the Mobile Device Management Market. We also brought certain key deals in-house, providing greater visibility and control over key reference accounts, especially in Europe where we are experiencing a resurgence of interest in our Operator OTT solutions. Looking ahead into fiscal 2015, we will continue to build our channel and further develop our sales organization as we return to growth in key markets." Recent Business Highlights -- Announced new channel partner, MegaPath, a leading provider of managed data, voice, security and cloud services to small, medium and enterprise businesses.

-- Announced plans to enter the Desktop as a Service (DaaS) and Virtual Desktop Integration (VDI) markets in partnership with Teradici to provide a unified communications solution for virtual workspaces.

-- Strengthened intellectual property portfolio with award of US patent No.

8,737,351 titled "Methods and Systems for Reducing MAC layer Handoff Latency in Wireless Networks".

-- Enhanced product line with the launch of our Bria 4 softphone client with new and advanced unified communications features for enterprises, including streamlined messaging, full-screen video calling, screen sharing capabilities and Microsoft Outlook(R) integration.

-- Announced that CounterPath was again named one of the Top 10 Mobile Technology companies in Canada by Branham Group in the 2014 Edition of the Branham300.

-- Renewed our normal course issuer bid, positioning the company to continue repurchasing its shares on the open market and demonstrating management's ongoing belief that the shares are currently trading in a price range that does not adequately reflect their underlying value.

-- Launched Bria Cloud, our cloud based subscription service for small to medium sized businesses, simplifying the sales and deployment processes for our partners and customers, while positioning the company to generate more recurring revenue in the future.

-- Entered into a licensing and distribution agreement with Gryphon Networks, a provider of fully automated, integrated and real-time sales intelligence and marketing compliance solutions for dispersed sales and marketing organizations.

-- Signed distribution agreement with channel partner ABP Technology, a leading value-added distributor of IP Telephony and unified communication solutions provider with over 10,000 value-added resellers in North America and Latin America.

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 fourth quarter and fiscal year ended April 30, 2014. 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 July 20, 2014. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 59001105, 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) Looking ahead into fiscal 2015, we will continue to build our channel and further develop our sales organization as we return to growth in 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) 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 our customers (2) the Company's ability to manage its operating expenses, which may adversely affect its financial condition, (3) 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, (4) the Company's ability to remain competitive as other better financed competitors develop and release competitive products, (5) the impact of intellectual property litigation that could materially and adversely affect our business, (6) the success by the Company of the sales of its current and new products, (7) the impact of technology changes on the Company's products and on our industry, (8) the failure to develop new and innovative products using the Company's technologies, (9) 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 and NEC.

For more information please visit www.counterpath.com.

COUNTERPATH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in U.S. Dollars) April 30, April 30, 2014 2013 ------------ ------------ Assets Current assets: Cash $ 7,172,798 $ 11,229,595 Accounts receivable (net of allowance for doubtful accounts of $240,681 (2013 - $456,051)) 3,401,491 4,640,620 Prepaid expenses and deposits 161,627 139,591 ------------ ------------ Total current assets 10,735,916 16,009,806 Deposits 125,267 125,160 Equipment 154,293 167,986 Derivative instruments - 9,830 Goodwill 8,018,578 8,660,930 Other assets 102,836 82,165 ------------ ------------ Total Assets $ 19,136,890 $ 25,055,877 ------------ ------------ ------------ ------------ Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 2,326,763 $ 2,363,311 Derivative instruments - 93,057 Unearned revenue 1,625,826 1,442,511 Customer deposits 9,553 9,553 Accrued warranty 69,159 91,151 ------------ ------------ Total current liabilities 4,031,301 3,999,583 Deferred lease inducements - 30,110 Unrecognized tax benefit 25,631 98,575 ------------ ------------ Total liabilities 4,056,932 4,128,268 ------------ ------------ Stockholders' equity: Preferred stock, $0.001 par value Authorized: 100,000,000 Issued and outstanding: April 30, 2014 - 0; April 30, 2013 - 1 - - Common stock, $0.001 par value Authorized: 100,000,000 Issued: April 30, 2014 - 42,599,869; April 30, 2013 - 41,958,350 42,600 41,959 Treasury stock (16) (79) Additional paid-in capital 66,910,540 66,191,140 Accumulated deficit (50,889,038) (44,974,491) Accumulated other comprehensive income (loss) - currency translation adjustment (984,128) (330,920) ------------ ------------ Total stockholders' equity 15,079,958 20,927,609 ------------ ------------ Liabilities and Stockholders' Equity $ 19,136,890 $ 25,055,877 ------------ ------------ ------------ ------------ COUNTERPATH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in U.S. Dollars) (unaudited) (audited) Three Months Ended Year Ended April 30, April 30, ------------------------- ------------------------- 2014 2013 2014 2013 ----------- ----------- ----------- ----------- Revenue: Software $ 2,473,851 $ 2,707,194 $ 7,035,323 $ 9,164,107 Service 1,197,912 1,316,086 4,646,625 6,075,816 ----------- ----------- ----------- ----------- Total revenue 3,671,763 4,023,280 11,681,948 15,239,923 ----------- ----------- ----------- ----------- Operating expenses: Cost of sales (includes depreciation of $74,955 (2013 - $67,669) and amortization of intangible assets of $nil (2013 - $39,003)) 572,265 553,545 2,231,222 2,276,777 Sales and marketing 1,272,276 1,269,839 5,112,026 4,463,292 Research and development 1,430,479 1,410,401 5,508,516 5,503,928 General and administrative 911,434 955,806 4,033,984 4,452,214 ----------- ----------- ----------- ----------- Total operating expenses 4,186,454 4,189,591 16,885,748 16,696,211 ----------- ----------- ----------- ----------- Loss from operations (514,691) (166,311) (5,203,800) (1,456,288) Interest and other income (expense), net Interest and other income (39,828) 6,131 64,630 141,391 Interest expense (138) (387) (1,732) (1,135) Foreign exchange gain (loss) 296,895 966 (670,570) 2,539 Fair value adjustment on derivative instruments (99,458) 261,173 (87,339) 1,785,773 ----------- ----------- ----------- ----------- Net income (loss) for the year before income taxes (357,220) 101,572 (5,898,811) 472,280 Income tax expense - - (15,736) - ----------- ----------- ----------- ----------- Net income (loss) for the year $ (357,220) $ 101,572 $ (5,914,547) $ 472,280 ----------- =========== =========== =========== Net income (loss) per share: Basic $ (0.01) $ 0.00 $ (0.14) $ 0.01 Diluted $ (0.01) $ 0.00 $ (0.14) $ (0.01) Weighted average common shares outstanding: Basic 42,399,045 41,933,750 42,126,733 41,519,117 Diluted 42,399,045 44,387,217 42,126,733 41,637,025 Non-GAAP Financial Measures This news release contains "non-GAAP financial measures". The non-GAAP financial measures in this news release consist of 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 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) Three Months Ended Twelve Months Ended April 30, April 30, ---------------------- ------------------------ 2014 2013 2014 2013 ---------- ---------- ----------- ----------- Non-GAAP gross margin: Revenue $ 3,671,763 $ 4,023,280 $ 11,681,948 $ 15,239,923 Less: Cost of sales 572,265 553,545 2,231,222 2,276,777 ---------- ---------- ----------- ----------- GAAP gross profit $ 3,099,498 $ 3,469,735 $ 9,450,726 $ 12,963,146 Percentage of revenue (gross margin) 84% 86% 81% 85% GAAP gross profit $ 3,099,498 $ 3,469,735 $ 9,450,726 $ 12,963,146 Plus: Stock-based compensation 17,488 14,360 62,515 33,577 Amortization of intangible assets 9,697 39,003 ---------- ---------- ----------- ----------- Non-GAAP gross profit $ 3,116,986 $ 3,493,792 $ 9,513,241 $ 13,035,726 Percentage of revenue (Non-GAAP gross margin) 85% 87% 81% 86% Three Months Ended Twelve Months Ended April 30, April 30, ------------------------- ------------------------- 2014 2013 2014 2013 ----------- ----------- ----------- ----------- Non-GAAP income (loss) from operations: GAAP income (loss) from operations $ (514,691) $ (166,311) $ (5,203,800) $ (1,456,288) Plus: Stock-based compensation 223,441 195,896 1,071,467 1,008,004 Amortization of intangible assets 9,697 39,003 ------------- ------------- ----------- ----------- Non-GAAP income (loss) from operations $ (291,250) $ 39,282 $ (4,132,333) $ (409,281) Three Months Ended Twelve Months Ended April 30, April 30, ------------------------- ------------------------- 2014 2013 2014 2013 ----------- ----------- ----------- ----------- Non-GAAP net income (loss): GAAP net income (loss) $ (357,220) $ 101,572 $(5,914,547) $ 472,280 Plus: Stock-based compensation 223,441 195,896 1,071,467 1,008,004 Amortization of intangible assets 9,697 39,003 Fair value adjustment on derivative instruments 99,458 (261,174) 87,339 (1,785,774) ----------- ----------- ----------- ----------- Non-GAAP net income (loss) $ (34,321) $ 45,991 $ (4,755,741) $ (266,487) GAAP net income (loss) per share: Basic $ (0.01) $ 0.00 $ (0.14) $ 0.01 Diluted $ (0.01) $ 0.00 $ (0.14) $ (0.01) Non-GAAP net income (loss) per share: Basic $ 0.00 $ 0.00 $ (0.11) $ (0.01) Diluted $ 0.00 $ 0.00 $ (0.11) $ (0.01) FOR FURTHER INFORMATION PLEASE CONTACT: CounterPath Corporation David Karp Chief Financial Officer (604) 628-9364 dkarp@counterpath.com CounterPath Corporation Steve Hards Vice President Investor Relations (604) 637-6498 shards@counterpath.com www.counterpath.com Source: CounterPath Corporation

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