CounterPath Reports Third Quarter Fiscal 2014 Financial Results

March 13, 2014
CounterPath Reports Third Quarter Fiscal 2014 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - March 13, 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 third quarter ended January 31, 2014 of fiscal 2014.

Third Quarter Financial Highlights

  • Quarterly revenue of $2.6 million.

  • GAAP and non-GAAP Gross margin of 80%.

  • Loss from operations of $1.6 million, non-GAAP loss from operations of $1.4 million.

  • Net loss of $0.05 per share.

  • Cash of $8.1 million as of January 31, 2014.

Results for the three months ended January 31, 2014

Revenue was $2.6 million compared to revenue of $3.3 million for the third quarter of fiscal 2013.

Net loss was $2.2 million or $0.05 per share compared to net loss of $0.2 million or $0.00 per share for the third quarter of fiscal 2013.

Non-GAAP net loss was $1.9 million or $0.05 per share compared to non-GAAP net loss of $0.5 million or $0.01 per share for the third quarter of fiscal 2013. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary

"During the quarter we focused on improving our direct sales efforts and developing our channel partners. These efforts are paying off, as our revenues booked to date for the current quarter and our sales funnel look promising," said Donovan Jones, President and Chief Executive Officer. "Additionally, the recent WhatsApp and Viber acquisitions support our strategy, as our products and services enable operators to counter the over-the-top (OTT) threat by launching their own white labeled voice, video and messaging services, thus strengthening relationships with their customers and reducing customer churn. And with over 1,100 operators and three billion wireless subscribers worldwide, the market for our products is large," continued Jones.

Recent Business Highlights

  • Announced new distribution agreement with ABP Tech, a leading wholesale channel supplier of IP telecommunication infrastructure products and services. ABP Tech supports over 10,000 value-added resellers in North America and Latin America.

  • Announced plans to enter Virtual Desktop Infrastructure and Desktop-as-a-Service markets via a new software architecture that can handle delay sensitive applications, such as voice, across all types of virtual desktops including thick clients, thin clients and zero clients.

  • Announced plans to enter the Mobile Device Management (MDM) market by partnering with key MDM vendors offering direct channels to thousands of enterprise customers.

  • Received two Product of the Year awards from Internet Telephony Magazine (TMC). The awards recognize CounterPath's leading BlackBerry client and its software-as-a-service offerings.

  • Released new Software Development Kit (SDK) for desktop, tablet and mobile platforms, enabling enterprises, carriers and solution vendors to develop customized SIP-based client applications based on CounterPath's market leading technology.

  • Launched next generation of softphone clients containing design updates and advanced enterprise communications features, including: voice quality monitoring, screen sharing and an add-in for Microsoft Outlook.

  • Announced new growth in the expanding call center market through deals with InContact, Telmex, Telefonica and Vivo.

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 third quarter ended January 31, 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 March 20, 2014. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 4380232, 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) these efforts are paying off, as our revenues booked to date for the current quarter and our sales funnel look promising.

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.

For more information please visit www.counterpath.com.

COUNTERPATH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
January 31,April 30,
20142013
Assets(Unaudited)
Current assets:
Cash and cash equivalents$8,143,613$11,229,595
Accounts receivable (net of allowance for doubtful accounts of $383,575 and $456,051, respectively)3,659,0844,640,620
Prepaid expenses and deposits165,178139,591
Total current assets11,967,87516,009,806
Deposits121,526125,160
Equipment129,807167,986
Derivative instruments-9,830
Goodwill7,890,4308,660,930
Other assets100,29582,165
Total Assets$20,209,933$25,055,877
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities$2,237,232$2,363,311
Derivative instruments71,10893,057
Unearned revenue1,589,2981,442,511
Customer deposits800,5539,553
Accrued warranty71,96191,151
Total current liabilities4,770,1523,999,583
Deferred lease inducements4,43830,110
Unrecognized tax benefit98,57598,575
Total liabilities4,873,1654,128,268
Stockholders' equity:
Preferred stock, $0.001 par value
Authorized: 100,000,000
Issued and outstanding: January 31, 2014 - nil; April 30, 2013 - 1--
Common stock, $0.001 par value
Authorized: 100,000,000
Issued:
January 31, 2014 - 42,232,092; April 30, 2013 - 41,958,35042,23241,959
Treasury stock(17)(79)
Additional paid-in capital66,875,46866,191,140
Accumulated deficit(50,531,818)(44,974,491)
Accumulated other comprehensive income (loss) - currency translation adjustment
(1,049,097
)(330,920)
Total stockholders' equity15,336,76820,927,609
Liabilities and Stockholders' Equity$20,209,933$25,055,877
COUNTERPATH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
(Unaudited)
Three Months EndedNine Months Ended
January 31,January 31,
2014201320142013
Revenue:
Software$1,462,477$2,117,042$4,561,472$6,456,913
Service1,141,4111,149,0463,448,7134,759,730
Total revenue2,603,8883,266,0888,010,18511,216,643
Operating expenses:
Cost of sales (includes depreciation of $61,058 (2013 - $22,071) and amortization of intangible assets of $nil (2013 - $29,306))529,645537,4331,658,9571,723,232
Sales and marketing1,310,8461,110,2013,839,7503,193,453
Research and development1,340,6541,447,9214,078,0374,093,527
General and administrative1,007,563952,9973,122,5503,496,408
Total operating expenses4,188,7084,048,55212,699,29412,506,620
Income (loss) from operations(1,584,820)(782,464)(4,689,109)(1,289,977)
Interest and other income (expense), net:
Interest and other income19,98473,317104,458135,260
Interest expense(662)(124)(1,594)(748)
Fair value adjustment on derivative instruments(61,294)531,43612,1191,524,600
Foreign exchange gain (loss)(578,280)6,110(967,465)1,573
Net income (loss) for the period before income taxes(2,205,072)(171,725)(5,541,591)370,708
Income tax expense(15,736)-(15,736)-
Net income (loss) for the period$(2,220,808)$(171,725)$(5,557,327)$370,708
Net income (loss) per share:
Basic and diluted$(0.05)$0.00$(0.13)$0.01
Weighted average common shares outstanding:
Basic and diluted 42,174,448 41,836,341 42,038,923 41,385,413

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 EndedNine Months Ended
January 31,January 31,
2014201320142013
Revenue2,603,8883,266,088$8,010,185$11,216,643
Less:
Cost of sales529,645537,4331,658,9571,723,232
GAAP gross profit2,074,2432,728,655$6,351,228$9,493,411
Percentage of revenue (GAAP gross margin)80%84%79%85%
GAAP gross profit2,074,2432,728,655$6,351,228$9,493,411
Plus:
Stock-based compensation18,1898,24745,02725,883
Amortization of intangible assets-9,715-29,306
Non-GAAP gross profit2,092,4322,746,617$6,396,255$9,548,600
Percentage of revenue (non-GAAP gross margin)80%84%80%85%
Non-GAAP income (loss) from operations:Three Months EndedNine Months Ended
January 31,January 31,
2014201320142013
GAAP income (loss) from operations$(1,584,820)$(782,464)$(4,689,109)$(1,289,977)
Plus:
Stock-based compensation210,983200,733848,026812,108
Amortization of intangible assets-9,715-29,306
Non-GAAP income (loss) from operations$(1,373,837)$(572,016)$(3,841,083)$(448,563)
Non-GAAP net income (loss):Three Months EndedNine Months Ended
January 31,January 31,
2014201320142013
GAAP net income (loss)$(2,220,808)$(171,725)$(5,557,327)$370,708
Plus:
Stock-based compensation210,983200,733848,026812,108
Amortization of intangible assets-9,715-29,306
Fair value adjustment on derivative instruments61,294(531,436)(12,119)(1,524,600)
Non-GAAP net income (loss)$(1,948,531)$(492,713)$(4,721,420)$(312,478)
GAAP net income (loss) per share - basic and diluted$(0.05)$0.00$(0.13)$0.01
Non-GAAP net Income (loss) per share - basic and diluted$(0.05)$(0.01)$(0.11)$(0.01)
CounterPath Corporation
David Karp
Chief Financial Officer
(604) 628-9364
[email protected]

CounterPath Corporation
Investor Relations
(604) 637-6498
[email protected]
www.counterpath.com

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