Mr. David Karp reports

COUNTERPATH REPORTS SECOND QUARTER FISCAL 2019 FINANCIAL RESULTS

CounterPath Corp. has released its financial and operating results for the quarter ended Oct. 31, 2018, being the second quarter of fiscal 2019.

Second quarter financial highlights:

• Revenue of $2.4-million, compared with revenue of $3.4-million for the second quarter of fiscal 2018;
• Growth in subscription, support and maintenance revenue (revenue of a recurring nature) of 34 per cent for the quarter, compared with second quarter of fiscal 2018;
• Non-GAAP (generally accepted accounting principles) loss from operations of $2-million, compared with non-GAAP income from operations of $100,000 for the second quarter of fiscal 2018;
• Net loss of $2.1-million, or 35 cents per share, compared with net income of $200,000, or three cents per share, for the second quarter of fiscal 2018;
• Non-GAAP net loss of $2-million, or 34 cents per share, compared with non-GAAP net income of $100,000, or once cent per share, for the second quarter of fiscal 2018;
• Cash of $1.8-million as of Oct. 31, 2018, compared with cash of $2.3-million as of April 30, 2018.

Management commentary

"Continuing with the trend we experienced in the first quarter, we had strong growth in recurring revenue," commented David Karp, interim chief executive officer and chief financial officer of CounterPath. "Our recurring revenue business contributed to more than 50 per cent of the total revenue and was at the highest level ever for CounterPath. Another milestone for the company was achieved in the second quarter with the launch of Bria Teams. This latest software-as-a-service (SaaS) offering combines all of CounterPath's core technologies with newly introduced services, such as team voice and video calling, in addition to secure corporate instant messaging, presence, message synchronization and screen sharing, all hosted by CounterPath from the cloud. This subscription-based offering will contribute to additional recurring revenue growth and is targeted towards new users within the small- and medium-sized business (SMB) enterprise market. Furthermore, we are expanding our product portfolio to address the demand for support in virtual desktop infrastructure (VDI) environments. This included a customer contract last quarter with one of the top 10 call centre service providers looking to enable voice capability for work-at-home users across various VDI hardware clients. As more employees work remotely, rather than in a corporate office setting, implementation of cloud-based virtual desktop infrastructure is increasing. According to the Research and Markets report, the global desktop virtualization market is projected to grow from $7.83-billion (U.S.) in 2017 to $13.45-billion (U.S.) by 2022 at a compound annual growth rate (CAGR) of 11.4 per cent during the forecast period."

Financial overview (all amounts are in U.S. dollars and in accordance with accounting principles generally accepted in the United States, unless otherwise specified)

Revenue was $2.4-million for the quarter ended Oct. 31, 2018, compared with $3.4-million for the same quarter in the last fiscal year. Software revenue amounted to $900,000, compared with $1.8-million for the same quarter in the last fiscal year. Subscription, support and maintenance revenue amounted to $1.3-million, compared with $1-million for the same quarter in the last fiscal year. Professional services and other revenue amounted to $200,000, compared with $600,000 for the same quarter in the last fiscal year.

Operating expenses for the quarter ended Oct. 31, 2018, were $4.5-million, compared with $3.5-million for the same quarter in the last fiscal year. Operating expenses for the quarter ended Oct. 31, 2018, included a non-cash stock-based compensation expense of $100,000 ($100,000 for the same period in 2017) and a one-time accrual of $300,000 related to the departure of the company's former chief executive officer. Cost of sales were $600,000 for the quarter ended Oct. 31, 2018, compared with $400,000 for the same quarter in the last fiscal year. Sales and marketing expenses were $1-million for the quarter ended Oct. 31, 2018, compared with $1-million for the same quarter in the last fiscal year. For the quarter ended Oct. 31, 2018, research and development expenses were $1.4-million, while general and administrative expenses were $1.6-million, compared with $1.3-million and $700,000, respectively, for the same quarter in the last fiscal year.

Foreign exchange gain for the quarter ended Oct. 31, 2018, amounted to $40,000, compared with $200,000 for the same quarter in the last fiscal year. The foreign exchange gain/loss represents the gain/loss on account of translation of the intercompany accounts of the company's subsidiary, which are maintained in Canadian dollars, and transactional gains and losses resulting from transactions denominated in currencies other than U.S. dollars.

The net loss for the quarter ended Oct. 31, 2018, amounted to $2.1-million, or 35 cents per share, compared with a net income of $200,000, or three cents per share, for the same quarter in the last fiscal year. As of Oct. 31, 2018, the company had $1.8-million in cash, compared with $2.3-million at April 30, 2018.

About CounterPath Corp.

CounterPath's unified communications solutions are changing the face of telecommunications. An industry and user favourite, Bria soft phones for desktop, tablet and mobile devices, together with Stretto platform server solutions, enable operators, OEMs (original equipment manufacturers) and enterprises large and small around the globe to offer a seamless and unified over-the-top (OTT) communications experience across both fixed and mobile networks.

                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (in U.S. dollars)

                                                            Three months ended Oct. 31,    Six months ended Oct. 31,
                                                                    2018          2017           2018          2017    
Revenue                                                                                                   
Software                                                      $  923,416    $1,816,867     $2,279,418    $3,515,760 
Subscription, support and maintenance                          1,319,840       981,619      2,570,860     1,948,681 
Professional services and other                                  198,005       612,079        478,813     1,058,930 
Total revenue                                                  2,441,261     3,410,565      5,329,091     6,523,371 
Operating expenses                                                                                        
Cost of sales (includes depreciation of 
$528 (2017 -- $3,168))                                           623,811       380,822      1,219,367       769,065 
Sales and marketing                                              967,689     1,031,227      1,962,649     2,035,511 
Research and development                                       1,391,737     1,329,437      2,794,693     2,690,910 
General and administrative                                     1,550,101       714,598      2,541,739     1,607,185 
Total operating expenses                                       4,533,338     3,456,084      8,518,448     7,102,671 
(Loss) from operations                                        (2,092,077)      (45,519)    (3,189,357)     (579,300)
Interest and other income (expense), net                                                                  
Interest and other income                                                                                  
Interest expense                                                  (4,661)         (162)        (4,666)         (215)
Foreign exchange gain (loss)                                      43,535       204,515        124,471      (414,184)
Change in fair value of derivative instruments                   (10,554)            -         (5,152)            - 
Total interest and other income (expense), net                    28,320       204,353        114,653      (414,399)
Net income (loss) for the period                              (2,063,757)      158,834     (3,074,704)     (993,699)
Net income (loss) per share                                                                               
Basic                                                              (0.35)         0.03          (0.52)        (0.19)
Diluted                                                            (0.35)         0.03          (0.52)        (0.19)

We seek Safe Harbor.