An anonymous director reports

COUNTERPATH REPORTS THIRD QUARTER FISCAL 2019 FINANCIAL RESULTS

CounterPath Corp. has provided its financial and operating results for its quarter ended Jan. 31, 2019, being the third quarter of fiscal year 2019.

Third quarter financial highlights (unaudited)

• Revenue of $2.6-million compared with revenue of $3.1-million for the third quarter of fiscal 2018;
• Growth in subscription, support and maintenance revenue (revenue of a recurring nature) of 22 per cent for the quarter compared with the third quarter of fiscal 2018;
• Non-GAAP (generally accepted accounting principles) loss from operations of $1.0-million compared with non-GAAP loss from operations of $300,000 for the third quarter of fiscal 2018;
• Net loss of $1.1-million, or 18 cents per share, compared with net loss of $800,000, or 14 cents per share, for the third quarter of fiscal 2018;
• Non-GAAP net loss of $1.0-million, or 17 cents per share, compared with non-GAAP net income of $300,000, or six cents per share, for the third quarter of fiscal 2018;
• Cash of $1.7-million as of Jan. 31, 2019, compared with cash of $2.3-million as of April 30, 2018.

Management commentary

"We continue to make progress on our strategy of growing our recurring revenue business in the quarter, which contributed 53 per cent of total revenue and grew 22 per cent over the same quarter last year," said David Karp, interim chief executive officer and chief financial officer. "We recorded $1.4-million in recurring revenue, the highest level on record at CounterPath. Contributing to this growth included our channel partner program and e-store software-as-a-service (SaaS) offerings. We also sold our first on-premises collaboration solution to a North American service provider that offers cloud communication services to small and medium sized businesses. The CounterPath solution is intended to displace their legacy BroadSoft solution over time. Our solution will extend the customer's internally developed PBX to enable a complete unified communications and collaboration offering to their customers powered by Bria softphones and the Stretto Platform. During the quarter, we also received recognition for our innovation as Bria Teams was named a finalist for the best of enterprise connect award 2019. The winner will be announced on March 19, 2019, at the event. Bria Teams is a subscription-based cloud service that unifies team communications and collaboration across desktop and mobile devices, enabling organizations to enhance team productivity and improve business processes. SMBs and enterprises can easily integrate Bria Teams with existing call server (PBX) or VoIP service, allowing users to take their business number with them as their single identity. Bria Teams overlays an organization's infrastructure to leverage their existing investments, reducing both costs and complexity."

Financial overview

(All amounts are in U.S. dollars and in accordance with accounting principles generally accepted in the United States unless otherwise specified -- unaudited).

Revenue was $2.6-million for the quarter ended Jan. 31, 2019, compared with $3.1-million for the same quarter in the last fiscal year. Software revenue was $1.1-million compared with $1.8-million for the same quarter in the last fiscal year, subscription, support and maintenance revenue was $1.4-million compared with $1.1-million for the same quarter in the last fiscal year, and professional services and other revenue was $100,000 compared with $200,000 for the same quarter in the last fiscal year.

Operating expenses for the quarter ended Jan. 31, 2019, were $3.6-million compared with $3.5-million for the same quarter in the last fiscal year. Operating expenses for the quarter ended Jan. 31, 2019, included a non-cash stock-based compensation expense of $100,000 (2018 -- $100,000). Cost of sales was $600,000 for the quarter ended Jan. 31, 2019, compared with $400,000 for the same quarter in the last fiscal year. Sales and marketing expenses were $1.0-million for the quarter ended Jan. 31, 2019, compared with $1.0-million for the same quarter last fiscal year. For the quarter ended Jan. 31, 2019, research and development expenses were $1.4-million, and general and administrative expenses were $700,000 compared with $1.4-million and $800,000, respectively, for the same quarter in the last fiscal year.

Foreign exchange loss for the quarter ended Jan. 31, 2019, was nil compared with $300,000 for the same quarter 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 Jan. 31, 2019, was $1.1-million, or 18 cents per share, compared with a net loss of $800,000, or 14 cents per share, for the same quarter in the last fiscal year. As of Jan. 31, 2019, the company had $1.7-million in cash, compared with $2.3-million at April 30, 2018.

About CounterPath Corp.

CounterPath Unified Communications solutions are changing the face of telecommunications. An industry and user favourite, Bria softphones for desktop, tablet and mobile devices, together with Stretto Platform server solutions, enable service providers, OEMs (original equipment manufacturer) and enterprises large and small around the globe to offer a seamless and unified communications experience across any network.

                COUNTERPATH CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Stated in U.S. dollars)
                                                                 Three months ended         Nine months ended    
                                                                            Jan. 31,                  Jan. 31,       
                                                                    2019       2018        2019          2018     
Revenue
Software                                                      $1,119,311 $1,791,165   $3,398,729   $5,306,925 
Subscription, support and maintenance                          1,367,387  1,120,690    3,938,247    3,069,371 
Professional services and other                                  101,060    172,048      579,873    1,230,978 
Total revenue                                                  2,587,758  3,083,903    7,916,849    9,607,274 
Operating expenses                                                                                         
Cost of sales (includes depreciation of $528 (2018 -- $4,753))   563,236    362,057    1,782,603    1,131,122 
Sales and marketing                                              983,290    996,470    2,945,939    3,031,981 
Research and development                                       1,369,196  1,361,219    4,163,889    4,052,129 
General and administrative                                       699,428    800,049    3,241,167    2,407,234 
Total operating expenses                                       3,615,150  3,519,795   12,133,598   10,622,466 
Loss from operations                                          (1,027,392)  (435,892)  (4,216,749)  (1,015,192)
Interest and other income (expense), net:                                                                   
Interest and other income                                          2,145          -        2,145            - 
Interest expense                                                 (22,122)      (123)     (26,788)        (338)
Foreign exchange gain (loss)                                     (16,266)  (342,328)     108,205     (756,512)
Change in fair value of derivative instruments                     4,255          -         (897)           - 
Total interest and other income (expense), net                   (31,988)  (342,451)      82,665     (756,850)
Net (loss) for the period                                    $(1,059,380) $(778,343) $(4,134,084) $(1,772,042)
Net (loss) per share                                                                                         
Basic and diluted                                                 $(0.18)    $(0.14)      $(0.70)      $(0.33)

We seek Safe Harbor.