CounterPath Reports Fourth Quarter and Fiscal 2016 Financial Results

Vancouver, BC, Canada — July 14, 2016

CounterPath Corporation (“CounterPath” or the “Company”) (NASDAQ: CPAH) (TSX: CCV), a global provider of award-winning over-the-top (OTT) Unified Communications solutions for enterprises and carriers, today announced the financial and operating results for its fourth quarter and fiscal year ended April 30, 2016.

Fourth Quarter Financial Highlights

• Quarterly revenue of $3.0 million, compared to revenue of $2.7 million for the third quarter of fiscal 2016 and $3.1 million for the fourth quarter of fiscal year 2015.
• Non-GAAP loss from operations of $0.2 million compared to non-GAAP loss from operations of $0.8 million for the fourth quarter of fiscal year 2015.
• Net loss of $1.0 million, or $0.22 per share, compared to a net loss of $1.4 million, or $0.33 per share, for the fourth quarter of fiscal year 2015.
• Non-GAAP net loss of $0.8 million, or $0.18 per share, compared to non-GAAP net loss of $1.2 million, or $0.29 per share, for the fourth quarter of fiscal year 2015.
• Cash of $2.2 million as of April 30, 2016.

Fiscal 2016 Financial Highlights

• Annual revenue of $11.1 million, compared to $12.0 million for fiscal 2015.
• Non-GAAP gross margin of 86% and GAAP gross margin of 85% (compared to non-GAAP gross margin of 82% and GAAP gross margin of 81% in fiscal 2015).
• Non-GAAP loss from operations of $1.9 million compared to a non-GAAP loss from operations of $4.3 million last fiscal year.
• Net loss of $2.7 million, or $0.61 per share, compared to a net loss of $4.4 million, $1.05 per share, last fiscal year.
• Non-GAAP net loss of $1.7 million, or $0.39 per share, compared to a non-GAAP net loss of $3.4 million, or $0.81 per share, last fiscal year.

Management Commentary

“For fiscal year 2016 the Company improved gross margin and operating income while investing heavily in a strategic roadmap, involving product line development and Intellectual Property” said Donovan Jones, President and Chief Executive Officer. “I am proud of our team performance in generating a strong foundation for business growth. In particular we advanced our unified communications and collaboration solutions with global partners and significantly broadened the underlying technology platform. Later this year CounterPath will introduce a powerful new SaaS communications offering called Bria X, which has been developed to accommodate rapidly growing enterprise client demands. The offering is highly differentiated and disruptive to all other offerings in the market. The Bria X solution enables enterprises to communicate and collaborate better in a global, secure and productive environment. During fiscal year 2016 the Company experienced a considerable increase in recurring revenue with new solutions and services. We are expecting continued growth in our subscription based revenue model, with the CounterPath public cloud solutions targeting small and medium sized businesses globally. The Company will also continue to focus on securing new large enterprise customers with private cloud communications solutions in the financial services, healthcare and government sectors with large partners which include Nokia, Oracle and Avaya.”

FY2016 and Recent Business Highlights

• Announced its new Bria for Salesforce application is now available through the Salesforce AppExchange, empowering Salesforce users to connect with customers, partners and employees.
• Announced an agreement with Ingram Micro Inc. (NYSE: IM), a Fortune 100 company that delivers a full spectrum of global technology and supply chain services to businesses around the world, to distribute CounterPath OTT communications solutions.
• Awarded patent No. US 9131006, by the U.S. Patent and Trademark Office. Titled “Method And System for Extending Services to Cellular Devices”, a patent that builds on a previous patent (US 8165576) of the same name by further protecting unique methods for the seamless handover of communication services from a fixed or cellular network to a packet switched network.
• Raised gross proceeds of $1,465,000 by way of a non-brokered private placement of units at a price of $5.00 per unit.
• Launched our next generation of solutions, including Bria 4.4 for desktops, Bria 3.6 for Android/iOS, and Stretto Platform 1.8 which provides management, mobility and messaging capabilities.
• Announced that a European carrier offering highly secure telecommunication services has purchased over $800,000 of CounterPath software and services.
• Announced partnership with Nokia (formerly Alcatel-Lucent) through which CounterPath is developing unified communication and collaboration software for Nokia to market to large enterprise.

Financial Overview

(All amounts in U.S. dollars and in accordance with accounting principles generally accepted in the United States (“GAAP”) unless otherwise specified. Per share figures reflect the impact of a one-for-ten reverse stock split effected at the opening of trading on November 2, 2015 which has been retroactively applied to the figures in this new release and the consolidated financial statements.)

Revenue was $11.1 million for the year ended April 30, 2016 compared to $12.0 million for last fiscal year. Software revenue was $6.0 million compared to $7.2 million for last fiscal year, and service revenue was $5.0 million compared to $4.9 million for last fiscal year. Operating expenses for the year ended April 30, 2016 were $13.9 million compared to $17.3 million for last fiscal year. Approximately $1.2 million of the $3.4 million decline in operating expenses was related to a weakening Canadian dollar relative to the U.S. dollar as a significant percentage of the Company’s operating costs are based in Canadian dollars. Operating expenses for the year included a non-cash stock-based compensation expense of $0.9 million (2015 – $1.0 million). Sales and marketing expenses were $4.1 million for the year ended April 30, 2016 compared to $4.9 million for last fiscal year. For the year ended April 30, 2016, research and development expenses were $4.7 million and general and administrative expenses were $3.4 million compared to $5.7 million and $4.5 million, respectively, for last fiscal year.

Foreign exchange gain for the year ended April 30, 2016 was $0.2 million compared to $0.9 million for the year ended April 30, 2015. The foreign exchange gain represents the gain on account of translation of the intercompany accounts of CounterPath’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 year ended April 30, 2016 was $2.7 million, or ($0.61) per share, compared to a net loss of $4.4 million, or ($1.05) per share, for the year ended April 30, 2015. As of April 30, 2016, the Company had $2.2 million in cash, compared to $2.9 million at April 30, 2015.

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 including (1) later this year CounterPath will introduce a powerful new SaaS communications offering called Bria X; (2) we are expecting continued growth in our subscription based revenue model, with the CounterPath public cloud solutions targeting small and medium sized businesses globally; and (3) the Company will also continue to focus on securing new large enterprise customers with private cloud communications solutions in the financial services, healthcare and government sectors with large partners which include Nokia, Oracle and Avaya. 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 its customers, (2) the Company’s ability to manage its operating expenses, which may adversely affect its financial condition, (3) the Company’s ability to remain competitive as other better financed competitors develop and release competitive products, (4) a decline in the Company’s stock price or insufficient investor interest in the Company’s securities which may impact the Company’s ability to raise additional financing as required or be delisted from a stock exchange on which its common stock trades, (5) the impact of intellectual property litigation that could materially and adversely affect CounterPath’s 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 industry, (8) the failure to develop new and innovative products using the Company’s technologies, and (9) the potential dilution to shareholders or overhang on the Company’s share price of its outstanding stock options. Readers should also refer to the risk disclosures outlined in the Company’s quarterly reports on Form 10-Q, or in the annual reports on Form 10-K, and the Company’s other disclosure documents filed from time-to-time with the Securities and Exchange Commission at http://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 Unified Communications solutions are changing the face of telecommunications. An industry and user favorite, Bria softphones for desktop, tablet and mobile devices, together with Stretto Platform™ server solutions, enable operators, OEMs 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. The Bria and Stretto combination enables an improved user experience as an overlay to the most popular UC and IMS telephony and applications servers on the market today. Standards-based, cost-effective and reliable, CounterPath award-winning solutions power the voice and video calling, messaging, and presence offerings of customers such as AT&T, Avaya, BroadSoft, BT, Cisco Systems, GENBAND, Metaswitch Networks, Mitel, NEC, Network Norway, Nokia, Rogers and Verizon. Visit mrkt-stg.counterpath.com.

Contacts:

David Karp
Chief Financial Officer, CounterPath
[email protected]
(604) 628-9364

###

(TABLES TO FOLLOW)

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 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 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.