CounterPath Reports Third Quarter Fiscal 2015 Financial Results

Vancouver, BC, Canada — March 09, 2015

CounterPath Corporation (“CounterPath” or the “Company”) (NASDAQ: CPAH) (TSX: CCV), a developer of award-winning over-the-top (OTT) Unified Communications solutions for enterprises and operators, today announced the financial and operating results for its third quarter ended January 31, 2015 of fiscal 2015.

Third Quarter Financial Highlights (Unaudited)

• Quarterly revenue of $3.0 million, up 16% compared to revenue of $2.6 million for the third quarter of fiscal 2014.
• Gross margin of 82%, compared to 80% for third quarter of fiscal 2014
• Non-GAAP loss from operations of $1.0 million compared to non-GAAP loss from operations of $1.4 million for the third quarter of fiscal 2014.
• Net loss of $0.5 million or ($0.01) per share compared to net loss of $2.2 million or ($0.05) per share for the third quarter of fiscal 2014.
• Non-GAAP net loss of $0.3 million or ($0.01) per share compared to non-GAAP net loss of $1.9 million or ($0.05) per share for the third quarter of fiscal 2014.

Management Commentary

“For the third consecutive quarter, we grew year on year revenue further demonstrating that we are building sales momentum,” said Donovan Jones, President and Chief Executive Officer, CounterPath. “Revenue growth is accelerating, especially in Europe, following the expansion of our sales team and other investments in sales operations. Looking ahead, we expect our focus on the enterprise sector to increase revenue as our channel partners continue selling our SaaS based subscriptions to businesses, and as we gain traction in the Virtual Desktop Infrastructure sector. At the same time, our strategic relationships with global equipment vendors and systems integrators are starting to yield results, especially in the financial services, government and global industrial verticals, where our security and user management functionality is critical.”

Recent Business Highlights

• Reported 16% revenue growth in the third quarter of fiscal 2015 as compared to the same quarter last year, up from 12% and 6% revenue growth in the second and first quarters of fiscal 2015, respectively.
• Generated approximately $800,000 of revenue in Europe during the third quarter of fiscal 2015, an 83% year-over-year and 51% sequential increase.
• Developed further sales momentum in the enterprise sector with the announcement of a new reseller agreement with a global network equipment provider that plans to sell CounterPath’s products to financial institutions and global enterprises.
• Announced contract with eircom, Ireland’s largest telecom operator, following its thorough test and evaluation process of CounterPath’s products.
• Equipped Vodafone New Zealand’s call center with Unified Communications software, demonstrating the value of CounterPath’s channel partners, who secured the deal, and the quality of the Company’s solutions.
• Announced the availability of the Messaging and Presence Module for the Stretto PlatformTM, positioning the company to offer messaging and presence services to SMBs and enterprises that do not have their own XMPP platform and to generate higher recurring revenue.

Financial Overview

(All amounts in U.S. dollars and in accordance with accounting principles generally accepted in the United States (“GAAP”) unless otherwise specified – unaudited.)

Revenue was $3.0 million for the quarter ended January 31, 2015, compared to $2.6 million for the same quarter last year. The increase in revenue largely reflects greater sales of software to service providers and higher sales in Europe. Software revenue was $1.7 million compared to $1.5 million for the same quarter last year, and service revenue was $1.4 million compared to $1.1 million for the same quarter last year.

Operating expenses for the quarter ended January 31, 2015 were $4.3 million compared to $4.2 million for the same quarter last year. Operating expenses for the quarter included a non-cash stock-based compensation expense of $0.2 million (2014 – $0.2 million).

Sales and marketing expenses were $1.4 million for the quarter ended January 31, 2015 compared to $1.3 million for same quarter last year. For the quarter ended January 31, 2015, research and development expenses were $1.3 million and general and administrative expenses were $1.0 million, compared to $1.3 million and $1.0 million, respectively, for the same quarter last year.

Foreign exchange gain (loss) for the three months ended January 31, 2015 was $733,773 compared to ($578,280) for the three months ended January 31, 2014. The foreign exchange gain (loss) represents the gain (loss) on account of translation of the intercompany accounts of CounterPath’s subsidiary which maintains its records in Canadian dollars and transactional gains and losses. The increase in foreign exchange gain is the result of the decline in the Canadian dollar against the US dollar in the three months ended January 31, 2015.

The net loss for the quarter ended January 31, 2015 was $0.5 million, or ($0.01) per share, compared to a net loss of $2.2 million, or ($0.05) per share, for the quarter ended January 31, 2014.

As of January 31, 2015, the Company had $3.7 million in cash, compared to $7.2 million at April 30, 2014.

Outlook

For the remainder of fiscal 2015, CounterPath expects to:

• Drive sales to businesses and enterprises, especially in the financial services, call center, government, industrial and technology sectors where demand for our products and services is proving robust.
• Leverage partnerships with telecommunication equipment providers to generate revenue from operators in Asia, Europe, North America and Latin America, where CounterPath has a number of business prospects, while continuing to support the market via the Company’s direct sales team.
• Achieve first commercial deployments in the Virtual Desktop Infrastructure Virtual Desktop Infrastructure (VDI) market, validating CounterPath’s technical leadership position and increasing the Company’s recurring revenue.
• Further improve CounterPath’s website through a search engine optimization/marketing program to generate higher e-Store sales, currently the Company’s largest, lowest touch sales channel.
• Continue building sales momentum in Europe, developing a second geography of sales strength for the Company.

About CounterPath

CounterPath’s 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 PlatformTM 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 enable 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’s award-winning solutions power the voice and video calling, messaging, and presence offerings of customers such as Alcatel-Lucent, AT&T, Avaya, BroadSoft, BT, Cisco Systems, GENBAND, Metaswitch Networks, Mitel, NEC, Network Norway, Rogers and Verizon.

Visit: mrkt-stg.counterpath.com

Contacts:

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

Steven Hards
Vice President of Investor Relations, CounterPath
[email protected]
(604) 637-6498

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, we expect our focus on the enterprise sector to increase revenue as our channel partners continue selling our SaaS based subscriptions to businesses, and as we gain traction in the Virtual Desktop Infrastructure sector; and (2) the Company’s expectations with respect to generating and increasing sales and revenues as set out under the section entitled “Outlook”.

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.

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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.