Q2 Revenue of $2.7 Million and Pro Forma Net Loss of $0.22 Per Share Better than Guided Expectations 

HAYWARD, Calif., November 29, 2001 - Certicom Corporation (Nasdaq: CERT; TSE: CIC), a leading provider of mobile e-business security, today announced revenue of $2.7 million for the second quarter of fiscal 2002 ended October 31, 2001. The Company had previously stated that it expected to generate at least $2.5 million in revenue in fiscal Q2. Revenue results reflect a change in the Company's licensing model implemented during the first fiscal quarter. Under the Company's new subscription licensing model, revenue is recognized ratably over the term of the license agreement rather than upon shipment. 

Certicom reported a pro forma net loss (excluding non-operating and restructuring charges) of $7.0 million, or $(0.22) per share, for the second quarter of fiscal 2002. The Company had previously stated that it expected the pro forma net loss to be approximately $8.0 million, or $(0.26) per share, in fiscal Q2. The net loss was smaller than expected due to higher revenue and lower costs. Total pro forma costs and operating expenses were $9.7 million compared with guided expectations of $10.5 million. 

On an as-reported basis, including restructuring charges of $12.0 million and non-operating charges of $3.2 million in depreciation and amortization, $0.5 million for deferred compensation, and $0.5 million for inventory write-downs, Certicom reported a net loss of $23.2 million, or $(0.74) per share for the second quarter of fiscal 2002. 

"With the new fiscal disciplines we have put in place, we have been able to exceed all of our stated financial goals in Q2," said Greg Capitolo, Certicom's Chief Financial Officer. "We generated more revenue, controlled costs better than our guidance and ended the quarter with more cash on hand than guided. While the economic environment remains very challenging, we are confident that we have put in place the appropriate mechanisms to manage our operations towards profitability by October 2002," Capitolo continued. 

Cash and cash equivalents, restricted cash, and short-term investments ("Cash") totaled $30.9 million at the end of Q2 compared with guided expectations of approximately $20 million. Cash balances were higher due to the restructured payment schedule of capital expenditures related to leasehold obligations, improved productivity of collections, lower costs and expenses, cost-saving decisions related to unoccupied office space, and cash outlays for restructuring initiatives that were less than conservatively estimated. 

For the first six months of fiscal 2002, Certicom reported revenue of $5.3 million. Certicom reported a pro forma net loss (excluding non-operating and restructuring charges) of $16.6 million, or $(0.54) per share for the first six months of fiscal 2002. 

On an as-reported basis, including restructuring charges of $21.6 million and non-operating charges of $9.4 million for goodwill impairment, $6.8 million in depreciation and amortization, $1.0 million for deferred compensation, and $0.5 million for inventory write-downs. Certicom reported a net loss of $55.8 million, or $(1.80) per share, for the first six months of fiscal 2002. 

Q2 FY 2002 Highlights
Enabling Technologies: Certicom expanded relationships with key partners Palm and Verizon. Certicom has already provided Palm with security for the Palm VII, its popular wireless handheld, and the Palm Mobile Internet Kit, which enables Palm users to connect wirelessly to the Internet. In addition, Certicom is working closely with Palm's Solutions Group to provide application and VPN security for an array of products for Palm Powered devices. Certicom signed a multi-year contract with Verizon to provide advanced security for a disaster recovery program that was launched after the events of September 11th. Certicom also announced key wins with wireless innovators Aether Systems, Mobile Airways, Motient, ThinAirApps, Visto, and a multi-faceted relationship with Intel. 

Trust Services: Certicom launched the MobileTrust™ PKI Express Program and other exclusive new enhancements to its complete public-key infrastructure (PKI) offering that further reduce the complexities and costs associated with PKI. Certicom's offering -- the industry's first PKI solution to extend e-business security investments to the wireless world -- continued to gain support from leading vendors, including 724 Solutions, Cysive, Funk Software, MedQuist, Motorola, VeriSign and others. 

Enterprise Application Software: Certicom started shipping movianVPN™ 2.0, the industry's first VPN solution for wireless devices using 802.11b (Wi-Fi) networks. movianVPN 2.0 adds support for leading VPN gateways by Avaya, the Hewlett-Packard Company (HP), Lucent, NetScreen and Secure Computing as well as popular handheld device platforms including Microsoft Windows Powered Handheld PC 2000 and Pocket PC, PalmOS® (3.5 and above), and Microsoft's newly launched Pocket PC 2002. In addition, Certicom announced key movianVPN bundling agreements with HP, Sierra Wireless and Palm. Certicom's movian product line continued to gain industry support and registered key wins in the Fortune 100, Government, Finance, and Healthcare sectors. 

"We were pleased with the activity last quarter that enabled us to return to sequential revenue growth, even with over 75% of our software licenses coming in subscriptions," said Robert Williams, leader of the Office of the President. "Our strategy of enhancing our cryptographic toolkit portfolio with protocol toolkits and application-level products continues to gain traction. Now that there are signs of renewed growth in the wireless world, we believe that the opportunities for our complete range of offerings will continue to expand," Williams concluded. 

Q3 FY 2002 Outlook
The following statements are forward looking, and actual results may differ materially. Please consult the Company's recent disclosures (including its most recent Form 10-K) on file with the Securities and Exchange Commission (SEC) and the Ontario Securities Commission (OSC) for a further discussion of risks. 

  • Revenue in Q3 FY 2002 is expected to be approximately $3.0 million.
  • Total pro forma costs of revenue and operating expenses are expected to decline from $9.7 million in Q2 to approximately $8.0 million in Q3. Operating expenses are expected to continue to decline as the cost savings anticipated from the Company's restructuring initiative announced on November 9th accrue towards the latter part of the quarter, as transitions are completed and payroll is reduced.
  • The pro forma net loss (including an estimated interest expense of $0.3 million, and excluding restructuring, non-operating, and any other non-recurring charges) is expected to decline from $7.0 million in Q2 to approximately $5.3 million in Q3, or approximately ($0.17) per share.
  • Cash and cash equivalents, short-term investments and restricted cash are expected to total approximately $17 million at the end of Q3.
  • The Company expects to achieve profitability by the end of Q2 FY 2003 (October 2002).

The targets set forth above represent the Company's expectations only as of the date of this release and should not be viewed as a statement about the Company's expectations after this date. Although this release may remain available on the Company's website, its continued availability does not indicate that the Company is reaffirming or confirming its continued validity. The Company will not report on its progress during the quarter or comment to analysts or investors on, or otherwise update, such targets until it releases its quarterly results. 

Conference Call
Certicom will host a conference call to discuss these results. All parties are invited to listen to the call. 

Topic: Q2 FY 2002 Earnings Release
Date: November 29, 2001
Time: 2:00 PM Pacific (5:00 PM Eastern)
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  1-973-694-6836 (International)
  Password "Certicom"
  (please dial in at least ten minutes prior to the scheduled start time)
Webcast: http://www.certicom.com
Replay: (Available November 29 7:00 PM Pacific to November 30 12:00 AM Pacific)
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Archive: http://www.certicom.com

About Certicom
Certicom is a leading provider of information security software and services, specializing in solutions for mobile e-business. The company's products and services are specifically designed to address the challenges imposed by a wireless data environment. Certicom's solutions incorporate its efficient encryption technology and are based on industry standards for information security that utilize public-key cryptography. Certicom's products are currently licensed to more than 200 customers including Cisco Systems, Inc., Handspring Inc., Motorola, Inc., Nortel Networks, Openwave Systems, Inc., Palm, Inc., QUALCOMM, Inc., Research In Motion Ltd., Sony International (Europe) GmbH and Verizon Communications Inc. Certicom's headquarters and worldwide sales and marketing operations are based in the Silicon Valley in Hayward. For more information, visit Certicom's Web site at http://www.certicom.com. Certicom, MobileTrust, movian and movianVPN are trademarks of Certicom Corp. All other companies and products listed herein are trademarks or registered trademarks of their respective holders. 

Except for historical information contained herein, this press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Factors that might cause a difference include, but are not limited to, those relating to the acceptance of mobile and wireless devices and the continued growth of e-commerce and m-commerce, the continued acceptance by our customers of our subscription license model, our ability to implement our restructuring initiatives and our ability to realize resulting cost savings, the increase of the demand for mutual authentication in m-commerce transactions, the acceptance of Elliptic Curve Cryptography (ECC) technology as an industry standard, the market acceptance of our principal products and sales of our customer's products, the impact of competitive products and technologies, the possibility of our products infringing patents and other intellectual property of fourth parties, and costs of product development. Certicom will not update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect Certicom's financial results is included in the documents Certicom files from time to time with the Securities and Exchange Commission and Canadian securities regulatory authorities.

For further information, please contact:

Investors and Financial Analysts Media:
Gregory M. Capitolo Lorraine Kauffman
Chief Financial Officer Corporate Communications
Certicom Corp. Certicom Corp.
(510) 780-5084 (510) 780-5417
gcapitolo@certicom.com lkauffman@certicom.com