Completes restructuring; on track for Q2 operational profitability

Mississauga, Ontario (September 4, 2002) – Certicom Corporation (TSX: CIC), a leading provider of wireless information security solutions, today announced results for the first quarter of fiscal 2003 ended July 31, 2002. This represents the first complete quarter of operation under the direction of a new management team and with an expanded sales force. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP).

“First quarter results were extremely positive, with significant year-over-year growth in revenues and disciplined cost management,” said Ian McKinnon, President and Chief Executive Officer. “At the same time, we completed our restructuring and expanded the sales force to position Certicom for profitable growth. Our world-class team is responding to increased demand for Certicom’s technology and is pursuing new market opportunities.” 

“We remain confident that the company will achieve its fiscal 2003 financial objectives,” added Hervé Séguin, Chief Financial Officer. “Our cash position is higher than expected, which gives us the flexibility to continue executing our growth strategy. We are on track to achieve EBITDA profitability in the second quarter as well as for the full year and expect to generate modest cash from operations in the second half of the fiscal year.”

First Quarter Financial Review
Certicom reported revenues of US$3.3 million in the first quarter of fiscal 2003, a year- over-year increase of 32 per cent compared with US$2.5 million a year ago. This increase is due primarily to contract wins with new and existing customers as well as the balance achieved between subscription and perpetual licenses. Previous revenue guidance for the first quarter was US$3.5 million. The shortfall in first quarter revenues reflects the time required to ramp up restructured operations and the expanded sales team, as well as general seasonal fluctuations in Certicom’s business.

Operating expenses, including cost of sales and excluding depreciation and amortization, totaled US$3.8 million during the quarter, a decrease of 72 per cent compared with US$13.7 million (excluding fiscal 2002 restructuring and goodwill impairment charges of US$18.2 million) in the same period a year ago. First quarter operating expenses, including cost of sales and excluding depreciation and amortization, were less than guidance of US$4.0 million, reflecting disciplined cost management. As a result, the company reported an EBITDA loss of US$0.4 million compared with a loss of US$11.1 million (excluding fiscal 2002 restructuring and goodwill impairment charges of US$18.2 million) a year ago.

Net loss for the quarter was US$1.1 million, or US$0.03 per share, compared with a net loss of US$30.8 million (including fiscal 2002 restructuring and goodwill impairment charges of US$18.2 million), or US$1.00 per share, in the first quarter of fiscal 2002.

Cash and cash equivalents, marketable securities and restricted cash (collectively, "Cash") totaled US$14.9 million at quarter end compared with guidance of US$13.0 million, reflecting strong financial controls initiated in the prior quarter. Cash totaled US$35.1 million in the first quarter a year ago and US$17.1 million at April 30, 2002. Given this strong cash position, coupled with management’s fiscal 2003 business plan expectations, the company does not expect to require additional financing in the foreseeable future.

During the quarter, the company delisted its common shares from Nasdaq and ceased to be a U.S. reporting issuer, an initiative that is expected to deliver an annual cost savings of US$750,000. The stock continues to trade on the TSX under the symbol CIC.

Accordingly, the company is reporting under Canadian GAAP. Going forward, the company will provide full reconciliation between U.S. GAAP and Canadian GAAP. Certicom is committed to continuing to provide complete disclosure of the highest quality. The transition to Canadian GAAP is consistent with the company’s focus on cost reduction and achieving profitability.

First Quarter Operational Highlights
Certicom continued to strengthen its competitive position in key target markets:

  • Achieved contract wins with six new customers;
  • Added new government certified products and enhanced functionality of existing developer toolkits. These products are currently being tested by select customers and are scheduled to be launched in September;
  • Certicom is developing a highly optimized native security platform for the Java 2 Platform, Micro Edition (J2ME) standard with an undisclosed company;
  • Opened a sales and marketing office in Ottawa, Ontario to give Certicom’s sales and marketing team a strong presence in one of Canada’s technology hubs and to address prospective business opportunities within the Canadian government and OEM markets; and
  • To continue to reduce operating expenses, the company relocated to a new office in London, England and is planning a mid-September move to a more modestly sized and priced California facility.

Strategic Growth Plan Starts to Show Results
A key component of Certicom’s fiscal 2003 growth strategy is to rationalize its product and service offerings. The company is focused on expanding its toolkit offerings to key OEMs in the device, application and processor segments where it has traditionally been very strong.

In an effort to accelerate growth and drive a faster and more efficient time to market, Certicom ramped up and improved the geographic distribution of its North American sales force during the quarter. The company increased the number of quota-carrying sales representatives worldwide while retaining their top sales representatives.

The company has also begun to aggressively pursue relationships with key value-added resellers (VARs) to expand the reach of its direct sales team. Certicom is currently in discussions with several security-specific VARs in North America and Europe. Subsequent to quarter end, Certicom signed reseller agreements with Ohio- based Onix Networking Corporation as well as Ameriss Corporation, located in Dallas, Texas.

Also during the quarter, Hunton Witt was appointed acting VP Sales while Fran Parscarella, VP Sales, is on medical leave. Mr. Parscarella is expected to return to his role in fiscal 2003.

“Hunton Witt brings significant depth and breadth of expertise to this role, gained through 25 years of industry experience,” said McKinnon. “Given his proven knowledge of the security industry as well as his professional network, we have confidence in his ability to expand the reach of Certicom products through sales to OEMs, within the U.S. federal government and enterprises through systems integrators (SIs) as well as value-added resellers (VARs).”

Guidance for Second Quarter of Fiscal 2003
Based on expected market conditions and projected demand, the company issues the following guidance for the second quarter of fiscal 2003:

  • Revenue is expected to grow to approximately US$4.0 million, an increase of 48% from the second quarter last year. Management expects to achieve year-over-year revenue growth in fiscal 2003.
  • Operating expenses, including cost of sales, are expected to decrease to US$3.9 million, from US $10.7 million in the second quarter last year.
  • The company expects to achieve operating profitability by the end of the second quarter (October 31, 2002), as well as on a full year basis.
  • Cash and cash equivalents, marketable securities and restricted cash are expected to total approximately US$13.0 million at quarter end. Thereafter, it is anticipated that the company will generate modest cash from operations for the balance of the fiscal year.

Conference call
Management will host a conference call to discuss Certicom’s performance and outlook, starting at 5 p.m. (ET) (2 p.m. PT), today, September 4, 2002. The call may be accessed at: 1-888-881-4892 or 416-640-4127. It will also be webcast with supporting slides and subsequently archived at: http://www.certicom.com. To listen to the webcast, participants will require Windows Media Player™ which can be downloaded via Certicom’s website, prior to accessing the event. A taped rebroadcast will be available from September 4 at 7 p.m. (ET) until September 11 at 11:59 p.m. (ET). For access, please call 1-877-289-8525 or 416-640-1917 and enter the passcode 206268.

Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheet

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 300 customers including Cisco Systems, Inc., Handspring Inc., Motorola, Inc., Texas Instruments 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 are based in Mississauga, Ontario, Canada, with offices in Ottawa, Ontario, the Washington DC area, Silicon Valley/Hayward, CA, and London, England. For more information, visit Certicom's website at http://www.certicom.com

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 our ability to successfully integrate newly-hired professionals into the management team, the ability to realize anticipated cost savings from our consolidation initiatives, the acceptance of mobile and wireless devices and the continued growth of e-commerce and m-commerce, the continued commitment to new security investments on the part of the US, Canadian and other governments and government agencies, 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:
Hervé Séguin Brendan Ziolo
Chief Financial Officer Director of Marketing
Certicom Corp. Certicom Corp.
(905) 501-3827 (613) 254-9267
hseguin@certicom.com bziolo@certicom.com