Ends quarter with new customer wins; relationships with Palm and Microsoft; strong cash position

Mississauga, Ontario (December 5, 2002) – Certicom Corp. (TSX: CIC), a leading provider of wireless security solutions, today announced results for the second quarter of fiscal 2003 ended October 31, 2002. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP).

“Our second quarter revenue was affected by a challenging IT selling environment and general economic uncertainty overall,” said Ian McKinnon, President and Chief Executive Officer. “Although we’re disappointed with our top-line performance, as far as we are aware, Certicom has not lost any contracts to competitors. In fact, we launched new products and continued to win new business in the wireless security arena with eight new customers. We are currently reassessing our outlook for the remainder of this fiscal year, but are confident we are taking the right steps to position Certicom for sustainable, profitable growth.”

“We have significantly reduced Certicom’s overall cost structure and maintained a strong cash balance, which demonstrates management’s disciplined operating approach and commitment to achieving profitability,” said Hervé Séguin, Chief Financial Officer. “As a result, we do not expect to require additional financing in the foreseeable future. With a solid foundation and focused strategy, Certicom is ready to capitalize on opportunities as the market environment improves.”

Second Quarter Financial Review

Certicom reported revenues of $2.6 million compared with $2.7 million in the same quarter of fiscal 2002. Previous revised revenue guidance for the quarter was $2.5 million to $3.0 million. Revenues have been affected primarily by longer than expected sales cycles and generally conservative IT spending in the private sector, which has caused a number of original equipment manufacturers (OEMs) to delay projects. In particular, the company experienced slower than expected sales of its traditional developer toolkit offering as well as a decrease in demand for professional consulting services as customers focus on conserving cash.

Operating expenses, including cost of sales and excluding depreciation and amortization, totaled $3.4 million during the quarter, in line with revised guidance of $3.4 million to $3.7 million. This compares with operating expenses of $10.7 million (excluding goodwill impairment and restructuring and other costs) in the same quarter last year, which represents a decrease of 68%.

The EBITDA (earnings before interest, taxes, depreciation and amortization) loss for the quarter was $0.9 million compared with $8.0 million (excluding goodwill impairment and restructuring and other costs) in the same quarter last year, a decrease of 89%.

Net loss for the quarter was $1.7 million, or $0.05 per share, compared with a net loss of $22.8 million, or $0.73 per share, in the same period last year.

Cash and cash equivalents, marketable securities and restricted cash (collectively, “Cash”) totaled $12.4 million, exceeding previously revised guidance of $11.7 million to $12.2 million. Cash totaled $17.1 million at April 30, 2002. 

Six-Month Financial Review

For the first six months of fiscal 2003, Certicom reported revenue of $5.9 million, up 12% from $5.3 million in the same period last year. Operating expenses, including cost of sales and excluding depreciation and amortization, decreased 70.5% to $7.2 million from $24.4 million (excluding goodwill impairment and restructuring and other costs) a year ago. The EBITDA loss for the period was $1.3 million, compared with $19.1 million (excluding goodwill impairment and restructuring and other costs) in the same period last year, which represents a decrease of 93%. The company posted a net loss of $2.7 million, or $0.09 per share for the first six months of fiscal 2003, compared with a net loss of $53.6 million, or $1.72 per share, in the same period last year.

Subsequent to quarter end, Certicom announced the termination of its lease of the company’s 68,000-square-foot Hayward, California facility, effective November 30, 2002. Under the terms of the agreement, Certicom will pay a total of $1.5 million, payable in installments ending on August 1, 2003. These payments will be approximately equal to lease obligations the company would have otherwise incurred during this period.

At October 31, 2002, the company had contractual obligations of $5.2 million related to this lease, including $2.5 million recorded in accrued restructuring charges. As a result of this transaction, the company will eliminate the remaining financial legacy from previous fiscal years, including:

• Reversal of a remaining $1-million restructuring provision recorded at April 30, 2002 in the company’s third quarter ended January 31, 2003;
• Elimination of $2.7 million in future unrecorded operating expenses related to the lease, which was scheduled to expire in 2007;
• Elimination of $3.7 million in future cash payment obligations for the period August 2003 to July 2007; and
• Gradual reduction of $1.2 million in restricted cash to August 2003, thereby strengthening the company’s unrestricted cash position.

In September 2002, Certicom relocated its West Coast sales organization to more modestly sized and priced facilities in San Mateo, California, thereby ensuring a continuing strong sales presence in the Silicon Valley.

Operational Highlights

Certicom is focused on the wireless security market, where the company has already established a strong competitive edge. Certicom is growing its share of this market by:

• Partnering with OEMs and developers to embed security into new and emerging processors, operating systems (OS), devices, and applications such as middleware;
• Selling wireless security applications through the company’s expanding value-added reseller (VAR) network to enterprises for existing devices where security is added on rather than embedded; and
• Focusing on verticals with unique security requirements, such as governments.

During the quarter Certicom continued to advance this strategy in a number of ways:

• Achieved contract wins with eight new customers, including Psion Teklogix, which has selected Certicom to integrate wireless security into newly launched netpad® handheld computer. Collectively, these wins represent one-third of total quarterly revenue.
• Launched a wireless security suite of software applications and toolkits that meet strict government security standards. Certicom Government Security Edition (GSE) products enable government agencies to extend existing security polices to wireless devices.
• Introduced movianVPN 3.0, the industry's first wireless VPN client, to support the advanced encryption standard (AES) and digital certificates for authentication. This product enables mobile users to protect sensitive information with the highest level of security, without compromising the speed and flexibility of wireless devices.
• Working with Microsoft to deliver movianVPN support for the newly launched Windows® Powered Smartphone OS.
• Extended relationship with Palm to provide movian support for the Tungsten ™ W handheld, part of Palm's new Tungsten series of mobile professional and enterprise products.

In addition, Certicom advanced a key element of its growth strategy with the launch of the Certicom Partner Network, which simplifies the delivery of complete security solutions to enterprises, governments and other markets. The company signed agreements with four new security-focused VARs and systems integrators (SIs) in North America, the U.K. and Korea, including Boxing Orange Ltd., Comark Inc., ReefEdge Inc., and Seoul Information Systems. Certicom previously announced agreements with Ameriss Corp. and Onix Networking Corp., which are both based in the U.S. Year to date, the company has signed 10 agreements, which, collectively, further expand the global reach of Certicom’s direct sales team.

Outlook

Due to the uncertain economic outlook and currently unpredictable selling environment, management has decided to temporarily cease providing quarterly guidance for revenue and cash but will continue to provide guidance for operating expenses. Third quarter operating expenses, including cost of sales, are expected to range from $3.2 million to $3.5 million.

Mr. McKinnon continued, “Although our sales opportunities are strong, many existing and potential customers are postponing purchases until economic conditions improve. We are committed to resuming revenue and cash guidance as soon as we have more certain market visibility.”

“However, the current slowdown in spending in no way reflects what we believe is the underlying demand and long-term potential of the global market for wireless security solutions, which is forecast to grow rapidly over the next five years. We believe that Certicom’s unique value proposition and competitive strengths will enable us to capture an increasing share of this market going forward.”

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, December 5, 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 December 5 at 7 p.m. (ET) until December 12 at 11:59 p.m. (ET). For access, please call 1-877-289-8525 or 416-640-1917 and enter the passcode 222005.

Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheet
Condensed Consolidated Statement of Cash Flows

About Certicom
Certicom is a leading provider of wireless security solutions, enabling developers, governments and enterprises to add strong security to their devices, networks and applications. Designed for constrained devices, Certicom’s patented technologies are unsurpassed in delivering the strongest cryptography with the smallest impact on performance and usability. Certicom products are currently licensed to more than 300 customers including Texas Instruments, Palm, Research In Motion, Cisco Systems, Oracle and Motorola. Founded in 1985, Certicom is headquartered in Mississauga, ON, Canada, with offices in Ottawa, ON; Herndon, VA; San Mateo, CA; and London, England. Visit www.certicom.com.

Certicom, Security Builder, SSL Plus, Trustpoint, WTLS Plus, movian and movianVPN are trademarks or registered 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 news 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 U.S., 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 Canadian securities regulatory authorities.

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