Company exceeds guidance for third consecutive quarter; well positioned to deliver growth and pro-forma operating profitability in FY2003 

Mississauga, Ontario (June 12, 2002) - Certicom Corp. (Nasdaq: CERT; TSX: CIC), a leading provider of wireless information security solutions, today announced results for the fourth quarter and for fiscal 2002, ended April 30, 2002. The company also announced management's fiscal 2003 growth strategy and guidance for the first quarter. All figures are in US dollars. 

"For the third consecutive quarter, results again exceeded previous guidance, with increased revenue and significantly reduced costs. We also generated more cash than expected, which gives us the financial flexibility currently required to execute our strategy," said Hervé Séguin, Certicom's Chief Financial Officer. "We are taking decisive steps that we believe will set the stage for profitable growth in the years ahead." 

In April, Certicom announced a corporate restructuring designed to reduce operating costs by one third, enhance engineering innovation and strengthen the global reach of the company's sales force in key target markets. The head office, formerly located in Hayward, California, was moved to Certicom's office in Mississauga, Ontario. Other initiatives included the appointment of a new senior management team with significant industry experience and the launch of a new sales office in Washington, DC. 

"We have entered fiscal 2003 on a strong growth path with a robust pipeline and are well positioned to win new business," said Ian McKinnon, President and CEO. "Our strategy focuses on Certicom's core competencies and is designed to expand our leadership position in information security. Most importantly, we have a world-class team fully committed to achieving revenue growth and increased market share. We are confident the company will post pro-forma operating profitability by the end of the second quarter." 

Fourth Quarter Financial Review
Certicom reported revenue of US$3.8 million compared with previous guidance of US$3.7 million. Revenue results reflect a change in the company's licensing model implemented during the first quarter of fiscal 2002. Under the company's new subscription licensing model, revenue is recognized ratably over the term of the license agreement rather than upon shipment. 

Pro forma costs and operating expenses totaled US$6.1 million compared with guidance of US$6.5 million. As a result, the company reported a pro forma net loss (excluding non-operating and restructuring charges) of US$3.0 million, or US$0.10 per share. This result reflects higher revenue and lower costs. 

On an as-reported GAAP basis (including non-operating charges of US$3.1 million in depreciation and amortization and restructuring and other charges of US$17.0 million, and goodwill impairment charges of US$8.8 million), Certicom reported a fourth quarter net loss of US$32.1 million, or US$1.01per share. 

The restructuring and other charges incurred during the quarter included:

  • Severance charges related to the reduction in staff, principally in Certicom's Hayward office;
  • The write down of assets rendered non-productive as a result of the restructuring; and
  • The provision for future estimated unrecoverable leasing and operating expenses relating to the Hayward office facility, which the company is currently in the process of vacating in favor of a more modestly sized and priced Silicon Valley sales office.

Cash and cash equivalents, restricted cash, and short-term investments ("Cash") totaled US$17.1 million at quarter end compared with guidance of at least US$13.0 million. This result reflects:

  • Higher revenue, as noted above;
  • Lower fixed costs and expenses, including the termination of the lease agreement and elimination of operating costs related to the company's 1980 Matheson Boulevard facility, located in Mississauga, Ontario;
  • Strong collections efforts; and
  • A lesser than expected cash outlay for non-staff restructuring initiatives.

With this strong cash position, the company does not expect to require additional financing in the foreseeable future. 

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

  • Opened Washington, DC office to expand the reach of its sales force and complement the existing offices in Silicon Valley/Hayward, California, London, England and Mississauga, Ontario;
  • Texas Instruments (TI) licensed Certicom security solutions for its next generation wireless platform;
  • Other industry leaders such as Lucent, NCR, Terayon and Reuters also selected Certicom security technologies;
  • Achieved key wins in the government market, including a significant contract with the Federal Aviation Administration (FAA); and
  • Expanded movian™ product line, making it one of the most comprehensive security solutions for personal digital assistants (PDAs) and next generation wireless handsets.

Fourth Quarter Operational Highlights
For fiscal 2002, Certicom reported revenue of US$12.3 million, compared with US$26.6 million last year. The variance principally reflects a change in the company's licensing model implemented during the first quarter of fiscal 2002, as noted above, along with the difficult global economic conditions over the past year. 

The company posted a pro forma net loss (excluding non-operating and restructuring charges) of US$23.2 million, or US$0.74 per share compared with US$22.1 million, or US$0.84 per share in fiscal 2001. 

On an as-reported GAAP basis, including restructuring and other charges of US$39.3 million, goodwill impairment charges of US$18.2 million and non-operating charges of US$12.8 million in depreciation and amortization, Certicom reported a net loss of US$95.8 million, or US$3.06 per share, compared with a loss of US$40.7 million, or US$1.54 per share, in the previous year. 

The restructuring and other charges incurred during the year substantially included:

  • Severance charges related to the reduction in staff;
  • The write down of assets rendered non-productive as a result of restructuring initiatives;
  • The provision for future estimated unrecoverable leasing and operating expenses commitments related to the excess office space in Hayward, California and Mississauga, Ontario.

Accordingly, Certicom has eliminated a significant amount of financial burden from previous fiscal years, resulting in a new cost structure that is in line with the company's projected revenue. 

Subsequent to year-end and after due consideration, the company has elected to delist its common shares from Nasdaq, where the shares are traded under the symbol CERT. Certicom also has made the decision to cease being a reporting company under the U.S. Securities Exchange Act of 1934, and, upon filing of the appropriate documents in accordance with applicable laws and regulations, will no longer be required to file with the SEC Form 10-K annual reports, Form 10-Q quarterly reports, Form 6-K periodic reports, and generally other periodic filings required under the 1934 Act. Both of these events are expected to occur as soon as possible and are expected to result in significant savings. The company will continue to trade on the Toronto Stock Exchange (TSX), under the symbol CIC, where the majority of the trading volume occurs today. Certicom also will continue to make its required filings with the Canadian securities regulatory authorities. 

Strategic Plan for Growth in Fiscal 2003
The company's fiscal 2003 strategy focuses strictly on Certicom's core competencies. The company believes that the plan, designed to accelerate revenue growth and deliver operating profitability, will position Certicom to expand its share of the company's traditional markets and address emerging sectors that require ultra secure and high performance cryptography. 

"We are a recognized leader in embedded security technologies and will add key functionality to address the original equipment manufacturer (OEM) market," said Mr. McKinnon. "We will continue to expand the reach of our solutions within wireless carriers and the US and Canadian federal government agencies through systems integrators (SIs) and value added resellers (VARs). This efficient approach will allow us to directly serve customers in our target sectors and regions while reaching the broadest possible global market through our partners." 


  • Certicom's direct sales force will continue to build upon its successful track record with key OEMs such as Motorola and TI. These relationships deliver significant revenue through licenses and royalties while enabling strong leverage into other accounts, thereby providing a strong growth foundation.
  • Certicom will expand its solutions business and partner with SIs to address the unique requirements of wireless service providers, where security is not plug-and-play. Certicom's expertise in this area is proven, as demonstrated by its scalable, award-winning security solution for XM Radio, the leading satellite radio service in the US.
  • Certicom will use a similar approach to address the multi-billion dollar US government market, where IT security spending is expected to double in 2002 over 2001. Certicom's patented technology is in the final stage of the U.S. federal government's certification process required to meet their stringent security standards. Certicom believes that this will uniquely position the company to be a solutions provider of choice as the government's IT security needs increase.
  • To expand the reach of the global sales team, Certicom intends to work with VARs to offer comprehensive security solutions to other markets in Europe and North America.

To support this plan, the company will:

  • Discontinue direct sales to independent end users and unprofitable markets in order to focus instead on high-value contracts;
  • Move from direct to indirect sales with the movian product line; and
  • Rationalize its product and service offerings.

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

  • Revenue is expected to grow to approximately US$3.5 million, up about 40% from the first quarter last year. However, first quarter revenue is expected to decrease slightly from the fourth quarter of fiscal 2002 as a result of temporary factors. These include the lag in first quarter activity typically experienced by companies within the industry, seasonal fluctuations in Certicom's business and the time required to ramp up restructured operations. Management expects to achieve year-over-year growth in fiscal 2003.
  • Pro forma operating expenses are expected to decline to US$4 million, from US$12.9 million in the first quarter last year. Pro forma operating expenses will also decrease sequentially by one third from the fourth quarter of fiscal 2002.
  • Cash and cash equivalents, short-term investments and restricted cash are expected to total at least US$13.0 million at quarter end, and thereafter it is anticipated that the company will generate modest cash flow from operations for the balance of the fiscal year.
  • The company expects to achieve pro-forma operating profitability (excluding restructuring, non-operating, and any other non-recurring charges) by the end of the second quarter (October 31, 2002).

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, June 12, 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/investors. 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 June 12 at 7 p.m. (ET) until June 19 at 11:59 p.m. (ET). For access, please call 1-877-289-8525 or 416-640-1917 and enter the passcode 194282.

Condensed Consolidated Statements of Operations and Balance Sheets

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