U.S. government endorses core technology; Company achieves financial stability

Mississauga, Ontario (December 11, 2003) – Certicom Corp. (TSX: CIC), a leading provider of wireless security solutions, today announced results for the second quarter of fiscal 2004 ended October 31, 2003. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.

Certicom reported revenues of $27.6 million in the second quarter of fiscal 2004, which included $24.9 million in revenue recognized from the company’s previously reported $25 million contract with the U.S. government’s National Security Agency (NSA) for the licensing of Certicom’s intellectual property (IP). Revenues from Certicom’s core business, which exclude revenue from the NSA licensing agreement, were $2.7 million, up 4% from $2.6 million a year ago and up 20% from $2.2 million in the first quarter of fiscal 2004. This increase was primarily due to a rise in sales of security solutions to original equipment manufacturers (OEMs).

“During the quarter, our core business showed some signs of progress,” said Ian McKinnon, President and CEO. “In addition, our contract with the NSA represents a significant endorsement of Certicom’s Elliptic Curve Cryptography (ECC) technology, which creates opportunities to grow our core business while positioning Certicom to realize increasing revenue from licensing the company’s intellectual property.”

“While we are pleased with what we achieved in the quarter, market conditions remain challenging. We are working aggressively to maximize the growth potential of our core business to achieve sustained profitability.”

Financial Review
Core operating expenses, which exclude costs associated with the NSA agreement, of $2.7 million were slightly below previously provided guidance of $2.8 million to $3.1 million. This compares with operating expenses of $3.4 million in the same quarter last year, representing a 21% decrease. Second quarter core operating expenses were down 4% from first quarter 2004 operating expenses of $2.8 million, despite the negative impact of foreign exchange fluctuations. Total operating expenses, including cost of sales and excluding depreciation and amortization, were $3.9 million during the quarter. This amount included $1.2 million of incremental expenses resulting from the NSA contract.

The company’s total EBITDA* was $23.6 million for the three months ended October 31, 2003. Excluding the revenue gain and incremental expenses triggered by the NSA contract, the company’s EBITDA* loss from its core business was $53,000. This compares with an EBITDA* loss of $0.9 million for the same period a year ago and an EBITDA* loss of $0.6 million in the first quarter of fiscal 2004.

Net income on a GAAP basis for the quarter was $22.3 million, or $0.70 per share (basic) and $0.63 per diluted share, compared with a net loss of $1.7 million, or $0.05 per share (basic and diluted), in the second quarter of fiscal 2003. In the first quarter of fiscal 2004, the net loss was $1.6 million, or $0.05 per share. The company does not anticipate paying income taxes as a result of the NSA contract, as it expects this gain to be absorbed by previous years’ operating losses.

For the first six months of fiscal 2004, Certicom reported revenues of $29.8 million, which include $24.9 million in revenue recognized from the company’s NSA licensing contract. Core revenues, which exclude revenue from the NSA contract, were $4.9 million, down 17% from $5.9 million in the same period last year. Core operating expenses, which exclude costs associated with the NSA contract, decreased 23% to $5.6 million from $7.2 million a year ago. The EBITDA* loss from the company’s core business was $670,000 for the period, compared with $1.3 million in the same period last year, which represents an improvement of 49%. The company posted net income on a GAAP basis of $20.7 million, or $0.65 per share (basic) and $0.60 per diluted share for the first six months of fiscal 2004, compared with a net loss of $2.7 million, or $0.09 per share (basic and diluted), in the same period last year.

Cash and cash equivalents and restricted cash (collectively, “Cash”) totaled $5.3 million at quarter end. Cash at the end of the first quarter of fiscal 2004 was $6.8 million. The company made a $0.3 million payment for restructuring liabilities during the quarter, which represents the company’s last significant one-time restructuring payment, thereby reducing Certicom’s future cash requirements. In the third quarter, Certicom expects to receive $25 million as a result of the NSA contract.

“The NSA contract significantly improves Certicom’s financial position. Additionally, we will not need to refinance the company’s convertible debentures, which mature in August 2004,” said Hervé Séguin, Chief Financial Officer. “While this is the first profitable quarter in Certicom’s history as a result of the NSA agreement, we cannot expect to close such sizable deals in every quarter. We are working hard to capitalize on the opportunities created by the NSA contract and believe we are taking the right steps to put the company on a profitable growth path.”

During the quarter, the company implemented a foreign exchange program, which is expected to significantly reduce its exposure to Canadian/U.S. currency valuation fluctuation in future quarters.

Subsequent to quarter end, Certicom completed a CDN$15.0 million equity issue, which was oversubscribed, thereby successfully broadening its base of institutional investors. The financing resulted in net proceeds of approximately CDN$14.0 million after underwriters’ commissions and associated expenses. This is consistent with Certicom’s objective to improve its balance sheet so that it can pursue profitable growth from a strong financial foundation.

Second Quarter Operational Highlights

  • The NSA purchased non-exclusive, worldwide licensing rights to Certicom's ECC intellectual property, in a limited field of use. This $25 million contract endorses ECC as crucial technology for protecting mission critical information.
  • Signed licensing contracts with three new OEMs for Certicom’s Security Builder® developer toolkits.
  • Certicom announced that Synchrologic, a current customer, will use its Security Builder® GSE™ toolkit to build Federal Information Processing Standards (FIPS) 140-2 validated security into its products to ensure they meet stringent government security standards.
  • We signed a distribution agreement with Fujitsu Siemens Computers, a European computer company that has agreed to add movianVPN™ to its end-to-end security solutions. We are proud of this contract as it demonstrates Certicom’s ability to attract large, world-class partners.
  • Certicom launched Security Builder® Crypto™ 4.0, a security toolkit that provides FIPS-validated algorithms and support for more than 30 platforms. This new version adds support for the Microsoft® Smartphone operating system and Microsoft Windows® CE.Net 4.0 and Itanium (Linux and Windows) platforms.
  • Signed agreements with two new channel partners, including Credant Technologies, an Advantage partner who will add movianVPN to its mobile device offering.
  • Subsequent to quarter end, Certicom announced that Security Builder GSE, Certicom’s core developer toolkit for government, earned the FIPS 140-2 validation for the Palm OS 4.1 platform. This makes Security Builder GSE the first developer toolkit to provide a FIPS 140-2 validated module for use on both PC-based and multiple wireless operating systems. In June, Certicom announced FIPS 140-2 validation on Microsoft Windows and Microsoft Windows CE operating systems.
  • Subsequent to quarter end, Bluefire Security Technologies™ announced its plans to integrate Security Builder GSE, Certicom’s FIPS 140-2 validated module, into its flagship product. Bluefire can now offer new solutions that meet stringent government information security requirements.
  • Subsequent to quarter end, Certicom announced movianVPN for Pocket PC 2003. With its continued support for the latest operating systems, Microsoft Windows Mobile, Palm OS and Symbian OS, movianVPN can now be used with more than 50 handheld devices. It also interoperates with more than 13 leading VPN gateways, including those from Cisco, Netscreen and Nortel, ensuring that it fits with existing enterprise infrastructures.

Certicom no longer provides quarterly guidance for revenue and cash but continues to provide guidance for operating expenses. Third quarter fiscal 2004 operating expenses, including cost of sales, are expected to range from $2.9 million to $3.2 million. This range reflects Certicom’s commitment to investing in its business to capitalize on the NSA agreement, as well as the effects of a stronger Canadian dollar.

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 11, 2003. The call may be accessed at: 1-800-814-4861 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, priorto accessing the event. A taped rebroadcast will be available from December 11 at 7 p.m. (ET) until December 18 at 11:59 p.m. (ET). For access, please call 1-877-289-8525 or 416-640-1917 and enter the passcode 21026245#.

Consolidated Balance Sheets and Statements

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 and technologies are currently licensed to more than 300 customers including Cisco Systems, Motorola, the National Security Agency, Palm, Research In Motion, Sony Ericsson and Texas Instruments. Founded in 1985, Certicom is headquartered in Mississauga, ON, Canada, with offices in Ottawa, ON; Reston, VA; San Mateo, CA; and London, England. Visit www.certicom.com.

Certicom, Security Builder, Security Builder Crypto, Security Builder SSL, Security Builder PKI, Security Builder GSE, movianVPN, movianCrypt and movianMail are trademarks or registered trademarks of Certicom Corp. All other companies and products listed herein are trademarks or registered trademarks of their respective holders.

Forward-Looking Statements
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 the acceptance of mobile and wireless devices and the continued growth of e-commerce and m-commerce, 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 Canadian securities regulatory authorities.

The shares of the company described above have been offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States pursuant to Regulation S of the Securities Act. The shares have not been registered under the Securities Act and may not be offered or sold in the United States or to a U.S. Person absent registration or an applicable exemption from registration requirements.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering would be unlawful.

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