Long-term growth strategy on track

Webcast URL: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=893420

• Signed US $3.5 million contract with RIM for ECC-based intellectual property that expands use of Certicom security in BlackBerry® offerings
• Received Award for Excellence in Technology from Frost & Sullivan for work with ECC
• Increased first quarter revenue contributes to long-term growth strategy

Mississauga, Ontario (September 9, 2004) – Certicom Corp. (TSX: CIC), the authority for strong, efficient cryptography, today announced results for the first quarter of fiscal year 2005 ended July 31, 2004. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.

Certicom reported first quarter revenue for fiscal 2005 of $2.9 million, compared to $2.2 million for the same period in fiscal 2004, and $2.6 million in the fourth quarter of fiscal 2004. The increase in revenue is due primarily to increased sales in both the product and intellectual property licensing businesses.

“We are pleased with our results for the first quarter as we continue to see increased adoption of Elliptic Curve Cryptography, or ECC, in the market. This will be the long-term growth driver for our product and intellectual property licensing business,” said Ian McKinnon, President and Chief Executive Officer. “Our contract with RIM is a prime example of increasing ECC adoption.”

“Following the quarter end we achieved a key milestone with the elimination of the company’s debt in August,” added Mr. McKinnon. “The company is now debt-free, our cash position remains strong and the momentum in our intellectual property licensing businesses is continuing with incremental revenue growth expected in the second half fiscal 2005.”

First Quarter Financial Review 
Operating expenses, including cost of sales and excluding depreciation and amortization and stock-based compensation expense, were $3.3 million compared with operating expenses of $2.8 million in the same period last year. Expenses in the first quarter were in line with previously provided guidance of between $3.3 and $3.6 million for the period. The increase in year-over-year expenses reflects the company’s increasing investment in support of the intellectual property licensing strategy.

The company posted an EBITDA* loss of $0.4 million, compared with a loss of $0.6 million in the first quarter last year. In the fourth quarter of fiscal 2004 the company posted an EBITDA loss of $1.3 million.

The net loss on a GAAP basis for the quarter was $1.2 million, or $0.03 per basic and diluted share, compared with a net loss in the same period last year of $1.6 million, or $0.05 per basic and diluted share. In the fourth quarter of fiscal 2004 the company posted a net loss on a GAAP basis of $2.1 million, or $0.06 per basic and diluted share.

The Company today announced that it had adjusted its net earnings reported in its fiscal 2004 and fourth quarter earnings announcement to reflect a change in its accrued earned interest on investments. The adjustment reduced net income by $417,000 to $16.8 million, or $0.49 per share basic and $0.47 fully diluted for the 12 months ended April 30, 2004 and to a net loss of $2.1 million, or $0.06 per share basic and fully diluted for the fourth quarter ended April 30, 2004.
Certicom had $38.5 million in cash** at July 31, 2004 compared to $36.5 million at April 30, 2004 and $6.8 million at July 31, 2003. Subsequent to quarter end, Certicom disbursed CDN$13.2 million to retire fully its convertible debentures, which matured on August 30, 2004. As a result, the Company’s cash** is in excess of $27 million at August 31, 2004, “ Our strong cash position and debt-free balance sheet position us well to continue to support the execution of our long-term business strategy,” said Hervé Séguin, Chief Financial Officer.

First Quarter Operational Highlights

  • Announced Research In Motion (RIM) has licensed the Security Builder® Crypto toolkit and ECC-based intellectual property from Certicom. This agreement allows RIM to extend its existing ECC-based security from Certicom in its Blackberry® offerings. Under the agreement, RIM will pay a one-time $3.5 million intellectual property license fee in the first quarter of fiscal 2005, entitling them to deploy a fixed number of seats. Certicom will be recognizing the license revenue over three years starting in the first quarter of fiscal 2005. The agreement provides for additional revenue once RIM exceeds the pre-paid number of seats.
  • Announced that Sierra Wireless has embedded Certicom’s IPSec technology into its VoqMail™ Professional Edition (VoqMail Pro) wireless e-mail solution, offered for the new Voq Professional Phone™. As an embedded feature that supports multiple VPN gateways, the solution is designed to offer IT managers minimal administration and a better return on their existing security infrastructure investment.
  • Announced that Unisys Corporation licensed Certicom’s Security Builder toolkits to embed ECC in its document processor families. The highly optimized implementations of ECC, found in the Security Builder toolkit, enable Unisys to digitally sign over 10,000 images per minute and address the security requirements of Check 21 (Check clearing for the 21st Century Act) image exchange.
  • Announced Certicom received the 2004 Award for Excellence in Technology from Frost & Sullivan, an international market analysis and consulting firm. Certicom was recognized for its work with ECC and selection by the NSA. Founded in 1961, Frost & Sullivan is recognized as a global leader in growth consulting. Frost & Sullivan Awards are presented to companies that demonstrate excellence in their industry, commending the diligence, commitment, and innovative business strategies required to advance in the global marketplace.
  • Released Certicom CodeSign™, a standards-based code signing application for firmware. Accessed through a web browser, CodeSign enables organizations like device manufacturers, wireless service providers and cables operators to remotely distribute network firmware updates and applications without fear of the introduction of any rogue code or viruses, thereby protecting content and revenue.

Subsequent To Quarter End
On August 17, 2004 Certicom announced that David Sequino joined the company as vice president, worldwide sales. Mr. Sequino has more than 15 years of sales and business development expertise, the majority of it in the embedded systems industry, a primary focus for Certicom.

Certicom announced on August 25, 2004 that it had licensed Security Builder Crypto 4.0, its cross platform cryptographic toolkit, to Avanza Technologies to build ECC into its secure identity management product, It’sM(*)iMail. Avanza’s product generates an email address that looks and acts like a standard email address but is encrypted with security features that dictate user identification privileges.

On September 2, 2004, Certicom announced the launch of Security Builder IPSec, a cross-platform, client-side IPSec developer toolkit that will capitalize on the greater opportunities presented by the embedded virtual private network (VPN) market. Certicom will migrate its existing movianVPN product from an end-user application to Security Builder IPSec, which enables developers to quickly embed the IPSec protocol into wireless handheld devices and to secure Voice over IP. In addition to recent contracts announced with Motorola and Sierra Wireless, Certicom has recently signed a substantial licensing contract for Security Builder IPSec with a customer that cannot be disclosed for confidentiality reasons.

Certicom does not provide guidance for revenue and cash but does provide quarterly guidance for operating expenses. Second quarter fiscal 2005 operating expenses, including cost of sales, are expected to range from $3.4 million to $3.7 million.

Certicom continues to work diligently to maximize the growth potential of its business in order to achieve sustainable, profitable growth. This growth pattern may be uneven as Certicom continues to manage extended sales cycles that are incumbent with the targeting of original equipment manufacturers and independent software vendors, which embed security into their products.

Conference Call
Management will host a conference call to discuss Certicom’s performance for the first quarter of fiscal 2005 starting at 10 a.m. (ET) (7 a.m. PT) September 9, 2004. The call may be accessed at: 1-800-814-3911 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 9 at 7 p.m. (ET) until September 16 at 11:59 p.m. (ET). For access, please call 1-877-289-8525 or 416-640-1917 and enter the passcode 21092177#.

Annual General Meeting
Certicom will hold its Annual General Meeting of shareholders on Wednesday, October 13 at 10 a.m. ET at the TSX Conference Centre Auditorium located at The Exchange Tower at 130 King Street West in Toronto. The meeting will also be simulcast live at Certicom’s web site at www.certicom.com.

Consolidated Balance Sheets

Consolidated Statements Of Operations And Retained Earnings (Deficit)

Condensed Consolidated Statements Of Cash Flows

About Certicom
Certicom Corp. (TSX: CIC) is the authority for strong, efficient cryptography required by software vendors and device manufacturers to embed security in their products. Adopted by the US Government’s National Security Agency (NSA), Certicom technologies for Elliptic Curve Cryptography (ECC) provide the most security per bit of any known public key scheme, making it ideal for constrained environments. Certicom products and services are currently licensed to more than 300 customers including Motorola, Oracle, Research In Motion, Terayon, Texas Instruments and XM Radio. 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, Security Builder IPSec, 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.

*This news release contains references to earnings before interest, taxes, depreciation and amortization (EBITDA), which is defined as gross margin less selling and marketing, product development and engineering and general and administrative expenses. EBITDA is a non-GAAP earnings measure, which is used by Certicom to assess the operating performance of its ongoing business. Non-GAAP earnings measures do not have standardized meanings prescribed by GAAP and therefore may not be comparable to similar measures presented by other publicly traded companies.

US$000's Three months ended

July 31, 2004

July 31, 2003

April 30, 2004


EBITDA (loss) excluding the NSA contract




Add (subtract):      

Employee bonus triggered by the NSA contract




EBITDA (loss) including the NSA contract




Add (subtract):


Depreciation and amortization




Stock-based compensation expense




Interest expense and other income (expense), net




Net income (loss) on GAAP basis




** Cash is defined as cash and cash equivalents, marketable securities and restricted cash.

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