Solid Progress in Consumer Electronics and Government Markets; Long-Term Growth Strategy on Track
Mississauga, Ontario (December 8, 2005) – Certicom Corp. (TSX: CIC) today announced results for the second quarter of fiscal year 2006 ended October 31, 2005. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.
Second quarter revenue for fiscal 2006 was $2.2 million compared to $2.6 million in the second quarter of fiscal 2005, and $3.5 million in the first quarter of fiscal 2005. The decline was primarily a result of the timing in closing anticipated contracts. Certicom is at various stages of the sales cycle for significant multi-year contracts with large, multinational corporations.
“While we’re disappointed with our second quarter results, the last three months provided evidence that our long-term strategy is on track. We had wins in both intellectual property licensing and on the product side, and made significant progress in two key vertical markets – consumer electronics and government,” said Ian McKinnon, President and Chief Executive Officer. “The contract delays that affected our revenues for the quarter are partly due to the fact that we are negotiating with more multinational companies for recurring revenues over a number of years, and these strategic agreements take longer to conclude. Our growth strategy is on track, ECC adoption is increasing, our long-term outlook is positive and we expect to conclude more contracts in the future.”
SECOND QUARTER FINANCIAL REVIEW
Operating expenses1 for the quarter were $4.1 million, in line with guidance, compared to operating expenses of $3.4 million in the same period last year. The increase in year-over-year operating expenses was due to the strengthening Canadian dollar, higher third party direct cost of sales resulting from product sales mix and the initiation of accruing a portion of annual bonus payments.
The net loss on a GAAP basis for the quarter was $2.3 million, or $0.06 per basic and diluted share, compared with a net loss of $1.0 million, or $0.03 per basic and diluted share last year.
Certicom had $22.5 million in cash2 at quarter-end, compared to $25.1 million at the end of the first quarter and $29.1 million at October 31, 2004. The Company has no debt.
“While continuing to monitor and control expenses, we are maintaining our current expense structure to ensure we have the resources to execute our long-term strategy,” said Hervé Séguin, Chief Financial Officer. “We have a debt-free balance sheet and financial strength, and are well positioned to achieve our long-term goal of sustainable, profitable growth.”
SIX MONTH FINANCIAL REVIEW
For the first six months of fiscal 2006, Certicom reported revenue of $5.7 million, compared to $5.5 million in the same period last year.
Operating expenses1 for the period were $8.0 million compared with operating expenses of $6.7 million for the first six months of fiscal 2005.
The company posted a net loss on a GAAP basis of $3.1 million or $0.08 per basic and diluted share, compared to $2.2 million, or $0.06 per basic and diluted share for the first six months of fiscal 2005.
SECOND QUARTER OPERATIONAL HIGHLIGHTS
Certicom announced it has developed a method to accelerate verification of the elliptic curve digital signatures algorithm (ECDSA). Certicom has reduced the time needed to verify these digital signatures by 40 percent, making ECDSA more efficient than open source and legacy systems.
SUBSEQUENT TO QUARTER END
Certicom earned FIPS 140-2 Validation for the Java version of Security Builder® GSE™, certifying another toolkit in its security solutions to help vendors sell into the government market. Certicom is the first company to offer FIPS 140-2-Validated (Federal Information Processing Standards) security modules in multiple programming languages that also meet the NSA’s cryptographic recommendations known as Suite B.
Realm Systems licensed Security Builder® IPSec™ to build a proven, standards-based virtual private network (VPN) into its mobile enterprise platform.
The Company launched Certicom Security for DRM, a comprehensive platform that delivers robust digital rights management (DRM) implementation for multimedia capable phones, consumer electronic devices and set-top boxes. As part of this solution, Certicom announced a partnership with Elliptic Semiconductor to offer pre-integrated hardware intellectual property cores that enable chip designers to include hardware-based security for DRM.
Certicom does not provide guidance for revenue and cash, but does provide quarterly guidance for operating expenses. Operating expenses1 in the third quarter of fiscal 2006, including cost of sales and bonus accrual, are expected to range from $3.8 million to $4.1 million.
Certicom continues to work diligently to maximize the potential of its business and to build recurring revenue. The management team expects to grow market share to achieve sustainable, profitable growth.
Management will host a conference call to discuss Certicom’s performance for the first quarter and fiscal year 2006 starting at 10 a.m. (ET) (7 a.m. PT) on December 8, 2005. The call may be accessed at: 1-800-814-4859 or 416-644-3414. 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 8 at 7 p.m. (ET) until December 15 at midnight. For access, please call 1-877-289-8525 or 416-640-1917 and enter the passcode 21163731#.
Certicom protects the value of your content, software and devices with government-approved security. Adopted by the National Security Agency (NSA) for classified and sensitive but unclassified government communications, Elliptic Curve Cryptography (ECC) provides the most security per bit of any known public-key scheme. As the undisputed leader in ECC, Certicom security offerings are currently licensed to more than 300 customers including General Dynamics, Motorola, Oracle, Research In Motion and Unisys. Founded in 1985, Certicom’s corporate offices are in Mississauga, ON, Canada with worldwide sales headquarters in Reston, VA and offices in the US, Canada and Europe. Visit www.certicom.com
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