Increasing ECC adoption and success in licensing strategy positions company for future growth

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Highlights for the Year: 

• National Security Agency (NSA) selected Elliptic Curve Cryptography (ECC) as the exclusive key agreement and digital signature standard to secure sensitive but unclassified data within the U.S. government 
• Strong progress in product and intellectual property licensing strategy, including contracts with General Dynamics and Research In Motion
• Grew revenue 20% and improved bottom line performance 33% over last year, excluding the one-time NSA contract in fiscal 2004
• Now debt-free with a strong cash position to support growth strategy

Mississauga, Ontario (June 9, 2005) – Certicom Corp. (TSX: CIC), the authority for strong, efficient cryptography, today announced results for the fourth quarter and fiscal year 2005 ended April 30, 2005. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.
Certicom reported fourth quarter revenue for fiscal 2005 of $3.1 million compared to $2.6 million in the fourth quarter of fiscal 2004. Revenue for the year was $11.6 million compared to $9.6 million last year, excluding the NSA contract of $24.9 million. Revenue including the NSA contract totalled $34.5 million.

“Our progress in fiscal 2005 provides clear validation of Certicom’s strategy for growth,” said Ian McKinnon, President and Chief Executive Officer. “The most significant event during the year was the NSA’s selection of ECC as the exclusive key agreement and digital signature standard to secure all U.S. government sensitive but unclassified communications. This greatly expands Certicom’s potential to win licensing agreements with organizations that manufacture both commercial off the shelf (COTS) and classified products. This is a major announcement by the NSA that will drive the proliferation of ECC in the government and commercial marketplaces.”

“We concluded three contracts in the patent licensing business in fiscal 2005, including agreements with General Dynamics, Pitney Bowes and Research In Motion. In the first quarter of fiscal 2006, we signed an intellectual property license agreement with Freescale, bringing the total to four agreements since launching this business in March 2004. Our product licensing strategy is also growing and we are steadily building our recurring revenue stream,” Mr. McKinnon added. “Certicom is aggressively taking action to capitalize on the growth of ECC by expanding our sales force and launching security platforms targeted at the embedded, mobility and government markets. We are well positioned for a strong start to fiscal 2006 and are confident that we will win more strategic licensing agreements in the year ahead.”

Full Year Financial Review

Operating expenses1 for the year were $14.3 million compared to operating expenses of $13.7 million last year including the NSA contract related expenses and operating expenses of $12.0 million excluding the NSA contract related expenses. The increase in year-over-year operating expenses, excluding those related to the NSA contract, reflects the company’s increasing investment in support of the intellectual property licensing strategy. 
The company posted an EBITDA2 loss of $2.7 million, compared to a loss of $2.4 million in fiscal 2004 excluding the NSA contract. Including the NSA contract, Certicom’s EBITDA was $20.8 million last year.
The net loss on a GAAP basis for the year was $4.3 million, or $0.11 per basic and diluted share. Last year, net income including the NSA contract was $16.8 million, or $0.49 per basic share and $0.47 per diluted share. Excluding the NSA contract, the net loss2 in fiscal 2004 was $6.4 million. 
Certicom had $25.9 million in cash3 at year-end, compared to $27.5 million at January 31, 2005 and $36.5 million at April 30, 2004. 
“ During fiscal 2005 we strengthened our financial position by paying off our debt and building recurring revenues,” said Hervé Séguin, Chief Financial Officer. “With our strong cash position and debt-free balance sheet, we have the financial flexibility to capitalize on our momentum as we enter fiscal 2006.” 

Fourth Quarter Financial Review

Operating expenses1 for the fourth quarter were $4.1 million, compared to operating expenses of $3.9 million last year. Of the expenses in the fourth quarter of fiscal 2005, approximately $0.4 million was from the one-time cost of increasing the sales force and an employee year-end bonus charge. Excluding these, operating expenses were $3.7 million, in line with previously provided guidance of $3.4 to $3.7 million. 
For the quarter, the company posted an EBITDA2 loss of $1.0 million, compared to an EBITDA loss of $0.8 million in the prior year excluding the NSA contract related expenses. Including these expenses, the EBITDA loss was $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 to a net loss in the same period last year of $2.1 million, or $0.06 per basic share and diluted share. 

Fourth Quarter Operational Highlights

• The NSA announced that it has selected ECC as the exclusive key management and digital signature standard to secure sensitive but unclassified data, essentially making ECC the standard to secure all U.S. government communications. 
• Borland Software Corporation licensed Certicom’s Security Builder® SSL™ developer toolkit to ensure it has the most up-to-date and efficient security in its VisiBroker® CORBA® infrastructure solution.
• Apani Networks, a leading provider of encryption and access control solutions to secure data flows, licensed Certicom’s proven Security Builder® IPSec™ toolkit to significantly reduce development costs and accelerate time-to-market of its virtual private network product.
• Launched Certicom Security Architecture™ for Embedded, a platform that allows device manufacturers to quickly create a trusted embedded computing environment. 
• Launched the Certicom Partner Connection to partner with vendors that provide developers with solutions for embedded devices. Inaugural members of the program include Beep Science, Eracom Technologies, Freescale Semiconductor, Green Hills Software, Intel, and Texas Instruments.
• Announced a Board Support Package (BSP), Security Builder® BSP™, for Texas Instruments Incorporated’s (TI’s) OMAP™ platform.
• Announced a partnership with Beep Science, a leading provider of Open Standard digital rights management (DRM) technology, enabling Certicom to integrate and resell Beep Science’s DRM software solution. 
• To support its long-term growth strategy, Certicom has expanded its sales force. The company added new sales representatives and field engineers across offices in Europe and the United States.

Subsequent To Year End

• Certicom signed an intellectual property license agreement with Freescale Semiconductor. 
• Announced a patent licensing agreement with Pitney Bowes for Certicom’s latest digital signature scheme, the Nyberg Rueppel public-key cryptographic scheme, which offers greater protection against fraud without compromising speed.
• Certicom Security Architecture™ for Government earned FIPS 140-2 validation. The Security Builder® GSE-C™ cryptographic module enables device manufacturers and software vendors to add government-approved security to their products. It saves them from undergoing the time-consuming and costly Federal Information Processing Standards (FIPS) process.


Certicom does not provide guidance for revenue and cash, but does provide quarterly guidance for operating expenses. Operating expenses in the first quarter of fiscal 2006, including cost of sales, are expected to range from $3.6 million to $3.9 million. 
Certicom continues to work diligently to maximize the potential of its business and to build recurring revenue, and we expect to grow our market share in order to achieve sustainable, profitable growth.


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Conference Call 

Management will host a conference call to discuss Certicom’s performance for the fourth quarter and fiscal year 2005 starting at 10 a.m. (ET) (7 a.m. PT) on June 9, 2005. The call may be accessed at: 1-800-814-4859 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 June 9 at 7 p.m. (ET) until June 16 at 11:59 p.m. (ET). For access, please call 1-877-289-8525 or 416-640-1917 and enter the passcode 21126069#.

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 Unisys. 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.

For further information, please contact:

Investors and Financial Analysts:
Hervé Séguin
Chief Financial Officer 
Certicom Corp. 
(905) 501-3827

Brendan Ziolo
Director of Marketing
Certicom Corp.
(613) 254-9267
Operating expenses, EBITDA and cash as defined below are non-GAAP earnings measures that do not have standardized measures prescribed by GAAP, and therefore may not be comparable to similar measures presented by publicly traded companies.
  1. This news release contains references to operating expenses. Certicom defines operating expenses as total operating expenses plus cost of revenues and excluding depreciation and amortization and stock-based compensation.
  2. 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.
  3. This news release contains references to cash, which is defined as cash and cash equivalents, marketable securities and restricted cash.
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 fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar and other currencies, general economic conditions, 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, our ability to successfully implement our intellectual property strategy, 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.