Increasing Customer Wins Validate Growth Strategy and Long-Term Market Opportunities
Highlights:
Mississauga, Ontario (March 2, 2006) – Certicom Corp. (TSX: CIC) today announced results for the third quarter of fiscal year 2006 ended January 31, 2006. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.
Third quarter revenue for fiscal 2006 was $4.4 million, up from $3.0 million in the third quarter of fiscal 2005 and from $2.2 million in the previous quarter. The higher revenue was driven by an increase in both the number of customer wins and royalty revenue for Certicom’s products and intellectual property, including revenue from the multi-year agreement with a global manufacturer signed in December 2005.
“We are steadily increasing our customer wins and are pleased with the strong growth this quarter. We will continue to focus on two primary goals: signing multi-year recurring revenue contracts to ensure a more stable revenue pattern, and positioning Certicom to take advantage of the much larger opportunity in front of us over the long term,” said Ian McKinnon, President and Chief Executive Officer. “ECC adoption and the demand for Certicom’s industry-leading technology are growing worldwide. We continue to negotiate contracts with large multinational companies to license our products and intellectual property, with a focus on maximizing long-term profitability for our shareholders.”
THIRD QUARTER FINANCIAL REVIEW
Operating expenses1 for the quarter were $4.0 million, in line with guidance, compared to operating expenses of $3.5 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, the initiation of accruing a portion of annual bonus payments and higher sales commissions related to increased revenue.
The net earnings on a GAAP basis for the quarter were $142,000, or $0.00 per basic and diluted share, compared with a net loss of $909,000, or $0.02 per basic and diluted share last year.
Certicom had $21.4 million in cash2 at quarter-end, compared to $22.5 million at the end of the second quarter and $27.5 million at January 31, 2005. The Company has no debt.
“Given the strength of the Canadian dollar, we continue to face expense pressures due to the fact that we report in U.S. dollars but the bulk of our expenses are paid in Canadian dollars. However, by carefully controlling expenses while steadily winning more and larger customers, Certicom is on track to deliver sustainable profitability over the long term,” said Hervé Séguin, Chief Financial Officer. “We will continue to use our debt-free balance sheet and financial strength to invest judiciously in executing our growth strategy.”
NINE-MONTH FINANCIAL REVIEW
For the first nine months of fiscal 2006, Certicom reported revenue of $10.0 million, compared to $8.5 million in the same period last year.
Operating expenses1 for the period were $12.1 million compared with operating expenses of $10.2 million for the first nine months of fiscal 2005. The increase in year-over-year operating expenses was due to the same reasons mentioned in the three-month review.
The company posted a net loss on a GAAP basis of $3.0 million or $0.08 per basic and diluted share, compared to $3.1 million, or $0.08 per basic and diluted share for the first nine months of fiscal 2005.
THIRD QUARTER OPERATIONAL HIGHLIGHTS
Certicom signed a multi-year multi-million dollar agreement with a global manufacturer to license Certicom security software for select products. Under the terms of the agreement, Certicom will provide a number of Security Architecture modules to enable secure Internet connections.
Varaha Systems selected Certicom’s Security Builder® IPSec™ technology to provide security in dual-mode voice and data mobility solutions.
Realm Systems licensed Security Builder® IPSec™ to build a proven, standards-based virtual private network (VPN) into its mobile enterprise platform.
Asia-based Zeetoo Sdn Bhd (Zeetoo) licensed Certicom’s Security Builder® Crypto™ to build ECC into its financial trading and secure messaging applications.
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.
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.
SUBSEQUENT TO QUARTER END ANNOUNCEMENTS
Sony-Ericsson licensed Security Builder® IPSec™ to add VPN functionality to its P990i and M600 smartphones.
Freescale and Certicom have partnered to provide enhanced DRM security for mobile devices. The Certicom Security Architecture™ is tightly integrated with the Freescale i.MX31 processor to create a trusted platform and robust DRM.
OUTLOOK
Certicom does not provide guidance for revenue and cash, but does provide quarterly guidance for operating expenses. Operating expenses1 in the fourth quarter of fiscal 2006, including cost of sales and bonus accrual, are expected to range from $4.5 million to $4.9 million. The expected increase in fourth quarter expenses reflects a full employee bonus expense at year-end in anticipation of the Company achieving its internal fiscal 2006 corporate business objectives.
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.
CONFERENCE CALL
Management will host a conference call to discuss Certicom’s performance for the third quarter and fiscal year 2006 starting at 10 a.m. (ET) (7 a.m. PT) on March 2, 2005. The call may be accessed at: 416-644-3423 or 1-800-814-4859. 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 March 2 at 7 p.m. (ET) until March 10 at midnight. For access, please call 416-640-1917 or 1-877-289-8525 and enter the passcode 21177022#.
Condensed Consolidated Statements of Cash Flows
Condensed Consolidated Statements of Operations and Retained Earnings
ABOUT CERTICOM
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
FOOTNOTES:
Operating expenses 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.
For further information, please contact:
Investors and Financial Analysts: Media:
Hervé Séguin Wendy Moore-Bayley
Chief Financial Officer Director, Marketing
Certicom Corp. Certicom Corp.
(905) 501-3827 (613) 254-9268
hseguin@certicom.com wmoore@certicom.com