Significant growth in ECC adoption drives revenue increase of 31%

Webcast URL: click to view

Highlights for the Year:

  • Executed strategy of signing multi-year, recurring revenue contracts
  • Signed product and intellectual property Elliptic Curve Cryptography (ECC) licensing agreements with multinational companies
  • Launched new products to capitalize on high-growth markets
  • Grew revenue 31% and improved bottom line performance 26% over last year
  • Unprecedented interest in ECC drives sales opportunities

Mississauga, Ontario (June 8, 2006) – Certicom Corp. (TSX: CIC) today announced results for the fourth quarter and fiscal year 2006 ended April 30, 2006. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.

Revenue for the year was $15.1 million, an increase of 31 per cent from $11.6 million in the prior year. Fourth quarter revenue for fiscal 2006 was $5.1 million, up from $3.1 million in the fourth quarter of fiscal 2005 and from $4.4 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.

“We are pleased with our progress in both the fourth quarter and the fiscal year. We signed a number of contracts with large multinational companies, including a significant number of new design wins. We are seeing tangible evidence of market adoption of ECC worldwide, with leading companies and government agencies that are increasingly recognizing the benefits of our ECC-enabled solutions. This bodes very well for our future growth plans,” said Ian McKinnon, President and Chief Executive Officer. “In addition, Certicom is steadily expanding its market share. Our outlook is positive and we intend to build on our successes in fiscal 2007.”

Five-Year Strategic Growth Plan and Market Opportunity 
The Certicom management team and board of directors recently approved an updated strategic growth plan for the company. The plan identifies five high-growth target markets – Mobility, Government, Digital Rights Management (DRM)/Conditional Access, Sensors and Enterprise Software – which Certicom’s ECC-enabled security solutions are uniquely suited to address. Based on a combination of external and internal research, Certicom estimates the potential addressable market in these five target markets is approximately $6 billion over a five-year period.

Certicom’s five-year plan is designed to maximize market share growth in these target markets through a combination of partnerships, expanded global sales channels including recent additions in Asia Pacific and Israel, incremental investments in product development and complementary acquisitions that can add critical technologies.

“We have carefully selected markets with excellent growth potential where we believe Certicom can gain significant market share,” said Mr. McKinnon. “The addressable market is growing as requirements for security increase, and I’m pleased to report that we are seeing positive signs of growth in all five markets.”

Full Year Financial Review 
Operating expenses1 for the year were $17.0 million compared with operating expenses of $14.3 million in the prior 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 higher sales commissions related to increased revenue.

The company posted a net loss on a GAAP basis of $3.2 million or $0.08 per basic and diluted share, compared to $4.3 million, or $0.11 per basic and diluted share in fiscal 2005.

Fourth Quarter Financial Review
Operating expenses1 for the quarter were $4.9 million, in line with guidance, compared to operating expenses of $4.1 million in the same period last year. The increase in year-over-year operating expenses was due to the same reasons mentioned in the full year review.

The net loss on a GAAP basis for the quarter was $0.2 million, or $0.00 per basic and diluted share, compared with a net loss of $1.2 million, or $0.03 per basic and diluted share last year.

Certicom had $24.7 million in cash2 at year-end, compared to $25.9 million in the fourth quarter of fiscal 2005, and $21.4 million at January 31, 2006. The Company has no debt.

“Certicom not only continued to be debt-free, but we also generated a significant amount of cash in the fourth quarter,” said Hervé Séguin, Chief Financial Officer. “Our focus on a multi-year recurring revenue business model is contributing to the company’s financial strength, and we are confident that it will help us deliver sustainable, profitable growth over the long-term.” 

Fourth Quarter Operational Highlights

  • Sony-Ericsson licensed Security Builder® IPSec™ to add VPN functionality to its P990i and M600 smartphones.
  • L-3 Communications, a manufacturer of military satellite communication terminals, licensed Certicom’s ECC technology to meet emerging National Security Agency (NSA) security requirements, including Suite B.
  • 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.
  • Apriva licensed Certicom’s Security Builder® GSE™, a FIPS 140-2 cryptographic module, to strengthen security for mobile devices and meet government requirements.
  • Certicom licensed its technology to Mobile Armor to provide virtual private network (VPN) security for mobile devices. Mobile Armor is a leading provider of Enterprise Mobile Data Security.
  • Launched Certicom Security for Sensor Networks, a software module and hardware IP core that secures low-power, wireless sensor networks using ECC.
  • Launched Certicom Security for VoIP, a flexible, standard-based solution for desktop VoIP handsets and mobile VoIP devices.

Subsequent To Year End

  • GE’s security business licensed Certicom’s ECC technology.
  • Certicom partnered with IdentiPHI LLC, which will use Certicom Security Architecture™ to add a FIPS 140-2-Validated module to meet the NSA’s Suite B Cryptography recommendations.


Certicom does not provide guidance for revenue and cash, but does provide quarterly guidance for operating expenses. Operating expenses1 in the first quarter of fiscal 2007, excluding cost of sales, are expected to range from $4.6 million to $4.9 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.

Conference Call

Management will host a conference call to discuss Certicom’s performance for the fourth quarter and fiscal year 2006 starting at 10 a.m. (ET) (7 a.m. PT) on June 8, 2006. The call may be accessed at: 416-644-3417 or 1-800-814-4890. 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 the event. A taped rebroadcast will be available from June 8 at 12 p.m. (ET) until June 15 at midnight. To access the archive, please call 416-640-1917 or 1-877-289-8525 and enter the passcode 21189460#. 

Consolidated Balance Sheets

Consolidated Statements Of Operations And Retained Earnings

Condensed Consolidated Statements Of Cash Flows

About Certicom
Certicom protects the value of your content, applications 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

Certicom, Certicom Security Architecture, Certicom Trust Infrastructure, Certicom CodeSign, Certicom KeyInject, Security Builder, Security Builder API, Security Builder BSP, Security Builder Crypto, Security Builder ETS, Security Builder GSE, Security Builder IPSec, Security Builder NSE, Security Builder PKI and Security Builder SSL are trademarks or registered trademarks of Certicom Corp. All other companies and products listed herein are trademarks or registered trademarks of their respective holders.

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.

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 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.

For further information, please contact:

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

John Callahan
Director, Public Relations & Marketing Communications
Certicom Corp.
(703) 234-2357