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Certicom Reports Year-end Results for Fiscal 2008

MISSISSAUGA, ON, June 4 /PRNewswire-FirstCall/ - Certicom Corp. (TSX: CIC) ("Certicom" or the "Company") today reported results for the fiscal year and fourth quarter ended April 30, 2008. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP) except where otherwise noted.

MISSISSAUGA, ON, June 4 /PRNewswire-FirstCall/ – Certicom Corp. (TSX: CIC) ("Certicom" or the "Company") today reported results for the fiscal year and fourth quarter ended April 30, 2008. 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 $16.6 million compared to $21.4 million for fiscal 2007. For the fourth quarter, revenue was $3.5 million, compared to $6.5 million in the fourth quarter of fiscal 2007.

Certicom closed a multi-year, multi-million dollar agreement with IBM on April 30, 2008. Under the terms of the agreement, the Company is entitled to an immediate first payment of $2 million and this was received in early May. In accordance with GAAP, the Company will recognize the revenue related to this payment prospectively using the subscription accounting method, in which $500,000 will be recorded in each quarter of fiscal 2009. Revenue from subsequent payment commitments from the IBM agreement will also be recognized using the subscription method.

"The IBM agreement is a clear endorsement of our IP portfolio and its underlying value, and represents a major event in accelerating the adoption of ECC in the marketplace," said Karna Gupta, Chief Executive Officer. "In addition to this endorsement, several events occurred during fiscal 2008 that further strengthened our position for future growth. These included the launch of patent infringement litigation against Sony, the signing of multiple contracts in the gaming vertical, the introduction of several innovative security solutions, and finally the completion of our three-year strategic growth plan."

Full Year Financial Review

Total operating expenses(1) for the year were $21.9 million, compared to $20.1 million in fiscal 2007. The increase was mainly due to legal expenses related to the Sony litigation. However, these expenses, which totaled $2.4 million for the year, were lower than expected. The Company posted a net loss on a GAAP basis of $10.5 million, or $0.24 per basic and diluted share for the year, compared to a net loss of $3.1 million, or $0.08 per basic and diluted share, in fiscal 2007.

The Company reports that recurring revenue for the year was $8.0 million, consistent with fiscal 2007. With the completion of the IBM agreement and other initiatives relating to the new strategic growth plan, management expects recurring revenue to increase in fiscal 2009.

Certicom had $38.5 million in cash(2) at year-end compared to $38.6 million at January 31, 2008 and $43.2 million at year-end fiscal 2007. The Company has no debt.

Fourth Quarter Financial Review

Total operating expenses(1) for the fourth quarter were $6.2 million, compared to $6.3 million for the same period last year. This included $1.1 million for expenses related to the Sony litigation and $0.3 million for one-time restructuring costs. The Sony litigation expenses were higher than the guidance given last quarter due to the timing of legal activities as the case progresses. Excluding the Sony litigation expenses and the one-time restructuring costs, total operating expenses for the fourth quarter were within the guidance given last quarter.

The Company posted a net loss on a GAAP basis of $4.1 million for the quarter, or $0.09 per basic and diluted share, compared to a net loss of $1.2 million, or $0.03 per basic and diluted share for the same period last year.

Outlook: A New Strategic Direction

Management has completed Certicom's new three-year strategic growth plan and will be addressing several strategic priorities that build on the Company's current strengths in patent position, brand recognition, human capital and technology development. Of these strategic priorities, Certicom has identified the following four as the most critical:

1. Aggressively transitioning from toolkits to complete security solutions for solving specific business problems 2. Sharpening focus on more defined market verticals: Consumer Electronics/Mobility, Semiconductors, Energy/Utilities, Gaming and Defense/Aerospace 3. Increasing international market presence in high potential geographic areas 4. Aggressively improving the efficiencies of the Company's underlying cost structure

"We secured 25 design wins during the year, which reflects the continued momentum in the adoption of Certicom's technology," said Mr. Gupta. "However, I will point out that our new focus is less on the quantity of annual design wins and more on the long term revenue potential of each design win. This is consistent with our new strategic direction, which calls for greater concentration on securing high value contracts based on comprehensive security solutions. I am pleased to advise you that we are currently working with several marquee global accounts in addition to the IBM and Micronas agreements that we recently closed."

Mr. Gupta continued, "Our recent design wins for complete security solutions in gaming, semiconductor manufacturing and utilities demonstrate the headway we're making in the transition from toolkits to total solutions, and we look forward to continuing progress towards this and our other strategic priorities in fiscal 2009. Our commitment to these strategic priorities will provide a solid basis for achieving our ultimate goal of sustainable, profitable growth for shareholders."

Operating expenses(1) for the first quarter of fiscal 2009, excluding expenses related to the Sony litigation, cost of revenue, depreciation and amortization, and stock-based compensation, are expected to range from $4.7 to $5.0 million. The expenses related to the Sony litigation for the quarter are expected to be approximately $1.5 million.

Sony Patent Infringement Litigation

Certicom continues to progress through the broad discovery phase of the Sony litigation case, which requires both parties to provide specific documentation. As stated previously, the claims construction hearing of the litigation case (known as a Markman hearing) has been set for June 11, 2009 and the trial date has been set for September 8, 2009. The Company remains confident of its legal position and ability to pursue this litigation to a successful conclusion.

Conference Call ————————————————————————- Conference Call and Webcast June 5 2008, 10 a.m. ET (7 a.m. PT) ————————————————————————- Participant Numbers 416-644-3414 or 1-800-733-7560 ————————————————————————-

The conference call will be webcast live with supporting slides and subsequently archived at www.certicom.com. To listen to the webcast, participants will require Windows Media Player(TM) which can be downloaded from Certicom's website prior to the event. An archived recording will be available from 12 p.m. (ET) on June 5 until 12 a.m. (ET) on June 12, 2008. To access the archive, please call 416-640-1917 or 1-877-289-8525 and enter passcode 21271281 followed by the number sign.

Annual General Meeting of Shareholders

Certicom will hold its Annual General Meeting of shareholders on Wednesday, September 24, 2008 at 10 a.m. ET at The Gallery of the TSX Broadcast & Conference Centre located at The Exchange Tower, 130 King Street West in Toronto. The audio of the meeting will also be simulcast live at Certicom's web site at www.certicom.com.

About Certicom

Certicom manages and protects the value of content, applications and devices with government-approved security. Adopted by the National Security Agency (NSA) for government communications, Elliptic Curve Cryptography (ECC) provides the most security per bit of any known public-key scheme. As the global leader in ECC, Certicom's security offerings are currently licensed to hundreds of multinational technology companies, including IBM, General Dynamics, Motorola, Oracle and Research In Motion. Founded in 1985, Certicom's corporate offices are in Mississauga, Ontario, Canada with worldwide sales and marketing headquarters in Reston, Virginia and offices in Europe and Asia. 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. Information subject to change.

ENDNOTES: ——— (1) This news release contains references to operating expenses. Certicom defines operating expenses as total operating expenses excluding cost of revenues, depreciation and amortization and stock-based compensation. It also excludes interest income, other income (expense) and withholding tax expense. ——————— ——————— Three months ended Twelve months ended —————— ——————- April 30, April 30, 2008 2007 2008 2007 ——————— ——————— Sales and marketing $ 1,738 $ 2,635 $ 7,688 $ 9,211 Product development and engineering 1,802 1,878 6,964 6,213 General and administrative 2,611 1,813 7,294 4,686 ——————— ——————— Total operating expenses $ 6,151 $ 6,326 $ 21,946 $ 20,110 ——————— ——————— ——————— ——————— (2) This news release contains references to cash, which is defined as cash and cash equivalents, short term and long term marketable securities and restricted cash. April 30, 2008 April 30, 2007 Cash and cash equivalents $ 1,641 $ 3,397 Marketable securities 25,980 26,752 Long-term marketable securities 10,832 13,013 —————————— Total Cash $ 38,453 $ 43,162 ——————————

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Forward-looking information includes information concerning the Company's future financial performance, business strategy, plans, goals and objectives. When used in such documents, the words "plans", "expects", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "will", "believes" or variations of such words and phrases often, but not always, identify forward looking statements. Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits; the ability of the Company to develop, promote and protect its proprietary technology security breaches or defects in the Company's products; competitive conditions in the businesses in which the Company participates; changes in consumer spending; the outcome of legal proceedings as they arise; general economic conditions and normal business uncertainty; consolidation in the Company's industry and by its customers; customer preferences towards product offerings; the risk that customers may cancel their contracts with the Company; reliance on a limited number of customers; demand for ECC-based technology; performance of the Company's management team and the Company's ability to attract and retain skilled employees; operating the Company's business profitably; fluctuations in revenue and foreign currency exchange rates; interest rate fluctuations and other changes in borrowing costs; the ability to develop and maintain strategic relationships; and other factors identified under the heading "Risk Factors" in the Company's annual information form dated July 26, 2007 and filed on SEDAR at www.sedar.com.

While the Company believes that its forecasts and assumptions are reasonable, results or events predicted in this forward-looking information may differ materially from actual results or events. In particular but without limitation, there is no assurance that the Company will achieve all or a portion of the goals outlined in its three year strategic growth plan within the time limits specified therein or at all.

CERTICOM CORP. CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars) April 30, 2008 2007 ———- ———- ASSETS Current assets: Cash and cash equivalents…………………… $ 1,641 $ 3,397 Marketable securities………………………. 25,980 26,752 Accounts receivable, net……………………. 5,426 6,008 Unbilled receivables……………………….. 503 559 Prepaid expenses and other current assets…….. 659 758 ———- ———- Total current assets……………………… 34,209 37,474 Long-term marketable securities……………….. 10,832 13,013 Property and equipment, net…………………… 1,173 1,250 Patents, net………………………………… 2,776 2,222 Other assets………………………………… 24 24 ———- ———- Total assets…………………………….. $ 49,014 $ 53,983 ———- ———- ———- ———- LIABILITIES Current liabilities: Accounts payable…………………………… $ 2,255 $ 2,170 Accrued liabilities………………………… 2,332 2,878 Deferred revenue…………………………… 5,123 3,378 Obligation under capital lease………………. 17 – Current portion of lease inducements…………. 52 52 ———- ———- Total current liabilities…………………. 9,779 8,478 Other long-term payables……………………… 718 491 Obligation under capital lease, long-term………. 30 – Lease inducements, net of current portion………. 35 87 ———- ———- Total liabilities………………………… 10,562 9,056 SHAREHOLDERS' EQUITY Share capital……………………………… 38,624 36,514 Contributed surplus………………………… 9,021 7,044 Retained earnings (deficit)…………………. (9,131) 1,369 Accumulated other comprehensive loss…………. (62) – ———- ———- Total shareholders' equity………………… 38,452 44,927 ———- ———- Total liabilities and shareholders' equity….. $ 49,014 $ 53,983 ———- ———- ———- ———- CERTICOM CORP. CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS ———————————————————– (In thousands of U.S. dollars, except number of shares and per share data) Years ended April 30, ——————————– 2008 2007 2006 ———- ———- ———- Revenues………………………….. $ 16,615 $ 21,353 $ 15,135 ———- ———- ———- Costs and expenses: Cost of product and intellectual property sales………………….. 18 207 126 Cost of services…………………. 3,301 2,614 1,648 Sales and marketing………………. 7,688 9,211 7,017 Product development and engineering… 6,964 6,213 4,873 General and administrative………… 7,294 4,686 3,315 Depreciation of property and equipment…………………… 827 703 570 Amortization of patents…………… 389 428 400 Stock-based compensation………….. 2,293 1,742 1,030 ———- ———- ———- Total costs and expenses………… 28,774 25,804 18,979 ———- ———- ———- Loss from operations……………….. (12,159) (4,451) (3,844) Other income (expense): Interest income………………….. 1,846 1,814 766 Interest expense and other income, net……………….. 57 (22) (76) ———- ———- ———- Total other income……………… 1,903 1,792 690 ———- ———- ———- Loss before income taxes……………. (10,256) (2,659) (3,154) Income tax expense…………………. 244 474 – ———- ———- ———- Net loss for the year………………. (10,500) (3,133) (3,154) Retained earnings, beginning of year…. 1,369 4,502 7,656 ———- ———- ———- Retained earnings (deficit), end of year………………………. $ (9,131) $ 1,369 $ 4,502 ———- ———- ———- ———- ———- ———- Basic and diluted net loss per common share……………………… $ (0.24) $ (0.08) $ (0.08) ———- ———- ———- ———- ———- ———- Weighted average shares used in computing basic and diluted net loss per common share (000's)…………… 43,544 41,453 38,162 ———- ———- ———- ———- ———- ———- CERTICOM CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE GAIN (LOSS) (In thousands of U.S. dollars) Years ended April 30, ——————————– 2008 2007 2006 ———- ———- ———- Net loss for the period…………….. $(10,500) $ (3,133) $ (3,154) Other comprehensive income: Net unrealized loss on derivatives designated as cash flow hedges……. (402) – – ———- ———- ———- Comprehensive loss…………………. $(10,902) $ (3,133) $ (3,154) ———- ———- ———- ———- ———- ———- CERTICOM CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) Years ended April 30, ——————————– 2008 2007 2006 ———- ———- ———- Cash provided by (used in): Operating activities: Net loss for the year…………….. $(10,500) $ (3,133) $ (3,154) Items not affecting cash: Depreciation of property and equipment…………………. 827 703 570 Amortization of patents…………. 389 428 400 Stock-based compensation………… 2,293 1,742 1,030 Amortization of lease inducements… (52) (52) (63) Net change in non-cash operating working capital…………………. 2,233 (2,056) 365 ———- ———- ———- Net cash used in operating activities……………………. (4,810) (2,368) (852) Investing activities: Purchase of property and equipment…. (750) (874) (475) Purchase of patents………………. (942) (762) (660) Maturity (purchase) of marketable securities, net…………………. 2,953 (17,062) (154) Decrease in restricted cash……….. – – 617 ———- ———- ———- Net cash provided by (used in) investing activities…………… 1,261 (18,698) (672) Financing activities: Proceeds from issuance of common stock, net……………….. 2,100 22,419 872 Common shares repurchased…………. (306) – – ———- ———- ———- Net cash provided by financing activities……………………. 1,794 22,419 872 Effect of exchange rate on cash and cash equivalents………………….. (1) – 9 ———- ———- ———- Increase (decrease) in cash and cash equivalents………………….. (1,756) 1,353 (643) Cash and cash equivalents, beginning of year…………………. 3,397 2,044 2,687 ———- ———- ———- Cash and cash equivalents, end of year………………………. $ 1,641 $ 3,397 $ 2,044 ———- ———- ———- ———- ———- ———-

SOURCE Certicom Corp.

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