Certicom Reports Year-End Results for Fiscal 2006
Thursday June 8, 6:00 am ET
Significant growth in ECC adoption drives revenue increase of 31%
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, ON, June 8 /CNW/ - Certicom Corp. (TSX: CIC - News) 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 expenses(1) 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 expenses(1) 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 cash(2) 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(R) IPSec(TM) 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(TM) is tightly
integrated with the Freescale i.MX31 processor to create a trusted
platform and robust DRM.
- Apriva licensed Certicom's Security Builder(R) GSE(TM), 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 Announcements
- GE's security business licensed Certicom's ECC technology.
- Certicom partnered with IdentiPHI LLC, which will use Certicom
Security Architecture(TM) to add a FIPS 140-2-Validated module to meet
the NSA's Suite B Cryptography recommendations.
Outlook
Certicom does not provide guidance for revenue and cash, but does provide quarterly guidance for operating expenses. Operating expenses(1) 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 certicom.com. To listen to the webcast, participants will require Windows Media Player(TM) 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 followed by the number sign.
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. Information subject to change.
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.
(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.
CERTICOM CORP.
AUDITED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
CANADIAN GAAP
April 30, April 30,
2006 2005
---------------------
(Audited)
ASSETS
Current assets:
Cash and cash equivalents ........................ $ 2,044 $ 2,687
Marketable securities ............................ 22,703 22,549
Restricted cash .................................. - 617
Accounts receivable, net ......................... 2,729 1,933
Unbilled receivables ............................. 287 384
Prepaid expenses and other current assets ........ 657 526
---------- ----------
Total current assets ........................... 28,420 28,696
Property and equipment, net ........................ 1,079 1,187
Patents, net ....................................... 1,888 1,628
Other assets ....................................... 176 528
---------- ----------
Total assets ................................... $ 31,563 $ 32,039
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 1,118 $ 760
Accrued liabilities .............................. 2,253 1,392
Deferred revenue ................................. 3,599 3,832
Current portion of lease inducements ............. 52 63
---------- ----------
Total current liabilities ...................... 7,022 6,047
Other long-term payables ........................... 503 647
Lease inducements .................................. 139 191
---------- ----------
Total liabilities .............................. 7,664 6,885
Shareholders' equity:
Share capital .................................... 14,031 13,045
Contributed surplus .............................. 5,366 4,453
Retained earnings ................................ 4,502 7,656
---------- ----------
Total shareholders' equity ..................... 23,899 25,154
---------- ----------
Total liabilities and shareholders' equity ..... $ 31,563 $ 32,039
---------- ----------
---------- ----------
CERTICOM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(In thousands of U.S. dollars,
except number of shares and per share data)
CANADIAN GAAP Three months ended Year ended
April 30, April 30,
2006 2005 2006 2005
--------------------- ---------------------
Unaudited Audited
--------- -------
Revenues:
Product and intellectual
property .................. $ 3,610 $ 1,991 $ 10,871 $ 7,611
Services .................. 1,500 1,103 4,264 3,939
---------- ---------- ---------- ----------
Total revenues ........... 5,110 3,094 15,135 11,550
Cost of revenues:
Product and intellectual
property .................. (91) 17 126 70
Services ................... 511 356 1,648 1,269
---------- ---------- ---------- ----------
Total cost of revenues ... 420 373 1,774 1,339
---------- ---------- ---------- ----------
Gross margin ................. 4,690 2,721 13,361 10,211
Operating expenses:
Sales and marketing ........ 1,965 1,853 7,017 6,466
Product development and
engineering ............... 1,515 1,220 4,873 3,772
General and administrative . 1,017 609 3,315 2,711
Depreciation and
amortization .............. 265 245 970 751
Stock-based compensation ... 291 211 1,030 611
---------- ---------- ---------- ----------
Total operating expenses . 5,053 4,138 17,205 14,311
---------- ---------- ---------- ----------
Loss from operations ......... (363) (1,417) (3,844) (4,100)
Other income (expense):
Interest income ............ 199 300 766 584
Interest and other income
(expense), net ............ (3) (54) (76) (758)
---------- ---------- ---------- ----------
Total other income
(expense)................ 196 246 690 (174)
---------- ---------- ---------- ----------
Loss before provision for
income taxes................. (167) (1,171) (3,154) (4,274)
Provision for income taxes . - - - -
---------- ---------- ---------- ----------
Net loss for the period ...... $ (167) $ (1,171) $ (3,154) $ (4,274)
Retained earnings, beginning
of period ................... 4,669 8,827 7,656 11,930
---------- ---------- ---------- ----------
Retained earnings, end of
period ...................... $ 4,502 $ 7,656 $ 4,502 $ 7,656
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic and diluted net loss
per share ................... $ - $ (0.03) $ (0.08) $ (0.11)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Shares used in basic and
diluted net loss per share
calculations (000s) ......... 38,376 37,882 38,162 37,774
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
CERTICOM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
CANADIAN GAAP Three months ended Year ended
April 30, April 30,
2006 2005 2006 2005
--------------------- ---------------------
Unaudited Audited
--------- -------
Cash flows from operating
activities:
Net loss ................... $ (167) $ (1,171) $ (3,154) $ (4,274)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating
activities:
Depreciation and
amortization ............ 265 245 970 751
Stock-based compensation 291 211 1,030 611
Non-cash interest expense - - - 483
Foreign exchange loss on
convertible debentures .. - - - 391
Lease inducements ........ (13) (5) (63) (20)
Changes in operating
assets and liabilities:
Accounts receivable and
unbilled receivables,
net ................... 1,633 (172) (701) 150
Prepaid expenses and
other assets .......... 157 300 40 152
Account payable ........ 481 247 358 317
Accrued liabilities .... 682 134 1,045 (526)
Deferred revenue ....... 89 (1,135) (233) 2,479
Other payables ......... (13) (18) (144) (131)
---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities .......... 3,405 (1,364) (852) 383
Cash flows from investing
activities:
Purchase of property
and equipment ........... (47) (166) (475) (642)
Purchase of patents ...... (308) (215) (660) (712)
Net maturity (purchase) of
marketable securities ... (7,841) 943 (154) 8,341
Decrease in restricted
cash .................... 1 9 617 51
---------- ---------- ---------- ----------
Net cash provided by
(used in) investing
activities ............ (8,195) 571 (672) 7,038
Cash flows from financing
activities:
Proceeds from issuance of
common stock, net ....... 257 71 872 337
Repayment of convertible
debentures .............. - - - (10,005)
---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities .............. 257 71 872 (9,668)
Effect of exchange rate on
cash and cash equivalents . (7) (4) 9 (12)
---------- ---------- ---------- ----------
Net decrease in cash and
cash equivalents .......... (4,540) (726) (643) (2,259)
Cash and cash equivalents,
beginning of period ....... 6,584 3,413 2,687 4,946
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period ............. $ 2,044 $ 2,687 $ 2,044 $ 2,687
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
For further information
Investors and Financial Analysts: Hervé Séguin, Chief Financial Officer, Certicom Corp., (905) 501-3827, hseguin@certicom.com
Media: John Callahan, Director, Public Relations & Marketing Communications, Certicom Corp., (703) 234-2357, jcallahan@certicom.com
Source: Certicom Corp. |
