newswire.ca
Certicom Announces Q2 FY03 Results in Line With Revised Guidance
Ends quarter with new customer wins; relationships with Palm and
Microsoft; strong cash position
MISSISSAUGA, ON, Dec. 5 /CNW/ - Certicom Corp. (TSX: CIC), a leading
provider of wireless security solutions, today announced results for the
second quarter of fiscal 2003 ended October 31, 2002. All figures are in U.S.
dollars and in accordance with Canadian Generally Accepted Accounting
Principles (GAAP).
"Our second quarter revenue was affected by a challenging IT selling
environment and general economic uncertainty overall," said Ian McKinnon,
President and Chief Executive Officer. "Although we're disappointed with our
top-line performance, as far as we are aware, Certicom has not lost any
contracts to competitors. In fact, we launched new products and continued to
win new business in the wireless security arena with eight new customers. We
are currently reassessing our outlook for the remainder of this fiscal year,
but are confident we are taking the right steps to position Certicom for
sustainable, profitable growth."
"We have significantly reduced Certicom's overall cost structure and
maintained a strong cash balance, which demonstrates management's disciplined
operating approach and commitment to achieving profitability," said Hervé
Séguin, Chief Financial Officer. "As a result, we do not expect to require
additional financing in the foreseeable future. With a solid foundation and
focused strategy, Certicom is ready to capitalize on opportunities as the
market environment improves."
Second Quarter Financial Review
Certicom reported revenues of $2.6 million compared with $2.7 million in
the same quarter of fiscal 2002. Previous revised revenue guidance for the
quarter was $2.5 million to $3.0 million. Revenues have been affected
primarily by longer than expected sales cycles and generally conservative IT
spending in the private sector, which has caused a number of original
equipment manufacturers (OEMs) to delay projects. In particular, the company
experienced slower than expected sales of its traditional developer toolkit
offering as well as a decrease in demand for professional consulting services
as customers focus on conserving cash.
Operating expenses, including cost of sales and excluding depreciation
and amortization, totaled $3.4 million during the quarter, in line with
revised guidance of $3.4 million to $3.7 million. This compares with operating
expenses of $10.7 million (excluding goodwill impairment and restructuring and
other costs) in the same quarter last year, which represents a decrease of
68%.
The EBITDA (earnings before interest, taxes, depreciation and
amortization) loss for the quarter was $0.9 million compared with $8.0 million
(excluding goodwill impairment and restructuring and other costs) in the same
quarter last year, a decrease of 89%.
Net loss for the quarter was $1.7 million, or $0.05 per share, compared
with a net loss of $22.8 million, or $0.73 per share, in the same period last
year.
Cash and cash equivalents, marketable securities and restricted cash
(collectively, "Cash") totaled $12.4 million, exceeding previously revised
guidance of $11.7 million to $12.2 million. Cash totaled $17.1 million at
April 30, 2002.
Six-Month Financial Review
For the first six months of fiscal 2003, Certicom reported revenue of
$5.9 million, up 12% from $5.3 million in the same period last year. Operating
expenses, including cost of sales and excluding depreciation and amortization,
decreased 70.5% to $7.2 million from $24.4 million (excluding goodwill
impairment and restructuring and other costs) a year ago. The EBITDA loss for
the period was $1.3 million, compared with $19.1 million (excluding goodwill
impairment and restructuring and other costs) in the same period last year,
which represents a decrease of 93%. The company posted a net loss of
$2.7 million, or $0.09 per share for the first six months of fiscal 2003,
compared with a net loss of $53.6 million, or $1.72 per share, in the same
period last year.
Subsequent to quarter end, Certicom announced the termination of its
lease of the company's 68,000-square-foot Hayward, California facility,
effective November 30, 2002. Under the terms of the agreement, Certicom will
pay a total of $1.5 million, payable in installments ending on August 1, 2003.
These payments will be approximately equal to lease obligations the company
would have otherwise incurred during this period.
At October 31, 2002, the company had contractual obligations of
$5.2 million related to this lease, including $2.5 million recorded in accrued
restructuring charges. As a result of this transaction, the company will
eliminate the remaining financial legacy from previous fiscal years,
including:
- Reversal of a remaining $1-million restructuring provision recorded at
April 30, 2002 in the company's third quarter ended January 31, 2003;
- Elimination of $2.7 million in future unrecorded operating expenses
related to the lease, which was scheduled to expire in 2007;
- Elimination of $3.7 million in future cash payment obligations for the
period August 2003 to July 2007; and
- Gradual reduction of $1.2 million in restricted cash to August 2003,
thereby strengthening the company's unrestricted cash position.
In September 2002, Certicom relocated its West Coast sales organization
to more modestly sized and priced facilities in San Mateo, California, thereby
ensuring a continuing strong sales presence in the Silicon Valley.
Operational Highlights
Certicom is focused on the wireless security market, where the company
has already established a strong competitive edge. Certicom is growing its
share of this market by:
- Partnering with OEMs and developers to embed security into new and
emerging processors, operating systems (OS), devices, and applications
such as middleware;
- Selling wireless security applications through the company's expanding
value-added reseller (VAR) network to enterprises for existing devices
where security is added on rather than embedded; and
- Focusing on verticals with unique security requirements, such as
governments.
During the quarter Certicom continued to advance this strategy in a
number of ways:
- Achieved contract wins with eight new customers, including Psion
Teklogix, which has selected Certicom to integrate wireless security
into newly launched netpad(R) handheld computer. Collectively, these
wins represent one-third of total quarterly revenue.
- Launched a wireless security suite of software applications and
toolkits that meet strict government security standards. Certicom
Government Security Edition (GSE) products enable government agencies
to extend existing security polices to wireless devices.
- Introduced movianVPN 3.0, the industry's first wireless VPN client, to
support the advanced encryption standard (AES) and digital certificates
for authentication. This product enables mobile users to protect
sensitive information with the highest level of security, without
compromising the speed and flexibility of wireless devices.
- Working with Microsoft to deliver movianVPN support for the newly
launched Windows(R) Powered Smartphone OS.
- Extended relationship with Palm to provide movian support for the
Tungsten(TM) W handheld, part of Palm's new Tungsten series of mobile
professional and enterprise products.
In addition, Certicom advanced a key element of its growth strategy with
the launch of the Certicom Partner Network, which simplifies the delivery of
complete security solutions to enterprises, governments and other markets. The
company signed agreements with four new security-focused VARs and systems
integrators (SIs) in North America, the U.K. and Korea, including Boxing
Orange Ltd., Comark Inc., ReefEdge Inc., and Seoul Information Systems.
Certicom previously announced agreements with Ameriss Corp. and Onix
Networking Corp., which are both based in the U.S. Year to date, the company
has signed 10 agreements, which, collectively, further expand the global reach
of Certicom's direct sales team.
Outlook
Due to the uncertain economic outlook and currently unpredictable selling
environment, management has decided to temporarily cease providing quarterly
guidance for revenue and cash but will continue to provide guidance for
operating expenses. Third quarter operating expenses, including cost of sales,
are expected to range from $3.2 million to $3.5 million.
Mr. McKinnon continued, "Although our sales opportunities are strong,
many existing and potential customers are postponing purchases until economic
conditions improve. We are committed to resuming revenue and cash guidance as
soon as we have more certain market visibility."
"However, the current slowdown in spending in no way reflects what we
believe is the underlying demand and long-term potential of the global market
for wireless security solutions, which is forecast to grow rapidly over the
next five years. We believe that Certicom's unique value proposition and
competitive strengths will enable us to capture an increasing share of this
market going forward."
Conference Call
Management will host a conference call to discuss Certicom's performance
and outlook, starting at 5 p.m. (ET) (2 p.m. PT), today, December 5, 2002. The
call may be accessed at: 1-888-881-4892 or 416-640-4127. 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 accessing the event. A taped rebroadcast will be available from December 5
at 7 p.m. (ET) until December 12 at 11:59 p.m. (ET). For access, please call
1-877-289-8525 or 416-640-1917 and enter the passcode 222005.
About Certicom
Certicom is a leading provider of wireless security solutions, enabling
developers, governments and enterprises to add strong security to their
devices, networks and applications. Designed for constrained devices,
Certicom's patented technologies are unsurpassed in delivering the strongest
cryptography with the smallest impact on performance and usability. Certicom
products are currently licensed to more than 300 customers including Texas
Instruments, Palm, Research In Motion, Cisco Systems, Oracle and Motorola.
Founded in 1985, Certicom is headquartered in Mississauga, ON, Canada, with
offices in Ottawa, ON; Herndon, VA; San Mateo, CA; and London, England. Visit
www.certicom.com.
Certicom, Security Builder, SSL Plus, Trustpoint, WTLS Plus, movian and
movianVPN are trademarks or registered trademarks of Certicom Corp. All other
companies and products listed herein are trademarks or registered trademarks
of their respective holders.
This press release contains references to earnings before interest,
taxes, depreciation and amortization (EBITDA), which is a non-GAAP earnings
measure. Non-GAAP earnings measures do not have standardized meanings
prescribed by GAAP and therefore may not be comparable to similar measures
presented by other publicly traded companies.
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 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, the continued acceptance by our customers of our subscription
license model, our ability to implement our restructuring initiatives and our
ability to realize resulting cost savings, 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except number of shares and
per share data)
(Unaudited)
CANADIAN GAAP
Three months ended Six months ended
October 31, October 31,
2002 2001 2002 2001
--------- --------- --------- ---------
Revenues:
Product.................. $ 1,601 $ 1,052 $ 2,986 $ 2,002
Services................. 970 1,656 2,913 3,250
--------- --------- --------- ---------
Total revenues......... 2,571 2,708 5,899 5,252
Cost of revenues:
Product.................. 19 557 36 633
Services................. 513 2,021 1,303 4,504
--------- --------- --------- ---------
Total cost of revenues. 532 2,578 1,339 5,137
--------- --------- --------- ---------
Gross margin............... 2,039 130 4,560 115
Operating expenses:
Selling and marketing.... 1,322 3,546 2,767 9,156
Product development
and engineering......... 713 1,888 1,424 4,414
General and
administrative.......... 876 2,673 1,673 5,650
Depreciation and
amortization............ 425 2,331 869 4,468
Goodwill impairment...... - - - 8,653
Restructuring and
other costs............. - 12,047 - 21,580
--------- --------- --------- ---------
Total operating
expenses.............. 3,336 22,485 6,733 53,921
Loss from operations....... (1,297) (22,355) (2,173) (53,806)
Other income (expense):
Interest income.......... 64 150 153 866
Interest (expense)....... (381) (274) (738) (274)
Other income and
(expense)............... (53) (275) 36 (297)
--------- --------- --------- ---------
Total other income
(expense) (370) (399) (549) 295
--------- --------- --------- ---------
Loss before provision
for income taxes.......... (1,667) (22,754) (2,722) (53,511)
Provision for income taxes. - 45 - 45
--------- --------- --------- ---------
Net loss for the period.... (1,667) (22,799) (2,722) (53,556)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic and diluted net
loss per share............ $ (0.05) $ (0.73) $ (0.09) $ (1.72)
--------- --------- --------- ---------
--------- --------- --------- ---------
Shares used in basic and
diluted net loss per
share calculations
(in thousands)............ 31,944 31,346 31,887 31,059
--------- --------- --------- ---------
--------- --------- --------- ---------
CERTICOM CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
CANADIAN GAAP
October 31, April 30,
2002 2002
----------- -----------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents....................... $ 10,584 $ 14,632
Marketable securities........................... - 667
Accounts receivable............................. 2,442 3,295
Prepaid expenses and other assets............... 526 1,641
--------- ---------
Total current assets.......................... 13,552 20,235
Property and equipment, net....................... 2,319 3,151
Intangible assets, net............................ 1,299 1,219
Other assets...................................... 671 682
Restricted cash................................... 1,825 1,791
--------- ---------
Total assets.................................... $ 19,666 $ 27,078
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 1,310 $ 1,700
Accrued liabilities............................. 1,737 2,720
Accrued restructuring charges................... 1,457 3,494
Deferred revenue................................ 2,158 3,256
--------- ---------
Total current liabilities..................... 6,662 11,170
Other payables.................................... 573 600
Accrued restructuring charges..................... 2,285 2,877
Lease inducements................................. 315 332
Convertible debentures............................ 6,856 6,476
--------- ---------
Total liabilities............................... 16,691 21,455
Shareholders' equity:
Share capital................................... 187,431 185,960
Contributed surplus............................. 5,852 7,249
Conversion option, net of issuance costs........ 2,087 2,087
Deficit......................................... (192,395) (189,673)
--------- ---------
Total shareholders' equity.................... 2,975 5,623
--------- ---------
Total liabilities and shareholders' equity.... $ 19,666 $ 27,078
--------- ---------
--------- ---------
CERTICOM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
CANADIAN GAAP
Three months ended Six months ended
October 31, October 31,
2002 2001 2002 2001
--------- --------- --------- ---------
Cash flows from
operating activities:
Net loss................. $ (1,667) $(22,799) $ (2,722) $(53,556)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization.......... 425 2,331 869 4,468
Non-cash restructuring
costs................. - 5,205 - 13,141
Write-off of impaired
goodwill and other
intangibles........... - - - 8,653
Stock compensation
expense............... - 516 - 1,290
Non-cash interest
expense............... 204 145 342 145
Changes in operating assets
and liabilities:
Accounts receivable,
net................... (46) 1,998 853 3,764
Prepaid and other
assets................ 116 247 1,116 588
Account payable........ (62) (2,189) (390) (4,188)
Accrued liabilities.... (98) (305) (984) (651)
Accrued restructuring
payable............... (958) 5,962 (2,629) 5,962
Deferred revenue....... (382) 393 (1,098) 568
Other payables......... (26) - (26) -
--------- --------- --------- ---------
Net cash used in
operating
activities.......... (2,494) (8,496) (4,669) (19,816)
Cash flows from investing
activities:
Purchase of property
and equipment......... (49) (3,787) (57) (13,101)
Purchase of patents
and other long term
assets................ (64) (270) (129) (270)
Net sale of marketable
securities, available
for sale.............. 666 3,210 666 22,058
Increase in restricted
cash.................. (3) - (18) -
--------- --------- --------- ---------
Net cash provided by
(used in) investing
activities.......... 550 (847) 462 8,687
Cash flows from financing
activities:
Proceeds from issuance
of common stock, net.. 74 673 74 2,192
Leasehold inducements.. (9) (149) (18) (149)
Sale of convertible
debt.................. - 7,736 - 7,736
--------- --------- --------- ---------
Net cash provided by
financing
activities.......... 65 8,260 56 9,779
Effect of exchange rate
on cash and cash
equivalents............. 66 18 103 18
--------- --------- --------- ---------
Net decrease in cash
and cash equivalents.. (1,813) (1,065) (4,048) (1,332)
Cash and cash equivalents,
beginning of period..... 12,397 1,675 14,632 1,942
--------- --------- --------- ---------
Cash and cash equivalents,
end of period........... $ 10,584 $ 610 $ 10,584 $ 610
--------- --------- --------- ---------
--------- --------- --------- ---------
>>
%SEDAR: 00003865E |
