Certicom Reports Results for First Quarter of Fiscal 2009



    
    Results indicate early progress in build phase of new strategic direction

    Highlights for the Quarter:

    -   Micronas licensed Certicom's KeyInject solution for securing silicon
        chips in consumer electronics

    -   Certicom launched device authentication service for ZigBee Smart
        Energy to secure wireless data communications and authenticate smart
        meter devices

    -   Qualcomm Inc. announced the use of Certicom's advanced cryptographic
        modules to achieve Suite B compliance for BREW

    -   ClearCommerce Corporation, a Fidelity National Information Services
        company, selected Certicom's ECC technology to support secure payment
        processing

    -   Tumbleweed Communications Corp. announced the use of Certicom's
        Security Builder(R) family of solutions

    Subsequent to Quarter-End:

    -   Daintree Networks licensed Certicom's Security Builder technology for
        the development of secure ZigBee Smart Energy networking products
    

    MISSISSAUGA, ON, Sept. 3 /CNW/ - Certicom Corp. (TSX: CIC) (the
"Company") today reported results for the first quarter of fiscal 2009 ended
July 31, 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 quarter was $4.2 million compared to $3.2 million for the
first quarter of fiscal 2008.
    "Certicom has embarked on its new strategic direction and has completed
the first quarter of its 12-quarter strategic plan. This quarter's results are
consistent with this transition phase, in which we continue to focus on the
most promising market verticals," said Karna Gupta, Chief Executive Officer.
"A prime example of this is our work in the emerging area of advanced metering
infrastructure in the Energy and Utilities vertical, in which we have secured
a contract win with Daintree Networks, a leading provider of analysis tools
for wireless smart metering. Another example is the progress we're making in
the growing field of satellite-based content management in the Consumer
Electronics and Mobility vertical, in which we have established relationships
with dominant players XM Radio, WorldSpace and Ondas."
    Mr. Gupta added, "We continue to develop total security solutions by
leveraging our core strengths; namely our proven technology, ECC leadership
position, brand recognition and highly skilled human resources. Our recent
wins stand as significant proof points of our strategic focus and represent
important initial steps towards our ultimate goal of sustainable, profitable
growth."

    First Quarter Financial Review

    Operating expenses(1) for the quarter were $6.2 million, compared to
$5.7 million in the first quarter of fiscal 2008. Excluding expenses for the
Sony litigation case, operating expenses were $5.2 million, in line with the
same period in fiscal 2008 and slightly higher than the expense guidance of
$5.0 million. The higher expenses were mainly attributable to investments in
accelerated product development spending and the enhancement of Certicom's
customer service infrastructure. The Sony litigation costs were $1.0 million
compared to $0.4 million in the same quarter of fiscal 2008 and the expense
guidance of $1.5 million. The actual expenses were lower than the guidance
primarily due to the timing of legal services rendered.
    The Company posted a net loss on a GAAP basis of $3.4 million or $0.08
per basic and diluted share for the quarter, consistent with the net loss of
$3.4 million and $0.08 per basic and diluted share in the first quarter of
fiscal 2008.
    Certicom had $37.6 million in cash(2) at quarter-end compared to $38.5
million at year-end fiscal 2008. The Company has no debt.

    Outlook

    "Certicom is making headway on its new three-year plan," said Mr. Gupta.
"We expect to report more contract wins and improved cost efficiencies that
are consistent with our new strategic direction as we progress through fiscal
2009."
    Operating expenses(1) for the second 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
$4.8 million to $5.2 million. The expenses related to the Sony litigation for
the quarter are expected to be approximately $1.7 million.

    Sony Patent Infringement Litigation

    Certicom continues to progress through the discovery phase of the Sony
litigation, which requires both parties to provide requested documentation,
including software code, to conduct depositions, and to exchange specific
information. 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      September 4 2008, 10 a.m. ET (7 a.m. PT)
    -------------------------------------------------------------------------
    Participant Numbers              416-644-3417 or 1-800-733-7571
    -------------------------------------------------------------------------
    

    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 September 4 until 12 a.m. (ET) on September 11,
2008. To access the archive, please call 416-640-1917 or 1-877-289-8525 and
enter passcode 21276301 followed by the number sign.

    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
                                                      ------------------
                                                           July 31,
                                                          2008          2007
                                                 ----------------------------
    Sales and marketing                           $      2,122  $      2,199
    Product development and engineering                  1,998         1,849
    General and administrative                           2,127         1,615
                                                 -------------- -------------
    Total operating expenses                      $      6,247  $      5,663
                                                 -------------- -------------
    Less: Litigation                                    (1,065)         (427)
                                                 -------------- -------------
    Total operating expenses excluding
     litigation                                   $      5,182  $      5,236
                                                 -------------- -------------
                                                 -------------- -------------

    (2) This news release contains references to cash, which is defined as
        cash and cash equivalents and short term and long term marketable
        securities.

                                                       July 31,     April 30,
                                                          2008          2008

    Cash and cash equivalents                     $      8,203  $      1,641
    Marketable securities                               23,178        25,980
    Long-term marketable securities                      6,233        10,832
                                                 ----------------------------
    Total Cash                                    $     37,614  $     38,453
                                                 ----------------------------



                               CERTICOM CORP.
                               --------------
                         CONSOLIDATED BALANCE SHEETS
                       (In thousands of U.S. dollars)

    CANADIAN GAAP                                      July 31,     April 30,
                                                          2008          2008
                                                  ------------- -------------
                                                    (Unaudited)     (Audited)
    ASSETS

    Current assets:
      Cash and cash equivalents.................  $      8,203  $      1,641
      Marketable securities.....................        23,178        25,980
      Accounts receivable, net..................         2,377         5,426
      Unbilled receivables......................           760           503
      Prepaid expenses and other current
       assets...................................           774           659
                                                  ------------- -------------
        Total current assets....................        35,292        34,209

    Long-term marketable securities.............         6,233        10,832
    Property and equipment, net.................         1,088         1,173
    Patents, net................................         2,883         2,776
    Other assets................................            24            24
                                                  ------------- -------------
      Total assets..............................  $     45,520  $     49,014
                                                  ------------- -------------
                                                  ------------- -------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Accounts payable..........................  $      2,209  $      2,255
      Accrued liabilities.......................         1,914         2,332
      Deferred revenue..........................         5,208         5,123
      Obligation under capital lease............            15            17
      Current portion of lease inducements......            52            52
                                                  ------------- -------------
        Total current liabilities...............         9,398         9,779

    Other long-term payables....................           718           718
    Obligation under capital lease, long-term...            25            30
    Lease inducements, net of current portion...            22            35
                                                  ------------- -------------
      Total liabilities.........................        10,163        10,562

    Shareholders' equity:
      Share capital.............................        38,630        38,624
      Contributed surplus.......................         9,617         9,021
      Retained deficit..........................       (12,509)       (9,131)
      Accumulated other comprehensive loss......          (381)          (62)
                                                  ------------- -------------
        Total shareholders' equity..............        35,357        38,452
                                                  ------------- -------------
        Total liabilities and shareholders'
         equity.................................  $     45,520  $     49,014
                                                  ------------- -------------
                                                  ------------- -------------



                               CERTICOM CORP.
                               --------------
    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS AND DEFICIT
    (In thousands of U.S. dollars, except number of shares and per share
                                    data)
                                 (Unaudited)

    CANADIAN GAAP                                 Three months ended July 31,
                                                          2008          2007
                                                  ------------- -------------
    Revenues:
      Product and intellectual property.........  $      2,348  $      1,413
      Services..................................         1,847         1,795
                                                  ------------- -------------
        Total revenues..........................         4,195         3,208

    Cost of revenues:
      Product and intellectual property.........            36            12
      Services..................................           752           606
                                                  ------------- -------------
        Total cost of revenues..................           788           618

                                                  ------------- -------------
    Gross margin................................         3,407         2,590

    Operating expenses:
      Sales and marketing.......................         2,122         2,199
      Product development and engineering.......         1,998         1,849
      General and administrative................         2,127         1,615
      Depreciation and amortization.............           294           308
      Stock-based compensation..................           595           534
                                                  ------------- -------------
        Total operating expenses................         7,136         6,505

                                                  ------------- -------------
    Loss from operations........................        (3,729)       (3,915)

    Other income:
      Interest income...........................           393           524
      Interest expense and other income (expense),
       net......................................           (32)           33
                                                  ------------- -------------
        Total other income                                 361           557

                                                  ------------- -------------
    Loss before provision for income taxes......        (3,368)       (3,358)
      Provision for income taxes................            10            16
                                                  ------------- -------------
    Net loss for the period.....................        (3,378)       (3,374)
    Retained earnings (deficit), beginning of
     period.....................................        (9,131)        1,369
                                                  ------------- -------------
    Retained deficit, end of period.............  $    (12,509) $     (2,005)
                                                  ------------- -------------
                                                  ------------- -------------

    Basic and diluted net loss per share........  $      (0.08) $      (0.08)
                                                  ------------- -------------
                                                  ------------- -------------

    Shares used in basic and diluted net loss
     per share calculations (000s)..............        43,677        43,200
                                                  ------------- -------------
                                                  ------------- -------------



                               CERTICOM CORP.
                               --------------
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                       (In thousands of U.S. dollars)

    CANADIAN GAAP                                 Three months ended July 31,
                                                          2008          2007
                                                 -------------- -------------

    Net loss for the period.....................  $     (3,378) $     (3,374)

    Other comprehensive loss:
      Net unrealized gain (loss) on derivatives
       designated as cash flow hedges...........          (319)           97
                                                 -------------- -------------
    Comprehensive loss..........................  $     (3,697) $     (3,277)
                                                 -------------- -------------
                                                 -------------- -------------



                               CERTICOM CORP.
                               --------------
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (In thousands of U.S. dollars)
                                 (Unaudited)

    CANADIAN GAAP                                 Three months ended July 31,
                                                          2008          2007
                                                 -------------- -------------
    Cash flows from operating activities:
      Net loss..................................  $     (3,378) $     (3,374)
      Adjustments to reconcile net loss to net
       cash provided by (used in) operating
       activities:
        Depreciation and amortization...........           294           308
        Stock-based compensation................           595           534
        Amortization of lease inducements.......           (13)          (13)
        Changes in operating assets and
         liabilities:
          Accounts receivable and unbilled
           receivables, net.....................         2,792         2,698
          Prepaid expenses and other assets.....          (434)           96
          Accounts payable......................           (46)         (578)
          Accrued liabilities...................          (418)         (644)
          Deferred revenue......................            85           194
          Obligation under capital lease........            (7)            -
          Other payables........................             -           (27)
                                                 -------------- -------------
            Net cash used in operating
             activities.........................          (530)         (806)

    Cash flows from investing activities:
      Purchase of property and equipment........          (109)         (183)
      Purchase of patents.......................          (207)         (312)
      Net maturity of marketable securities.....         7,401           771
                                                 -------------- -------------
        Net cash provided by investing
         activities.............................         7,085           276

    Cash flows from financing activities:
      Proceeds from the issuance of common
       stock....................................             6         2,034
      Common shares repurchased.................             -          (306)
                                                 -------------- -------------
        Net cash provided by financing
         activities.............................             6         1,728

    Effect of exchange rate on cash and cash
     equivalents................................             1             -
                                                 -------------- -------------
    Net increase in cash and cash equivalents...         6,562         1,198

    Cash and cash equivalents, beginning of
     period.....................................         1,641         3,397
                                                 -------------- -------------
    Cash and cash equivalents, end of period....  $      8,203  $      4,595
                                                 -------------- -------------
                                                 -------------- -------------
    





For further information:

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, www.certicom.com

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