Entrust Announces Fourth Quarter Fiscal Year 2006 Financial Results



    
    (*) Total revenues of $28.0 million - an increase of 13% from Q4, 2005 and
    17% from Q3, 2006

    (*) Product revenues of $12.7 million - an increase of 40% from Q4, 2005
and
    45% from Q3, 2006

    (*) Emerging Growth Products revenues of $3.9 million - an increase 289%
from
    Q4, 2005 and 15% from Q3, 2006, representing 31% of total product revenue
    in Q4, 2006

    (*) Entrust generated over $4.3 million in positive cash flow from
operations
    for the full year 2006
    

    DALLAS, Jan. 30 /CNW/ -- Entrust, Inc. (Nasdaq:   ENTU), a world leader in
securing digital identities and information, today announced financial results
for its fiscal quarter ended December 31, 2006.
    Revenue for the fourth quarter was $28.0 million, an increase of 13% from
$24.8 million in Q4, 2005, and a 17% increase from $24.0 million in Q3, 2006.
Revenue in the fourth quarter was driven by product revenue, which increased
40% from Q4, 2005 and 45% from Q3, 2006.  Product revenue of $12.7 million is
the company's highest attainment since Q4, 2000.
    "2006 was a transformation year for Entrust; we dramatically grew our
Emerging Growth Products revenue and market share, our PKI products
experienced a resurgence at year-end with its highest quarterly revenue in two
years," said Bill Conner, Entrust chairman, president and chief executive
officer. "We successfully integrated two acquisitions, returned the company to
profitability in Q4 and generated positive cash flow from operations for the
year."
    "In the quarter, both Entrust IdentityGuard and our Boundary Messaging
solutions attained their highest quarterly product revenue and both were up
well over 100 percent from last year," Conner continued.  "This achievement
helped us exit the fourth quarter with 31 percent of our product revenue
growing at nearly 300 percent year-over-year.  I am pleased with the way we
finished the second half of 2006 and look forward to building on our growth
and profitability in 2007."
    Entrust recorded a Q4, 2006 net loss, calculated in accordance with GAAP,
of $1.6 million, or $0.03 per share, compared to Q4, 2005 net income of $3.4
million, or $0.05 per share.  On a non-GAAP basis the company recorded income
of $129 thousand, or $0.00 per share.  The non-GAAP figures exclude
amortization of purchased intangibles and stock-option based compensation
expense. See the financial table below reconciling these non-GAAP figures to
GAAP.
    For the full year 2006 the company generated over $4.3 million in
positive cash flow from operations.  The company ended Q4, 2006 with
approximately $22.5 million in cash and marketable securities, and no debt.
    "As we enter 2007, we are well positioned to continue our leadership
position in the security market space," Conner added. "Our new capabilities
for 2007 include; expanding our IdentityGuard platform to include OTP Tokens,
deploying our Extended Validation SSL certificates, extending our PKI offering
to a hosted model, increasing our global eGovernment presence, delivering
Group Share, our newest solution for helping secure shared data on corporate
networks and enhanced offerings in the consumer fraud market. These new
capabilities coupled with the success of our emerging growth products
positions us to grow product revenue significantly faster than the market."

    Financial Outlook:

    
    Revenue:
    
    Entrust is targeting total revenues for the first half of 2007 of between
$54.0 and $56.0 million.  Entrust is targeting total revenues for the full
year of 2007 of between $115.0 and $120.0 million.  The high-end of the first
half and full year 2007 revenue outlook does not reflect all opportunities
that are over $1.0 million as it is difficult to determine sizing, profiling
and timing of certain large deals that are in the company's funnel.

    
    Earnings:
    
    Entrust is targeting first half 2007 net loss in accordance with GAAP of
between $0.02 and $0.04 per share.  On a non-GAAP basis the company is
targeting a profit of $0.02 to $0.04 per share for the first half of 2007.
Entrust is targeting a full year 2007 net income in accordance with GAAP of
between breakeven or $0.00 per share to a net income of $0.04 per share.  On a
non-GAAP basis the company is targeting a profit of $0.11 to $0.15 per share
for the full year 2007.
    See the financial table below reconciling the non-GAAP figures to GAAP.

    The following charges for the first half of 2007 and full year 2007,
reconcile the GAAP and non-GAAP earnings per share:

    
    (*)  A stock-based compensation charge in accordance with SFAS 123R of
    approximately $2.2 million, or $(0.04) per share for the first half of
    2007 and $4.4 million, or $(0.07) per share for the full year 2007

    (*)  Amortization charges of intangible assets primarily associated with
    the acquisition of Business Signatures, Orion and AmikaNow of
    approximately $1.2 million, or $(0.02) per share for the first half of
    2007 and $2.4 million, or $(0.04) per share for the full year 2007.

    Q4 Business and Financial Metrics:

    (*)  Revenue of $28.0 million consisted of 45% product revenue ($12.7
    million) and 55% services and maintenance revenue ($15.3 million).
    Product revenue of $12.7 million is the company's highest attainment
    since Q4, 2000.  The top five product transactions accounted for 16%
    of Q4, 2006 revenues.  There were two product transactions of $1
    million in Q4, 2006 and one transaction that contributed $1.0 million
    to total revenue in the quarter.

    (*)  Emerging growth products (Entrust IdentityGuard, Boundary Messaging
    and Fraud Detection) accounted for $3.9 million, or 31% of product
    revenue, up 289% from $1.0 million in Q4, 2005 and up 15% from $3.4
    million in Q3, 2006.

    (*)  Entrust IdentityGuard achieved its highest quarterly revenue ever with
    $2.0 million of product revenue (included in the above Emerging Growth
    Products revenue).  Entrust IdentityGuard transactions also reached
    their highest level at 38 this quarter, up from 23 in Q3, 2006.
    Entrust IdentityGuard pilots and trials increased 62 in the quarter,
    now totaling 288.  In the quarter, U.S. Bank became Entrust's first
    Risk Based Authentication customer with its initial purchase of
    Entrust IdentityGuard.

    (*)  Public Key Infrastructure (PKI) products accounted for $8.1 million,
    or 63% of product revenue, up 6% from $7.6 million in Q4, 2005 and up
    95% from $4.1 million in Q3, 2006. Entrust certificate services
    accounted for $1.5 million of product revenue, up 22% from $1.2
    million in Q4, 2005.

    (*)  Product revenue for the quarter was 34% Extended Government and 66%
    Extended Enterprise. The financial services vertical continued to be
    strong increasing 100% over Q4, 2005, accounting for approximately 29%
    of product revenue in Q4, 2006, driven by continued uptake of multi-
    factor authentication, zero touch fraud detection and boundary
    messaging.

    (*)  The average purchase size in the fourth quarter was $99,000, an
    increase from $91,000 in Q4, 2005 and an increase from $83,000 in Q3,
    2006. Total transactions in Q4, 2006 reached 108, which is up from 84
    in Q4, 2005 and is up from 86 in Q3, 2006. Thirty-one, or 29% of the
    transactions were from new customers.  The increase in new customers
    and total transactions was driven mainly by Entrust IdentityGuard,
    Boundary Messaging and PKI solutions.

    (*)  Deferred revenue of $23.6 million increased $2.7 million over Q4,
    2005.

    Technology and Industry Highlights:

    (*)  Entrust Introduced a Five Dollar One-Time-Passcode (OTP) Security
    Token to disrupts a $500 million security token market. The low price
    point of the Entrust OTP token will officially commoditize the OTP
    token market. In addition, Expedia will be the first customer for the
    Entrust IdentityGuard OTP token. In addition to the OTP token, Entrust
    customers will get to enjoy a range of authentication mechanisms
    because Entrust IdentityGuard supports multiple authenticators from a
    single platform, giving unprecedented flexibility and choice customers
    currently do not have with the existing OTP token vendors.

    (*)  Expedia and Entrust signed a strategic deal in October to leverage a
    suite of security software from Entrust, including Entrust
    IdentityGuard, Entrust Entelligence, Entrust GetAccess, Entrust
    Messaging Server, Entrust Identity Management, Entrust Content
    Management and mobile workforce protection. Entrust's solutions will
    now protect the world's leading online travel company, helping them
    secure customers, employees and partners around the world.

    (*)  Entrust and Digital Insight Corp., the leading on-demand banking
    provider, announced they formed a strategic relationship to further
    strengthen the layers of security protecting Digital Insight client
    financial institutions and their end-users. Under terms of the
    agreement, Digital Insight will offer its clients transaction
    monitoring using the Entrust TransactionGuard(TM) product.

    (*)  Entrust Entelligence Group Share helps organizations protect data
    stored on corporate networks in a manner that is automatic and
    transparent to the end-user and persistent. With zero-touch folder
    administration, Entrust Entelligence Group Share offers unprecedented
    manageability allowing the ability to change permissions on a shared
    folder without having to modify the folder or its contents --
    eliminating the need to re-encrypt data when permissions are changed.

    (*)  Entrust's managed PKI service was added to the General Services
    Administration (GSA) list of approved shared service providers. This
    status enables Entrust to help federal agencies reap the security
    benefits of PKI without having to maintain the certification authority
    (CA) themselves. This status also enables Entrust to service federal
    government agencies needing to meet HSPD-12 and beyond.

    (*)  Entrust announced that it is offering Extended Validation (EV) SSL
    Certificates for use with the next-generation of EV-aware browsers.
    Entrust Extended Validation SSL Certificates -- commonly referred to
    as "EV" certificates -- are expected to be an effective tool for
    helping to rebuild consumer confidence in online transactions by
    enabling strong visual cues that notify a user that a site is secure.
    The new technology can help increase consumer confidence by displaying
    prominent and consistent trust indicators in a browser's address bar.
    In addition, Entrust was the first SSL vendor to activate EV SSL
    Certificates for Windows XP users with Internet Explorer 7.

    (*)  Entrust released Entrust TransactionGuard 3.1.1, the latest iteration
    of its zero touch software-based monitoring tool that identifies
    potential fraudulent behavior and access patterns across the online
    channel. This version is fully integrated with Entrust IdentityGuard,
    enabling organizations to deploy a complete risk-based authentication
    solution for protecting end users.

    (*)  Entrust and the United Kingdom's Ministry of Defence announced an
    agreement that will see Entrust Authority(TM) Security Manager
    deployed in an effort to enforce the MoD's strategy of centrally
    controlling policy to maintain a trusted network environment. The MoD
    sought a public key infrastructure (PKI) solution to manage
    authentication, digital signatures and encryption capabilities.
    

    Entrust will host a live teleconference and Webcast on Tuesday, January
30, 2007 at 5:00 p.m. (Eastern), featuring Chairman, President and CEO Bill
Conner and Chief Financial Officer David Wagner to discuss the company's
fiscal fourth quarter results and 2007 outlook. The conference call audio will
be available live via dial-in at 1-800-733-7571 and via the Internet at
http://phx.corporate-ir.net/playerlink.zhtml?c=73119&s=wm&e=1451029 .  Please
log on approximately 15 minutes before the Webcast begins in order to register
and to download and install any necessary audio software. An archive of the
Webcast will be available for 90 days at the above Internet address.
    For those unable to attend the live conference call, an audio replay will
be available beginning at 7:00 p.m. (Eastern), Tuesday, January 30, 2007
through Tuesday, February 6, 2007 at 11:59 p.m. (Eastern). The North American
replay number is 1- 877-289-8525 and the International replay number is
416-640-1917. Both numbers have a pass code of 21214963#.

    
    Use of Non-GAAP Financial Measures
    
    To supplement the financial results that are prepared and presented in
accordance with accounting principles generally accepted in the United States,
Entrust's management prepares and uses non-GAAP financial measures for many of
its internal financial, operating and planning reports. The company's
management believes that by excluding charges such as the purchased
intangibles amortization in cost of goods sold, the amortization of purchased
intangible assets in operating expenses, stock compensation expense,
restructuring charges and write down of strategic investments from its GAAP-
based results, these non-GAAP financial measures are more likely to facilitate
investors' understanding of the company's ongoing business operating results.
These non-GAAP financial measures also facilitate comparisons to the operating
results of the company's competitors and provide investors with greater
transparency with respect to the supplemental information used by management
in its operational and financial decision making.
    The non-GAAP measures are included to provide investors with supplemental
information to facilitate their understanding of Entrust's operating results
and future prospects. Management uses these non-GAAP measures to assess its
success in reducing the company's cost structure, to measure its ongoing cash
operating costs, and to establish budgets and operational goals. The
presentation of this additional information should not be considered in
isolation or as a substitute for financial and operating results prepared in
accordance with accounting principles generally accepted in the United States,
as non-GAAP measures are susceptible to varying calculations and they may not
be comparable, as presented, to other similarly titled measures of other
companies.

    This press release contains forward-looking statements relating to
Entrust's projected revenue, net income and net loss per share for the first
half of 2007 and full year ending 2007.  Such statements involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are unforeseen operating expenses, unconverted customer
opportunities, issues associated with revenue recognition, issues raised in
connection with the review of quarterly financial results, and the risk
factors detailed from time to time in Entrust's periodic reports and
registration statements filed with the Securities and Exchange Commission,
including without limitation Entrust's Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 and Entrust's Quarterly Report on Form 10-
Q for the fiscal third quarter ended September 30, 2006. While Entrust may
elect to update forward-looking statements in the future, Entrust specifically
disclaims any obligation to do so, even if its estimates change.

    
    About Entrust
    
    Entrust, Inc. (Nasdaq:   ENTU) is a world leader in securing digital
identities and information. Over 1,450 enterprises and government agencies in
more than 50 countries use Entrust solutions to help secure the digital lives
of their citizens, customers, employees and partners. Our proven software and
services can help customers in achieving regulatory and corporate compliance,
while helping to turn security challenges such as identity theft and email
security into business opportunities. For more information on how Entrust can
help secure your digital life, please visit: http://www.entrust.com

    Entrust is a registered trademark of Entrust, Inc. in the United States
and certain other countries.  In Canada, Entrust is a registered trademark of
Entrust Limited.  All Entrust product names are trademarks of Entrust.  All
other company and product names are trademarks or registered trademarks of
their respective owners.



    
    ENTRUST, INC.
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (in thousands, except per share data)

    Three Months
    Ended,          Year Ended,
    December 31st     December 31st
    2006     2005     2006     2005

    Revenues:
    Product                            12,733  $9,081    35,487  $34,216
    Services and maintenance           15,266  15,680    59,696   63,912
    Total revenues                          27,999  24,761    95,183   98,128

    Cost of revenues:
    Product                             3,148   1,753     7,568    5,153
    Services and maintenance            7,616   6,990    29,316   30,495
    Amortization of purchased product
    rights                               337     202     1,075      802
    Total cost of revenues                  11,101   8,945    37,959   36,450

    Total gross profit                      16,898  15,816    57,224   61,678

    Operating expenses:
    Sales and marketing                 9,364   7,054    33,795   28,534
    Research and development            5,647   3,822    19,795   16,439
    General and administrative          3,621   2,548    14,275   11,534
    Restructuring charges and
    adjustments                          ---     ---     2,765      ---
    Total operating expenses                18,632  13,424    70,630   56,507

    Income (loss) from operations           (1,734)  2,392   (13,406)   5,171

    Other income (expense):
    Interest income                       232     652     2,177    2,357
    Gain on sale of asset                 ---     ---       ---      200
    Foreign exchange gain (loss)           26     (38)     (249)     (62)
    Loss from equity investments         (101)    (99)     (445)    (760)
    Writedown of long-term strategic
    and equity investments               ---     ---    (3,016)     ---
    Total other income (expense)               157     515    (1,533)   1,735

    Income (loss) before income taxes       (1,577)  2,907   (14,939)   6,906

    Provision for income taxes                 (25)   (449)      284      532

    Net income (loss)                      $(1,552) $3,356  $(15,223)  $6,374

    Weighted average common shares used
    Basic                              60,064  59,949    59,877   60,834
    Diluted                            60,064  61,750    59,877   62,517

    Net income (loss) per share
    Basic                              ($0.03)  $0.06    ($0.25)   $0.10
    Diluted                            ($0.03)  $0.05    ($0.25)   $0.10



    ENTRUST, INC.
    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
    (in thousands)

    December 31,       December 31,
    2006               2005

    ASSETS

    Cash and marketable investments              $22,527            $82,453
    Accounts receivable, net of
    allowance for doubtful accounts              21,117             20,341
    Other current assets                           2,904              4,782
    Property and equipment, net                    2,721              2,677
    Purchased product rights and other
    purchased intangible assets, net             13,843              2,086
    Goodwill, net                                 60,214             12,713
    Long-term strategic and equity
    investments                                     169              3,630
    Other long-term assets, net                    4,321              1,767

    Total assets                             $127,816           $130,449


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Accounts payable and accruals                $20,268            $13,634
    Accrued restructuring charges                 24,518             25,949
    Deferred revenue                              23,575             20,895
    Long-term liabilities                            231                859

    Total liabilities                          68,592             61,337

    Shareholders' equity                          59,224             69,112

    Total liabilities and
    shareholders' equity                    $127,816           $130,449



    The following supplemental tables provide non-GAAP financial measures
used
    by the company's management to evaluate operational results.  The company
    believes this information may be useful to investors.   In addition to
    disclosing financial results calculated in accordance with U.S. generally
    accepted accounting principles (GAAP), the company's earnings release
    contains non-GAAP financial measures that exclude the income statement
    effects of share-based compensation, amortization of purchase product
    rights, non recurring restructuring and impairment charges. The non-GAAP
    financial measures disclosed by the company should not be considered a
    substitute for, or superior to, financial measures calculated in
    accordance with GAAP, and the financial results calculated in accordance
    with GAAP and reconciliations to those financial statements should be
    carefully evaluated. The non-GAAP financial measures used by the company
    may be calculated differently from, and therefore may not be comparable
    to, similarly titled measures used by other companies.

    Set forth below are reconciliations of the non-GAAP financial measures to
    the most directly comparable GAAP financial measures.

    For additional information regarding these non-GAAP financial measures,
    see the Form 8-K dated January 31, 2007 that Entrust has filed with the
    Securities and Exchange Commission.



    ENTRUST, INC.
    SUPPLEMENTAL
    RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
    (in thousands, except per share data)

    Three Months
    Ended,          Year Ended,
    December 31st     December 31st
    2006     2005     2006     2005

    Reconciliation of net income (loss) per
    GAAP to Non-GAAP income (loss):
    GAAP net income (loss)                  $(1,552) $3,356  $(15,223) $6,374
    Adjustments for share-based
    compensation expense:
    Cost of revenues                     128     ---       319     ---
    Sales and marketing                  268     ---       903     ---
    Research and development             152     ---       414     ---
    General and administrative           529     ---     1,640     ---
    Amortization of other purchased
    intangibles:
    Cost of revenues                      39     ---        90     ---
    Sales and marketing                  228      19       479      75
    Amortization of purchased product
    rights                                337     202     1,075     802
    Restructuring charges and
    adjustments                           ---     ---     2,765     ---
    Write-down of long-term strategic
    and equity investments                ---     ---     3,016     ---
    Tax effect on Non-GAAP adjustments     ---     (66)      ---    (263)

    Non-GAAP income (loss)                     $129  $3,511   $(4,522) $6,988


    Reconciliation of net income (loss) per
    diluted share according to GAAP to
    Non-GAAP income (loss) per diluted
    share:

    GAAP net income (loss) per diluted
    share                                   ($0.03)  $0.05    ($0.25)  $0.10

    Adjustments for share-based
    compensation expense                 0.02     ---      0.05     ---
    Amortization of other purchased
    intangibles:                          ---     ---      0.01     ---
    Amortization of purchased product
    rights                               0.01    0.01      0.02    0.01
    Restructuring charges and
    adjustments                           ---     ---      0.04     ---
    Write-down of long-term strategic
    and equity investments                ---     ---      0.05     ---
    Tax effect on Non-GAAP adjustments     ---     ---       ---     ---
    0.03    0.01      0.17    0.01

    Non-GAAP income (loss) per diluted
    share                                    $0.00   $0.06    ($0.08)  $0.11

    Weighted average common shares used      60,064  61,750    59,877  62,517



    Forward Looking Guidance
    Earnings Per Share Range

    First Half          Full Year
    2007               2007
    U.S. GAAP measure              ($0.04)   ($0.02)   $0.00    $0.04

    Adjustments to exclude the
    effects of amortization of
    purchased intangible assets    $0.02     $0.02    $0.04    $0.04

    Adjustments to exclude the
    effects of expenses related
    to stock-based compensation    $0.04     $0.04    $0.07    $0.07

    Non-GAAP figures                $0.02     $0.04    $0.11    $0.15

    




For further information:

For further information: investors, David Rockvam, Investor Relations, 
+1-972-713-5824, or david.rockvam@entrust.com , or media, Michelle Metzger, 
Media Relations, +1-972-713-5866, or michelle.metzger@entrust.com , both of 
Entrust, Inc. Web Site: http://www.entrust.com                 
http://phx.corporate-ir.net/playerlink.zhtml?c=73119&s=wm&e=1451029

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