Entrust Announces Second Quarter and First Half Fiscal Year 2008 Financial Results



    
    - Total 2nd Quarter and 1st Half Revenues of $24.5 million and $50.3
    million respectively

    - 2nd Quarter and 1st Half Subscription Revenue Achieved 56% and 54% of
    Revenue Respectively

    - Second Quarter and 1st Half Profitability increased $2.8 million and
$4.1
    million year-over-year

    - Cash and Cash Equivalents increased $2.6 million in the quarter to $25.4
    million

    - Company Reiterates Full Year Profitability Targets

    - July Booked Product Revenue of Over $4.0 million

    
    DALLAS, July 29 /CNW/ -- Entrust, Inc. (Nasdaq:   ENTU), a world leader in
securing digital identities and information, today announced financial results
for its fiscal quarter ended June 30, 2008.
    "I am pleased with our first half performance in what is a challenging
business environment," said Bill Conner, Entrust chairman, president and chief
executive officer.  "While we are disappointed in our lower than expected
revenue for the quarter, we were able to meet the low end of our guidance with
an increase in our first half revenue by three percent, an increase in our
profitability by $4.1 million or $0.06 per share, and to increase our cash
position by nearly $5.0 million from the end of 2007."
    Revenue for the second quarter was $24.5 million, flat to Q2 2007.
Revenues in the quarter were flat due to lower transaction volumes, timing of
deals and lower professional services.  On the positive side, the company
increased revenue in Risk Based Authentication, Government and the company's
subscription businesses from a year ago.  Deferred revenue increased in the
quarter to approximately $29.3 million, an increase of approximately $800
thousand, from $28.5 million at Q2, 2007.
    Conner added, "In the first half of 2008, we made solid progress on Risk
Based Authentication, where we delivered 126 percent growth.  Our largest
transaction in the second quarter was with DnB Nor, Norway's largest financial
services group, which selected Entrust for real-time fraud monitoring.  In
Public Key Infrastructure (PKI), we were awarded our first Extended Access
Control passport order from a large EU country. Our PKI software-as-a-service
products continued to be strong led by our SSL certificate business, which for
the first half of the year was up 37 percent. We also are seeing increased
momentum with business development partners and channels to market these
offerings."
    Entrust recorded a Q2, 2008 net loss, calculated in accordance with GAAP,
of $422 thousand, or $0.01 per share, compared to Q2, 2007 net loss of $3.2
million, or $0.05 per share. On a non-GAAP basis the company recorded a profit
of $480 thousand, or $0.01 per share, compared to Q2, 2007 loss of $1.5
million, or $0.02 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.
    "In the second quarter, we continued to make progress on our financial
model. We increased our subscription revenues to 56 percent of our quarterly
revenues; we increased deferred revenue by $800 thousand, we increased our
cash and cash equivalents by $2.6 million; and we reduced total expenses by
eight percent or $2.3 million from the first quarter. Our lower expense base,
combined with having booked over $4 million of third quarter product revenue
in July, has us well positioned to make our full year Non-GAAP earnings target
of 10 cents per share and Non-GAAP cash flow from operations of over $10.0
million," said David Wagner, Entrust senior vice president and chief financial
officer.
    The company ended Q2, 2008 with approximately $25.4 million in cash and
cash equivalents and no debt.
    
    Financial Outlook:
    
    Entrust is maintaining its second half 2008 outlook of total revenue of
between $54.0 million to $58.0 million.
    For the full year 2008, Entrust is targeting a net income in accordance
with GAAP of approximately $0.03 per share. On a non-GAAP basis, the company
is targeting a full year profit of $0.10 per share. These net income targets
are in line with the company's prior 2008 targets.  For the second half of
2008 the full year guidance translates to a net income in accordance with GAAP
of approximately $0.05 per share and on a non-GAAP basis a profit of $0.08 per
share. The company's Q3, 2008, total expenses on a non-GAAP basis are expected
to be approximately $24.5 million. The Company expects to be cash flow
positive from operations adjusted to exclude the net change in accrued
restructuring charges for the full year by over $10.0 million. See the
financial table below reconciling the non-GAAP figures to GAAP.
    
    Q2 Business and Financial Metrics:
    
    -- Revenue of $24.5 million consisted of 37% product revenue ($9.0
million) and 63% services and maintenance revenue ($15.5 million). The top
five product transactions accounted for 9% of Q2, 2008 revenues. There were no
product transactions over $1 million in Q2, 2008.
    -- Revenue from subscription based product and services accounted for 56%
of total revenue for Q2, 2008, up from 51% in Q2, 2007 and Q1, 2008.
    -- Revenue from transactions under $500 thousand increased 3% from Q2,
2007, continuing to drive the company's strategy to be less reliant on large
deals. Transactions under $500 thousand and subscription product revenue
accounted for 93% of product revenue in Q2, 2008.
    -- Emerging growth products (Entrust IdentityGuard, Boundary Messaging
and Fraud Detection) accounted for $2.6 million, or 29% of product revenue, up
56% from $1.7 million in Q2, 2007.
    -- Public Key Infrastructure (PKI) products accounted for $6.2 million,
or 68% of product revenue, a decrease of 3% from $6.4 million in Q2, 2007. 
The decrease in total PKI revenue was from the planned decrease in Entrust's
full disk product's which it resells from Checkpoint.  Entrust certificate
services (SSL certificates) increased 34% year-over-year and accounted for
$2.4 million of PKI product revenue in Q2, 2008.
    -- Product revenue for the quarter was 47% Extended Government and 53%
Extended Enterprise. The Extended Government vertical was up 42% from Q2 of
last year and 7% from the first half of 2007.  The financial services vertical
accounted for approximately 29% of product revenue in Q2, 2008, and was up 16%
over the first half of 2007.
    -- The average purchase size in the second quarter was $58,000, a
decrease from $61,000 in Q2, 2007 and an increase from $50,000 Q1, 2008. Total
transactions in Q2, 2008 reached 103.  Thirty-one transactions or 30% of the
total transactions were from new customers.
    -- Deferred revenue achieved a record level of $29.3 million, an increase
of $800 thousand from Q2, 2007.
    -- Support and Maintenance revenues increased 10% for the first half of
2008 and now accounts for over $10.0 million of quarterly revenue.
    -- Cash flow from operations was positive $4.1 million for Q2, 2008
before the net change in restructuring accruals of $1.4 million.  Year-to-date
cash flow for operations is positive $8.0 million before the net change in
restructuring accruals of $2.8 million.
    
    Technology and Industry Highlights:
    
    -- Entrust, Inc. and the Acxiom Corporation signed an agreement for joint
sales and marketing of an integrated consumer verification and authentication
solution. Acxiom is now a member of the Entrust TrustedPartner Program and
will resell Entrust's risk-based authentication solution, which includes
multifactor authentication, fraud detection and transaction-monitoring
capabilities. Acxiom also will join Entrust's Open Fraud Intelligence Network
(OFIN), which consolidates and shares key fraud behavior patterns and data
among network participants to help fight online fraud. Entrust will integrate
Acxiom's real-time consumer verification capabilities with its portfolio and
jointly sell the solution with Acxiom.
    -- Entrust announced that the Taiwanese government selected Entrust PKI
to help authenticate sensitive biometric information stored on machine
readable travel documents (MRTDs) -- also known as ePassports -- which will be
available to nearly 23 million citizens by the end of 2008.
    -- Kotak Securities Limited, the stock broking arm of the Kotak Mahindra
group, announced the implementation of Entrust IdentityGuard for its
customers. Kotak's Security Key solution, powered by Entrust, uses the concept
of a dual-password system. It is a user-friendly product enabling risk-based
authentication that allows Kotak Securities to apply an appropriate level of
security and reduces the chances of fraudulent practices.
    -- A large new customer in Asia-Pacific chose Entrust's managed public
key infrastructure (PKI) solution to cost effectively enable digital
signatures and verification to ensure the integrity of the documents it
exchanged with businesses.  Using the managed PKI service, businesses can
leverage digital certificates for authentication, digital signatures and
encryption purposes to enable secure e-mail, file and folder encryption,
authenticated remote access (VPN) and secure electronic forms and PDFs.
Entrust adds value to each of these applications with security that is simple
to deploy and transparent to use.
    -- Banco Security leveraged the Entrust IdentityGuard versatile
authentication platform's grid card solution to help verify the identities of
more than 17,600 customers. Banco Security has nine offices in Santiago,
Chile, four regional branches, but predominantly provides its services through
electronic channels, which made the need for strong multifactor authentication
a priority.
    -- India's leading credit rating, research, risk and policy advisory
company, CRISIL, selected the Entrust IdentityGuard versatile authentication
platform and one-time-passcode (OTP) tokens to enable secure communication
with their mobile workforce.
    -- SC Magazine, a well-respected IT security publication, gave Entrust
Entelligence Messaging Server five stars and a "Recommended" rating in their
e-mail security group test, which featured side-by-side comparisons of the
industry's leading e-mail security solutions.
    -- Entrust was chosen for Hydro Ottawa's "Companies for Conservation"
award in June 2008. Between August of 2006 and January of 2007, Entrust cut
power use by more than 40 percent -- from more than 5 million kilowatt hours
per year to less than 3 million. The 2 million kilowatt hours now being
conserved annually by Entrust is enough energy to power roughly 222 homes for
an entire year. Several initiatives contributed to this achievement.
    -- Entrust announced its inclusion to the Russell 3000 Index. The
addition to the Russell 3000 Index, which remains in place for one fiscal
year, also includes Entrust in additional Russell indexes. The index is a
trusted, proven barometer for businesses success, stock growth and investment
forecasting for U.S.-based companies.
    Entrust will host a live teleconference and Webcast on Tuesday, July 29,
2008 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
second quarter results and 2nd half 2008 outlook. The conference call audio
will be available live via dial-in at 1-800-732-9303 and via the Internet
http://phx.corporate-ir.net/playerlink.zhtml?c=73119&s=wm&e=1893020.  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. EDT, Tuesday, July 29, 2008 through
Tuesday, August 5, 2008 at 11:59 p.m. EDT. The replay number is 1-877-289-8525
and the pass code is 21276750#.
    
    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, non-GAAP
income per share and cash flow from operations for the second half and full
year 2008 and the company's planned third quarter non-GAAP total expenses.
Such statements are based upon preliminary estimates which 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, inaccuracy in preliminary
estimates issues associated with revenue recognition, issues raised in
connection with the internal 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, 2007. 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 [NASDAQ:   ENTU] secures digital identities and information for
consumers, enterprises and governments in 1,700 organizations spanning 60
countries. Leveraging a layered security approach to address growing risks,
Entrust solutions help secure the most common digital identity and information
protection pain points in an organization. These include SSL, authentication,
fraud detection, shared data protection and e-mail security. For information,
call 888-690-2424, e-mail entrust@entrust.com or 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        Six Months
                                                 Ended             Ended
                                               June 30th,        June 30th,
                                             2008    2007      2008     2007
    

    
    Revenues:
         Product                            $9,013   $8,930  $18,643  $18,074
         Services and maintenance           15,466   15,563   31,674   30,982
    Total revenues                          24,479   24,493   50,317   49,056
    

    
    Cost of revenues:
         Product                             2,118    2,162    4,480    3,970
         Services and maintenance            7,048    7,759   14,903   15,207
         Amortization of purchased product
          rights                               315      345      660      677
    Total cost of revenues                   9,481   10,266   20,043   19,854
    

    
    Total gross profit                      14,998   14,227   30,274   29,202
    

    
    Operating expenses:
         Sales and marketing                 7,806    8,813   16,509   17,906
         Research and development            4,432    5,312    9,174   10,661
         General and administrative          3,124    3,258    6,240    6,518
    Total operating expenses                15,362   17,383   31,923   35,085
    

    
    Loss from operations                      (364)  (3,156)  (1,649)  (5,883)
    

    
    Other income (expense):
         Interest income                        98      176      229      356
         Foreign exchange gain                  55     (177)      75       70
         Gain on sale of long-term
          strategic investments                 -        -        18        -
         Loss from equity investments           -        -        -       (77)
    Total other income (expense)               153       (1)     322      349
    

    
    Loss before income taxes                  (211)  (3,157)  (1,327)  (5,534)
    

    
    Provision for income taxes                 211       72      275      124
    

    
    Net loss                                 $(422) $(3,229) $(1,602) $(5,658)
    

    
    Weighted average common shares used
         Basic                              61,291   60,777   61,228   60,582
         Diluted                            61,291   60,777   61,228   60,582
    

    
    Net loss per share
         Basic                              ($0.01)  ($0.05)  ($0.03)  ($0.09)
         Diluted                            ($0.01)  ($0.05)  ($0.03)  ($0.09)
    



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

    
                                                  June 30,        December 31,
                                                    2008               2007
    

    
    ASSETS
    

    
      Cash and marketable investments              $25,416            $20,485
      Accounts receivable, net of
       allowance for doubtful accounts              16,738             20,773
      Other current assets                           3,608              4,079
      Property and equipment, net                    1,148              1,490
      Purchased product rights and other
       purchased intangible assets, net             10,377             11,543
      Goodwill                                      60,214             60,214
      Long-term strategic and equity investments        91                 91
      Other long-term assets, net                    3,329              3,479
    

    
         Total assets                             $120,921           $122,154
    


    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    

    
      Accounts payable and accruals                $15,826            $16,330
      Accrued restructuring charges                 16,487             19,266
      Deferred revenue                              29,299             27,894
      Long-term liabilities                            816                218
    

    
         Total liabilities                          62,428             63,708
    

    
      Shareholders' equity                          58,493             58,446
    

    
         Total liabilities and shareholders'
          equity                                  $120,921           $122,154
    



    
    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 and other purchased intangibles, and 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 July 29, 2008 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   Six Months Ended
                                               June 30th,         June 30th,
                                              2008    2007       2008     2007
    

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

    
    GAAP net loss                            $(422) $(3,229) $(1,602) $(5,658)
      Adjustments for share-based
       compensation expense:
         Cost of revenues                       15       81      106      148
         Sales and marketing                   106      339      424      628
         Research and development               34      204      156      401
         General and administrative            183      511      582      952
      Amortization of other purchased
       intangibles:
         Cost of revenues                       38       38       76       76
         Sales and marketing                   211      229      422      457
      Amortization of purchased product
       rights                                  315      345      660      677
    

    
    Non-GAAP income (loss)                    $480  $(1,482)    $824  $(2,319)
    


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

    
    GAAP net loss per diluted share         ($0.01)  ($0.05)  ($0.03)  ($0.09)
    

    
         Adjustments for share-based
          compensation expense                0.01     0.02     0.02     0.03
         Amortization of other purchased
          intangibles                          -        -       0.01     0.01
         Amortization of purchased product
          rights                              0.01     0.01     0.01     0.01
                                              0.02     0.03     0.04     0.05
    

    
    Non-GAAP income (loss) per diluted
     share                                   $0.01   ($0.02)   $0.01   ($0.04)
    

    
    Weighted average common shares used     61,291   60,777   61,228   60,582
    


    
    Reconciliation of net cash flow from
     operating activities per GAAP to
     Non-GAAP cash flow from operations
     before the net change in restructuring
     accruals:
    

    
    GAAP net cash flow from operating
     activities                             $2,694   $2,666   $5,182     $122
       Adjustments to exclude the effects
        of:
            Net change in accrued
             restructuring charges           1,375    1,375    2,779    2,613
    

    
    Non-GAAP cash flow from operations
     before the net change in restructuring
     accruals                               $4,069   $4,041   $7,961   $2,735
    



    
                                Forward Looking Guidance
                                Earnings Per Share Range
    

    
                                                     Second Half     Full Year
                                                         2008          2008
    

    
    U.S. GAAP measure                                   $0.05         $0.03
    

    
    Adjustments to exclude the effects of
     amortization of purchased intangible
     assets                                             $0.01         $0.03
    

    
    Adjustments to exclude the effects of
     expenses related to stock-based
     compensation                                       $0.02         $0.04
    

    
    Non-GAAP figures                                    $0.08         $0.10
    



    
                           Forward Looking Guidance
                            Total Quarterly Costs
                                                     (in millions)
                                                        Q3 2008
    

    
    U.S. GAAP measure                                   $25.4
    

    
    Adjustments to exclude the effects of
     amortization of purchased intangible assets         $0.4
    

    
    Adjustments to exclude the effects of
     expenses related to stock- based compensation       $0.5
    

    
    Non-GAAP figures                                    $24.5
    



    
                                      Forward Looking
                                         Guidance
                                      Cash Flow from
                                    Operating Activities
                                                        (in millions)
                                                                   Full Year
                                                                      2008
    
    U.S. GAAP measure                                                  $4.5
    Adjustments to exclude the effects of the
    
    net change in accrued restructuring charges                       $5.5
    
    Non-GAAP figures                                                  $10.0




For further information:

For further information: David Rockvam, Investor Relations,
+1-972-713-5824, david.rockvam@entrust.com, or Michelle Metzger, Media
Relations, +1-972-713-5866, michelle.metzger@entrust.com, both of Entrust,
Inc. Web Site: http://www.entrust.com

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