Management sets new strategic direction to improve company performance
Highlights for the Year:
- New, permanent Chief Executive Officer appointed
- IBM and Certicom signed multi-year, multi-million dollar technology agreement
- Certicom established firm stance on intellectual property protection through pursuit of Sony patent infringement lawsuit
- Bally Technologies licensed Certicom technology for gaming security
- Aristocrat Technologies licensed Certicom technology for gaming security
- Continental Airlines selected Certicom technology for mobile ticketing security solution
- Texas Instruments licensed Certicom’s ECC technology for improved security in next-generation, government-issued identification documents
- Certicom opened design centre in Silicon Valley dedicated to development of hardware-based cryptographic technologies
- Certicom launched UMA Device Software for mobility market, Security Builder API for Open Source and .NET, Device Certificate Authority
Subsequent to Year-End:
- 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
Mississauga, Ontario (June 4, 2008) – Certicom Corp. (TSX: CIC) (“Certicom” or the “Company”) today reported results for the fiscal year and fourth quarter ended April 30, 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 year was $16.6 million compared to $21.4 million for fiscal 2007. For the fourth quarter, revenue was $3.5 million, compared to $6.5 million in the fourth quarter of fiscal 2007.
Certicom closed a multi-year, multi-million dollar agreement with IBM on April 30, 2008. Under the terms of the agreement, the Company is entitled to an immediate first payment of $2 million and this was received in early May. In accordance with GAAP, the Company will recognize the revenue related to this payment prospectively using the subscription accounting method, in which $500,000 will be recorded in each quarter of fiscal 2009. Revenue from subsequent payment commitments from the IBM agreement will also be recognized using the subscription method.
“The IBM agreement is a clear endorsement of our IP portfolio and its underlying value, and represents a major event in accelerating the adoption of ECC in the marketplace,” said Karna Gupta, Chief Executive Officer. “In addition to this endorsement, several events occurred during fiscal 2008 that further strengthened our position for future growth. These included the launch of patent infringement litigation against Sony, the signing of multiple contracts in the gaming vertical, the introduction of several innovative security solutions, and finally the completion of our three-year strategic growth plan.”
Full Year Financial Review
Total operating expenses1 for the year were $21.9 million, compared to $20.1 million in fiscal 2007. The increase was mainly due to legal expenses related to the Sony litigation. However, these expenses, which totaled $2.4 million for the year, were lower than expected. The Company posted a net loss on a GAAP basis of $10.5 million, or $0.24 per basic and diluted share for the year, compared to a net loss of $3.1 million, or $0.08 per basic and diluted share, in fiscal 2007.
The Company reports that recurring revenue for the year was $8.0 million, consistent with fiscal 2007. With the completion of the IBM agreement and other initiatives relating to the new strategic growth plan, management expects recurring revenue to increase in fiscal 2009.
Certicom had $38.5 million in cash2 at year-end compared to $38.6 million at January 31, 2008 and $43.2 million at year-end fiscal 2007. The Company has no debt.
Fourth Quarter Financial Review
Total operating expenses1 for the fourth quarter were $6.2 million, compared to $6.3 million for the same period last year. This included $1.1 million for expenses related to the Sony litigation and $0.3 million for one-time restructuring costs. The Sony litigation expenses were higher than the guidance given last quarter due to the timing of legal activities as the case progresses. Excluding the Sony litigation expenses and the one-time restructuring costs, total operating expenses for the fourth quarter were within the guidance given last quarter.
The Company posted a net loss on a GAAP basis of $4.1 million for the quarter, or $0.09 per basic and diluted share, compared to a net loss of $1.2 million, or $0.03 per basic and diluted share for the same period last year.
Outlook: A New Strategic Direction
Management has completed Certicom’s new three-year strategic growth plan and will be addressing several strategic priorities that build on the Company’s current strengths in patent position, brand recognition, human capital and technology development. Of these strategic priorities, Certicom has identified the following four as the most critical:
Aggressively transitioning from toolkits to complete security solutions for solving specific business problems
Sharpening focus on more defined market verticals: Consumer Electronics/Mobility, Semiconductors, Energy/Utilities, Gaming and Defense/Aerospace
Increasing international market presence in high potential geographic areas
- Aggressively improving the efficiencies of the Company’s underlying cost structure
“We secured 25 design wins during the year, which reflects the continued momentum in the adoption of Certicom’s technology,” said Mr. Gupta. “However, I will point out that our new focus is less on the quantity of annual design wins and more on the long term revenue potential of each design win. This is consistent with our new strategic direction, which calls for greater concentration on securing high value contracts based on comprehensive security solutions. I am pleased to advise you that we are currently working with several marquee global accounts in addition to the IBM and Micronas agreements that we recently closed.”
Mr. Gupta continued, “Our recent design wins for complete security solutions in gaming, semiconductor manufacturing and utilities demonstrate the headway we’re making in the transition from toolkits to total solutions, and we look forward to continuing progress towards this and our other strategic priorities in fiscal 2009. Our commitment to these strategic priorities will provide a solid basis for achieving our ultimate goal of sustainable, profitable growth for shareholders.”
Operating expenses1 for the first 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 $4.7 to $5.0 million. The expenses related to the Sony litigation for the quarter are expected to be approximately $1.5 million.
Sony Patent Infringement Litigation
Certicom continues to progress through the broad discovery phase of the Sony litigation case, which requires both parties to provide specific documentation. 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.
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