Financials

2006 First-Quarter Financial Statements

Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheets

ENTRUST, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
	Three Months Ended March 31			Three Months Ended March 31
	2006			2005
	(unaudited)			(unaudited)
	Total Entrust (GAAP)	Non-GAAP Adj.	Total Entrust (Non-GAAP)	Total Entrust (GAAP)	Non-GAAP Adj.	Total Entrust (Non-GAAP)
Revenues:
Product	$6,578	-	$6,578	$8,067	-	$8,067
Services and maintenance	14,521	-	14,521	16,839	-	16,839
Total revenues	21,099	-	21,099	24,906	-	24,906
Cost of revenues:
Product	1,944	(3)¹	1,941	971	-	971
Services and maintenance	7,041	(54) ¹	6,987	8,711	-	8,711
Amortization of purchased product rights	207	(207) ²	-	195	(195) ²	-
Total cost of revenues	9,192	(264)	8,928	9,877	(195)	9,682
Total gross profit	11,907	264	12,171	15,029	195	15,224
Operating expenses:
Sales and marketing	7,513	(187) ^1,2	7,326	7,194	(18) ²	7,176
Research and development	4,240	(60) ¹	4,180	4,162	-	4,162
General and administrative	3,675	(330) ¹	3,345	2,922	-	2,922
Restructuring charges and adjustments	2,895	(2,895)³	-	-	-	-
Total operating expenses	18,323	(3,472)	14,851	14,278	(18)	14,260
Income (loss) from operations	(6,416)	3,736	(2,680)	751	213	964
Other income (expense):
Interest income	742	-	742	528	-	528
Gain on sale of asset	-	-	-	200	-	200
Foreign exchange gain (loss)	(208)	-	(208)	89	-	89
Loss from equity investment	(171)	-	(171)	(230)	-	(230)
Writedown of long-term strategic and equity investments	(3,016)	3,016 ⁴	-	-	-	-
Total other income (expense)	(2,653)	3,016	363	587	-	587
Income (loss) before income taxes	(9,069)	6,752	(2,317)	1,338	213	1,551
Provision for income taxes	99	252 ⁵	351	374	64 ⁵	438
Net income	$(9,168)	$6,500	$(2,668)	$964	$149	$1,113
Weighted average common shares used
Basic	59,895	59,895	59,895	62,291	62,291	62,291
Diluted	59,895	59,895	59,895	63,318	63,318	63,318
Net income (loss) per share
Basic	($0.15)	$0.11	($0.04)	$0.02	$0.00	$0.02
Diluted	($0.15)	$0.11	($0.04)	$0.02	$0.00	$0.02

¹ Non-GAAP adjustment to exclude the stock-based compensation costs recognized related to stock options and stock appreciation rights granted by the Company, as follows (in thousands):

	Three Months Ended March 31, 2006
Cost of product revenues	3
Cost of services and maintenance revenues	54
Sales and marketing expenses	170
Research and development expenses	60
General and administrative expenses	330
617

² Non-GAAP adjustment to exclude the amortization of purchased intangibles, as follows (in thousands):

	Three Months Ended March 31
	2006	2005
Cost of product revenues	207	195
Sales and marketing expenses	17	18
	224	213

³ Non-GAAP adjustment to exclude restructuring charges and adjustments related to the Company's unused Santa Clara, California facility.

⁴ Non-GAAP adjustment to exclude the write-down of the Company's investments in Asia Digital Media Limited and Ohana Wireless, Inc.

⁵ Tax effect of Non-GAAP adjustments related to the stock-based compensation costs and amortization of purchased intangibles.

ENTRUST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
	Mar 31, 2006	Dec 31, 2005
	(unaudited)
ASSETS
Cash and marketable investments	$84,648	$82,453
Accounts receivable, net of allowance for doubtful accounts	17,054	20,341
Other current assets	3,581	4,782
Property and equipment, net	2,720	2,677
Purchased product rights and purchased non-contractual customer relationships, net	1,863	2,086
Goodwill, net	12,713	12,713
Long-term equity investment	443	3,630
Other long-term assets, net	1,612	1,767
Total assets	$124,634	$130,449
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accruals	$12,703	$13,634
Accrued restructuring charges	27,913	25,949
Deferred revenue	23,353	20,895
Long-term liabilities	840	859
Total liabilities	64,809	61,337
Shareholders' equity	59,825	69,112
Total liabilities and shareholders' equity	$124,634	$130,449

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