Financials

2007 First-Quarter Financial Statements

ENTRUST, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended
March 31st

2007

2006

Revenues:

Product

$ 9,144

$6,578

Services and maintenance

15,419

14,521

Total revenues

24,563

21,099

Cost of revenues:

Product

1,808

1,944

Services and maintenance

7,448

7,041

Amortization of purchased product rights

332

207

Total cost of revenues

9,588

9,192

Total gross profit

14,975

11,907

Operating expenses:

Sales and marketing

9,093

7,513

Research and development

5,349

4,240

General and administrative

3,260

3,675

Restructuring charges and adjustments

-

2,895

Total operating expenses

17,702

18,323

Loss from operations

(2,727)

(6,416)

Other income (expense):

Interest income

180

742

Foreign exchange gain (loss)

247

(208)

Loss from equity investment

(77)

(171)

Writedown of long-term strategic and equity investments

-

(3,016)

Total other income (expense)

350

(2,653)

Loss before income taxes

(2,377)

(9,069)

Provision for income taxes

52

99

Net loss

$(2,429)

$(9,168)

Weighted average common shares used
Basic

60,387

59,895

Diluted

60,387

59,895

Net loss per share

Basic

($0.04)

($0.15)

Diluted

($0.04)

($0.15)

ENTRUST, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

Mar 31, 2007

Dec 31, 2006

ASSETS

Cash and marketable investments

$20,789

$22,527

Accounts receivable, net of allowance for doubtful accounts

21,282

21,117

Other current assets

3,058

2,904

Property and equipment, net

2,106

2,721

Purchased product rights and purchased non-contractual customer relationships, net

13,254

13,843

Goodwill

60,214

60,214

Long-term strategic and equity investments

91

169

Other long-term assets, net

4,290

4,321

Total assets

$125,084

$127,816

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable and accruals

$14,738

$20,268

Accrued restructuring charges

23,280

24,518

Deferred revenue

28,279

23,575

Long-term liabilities

218

231

Total liabilities

66,515

68,592

Shareholders' equity

58,569

59,224

Total liabilities and shareholders' equity

$125,084

$127,816

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 April 25, 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,
March 31st

2007

2006

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

GAAP net loss

$(2,429)

$(9,168)

Adjustments for share-based compensation expense:

Cost of revenues

67

57

Sales and marketing

289

170

Research and development

197

60

General and administrative

441

330

Amortization of other purchased intangibles:

Cost of revenues

38

-

Sales and marketing

228

17

Amortization of purchased product rights

332

207

Restructuring charges and adjustments

-

2,895

Write-down of long-term strategic and equity investments

-

3,016

Tax effect on Non-GAAP adjustments

-

(252)

Non-GAAP loss

$(837)

$(2,668)

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

GAAP net loss per diluted share

($0.04)

($0.15)

Adjustments for share-based compensation expense

0.02

0.01

Amortization of other purchased intangibles:

-

-

Amortization of purchased product rights

0.01

-

Restructuring charges and adjustments

-

0.05

Write-down of long-term strategic and equity investments

-

0.05

Tax effect on Non-GAAP adjustments

-

-

0.03

0.11

Non-GAAP loss per diluted share

($0.01)

($0.04)

Weighted average common shares used

60,387

59,895

Forward Looking Guidance
Earnings Per Share Range

First Half
2007

Full Year
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

Forward Looking Guidance
Total Quarterly Costs

2007

U.S. GAAP measure

$27.2

Adjustments to exclude the effects of amortization of purchased intangible assets

$0.6

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

$1.1

Non-GAAP figures

$25.5
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