Press Releases

Entrust Reports in Line Q4 Results

Revenue Growth Driven by Government & Secure Desktop Application Wins

23 Jan 2003

  • Revenues of $24.7 million - an increase of 3% sequentially and a decrease of 13% year-over-year
  • Software revenues of $9.7 million - an increase of 14% sequentially
  • Extended Government vertical represented 51% of software revenues, up from 23% in Q3, 2002
  • Average purchase at $124 thousand - an increase of 28% sequentially and 53% year-over-year
  • Net loss of $0.07 per share - an improvement of $0.01 sequentially and $0.02 year-over-year
  • Pro forma loss from operations of $0.06 per share - versus $.07 loss in Q3, 2002 and $.04 loss in Q4, 2001
  • Balance sheet - $131.4 million in cash and marketable securities, with no debt

DALLAS - Entrust, Inc. [Nasdaq: ENTU], a leading global provider of Internet security solutions and services, today announced financial results for the quarter ended December 31, 2002.  The fourth quarter, 2002 pro forma loss from operations applicable to common shares (note "a") was $4.0 million, or $0.06 per share. This represents a $0.6 million, or $0.01 per share, improvement from the third quarter of 2002 and compares to a $0.04 pro forma per share loss in the fourth quarter of 2001.  For the fiscal year ended December 31, 2002, the pro forma loss from operations applicable to common shares (note "a") was $15.5 million, or $0.24 per share, versus a 2001 full year pro forma loss from operations of $42.5 million, or $0.67 per share, an operating earnings improvement of $27.0 million, or $0.43 per share.

Entrust recorded a fourth quarter, 2002 net loss of $4.6 million, or $0.07 per share, compared to a Q3, 2002 net loss of $5.2 million, or $0.08 per share, and a Q4, 2001 net loss of $5.7 million, or $0.09 per share. For the fiscal year ended December 31, 2002, Entrust reported a net loss of $17.9 million, or $0.28 per share, compared to a net loss of $543.7 million, or $8.57 per share, over the corresponding twelve-month period of 2001.

Revenues were $24.7 million in the quarter ended December 31, 2002, a 3% increase from the third quarter of 2002 and a 13% decrease from the fourth quarter of 2001.  Revenues for the twelve months ended December 31, 2002 were $102.7 million, a 13% decrease from the comparable twelve-month period of 2001.

"I'm pleased with our improved fourth quarter and total year performance. In the quarter, we experienced our first quarter-over-quarter software revenue growth in the year while continuing to improve our cost structure.  We exit the year in excellent financial shape with the broadest portfolio and the lowest cost structure among Internet security providers," said Bill Conner, Entrust chairman, president and chief executive officer. "Overall, 2002 was a pivotal year for our customers and Entrust.  We invested in key technologies and markets for our future despite the tough economic environment."

Business Metrics:

  • The top five transactions increased to 18% of revenues from 15% last quarter.  Entrust's five largest customers included: the US Department of Treasury, the State of Illinois,  two major European telecom service providers and a European federal government agency. 
  • The average customer purchase was $124,000, up 28% from Q3, 2002, and up 53% from Q4, 2001.  These increases were driven primarily by larger deals to the top five accounts and the increased purchase size from new customers.  Total software transactions were 76, down 12% sequentially, but new customer wins grew almost 200 percent.
  • Entrust's extended government vertical increased to 51% of software revenue, up from 23% in Q3.  During 2002 Entrust continued its leadership role in the U.S. federal government through its role with such initiatives as the Federal Bridge Certification Authority. 
  • The financial vertical continued to be an important global revenue driver in 2002 accounting for approximately 10% of fiscal year software revenue.  Keys to revenue contribution were deployments by on-line banks and global financial network providers.
  • Revenues from sales of digital certificate-based Secure Desktop Applications generated over 45% of the company's fourth quarter revenue.  The performance in the extended government vertical underpinned the revenue gains over the third quarter of 2002.  Key applications included Secure Desktop, Secure VPN, Secure e-mail and Secure e-forms with digital signatures. 
  • Secure Web Portal contributed approximately 36% of total software revenue in the quarter.  Entrust TruePass, Entrust's thin-client digital certificate solution for secure Web portals, was a key contributor to Secure Web Portal's continued success this quarter.  This was in line with the total year performance of 37% of total software revenue for the fiscal year 2002, an increase of 95% from 2001. 
  • Entrust Secure VPN solution increased 240% for the total fiscal year 2002 over 2001.  Basic Web certificates and Web server certificates increased over 100% year-over-year.  Growth in these two solutions was driven primarily by enterprise purchases of cost-effective solutions that generate return on investment over a short payback period.
  • Entrust experienced its highest quarter of support and maintenance revenue and renewals since the company began.  Underpinning this improvement was the ease of deployment of Entrust's solutions, quality of software and the responsiveness and professionalism of the customer support team. 

Financial Metrics:

  • Global revenues: $24.7 million in revenues includes $9.7 million in software revenues, or 39% of total, and $15.0 million in services, or 61% of total.  The $24.7 million in revenues compares to $24.0 million in Q3, 2002, generating a $0.7 million, or 3%, sequential increase.  The $9.7 million in software revenues represents an increase of $1.2 million or 14% over Q3, 2002.  Versus the fourth quarter of 2001, which included $3.6 million in software revenues for the Government of Canada's Secure Channel project, total revenues decreased by $3.7 million or 13%.  The market mix for the fourth quarter of 2002 was 69% in North America and 31% Internationally, which is in-line with the 12 month performance for 2002. 
  • Gross margins: Gross margins, at 62% in the fourth quarter of 2002, were down one-percentage point both sequentially from Q3, 2002 and year-over-year.  The decrease sequentially resulted from the lower professional services utilization.  Year-over-year, the one point decrease resulted from lower software revenue volume.  Services margins in the fourth quarter of 2002 are 2% points better than Q4, 2001.
  • Operating expenses: Pro forma operating expenses of $19.9 million in the fourth quarter of 2002 (sales & marketing, research & development, administrative) improved by $1.7 million, or 8%, from Q4, 2001 and improved a further $0.5 million, or 2%, sequentially from Q3, 2002.
  • Earnings: The pro forma loss from operations (note "a") of $4.0 million, or $0.06 per share, represents a $0.6 million, or $0.01 per share, improvement from Q3, 2002.  The GAAP net loss of  $4.6 million, or $0.07 per share, compares to a year-over-year $5.7 million net loss, or $0.09 per share.
  • Asset management: Entrust closed the quarter with $131.4 million in cash and marketable securities and no debt.  The year-end DSO (days sales outstanding) was 81 versus 70 as at the third quarter of 2002, and 75 as at the fourth quarter of 2001.  The slight DSO increase resulted primarily from a shift in revenue linearity.

"We closed 2002 with a solid quarterly performance on a number of fronts.  Quarterly revenue increased sequentially for the first time this year driven by software strength into the Extended Government vertical.  For the fourth successive quarter of 2002, we again drove down operating expenses which contributed to improved earnings this quarter," said David Thompson, Entrust chief financial officer. "We exit 2002 with a quarter of revenue momentum, a vastly improved business model in both efficiency and operating costs, and a strong balance sheet.  Our financial foundation, coupled with our industry-leading Internet security solutions, provides a solid platform for success in the upcoming year."

Technology and Industry Highlights:

  • Entrust introduced the newest extension to its Secure Messaging Solution.  The Entrust Messaging Server provides server-based, end-to-end secure messaging capabilities that extends secure communications to external businesses, government agencies and customers. http://www.entrust.com/news-archives/files/10_15_02.htm
  • Entrust released Entrust Verification Server 6.0. The Entrust Verification Server 6.0 is the first in a planned series of releases under the Entrust Secure Transaction Platform, a new product portfolio that delivers security to enable Web services transactions and server-based applications.  As an integral part of the portfolio, the Entrust Verification Server 6.0 delivers the ability to audit Web services transactions through centralized digital signatures and time stamping capabilities.  http://www.entrust.com/stp/verification.htm
  • The Department of Energy (DOE) announced the deployment of a government-wide license of a digital signature solution developed by Entrust. In a public ceremony, DOE Secretary Spencer Abraham and Office of Management and Budget Director Mitch Daniels digitally signed and validated an Adobe digital copy of the Department of Energy's (DOE's) e-Government Strategic Action Plan. http://www.entrust.com/news-archives/files/10_16_02.htm
  • Entrust announced the planned release of Entrust GetAccess 7.0 software, which expands Entrust's current breadth of authentication methods to include the Security Assertions Markup Language (SAML) 1.0.  In addition to SAML support, Entrust GetAccess 7.0 includes support for Microsoft .NET Passport, and features enhanced entitlements and n-level delegation capabilities.  http://www.entrust.com/news-archives/files/11_12_02.htm
  • Entrust released Entrust Certificate Administrator Service 2.0. The Entrust Certificate Administrator Service is a self-service tool that streamlines the procurement and administration of Entrust Web Server Certificates easily and cost effectively. The Entrust Certificate Administrator Service provides organizations with services that deliver a cost-effective method of ordering and managing large-scale deployments of Web Server Certificates quickly and efficiently. http://www.entrust.com/certificate_services/index.htm
  • In November 2002, IBM announced that Entrust was selected as an inaugural partner in its Application Enablement Program (AEP).  AEP is a foundation element of IBM's e-business on demand strategy and provides ISVs a vehicle to offer their applications as on demand solutions.  The initial Entrust solution in this program is Entrust Authority Hosted Solution, which enables governments, and businesses to rapidly enable secure solutions, including secure web portal, secure messaging, and secure e-forms.  This solution will be jointly marketed by IBM and Entrust to the Government and Healthcare industries.  Entrust is currently the only partner in the program to bring security solutions to market thru IBM's e-business hosting services.   http://www.entrust.com/news-archives/files/11_14_02.htm
  • The Organization for the Advancement of Structured Information Standards (OASIS) approved the Security Assertion Markup Language (SAML) v1.0 as an OASIS Open Standard, its highest level of ratification. A critical component to the Web Services framework, SAML enables businesses to more easily and securely interact with other organizations by providing a standard way of defining user authentication and entitlements, and attributing information in XML documents that are exchanged between sites. Entrust is a founding member of the OASIS Security Services Technical Committee, which spearheaded SAML's development. http://www.entrust.com/news-archives/files/11_06_02_2.htm
  • Entrust awarded Entrust Ready status for interoperability with Entrust Internet Security Solutions to ActivCard, PureEdge Solutions, Datakey and Chrysalis-ITS among others. To see all Entrust Ready partners, visit: http://www.entrust.com/partners/index.htm.

Conner added, "Building off the team's accomplishments in 2002, Entrust plans to leverage our strong financial position and leading product portfolio to return to profitability.  In 2003, we will continue to seize the opportunities in the global government and enterprise markets."

Financial Outlook:

For the upcoming first quarter of 2003, Entrust is currently targeting a pro forma operating loss per share (note "a") in the range of $0.05 to $0.02 per share on revenues in a targeted range of $24 to $26 million.  The corresponding GAAP net loss per share is in a targeted range of $0.06 to $0.03.  Entrust is targeting a cash and marketable securities position at March 31, 2003 of $130 million or greater, while continuing the share buyback program announced and commenced in the third quarter of 2002.

Entrust will host a Webcast featuring Chairman and CEO Bill Conner and CFO David Thompson discussing Entrust's Q4 results on Thursday January 23, 2003 at 8:00 a.m. Eastern.
For a listen-only Webcast please visit: http://webevents.broadcast.com/cnw/entrust20030121, about 15 minutes prior to the call, to register, download and install any necessary audio software. The Webcast will be accessible until for 90 days at the above Internet address.

This press release contains forward-looking statements relating to Entrust's projected revenue range, pro forma operating loss per share and net loss per share for the first quarter of 2003 and Entrust's cash and marketable securities position as of the end of Q1, 20032, and 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, lower demand for technology products and services, general difficulties in leveraging the restructured organization, difficulties in  working with third parties, software errors or bugs, competitive pressures, governmental regulation, terrorist activities, general economic conditions 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 Quarterly Report on Form 10-Q for the quarter  ended September 30, 2002. 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.

Note (a): Pro-forma earnings (loss) from operations applicable to common shares is defined as reported net earnings applicable to common shares before "Acquisition Related Costs" (acquired in-process R&D and the amortization of purchased product rights, goodwill and other intangibles), restructuring and other related special non-recurring charges.

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