Entrust Q1, 2002, Results Bolstered by New Customer Wins

23 Apr 2002

• Secure Web Portal revenue increases - up 120 percent, year over year, and 36 percent, sequentially
• Average customer purchase increases - up 84 percent, year over year, and 22 percent, sequentially
• Global revenue of $27.5 million - software revenue up 14 percent over Q1, 2001
• Pro forma operating loss of $.04 per share - a $.28 per share improvement from Q1, 2001
• Strong balance sheet - $151 million in cash & marketable securities, with no debt

DALLAS - Entrust, Inc. [Nasdaq: ENTU], a leading global provider of enhanced Internet security solutions and services, today reported revenues for the quarter ended March 31, 2002 of $27.5 million. This results in a pro forma loss from operations applicable to common shares (note "a") of $0.04 per share, an 87 percent improvement of $17.6 million in pro forma operating earnings, or $0.28 per share from the first quarter of 2001. On a full GAAP basis, Entrust recorded a net loss of $3.3 million, or $0.05 per share, compared with a Q1, 2001, full GAAP net loss adjusted for SFAS No. 142 of $22.0 million, or $0.35 per share. This represents an 85 percent full GAAP earnings improvement year over year.

"Entrust had a solid first quarter of 2002, given the very challenging economic and capital spending environment," said Bill Conner, Entrust chairman, president and chief executive officer. "These results were bolstered by our new customer wins and our Entrust Secure Web Portal Solutions, which grew more than 120 percent, year over year, and 36 percent, sequentially."

Quarterly Market & Customer Highlights in Q1, 2002:

• North American software revenue increased 14 percent over Q1, 2001, driven primarily by demand from both Governments and Enterprises for Entrust Secure Web Portal Solutions.
• Installed base transactions numbered 77 - new customers playing a significantly larger role.
• Average customer purchase was $138,000, up 84 percent from $75,000 in Q1, 2001, and 22 percent from the $113,000 level in Q4, 2001.
• Customer concentration, the measurement of the largest five transactions, was 28 percent.
• The largest five sales included: the Government of Canada Secure Channel Project; a Canadian provincial government health care agency (new account); a multi-national European pharmaceutical company (new account); the China Financial Certificate Authority (CFCA) and a U.S.-based semiconductor manufacturer (new account).
• Major financial services customers also included S.W.I.F.T. and two new online banking customers utilizing Entrust Secure Web Portal Solutions. Additionally, Egg Bank (the world's largest and fastest growing Internet bank) achieved deployment of more than two million customers.
• Government customers also included the California Highway Patrol, whose Internal Affairs division is using Entrust Entelligence? to provide e-mail and file encryption department-wide. Additionally, the Southampton City Council and the Portsmouth Hospitals NHS Trust in the United Kingdom implemented Secure Web Portal Solutions.
• Entrust added two new board members, General Wesley K. Clark and Liener Temerlin, who bring years of experience to the board. Additionally, Bill Conner was appointed chairman.

Technology and Industry Events in Q1, 2002:

• Entrust Authority? software received the "2002 Information Security Excellence Award for Soft Form Factor Authentication" from Information Security Magazine readers.
• Entrust TruePass v.6.0 software was released in April, delivering thin-client enhanced Internet security for smart cards, mobile phones, and PDAs.
• Secure Web Portal Solutions deliver on the requirement for security and performance by combining Entrust GetAccess and Entrust TruePass into a flexible solution, which represented over one-third of the Company's software revenue.
• Entrust launched its Secure E-Forms solutions with Adobe, Accelio and Shana. This solution helps governments and enterprises move paper-based processes to the Internet with an auditable transaction record enabled by digital signatures.

Strategic Partnerships and Channels:

• Entrust strengthened its relationship with Sun by announcing support for the Sun Open Net Environment (Sun ONE) Platform for Network Identity. Our integration provides customers with the option for identity management and Single-Sign-On.
• Entrust announced that it will integrate its Secure Web Portal Solutions with BEA Systems new Security Services Provider Interface (SSPI).
• Entrust and SECOM successfully re-capitalized Entrust Japan, which will market, sell, and support the entire Entrust suite of products.

"Over the next few weeks we are introducing a new product platform that will extend our ability to deliver trust and security to Enterprises and Government transactions," said Conner. "These new solutions, coupled with our current portfolio of award-winning products, represent a significant, global opportunity for Entrust to maintain and grow its leadership position."

Key Financial Metrics in Q1, 2002:

• Global revenues: The $27.5 million in global revenue was underpinned by a 14 percent increase in software license revenue from Q1, 2001.
• Gross margins: Gross margins at 66 percent were up 11 percentage points from Q1, 2001, and up three percentage points from Q4, 2001.
• Operating expenses: Operating expenses of $21.7 million (sales & marketing, general administrative, research & development) improved by $19.1 million over Q1, 2001.
• Earnings: The pro forma loss from operations of $2.7 million, or $0.04 per share, represents a $17.6 million, or $.28 per share, improvement over Q1, 2001.  The GAAP loss of  $3.3 million, or $0.05 per share, represents an $18.7 million, or $.30 per share, improvement from Q1, 2001 and a  $0.01 per share, improvement from Q4, 2001.
• Asset management: Days Sales Outstanding (DSO) at 82 days is significantly down from 118 during Q1, 2001. Entrust remains debt free with over $151 million cash and securities.

Financial Outlook
"We are pleased with the momentum we are seeing with new customer activity generating a year over year 14 percent increase in software revenue," said David Thompson, Entrust chief financial officer. "While customer interest in our solutions remains strong, our ability to drive increased revenue from this interest is dependent on the size, scope and timing of specific opportunities. Entrust's financial and market strength positions us well to capitalize and deliver on these global customer opportunities."

Entrust is currently targeting a pro forma operating loss (note "a") per share range of $.08 to $.04 for Q2, 2002, on revenues in the range of $25 to $28 million. Entrust is targeting quarterly expenses for the second half of 2002 between $29 and $30 million while maintaining its cash and marketable securities position greater than $135 million throughout the year.

Web cast: For a listen-only broadcast of Entrust's Chairman and CEO Bill Conner and CFO David Thompson discussing Entrust's Q1 results, please visit:
http://webevents.broadcast.com/cnw/entrust20020423, about 15 minutes prior to the call, which will take place at 5:00 p.m. Eastern on April 23, to register, download and install any necessary audio software. The Web cast will be accessible until Sunday, July 21, 2002.

About Entrust
Entrust, Inc. (Nasdaq: ENTU) is a leading global provider of enhanced Internet security solutions and services that make it safe to do business and complete transactions over the Internet. Entrust has the industry's broadest set of identification, entitlements, verification, privacy and security management capabilities. More than 1,200 major corporations, service providers, financial institutions and government agencies in more than 40 countries use the privacy, security and trust provided through Entrust's portfolio of award-winning technologies. For more information, please visit www.entrust.com.

This press release contains forward-looking statements relating to Entrust's projected revenue range and pro forma operating loss for the second quarter of 2002,Entrust's targeted expense structure beginning in the third quarter of 2002, Entrust's cash and marketable securities position, Entrust's ability to achieve breakeven financial results during the fourth quarter of 2002 the roll out of Entrust's new product road map, the number of users in the Southampton City Council's SmartPath project and Entrust's ability to deliver on its plan, 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, diversion of managerial resources from operation of the business, difficulties in working with third parties, software errors or bugs, competitive pressures, governmental regulation, 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 Annual Report on Form 10-K for the year ended December 31, 2001. While Entrust may elect to update forward-looking statements at some point 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) and other special non-recurring charges, utilizing a 30 percent effective tax rate on net earnings and zero percent on net losses.