Entrust Generates 50% Operating EPS Improvement for 3rd Consecutive Quarter by Delivering Best Software Revenue Quarter of the Year

DALLAS, TX - Entrust, Inc. [Nasdaq: ENTU], a leading global provider of enhanced Internet security solutions and services, today reported revenues for the quarter ended December 31, 2001 of $28.4 million, resulting in a pro forma net loss from operations applicable to common shares (note "a") of $0.04 per share.

The pro forma net loss from operations applicable to common shares (note "a") for the fourth quarter of 2001 was $2.5 million, or $0.04 per share, a 50 percent improvement of $2.8 million in operating earnings, or $0.04 per share from the third quarter of 2001. Entrust recorded a GAAP net loss of $5.7 million, or $0.09 per share, compared with a net loss applicable to common shares of $8.3 million, or $0.13 per share, recorded in the third quarter of 2001, and compared with a net loss applicable to common shares of $27.9 million, or $0.44 per share, recorded in the fourth quarter of 2000, an 80% improvement year-over-year.

"We are pleased to close 2001 with our strongest software revenue quarter of the year, which helped drive operating earnings to a per share improvement of 50% over the 3rd quarter," said Bill Conner, Entrust president and chief executive officer. "2001 was clearly a rebuilding year for Entrust, and we are now positioned for a return to growth and breakeven in 2002. Our Secure Web Portal solution, which grew by 60% this quarter, coupled with our targeted marketing programs and a sharp focus on customer needs, strongly positions us to capitalize on the heightened Internet security requirements of Governments and Enterprises worldwide."

Key Financial Metrics
"Our solid financial and commercial performance in the fourth quarter of 2001 represents a major milestone in the recovery plan we announced this past June. Clearly the measures we undertook in 2001 to re-focus Entrust back to key verticals and partners, re-align corporate resources in support of this strategy, and eliminate non-core activities have successfully gained traction and generated financial returns, despite the economic turbulence," said David Thompson, Entrust chief financial officer. "We enter 2002 with our resources and expense base aligned, our balance sheet the strongest it has been all year, and revenue visibility clearer than we have experienced in previous quarters."

Global revenues increased: The $28.4 million global revenues in the fourth quarter increased by $0.4 million from the third quarter of 2001. The increase was driven primarily by stronger software sales of Entrust enhanced Internet security solutions into Government vertical markets both in Europe/Middle East/Africa (EMEA) and in North America. Software revenues increased to $12.6 million, with the fourth quarter representing the highest software revenue quarter for the year 2001. Service revenues stabilized at $15.8 million, essentially equal to the third quarter.

Gross margins increased: Gross margins at 63 percent for the fourth quarter, were up two percentage points from the third quarter of 2001. Strong software revenues and operating efficiency gains in Professional Services drove gross margins to 63 percent, the highest level for any quarter of the year 2001.

Operating expenses decreased: Overall pro forma operating expenses of $21.6 million in the fourth quarter of 2001 (sales & marketing, administrative, research & development) decreased by $2.2 million or 9 percent, from the $23.8 million expenditure level in the third quarter of 2001. The $21.6 million operating expense level in the fourth quarter of 2001 is the lowest quarterly level for the year 2001. Entrust continued to increase investment in global marketing programs targeted to Government and Enterprises in the fourth quarter.

Operating earnings improvement: The pro forma loss from operations of $2.4 million, or $0.04 per share, represents a $2.8 million, or $0.04 per share, improvement from the third quarter of 2001, which equates to a 50% operating EPS improvement. Revenue volume increases, improvement in sales mix, and continued expense management focus helped deliver the operating earnings improvement and operating earnings per share improvement.

GAAP earnings improvement: The fourth quarter fully diluted loss of $5.7 million, or $0.09 per share, represents a $2.6 million, or $.04 per share, improvement from the third quarter of 2001 and a $22.1 million, or $0.35 per share, improvement from the fourth quarter of 2000.

Asset management performance: Days sales outstanding (DSO) at 75 increased by 3 from the previous quarter. The 75 DSO is substantively down from the 87 DSO during the fourth quarter of 2000. The $163 million year-end cash and marketable securities position, with no debt, results from continued working capital diligence and the operating expense efficiencies realized through the June 2001 restructuring.

Thompson added, "For the first quarter of 2002, Entrust is currently targeting a pro forma operating loss (note 'a') per share of $.04, essentially flat to this quarter, on continued modest revenue growth. Entrust is targeting revenue growth in the 3% to 6% range for the first half of 2002 over that delivered in the second half of 2001, when we restructured and re-focused the Company. As the market for enhanced Internet security solutions recovers, and our market and product programs further position the Company, we expect continued financial improvement and progress towards breakeven operating earnings in the second half of 2002."

Quarterly Market & Customer Highlights Include:

• North American software revenue increased 5% sequentially over Q3 2001. This was driven by demand for the Entrust Secure Web Portal solutions from both Governments and Enterprises.
• Software sales in the EMEA region continued strong, attaining $5 million for the quarter. Governments, financial institutions and a Wireless manufacturer primarily drove demand in EMEA, delivering three of Entrust's top five deals in the quarter.
• Sales to existing customers were up significantly in the fourth quarter to 95 transactions compared to 70 in Q3. The increase in transactions resulted primarily from the strength of Entrust's Secure Web Portal marketing programs and solution. Secure Web Portal allows the customer the flexibility to pay for only the pieces of the solution it is currently using. Customers can then add additional security features as its requirements increase.
• Average customer purchase size was $113,000, from $133,000 in Q3. This was driven primarily by the Secure Web Portal marketing program, which allows customers to add security in smaller increments.
• Customer concentration, the measurement of the top five transactions, was 22 percent in the fourth quarter of 2001, an improvement of 21% from the previous quarter, and within Company guidance of 20% to 25%.
• Fifty-six percent of software revenue came from the Government vertical market globally. This represents a 24% increase from Q3 in which government made up approximately 46% of software revenue. International governments fueled growth as they moved forward with their e-government initiatives.
• The Royal Canadian Mounted Police (RCMP), one our top five transactions in the quarter, purchased Entrust TruePass to provide enhanced authentication, verification and privacy for over seventy-five thousand police officers across Canada. Entrust also added two new state agencies, as well as purchases from ViaCode (formerly the UK Post), a second U.K. government agency, the Government of Canada Secure Channel Project and a number of US Federal agencies.
• Major financial services customers included: a large Boston-based provider of financial services, Egg, Experian and SWIFT.

Strategic Partnerships and Channels:

• Entrust announced the formation of a new strategic alliance with beTRUSTed, the e-security business of PricewaterhouseCoopers. The agreement will expand the depth of services offered to both companies' clients worldwide.
• Entrust continued to broaden its global reach through its relationships with System Integrator and Systems Consultants. Entrust closed deals in Q4 2001 with the help and leadership of partners including: EDS, Hewlett Packard, Syntegra, Schlumberger, Compaq, IBM Global Services and Siemens.
• Further progress was made in Asia Pacific as Entrust targets to close the re-capitalization of Entrust Japan by the end of the first quarter of 2002.
• The Entrust Ready Partner program launched a new Web-based, Partner-driven model. The new program supports third-party software, hardware and directory vendors that want to achieve compatibility and interoperability between their commercially available products and the Entrust enhanced Internet security portfolio.

Technology and Industry:

• Introduced a comprehensive solution designed to secure Web portals without compromising performance. The Entrust Secure Web Portal solution helps to address the new economic imperative for protecting Web portals for sensitive data and information exchange within Governments and Enterprises worldwide.
• Entrust's enhanced authorization solution achieved 60 percent software revenue growth over Q3 of 2001. This demand was primarily driven by the launch of a new enhanced version of Entrust's authorization solution, which offers wider platform support, better performance, and greater scalability with new packaging and pricing as part of the Entrust Secure Web Portal solution.
• Entrust unveiled a U.S. Government blueprint to help to enable the United States federal government to conduct Internet-based E-Government and Homeland Security operations with significantly enhanced Internet security. Entrust launched a similar initiative in the UK.
• In October, IDC reported that Entrust's authorization solution had captured over 10% of the Web Single Sign On (SSO) market worldwide, placing it in a strong second place position. IDC went on to say that it believes the Entitlements (Web SSO) market will be the fastest growing segment of the 3As (Authentication, Authorization and Administration) market with a 62% Compound Annual Growth Rate (CAGR).
• In order to further enhance the platform breadth of its public-key infrastructure (PKI), Entrust announced the general availability of Entrust Authority? 6.0 software and the Entrust family of developer toolkits for Compaq Computer Corporation's Tru64 UNIX operating system, providing security, privacy and integrity for online interactions.
• The U.S. National Institute of Standards and Technology (NIST) and Canada's Communications Security Establishment (CSE) awarded Entrust TruePass with the Federal Information Processing Standards and Publication (FIPS) 140-1 validation. Entrust TruePass is the first and only Java application to gain this key security validation from both agencies. Now, agencies within both governments can take advantage of Entrust TruePass to enable users to more securely conduct valuable and sensitive online transactions.
• The National Institute of Standards and Technology (NIST) and the U.S. Department of Commerce recognized CygnaCom Solutions for achievements in electronic security standards research and development. NIST awarded one of only nine Critical Infrastructure Protection (CIP) research grants to CygnaCom Solutions under its CIP Grants Program (CIPGP).

"We are entering 2002 in a strong position," said Conner. "The market traction resulting from our vertical programs, strategic partnerships and industry leading solutions, have positioned Entrust to deliver on the new requirement for enhanced Internet security."

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 rely on 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 revenues for the first half of 2002 and projected pro forma operating loss for the first quarter of 2002, Entrust's ability to achieve breakeven financial results during the second half of 2002, the recapitalization of Entrust Japan in the first quarter of 2002, the expansion of strategic partnership and channel capabilities 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 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 net 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 non-recurring charges, utilizing a 30 percent effective tax rate on net earnings and zero percent on net losses.

Additional Information
Entrust, Inc.
David E. Rockvam
972-713-5824
david.rockvam@entrust.com

Entrust, Inc.
Mark Davis
972-713-5863
mark.davis@entrust.com