Entrust Achieves 2nd Consecutive Profitable Quarter

Revenues were $23.0 million in Q1, 2004, compared to $21.7 million in Q1, 2003 and $23.7 million in Q4, 2003. The company also reported that cash and marketable investments increased by $3.9 million to $108.5 million, with no debt. Business Metrics: - The largest transaction in the quarter involved Entrusts Secure Data solution to an industry-owned financial cooperative that supplies secure, standardized messaging services and interface software to financial institutions in over 200 countries. Four of the top five customers in the quarter purchased Entrusts Secure Identity Management Solution to provide Identity and Access Management for internal and external use. Two of these customers were global governments, one customer was a large auto manufacturer and the other customer was a large investment fund technology infrastructure provider. - Eight out of the top ten software sales in the Q1, 2004 and Q4, 2003 included new product and new solutions that were launched in the middle of 2003. The company also had more new customer software transactions. - Services and Maintenance reached $16.5 million, its highest level in nearly 3 years. Entrust support and maintenance revenue matched Q4, 2003 record levels. This achievement was driven by a record number of customer renewals and customer dollars in the quarter. - Entrust Cygnacom, a business unit which is focused on providing security services to the U.S. Federal government, achieved its highest revenue level ever. Entrust Cygnacom continues to grow its position as a trusted advisor in meeting the security needs of the U.S. Federal government. - U.S. professional services was at its highest revenue in three years reflecting increased activity in the extended enterprise market. - Entrust Certificate Services continued to gain traction in the SSL Web Server certificate market with its sixth consecutive quarter of revenue growth and highest revenue achievement since entering this market in 1999. Entrust Certificate Services is one component of Entrusts total services and maintenance revenue. - The finance vertical accounted for approximately 56% of first quarter software revenue, producing its largest contribution to software revenue in nearly four years. Extended Enterprise accounted for 83% and Extended Government accounted for 17% of the software revenue in the quarter. - The top five software transactions accounted for 17% of Q1, 2004 revenues, which is in line with the companys 2003 average of 18%. The average purchase size this quarter was $103,000, an increase of 12% from Q1, 2003. Enterprise software transactions totaled 62, which is flat compared to Q4, 2003. Financial Metrics - Global revenues: Total revenues increased to $23.0 million in Q1, 2004 compared to $21.7 million in Q1, 2003. This figure includes $6.5 million in software, or 28% of total revenue in the quarter, and $16.5 million in services, or 72% of total revenue in the quarter. The Q1, 2004 software revenue of $6.5 million represents a decrease of 10 percent from Q1, 2003 and a decrease of 17 percent from Q4, 2003. The decrease from Q1, 2003 is primarily due to reduced U.S. government spending in the quarter due to delays in budget approvals. The decrease from Q4, 2003 is attributed to normal first quarter seasonality for the companys software solutions. Services revenue of $16.5 million is the highest Entrust has achieved in nearly 3 years. The increase in services revenues is due to strong demand for Entrusts architecture and deployment services, record support and maintenance revenue and record certificate services revenue. - Gross margins: Gross margins at 63% were up four percentage points from Q1, 2003 and up one percentage point from Q4, 2003. The increase from Q4, 2003 resulted from the improved services margins attained in Q1, 2004.