BlackBerry Ltd (BB) 2004 Q1 法說會逐字稿

Good afternoon. Welcome to the Certicom Corp. fiscal 2004 first quarter results conference call. (OPERATOR INSTRUCTIONS). I would like to advise everyone that this conference call is being recorded, and will turn the conference over to Tracy Wyeth (ph), I.R. representative.

Thank you, Brigette, and good afternoon, everyone. Thank you for joining us. On the call today is Ian McKinnon, President and Chief Executive Officer, who will discuss the company's operations for the first quarter ended July 31, 2003. Herve Seguin, Chief Financial Officer, will then review the company's financial performance. Also with us today is Tony Rosati, Vice President, Marketing, who will be available to answer questions during the Q&A session. Please note that all dollar amounts are in U.S. dollars. This conference call is also being broadcast live on the company's web site at www.certicom.com.

During the course of this conference call, management may make projections or other forward-looking statements regarding future events of the future financial performance of the company. Such statements are predictions and actual events or results may differ materially. Please refer to Certicom's most recent annual report and other documents the company files with the securities commissions in Canada which identify factors that could cause actual results to differ materially from forward-looking statements. I would now like to turn the call over to Ian McKinnon.

Thank you, Tracy, and good afternoon and thank you for joining us. I am now on slide four of our presentation. I will begin today with an overview of our first quarter results. Herve Seguin will then give a Q1 fiscal '04 financial overview, and I will conclude with Certicom's operational highlights, outlook and a brief summary.

Slide 5. Our revenues this quarter continued to be affected by a challenging IT and technology selling environment and general economic uncertainty. Specifically, these conditions have affected our first quarter sales of movian products as companies appear to be deferring the considerable expense of moving from the pilot stage to full deployment. Although we've not been in the reseller market long enough to have historical trends as a form of comparison, we are optimistic about movian sales in future quarters.

Seasonal fluctuations, as well as the lag in first-quarter activity typically experienced by companies in the industry, also accounted for lower revenues. Although we are disappointed with our topline performance, we've continued to significant revenues the company's expenses and maintained a strong cash position. As a result, Certicom is well positioned to act on opportunities when the economy recovers.

We also made solid progress operationally. We advanced our strategy and expanded our Certicom partner network with six new partners, including Fujitsu Siemens Computers, and we strengthened our foothold in the government market, including achieving FIPS validation for our GSE products. So while the selling environment continues to be challenging, we're confident in the steps being taken towards achieving sustainable, profitable growth. I will discuss our first quarter highlights in greater detail later on, but first I will turn the call over to Herve Seguin to provide the Q1 fiscal '04 financial overview.

Thanks, Ian, and good afternoon, everyone. In the first quarter, Certicom reported revenues of $2.2 million, compared to 3.3 million a year ago and 2.4 million in the fourth quarter of fiscal '03. Operating expenses totaled 2.8 million during the quarter, which is in line with previously provided guidance of $2.8-$3.1 million. First quarter operating expenses are down 24 percent from 3.8 million in the same quarter last year and down 12 percent from 3.2 million from the fourth quarter of fiscal '03. The EBITDA loss for the quarter was $600,000, compared with $400,000 in the same quarter last year. The first quarter EBITDA loss was 33 percent smaller than the loss of 800,000 in the fourth quarter of fiscal '03. Net loss for the quarter was $1.6 million, or 5 cents a share. That compares with a net loss of 1.1 million, or 3 cents per share in the same period last year. In the fourth quarter of fiscal '03, the net loss was $2 million, or 6 cents per share. Cash and cash equivalent, marketable securities and our restricted cash totaled $6.8 million at the end of the first quarter. Cash at the end of fiscal FY '03 was $8.8 million. In August, we made a final $300,000 payment for restructuring liabilities, which represents the company's last significant restructuring payment, thereby reducing Certicom's future cash requirements starting in Q2. It is also worth noting that at our current operating level, the company will not need to raise additional cash to meet its operational obligations in the next fiscal year. We have begun to address the issue of our convertible debenture, which matures in August 2004.

I would now like to turn the call back to Ian to discuss our operational highlights.

We're on slide 7 now. Operationally, we made progress on a number of fronts in the first quarter. We signed contracts with three new OEM customers, and where Certicom was competing, we did not lose any significant contracts to competition. We also signed six new channel partners, including four alliance partners and two advantage partners -- Fujitsu Siemens Computers and SRA International.

First, let me talk to about Fujitsu Siemens computers. Fujitsu Siemens is a European computer company that has agreed to add movian to its mobile device offerings. This will allow the company to develop complete end-to-end security solutions to its extensive reseller channels and corporate customers. We are very proud of this contract as it demonstrates Certicom's ability to attract large, world-class partners.

SRA International is a leading provider of informational technology services and solutions to the U.S. Federal Government. Under our agreement, SRA International will include movian GSE (technical difficulty) Certicom products, which will enable it to provide key capabilities for comprehensive and integrated secure, wireless solutions that meet the government's highest security standards.

Also significant to our progress in the government market was our achievement of FIPS validation for our GSE products. Security Builder GSE is the first solution to receive the designation for use on both PC-based and wireless operating systems. It is also the core cryptographic module for all Certicom security applications. As a result (technical difficulty) VPN, GSE, movianCrypt GSE and movianMail GSE meet stringent government security requirements.

In addition to our progress on the government front, we recently announced our support of EDS' extended connected office, or ECO offering, a fully managed enterprise mobility solution with movianVPN. In Q1, we also announced that Certicom has partnered with NetScreen (ph) Technologies in the NetScreen global security alliance. The combined Certicom/NetScreen solution will allow corporations to extend existing NetScreen VPN infrastructures to support wireless devices.

Slide 8. Subsequent to quarter end, we announced that Synchrologic, a current customer, will expand its use of Certicom's products by licensing Certicom's Security Builder GSE Tool Kit to build FIPS validated security into its solutions.

Slide 9. In terms of our outlook, due to the unpredictable economic environment, Certicom no longer provides quarterly guidance for revenue and cash. We are continuing, however, to provide guidance for operating expenses. Excluding unforeseen significant foreign exchange fluctuations, second-quarter operating expenses, including cost of sales for fiscal 2004, are expected to range from $2.8 to $3.1 million.

Slide 10. To sum up, although we're disappointed with our first quarter revenue performance, we believe Certicom has significant competitive strengths and our long-term market outlook remains positive. We have a very strong sales force that is focused on customer needs and increasing market share. With a strong cash position and do not anticipate requiring financings in the next fiscal year for current operating needs. We are well positioned in the U.S. government market and we are continuing to attract blue-chip customers and partners. We appreciate your continuing support as we work to get Certicom on a profitable growth path. Now at this point, we would be pleased to answer any questions that you may have.

(Operator Instructions). Scott Preston, Research Capital.

Good afternoon, gentlemen, it's Jonathan Weisblatt (ph) speaking. Just a couple of questions. Can you guys speak to why DSOs were up in the quarter? And secondly, what is the percentage of receivables over 90 days?

Number one is the DSOs went up primarily because of the skewing of orders in the quarter. The orders typically in this quarter came towards the end of the quarter, so we did not have an opportunity to collect on many of the orders that came in. The percentage of receivables in the over 90 days is minuscule. Eighty-six percent of our receivables are within 90 days.

Can you give us a handle on the government sector? Are there any revenue contributions in this current quarter that you guys have seen?

We don't break out the segments, Jonathan, as you know in our reporting. However, we did talk to the fact that we had expected to see more increases in the sales of movian in general, and that was a slight disappointment for us in the first quarter. Also in general, it's safe to say that we had a number of orders that we had expected to close in Q1 that have slipped into our current quarter. So that is more of a general statement, in terms of some of the areas of difficulty. But to your question on government, we are very, very optimistic that there are a number of pilots that we are working on that are going to come to fruition very shortly within the government. It continues to the one of our hotspots, if you will, in terms of our outlook for the company. And hopefully, we will be able to make some announcements around those commitments in coming months.

On that note, do you see any traction in any of the other verticals that you sell into?

Tony, do you want to comment to that?

In the embedded world, what we are seeing is I guess kind of a trend with our movian products is in the wireless world, just in the general wireless enterprise access, that we are now seeing more demand for the movian products to be embedded with the devices. And so much of our focus has been shifted to actually work with the OEMs of the actual device manufacturers, versus just offering a product, a stand-alone product that you download and deploy after the fact. So we still see that the wireless market is a great vertical, and there is certainly a lot of demand. The challenge in that environment is all of the changing devices. And the whole PDA world, there are smart phones that are coming out, so there are a lot of changes in that environment. We see Palm acquiring Handspring and a lot of new devices coming on the market. So there is certainly some challenges in that world, but we do see quite a few opportunities for movian there.

One other comment I'd add, Jonathan -- we're also seeing an increased level of demand and interest in our FIPS products, and that was a recent announcement, and we are very pleased subsequent to that FIPS validation that we were able to get recently. We have seen a strong level of interest in those products. I think that the Synchrologic contract that we referenced during the presentation is representative of the kind of interest that we are seeing building in the market.

So the FIPS validation is a government validation, and so a lot of our traditional customers who use Certicom's security solutions, such as Security Builder, are now targeting the government market as well, and so they would use in the FIPS validated products.

Thank you very much. Good luck going forward.

(Operator Instructions). Oscar Cabreras (ph), Credit Suisse First Boston.

Good afternoon gentlemen. Just a couple questions, please. in terms of your convertible debenture that's coming due August 2004, how are you planning refinance this or pay for it?

Oscar, what we've been doing at this point is we have been speaking to a number of folks in the investment banking environment to understand what options are available to us at this point. And the ranges go anywhere from refinancing, raising new money to renegotiating with the current holders. So there's all sorts of options open to us. We are evaluating them now and we will be taking some actions on it in the next, I would say, quarter or two. As you know, we still have four quarters before it matures.

In terms of SafeNet (ph), are you guys running into them at all?

I can answer that, Oscar. Actually in a lot of cases, we end up partnering with SafeNet. SafeNet has a lot of intellectual property around hardware, low-level hardware components. And one of the projects that we did work together on was TI -- Texas Instruments has an OMAP (ph) platform, or wireless platform for the cell phone and PDA market. And where we actually worked together with SafeNet on providing components. So, Certicom is 100 percent a software company, offering -- I would say protocol toolkits. So the security functionality does not just cover low-level pieces, it actually covers the entire protocol. So for example, if you are browsing a secure Web site, you use a protocol (technical difficulty) which we provide. Those are pieces that SafeNet does not provide. They provide low-level IP that would be embedded on a chip. So they are different. So we are actually more complementary than the competitors.

Okay, thank you very much.

Mr. McKinnon, there are no further questions at this time.

Thank you for joining us, everybody, today, and we look forward to keeping updated through the rest of the fiscal year. I would also like to mention that our annual general meeting of shareholders will be taking place on Wednesday, October 8, in Toronto. It is being held at 4:15 PM at the TSX Conference Center in the Exchange Tower at 130 King Street East, and I hope many of you can make it. In the meantime, thank you again for joining us today.

Ladies and gentlemen, this concludes your conference call for today. Thank you for participating and please disconnect your lines.