Financials

2008 First-Quarter Financial Statements

ENTRUST, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended
March 31st

2008

2007

Revenues:

Product

$ 9,630

$ 9,144

Services and maintenance

16,208

15,419

Total revenues

25,838

24,563

Cost of revenues:

Product

2,362

1,808

Services and maintenance

7,855

7,448

Amortization of purchased product rights

345

332

Total cost of revenues

10,562

9,588

Total gross profit

15,276

14,975

Operating expenses:

Sales and marketing

8,703

9,093

Research and development

4,742

5,349

General and administrative

3,116

3,260

Total operating expenses

16,561

17,702

Loss from operations

(1,285)

(2,727)

Other income (expense):

Interest income

131

180

Foreign exchange gain (loss)

20

247

Loss from equity investment

-

(77)

Gain on sale of long-term strategic investments

18

-

Total other income (expense)

169

350

Loss before income taxes

(1,116)

(2,377)

Provision for income taxes

64

52

Net loss

$(1,180)

$(2,429)

Weighted average common shares used
Basic

61,165

60,387

Diluted

61,165

60,387

Net loss per share

Basic

($0.02)

($0.04)

Diluted

($0.02)

($0.04)

ENTRUST, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

Mar 31, 2008

Dec 31, 2007

ASSETS

Cash and marketable investments

$22,822

$20,485

Accounts receivable, net of allowance for doubtful accounts

19,212

20,773

Other current assets

3,375

4,079

Property and equipment, net

1,313

1,490

Purchased product rights and other purchased intangible assets, net

10,938

11,543

Goodwill

60,214

60,214

Long-term strategic and equity investments

91

91

Other long-term assets, net

3,655

3,479

Total assets

$121,620

$122,154

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable and accruals

$15,451

$16,330

Accrued restructuring charges

17,862

19,266

Deferred revenue

28,898

27,894

Long-term liabilities

778

218

Total liabilities

62,989

63,708

Shareholders' equity

58,631

58,446

Total liabilities and shareholders' equity

$121,620

$122,154

The following supplemental tables provide non-GAAP financial measures used by the company's management to evaluate operational results. The company believes this information may be useful to investors. In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), the company's earnings release contains non-GAAP financial measures that exclude the income statement effects of share-based compensation, amortization of purchase product rights, non recurring restructuring and impairment charges. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

For additional information regarding these non-GAAP financial measures, see the Form 8-K dated April 22, 2008 that Entrust has filed with the Securities and Exchange Commission.

ENTRUST, INC.

SUPPLEMENTAL

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

(in thousands, except per share data)

Three Months Ended,
March 31st

2008

2007

Reconciliation of net loss per GAAP to Non-GAAP income (loss):

GAAP net loss

$(1,180)

$(2,429)

Adjustments for share-based compensation expense:

Cost of revenues

91

67

Sales and marketing

318

289

Research and development

122

197

General and administrative

399

441

Amortization of other purchased intangibles:

Cost of revenues

38

38

Sales and marketing

211

228

Amortization of purchased product rights

345

332

Non-GAAP income loss

$344

$(837)

Reconciliation of net loss per diluted share according to GAAP to Non-GAAP loss per diluted share:

GAAP net loss per diluted share

($0.02)

($0.04)

Adjustments for share-based compensation expense

0.02

0.02

Amortization of other purchased intangibles:

-

-

Amortization of purchased product rights

0.01

0.01

Non-GAAP income (loss) per diluted share

$0.01

($0.01)

Weighted average common shares used

61,165

60,387

Reconciliation of net cash flow from operating activities per GAAP to Non-GAAP cash flow from operations before the net change in restructuring accruals:

GAAP net cash flow from operating activities

$2,488

$(2,544)

Adjustments to exclude the effects of:

Net change in accrued restructuring charges

1,404

1,238

Non-GAAP cash flow from operations before the net change in restructuring accruals

$3,892

$(1,306)
     
Forward Looking Guidance
Earnings Per Share Range

First Half
2008

Full Year
2008

U.S. GAAP measure

($0.02)

$0.01

Adjustments to exclude the effects of amortization of purchased intangible assets

$0.02

$0.03

Adjustments to exclude the effects of expenses related to stock-based compensation

$0.03

$0.06

Non-GAAP figures

$0.03

$0.10

Forward Looking Guidance
Total Quarterly Costs

Q1 2008
(in millions)

U.S. GAAP measure

$26.5

Adjustments to exclude the effects of amortization of purchased intangible assets

$0.6

Adjustments to exclude the effects of expenses related to stock-based compensation

$0.9

Non-GAAP figures

$25.0

Forward Looking Guidance
Cash Flow from Operating Activities

Full Year 2008
(in millions)

U.S. GAAP measure

$4.6

Adjustments to exclude the effects of the net change in accrued restructuring charges

$5.4

Non-GAAP figures

$10.0
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