Tumbleweed Announces Record Revenue in 2004 CEO Announces
Succession Plan REDWOOD CITY, Calif., Jan. 24
/PRNewswire-FirstCall/ -- Tumbleweed(R) Communications Corp.
(NASDAQ:TMWD), a leading provider of e-mail and file transfer
security products for enterprises and government agencies, today
reported results for the fourth quarter and year ended December 31,
2004. Financial Results Tumbleweed reported Q4-04 revenue of $12.1
million, up 20% from $10.0 million in Q4-03; a net loss of
$923,000, compared to a net loss of $703,000 in Q4-03; and non-GAAP
income, which excludes certain items described below, of $102,000,
compared to $334,000 in Q4-03. Net loss per share was $(0.02).
Non-GAAP loss per share was $0.00. For the year 2004, Tumbleweed
reported record annual revenue of $43.4 million, up 42% from $30.6
million in 2003; a net loss of $7.5 million, compared to a net loss
of $9.2 million in 2003; and non-GAAP loss of $2.5 million,
compared to non-GAAP loss of $4.7 million for 2003. Net loss per
share for 2004 was $(0.16). Non-GAAP loss per share was $(0.05).
Cash balances were $21.4 million at December 31, 2004. "2004 was a
record year for Tumbleweed across a variety of metrics, including
revenue, income, cash-flow, product delivery, distribution, and new
customer acquisition," said Jeffrey C. Smith, Chief Executive
Officer of Tumbleweed. "For the year, we added three hundred and
fifty new customers, grew our revenue by more than 40%, and
generated cash from operations." "Fourth quarter results exceeded
our estimates. The investments we made in products and distribution
in the front half of 2004 are beginning to have a positive impact
and provide Tumbleweed with increasing momentum entering 2005,"
said Mr. Smith "In addition to our continued revenue growth, we
increased our cash position by more than $800,000 in the quarter
and were cash flow positive from operations in the quarter and for
the year," said Tim Conley, Chief Financial Officer of Tumbleweed.
"We are pleased to have finished the year with a very solid
quarter." New Customer Wins Tumbleweed continued to execute on its
goal of attracting new customers while expanding penetration into
its existing customer base. During the fourth quarter, Tumbleweed
signed approximately 400 customer contracts including 100 new
customers. Approximately 100 customers entered into contracts for
repeat business, exclusive of maintenance renewals. Tumbleweed has
more than 1,000 enterprise customers. New customers were primarily
in the financial services, health care, and government markets and
included such accounts as Barclays Global Investors, Children's
Hospital Seattle, Collegiate Funding Services, Driscoll Childrens
Hospital, Henry Ford Health System, Intermountain Healthcare, Irish
Life and Permanent, RL Polk & Co., and a division of the U.S.
Army. Demonstrating continued customer satisfaction with its
products, Tumbleweed received orders for expansion of existing
applications or new product deployments from its existing customer
base. These orders were from accounts such as Aetna Life Insurance,
American Express, Bank of America, Express Scripts, Hewitt
Associates, McKesson HBOC, National City Corp., Premera Blue Cross,
TD Waterhouse, the U.S. Navy, Wachovia Bank and Wells Fargo Bank.
Product News and Industry Recognition Tumbleweed continues its
leadership in the communications security market, with new products
shipping in volume in its secure email and file transfer product
lines. Through its growing product portfolio, Tumbleweed has
pioneered the "two-tier" approach to secure communications,
offering multiple solutions within each product line that can be
used together or separately to protect information at various
points within the network. META Group, an industry analyst firm,
recognized Tumbleweed's leadership by giving the Tumbleweed Email
Firewall product its highest product functionality rating in a
report comparing Tumbleweed and its key competitors. * Tumbleweed
Email Firewall was ranked by META Group as having the best email
hygiene functionality in the industry in the firm's "E-Mail Hygiene
Vendor Comparison" META Practice Report. The study focused on the
top twelve companies providing hygiene solutions, comparing them
across twelve key criteria. Tumbleweed received the highest marks
in the overall Product Functionality category and the top scores in
content filtering and secure mail categories. * Tumbleweed
announced the release of Email Firewall 6.1, which includes the
integration of Intent-Based Filtering (IBF) artificial intelligence
into the product, as well as enhancements to system management, the
policy engine and security. Email Firewall 6.1 is especially
significant in that it is the first version of the product to
leverage technology (IBF) gained from the Corvigo acquisition and
accompanying MailGate product line. Now, both Email Firewall and
MailGate share the same best-of-breed technology, employing both
IBF and Dynamic Anti-Spam for pro-active and reactive spam
prevention. * During the quarter, Tumbleweed began production
shipments of MailGate Edge, Tumbleweed's newest addition to its
suite of email security products. MailGate Edge provides
network-level perimeter defense, blocking Directory Harvest Attacks
(DHAs) and Denial of Service (DoS) attacks before the unwanted
traffic enters the corporate network. MailGate Edge complements
Tumbleweed's other email security offerings, offering an additional
"tier" of protection and stopping intrusions before they can
adversely impact network and server performance. * During Q4,
Tumbleweed successfully shipped the appliance version of
SecureTransport, the Company's industry-leading enhanced file
transfer solution, resulting in orders of more then $1.0 million
for this new product. By providing an out-of-the-box, hardened
Linux appliance, SecureTransport makes it even easier for
organizations to move from VPNs, proprietary networks and
home-grown FTP and EDI point products to a standard, easy-to-deploy
and cost-effective solution for securely transferring files.
Expanding Distribution Tumbleweed continued its efforts to expand
its distribution and market reach by adding 14 new channel partners
in the quarter. In addition to selling the MailGate and MailGate
Edge appliances through the channel, Tumbleweed also began working
with select resellers to expand their product depth, successfully
closing its first SecureTransport, Secure Messenger, and Email
Firewall deals through resellers. Patents The U.S. Patent and
Trademark Office granted one additional patent to Tumbleweed during
the quarter, Patent No. 6,826,609 "Policy enforcement in a secure
data file delivery system." Tumbleweed now owns 21 U.S. patents.
Tumbleweed also secured license agreements for its Email Firewall
patents with two additional competitors during the quarter.
Tumbleweed has now licensed its patents to twelve competitors,
reflecting the continued value and relevance of its intellectual
property for the email security industry. First Quarter Financial
Outlook Tumbleweed's outlook for the first quarter of 2005: *
Tumbleweed currently estimates that revenue in the first quarter of
2005 will be between $11.0 million and $12.0 million. This estimate
reflects in part the historically seasonal nature of its business
in which, over the past several years, revenue has been flat or
lower in the first fiscal quarter as compared to the fourth
quarter. * GAAP net loss for the first quarter of 2005 is currently
expected to be approximately $2.0 million to $1.0 million, or
$(0.04) to $(0.02) per share. * The non-GAAP results for the first
quarter of 2005 are currently expected to range from a loss of $1.0
million to breakeven, or $(0.02) to $0.00 per share. Per share
amounts are based on approximately 48.0 million shares. Non-GAAP
loss excludes amortization of intangibles and stock-based
compensation expense estimated to be approximately $1.0 million. *
Cash balances are expected to be at least $20 million at the end of
the first quarter. Transition of Chief Executive Officer Tumbleweed
also announced today that Jeffrey C. Smith, who currently serves as
its CEO and Chairman of the Board of Directors, has notified the
Company that he would like to step down as CEO at such time as the
Company secures a qualified successor. Mr. Smith will remain in the
CEO role until a successor is named, and will continue to serve as
an active Chairman of the Board after the CEO transition occurs. "I
am proud of all we have accomplished since Jean-Christophe Bandini
and I founded the Company in 1993 and am optimistic about
Tumbleweed's future," said Mr. Smith. "With Tumbleweed established
as a market leader in email and file transfer security, I feel it
is the right time to step back from daily operations to spend more
time with my young and growing family." Conference Call Information
Tumbleweed management will host a conference call at 2:00 p.m. PST
(5:00 p.m. EST) today to discuss these results. The call can be
accessed by dialing 800-267-9517 and giving the company name,
"Tumbleweed." Participants are asked to call the assigned number
approximately 10 minutes before the conference call begins. A
replay of the conference call will be available two hours after the
call for the following five business days by dialing 800-642-1687
and entering the following pass code: 3192268. Also, the conference
call will be available over the Internet at
http://www.tumbleweed.com/ in the Investor Relations area of the
site or by going to http://www.mkr-group.com/. Non-GAAP Information
The non-GAAP financial information included in this press release
is not prepared in accordance with generally accepted accounting
principals ("GAAP") as it excludes merger-related and other costs,
amortization of intangible assets and stock-based compensation
expense. Management believes that the presentation of non-GAAP
information may provide useful information to investors because
Tumbleweed has historically provided this information and
understands that some investors consider it useful in evaluating
Tumbleweed's expenses. Management also uses this non-GAAP
information, along with GAAP information, in evaluating
Tumbleweed's expenses. The non-GAAP operating results are presented
for supplemental informational purposes only for understanding
Tumbleweed's operating results. The non-GAAP results should not be
considered a substitute for financial information presented in
accordance with generally accepted accounting principles, and may
be different from non-GAAP measures used by other companies. A
reconciliation between net loss on a GAAP basis and non-GAAP net
loss is provided in the attached financial statements. About
Tumbleweed Communications Corp. Tumbleweed provides security
solutions for email protection, file transfers, and identity
validation that allow organizations to safely conduct business over
the Internet. Tumbleweed offers these solutions in three
comprehensive product suites: MailGate, SecureTransport and
Valicert Validation Authority. MailGate provides protection against
spam, viruses and attacks, and enables policy-based message
filtering, encryption and routing. SecureTransport enables business
to safely exchange large files and transactions without proprietary
software. Valicert Validation Authority is the world-leading
solution for determining the validity of digital certificates.
Tumbleweed's enterprise and government customers include ABN Amro,
Bank of America Securities, Catholic Healthcare West, JP Morgan
Chase & Co., The Regence Group (Blue Cross/Blue Shield), St.
Luke's Episcopal Healthcare System, the US Food and Drug
Administration, the US Department of Defense, and all four branches
of the US Armed Forces. Tumbleweed was founded in 1993 and is
headquartered in Redwood City, Calif. For additional information
about Tumbleweed go to http://www.tumbleweed.com/ or call
650-216-2000. Safe Harbor Statement Tumbleweed cautions that
forward-looking statements contained in this press release are
based on current plans and expectations, and that a number of
factors could cause the actual results to differ materially from
the guidance given at this time. These factors are described in the
Safe Harbor statement below. Except for the historical information
contained herein, the matters discussed in this press release may
constitute forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially
from those projected, particularly with respect to Tumbleweed's
financial outlook, markets, products, services, as well as its
ability to successfully undertake a CEO transition. In some cases,
forward-looking statements can be identified by terminology such as
"may," "will," "should," "potential," "continue," "expects,"
"anticipates," "intends," "plans," "believes," "estimates," and
similar expressions. For further cautions about the risks of
investing in Tumbleweed, we refer you to the documents Tumbleweed
files from time to time with the Securities and Exchange
Commission, particularly Tumbleweed's Form 10-K filed March 15,
2004 and Forms 10-Q filed May 10, 2004, August 12, 2004 and
November 9, 2004. Tumbleweed assumes no obligation to update
information contained in this press release, including for example
its guidance regarding its future performance, which represents
Tumbleweed's expectations only as of the date of this release and
should not be viewed as a statement about Tumbleweed's expectations
after such date. Although this release may remain available on
Tumbleweed's website or elsewhere, its continued availability does
not indicate that Tumbleweed is reaffirming or confirming any of
the information contained herein. Tumbleweed Communications Corp.
Condensed Consolidated Balance Sheets December 31, 2004 (in 000s)
12/31/2004 12/31/2003 ASSETS (unaudited) (unaudited) CURRENT ASSETS
Cash and cash equivalents $21,435 $25,351 Accounts receivable, net
7,459 10,039 Other current assets 1,544 1,068 TOTAL CURRENT ASSETS
30,438 36,458 Goodwill 48,074 13,308 Intangible assets, net 7,299
4,392 Property and equipment, net 1,316 1,648 Other assets 589 540
TOTAL ASSETS $87,716 $56,346 LIABILITIES & EQUITY CURRENT
LIABILITIES Accounts payable $324 $250 Current installments of
long-term debt 267 267 Accrued liabilities 5,006 6,791 Accrued
merger-related and other costs 775 485 Deferred revenue 13,915
11,808 TOTAL CURRENT LIABILITIES 20,287 19,601 LONG TERM
LIABILITIES Long-term debt, excluding current installments 200 467
Accrued merger-related and other costs, excluding current portion
430 540 Deferred revenue, excluding current portion 4,248 2,984
Other long term liabilities 147 159 TOTAL LONG TERM LIABILITIES
5,025 4,150 TOTAL LIABILITIES 25,312 23,751 STOCKHOLDERS' EQUITY
Common stock 49 43 Additional paid-in capital 351,121 313,532
Treasury stock (796) (796) Deferred stock compensation expense
(525) (302) Accumulated other comprehensive loss (648) (585)
Accumulated deficit (286,797) (279,297) TOTAL STOCKHOLDERS' EQUITY
62,404 32,595 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $87,716
$56,346 Tumbleweed Communications Corp. Condensed Consolidated
Statements of Operations December 31, 2004 (in 000s, except per
share data) Three Months Twelve Months Ended Ended December 31,
December 31, (unaudited) (unaudited) 2004 2003 2004 2003 REVENUES
Product revenue $5,925 $5,369 $19,628 $16,342 Service revenue 5,790
4,008 21,934 12,648 Intellectual property and other revenue 360 670
1,876 1,605 NET REVENUE 12,075 10,047 43,438 30,595 COSTS OF
REVENUES Cost of product and service revenue 1,971 918 6,112 4,894
Amortization of intangible assets 510 216 1,837 750 GROSS PROFIT
9,594 8,913 35,489 24,951 OPERATING EXPENSES Research and
development 2,735 2,554 11,563 9,127 Sales and marketing 5,722
4,730 23,125 15,857 General and administrative 1,630 1,681 5,319
6,170 SUB-TOTAL OPERATING EXPENSES 10,087 8,965 40,007 31,154
Stock-based compensation expense 118 42 640 166 Amortization of
intangible assets 321 306 1,458 532 Amortization of in-process
research and development -- -- -- 100 Merger-related and other
costs 76 473 1,078 2,909 TOTAL OPERATING EXPENSES 10,602 9,786
43,183 34,861 OPERATING LOSS (1,008) (873) (7,694) (9,910)
NON-OPERATING INCOME (EXPENSE) Other income (expense), net 72 175
213 752 NET LOSS BEFORE TAXES (936) (698) (7,481) (9,158) Provision
for income taxes (13) 5 16 29 NET LOSS $(923) $(703) $(7,497)
$(9,187) Shares used in computing basic and diluted Net loss per
share 48,082 42,006 46,777 36,007 BASIC AND DILUTED NET INCOME
(LOSS) PER SHARE $(0.02) $(0.04) $(0.16) $(0.26) Reconciliation to
Non-GAAP Net Income (Loss) NET LOSS $(923) $(703) $(7,497) $(9,187)
Stock-based compensation expense 118 42 640 166 Amortization of
intangible assets 831 522 3,295 1,282 Amortization of in-process
research and development -- -- -- 100 Merger-related and other
costs 76 473 1,078 2,909 NON-GAAP NET INCOME (LOSS) $102 $334
$(2,484) $(4,730) NON-GAAP BASIC AND DILUTED NET INCOME (LOSS) PER
SHARE $0.00 $0.01 $(0.05) $(0.13) DATASOURCE: Tumbleweed
Communications Corp. CONTACT: Charles Messman, or Todd Kehrli, both
of MKR Group, LLC, +1-818-556-3700, , both for Tumbleweed
Communications Corp.; or Tim Conley, VP Finance & CFO of
Tumbleweed Communications Corp., +1-650-216-2066, Web site:
http://www.mkr-group.com/ Web site: http://www.tumbleweed.com/
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