Revenue Increase of 22% From Prior Year; Operating Cash Flow of
$2.5 Million REDWOOD CITY, Calif., Oct. 19 /PRNewswire-FirstCall/
-- Tumbleweed(R) Communications Corp. (NASDAQ:TMWD), a leading
provider of email security, managed file transfer, and identity
validation appliance and software products, today reported results
for its third quarter ended September 30, 2005. Tumbleweed reported
Q3-05 revenue of $13.7 million, up 22% from $11.2 million in Q3-04;
a net loss of $538,000 or $(0.01) per share, compared to a net loss
of $2.7 million or $(0.06) per share in Q3-04; and non-GAAP income,
which excludes certain items described below, of $512,000 or $0.01
per share, compared to a non-GAAP loss of $1.1 million or $(0.02)
per share in Q3-04. Cash balances grew by $3.4 million in the
quarter to $25.7 million at September 30, 2005. "I am pleased to
announce another record revenue quarter and continued bottom line
improvement," said Craig Brennan, Chief Executive Officer of
Tumbleweed. "Total revenue increased $2.5 million, or 22% year over
year, including a 30% increase in license revenue. During my first
full quarter with Tumbleweed I spent considerable time meeting
customers, employees, analysts, and investors. I am increasingly
optimistic about the opportunity ahead of us." "Our cash growth was
certainly a highlight for the quarter as our cash position
increased by $3.4 million," said Tim Conley, Chief Financial
Officer of Tumbleweed. "Equally as important, we continued to
demonstrate operating leverage as we expanded our non-GAAP
profitability." Quarterly Highlights The communication security
market is moving beyond point solutions to fully integrated,
comprehensive and scaleable secure communications suites.
Tumbleweed leads the communication security market with the
industry's most comprehensive product portfolio for email and
electronic file exchanges. During the quarter, Tumbleweed hired a
new Executive Vice President of Products, hired a new Vice
President in Asia, and signed two major Channel Partner Agreements
in Europe. In addition, Tumbleweed recently launched a
significantly updated version of its MailGate email security suite
to further enhance its performance and effectiveness. Tumbleweed's
customer base grew again this quarter, with more than 100 new
customers purchasing products during the period. Tumbleweed entered
into more than 500 customer contracts, including 150 with repeat
customers, exclusive of maintenance renewals. Tumbleweed now has
more than 1,400 enterprise and government customers. Fourth Quarter
Financial Outlook * Tumbleweed currently estimates that revenue for
the fourth quarter of 2005 will range from $13.5 million to $14.5
million. * GAAP results for the fourth quarter are currently
expected to range from a loss of $600,000 to income of $200,000, or
$(0.01) to $0.00 per share. * Non-GAAP income for the fourth
quarter is currently expected to range from a $400,000 to $1.1
million, or $0.01 to $0.02 per share. Per share amounts are based
on approximately 49.1 million shares. Non-GAAP loss excludes
amortization of intangible assets and stock-based compensation
expense estimated to be approximately $1.0 million. Conference Call
Information Tumbleweed management will host a conference call at
2:00 p.m. PDT (5:00 p.m. EDT) today to discuss these results. The
call can be accessed by dialing 800-257-7087 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
800-405-2236 and entering the following pass code: 11039692#. 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 amortization of intangible
assets, stock-based compensation expense, and merger-related and
other expenses. 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 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
software and appliances 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
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.
Validation Authority is the world-leading solution for determining
the validity of digital certificates. Tumbleweed's enterprise and
government customers include ABN Amro, Banc of America Securities,
Catholic Healthcare West, JP Morgan Chase & Co., The Regence
Group (Blue Cross/Blue Shield), St. Luke's Episcopal Healthcare
System, the U.S. Food and Drug Administration, the U.S. Department
of Defense, and all four branches of the U.S. 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,
revenue growth and model leverage, markets, products and services.
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 16, 2005 and Form 10-Q filed August 9, 2005.
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 September 30, 2005 (in 000s) 09/30/2005
12/31/2004 ASSETS (unaudited) (unaudited) CURRENT ASSETS Cash and
cash equivalents $25,684 $21,435 Accounts receivable, net 8,979
7,459 Other current assets 996 1,544 TOTAL CURRENT ASSETS 35,659
30,438 Goodwill 48,074 48,074 Intangible assets, net 4,808 7,299
Property and equipment, net 1,182 1,316 Other assets 618 589 TOTAL
ASSETS $90,341 $87,716 LIABILITIES & EQUITY CURRENT LIABILITIES
Accounts payable $242 $324 Current installments of long-term debt
-- 267 Accrued liabilities 5,732 5,006 Accrued merger-related and
other costs 197 775 Deferred revenue 16,693 13,915 TOTAL CURRENT
LIABILITIES 22,864 20,287 LONG TERM LIABILITIES Long-term debt,
excluding current installments -- 200 Accrued merger-related and
other costs, excluding current portion 96 430 Deferred revenue,
excluding current portion 5,183 4,248 Other long term liabilities
136 147 TOTAL LONG TERM LIABILITIES 5,415 5,025 TOTAL LIABILITIES
28,279 25,312 STOCKHOLDERS' EQUITY Common stock 50 48 Additional
paid-in capital 352,933 351,122 Treasury stock (796) (796) Deferred
stock compensation expense (291) (525) Accumulated other
comprehensive loss (573) (651) Accumulated deficit (289,261)
(286,794) TOTAL STOCKHOLDERS' EQUITY 62,062 62,404 TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY $90,341 $87,716 Tumbleweed
Communications Corp. Condensed Consolidated Statements of
Operations September 30, 2005 (in 000s, except per share data)
Three Months Ended Nine Months Ended September 30, September 30,
(unaudited) (unaudited) 2005 2004 2005 2004 REVENUE Product revenue
$6,736 $5,186 $16,449 $13,703 Service revenue 6,593 5,428 19,142
16,144 Intellectual property and other revenue 351 584 2,592 1,516
NET REVENUE 13,680 11,198 38,183 31,363 COST OF REVENUE Cost of
product and service revenue 2,299 1,491 6,082 4,141 Amortization of
intangible assets 510 510 1,530 1,327 GROSS PROFIT 10,871 9,197
30,571 25,895 OPERATING EXPENSES Research and development 3,141
2,860 8,965 8,828 Sales and marketing 6,493 6,487 19,065 17,403
General and administrative 1,481 1,345 4,325 3,689 SUB-TOTAL
OPERATING EXPENSES 11,115 10,692 32,355 29,920 Stock-based
compensation 219 141 448 522 Amortization of intangible assets 321
421 963 1,137 Merger-related and other costs -- 533 (96) 1,002
TOTAL OPERATING EXPENSES 11,655 11,787 33,670 32,581 OPERATING LOSS
(784) (2,590) (3,099) (6,686) NON-OPERATING INCOME Other income
(loss), net 250 (113) 655 141 NET LOSS BEFORE TAXES (534) (2,703)
(2,444) (6,545) Provision for income taxes 4 28 23 29 NET LOSS
$(538) $(2,731) $(2,467) $(6,574) Shares used in computing basic
and diluted net loss per share 48,767 47,955 48,419 46,339 BASIC
AND DILUTED NET LOSS PER SHARE $(0.01) $(0.06) $(0.05) $(0.14)
Reconciliation to non-GAAP net income (loss) NET LOSS $(538)
$(2,731) $(2,467) $(6,574) Stock-based compensation 219 141 448 522
Amortization of intangible assets 831 931 2,493 2,464
Merger-related and other costs -- 533 (96) 1,002 NON-GAAP NET
INCOME (LOSS) $512 $(1,126) $378 $(2,586) NON-GAAP BASIC AND
DILUTED NET INCOME (LOSS) PER SHARE $0.01 $(0.02) $0.01 $(0.06)
DATASOURCE: Tumbleweed Communications Corp. CONTACT: Investors, Tim
Conley, VP Finance & CFO of Tumbleweed Communications Corp.,
+1-650-216-2000, ; or Charles Messman or Todd Kehrli, both of MKR
Group LLC, +1-818-556-3700, , for Tumbleweed Communications Corp.
Web site: http://www.tumbleweed.com/ http://www.mkr-group.com/
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