Tumbleweed Communications Corp. (Nasdaq:TMWD), the industry�s
leading pure play messaging security vendor, today reported
financial results for its first quarter ended March 31, 2007.
Tumbleweed reported revenue of $15.0 million for the quarter ended
March 31, 2007, compared to $15.1 million for the same period last
year. Product revenue for the first quarter of 2007 was $5.9
million, compared to $7.4 million in the first quarter of 2006.
Service revenue for the first quarter of 2007 was $9.0 million, up
from $7.3 million in the first quarter of 2006. Non-GAAP net loss
for the first quarter of 2007 was $368,000, or $(0.01) per share,
compared to non-GAAP net income of $1.5 million, or $0.03 per
share, in the first quarter of 2006. Non-GAAP results exclude
stock-based compensation expense and intangible asset amortization
expense of $1.1 million and $417,000 for the first quarter of 2007,
and $1.7 million and $831,000 for the first quarter of 2006,
respectively. A reconciliation of GAAP and non-GAAP results is
presented in the tables below. On a GAAP basis, net loss for the
first quarter of 2007 was $1.9 million, or $(0.04) per share,
compared to a net loss of $1.0 million, or $(0.02) per share, for
the first quarter of 2006. Results for the first quarter of 2006
included an expense of $164,000 for an additional provision for
excess inventory primarily due to the Company�s decision to
transition certain products to a new hardware platform earlier than
originally anticipated. Cash and cash equivalents were $31.9
million at March 31, 2007 compared to $30.5 million at December 31,
2006. "I am pleased with our overall performance and the results we
achieved in the first quarter," said James P. Scullion, Chief
Executive Officer of Tumbleweed. "We met our expectations for top
and bottom line results, delivered our tenth consecutive quarter of
positive cash flow from operations, and expanded our presence with
customers in our targeted market segments." "We are making
excellent progress towards being the leader in messaging security.
We have an excellent team in place and our execution has been
solid. We continue to enhance our product leadership, and our
customers are excited by the vision we have shared with them. Our
pipeline is the highest it has ever been and is continuing to grow.
I am confident that we are poised to deliver further growth in the
future," concluded Scullion. During the first quarter of 2007,
Tumbleweed continued to expand its customer base and now has 2,700
customers, primarily in the financial services, health care, and
government sectors. Recent Announcements Tumbleweed strengthened
its field operations and sales organizations with the additions of
Nicholas Hulse as Executive Vice President of Worldwide Field
Operations. Hulse brings more than 20 years of sales leadership
experience to Tumbleweed, most recently serving as Senior Vice
President of Sales, Marketing and Channel Development at
FrontBridge Technologies, a company acquired by Microsoft
Corporation. Tumbleweed announced a new, high performance appliance
platform for its MailGate�, SecureTransport� and Validation
Authority� products. The new MailGate appliance is able to process
up to 1.8 million messages per hour, a new messaging security
performance standard and substantial performance advantage over
competing appliances. The Tumbleweed Validation Authority identity
validation appliance, used for real-time validation of digital
certificates, has now increased appliance performance by up to 40
percent. Tumbleweed�s MailGate Secure Messenger� solution received
the Checkmark email security certification from West Coast Labs, a
leading independent testing organization for information security
products. MailGate Secure Messenger solution is part of the
MailGate Product Suite, a family of best-in-breed solutions
enabling businesses to manage inbound and outbound traffic, block
threats, encrypt messages and optimize network performance.
Tumbleweed launched MailGate Desktop Messenger�, streamlining
desktop-to-desktop message encryption for internal corporate users.
Desktop Messenger and Secure Messenger� secure email communications
by utilizing policy based management technology to inspect all
internal and outbound emails and attachments. MailGate�s policies
can automatically identify IT violations set by the organization
based on the content of the email and redirects suspect messages to
a secure and encrypted channel. Financial Outlook Second Quarter of
2007: The Company currently expects total revenue for the second
quarter of 2007 to be between $14.8 million and $16.3 million.
Non-GAAP results are expected to range from a loss of $300,000, or
$(0.01) per share to income of $600,000 or $0.01 per share. GAAP
results are currently expected to range from a net loss of $1.8
million to $900,000, or $(0.04) to $(0.02) per share, after
including an estimated $1.2 million for stock-based compensation
expense and $300,000 for the amortization of intangible assets. Per
share amounts are based on an estimated 51.2 million shares
outstanding. Full Year 2007: The Company expects revenue for the
full year 2007 to be between $70 million and $75 million. Non-GAAP
income for 2007 is expected to be in a range of $0.10 to $0.12 per
share. Including an estimated $4.3 million for stock-based
compensation expense and the amortization of intangible assets of
$1.2 million, GAAP results are expected to be in a range from a
loss of $(0.01) per share to income of $0.01 per share. Per share
amounts are based on an estimated 51.3 million shares outstanding.
Conference Call Information Tumbleweed management will host a
conference call on Thursday, April 26, 2007 at 2:00 p.m. PDT (5:00
p.m. EDT) to discuss the first quarter 2007 results. The call can
be accessed by dialing (800) 366-7417 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 after 5:00 p.m. PDT
on April 26, 2007 through May 7, 2007 by dialing (800) 405-2236 and
entering pass code 11087751#. The conference call and supplemental
financial information will also be available on the investor
relations portion of the Tumbleweed website. 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 for the second quarter of 2007
and for the 2007 year as a whole (including estimated revenue and
revenue growth, income and earnings per share on both a GAAP and a
non-GAAP basis), as well as Tumbleweed�s beliefs about its strategy
and vision, employees, products and product leadership,
productivity, and future growth. 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 14, 2007, and such
filings for the periods referred to above, to be filed
subsequently. Tumbleweed assumes no obligation to update
information contained in this press release. 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
as of a later date. Non-GAAP Information The non-GAAP financial
information included in this press release is not prepared in
accordance with GAAP as it excludes 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 and comparing Tumbleweed�s
performance with that of its competitors. 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. About Tumbleweed Tumbleweed Communications Corp.
(NASDAQ:TMWD), the industry�s leading pure play messaging security
vendor, provides world-class innovative messaging security
solutions for organizations of all sizes. Organizations rely on
Tumbleweed's solutions to securely manage their Internet
communications, spanning email management to file transfers.
Tumbleweed has 2,700 customers worldwide, representing industries
such as Finance, Healthcare, and the U.S. Government. The world�s
most security conscious organizations rely upon Tumbleweed
technology including Bank of America Securities, JP Morgan Chase
& Co., the U.S. Food and Drug Administration, and the U.S.
Department of Defense. Our award-winning products build on 13 years
of R&D and 26 security patents in the U.S. alone � many of
which are licensed by other security vendors. More information can
be found at www.tumbleweed.com. Tumbleweed Communications Corp.
Condensed Consolidated Balance Sheets March 31, 2007 (in 000s) �
3/31/2007� 12/31/2006� ASSETS (unaudited) (unaudited) � CURRENT
ASSETS Cash and cash equivalents $ 31,893� $ 30,511� Accounts
receivable, net 8,817� 12,506� Other current assets � 1,939� �
1,938� � TOTAL CURRENT ASSETS � 42,649� � 44,955� � Goodwill
48,074� 48,074� Intangible assets, net 1,054� 1,470� Property and
equipment, net 2,112� 1,820� Other assets � 584� � 612� � TOTAL
ASSETS $ 94,473� $ 96,931� � LIABILITIES & EQUITY � CURRENT
LIABILITIES Accounts payable $ 1,231� $ 1,808� Accrued liabilities
6,152� 7,522� Accrued merger-related and other costs 26� 97�
Deferred revenue � 19,548� � 20,003� � TOTAL CURRENT LIABILITIES �
26,957� � 29,430� � LONG TERM LIABILITIES Deferred revenue,
excluding current portion 4,334� 4,728� Other long term liabilities
� 74� � 63� � TOTAL LONG TERM LIABILITIES � 4,408� � 4,791� � TOTAL
LIABILITIES � 31,365� � 34,221� � STOCKHOLDERS' EQUITY Common stock
52� 51� Additional paid-in capital 361,630� 359,238� Treasury stock
(796) (796) Accumulated other comprehensive income 46� 29�
Accumulated deficit � (297,824) � (295,812) � TOTAL STOCKHOLDERS'
EQUITY � 63,108� � 62,710� � TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 94,473� $ 96,931� Tumbleweed Communications Corp.
Condensed Consolidated Statements of Operations March 31, 2007 (in
000s, except per share data) � Three Months Ended March 31,
(unaudited) � 2007� � 2006� REVENUES Product revenue $ 5,897� $
7,425� Service revenue 9,022� 7,255� Intellectual property and
other revenue � 96� � 375� NET REVENUE � 15,015� � 15,055� COST OF
REVENUE Cost of product revenue (1) 1,756� 723� Provision for
excess inventory 164� -� Cost of service revenue (1) 1,899� 1,539�
Amortization of intangible assets � 234� � 510� � GROSS PROFIT
10,962� 12,283� � OPERATING EXPENSES Research and development (1)
3,896� 3,420� Sales and marketing (1) 6,617� 6,453� General and
administrative (1) 2,487� 3,356� Amortization of intangible assets
� 183� � 321� � TOTAL OPERATING EXPENSES � 13,183� � 13,550� �
OPERATING LOSS (2,221) (1,267) Other income, net � 339� � 264� �
NET LOSS BEFORE TAXES (1,882) (1,003) Provision for income taxes �
13� � 35� � NET LOSS $ (1,895) $ (1,038) � BASIC AND DILUTED NET
LOSS PER SHARE $ (0.04) $ (0.02) � RECONCILIATION TO NON-GAAP NET
INCOME (LOSS) NET LOSS $ (1,895) $ (1,038) Stock-based compensation
expense 1,110� 1,698� Amortization of intangible assets � 417� �
831� NON-GAAP NET INCOME (LOSS) $ (368) $ 1,491� � NON-GAAP BASIC
AND DILUTED NET INCOME (LOSS) PER SHARE $ (0.01) $ 0.03� � WEIGHTED
AVERAGE SHARES: BASIC 50,841� 49,662� DILUTED 50,841� 49,662� � �
(1) Stock-based compensation expense is classified as follows: �
Cost of product revenue $ -� $ 2� Cost of service revenue 26� 39�
Research and development 303� 259� Sales and marketing 220� 189�
General and administrative � 561� � 1,209� $ 1,110� $ 1,698�
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