Tumbleweed� Communications Corp. (NASDAQ:TMWD), an industry leader
in managed file transfer and email security, today reported
financial results for its fourth quarter and full year ended
December 31, 2007. Revenue was $14.3 million for the quarter ended
December 31, 2007, compared to $16.7 million for the same period
last year. Product revenue for the fourth quarter of 2007 was $6.0
million, compared to $8.7 million in the fourth quarter of 2006.
Service revenue for the fourth quarter of 2007 was $8.3 million,
compared to $7.6 million in the fourth quarter of 2006. Revenue
from core managed file transfer and email security products
increased to $11.9 million in the fourth quarter of 2007 from $9.8
million in the fourth quarter of 2006. Revenue from the identity
validation product decreased to $2.3 million in the fourth quarter
of 2007 from $6.5 million in the fourth quarter of 2006. Non-GAAP
net loss for the fourth quarter of 2007 was $1.9 million, or
$(0.04) per share, compared to a non-GAAP net loss of $242,000, or
$(0.00) per share, in the fourth quarter of 2006. Non-GAAP results
exclude stock-based compensation expense and intangible asset
amortization expense of $1.2 million for the fourth quarter of 2007
and $1.3 million for the fourth quarter of 2006. On a GAAP basis,
net loss for the fourth quarter of 2007 was $3.1 million, or
$(0.06) per share, compared to a net loss of $1.5 million, or
$(0.03) per share, for the fourth quarter of 2006. A reconciliation
of GAAP and non-GAAP results is presented in the tables below. Cash
and cash equivalents were $26.3 million at December 31, 2007
compared to $27.0 million at September 30, 2007 and $30.5 million
at December 31, 2006. For the full year 2007, Tumbleweed reported
revenue of $57.5 million, compared to $62.0 million for the full
year 2006. Revenue from core managed file transfer and email
security products increased to $49.0 million in the fourth quarter
of 2007 from $43.5 million in the fourth quarter of 2006. Revenue
from the identity validation product decreased to $7.1 million in
the fourth quarter of 2007 from $14.8 million in the fourth quarter
of 2006. Non-GAAP net loss for the full year 2007 was $5.0 million,
or $(0.10) per share, compared to non-GAAP net income of $2.2
million, or $0.04 per share, for the full year 2006. Non-GAAP
results exclude stock-based compensation expense and intangible
asset amortization expense of $5.7 million for the full year 2007
and $7.1 million for the full year 2006. On a GAAP basis, the net
loss for the full year 2007 was $10.8 million, or $(0.21), compared
to a net loss of $4.9 million, or $(0.10) for the full year 2006.
�2007 was a transformational year for Tumbleweed,� said James P.
Scullion, Chief Executive Officer of Tumbleweed. �To maximize our
growth opportunities and extend our leadership in our target
markets, we refined our product strategy, expanded our indirect
sales model, and implemented operational changes throughout the
company. While a transformation like this is difficult, and we saw
a decline in our Validation Authority business, the investments we
made in 2007 will be a critical part of our success in 2008 and
beyond. I am optimistic that we will be able to expand our product
offerings and increase our addressable markets, and I believe that
we are well-positioned to achieve solid growth with improved
operating margins in 2008.� �I�m pleased that we are already
beginning to reap the benefits of our updated strategy,� continued
Scullion. �In the fourth quarter, we achieved a 21% increase in
revenue from our core managed file transfer and email security
products, and our channel program gained momentum throughout the
year. In the fourth quarter alone we added more than a dozen key
partners globally, and during this period nearly half of the
company�s orders from commercial customers were driven via our
channel partners. Internationally, the investments we made are
paying off, with last quarter�s contribution from our international
operations providing 14% of total revenue. And to support our key
operations initiatives, we significantly enhanced the leadership of
our product and sales teams.� Recent Highlights Tumbleweed�s core
product revenues grew 21% for the quarter ended December 31, 2007
compared to the same period last year. These core products include
award-winning SecureTransportTM, Secure MessengerTM and MailGate� ,
a suite of managed file transfer and email security solutions that
enable businesses to safely utilize the internet for
mission-critical communications. Tumbleweed�s channel program
delivered 48% of the company�s non-renewal commercial bookings for
the fourth quarter of 2007 compared with 26% for the fourth quarter
of 2006. With a focus on recruiting and enabling leading partners
in 2007, Tumbleweed increased the contribution from its channel
business throughout the year. In North America, new partners
include DynTek, Secure Links, Conscious Security, Enterprise Air,
TRM, Prosys Information Systems, GTC Systems, and Sirius Computer
Solutions. Internationally, new partners include Trustco and Blue
Cube in the UK, Rainbow Technologies Components and Systems (RTCS)
in Russia, ParaRede in Portugal, Primex in Hong Kong, and Nortech
Infonet, Softcell Technologies, and Texport Technologies in India.
Tumbleweed further strengthened its product development
organization with the appointment of Jorge Rodriguez as senior vice
president of product development. Rodriguez will oversee day-to-day
engineering operations while playing a hands-on role in delivering
on the company's product vision and roadmap. Tumbleweed was
positioned in the Leaders Quadrant of the 2007 Gartner Email
Encryption Magic Quadrant. The Gartner Magic Quadrant for Email
Encryption looks at email encryption products securing email
content data and attachments. According to Gartner, �leaders� are
vendors who are performing well today, have a clear vision of
market direction, and are actively building competencies to sustain
their leadership position in the market. Tumbleweed was awarded the
FIPS 140-2 security certification by the U.S. Government for the
security kernel contained in its SecureTransport�, MailGate� and
Validation Authority� products. This certification meets the
toughest data security standard for all U.S. government agencies.
Financial Outlook First Quarter of 2008: Tumbleweed currently
expects total revenue for the first quarter of 2008 to be between
$13.0 million and $14.5 million. Non-GAAP results are expected to
range from $(0.01) to $(0.03) per share. Non-GAAP results exclude
expected costs for stock-based compensation expense and intangible
asset amortization expense of a combined $(0.03) per share for the
first quarter of 2008. GAAP results are expected to range from
$(0.04) to $(0.06) per share. Per share amounts are based on an
estimated 51.2 million shares outstanding. Conference Call
Information Tumbleweed management will host a conference call on
Tuesday, February 5, 2008 at 2:00 p.m. PST (5:00 p.m. EST) to
discuss the fourth quarter and full year 2007 results. The call can
be accessed by dialing (800) 218-0204 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. PST
on February 5, 2008 through February 19, 2008 by dialing (800)
405-2236 and entering pass code 11106213#. The conference call and
supplemental financial information will also be available on the
investor relations portion of the Tumbleweed website. Safe Harbor
Statement Except for the historical information contained herein,
the matters discussed in this press release may constitute
forward-looking statements that could cause actual results to
differ materially from those currently expected, particularly with
respect to Tumbleweed�s financial outlook for the first quarter of
2008 (including estimated revenue, loss, and loss per share on both
a GAAP and a non-GAAP basis), as well as Tumbleweed�s beliefs about
the transformation of the company, expansion of its product
offerings, increase in its addressable markets, improved operating
margins, and its future growth and success. 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, Form 10-Q filed November 7, 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), an industry leader in managed file transfer and
email security, provides enterprise-class solutions to
organizations of all sizes. Tumbleweed's innovative products enable
organizations to effectively manage and protect business-critical
Internet communications, with capabilities that span secure file
transfer, encryption, data loss prevention, and email security.
Tumbleweed has more than 3,200 customers worldwide, including
blue-chip companies across an array of industries such as
Technology, Retail, Finance, Healthcare, Manufacturing, Consumer
Packaged Goods, Telecom, Energy, 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. Tumbleweed's award-winning products build on
14 years of R&D and 27 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,
SecureTransport, Secure Messenger and MailGate are either
registered trademarks or trademarks of Tumbleweed Communications
Corp. in the United States and/or other countries. All other
trademarks are the property of their respective owners. Tumbleweed
Communications Corp. Condensed Consolidated Statements of
Operations December 31, 2007 (in 000s, except per share data) � � �
� � Three Months Ended Twelve Months Ended December 31, December
31, (unaudited) (unaudited) 2007 2006 2007 2006 REVENUES Product
revenue $ 5,957 $ 8,731 $ 22,529 $ 28,683 Service revenue 8,259
7,597 33,559 29,664 Intellectual property revenue � 44 � � 366 � �
1,367 � � 3,647 � NET REVENUE � 14,260 � � 16,694 � � 57,455 � �
61,994 � � COST OF REVENUE Cost of product revenue (1) 1,473 1,092
5,694 4,316 Provision for excess inventory - 933 164 933 Cost of
service revenue (1) 1,953 1,901 7,672 6,750 Amortization of
intangible assets � 234 � � 234 � � 936 � � 1,467 � � GROSS PROFIT
10,600 12,534 42,989 48,528 � OPERATING EXPENSES Research and
development (1) 3,537 3,833 15,107 14,836 Sales and marketing (1)
6,842 8,016 28,575 28,002 General and administrative (1) 2,608
2,308 10,157 10,622 Amortization of intangible assets 39 204 305
1,041 Restructuring costs � 930 � � - � � 930 � � - � � TOTAL
OPERATING EXPENSES � 13,956 � � 14,361 � � 55,074 � � 54,501 � �
OPERATING LOSS (3,356 ) (1,827 ) (12,085 ) (5,973 ) Other income,
net � 294 � � 363 � � 1,336 � � 1,206 � � NET LOSS BEFORE TAXES
(3,062 ) (1,464 ) (10,749 ) (4,767 ) Provision for income taxes �
15 � � 56 � � 16 � � 115 � � NET LOSS $ (3,077 ) $ (1,520 ) $
(10,765 ) $ (4,882 ) � BASIC AND DILUTED NET LOSS PER SHARE $ (0.06
) $ (0.03 ) $ (0.21 ) $ (0.10 ) � RECONCILIATION TO NON-GAAP NET
INCOME (LOSS) NET LOSS $ (3,077 ) $ (1,520 ) $ (10,765 ) $ (4,882 )
Stock-based compensation expense 888 840 4,504 4,605 Amortization
of intangible assets � 273 � � 438 � � 1,241 � � 2,508 � NON-GAAP
NET INCOME (LOSS) $ (1,916 ) $ (242 ) $ (5,020 ) $ 2,231 � �
NON-GAAP BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $ (0.04 ) $
(0.00 ) $ (0.10 ) $ 0.04 � � WEIGHTED AVERAGE SHARES: BASIC 51,124
50,310 51,028 50,007 DILUTED 51,124 50,310 51,028 50,007 � � (1)
Stock-based compensation expense is classified as follows: � Cost
of product revenue $ - $ 3 $ - $ 9 Cost of service revenue 37 36
142 142 Research and development 186 287 946 1,256 Sales and
marketing 164 69 1,205 569 General and administrative � 501 � � 445
� � 2,211 � � 2,629 � $ 888 � $ 840 � $ 4,504 � $ 4,605 �
Tumbleweed Communications Corp. Condensed Consolidated Balance
Sheets December 31, 2007 (in 000s) � � 12/31/2007 12/31/2006 ASSETS
(unaudited) (unaudited) � CURRENT ASSETS Cash and cash equivalents
$ 26,299 $ 30,511 Accounts receivable, net 13,074 12,506 Other
current assets � 1,733 � � 1,938 � � TOTAL CURRENT ASSETS � 41,106
� � 44,955 � � Goodwill 48,074 48,074 Intangible assets, net 233
1,470 Property and equipment, net 2,038 1,820 Other assets � 385 �
� 612 � TOTAL ASSETS $ 91,836 � $ 96,931 � � LIABILITIES &
EQUITY CURRENT LIABILITIES Accounts payable $ 820 $ 1,808 Accrued
liabilities 6,795 7,522 Accrued merger-related and other costs - 97
Deferred revenue � 20,996 � � 20,003 � � TOTAL CURRENT LIABILITIES
� 28,611 � � 29,430 � � LONG TERM LIABILITIES Deferred revenue,
excluding current portion 5,401 4,728 Other long term liabilities �
13 � � 63 � � TOTAL LONG TERM LIABILITIES � 5,414 � � 4,791 � �
TOTAL LIABILITIES � 34,025 � � 34,221 � � STOCKHOLDERS' EQUITY
Common stock 52 51 Additional paid-in capital 365,155 359,238
Treasury stock (796 ) (796 ) Accumulated other comprehensive loss
94 29 Accumulated deficit � (306,694 ) � (295,812 ) � TOTAL
STOCKHOLDERS' EQUITY � 57,811 � � 62,710 � � TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY $ 91,836 � $ 96,931 �
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