Tumbleweed Announces Results for First Quarter of 2004 Revenue
Increases 75%; Operations Generate $1.5 Million of Cash REDWOOD
CITY, Calif., April 26 /PRNewswire-FirstCall/ -- Tumbleweed(R)
Communications Corp. , a leading provider of Secure Internet
Messaging products for enterprises and government agencies, today
reported results for the first quarter ended March 31, 2004.
Financial Results Tumbleweed reported Q1-04 revenue of $10.1
million, up 75% from $5.8 million in Q1-03; a net loss of $531,000,
compared to a net loss $2.5 million in Q1-03; and pro forma net
income, which excludes certain items as described below, of
$134,000, compared to a pro forma net loss of $2.4 million in
Q1-03. Net loss per share was $(0.01). Pro forma net income per
share was $0.00. Cash balances were $23.4 million as of March 31,
2004, a decrease of $2.0 million from December 31, 2003 reflecting
the net cash payment of approximately $3.3 million related to the
acquisition of Corvigo, Inc. "We are pleased to report another
quarter of revenue growth and positive cash-flow from operations,"
said Jeffrey C. Smith, Chief Executive Officer of Tumbleweed. "The
first quarter was eventful for us as we further enhanced our suite
of secure messaging products with the addition of a Linux-based
anti-spam appliance due to the Corvigo acquisition. We believe we
are increasingly well positioned in the Secure Internet Messaging
market and we are optimistic about our growth opportunities for the
remainder of the year." "The financial results for the first
quarter were consistent with our stated goals for revenue,
operating results, cash, and earnings per share," said Tim Conley,
Chief Financial Officer of Tumbleweed. "Operations produced
positive cash flow of $1.5 million in the quarter, our accounts
receivable collection improved to result in 75 days sales
outstanding, and deferred revenue increased $900,000." New Customer
Wins In the first quarter, Tumbleweed signed 300 customer contracts
including 55 with new customers. Additionally, more than 100
customers entered into contracts for repeat business, exclusive of
maintenance renewals that were also strong. Tumbleweed now has over
900 enterprise customers. Reflecting the company's continued focus
on high-growth markets, revenue contribution of Tumbleweed's core
email security and anti-spam products increased as a percentage of
overall revenue versus the fourth quarter of 2003. Financial
Services Several leading financial institutions did business with
Tumbleweed in the quarter, including American Express Business
Services, Northern Trust, Imperial Capital Bank, Premier West Bank,
Banco Comercial Portuguese and Star One Credit Union. Healthcare
and Pharmaceuticals During the first quarter, Tumbleweed expanded
its business in the healthcare market, including licenses with
Merck & Co., UCSF Medical Center, Highmark Inc., Manor Care
Inc., Health Net, Aventis Pharmaceutical, Harriman Jones Medical
Group, Medical Center of Central Georgia, Quintiles Transnational
and ImClone Systems. Other Industries Tumbleweed expanded its
business in other industries during the quarter, signing
significant contracts with IBM, ADP, the United States Marine
Corps, the United States Department of Energy, the College Board,
John Marshall Law School, Delco Remy, Magazine Publishers of
America, SureWest Communications, PaperPak USA, the State of Iowa
Dept of Human Services, SAIC, NTT Information Sharing, BACS, and
the Executive Office of the President of the United States. Corvigo
Acquisition On March 18th, Tumbleweed acquired Corvigo, the
best-of-breed Linux-based anti-spam appliance vendor, headquartered
in Palo Alto, California. Corvigo's MailGate product is a secure
Linux-based appliance that, according to InfoWorld magazine, offers
industry-leading spam capture along with ease-of-use. Corvigo also
brings to Tumbleweed an established network of resellers to address
the small and mid-tier market demand for anti-spam solutions.
Expanding Distribution Tumbleweed's channel of Value Added
Resellers is picking up momentum. Already twenty-five strong,
Tumbleweed announced plans to significantly expand its reseller
program and continue to attract the top security experts and
distributors. "Our reseller channel is strategic to our business,"
said Jeffrey C. Smith. "We are investing significant marketing and
sales resources in 2004 to grow our distribution capability." In
the quarter, Tumbleweed expanded its global presence by acquiring
its European distributor, Incubator. This brings Tumbleweed a
strong European presence for both sales and support of Tumbleweed
products. Market Trends and Product News Demand for anti-spam
solutions continues to be strong, particularly in small and
mid-tier enterprises. The acquisition of Corvigo gives Tumbleweed a
"best-of-breed" anti-spam appliance product family at a price-point
and ease-of-use that is ideal for the small and mid-tier market.
With the addition of the Corvigo MailGate appliance, Tumbleweed can
now offer the enterprise a two-tier defense against Email threats.
By combining the MailGate appliance with the Email Firewall,
Tumbleweed now offers enterprises the most complete and effective
multi-tier email security suite on the market. Email "phishing"
fraud continues to be a growing problem. Tumbleweed's Message
Protection Lab has found that phishing attacks on the Internet are
growing at a rate of 40% to 50% every month. Tumbleweed shipped the
Tumbleweed Email Authentication Engine in March, allowing
enterprises to have a turn-key defense against phishing attacks and
email fraud. "Email Authentication is the long-term solution to a
myriad of email security threats, including spam, phishing attacks,
and even viruses," said John Thielens, Chief Technology Officer,
Tumbleweed. "The Email Authentication Engine gives customers a
simple, turn-key defense against all such threats, while providing
support for all leading Email authentication standards including
SPF and S/MIME." Patents Tumbleweed settled the lawsuit it brought
against Ticketmaster and entered into four new patent license
agreements in the first quarter, which brought the total of
Tumbleweed patent licensees to eighteen. In addition, the company
acquired from Entrust U.S. Patent No. 6,393,568, titled "Encryption
and Decryption System and Method with Content Analysis Provision."
"We continue to focus our patent enforcement strategy on business
competitors," said Bernard J. "Barney" Cassidy, General Counsel of
Tumbleweed. Tumbleweed Outlook for the Second Quarter of 2004 *
Tumbleweed currently estimates that revenues in the second quarter
of 2004 will be between $10.5 million and $11.5 million. * The pro
forma loss for the second quarter of 2004, is currently expected to
range from $1.1 million to $1.9 million, or $(0.02) to $(0.04) per
share. Per share amounts are based on 48.0 million shares. * GAAP
net loss is currently expected to be approximately $3.2 million to
$4.0 million, or $(0.07) to $(0.08) per share. GAAP net loss
includes merger related and other costs of approximately $900,000
and the amortization of intangibles and stock compensation of
approximately $1.2 million. * Cash balances are expected to remain
in excess of $20 million at the end of the second quarter. "As
previously announced, we expect the Corvigo merger to be accretive
in the back-half of the year," said Tim Conley. "In Q2 we will
focus on integrating the businesses and investing in our
distribution capabilities." Conference Call Information Tumbleweed
will host a conference call with the investment community at 2:00
PM PDT/5:00 PM EDT today to discuss these results. The call can be
accessed by dialing (800) 267-9517 and giving the conference name,
"Tumbleweed." This call will be made available to all interested
parties via a live webcast on Tumbleweed's website at
http://www.tumbleweed.com/, under Company heading, Investor
Relations. A replay of the conference call will be available on the
Tumbleweed website, http://www.tumbleweed.com/, or by telephone
commencing two hours after the call and for the following five
business days by dialing (800) 642-1687 and entering the following
reservation number: 6655675. Pro Forma Information The pro forma
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.
Management believes that the presentation of non-GAAP pro forma
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 pro forma
information, along with GAAP information, in evaluating
Tumbleweed's expenses. The pro forma operating results are
presented for supplemental informational purposes only for
understanding Tumbleweed's operating results. The pro forma results
should not be considered a substitute for financial information
presented in accordance with generally accepted accounting
principles, and may be different from pro forma measures used by
other companies. A reconciliation between net income (loss) on a
GAAP basis and pro forma net income (loss) is provided in the
attached financial statements. About Tumbleweed Communications
Corp. Tumbleweed is a leading provider of secure Internet
communication software and appliances for enterprises and
government agencies. By making Internet communications secure,
reliable and automated, Tumbleweed's anti-spam email firewall,
secure file transfer, secure email, and identity validation
solutions help customers significantly reduce the cost of doing
business. Tumbleweed products are used to communicate with millions
of end-users and tens of thousands of corporations. Tumbleweed has
more than 900 enterprise customers, including ABN Amro, Bank of
America Securities, Catholic Healthcare West, JP Morgan Chase &
Co., The Regence Group (Blue Cross/Blue Shield), Society for
Worldwide Interbank Financial Telecommunication (SWIFT), St. Luke's
Episcopal Healthcare System, the US Food and Drug Administration,
and the US Navy and Marine Corps. Tumbleweed Communications was
founded in 1993 and is headquartered in Redwood City, California.
For additional information about Tumbleweed go to
http://www.tumbleweed.com/ or call 650-216-2000. 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 and projections, including
revenue, loss and cash balances for the second quarter and for pro
forma profitability and GAAP net loss thereafter. Tumbleweed's
markets and leadership in those markets, as well as its products,
services, and future 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 15, 2004.
Tumbleweed assumes no obligation to update information contained in
this press release, including for example its guidance regarding
its future performance, which represents the Company's expectations
only as of the date of this release and should not be viewed as a
statement about the Company's expectations after such date.
Although this release may remain available on the Company's website
or elsewhere, its continued availability does not indicate that the
Company is reaffirming or confirming any of the information
contained herein. Tumbleweed Communications Corp. Condensed
Consolidated Balance Sheets March 31, 2004 (in 000s) 03/31/2004
ASSETS (unaudited) 12/31/2003 CURRENT ASSETS Cash and cash
equivalents $23,361 $25,351 Accounts receivable, net 8,300 10,039
Other current assets 1,332 1,068 TOTAL CURRENT ASSETS 32,993 36,458
Goodwill 50,614 13,308 Intangible assets, net 10,008 4,392 Property
and equipment, net 1,746 1,648 Other assets 772 540 TOTAL ASSETS
$96,133 $56,346 LIABILITIES & EQUITY CURRENT LIABILITIES
Accounts payable $886 $250 Current installments of long-term debt
267 267 Accrued liabilities 6,346 6,791 Accrued merger-related and
other costs 1,114 485 Deferred revenue 12,976 11,808 TOTAL CURRENT
LIABILITIES 21,589 19,601 LONG TERM LIABILITIES Long-term debt,
excluding current installments 400 467 Accrued merger-related and
other costs, excluding current portion 465 540 Deferred revenue,
excluding current portion 2,721 2,984 Other long term liabilities
159 159 TOTAL LONG TERM LIABILITIES 3,745 4,150 TOTAL LIABILITIES
25,334 23,751 STOCKHOLDERS' EQUITY Common stock 48 43 Additional
paid-in capital 353,595 313,532 Treasury stock (796) (796) Deferred
stock compensation expense (1,616) (302) Accumulated other
comprehensive loss (601) (585) Accumulated deficit (279,831)
(279,297) TOTAL STOCKHOLDERS' EQUITY 70,799 32,595 TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY $96,133 $56,346 Tumbleweed
Communications Corp. Consolidated Comparative Income Statements
March 31, 2004 (in 000s, except per share data) Three Months Ended
March 31, (unaudited) 2004 2003 REVENUES Product revenue $3,973
$2,629 Service revenue 5,582 2,871 Intellectual property and other
revenue 570 281 NET REVENUE 10,125 5,781 COSTS OF REVENUES Cost of
product and service revenue 1,224 1,413 Amortization of intangible
assets 244 -- COST OF REVENUES 1,468 1,413 GROSS PROFIT 8,657 4,368
OPERATING EXPENSES Research & Development 2,913 1,963 Sales
& Marketing 4,708 3,441 General & Administrative 1,322
1,422 Stock-based compensation 82 34 Amortization of intangible
assets 339 -- TOTAL OPERATING EXPENSES 9,364 6,860 OPERATING LOSS
(707) (2,492) Other Income, net 171 14 NET LOSS BEFORE TAXES (536)
(2,478) Provision for income taxes (5) 4 NET LOSS $(531) $(2,482)
Shares Used in Computing Basic and Diluted Net Loss per Share
43,254 30,494 BASIC AND DILUTED NET LOSS PER SHARE $(0.01) $(0.08)
Reconciliation to Pro Forma Net Income (Loss) NET LOSS $(531)
$(2,482) Stock-based compensation 82 34 Amortization of intangible
assets 583 -- PRO FORMA NET INCOME (LOSS) $134 $(2,448) Shares Used
in Computing Basic Pro Forma Net Income (Loss) per Share 43,254
30,494 Shares Used in Computing Diluted Pro Forma Net Income (Loss)
per Share 51,663 30,494 PRO FORMA BASIC NET INCOME (LOSS) PER SHARE
$0.00 $(0.08) PRO FORMA DILUTED NET INCOME (LOSS) PER SHARE $0.00
$(0.08) DATASOURCE: Tumbleweed Communications Corp. CONTACT: Tim
Conley, VP Finance & CFO of Tumbleweed Communications Corp.,
+1-650-216-2066, ; or Charles Messman or Todd Kehrli, both of MKR
Group LLC, +1-626-395-9500, for Tumbleweed Communications Corp. Web
site: http://www.tumbleweed.com/
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