Tumbleweed Communications Reports Financial Results for Second-Quarter 2008

12% Revenue Growth; Non-GAAP Net Income, GAAP Loss Narrows 


REDWOOD CITY, Calif., Aug. 4  /PRNewswire-FirstCall/ -- Tumbleweed(R) Communications Corp. (NASDAQ:TMWD), an industry leader in managed file transfer, email security, and identity validation, today reported financial results for the second quarter ended June 30, 2008, including revenue growth, positive cash flow, and continued expansion of contribution from channel partners.

Revenue for the quarter rose 12 percent to $15.8 million from $14.1 million in second-quarter 2007. Non-GAAP net income for the quarter was $825,000, or $0.02 per share, compared to a non-GAAP net loss of $1.2 million, or $(0.02) per share, for the second quarter of 2007. Non-GAAP results for second-quarter 2008 exclude $3.2 million of expenses consisting of $1.3 million in stock-based compensation and $1.9 million in acquisition-related expenses. Non-GAAP results for the second-quarter of 2007 exclude a total of $1.5 million in expenses for stock-based compensation and the amortization of intangible assets. On a GAAP basis, the net loss for the quarter narrowed to $2.4 million, or $(0.05) per share, from a net loss of $2.7 million, or $(0.05) per share, for the second quarter of 2007. A reconciliation of GAAP and non-GAAP results is presented in the tables below. Due to positive cash flow for the quarter, cash and cash equivalents increased by $700,000 to $29.2 million at June 30, 2008, from $28.5 million on March 31, 2008; and increased by $2.9 million from $26.3 million on December 31, 2007.

Product revenue for the quarter was 15 percent higher at $5.9 million, compared to $5.1 million in second-quarter 2007. Service revenue for the quarter increased to $8.6 million from $8.0 million in second-quarter 2007. Revenue from intellectual property also increased to $1.2 million, compared to $1.0 million in the second quarter of 2007.

Second-Quarter Highlights

-- Channel partners delivered 77 percent of the company's non-renewal commercial bookings for the second quarter of 2008, compared to 37 percent for the second quarter of 2007.

-- Tumbleweed was positioned in the Leaders Quadrant of the newly released "Gartner Magic Quadrant for Managed File Transfer."

-- The U.S. Patent and Trademark Office granted Tumbleweed two patents: U.S. Patent No. 7,380,274, titled "Email Firewall," which describes the enforcement of multiple administrator-selected policies to email traffic entering or leaving an organization; and U.S. Patent No. 7,389,413, titled "Method & System for Filtering Communication," which describes the management of email traffic by comparing attributes of messages to a spam database.

-- Secure Messenger(TM) received a 5-star rating in Secure Computing Magazine's Email Security Group Test.

-- MailGate(R) received a "Recommended" rating in addition to its 5-star rating in Secure Computing Magazine's Email Content Management Group Test.

-- Announced the release of MailGate 3.6, the latest version of the Company's award-winning email security product that adds a number of compelling capabilities for government agencies and regulated industries.

-- Shipped the FTP Analyzer(TM) -- a tool which enables enterprises to monitor File Transfer Protocol (FTP) traffic and identify misuse and unsecured exchanges.

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, email security and identity validation, 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 approximately 3,500 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. Our award-winning products build on 15 years of R&D and 31 security patents in the U.S. alone -- many of which are licensed by other security vendors. More information can be found at http://www.tumbleweed.com/.

Tumbleweed, Secure Messenger, MailGate and FTP Analyzer 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.

   Contact:
   Tumbleweed Communications Corp.
   Matt Clawson, 949-474-4300 (Investor Relations)
   
   or
   SHIFT Communications
   Dan Gould, 415-591-8428 (Media Relations)
   

                      [Financial tables next pages]



                       Tumbleweed Communications Corp.
               Condensed Consolidated Statements of Operations
                                June 30, 2008
                       (in 000s, except per share data)

                                        Three Months Ended  Six Months Ended
                                             June 30,           June 30,
                                            (unaudited)       (unaudited)
                                           2008     2007     2008     2007
  REVENUES
    Product revenue                       $5,892   $5,121  $10,890  $11,018
    Service revenue                        8,640    7,973   16,852   16,995
    Intellectual property revenue          1,226    1,036    3,276    1,132
      NET REVENUE                         15,758   14,130   31,018   29,145
  COST OF REVENUE
  Cost of product revenue (1)              1,627    1,307    2,997    3,063
  Provision for excess inventory               -        -        -      164
  Cost of service revenue (1)              1,578    1,929    3,324    3,828
  Amortization of intangible assets            -      234      201      468
  GROSS PROFIT                            12,553   10,660   24,496   21,622
  OPERATING EXPENSES
    Research and development (1)           4,068    3,859    7,925    7,755
    Sales and marketing (1)                6,470    7,311   13,065   13,928
    General and administrative (1)         2,655    2,516    5,448    5,003
    Amortization of intangible assets          -       44       32      227
    Merger and Acquisition costs           1,903        -    1,903        -
  TOTAL OPERATING EXPENSES                15,096   13,730   28,373   26,913
  OPERATING LOSS                          (2,543)  (3,070)  (3,877)  (5,291)
  Other income, net                          170      381      394      720
  NET LOSS BEFORE TAXES                   (2,373)  (2,689)  (3,483)  (4,571)
    Provision for income taxes                16       21       41       34
  NET LOSS                               $(2,389) $(2,710) $(3,524) $(4,605)

  BASIC AND DILUTED NET LOSS PER SHARE    $(0.05)  $(0.05)  $(0.07)  $(0.09)

  RECONCILIATION TO NON-GAAP NET INCOME
   (LOSS)
  NET LOSS                               $(2,389) $(2,710) $(3,524) $(4,605)
    Stock-based compensation expense       1,311    1,190    2,657    2,300
    Amortization of intangible assets          -      278      233      695
    Merger and Acquisition costs           1,903        -    1,903        -
  NON-GAAP NET INCOME (LOSS)                $825  $(1,242)  $1,269  $(1,610)

  NON-GAAP BASIC NET INCOME (LOSS) PER
   SHARE                                   $0.02   $(0.02)   $0.02   $(0.03)
  NON-GAAP DILUTED NET INCOME (LOSS) PER
   SHARE                                   $0.02   $(0.02)   $0.02   $(0.03)
  WEIGHTED AVERAGE SHARES:
    BASIC                                 51,272   51,052   51,211   50,947
    DILUTED                               53,005   51,052   52,569   50,947

  (1) Stock-based compensation expense
       is classified as follows:

    Cost of service revenue                   45       39       82       65
    Research and development                 300      257      574      560
    Sales and marketing                      288      319      688      539
    General and administrative               678      575    1,313    1,136
                                          $1,311   $1,190   $2,657   $2,300



                     Tumbleweed Communications Corp.
                  Condensed Consolidated Balance Sheets
                              June 30, 2008
                                (in 000s)

                                               6/30/2008         12/31/2007
                 ASSETS                       (unaudited)       (unaudited)

  CURRENT ASSETS
    Cash and cash equivalents                    $29,186           $26,299
    Accounts receivable, net                       9,558            13,074
    Other current assets                           2,588             1,733
       TOTAL CURRENT ASSETS                       41,332            41,106

  Goodwill                                        48,074            48,074
  Intangible assets, net                               -               233
  Property and equipment, net                      1,891             2,038
  Other assets                                       442               385
                  TOTAL ASSETS                   $91,739           $91,836

          LIABILITIES & EQUITY
  CURRENT LIABILITIES
    Accounts payable                                $126              $820
    Accrued liabilities                            8,764             6,795
    Deferred revenue                              21,414            20,996
       TOTAL CURRENT LIABILITIES                  30,304            28,611
  LONG TERM LIABILITIES
    Deferred revenue, excluding current
     portion                                       4,496             5,401
    Other long term liabilities                       14                13
       TOTAL LONG TERM LIABILITIES                 4,510             5,414
       TOTAL LIABILITIES                          34,814            34,025
  STOCKHOLDERS' EQUITY
    Common stock                                      52                52
    Additional paid-in capital                   367,697           365,155
    Treasury stock                                  (796)             (796)
    Accumulated other comprehensive income           190                94
    Accumulated deficit                         (310,218)         (306,694)
       TOTAL STOCKHOLDERS' EQUITY                 56,925            57,811
  TOTAL LIABILITIES & STOCKHOLDERS' EQUITY       $91,739           $91,836


DATASOURCE: Tumbleweed Communications Corp.



CONTACT:  Matt Clawson, Investor Relations, [phone],

; or Dan Gould, Media Relations of SHIFT Communications,

[phone], , both for Tumbleweed Communications

Corp.



Web site:  http://www.tumbleweed.com/ 

Copyright