Tumbleweed Press Releases
Tumbleweed Announces 55% Increase in Revenue for Third Quarter of 2003
Demand for Anti-Spam Email Firewall and Secure File Transfer Products Fuels Revenue Growth and Operating Margin Improvement
Redwood City, CA - October 21, 2003 - Tumbleweed® Communications Corp. (NASDAQ:TMWD), a leading provider of mission-critical communication solutions for businesses and government agencies using the Internet, today reported results for the third quarter ended September 30, 2003. Third quarter 2003 results include the first full quarter of merged operations with Valicert, Inc.
Financial Results
Tumbleweed reported Q3-03 revenue of $8.63 million, up from $5.55 million in Q3-02; a net loss of $1.80 million, compared to a net loss $3.44 million in Q3-02; and a pro forma loss, which excludes certain items as described below, of $0.75 million, compared to a pro forma loss of $3.16 million in Q3-02.
Net loss per share was $(0.04). Pro forma net loss per share was $(0.02). Cash balances were $23.0 million as of September 30, 2003.
"Q3 was another solid quarter for Tumbleweed," said Jeffrey C. Smith, Chief Executive Officer of Tumbleweed. "The merger with Valicert has exceeded our expectations. We have begun to execute as a single company, producing better than anticipated revenue, significant growth in our deferred revenue, up over 20% sequentially, as well as improvements in our operating margin. Our business has developed critical mass and is now gaining momentum."
"We remain committed to our goal of achieving pro forma operating profitability in the fourth quarter," Smith added.
"We saw strength across the product line, highlighted by growth in our Email Firewall and SecureTransport revenue. We have also seen initial results from cross selling opportunities and feel that the transition to a combined sales team is progressing well," said John Vigouroux, President and Chief Operating Officer of Tumbleweed. "In fact, we saw our first new customers purchase our secure communications and anti-spam suite of products during the quarter."
"In the third quarter, we exceeded our financial goals for revenue, expenses, operating margins and cash, ending the quarter with $23.0 million in cash," said Tim Conley, Chief Financial Officer of Tumbleweed. "The pro forma loss per share of ($0.02) compared favorably to our prior outlook of ($0.05) to ($0.07) due to increased revenue and lower expenses."
New Customers
In the third quarter, Tumbleweed signed over 300 contracts with customers including 48 new enterprise customers.
Driven by demand for email security including solutions to the spam epidemic on the Internet, sales of Tumbleweed's email firewall continued to grow. The number of new customers who purchased the Tumbleweed anti-spam email firewall product and update service grew 100% from the second quarter, while sales to the existing customer base also continued to be strong. Third quarter customers of Tumbleweed's anti-spam solution included HBO, Prudential, Jockey, L'Oreal USA, Met Life, Best Buy, Travelers, Phelps Dodge, Mass Mutual, Stanford Hospital & Clinics and UNC Health Care System.
In the third quarter, sales of Tumbleweed's SecureTransport enterprise file transfer product were robust. The company gained 19 new enterprise customers including ADP, UBS Financial Services, Blue Cross Blue Shield of Arizona and Horizon Blue Cross Blue Shield.
Third quarter sales of secure email were strong, particularly in the healthcare and financial services markets. These gains were driven by HIPAA and GLBA regulatory compliance requirements in these industries. New customers included Premera Blue Cross, Multicare Health System, Trinity Health Corp., and AmSouth Bank.
Tumbleweed's identity validation solution continued to sell well to the U.S. Department of Defense and it suppliers. The company closed three deals in the quarter in this segment, and believes there are good opportunities for sales growth of identity validation and secure communications software.
Installed Base
Tumbleweed made significant gains in growing its installed base in the third quarter:
- Tumbleweed signed contracts with four Blue Cross Blue Shield customers in the quarter, and now has 21 Blue Cross Blue Shields using its secure communications products.
- Tumbleweed's market share of Fortune 500 grew during the quarter, including the addition of another Fortune 10 enterprise that licensed Tumbleweed's secure communication software. The company now has approximately 100 of the Fortune 500 as customers.
- Tumbleweed closed a significant sale with a major U.S. bank, and is now installed at over 100 financial institutions, including 9 of the 10 largest banks in the U.S..
- Tumbleweed signed contracts with 39 law firms in the quarter, bringing the company's installed base in the legal profession to over 100 firms.
- Tumbleweed's market share of state governments grew during the quarter, signing new contracts with Hawaii and New Mexico, and now includes eleven state governments and agencies. Tumbleweed's deployments also expanded at several federal government agencies, including various branches of the U.S. Department of Defense as well as the U.S. Department of Health and Human Services.
Industry Recognition
Tumbleweed's products and services have gained industry recognition for performance, functionality and value. In the third quarter, the Tumbleweed anti-spam appliance and service received two very favorable reviews in leading industry publications:
- Tumbleweed's anti-spam email firewall was rated as a Top Performer by Network World magazine in a review of 16 enterprise anti-spam products and services.
- Microsoft Certified Professional magazine reviewed Tumbleweed's anti-spam email firewall appliance, and called it the most viable anti-spam solution they've seen to date.
In July, the META Group (Nasdaq: METG) released a comprehensive METAspectrum market study of the leading enhanced file transfer products and vendors. Tumbleweed Communications/Valicert and its SecureTransport product are ranked in the "Leadership" segment of the META Group analysis. In particular, the META Group noted that while Tumbleweed is a newer player in the market, it is the only company in the leader segment poised to move higher in the leader category in the next few years.
Links to the METAspectrum report and the product reviews are available on our website at www.tumbleweed.com.
Patents
In August 2003, the U.S. Patent and Trademark Office granted Tumbleweed U.S. Patent No. 6,609,196, titled "Email Firewall with Stored Key Encryption/Decryption." Originally filed in 1997, the patent describes email management and security components that may be integrated into one solution.
"Our email firewall patent, U.S. Patent No. 6,609,196, is one of the more significant patents we've been granted to date. We have already signed our first licensee for the new patent" said Bernard J. "Barney" Cassidy, General Counsel of Tumbleweed. "To date, ten companies have licensed patents from our growing portfolio, and we plan to continue to enforce our patents when appropriate to protect our intellectual property."
Tumbleweed Outlook for the Fourth Quarter of 2003
- Tumbleweed currently estimates that revenues in the fourth quarter of 2003 will be between $9.0 million and $10.0 million.
- The pro forma net results for the fourth quarter of 2003 are currently expected to range from a loss of $1.0 million to a slight profit, or $(0.02) to $0.00 per share. GAAP net loss is currently expected to be approximately $1.80 million to $0.80 million, or $(0.04) to $(0.02) per share. Per share amounts are based on 41.6 million shares.
- Cash balances are expected to remain in excess of $23.0 million at the end of the fourth quarter 2003.
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) 374-0565 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 www.tumbleweed.com, under Company heading, Investor Relations. A replay of the conference call will be available on the Tumbleweed website, www.tumbleweed.com, or by telephone commencing two hours after the call and for the following two business days by dialing (800) 642-1687 and entering the following reservation number: 3143965.
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 informational purposes only as an alternative 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 mission-critical Internet communications software products for enterprises, financial services, healthcare and government. 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 600 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 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 its ability to achieve pro forma operating profitability in the fourth quarter of 2003), Tumbleweed's markets, products, and services, and the future success of Tumbleweed. 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 June 4, 2003, Form 10-Q filed August 14, 2003, and Form S-3/A filed September 18, 2003.
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.
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Contact:
Atomic PR
James Hannon
415/703-9454
james@atomicpr.com
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Tumbleweed Communications Corp.
All Rights Reserved
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