Tumbleweed Communications Corp. (NASDAQ:TMWD), a leading provider of messaging security products, today reported financial results for its third quarter ended September 30, 2006.
Tumbleweed reported record revenue of $45.3 million for the first nine months of 2006, an increase of 19% year-over-year, in addition to generating record non-GAAP income of $2.5 million, or $0.05 per share, for the first nine months of the year. The GAAP net loss for the first nine months of 2006 was $3.4 million, which included stock-based compensation expense of $3.8 million under SFAS 123R and $2.1 million for the amortization of intangible assets.
"I am pleased with the strong financial results for the first nine months of 2006," said James P. Scullion, Chief Executive Officer of Tumbleweed. "We have delivered record revenue and non-GAAP profitability, while also focusing on our strategic direction and making changes needed to position us for future growth," continued Scullion.
"In the third quarter, we saw an increase in orders for our MailGate email security suite that we believe reflects our introduction of new product releases. Recently, we announced key executive appointments to our management team; Jim Flatley as our Executive Vice President of Field Operations and Dr. Taher Elgamal as our Chief Technology Officer. Our management team is now complete and we are in a position to increase our sales reach, expand our product portfolio, and improve brand awareness, all of which support our goal of becoming the leader in the messaging security marketplace," concluded Scullion.
Tumbleweed reported revenue in Q3-06 of $15.1 million, compared to $13.7 million in Q3-05; a net loss of $1.4 million, compared to a net loss of $538,000 in Q3-05; and non-GAAP income of $172,000 in Q3-06, compared to non-GAAP income of $512,000 in Q3-05. Net loss per share for Q3-06 was $(0.03) and Q3-05 was $(0.01). Non-GAAP income per share for Q3-06 was $0.00, compared to $0.01 in Q3-05.
For the first nine months of 2006, Tumbleweed reported record revenue of $45.3 million, compared to $38.2 million for the first nine months of 2005; a net loss for ththe first nine months of 2006 of $3.4 million, compared to a net loss of $2.5 million in the first nine months of 2005; and record non-GAAP income for the first nine months of 2006 of $2.5 million, compared to non-GAAP income of $378,000 for the first nine months of 2005. Net loss per share for the first nine months of 2006 was $(0.07), compared to $(0.05) for the first nine months of 2005. Non-GAAP income per share for the first nine months of 2006 was a record $0.05, compared to non-GAAP income per share of $0.01 in the first nine months of 2005.
The net loss and the net loss per share amounts in 2006 include the effect of the adoption of Statement of Financial Accounting Standards ("SFAS") 123 (revised 2004), Share-Based Payment ("SFAS 123R") related to stock-based compensation. During the three and nine months ended September 30, 2006, Tumbleweed recorded stock-based compensation expense of $1.1 million and $3.8 million, respectively.
Q3-06 and Year-to-Date Highlights:
- Revenue of $15.1 million in Q3-06, an increase from $13.7 million in Q3-05.
- Revenue increased to a record $45.3 million in the first nine months of 2006, an increase of 19% over the first nine months of 2005.
- Non-GAAP income in Q3-06 was $172,000, as compared to $512,000 in Q3-05. Q3-06 includes approximately $325,000 in expense related to changes in Sales management.
- Non-GAAP income in the first nine months of 2006 increased to $2.5 million, or $0.05 per share, from non-GAAP income of $378,000, or $0.01 per share for the first nine months of 2005.
- Cash increased by $1.6 million during Q3-06 to $30.4 million at September 30, 2006
- Cash flow from operations was $1.9 million in Q3-06. Tumbleweed has achieved positive cash flow from operations in each of the past eight quarters, for a total of $9.4 million during that period.
- Tumbleweed added 300 new customers in Q3-06, bringing its total active customer count to approximately 2,300.
Jim Flatley Appointed as Executive Vice President, Field Operations In July, Tumbleweed announced the appointment of Jim Flatley as Executive Vice President, Field Operations, responsible for sales, professional services, channels and global support. Mr. Flatley most recently served as the Executive Vice President of Sales, Services & Marketing at Network General Corporation. He has held executive sales positions at Aspect Communications, Plumtree Software, Siebel, and AT&T, after starting his career at IBM.
Taher Elgamal Appointed as Chief Technology Officer
Tumbleweed earlier this month announced that Dr. Taher Elgamal joined Tumbleweed as its Chief Technology Officer. As CTO, Dr. Elgamal will lead the development and technology initiatives for the Company and will work closely with customers in developing next generation secure messaging products. Dr. Elgamal was formerly the Chief Scientist at Netscape and has served on the many boards of technology companies, including RSA and Phoenix Technologies. Dr. Elgamal is recognized as the inventor of Secure Socket Layer technology -- the standard used today for ecommerce across the Internet.
- Tumbleweed launched its new MailGate 6500 email security appliance. This advanced appliance product is targeted for large corporate enterprises and can process over one million messages per hour and offers a comprehensive solution for policy based email security. We believe the 6500 sets new standards for performance, enterprise scalability and ease of use allowing companies to lower costs by consolidating on fewer appliances and security point solutions.
- Tumbleweed announced the availability of Tumbleweed SecureTransport 4.6, the latest version of its award-winning enterprise managed file transfer solution, which offers exceptional enterprise performance, meeting the high volume file transfer demands of some of the largest institutions in the world.
- Tumbleweed also introduced Validation Authority 4.9, which includes key certifications for Homeland Security Presidential Directive 12 (HSPD-12) and Common Criteria Evaluation Assurance Level (EAL) 3. These certifications qualify Tumbleweed for the most demanding government and commercial PKI installations.
Fourth Quarter 2006 Financial Outlook
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- Tumbleweed currently estimates that revenue in the fourth quarter of 2006 will be between $14.0 million and $15.5 million.
- Net loss for the fourth quarter of 2006 is currently expected to be between $1.9 million to $1.2 million, or $(0.04) to $(0.02) per share.
- Non-GAAP results are currently expected to range from a loss of $200,000 to income of $500,000, or $(0.00) to $0.01 per share. Included in the estimated operating expenses for the fourth quarter is approximately $450,000 for organizational changes in R&D and Sales. Per share amounts are based on approximately 50.3 million basic and diluted shares. Non-GAAP net loss excludes amortization of intangible assets estimated to be $500,000 and stock-based compensation expense estimated to be approximately $1.2 million.