Tumbleweed Communications Announces Q2 2001 Financial Results

Tumbleweed reports sequential revenue growth of more than 90% in Q2

REDWOOD CITY, CA - July 25, 2001 - Tumbleweed® Communications Corp. (Nasdaq:TMWD), a leading provider of secure content management solutions for enabling the business Internet, today reported results for the second quarter ended June 30, 2001. Total revenue from products and services in the second quarter was $7.7 million, a more than 90% increase over revenue of $4.0 million in the first quarter of 2001. Net loss in Q2 01, excluding restructuring and impairment charges, and certain non-cash expenses, was $11.5 million, or $0.38 per basic and diluted share. This compares to $13.3 million, or $0.45 per basic and diluted share in the first quarter of 2001. Including these items, the Company reported a net loss for the quarter ended June 30, 2001 of $14.0 million or $0.46 per basis and diluted share.

"We are pleased with our performance this quarter," said Jeff Smith, Chairman and CEO of Tumbleweed Communications Corp. "In Q2, we grew revenue and significantly reduced our operating costs, exceeding our targets. We continue to deliver on our 2001 plan that we outlined in January, including the addition of strong management talent to our team."

"Today, companies are looking to innovate and fully leverage the business Internet to improve productivity and reduce costs," continued Smith. "Customers are prioritizing investment in our solutions because we empower them to achieve these efficiencies while improving their customer relationships. This positions us to capture the significant opportunity within the secure content management market, which, according to IDC, is the fastest growing market segment in Internet security."

The Company also announced that it continued to make solid progress towards its plan to achieve cashflow breakeven by Q4 of this year. Net cash used for operations in the second quarter was $8.4 million, an improvement of 28%, over $12.3 million used in the first quarter. Tumbleweed's cash balance at June 30, 2001 was $48.5 million versus cash of $58.0 million at the end of Q1. The Company will remain focused on improving its cash flow from operations in subsequent quarters.

"In Q2, we were successful at selling into our existing installed base and adding new customers," said Doug Sabella, President and Chief Operating Officer of Tumbleweed Communications Corp. "This year, we'll remain committed to delivering on our 2001 objectives by providing a high quality of service to our customers in order to grow our existing relationships and attract new customers. Like most companies, we remain cautious about the second half of the year due to the slowdown in technology spending, and so we will continue to manage our business aggressively as we did for the first half of this year."

Q2 01 Customer Highlights
In Q2, Tumbleweed signed approximately 200 contracts with new and existing customers. Tumbleweed now has an installed base of approximately 1,000 customers worldwide. Tumbleweed customers and partners include enterprises from more than a dozen sectors such as financial services, healthcare, pharmaceutical, manufacturing, government and technology.

The Company expanded its position across a number of vertical industries in the second quarter of 2001.

In financial services, over 320 banking, brokerage, credit card, insurance and mutual fund customers use Tumbleweed software to manage their communications. In Q2, Tumbleweed signed contracts with both new and existing customers including: Skandiniska Enskilden Banken (The SEB Group), JP Morgan Chase & Co., OppenheimerFunds, Inc., Spectrum EBP, LLC, and Royal & Sun Alliance Insurance Plc. Financial services providers are using Tumbleweed solutions to improve customer service and enhance customer relationships, at the same time as they reduce the cost and waste of paper-based communications. Tumbleweed software also helps meet various regulatory standards, including the information security guidelines issued by U.S. federal and state regulatory bodies under the Gramm-Leach-Bliley of 1999.

In Q2, the Company expanded its position in the healthcare market with new contracts with a number of healthcare companies, including LabOne, Inc., Glaxo SmithKline UK Ltd., Catholic Healthcare West, and Baxter International. Healthcare providers and pharmaceutical companies are using Tumbleweed software to improve communications and productivity and reduce administrative costs. Tumbleweed solutions also help meet growing requirements under new U.S. and European federal government privacy regulations to protect healthcare patient data.

The Company was successful in further penetrating additional verticals in Q2, new contracts signed include: Verizon Communications Inc. and Siebel Systems, Inc. in telecommunications and technology, and Hilton Hotels Corporation in real estate. The Company also expanded further in Japan in Q2 with new contracts including Hitachi netBusiness Ltd. and Sakura Information Systems Co., Ltd.

Conference Call Information
The Company will host a conference call with the investment community at 2 PM PT/5 PM ET today to discuss its results for the second quarter. This call is being 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 for 30 days at the Company's website or by telephone at (913)385-6780, pin #2017.

About Tumbleweed
Tumbleweed is a leading provider of solutions for managing secure communication and collaboration to enable the business Internet. Tumbleweed's robust policy-based framework empowers organizations to safely share and protect critical information, increase customer loyalty and privacy and dramatically reduce costs. Tumbleweed is trusted by 1,000 blue-chip customers including American Express, JP Morgan Chase & Co., Chevron, Datek Online, the European Union's Joint Research Council, US Food and Drug Administration, John Deere, Merrill Lynch, Nike, Northern Trust, NTT, Salomon Smith Barney, Travelers, United Parcel Service, and seven of the world's largest postal services. Tumbleweed Communications was founded in 1993 and is headquartered in Redwood City, CA with offices around the world.

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. The Company undertakes no obligation to update this guidance during the current quarter or future quarters. 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 the growth of Tumbleweed's market share, product adoption rate, or number of customers, as well as Tumbleweed's financial performance, including its ability to reach cash flow breakeven at any particular point and the ability of Tumbleweed's software to assist customers in meeting future regulations. 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 30, 2001 and Form 10-Q filed May 15, 2001. Tumbleweed assumes no obligation to update information contained in this press release.