BackWeb Cuts Q1 Net Loss to $249,000 vs. $1.37 Million in Q1 '04; Bal

    Business Editors/High-Tech Editors

    SAN JOSE, Calif.--(BUSINESS WIRE)--April 21, 2005--BackWeb Technologies Ltd. (Nasdaq:BWEB), a leading provider of offline and mobile Web software, today reported financial results for its first quarter ended March 31, 2005.
    BackWeb(R) reported Q1 2005 revenue of $1.66 million compared to $1.64 million in the first quarter of 2004, and $1.53 million in the fourth quarter of 2004. The performance increase was driven by higher license revenues and continued strength in maintenance renewal activity, which offset a decline in consulting revenues.
    BackWeb reported a substantially reduced net loss of $249,000, or $0.01 per share, for Q1 2005, compared to a net loss of $1.37 million, or $0.03 per share, in Q1 2004, and a net loss of $912,000, or $0.02 per share, in Q4 2004. BackWeb's improved Q1 performance reflects the recurring benefit of its October 2004 reductions in overhead and personnel, somewhat lower than expected expense levels in the period and an increase in revenue. Reflecting the improved performance, BackWeb's cash used in operating activities in the first quarter decreased to approximately $200,000, a decline of approximately $800,000 compared to cash used in operating activities of approximately $1.0 million in the year-ago first quarter. Several software license contracts entered into during Q1 2005 included terms for upfront customer payment of license fees, and improvements were made in accounts receivable, which contributed positively to the quarterly cash flow.
    BackWeb's balance sheet and cash position continue to remain solid, with no long-term debt and cash investments totaling approximately $10.1 million as of March 31, 2005.
    BackWeb's CEO, Bill Heye, commented, "Contributing to our Q1 performance were sales with existing customers Pfizer and Fidelity Management in new areas of their operations. We believe these sales confirm the value these customers are deriving from our solutions. We also recognized $375,000 in revenue related to our October license and distribution agreement with F-Secure, revenue that we will continue to recognize through the remainder of 2005. In addition, we had a modest revenue contribution in the period from our channel partner SAP as a result of our reseller relationship.
    "Also this quarter, we built an integration between our product, BackWeb Offline Access Server(TM), and the PeopleSoft(R) Enterprise ePerformance application from Oracle. The web-based ePerformance application is used by customers to conduct employee performance reviews. Our product and integration enables ePerformance users to work on the application when they are mobile and disconnected from the network. This provides work flexibility for participants in the performance review process, many of whom are mobile, and helps companies achieve timely completion of the overall process. We have initiated our sales efforts to the ePerformance customer base and are seeing demand to mobilize the performance review workflow.
    "Over the past two quarters, we have made progress toward stabilizing our business and operating performance, which we believe positions us better to achieve bottom-line improvements and top-line growth. We continue to make progress on our sales and marketing execution and see an increase in qualified customer prospects, which we believe reflects the maturation of enterprise web applications and increasing awareness of the business benefits of mobility. We are also pleased to see a contribution coming from our partner-related activities and believe this represents an important long-term opportunity.
    "We intend to maintain our expense and cash management disciplines as we make prudent investments necessary to support our operations and pursue sales growth. Guiding our decision-making in these areas is our continued focus on the goal of achieving sustainable profitability."

    About BackWeb Technologies:

    BackWeb Technologies is a leading offline web software company. BackWeb extends the value of technology investments by offering mobile and remote employees offline access to portals, intranets, and other web-based applications and content. The Company's products are designed to reduce network costs and improve the productivity of an increasingly mobile workforce. At the core of BackWeb's products is its patented Polite(R) synchronization technology that can distribute large amounts of data even over narrow bandwidth connections.
    BackWeb(R) Offline Access Server, the Company's flagship product, integrates with portal frameworks, intranets, and web applications to extend access to users who are frequently disconnected from the network or offline. Its two-way synchronization capability enables field personnel to both access and publish to portals and web applications while disconnected, creating greater efficiency and improved data accuracy and value.
    BackWeb customers include market leaders such as Boehringer Ingelheim, Centocor, Eastman Kodak, GE Medical Systems, Guidant, Hewlett-Packard, KLA Tencor, Lam Research, Pfizer, and more than one hundred other companies. BackWeb also has a co-marketing partnership with BEA and a reseller alliance with software industry leader SAP.
    BackWeb is headquartered in San Jose, California, and Rosh Ha 'ayin, Israel. For more information, visit www.backweb.com or call (877) 222-5932.
    (C) 2005 BackWeb Technologies Ltd. All rights reserved. BackWeb and Polite are registered trademarks and Offline Access Server is a trademark of BackWeb Technologies Ltd. All other trademarks are property of their respective owners.

    Statements in this news release, which are not purely historical, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements of beliefs, plans, expectations or intentions regarding the future. Such forward-looking statements include statements regarding: BackWeb's ability to achieve bottom-line improvements and top-line growth , the expected benefits of BackWeb's sales and marketing efforts, including with respect to sales to the ePerformance customer base, the timing of recognizing revenue from recently entered into agreements, anticipated benefits from partner-related activities and BackWeb's ability to achieve sustainable profitability. Actual results could differ materially from those in such forward-looking statements. Factors that could cause actual results to differ materially from expectations include, but are not limited to, the ability of the Company's new and existing sales personnel to effectively transition to the new sales execution model; the uncertainty of market acceptance of offline access products or our ability to license those products to customers; general economic conditions or any downturn in IT industry spending; the ability of the Company to develop innovative technology and deliver solutions that meet customer needs; and potential emergence of competitive technologies or competitor companies. In addition, please refer to our periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2004, which contain more detailed descriptions of the risk factors facing our business. BackWeb assumes no obligation to update any of the forward-looking statements in this release.

BackWeb Technologies Ltd. Condensed Consolidated Balance Sheets (in thousands)

March 31, December 31, 2005 2004 Unaudited ----------- ASSETS Current assets: Cash and investments $10,093 $10,320 Trade accounts receivable, net 1,087 1,677 Other current assets 296 378 ----------- ------------ Total current assets 11,476 12,375

Long-term investments and other assets 32 26 Property and equipment, net 134 154 ----------- ------------ Total assets $11,643 $12,555 =========== ============

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $1,635 $1,800 Deferred revenue 2,240 2,672 ----------- ------------ Total current liabilities 3,875 4,472

Long-term liabilities 47 145 Total shareholders' equity 7,721 7,938 ----------- ------------ Total liabilities and shareholders' equity $11,643 $12,555 =========== ============

BackWeb Technologies Ltd. Condensed Consolidated Statements of Operations (in thousands, except per share data)

Three months ended ------------------------ March 31, March 31, 2005 2004 Unaudited Unaudited ----------- ------------ Revenue: License $767 $669 Service 890 969 ----------- ------------ Total revenue 1,657 1,638

Cost of revenue: License 5 24 Service 159 393 ----------- ------------ Total cost of revenue 164 417 ----------- ------------

Gross profit 1,493 1,221 ----------- ------------

Operating expenses: Research and development 593 971 Sales and marketing 725 952 General and administrative 404 609 ----------- ------------ Total operating expenses 1,722 2,532 ----------- ------------

Loss from operations (229) (1,311)

Finance and other income, net (20) (60) ----------- ------------ Net loss $(249) $(1,371) =========== ============

Net loss per share $(0.01) $(0.03) =========== ============

Shares used in computing net loss per share 40,881 40,622 =========== ============

--30--JM/ny*

CONTACT: Jaffoni & Collins Karin Oloffson, David Collins, 212-835-8500 bweb@jcir.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: TELECOMMUNICATIONS SOFTWARE INTERNET E-COMMERCE EARNINGS SOURCE: BackWeb Technologies Ltd.

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