SAN JOSE, Calif., July 20 /PRNewswire-FirstCall/ -- WebEx Communications,Inc. (Nasdaq: WEBX) today announced financial results for its second quarter ended June 30, 2004.

For the second quarter of 2004, revenue was $61.1 million, a 36% increase compared to the second quarter of 2003. Net income for the second quarter of 2004 calculated in accordance with generally accepted accounting principles, or GAAP, was $10.3 million. Earnings per diluted share or EPS for the second quarter of 2004 were $0.22, compared to EPS of $0.19 for the second quarter of 2003. GAAP EPS for the second quarter of 2004 was 57% higher than the EPS of $0.14 for the second quarter of 2003, not calculated in accordance with GAAP ("non-GAAP"). The Q2 2003 non-GAAP EPS assumed a 40% tax rate and excluded equity based compensation expense. With the increase in its effective tax rate starting in the first quarter of 2004, WebEx has discontinued reporting non-GAAP EPS. Revenue for the second quarter of 2004 included $0.5 million from WebEx's CyberBazaar subsidiary, after it was purchased at the end of April 2004.

During the second quarter of 2004, cash and short-term investments increased to $162 million, up approximately $19 million from the first quarter of 2004. Cash flow from operations of approximately $20.4 million was offset by capital expenditures of $6.7 million and $2.7 million paid for the acquisition of CyberBazaar. WebEx received $7.7 million in cash from stock issuances under WebEx's employee stock plans.

"This is the nineteenth quarter of sequential revenue growth and this quarter we had strong incremental revenue and new bookings," said Subrah Iyar, chairman and chief executive officer of WebEx. "We are encouraged by our results and the performance of our sales organization this quarter."

Guidance

The following contains forward-looking guidance regarding WebEx's financial outlook. The following statements are based on current expectations.

For fiscal year 2004, revenue is anticipated to be in the range of $240 to $250 million an increase from earlier guidance in the range of $235 to $245 million. For fiscal year 2004, GAAP EPS is anticipated to be in the range of $0.86 to $0.92, an increase from earlier guidance in the range of $0.80 to $0.90.

For the third quarter of 2004, WebEx anticipates revenue in the range of $63 to $65 million and GAAP EPS in the range of $0.21 to $0.23.

Non-GAAP Financial Measures

This press release includes a financial measure for earnings per share for the second quarter of 2003 that was not calculated in accordance with generally accepted accounting principles (GAAP). This financial measure differs from GAAP in that it assumes a 40% tax rate and excludes equity based compensation expense. WebEx no longer provides non-GAAP financial measures for the current period, but believes that providing this non-GAAP financial measure for the prior period is still useful to investors because it provides a basis for comparison of WebEx's financial condition and results of operations between quarters, which comparison is not influenced by changes in its effective tax rate. Since WebEx has historically reported non-GAAP results to the investment community, WebEx also believes the inclusion of non- GAAP measurements for prior periods provides consistency in its financial reporting. The presentation of this additional information is not meant to be considered in isolation or as a substitute for earnings per share calculated in accordance with GAAP. A reconciliation of these GAAP and non-GAAP financial measures is included in the attached tables.

WebEx Online Meeting

Management will host the quarterly WebEx online meeting to discuss the results beginning at 5:00 PM Eastern time today. Interested parties may participate in the WebEx online meeting in one of the two ways mentioned below:

To join the WebEx online meeting and listen to the audio via the computer (WebEx VoIP), please go to http://webex.com/q2_earnings_voip

To join the WebEx online meeting and listen to the audio via the telephone, please go to http://webex.com/q2_earnings_tele and call (212) 271 4516.

For those unable to participate in the live WebEx meeting, a replay will be available beginning one hour after conclusion of the meeting. To replay the recorded WebEx meeting, go to http://webex.com/q2_replay or to replay the audio only, call (402) 977-9140, and enter pin code: 21196725.

About WebEx Communications, Inc.

WebEx Communications, Inc. is the world's leading provider of web communications services. WebEx is used across the enterprise in sales, support, training, marketing, engineering and product design. WebEx meetings simulate the spontaneity and interactivity of face-to-face meetings by allowing users to share presentations, applications, documents and desktop, with full-motion video and integrated telephony. WebEx provides carrier-class services using its MediaTone communications platform deployed over the WebEx MediaTone Network, a high-speed global network specifically designed for real- time web communications. With its unique information-switching technology, multimedia capabilities and standards-based APIs, MediaTone is the dial tone for Web communications. WebEx Communications is based in San Jose, California and has regional headquarters in Europe, Australia and Asia. Please call toll free (877) 509-3239 or visit http://www.webex.com/ for more information.

This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by use of the terms anticipates, believes, continue, could, estimates, expects, intends, may, plans, potential, predicts, should or will, or the negative of those terms or similar expressions. These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those described in such statements as a result of these risks and uncertainties. In particular, these forward looking statements include, but are not limited to, statements regarding guidance for the third quarter of 2004 and fiscal year 2004 on anticipated revenue and earnings per share. Factors which could contribute to risks and uncertainties include, but are not limited to the failure of WebEx to meet financial expectations, decrease in demand for WebEx services, the failure of WebEx to meet projections in domestic and international direct sales activity, channel sales, customer retention and expense control, failures and interruptions in the software and systems underlying WebEx's services, the effects of competitive offerings, and the impact of general economic conditions. A fuller discussion of the risks and uncertainties that could affect WebEx Communications, Inc. is set forth in WebEx Communications, Inc.'s filings with the Securities and Exchange Commission, including WebEx's Annual Report on Form 10-Q filed on May 10, 2004. WebEx Communications, Inc. assumes no obligation to update forward-looking information contained in this press release.

                          WebEx Communications, Inc.
           Unaudited Condensed Consolidated Statement of Operations
                    (In 000's - except per share amounts)

                                              QTD                 YTD
                                            June 30,            June 30,
                                         2004     2003      2004       2003

    Net revenues                       $61,128   $44,909   $117,472   $86,717

    Cost of revenues                    10,384     7,451     19,909    14,857
    Gross profit                        50,744    37,458     97,563    71,860

    Operating expenses:
      Sales and marketing               21,377    19,051     41,301    37,447
      Research and development           8,265     6,098     15,480    12,156
      General and administrative         5,030     2,988      8,437     5,790

    Total operating expenses before
     equity-based compensation          34,672    28,137     65,218    55,393

    Operating income before equity-
     based compensation                 16,072     9,321     32,345    16,467

    Equity-based compensation             (130)      577        381       896

    Operating income including equity-
     based compensation                 16,202     8,744     31,964     15,571

    Other income, net                      433       298        545        694
    Net income before income tax        16,635     9,042     32,509     16,265

    Provision for income tax             6,350     1,175     12,223      2,115
    Net income                         $10,285    $7,867    $20,286    $14,150

    Net income per share
      Basic                              $0.23     $0.19      $0.47      $0.35
      Diluted                             0.22      0.19       0.44       0.33

    Shares used in per share calculations
      Basic                             43,807    41,208     43,380     41,004
      Diluted                           46,499    42,415     46,479     42,331


  Reconciliation of net income before income tax as reported and net income
                     excluding equity-based compensation

                           (Unaudited)   (in 000's)

                                                                      QTD
                                                                 June 30, 2003

    Net income before income tax as reported                          $9,042

    Add back equity-based compensation                                   577

    Deduct income taxes (note 1)                                       3,848

    Net income excluding equity-based compensation                    $5,771

    Net income excluding equity-based compensation per share
      Basic                                                            $0.14
      Diluted                                                           0.14

    Shares used in per share calculations
      Basic                                                           41,208
      Diluted                                                         42,415

WebEx has consistently provided this measurement in press releases reporting earnings per share because this measurement provides a consistent basis for comparison between quarters, which is not influenced by fluctuations in the company's stock price or changes in the company's effective tax rate, and which therefore is useful to investors.

Note 1

Income taxes is calculated by applying a 40% effective tax rate to pre-tax income, excluding equity-based compensation. The 40% effective tax rate is based on combined US federal and state statutory tax rates. The company's actual tax rate can differ from the statutory rate because of changes in deferred tax valuation allowance, the effect of income taxed in foreign jurisdictions, tax credits and other items.

                          WebEx Communications, Inc.
               Unaudited Condensed Consolidated Balance Sheets
                                  (In 000's)

                                                        June 30,  December 31,
                                                          2004       2003
                     ASSETS

    Current assets:
      Cash and cash equivalents and short-term
       investments                                      $162,253   $134,635
      Accounts receivable, net                            26,657     21,414
      Deferred tax assets                                 14,623     14,623
      Prepaid expenses and other current assets            2,969      2,505
    Total current assets                                 206,502    173,177

    Property & equipment, net                             40,547     19,275
    Goodwill                                               1,389         --
    Other assets                                           2,359      2,235
    Deferred tax assets                                    6,481      6,809
    Total assets                                        $257,278   $201,496

          LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
      Accounts payable                                    $9,536     $4,648
      Accrued liabilities                                 19,794     18,953
      Deferred revenue                                    10,588      9,648
      Income tax payable                                   7,765      2,353
    Total current liabilities                             47,683     35,602

    Stockholders' equity:
      Common stock                                            44         43
      Additional paid-in capital                         235,402    213,275
      Accumulated deficit                                (28,637)   (48,923)
      Deferred equity-based compensation                     (25)       (74)
      Accumulated other comprehensive income               2,811      1,573
    Total stockholders' equity                           209,595    165,894

    Total liabilities and stockholders' equity          $257,278   $201,496