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SupportSoft Reports Third Quarter 2008 Financial Results Consumer Revenue Grows 137% Sequentially; Enterprise Posts Third Consecutive Quarter of Non-GAAP Profitability REDWOOD CITY, CA--(MARKET WIRE)--Oct 29, 2008 -- SupportSoft, Inc. (NasdaqGS:SPRT - News), a
provider of software and services that make technology work,
today reported
unaudited financial results for its third quarter ended
September 30, 2008.
Q3 Financial Summary Total revenue for the third quarter of 2008 was $12.8 million, as compared to $11.6 million in the second quarter of 2008 and $11.3 million in the third quarter of 2007. For the third quarter of 2008, total Enterprise revenue was $10.7 million as compared to $10.7 million in the second quarter of 2008 and $11.0 million in the year ago quarter. Third quarter Enterprise revenue consisted of $2.9 million of license revenue, $4.0 million of maintenance revenue and $3.8 million of service revenue. For the third quarter of 2008, Consumer revenue was $2.1 million as compared to $891,000 in the second quarter of 2008 and $278,000 in the third quarter of 2007. On a GAAP basis, net loss for the third quarter of 2008 was $4.3 million, or $(0.09) per share, compared to a net loss of $4.3 million, or $(0.09) per share, in the second quarter of 2008 and $5.0 million, or $(0.11) per share, in the third quarter of 2007. Non-GAAP net loss for the third quarter of 2008 was $3.1 million, or $(0.07) per share, compared to a non-GAAP net loss of $3.0 million, or $(0.06) per share, in the second quarter of 2008 and $3.5 million, or $(0.08) per share, in the third quarter of 2007. Non-GAAP results exclude stock compensation expenses, amortization of intangible assets and restructuring charges. These items totaled $1.2 million for the third quarter of 2008, $1.4 million for the second quarter of 2008 and $1.5 million for the third quarter of 2007. A reconciliation of GAAP to non-GAAP results is presented in the tables below. Cash and total investments at September 30, 2008 were $98.3 million, compared to $100.9 million at June 30, 2008. The change in cash and investments reflects approximately $1.7 million used for operations and $853,000 of incremental unrealized loss for auction rate securities. "Q3 was a strong quarter across our business, with substantial growth in Consumer revenue and continuing profitability in the Enterprise segment. We believe the revenue growth in Consumer, particularly in the current macro environment, further validates our pursuit of this new market," said Josh Pickus, President and CEO of SupportSoft. Recent Company Highlights Consumer Segment
-- Consumer revenue grows 137% sequentially
-- Retail partner Office Depot completes national roll-out to 1,275
stores
-- Pilots launched with two retail partners announced in Q2
-- New relationship established with leading Antivirus ProviderEnterprise Segment
-- Third consecutive quarter of non-GAAP profitability
-- Agreement with Wipro Technologies expands growing customer base of
outsourcing firms
-- New Dynamic Agent and Remote Control products announcedConference Call SupportSoft will host a conference call discussing the Company's third quarter of 2008 results and fourth quarter activities on Wednesday, October 29, 2008 starting at 4:30 p.m. EDT (1:30 p.m. PDT). A live webcast of the call will be available on the Investor Relations section of the Company's website at www.supportsoft.com/investors. For those unable to listen to the live webcast, a replay of the call will also be available on the SupportSoft website or by dialing (888) 286-8010 and entering passcode 5456-4168. Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements regarding our expected future performance as well as assumptions underlying or relating to such statements of expectation, all of which 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. We are subject to many risks and uncertainties that may materially affect our business and future performance and cause those forward-looking statements to be inaccurate. All statements in this press release, other than statements that are purely historical, are forward-looking statements. Words such as "outlook," "anticipates," "expects," "believes," "intends," "plans," "continuing," "seeks," "forecasts," "estimates," "goal," and similar expressions often identify such forward-looking statements. Forward-looking statements in this press release include, without limitation, the following: the Company's expected revenue and non-GAAP net loss for the fourth quarter of 2008; expectations regarding the progress of our collaboration with partners (including the Office Depot rollout) and the anticipated impact of those relationships on our business; anticipated new partner relationships; anticipated pilots; contribution to our revenue from our consumer operations; our continuing ability to run our enterprise business profitably while maintaining revenue; assessments of our future growth; and our future plans, investments and opportunities. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in these forward-looking statements. These risks and uncertainties include, but are not limited to: our dependence on our third-party alliances and partnerships to help us provide our software and services to consumers; our ability to establish new partnerships and the potential that such partnerships take longer than we expect to produce revenue or do not produce revenue; the potential that cancellations or delays in rolling out our consumer partner programs (including Office Depot) could decrease our revenues; the cancellation or delay of pilots with new consumer partners or the failure of those pilots to mature into full rollouts; our ability to hire, train and manage home-based consumer technology support agents effectively; our ability to achieve broad adoption and acceptance of our offerings, including the new enterprise offerings announced this quarter; the potential for a decrease in revenue in our enterprise segment caused by our reliance on a few large transactions that generally occur at the end of reporting periods or otherwise; long sales cycles; the ability of our software to operate with hardware and software platforms that are used by our customers now or in the future; our ability to compete successfully in the consumer technology support market and the support automation software market; our limited experience in servicing consumers directly; our ability to manage headcount changes including reductions in force; our ability to successfully integrate any acquisitions including YourTechOnline.com; our ability to profitably manage our enterprise business, including our professional services organization and its cost structure, while maintaining revenue; expectations regarding our international business; fluctuation in our quarterly results; diversion of management attention to strategic matters or litigation; our ability to accurately predict performance; our ability to attract and retain key employees; our ability to obtain and enforce sufficient patent protection; the uncertain economic conditions in the United States and in international markets; further weakness or changes in the market for auction rate securities or in other investments we may hold; a determination, upon completion of further quarterly closing and review procedures, that the financial results for the third quarter are different than the results set forth in this press release; as well as other risks detailed from time to time in our SEC filings, including those described in the "Risk Factors" section in our most recent Quarterly Report on Form 10-Q filed with the SEC on August 7, 2008. You can locate these filings on the Investor Relations page of our website, www.supportsoft.com/investors. Statements included in this release are based upon information known to SupportSoft as of the date of this release, and SupportSoft assumes no obligation to publicly revise or update any forward-looking statement for any reason. Disclosure Regarding Non-GAAP Financial Measures SupportSoft has excluded stock-based compensation expenses, amortization/write-down of intangible assets and restructuring charges from its GAAP results in order to determine the non-GAAP financial measures of net income/loss and net income/loss per share. Each of the excluded items (as such items are applicable to particular time periods) is discussed in more detail below. Stock-based compensation -- we believe that the non-GAAP measures, excluding stock-based compensation expenses, when viewed in addition to and not in lieu of our reported GAAP results, assist investors in understanding our results of operations. Management excludes stock-based compensation expenses when evaluating its performance from period to period because such expenses do not require cash settlement and because such expenses are not used by management to assess the performance of our business. Amortization/write-down of intangible assets -- we do not acquire businesses on a predictable cycle; therefore management excludes acquisition-related intangible asset amortization and related charges when evaluating its operating performance. We also exclude such charges as they represent non-cash expenses. Restructuring charges -- we believe the non-GAAP measures, excluding restructuring charges, provide meaningful supplemental information to investors in understanding our ongoing operational costs and expenses, without the broad-based termination costs that comprised our restructuring expenses. We do not undertake significant restructurings on a predictable basis and, as result, exclude associated charges in order to enable better and more consistent evaluation of our operating expenses before and after such actions are taken. We use these non-GAAP financial measures internally to evaluate our performance from period to period and against the performance of other software companies, many of which present similar non-GAAP financial measures. We also believe that investors benefit from seeing "through the eyes of management" as our operating budgets and compensation programs are based on the non-GAAP financial measures we present in this press release. Finally, we believe the non-GAAP measures provide useful supplemental information for investors to evaluate our operating results in the same manner as the research analysts that follow SupportSoft, all of whom present non-GAAP projections in their published reports. As such, the non-GAAP measures provided by us facilitate an "apples to apples" comparison of our performance with the financial projections published by the analysts. The economic substance behind our decision to use such non-GAAP measures is that such measures approximate our controllable operating performance more closely than the most directly comparable GAAP financial measures. The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of our activities and reliance solely on non-GAAP measures may lead management to make business decisions with unanticipated economic consequences on our GAAP financial results. We compensate for this limitation by not relying exclusively on non-GAAP financial measures to make business decisions. We also continuously reevaluate which non-GAAP measures are appropriate. Amounts related to third quarter of 2008 are subject to completion of management's and its independent registered public accounting firm's customary closing and review procedures. About SupportSoft SupportSoft (NasdaqGS:SPRT - News) provides software and services that make technology work. The Company's solutions reduce technology support costs, improve customer satisfaction and enable new revenue streams for companies reaching 50 million users worldwide. The Company also provides Instant Technology Relief® to consumers and small businesses through a series of channel partners and www.support.com. For more information about the Company and its enterprise offerings, visit www.supportsoft.com. For Instant Technology Relief from consumer and small business technology problems, visit www.support.com.
SUPPORTSOFT, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2008 (1) 2007 (2) 2008 (1) 2007 (2)
--------- --------- --------- ---------
Revenue:
License $ 2,861 $ 2,586 $ 8,732 $ 11,725
Maintenance 3,987 4,201 11,884 12,035
Services 3,822 4,258 11,705 10,721
Consumer revenue 2,110 278 3,704 702
--------- --------- --------- ---------
Total revenue 12,780 11,323 36,025 35,183
Costs and expenses:
Cost of license 60 52 203 141
Cost of
maintenance 473 630 1,487 1,929
Cost of services 3,424 3,891 10,673 11,725
Cost of consumer
revenue 2,582 1,420 5,692 3,296
Amortization of
intangible
assets 71 272 160 817
Research and
development 2,231 2,366 6,651 7,071
Sales and
marketing 5,639 6,909 17,735 22,938
General and
administrative 2,614 2,229 7,695 7,290
--------- --------- --------- ---------
Total costs
and expenses 17,094 17,769 50,296 55,207
Loss from operations (4,314) (6,446) (14,271) (20,024)
Interest income and
other, net 158 1,636 2,328 5,019
--------- --------- --------- ---------
Loss before income
taxes (4,156) (4,810) (11,943) (15,005)
Provision for income
taxes (184) (212) (375) (558)
--------- --------- --------- ---------
Net loss $ (4,340) $ (5,022) $ (12,318) $ (15,563)
--------- --------- --------- ---------
Net loss per share:
Basic $ (0.09) $ (0.11) $ (0.27) $ (0.34)
--------- --------- --------- ---------
Diluted $ (0.09) $ (0.11) $ (0.27) $ (0.34)
--------- --------- --------- ---------
Shares used in
computing per share
amounts:
Basic 46,119 45,614 46,083 45,449
--------- --------- --------- ---------
Diluted 46,119 45,614 46,083 45,449
--------- --------- --------- ---------
Note 1: 2008 amounts are subject to completion of management's and
its independent registered public accounting firm's customary closing
and review procedures.
Note 2: In January 2008, we reorganized the Company and created two
business segments, consumer and enterprise.
Prior to 2008, the Company conducted its business in one segment. Revenue
and cost of revenue are provided on a segment basis, all other operating
expenses are incorporated into the overall company results for these
periods. See the segment information table included in this press release
for more information.
SUPPORTSOFT, INC.
RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP FINANCIAL MEASURES (1)
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
2008 (1) 2007 (2) 2008 (1) 2007 (2)
-------- -------- --------- ---------
GAAP costs and
expenses $ 17,094 $ 17,769 $ 50,296 $ 55,207
Amortization of
intangible assets (71) (272) (160) (817)
Restructuring
charges - - (2) (17)
Stock-based
compensation (1,154) (1,229) (3,661) (3,731)
-------- -------- --------- ---------
Non-GAAP costs and
expenses 15,869 16,268 46,473 50,642
Detail of costs and
operating expenses:
GAAP cost of
maintenance 473 630 1,487 1,929
Restructuring
charges - - - -
Stock-based
compensation (20) (22) (58) (59)
-------- -------- --------- ---------
Non-GAAP cost of
maintenance 453 608 1,429 1,870
GAAP cost of
services 3,424 3,891 10,673 11,725
Restructuring
charges - - - (7)
Stock-based
compensation (133) (193) (485) (564)
-------- -------- --------- ---------
Non-GAAP cost of
services 3,291 3,698 10,188 11,154
GAAP cost of
consumer revenue 2,582 1,420 5,692 3,296
Restructuring
charges - - - (6)
Stock-based
compensation (21) - (70) -
-------- -------- --------- ---------
Non-GAAP cost of
consumer revenue 2,561 1,420 5,622 3,290
GAAP cost of
research and
development 2,231 2,366 6,651 7,071
Restructuring
charges - - - -
Stock-based
compensation (152) (129) (412) (366)
-------- -------- --------- ---------
Non-GAAP cost of
research and
development 2,079 2,237 6,239 6,705
GAAP cost of sales
and marketing 5,639 6,909 17,735 22,938
Restructuring
charges - - - (4)
Stock-based
compensation (459) (493) (1,323) (1,431)
-------- -------- --------- ---------
Non-GAAP cost of
sales and
marketing 5,180 6,416 16,412 21,503
GAAP cost of
general and
administrative 2,614 2,229 7,695 7,290
Restructuring
charges - - (2) -
Stock-based
compensation (369) (392) (1,313) (1,311)
-------- -------- --------- ---------
Non-GAAP cost of
general and
administrative 2,245 1,837 6,380 5,979
GAAP loss from
operations (4,314) (6,446) (14,271) (20,024)
Amortization of
intangible assets 71 272 160 817
Restructuring
charges - - 2 17
Stock-based
compensation 1,154 1,229 3,661 3,731
-------- -------- --------- ---------
Non-GAAP loss from
operations (3,089) (4,945) (10,448) (15,459)
GAAP loss before
income taxes (4,156) (4,810) (11,943) (15,005)
Amortization of
intangible assets 71 272 160 817
Restructuring
charges - - 2 17
Stock-based
compensation 1,154 1,229 3,661 3,731
-------- -------- --------- ---------
Non-GAAP loss before
income taxes (2,931) (3,309) (8,120) (10,440)
GAAP net loss $ (4,340) $ (5,022) $ (12,318) $ (15,563)
Amortization of
intangible assets 71 272 160 817
Restructuring
charges - - 2 17
Stock-based
compensation 1,154 1,229 3,661 3,731
-------- -------- --------- ---------
Non-GAAP net loss $ (3,115) $ (3,521) $ (8,495) $ (10,998)
======== ======== ========= =========
Basic net loss per share
GAAP $ (0.09) $ (0.11) $ (0.27) $ (0.34)
Non-GAAP $ (0.07) $ (0.08) $ (0.18) $ (0.24)
Diluted net loss per
share
GAAP $ (0.09) $ (0.11) $ (0.27) $ (0.34)
Non-GAAP $ (0.07) $ (0.08) $ (0.18) $ (0.24)
Shares used in computing
per share
amounts (GAAP)
Basic 46,119 45,614 46,083 45,449
Diluted 46,119 45,614 46,083 45,449
Shares used in computing
per share amounts
(Non-GAAP)
Basic 46,119 45,614 46,083 45,449
Diluted 46,119 45,614 46,083 45,449
Note 1: The adjustments above reconcile the Company’s GAAP financial
results to the non-GAAP financial measures used by the Company. The
Company’s non-GAAP financial measures exclude restructuring charges,
stock-based compensation and amortization of intangible assets from the
GAAP financial results. The Company believes that presentation of these
non-GAAP items provides meaningful supplemental information to investors,
when viewed in conjunction with, and not in lieu of, the Company’s GAAP
results. However, the non-GAAP financial measures have not been prepared
under a comprehensive set of accounting rules or principles. Non-GAAP
information should not be considered in isolation from, or as a
substitute for, information prepared in accordance with GAAP. Moreover,
there are material limitations associated with the use of non-GAAP
financial measures. See the text of this press release for more
information on non-GAAP financial measures.
2008 amounts are subject to completion of management’s and its
independent registered public accounting firm's customary closing
and review procedures.
Note 2: In January 2008, we reorganized the Company and created two
business segments, Consumer and Enterprise.
Prior to 2008, the Company conducted its business in one segment. Revenue
and cost of revenue are provided on a segment basis, all other operating
expenses are incorporated into the overall company results for these
periods. See the segment information table included in this press release
for more information.
SUPPORTSOFT, INC.
GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2008 (1) 2007 (2)
------------- -------------
(unaudited)
Assets
Current assets:
Cash and short-term
investments $ 76,069 $ 112,940
Accounts receivable, net 8,157 10,087
Prepaid expenses and other
current assets 2,153 2,531
------------- -------------
Total current assets 86,379 125,558
------------- -------------
Long-term investments 22,212 -
Property and equipment, net 1,675 2,086
Goodwill 12,646 9,792
Purchased technology 1,375 -
Intangible assets, net 459 340
Other assets 573 682
------------- -------------
Total assets $ 125,319 $ 138,458
============= =============
Liabilities and Stockholders'
Equity
Liabilities:
Accounts payable and accrued
compensation $ 2,384 $ 2,781
Other accrued liabilities 3,032 3,421
Deferred revenue 8,784 10,502
Other long-term liabilities 1,101 892
------------- -------------
Total liabilities $ 15,301 $ 17,596
------------- -------------
Stockholders' equity:
Common stock $ 5 $ 5
Additional paid-in-capital 216,230 212,188
Accumulated other
comprehensive loss (3,340) (772)
Accumulated deficit (102,877) (90,559)
------------- -------------
Total stockholders' equity $ 110,018 $ 120,862
------------- -------------
Total liabilities and
stockholders' equity $ 125,319 $ 138,458
============= =============
Note 1: 2008 amounts are subject to completion of management's and
its independent registered public accounting firm's customary closing
and review procedures.
Note 2: Derived from audited financial statements.
SUPPORTSOFT, INC.
SEGMENT INFORMATION
(in thousands)
(unaudited)
Three Months Ended September 30, 2008
--------------------------------------------------
Consolidated
Enterprise Consumer Corporate Total
----------- ----------- ----------- -----------
Revenue:
License $ 2,861 $ - $ - $ 2,861
Maintenance 3,987 - - 3,987
Services 3,822 - - 3,822
Consumer - 2,110 - 2,110
----------- ----------- ----------- -----------
Total revenue 10,670 2,110 - 12,780
----------- ----------- ----------- -----------
Segment operating costs
and expenses (7,361) (6,263) - (13,624)
Amortization of
intangible assets (30) (41) - (71)
Common corporate
expenses - - (2,245) (2,245)
Stock-based
compensation - - (1,154) (1,154)
Interest income and
other, net - - 158 158
----------- ----------- ----------- -----------
Income (loss) before
income taxes $ 3,279 $ (4,194) $ (3,241) $ (4,156)
=========== =========== =========== ===========
Nine Months Ended September 30, 2008
--------------------------------------------------
Consolidated
Enterprise Consumer Corporate Total
----------- ----------- ----------- -----------
Revenue:
License $ 8,732 $ - $ - $ 8,732
Maintenance 11,884 - - 11,884
Services 11,705 - - 11,705
Consumer - 3,704 - 3,704
----------- ----------- ----------- -----------
Total revenue 32,321 3,704 - 36,025
----------- ----------- ----------- -----------
Segment operating costs
and expenses (23,071) (17,023) - (40,094)
Amortization of
intangible assets (90) (70) - (160)
Common corporate
expenses - - (6,381) (6,381)
Stock-based
compensation - - (3,661) (3,661)
Interest income and
other, net - - 2,328 2,328
----------- ----------- ----------- -----------
Income (loss) before
income taxes $ 9,160 $ (13,389) $ (7,714) $ (11,943)
=========== =========== =========== ===========
Consumer Segment. In our Consumer segment, we provide premium technology
support to consumers over the phone and the internet for a fee. We offer
our services to consumers through retailers, digital service providers
and other companies who provide technology products and services to
consumers. We also provide our services directly to consumers through
http://www.support.com.
Enterprise Segment. Our Enterprise customers use our software to resolve
technical problems for their customers. Digital service providers use
our products to automate the installation, activation and verification of
broadband services, to reduce the cost and improve the quality of support
for customers, and to enable the remote management of devices located at
customer premises. Corporate IT departments and IT outsourcing firms use
our software to improve the cost-effectiveness and efficiency of their
support through an integrated portfolio of proactive service, self
service and assisted service products.
Corporate. This category consists of common corporate expenses such as
general and administrative expenses, stock-based compensation expense,
interest income, and other income or expenses, which are items that we
do not allocate to our business segments.
2008 amounts are subject to completion of management's and its
independent registered public accounting firm's customary closing and
review procedures.Contact: Contact:
Investors:
Carolyn Bass or Daniel Wood
Market Street Partners
415-445-3235
ir@supportsoft.com
Media:
Heather Hawkins
SupportSoft, Inc.
650-556-8545
pr@supportsoft.com
Source: SupportSoft, Inc.
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