Support.com Reports Second Quarter and 2014 Financial Results

Redwood City, CA – July 30, 2014 – Support.com, Inc. (NASDAQ: SPRT), a leading provider of cloud-based technology services and software, today reported unaudited financial results for its second quarter ended June 30, 2014.

Q2 2014 Financial Summary
For the second quarter of 2014, total revenue was $20.2 million compared to $20.1 million in the second quarter of 2013 and $18.6 million in the first quarter of 2014.

On a non-GAAP basis, income from continuing operations for the second quarter of 2014 was $478,000, or $0.01 per share, compared to $3.8 million, or $0.07 per share, in the second quarter of 2013 and $490,000, or $0.01 per share, in the first quarter of 2014.

On a GAAP basis, loss from continuing operations for the second quarter of 2014 was $649,000, or $(0.01) per share, compared to income of $2.6 million, or $0.05 per share, in the second quarter of 2013 and a loss of $476,000, or $(0.01) per share, in the first quarter of 2014.

Non-GAAP income from continuing operations excludes any warrant-related charges and stock-based compensation expense, amortization of intangible assets and other, restructuring and impairment charges, acquisition expense, other non-recurring items and tax expense associated with acquired goodwill. Collectively, these items impacted income from continuing operations by $1.1 million in the second quarter of 2014, $1.2 million in the second quarter of 2013 and $966,000 in the first quarter of 2014. A reconciliation of GAAP to non-GAAP results is presented in the tables below.

“After having been at Support.com for two months, I can say with confidence that the Company is well-run with a strong team,” said Elizabeth Cholawsky, President and Chief Executive Officer. “Underlying our positive results in the second quarter is our services’ operations, which is highly scalable and efficient. Our next-generation Nexus product has been released to the market and initial reaction has been positive. Our job now is to continue to listen to customer feedback, which will accelerate our innovation, and invest over the long-term to establish leadership with Nexus while continuing to grow services’ customers.”

Balance Sheet Information 
At June 30, 2014 cash, cash equivalents and investments were $75.6 million, compared to $75.5 million at March 31, 2014.

Recent Company Highlights

  • Q2 2014 exceeded non-GAAP earnings per share guidance
  • Growth in Comcast Home Networking bundle
  • Launch of XFINITY Home pilot, Comcast’s home security and automation system
  • Continued strong relationship with Office Depot, culminating in a two year contract extension
  • Released next-generation Nexus® and have received strong product feedback from customers

Conference Call 

Support.com will host a conference call discussing the Company’s second quarter 2014 results on Wednesday, July 30, 2014 starting at 4:30 p.m. ET (1:30 p.m. PT). The live call may be accessed by dialing (877)-388-8486 (domestic) or (408)-427-3864 (international) and referencing passcode 72833878. A live audio webcast and replay of the call will be available at the Investor Relations section of Support.com’s website at https://corporate.support.com/company/investor-relations/investor-webcasts-events/.

About Support.com

Support.com, Inc. (NASDAQ: SPRT) is a leading provider of cloud software and services for technology support. Our technology support programs help leading brands create new revenue streams and deepen customer relationships. Our cloud Nexus® Service Platform enables companies to boost their support productivity, dramatically improve their customer experience and resolve connected technology issues quickly. Support.com is the choice of leading communications providers including 3 of the top 5 cable companies in North America, top retailers, and other leading brands in software and connected technology. For more information, please visit us at: corporate.support.com.

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Support.com, Inc. is an Equal Opportunity Employer. For more information, visit https://corporate.support.com/about/careers.

Copyright © 2014 Support.com, Inc. All rights reserved. Support.com and Nexus are trademarks or registered trademarks of Support.com, Inc. in the United States and other countries. All other trademarks are the property of their respective owners.

Note on Forward-Looking Statements 
This release contains “forward-looking statements” as defined under the U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbors created by such laws. Forward-looking statements include, for example, all statements relating to expected financial performance (including without limitation statements involving growth and projections of revenue, margin, income (loss) from continuing operations, income (loss) per share from continuing operations, cash usage or generation, cash balance, capital structure and other financial items); the plans and objectives of management for future operations, customer relationships, products, services or investments; personnel matters; and future performance of the Company. Such forward-looking statements are based on current expectations that involve a number of uncertainties and risks that may cause actual events or results to differ materially including, among others, our ability to retain and grow major programs, our ability to expand our customer base, our ability to market and sell Nexus, our ability to maintain and grow revenue, our ability to successfully develop new products and services, our ability to manage our workforce, our ability to retain personnel, and our ability to control expenses and achieve desired margins. These and other risks may be detailed from time to time in Support.com’s periodic reports filed with the Securities and Exchange Commission, including, but not limited to, its latest Annual Report on Form 10-K and its latest Quarterly Report on Form 10-Q, copies of which may be obtained from www.sec.gov. Support.com assumes no obligation to update its forward-looking statements.

Disclosure Regarding Non-GAAP Financial Measures 

Support.com excludes warrant-related charges and stock-based compensation expense, amortization of intangible assets and other, restructuring and impairment charges, acquisition expense, other non-recurring items and tax expense associated with acquired goodwill from its GAAP results in order to determine the non-GAAP financial measures of income (loss) from continuing operations and income (loss) from continuing operations per share referenced in this document. We believe that the non-GAAP measures, when viewed in addition to and not in lieu of our reported GAAP results, assist investors in understanding our results of operations.

A. Warrant-related charges. When evaluating its operating performance management excludes warrant-related charges against revenue in the period in which performance milestones are met and warrants are earned and issued because the Company does not incur such non-cash charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance. Warrant-related charge was zero for the second quarter of 2014, the second quarter of 2013 and the first quarter of 2014.

B. Stock-based compensation expense. Management excludes stock-based compensation expense when evaluating its operating performance because such expense does not require cash settlement and because such expense is not used by management to assess the Company’s operating performance. Stock-based compensation expense was $633,000 in the second quarter of 2014, compared to $768,000 in the second quarter of 2013 and $622,000 in the first quarter of 2014.

C. Amortization of intangible assets and other. Management excludes acquisition-related intangible asset amortization and other charges when evaluating its operating performance because the Company does not acquire businesses on a predictable cycle and excluding such charges enables more consistent evaluation of the Company’s operating performance. Management also excludes such charges because they represent non-cash expenses. Amortization of intangible assets and other was $273,000 in the second quarter of 2014, compared to $335,000 in the second quarter of 2013 and $273,000 in the first quarter of 2014.

D. Restructuring and impairment charges. Management excludes restructuring and impairment charges when evaluating its operating performance because the Company does not undertake restructurings on a predicable basis and excluding such charges enables more consistent evaluation of the Company’s operating performance. Restructuring and impairment charges were zero in the second quarter of 2014, the second quarter of 2013 and the first quarter of 2014.

E. Acquisition expense. Management excludes acquisition expense such as legal and advisor fees when evaluating its operating performance because the Company does not acquire businesses on a predictable cycle and excluding such expense enables more consistent evaluation of the Company’s operating performance. Acquisition expense was zero in the second quarter of 2014, the second quarter of 2013 and the first quarter of 2014.

F. Other non-recurring items. Management excludes non-recurring items when evaluating its operating performance because the Company does not incur such expenses or obtain such benefits on a predictable basis and exclusion of such expenses or benefits enables more consistent evaluation of the Company’s operating performance. Other non-recurring items resulted in expense of $150,000 in the second quarter of 2014 for patent litigation settlement, no expense or benefit in the second quarter of 2013 and the first quarter of 2014.

G. Tax expense associated with acquired goodwill. The Company is required to record a deferred tax liability and the related tax expense that results from the amortization for income tax purposes of acquired goodwill. Management excludes tax expense associated with acquired goodwill when evaluating its operating performance because the Company does not acquire businesses on a predictable cycle and excluding such expense enables more consistent evaluation of the Company’s operating performance. Tax expense associated with acquired goodwill was $71,000 in the second quarter of 2014, compared to $82,000 in the second quarter of 2013 and $71,000 in the first quarter of 2014.

The Company believes that non-GAAP measures have significant limitations in that they do not reflect all of the amounts associated with the Company’s financial results as determined in accordance with GAAP and that these measures should only be used to evaluate the Company’s financial results in conjunction with the corresponding GAAP measures. In addition, the exclusion of the items indicated above from the non-GAAP financial measures presented does not indicate an expectation by management that such items will not be incurred in subsequent periods.

SUPPORT.COM, INC.
GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30,December 31,
2014(1)2013(2)
Assets
Current assets:
Cash, cash equivalents and short-term investments$75,581$72,357
Accounts receivable, net13,10513,993
Prepaid expenses and other current assets8531,322
Total current assets89,53987,672
Property and equipment, net454461
Goodwill14,24014,240
Intangible assets, net2,9093,454
Other assets1,2211,072
Total assets$108,363$106,899
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued compensation$3,284$3,017
Other accrued liabilities3,8553,359
Short-term deferred revenue2,8163,323
Total current liabilities9,9559,699
Long-term deferred revenue5450
Other long-term liabilities1,9061,754
Total liabilities11,91511,503
Stockholders’ equity:
Common stock55
Additional paid-in-capital260,396258,291
Treasury stock(5,036)(5,036)
Accumulated other comprehensive loss(1,790)(1,874)
Accumulated deficit(157,127)(155,990)
Total stockholders’ equity96,44895,396
Total liabilities and stockholders’ equity$108,363$106,899
Note 1: Amounts are subject to completion of management’s customary closing and review procedures.
Note 2: Derived from audited consolidated financial statements for the year ended December 31, 2013.
SUPPORT.COM, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months EndedSix Months Ended
June 30, 2014 (1)June 30, 2013June 30, 2014 (1)June 30, 2013     
Revenue:
Services$ 18,335$ 16,128$ 35,061$ 32,574
Software and other1,8433,9963,7307,752
Total revenue20,17820,12438,79140,326
Cost of revenue:
Cost of services (3)14,5318,83827,49318,148
Cost of software and other (3)228271467578
Total cost of revenue14,7599,10927,96018,726
Gross profit5,41911,01510,83121,600
Operating expenses:
Amortization of intangible assets and other273335546670
Research and development (3)1,0571,2822,4112,870
Sales and marketing (3)1,6884,3753,2398,311
General and administrative (3)2,9802,3545,6435,117
Total operating expenses5,9988,34611,83916,968
Income (loss) from operations(579)2,669(1,008)4,632
Interest income and other, net62108140181
Income (loss) from continuing operations, before income taxes(517)2,777(868)4,813
Income tax provision (benefit)132177257326
Income (loss) from continuing operations, after income taxes(649)2,600(1,125)4,487
Income (loss) from discontinued operations, net of income taxes(6)(5)(12)(10)
Net income (loss)$ (655)$ 2,595$ (1,137)$ 4,477
Income (loss) from continuing operations, after income taxes
Basic$ (0.01)$ 0.05$ (0.02)$ 0.09
Diluted$ (0.01)$ 0.05$ (0.02)$ 0.09
Loss from discontinued operations, net of income taxes
Basic$ (0.00)$ (0.00)$ (0.00)$ (0.00)
Diluted$ (0.00)$ (0.00)$ (0.00)$ (0.00)
Shares used in computing per share amounts:
Basic53,79850,79253,55750,476
Diluted53,79852,86653,55752,535
Note 3: Includes stock-based compensation expense, restructuring and impairment charges, acquisition expense and other non-recurring items, as follows:
Three Months EndedSix Months Ended
June 30, 2014June 30, 2013June 30, 2014June 30, 2013
Cost of revenue:
Cost of services$ 195$ 65$ 282$ 157
Cost of software and other4276
Operating expenses:
Research and development(4)129163338
Sales and marketing9474171182
General and administrative494498782882
Total$ 783$ 768$ 1,405$ 1,565
SUPPORT.COM, INC.
RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)
Three Months EndedSix Months Ended
June 30, 2014June 30, 2013June 30, 2014June 30, 2013
GAAP cost of revenue$ 14,759$ 9,109$ 27,960$ 18,726
Stock-based compensation expense (Cost of revenue portion only)(49)(67)(139)(163)
Other non-recurring items (Cost of revenue portion only)(150)(150)
Non-GAAP cost of revenue$ 14,560$ 9,042$ 27,671$ 18,563
GAAP operating expenses$ 5,998$ 8,346$ 11,839$ 16,968
Stock-based compensation expense (Excl. cost of revenue portion)(584)(701)(1,116)(1,402)
Amortization of intangible assets and other(273)(335)(546)(670)
Non-GAAP operating expenses$ 5,141$ 7,310$ 10,177$ 14,896
GAAP income tax provision$ 132$ 177$ 257$ 326
Tax expense associated with acquired goodwill(71)(82)(142)(155)
Non-GAAP income tax provision$ 61$ 95$ 115$ 171
GAAP income (loss) from continuing operations, after income taxes$ (649)$ 2,600$ (1,125)$ 4,487
Stock-based compensation expense6337681,2551,565
Amortization of intangible assets and other273335546670
Tax expense associated with acquired goodwill7182142155
Other non-recurring items150150
Total impact of Non-GAAP exclusions1,1271,1852,0932,390
Non-GAAP income (loss) from continuing operations, after income taxes$ 478$ 3,785$ 968$ 6,877
Income (loss) from continuing operations, after income taxes
Basic – GAAP$ (0.01)$ 0.05$ (0.02)$ 0.09
Basic – Non-GAAP$ 0.01$ 0.07$ 0.02$ 0.14
Diluted – GAAP$ (0.01)$ 0.05$ (0.02)$ 0.09
Diluted – Non-GAAP$ 0.01$ 0.07$ 0.02$ 0.13
Shares used in computing per share amounts (GAAP)
Basic53,79850,79253,55750,476
Diluted53,79852,86653,55752,535
Shares used in computing per share amounts (Non-GAAP)
Basic53,79850,79253,55750,476
Diluted53,86452,86653,81852,535
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 warrant-related charges, stock-based compensation expense, amortization of intangible assets and other, restructuring and impairment charges, acquisition expense, other non-recurring items and tax expense associated with acquired goodwill. 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.
2014 Amounts are subject to completion of management’s customary closing and review procedures.

 

Investor Contact

Carolyn Bass and Jacob Moelter
Market Street Partners
(415) 445-3235
sprt@marketstreetpartners.com