Published:
SupportSoft Reports Third Quarter 2007 Results
SupportSoft, Inc. (NASDAQ: SPRT), a
leading provider of software and services for technology problem
resolution, today reported unaudited financial results for its third
quarter ended September 30, 2007.
Total revenue for the third quarter of 2007 was $11.3 million, a decrease
of 5 percent from $11.9 million in the third quarter of 2006. License
revenue for the third quarter of 2007 was $2.6 million, down 42 percent
from $4.5 million in the third quarter of 2006. Services revenue for the
third quarter of 2007 was $4.5 million, up 31 percent from $3.5 million in
the third quarter of 2006. Maintenance revenue was $4.2 million for the
third quarter of 2007, up 7 percent from $3.9 million in the third quarter
of 2006.
Non-GAAP net loss for the third quarter of 2007 was $3.8 million, or
$(0.08) per share, compared to a non-GAAP net loss of $127,000, or $(0.00)
per share, in the third quarter of 2006. Non-GAAP results exclude stock
compensation expense of $1.2 million and $804,000 for the third quarter of
2007 and the third quarter of 2006, respectively, and restructuring charges
of $756,000 for the third quarter of 2006. A reconciliation of GAAP to
non-GAAP results is presented in the tables below.
On a GAAP basis, net loss for the third quarter of 2007 was $5.0 million,
or $(0.11) per share, compared to a net loss of $1.7 million, or $(0.04)
per share, in the third quarter of 2006.
Cash and marketable securities at September 30, 2007 was $114.2 million,
compared to $114.9 million at June 30, 2007 and $119.9 million at December
31, 2006.
"We are moving forward aggressively with our business notwithstanding
recent setbacks," said Josh Pickus, President and CEO of SupportSoft. "In
the consumer arena, we are ramping existing partners, including our U.S.
retail partner, and establishing new relationships, including three new
partnerships in the third quarter. While these partnerships clearly take
time to become productive, we believe we are laying a foundation for
revenue growth in 2008 and beyond. In our base business, we are squarely
focused on achieving consistent profitability. In order to achieve this
goal, we recently implemented a reduction in force, which will bring the
quarterly expense rate for the base business below $11 million. To ensure
that each part of our business is focused, accountable and transparent, we
plan to operate in two business units, Consumer Solutions and Enterprise
Solutions, starting in 2008."
Recent Highlights
-- Increase in number of stores with U.S. retail partner expected to
occur in December
-- TechGuys, a unit of DSG International, Europe's leading specialist
electronics retailing group, selects System TuneUp for delivery of PC
Healthchecks to consumers
-- Major anti-virus provider chooses support.com to deliver consumer
technology support services
-- Google selects support.com to deliver set up services to Google Apps
users
-- British Telecom licenses customer care solutions for use in major new
relationship with U.K. Post Office
-- Leading cable provider Cox Communications licenses ServiceVerify
solution for enhanced technician efficiency
Financial Outlook
As indicated in our October 4th preannouncement, we expect revenue of
approximately $47 million and a non-GAAP net loss per share of ($0.35) to
($0.37) for the full 2007 year. For the fourth quarter, we expect revenue
of approximately $12 million and a non-GAAP net loss per share of ($0.09)
to ($0.11). In connection with the fourth quarter reduction in force, we
expect a restructuring charge of $1.7 million to $1.9 million. Non-GAAP
results exclude stock-based compensation expense and restructuring charges.
SupportSoft will host a conference call discussing the Company's third
quarter 2007 results and fourth quarter activities on Tuesday, October 30,
2007 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 web
site at http://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 (617) 801-6888 and entering passcode
9603-5503.
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,"
"seeks," "forecasts," "estimates," "goal," "moving forward," "ramping,"
"laying a foundation," "focused on," "contribute to," " achieving
consistent profitability" 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, non-GAAP and GAAP net loss for the fourth quarter and full year of
2007; the anticipated restructuring charge for the fourth quarter of 2007;
the expected impact of our reduction in force; expectations regarding the
progress of our collaboration with partners (including the partners and
customers mentioned herein) and the anticipated impact of those
relationships on our business; anticipated contribution to our revenue from
our consumer operations; the potential for us to run our base business
profitably, the timing of any such profitability, and our other plans for
the base business; 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; the
potential that such partnerships take longer than we expect to produce
revenue or do not produce revenue; the potential that delays or
cancellation of third-party programs that include our software and services
could decrease our revenues; our ability to achieve broad adoption and
acceptance of our offerings; the potential for a decrease in revenue caused
by our reliance on a few large transactions that generally occur at the end
of reporting periods; 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 manage
consumer technology support call centers; our ability to profitably manage
our professional services organization; 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 sufficient patent protection; the
uncertain economic conditions in the United States and in international
markets; 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 2, 2007. You can locate these
filings on the Investor Relations page of our website,
http://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 expense and restructuring
charges from its GAAP results in order to determine the non-GAAP financial
measures of net loss and net loss per share.
We believe that the non-GAAP measures, excluding stock-based compensation
expense, when viewed in addition to and not in lieu of our reported GAAP
results, assist investors in understanding our results of operations.
SupportSoft uses these non-GAAP financial measures internally to evaluate
its performance from period to period and against the performance of other
software companies which present similar non-GAAP financial measures. 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 expense. We also believe that
investors benefit from seeing "through the eyes of management" as our
internal plans are based on the non-GAAP financial measures we present in
this press release. SupportSoft also believes 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.
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. For
example, the Company's management has no control over certain variables
that have a significant influence in the determination of stock-based
compensation such as the volatility of its stock price and changing
interest rates.
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 the Company's activities and reliance solely on non-GAAP measures
may lead management to make business decisions with unanticipated economic
consequences on the Company's GAAP financial results. We compensate for
this limitation by not relying exclusively on non-GAAP financial measures
to make business decisions. We also continuously re-evaluate which
non-GAAP measures are appropriate.
About SupportSoft
SupportSoft (NASDAQ: SPRT) is a leading provider of software and services
for technology problem resolution. 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 has expanded its offerings and now provides Instant Technology
Relief(SM) to frustrating technology problems directly to consumers through
http://www.support.com/. For more information about the Company and its
corporate offerings, visit http://supportsoft.com/; for Instant Technology
Relief (SM) to consumer technology problems, visit http://www.support.com/
or dial 1-800-PC-SUPPORT.
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,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Revenues:
License $ 2,586 $ 4,479 $ 11,725 $ 10,013
Services 4,536 3,462 11,423 9,106
Maintenance 4,201 3,917 12,035 11,740
--------- --------- --------- ---------
Total revenues 11,323 11,858 35,183 30,859
Costs and expenses:
Cost of license 52 119 141 333
Cost of services 5,279 3,606 14,933 9,579
Cost of maintenance 630 349 1,929 863
Amortization of intangible
assets 272 272 817 816
Research and development 2,366 2,267 7,071 7,125
Sales and marketing 6,959 6,013 23,081 16,993
General and administrative 2,211 2,689 7,235 7,677
--------- --------- --------- ---------
Total costs and expenses 17,769 15,315 55,207 43,386
Loss from operations (6,446) (3,457) (20,024) (12,527)
Interest income and other, net 1,636 1,842 5,019 4,705
--------- --------- --------- ---------
Loss before income taxes (4,810) (1,615) (15,005) (7,822)
Provision for income taxes (212) (72) (558) (333)
--------- --------- --------- ---------
Net loss $ (5,022) $ (1,687) $ (15,563) $ (8,155)
--------- --------- --------- ---------
Net loss per share:
Basic $ (0.11) $ (0.04) $ (0.34) $ (0.19)
--------- --------- --------- ---------
Diluted $ (0.11) $ (0.04) $ (0.34) $ (0.19)
--------- --------- --------- ---------
Shares used in computing per
share amounts:
Basic 45,614 44,152 45,449 44,000
--------- --------- --------- ---------
Diluted 45,614 44,152 45,449 44,000
--------- --------- --------- ---------
2007 amounts are subject to completion of management's and its independent
auditor's customary closing and review procedures.
SUPPORTSOFT, INC.
RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
GAAP costs and expenses $ 17,769 $ 15,315 $ 55,207 $ 43,386
Total restructuring charges - (756) - (756)
Total stock-based
compensation (1,229) (804) (3,731) (2,327)
--------- --------- --------- ---------
Non-GAAP costs and expenses 16,540 13,755 51,476 40,303
Detail of costs and operating
expenses:
GAAP cost of services 5,279 3,606 14,933 9,579
Restructuring charges - (151) - (151)
Stock-based compensation (193) (69) (564) (175)
--------- --------- --------- ---------
Non-GAAP cost of services 5,086 3,386 14,369 9,253
GAAP cost of maintenance 630 349 1,929 863
Restructuring charges - (33) - (33)
Stock-based compensation (22) (18) (59) (35)
--------- --------- --------- ---------
Non-GAAP cost of maintenance 608 298 1,870 795
GAAP research and
development expense 2,366 2,267 7,071 7,125
Restructuring charges - (40) - (40)
Stock-based compensation (129) (83) (366) (301)
--------- --------- --------- ---------
Non-GAAP research and
development expense 2,237 2,144 6,705 6,784
GAAP sales and marketing
expense 6,959 6,013 23,081 16,993
Restructuring charges - (338) - (338)
Stock-based compensation (493) (219) (1,431) (592)
--------- --------- --------- ---------
Non-GAAP sales and marketing
expense 6,466 5,456 21,650 16,063
GAAP general and
administrative expense 2,211 2,689 7,235 7,677
Restructuring charges - (194) - (194)
Stock-based compensation (392) (415) (1,311) (1,224)
--------- --------- --------- ---------
Non-GAAP general and
administrative expense 1,819 2,080 5,924 6,259
GAAP loss from operations (6,446) (3,457) (20,024) (12,527)
Total restructuring charges 756 756
Total stock-based
compensation 1,229 804 3,731 2,327
--------- --------- --------- ---------
Non-GAAP loss from operations (5,217) (1,897) (16,293) (9,444)
GAAP loss before income taxes (4,810) (1,615) (15,005) (7,822)
Total restructuring charges - 756 - 756
Total stock-based
compensation 1,229 804 3,731 2,327
--------- --------- --------- ---------
Non-GAAP loss before income
taxes (3,581) (55) (11,274) (4,739)
GAAP net loss $ (5,022) $ (1,687) $ (15,563) $ (8,155)
Total restructuring charges - 756 - 756
Total stock-based
compensation 1,229 804 3,731 2,327
--------- --------- --------- ---------
Non-GAAP net loss $ (3,793) $ (127) $ (11,832) $ (5,072)
========= ========= ========= =========
Basic net loss per share
GAAP $ (0.11) $ (0.04) $ (0.34) $ (0.19)
Non-GAAP $ (0.08) $ (0.00) $ (0.26) $ (0.12)
Diluted net loss per share
GAAP $ (0.11) $ (0.04) $ (0.34) $ (0.19)
Non-GAAP $ (0.08) $ (0.00) $ (0.26) $ (0.12)
Shares used in computing per
share amounts
Basic 45,614 44,152 45,449 44,000
Diluted 45,614 44,152 45,449 44,000
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 and stock-based
compensation expense 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.
2007 amounts are subject to completion of management's and its independent
auditor's customary closing and review procedures.
SUPPORTSOFT, INC.
GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2007 2006
------------- -------------
(unaudited)
Assets
Current assets:
Cash and marketable securities $ 114,232 $ 119,891
Accounts receivable, net 8,425 15,144
Prepaid expenses and other current assets 2,241 2,894
------------- -------------
Total current assets 124,898 137,929
------------- -------------
Property and equipment, net 2,317 937
Goodwill 9,792 9,792
Intangible assets, net 2,338 3,155
Other assets 849 792
------------- -------------
Total assets $ 140,194 $ 152,605
============= =============
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued compensation $ 2,446 $ 2,443
Other accrued liabilities 3,878 3,813
Deferred revenue 7,824 13,613
Other long-term liabilities 830 233
------------- -------------
Total liabilities $ 14,978 $ 20,102
------------- -------------
Stockholders' equity:
Common stock $ 4 $ 4
Additional paid-in-capital 210,735 202,440
Accumulated other comprehensive loss (770) (751)
Accumulated deficit (84,753) (69,190)
------------- -------------
Total stockholders' equity $ 125,216 $ 132,503
------------- -------------
Total liabilities and stockholders' equity $ 140,194 $ 152,605
============= =============
2007 amounts are subject to completion of management's and its independent
auditor's customary closing and review procedures.
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