Support.com Reports Fourth Quarter and 2014 Financial Results


REDWOOD CITY, Calif., Feb. 11, 2015 (GLOBE NEWSWIRE) -- Support.com, Inc. (Nasdaq:SPRT), a leading provider of cloud-based software and services for technology support, today reported unaudited financial results for its fourth quarter and year ended December 31, 2014.

"2014 was a transformative year for Support.com," said Elizabeth Cholawsky, President and Chief Executive Officer. "We entered the year managing a major business model shift in our contractual relationship with Comcast, planning to release a nascent SaaS product into the support market, and navigating changes on the leadership team. We exited the year having effectively managed the shift in business model while positioning ourselves for growth with Comcast, validated our new Nexus product in the market, and put into place a strong leadership team. We are a far more capable company today than when I joined in May of 2014, and this bodes well as we head into 2015."

Q4 2014 Financial Summary

For the fourth quarter of 2014, total non-GAAP and GAAP revenue was $22.0 million. For the fourth quarter of 2013, total non-GAAP revenue was $24.9 million and GAAP revenue was $24.5 million, after warrant-related charges of $394,000. For the third quarter of 2014, total non-GAAP and GAAP revenue was $22.2 million.

On a non-GAAP basis, loss from continuing operations for the fourth quarter of 2014 was $915,000, or $(0.02) per share, compared to income of $5.3 million, or $0.10 per share, in the fourth quarter of 2013 and income of $1.1 million, or $0.02 per share, in the third quarter of 2014.

On a GAAP basis, loss from continuing operations for the fourth quarter of 2014 was $2.4 million, or $(0.04) per share, compared to income of $2.8 million, or $0.05 per share, in the fourth quarter of 2013 and a loss of $95,000, or $(0.00) per share, in the third quarter of 2014.

At December 31, 2014 cash, cash equivalents and investments were $73.8 million compared to $75.3 million at September 30, 2014.

2014 Financial Summary

Total non-GAAP and GAAP revenue for 2014 was $83.0 million. Total non-GAAP revenue was $88.9 million in 2013. Total GAAP revenue for 2013 was $88.2 million, after warrant-related charges of $777,000.

Non-GAAP income from continuing operations for 2014 was $1.1 million, or $0.02 per share, compared to $16.8 million, or $0.31 per share, in 2013.

On a GAAP basis, loss from continuing operations for 2014 was $3.6 million, or ($0.07) per share, compared to income from continuing operations of $10.3 million, or $0.19 per share, in 2013.

Non-GAAP revenue excludes warrant-related charges. Non-GAAP income (loss) from continuing operations excludes warrant-related charges, stock-based compensation expense, amortization of intangible assets and other, restructuring and impairment charges, acquisition expense, other non-recurring items, charges for uncertain tax positions and tax expense associated with acquired goodwill. These items impacted results from continuing operations by $1.5 million in the fourth quarter of 2014, $2.4 million in the fourth quarter of 2013 and $1.2 million in the third quarter of 2014. On an annual basis, these items impacted results from continuing operations by $4.7 million in 2014 and $6.4 million in 2013. A reconciliation of GAAP to non-GAAP results is presented in the tables below.

Recent Company Highlights

  • Nexus® go-to-market validated; achieved goals for Nexus new customer acquisition in Q4
  • Nexus recognized as one of the few products in the market today to offer an end-to-end best of breed application focused on Support Interaction Optimization
  • Support.com recognized by Frost & Sullivan as the Company of the Year for growth, innovation and leadership in the new category of Support Interaction Optimization
  • Comcast Master Service Agreement renewed
  • Comcast Xfinity Home program is expanding

Conference Call

Support.com will host a conference call discussing the Company's fourth quarter and full year 2014 results on Wednesday, February 11, 2015, starting at 4:30 p.m. ET (1:30 p.m. PT). The live call may be accessed by dialing (855) 296-9613 (domestic) or (920) 663-6269 (international) and referencing passcode 71199831. A live audio webcast and replay of the call will be available at the Investor Relations section of Support.com's website at http://corp.support.com/company/investor-relations/investor-webcasts-events/.

About Support.com

Support.com, Inc. (Nasdaq:SPRT) is a leading provider of cloud-based software and services for technology support, including the Nexus® Support Interaction Optimization (SIO) solution that enables companies to boost agent productivity, dramatically improve the customer experience and more quickly resolve complex technology support issues. Nexus and our support programs help leading brands in cable, retail, software and other connected technology industries create new revenue streams and deepen customer relationships. For more information, please visit us at www.support.com.

The Support.com, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=25440

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

Copyright © 2015 Support.com, Inc. All rights reserved. Support.com and Nexus are trademarks or registered trademarks of Support.com, Inc. in the U.S. and other countries. All other trademarks and trade names are the property of their respective owners.

Safe Harbor Statement

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 in economic and other terms. 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 and diversify our customer base, our ability to market and sell our Nexus "Software-as-a-Service" offering, 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 operate in markets that are subject to extensive regulations, such as support for home security systems, 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, charges for uncertain tax positions 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. We believe that the non-GAAP measure, when viewed in addition to and not in lieu of our reported GAAP results, assists 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. For the fourth quarter of 2014, the warrant-related charge was zero compared to $394,000 in the fourth quarter of 2013 and zero for the third quarter of 2014.

B. Stock-based compensation expense. Management excludes stock-based compensation expense 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 the Company's business. Stock-based compensation expense was $817,000 in the fourth quarter of 2014, compared to $1.0 million in the fourth quarter of 2013 and $803,000 in the third quarter of 2014.

C. Amortization of intangible assets and other. The Company does not acquire businesses on a predictable cycle; therefore management excludes acquisition-related intangible asset amortization and related charges when evaluating its operating performance. Amortization of intangible assets and other was $273,000 in the fourth quarter of 2014, compared to $316,000 in the fourth quarter of 2013 and $273,000 in the third quarter of 2014.

D. Restructuring and impairment charges. The Company does not undertake significant restructurings on a predictable basis and therefore excludes associated charges in order to enable better and more consistent evaluation of the Company's operating expenses before and after such actions are taken. Restructuring and impairment charges were zero in the fourth quarter of 2014, compared to $431,000 in the fourth quarter of 2013 and zero in the third quarter of 2014.

E. Acquisition expense. The Company does not acquire businesses on a predictable cycle; therefore management excludes acquisition expenses such as legal fees and advisory fees when evaluating ongoing operating performance. Acquisition expense was zero in the fourth quarter of 2014, the fourth quarter of 2013 and the third quarter of 2014.

F. Other non-recurring items. Management excludes non-recurring items, which generally do not require cash settlement, 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 no expense or benefit in the fourth quarter of 2014, the fourth quarter of 2013 and the third quarter of 2014.

G. Charges for uncertain tax positions. The Company excludes charges for uncertain tax positions because excluding such charges enables more consistent evaluation of the Company's operating performance. Charges for uncertain tax positions were $306,000 in the fourth quarter of 2014, compared to $168,000 in the fourth quarter of 2013 and zero in the third quarter of 2014.

H. Tax expense associated with acquired goodwill. The Company does not amortize goodwill in its consolidated financial statements. However, for goodwill created through Asset Purchase Agreement transactions, the Company is required to amortize goodwill in its tax returns and to reflect such tax return entries as additional tax expense in its consolidated financial statements. The Company excludes the 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 $66,000 in the fourth quarter of 2014, compared to $80,000 in the fourth quarter of 2013 and $77,000 in the third 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)
           
   December 31,     September 30,   December 31,   
  2014 (1) 2014 2013 (2)
           
Assets          
Current assets:          
Cash, cash equivalents and short-term investments  $ 73,793    $ 75,310  $ 72,357  
Accounts receivable, net  14,627    15,190  13,993  
Prepaid expenses and other current assets  1,403    1,173  1,322  
Total current assets  89,823    91,673  87,672  
Property and equipment, net  417    428  461  
Goodwill  14,240    14,240  14,240  
Intangible assets, net  2,363    2,636  3,454  
Other assets  1,144    1,192  1,072  
           
Total assets  $ 107,987    $ 110,169  $ 106,899  
           
Liabilities and Stockholders' Equity           
Current liabilities:          
Accounts payable and accrued compensation  $ 4,417    $ 4,959  $ 3,017  
Other accrued liabilities  3,029    3,373  3,359  
Short-term deferred revenue  2,619    2,630  3,323  
Total current liabilities   10,065    10,962  9,699  
Long-term deferred revenue  72    61  50  
Other long-term liabilities  2,129    1,947  1,754  
Total liabilities  12,266    12,970  11,503  
           
Stockholders' equity:          
Common stock  5    5  5  
Additional paid-in-capital  262,253    261,341  258,291  
Treasury stock  (5,036)    (5,036)  (5,036)  
Accumulated other comprehensive loss  (2,028)    (1,884)  (1,874)  
Accumulated deficit  (159,473)    (157,227)  (155,990)  
Total stockholders' equity  95,721    97,199  95,396  
           
Total liabilities and stockholders' equity  $ 107,987    $ 110,169  $ 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 Ended   Year Ended December 31,   
   December 31,
2014 
(1)  September 30,
2014 
 December 31,
2013 
2014 (1) 2013 (2)
                 
Revenue:                
Services (3)  $ 20,633    $ 20,844  $ 22,258  $ 77,272    $ 74,867  
Software and other (3)  1,337    1,387  2,219  5,719    13,296  
Total revenue  21,970    22,231  24,477  82,991    88,163  
                 
Cost of revenue:                
Cost of services (4)  17,094    16,020  14,014  60,606    43,208  
Cost of software and other (4)  184    189  300  840    1,172  
Total cost of revenue  17,278    16,209  14,314  61,446    44,380  
                 
Gross profit  4,692    6,022  10,163  21,545    43,783  
                 
Operating expenses:                
Research and development (4)  1,464    1,203  1,410  5,078    5,735  
Sales and marketing (4)  2,184    1,782  2,167  7,206    14,599  
General and administrative (4)  2,870    2,808  3,183  11,320    11,376  
Amortization of intangible assets and other  273    273  316  1,091    1,321  
Total operating expenses  6,791    6,066  7,076  24,695    33,031  
                 
Income (loss) from operations  (2,099)    (44)  3,087  (3,150)    10,752  
                 
Interest income and other, net  77    77  62  294    369  
                 
Income (loss) from continuing operations, before income taxes  (2,022)    33  3,149  (2,856)    11,121  
                 
Income tax provision   355    128  326  740    772  
                 
Income (loss) from continuing operations, after income taxes  (2,377)    (95)  2,823  (3,596)    10,349  
                 
Income (loss) from discontinued operations, net of income taxes  131    (6)  50  113    34  
                 
Net income (loss)  $ (2,246)    $ (101)  $ 2,873  $ (3,483)    $ 10,383  
                 
                 
Income (loss) from continuing operations, after income taxes                
Basic  $ (0.04)    $ (0.00)  $ 0.05  $ (0.07)    $ 0.20  
Diluted  $ (0.04)    $ (0.00)  $ 0.05  $ (0.07)    $ 0.19  
                 
Income (loss) from discontinued operations, net of income taxes                
Basic  $ 0.00    $ (0.00)  $ 0.00  $ 0.00    $ 0.00  
Diluted  $ 0.00    $ (0.00)  $ 0.00  $ 0.00    $ 0.00  
                 
Shares used in computing per share amounts:                
Basic  54,184    54,028  52,959  53,834    51,553  
Diluted  54,184    54,028  54,637  53,834    53,825  
                 
 
 
Note 3: In the third quarter of 2014, fees from Nexus software-as-a-service solution were reclassified from "Software and other revenue" to "Services revenue". Therefore, certain amounts previously reported in fiscal years 2014 and 2013 have been reclassified to conform to the current period's presentation. Cost associated with the Nexus software-as-a-service solution was immaterial and therefore it was not reclassified from "Cost of software and other" to "Cost of services". These reclassifications have no impact on previously reported total revenue, net income (loss), and cash flows.
                 
Note 4: Includes stock-based compensation expense, restructuring and impairment charges, acquisition expense and other non-recurring items, as follows:
                 
   Three Months Ended   Year Ended December 31,   
   December 31,
2014 
   September 30,
2014 
 December 31,
2013 
2014   2013  
Cost of revenue:                
Cost of services   $ 60    $ 75  $ 407  $ 417    $ 649  
Cost of software and other   4    4  4  $ 14    12  
Operating expenses:                
Research and development   170    145  248  479    778  
Sales and marketing   120    122  172  413    457  
General and administrative   463    457  648  1,702    2,017  
Total  $ 817    $ 803  $ 1,479  $ 3,025    $ 3,913  
 
 
 
SUPPORT.COM, INC.
RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)
 
   Three Months Ended   Year Ended December 31, 
   December 31, 2014   September 30, 2014   December 31, 2013  2014 2013
           
GAAP revenue   $ 21,970  $ 22,231  $ 24,477  $ 82,991  $ 88,163
Warrant-related charge  --   --   394  --   777
Non-GAAP revenue   $ 21,970  $ 22,231  $ 24,871  $ 82,991  $ 88,940
           
GAAP cost of revenue   $ 17,278  $ 16,209  $ 14,314  $ 61,446  $ 44,380
Stock-based compensation expense (Cost of revenue portion only)  (64)  (79)  (94)  (281)  (344)
Restructuring and impairment charges (Cost of revenue portion only)  --   --   (317)  --   (317)
Other non-recurring items  --   --   --   (150)  -- 
Non-GAAP cost of revenue   $ 17,214  $ 16,130  $ 13,903  $ 61,015  $ 43,719
           
GAAP operating expenses   $ 6,791  $ 6,066  $ 7,076  $ 24,695  $ 33,031
Stock-based compensation expense (Excl. cost of revenue portion)  (753)  (724)  (954)  (2,594)  (3,138)
Amortization of intangible assets and other  (273)  (273)  (316)  (1,091)  (1,321)
Restructuring and impairment charges (Excl. cost of revenue portion)  --   --   (114)  --   (114)
Non-GAAP operating expenses   $ 5,765  $ 5,069  $ 5,692  $ 21,010  $ 28,458
           
GAAP interest income and other, net  77  $ 77  $ 62  $ 294  $ 369
Other non-recurring items  --   --   --   --   (57)
Non-GAAP interest income and other, net  $ 77  $ 77  $ 62  $ 294  $ 312
           
GAAP income tax provision (benefit)  $ 355  $ 128  $ 326  $ 740  $ 772
Tax expense associated with acquired goodwill  (66)  (77)  (80)  (285)  (289)
Charges for uncertain tax positions  (306)  --   (168)  (306)  (168)
Non-GAAP income tax provision (benefit)  $ (17)  $ 51  $ 78  $ 149  $ 315
           
GAAP income (loss) from continuing operations, after income taxes  $ (2,377)  $ (95)  $ 2,823  $ (3,596)  $ 10,349
Warrant-related charge  --   --   394  --   777
Stock-based compensation expense  817  803  1,048  2,875  3,482
Amortization of intangible assets and other  273  273  316  1,091  1,321
Restructuring and impairment charges  --   --   431  --   431
Tax expense associated with acquired goodwill  66  77  80  285  289
Charges for uncertain tax positions  306  --   168  306  168
Other non-recurring items  --   --   --   150  (57)
Total impact of Non-GAAP exclusions  1,462  1,153  2,437  4,707  6,411
Non-GAAP income (loss) from continuing operations, after income taxes  $ (915)  $ 1,058  $ 5,260  $ 1,111  $ 16,760
           
Income (loss) from continuing operations, after income taxes          
Basic - GAAP  $ (0.04)  $ (0.00)  $ 0.05  $ (0.07)  $ 0.20
Basic - Non-GAAP  $ (0.02)  $ 0.02  $ 0.10  $ 0.02  $ 0.33
           
Diluted - GAAP  $ (0.04)  $ (0.00)  $ 0.05  $ (0.07)  $ 0.19
Diluted - Non-GAAP  $ (0.02)  $ 0.02  $ 0.10  $ 0.02  $ 0.31
Shares used in computing per share amounts (GAAP)          
Basic  54,184  54,028  52,959  53,834  51,553
Diluted  54,184  54,028  54,637  53,834  53,825
Shares used in computing per share amounts (Non-GAAP)          
Basic  54,184  54,028  52,959  53,834  51,553
Diluted  54,184  54,159  54,637  53,984  53,825
 
           
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, charges for uncertain tax positions 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.
 


            

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