Support.com Reports First Quarter and 2014 Financial Results

Redwood City, CA – April 30, 2014 – Support.com, Inc. (NASDAQ: SPRT), a leading provider of cloud-based technology services and software, today reported unaudited financial results for its first quarter ended March 31, 2014.

Q1 2014 Financial Summary
For the first quarter of 2014, total non-GAAP revenue was $18.6 million compared to $20.2 million in the first quarter of 2013 and $24.9 million in the fourth quarter of 2013. Total GAAP revenue for the first quarter of 2014 was $18.6 million compared to $20.2 million in the first quarter of 2013. GAAP revenue in the fourth quarter of 2013 was $24.5 million, after a warrant-related charge to revenue of $394,000.

On a non-GAAP basis, income from continuing operations for the first quarter of 2014 was $490,000, or $0.01 per share, compared to $3.1 million, or $0.06 per share, in the first quarter of 2013 and $5.3 million, or $0.10 per share, in the fourth quarter of 2013.

On a GAAP basis, loss from continuing operations for the first quarter of 2014 was $476,000, or $(0.01) per share, compared to income of $1.9 million, or $0.04 per share, in the first quarter of 2013 and income of $2.8 million, or $0.05 per share, in the fourth quarter of 2013.

Non-GAAP revenue excludes warrant-related charges. Non-GAAP income from continuing operations excludes the warrant-related charge 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 $966,000 in the first quarter of 2014, $1.2 million in the first quarter of 2013 and $2.4 million in the fourth quarter of 2013. A reconciliation of GAAP to non-GAAP results is presented in the tables below.

“We are pleased with the first quarter’s financial results. The Company executed well and we exceeded our expectations on both the top and bottom lines,” said Jim Stephens, Chairman of the Board and Interim Chief Executive Officer. “I’ve been working closely with the team for the past month and I’m excited about the Company’s prospects and the opportunities ahead.”

Balance Sheet Information 
At March 31, 2014 cash, cash equivalents and investments were $75.5 million, compared to $72.4 million at December 31, 2013.

Recent Company Highlights

  • Q1 2014 financial results exceeded outlook
  • Cash and cash equivalents increased by $3.1 million sequentially
  • Comcast Home Networking bundle program grew as expected
  • Relationship with Comcast expands and diversifies to include remote support for XFINITY Home, Comcast’s next-generation home security and automation system
  • DISH® program continues to roll-out within their service territories and channels
  • Next generation Nexus® Service Platform released to Beta; general release expected in Q2 2014

Conference Call 
Support.com will host a conference call discussing the Company’s first quarter 2014 results on Wednesday, April 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 26258203. A live audio webcast and replay of the call will be available at the Investor Relations section of Support.com’s website at https://www.support.com/investors/events.

About Support.com
Support.com, Inc. (NASDAQ: SPRT) is a leading provider of cloud-based services and software that enable technology support for a connected world. Our premium technology support programs help leading brands create new revenue streams and deepen customer relationships. Our cloud-based Nexus® Service Platform enables companies to resolve connected technology issues quickly, boost their support productivity, and dramatically improve their customer experience. 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: www.support.com.
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Support.com, Inc. is an Equal Opportunity Employer. For more information, visit https://www.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 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 our customer base, our ability to market and sell our Nexus Service Platform, 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 has excluded a warrant-related charge 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. For the first quarter of 2014, the warrant-related charge was zero, compared to zero in the first quarter of 2013 and $394,000 in the fourth quarter of 2013.

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 performance of the Company’s business. Stock-based compensation expense was $622,000 in the first quarter of 2014, compared to $796,000 in the first quarter of 2013 and $1.0 million in the fourth quarter of 2013.

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 first quarter of 2014, compared to $335,000 in the first quarter of 2013 and $316,000 in the fourth quarter of 2013.

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 first quarter of 2014, compared to zero in the first quarter of 2013 and $431,000 in the fourth quarter of 2013.

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 first quarter of 2014, the first quarter of 2013 and the fourth quarter of 2013.

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 first quarter of 2014, no expense or benefit in the first quarter of 2013, and an expense of $168,000 in the fourth quarter of 2013.

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 first quarter of 2014, compared to $73,000 in the first quarter of 2013 and $80,000 in the fourth quarter of 2013.

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)
March 31,December 31,March 31,
2014(1)2013(2)2013
Assets
Current assets:
Cash, cash equivalents and short-term investments$75,549$72,357$59,474
Accounts receivable, net12,01513,99310,158
Prepaid expenses and other current assets1,3031,3221,746
Total current assets88,86787,67271,378
Property and equipment, net423461534
Purchased technology, net41
Goodwill14,24014,24014,240
Intangible assets, net3,1813,4544,440
Other assets1,1141,0721,155
Total assets$107,825$106,899$91,788
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued compensation$4,330$3,017$3,419
Other accrued liabilities2,9613,3594,785
Short-term deferred revenue2,9853,3236,177
Total current liabilities10,2769,69914,381
Long-term deferred revenue6450108
Other long-term liabilities1,8131,7541,479
Total liabilities12,15311,50315,968
Stockholders’ equity:
Common stock555
Additional paid-in-capital258,972258,291246,844
Treasury stock(5,036)(5,036)(5,036)
Accumulated other comprehensive loss(1,797)(1,874)(1,502)
Accumulated deficit(156,472)(155,990)(164,491)
Total stockholders’ equity95,67295,39675,820
Total liabilities and stockholders’ equity$107,825$106,899$91,788
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
March 31, 2014(1)December 31, 2013March 31, 2013
Revenue:
Services$16,726$21,973$16,446
Software and other1,8872,5043,756
Total revenue18,61324,47720,202
Cost of revenue:
Cost of services (3)12,96214,0149,310
Cost of software and other (3)239300307
Total cost of revenue13,20114,3149,617
Gross profit5,41210,16310,585
Operating expenses:
Amortization of intangible assets and other273316335
Research and development (3)1,3541,4101,588
Sales and marketing (3)1,5512,1673,936
General and administrative (3)2,6633,1832,763
Total operating expenses5,8417,0768,622
Income (loss) from operations(429)3,0871,963
Interest income and other, net786273
Income (loss) from continuing operations, before income taxes(351)3,1492,036
Income tax provision125326149
Income (loss) from continuing operations, after income taxes(476)2,8231,887
Income (loss) from discontinued operations, net of income taxes(6)50(5)
Net income (loss)$(482)$2,873$1,882
Income (loss) from continuing operations, after income taxes
Basic$(0.01)$0.05$0.04
Diluted$(0.01)$0.05$0.04
Income (loss) from discontinued operations, net of income taxes
Basic$(0.00)$0.00$(0.00)
Diluted$(0.00)$0.00$(0.00)
Shares used in computing per share amounts:
Basic53,31352,95950,085
Diluted53,31354,63752,141
Note 3: Includes stock-based compensation expense, restructuring and impairment charges, acquisition expense and other non-recurring items, as follows:
Three Months Ended
March 31, 2014December 31, 2013March 31, 2013
Cost of revenue:
Cost of services$87$407$92
Cost of software and other3$43
Operating expenses:
Research and development167248209
Sales and marketing77172108
General and administrative288648384
Total$622$1,479$796
SUPPORT.COM, INC.
RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31, 2014December 31, 2013March 31, 2013
GAAP revenue$18,613$24,477$20,202
Warrant-related charge394
Non-GAAP revenue$18,613$24,871$20,202
GAAP cost of revenue$13,201$14,314$9,617
Stock-based compensation expense (Cost of revenue portion only)(90)(94)(95)
Restructuring and impairment charges (Cost of revenue portion only)(317)
Non-GAAP cost of revenue$13,111$13,903$9,522
GAAP operating expenses$5,841$7,076$8,622
Stock-based compensation expense (Excl. cost of revenue portion)(532)(954)(701)
Amortization of intangible assets and other(273)(316)(335)
Restructuring and impairment charges (Excl. cost of revenue portion)(114)
Acquisition expense
Other non-recurring items
Non-GAAP operating expenses$5,036$5,692$7,586
GAAP income tax provision$125$326$149
Tax expense associated with acquired goodwill(71)(80)(73)
Other non-recurring items(168)
Non-GAAP income tax provision$54$78$76
GAAP income (loss) from continuing operations, after income taxes$(476)$2,823$1,887
Warrant-related charge$-$394$-
Stock-based compensation expense6221,048796
Amortization of intangible assets and other273316335
Restructuring and impairment charges431
Acquisition expense
Tax expense associated with acquired goodwill718073
Other non-recurring items168
Total impact of Non-GAAP exclusions9662,4371,204
Non-GAAP income from continuing operations, after income taxes$490$5,260$3,091
Income (loss) from continuing operations, after income taxes
Basic – GAAP$(0.01)$0.05$0.04
Basic – Non-GAAP$0.01$0.10$0.06
Diluted – GAAP$(0.01)$0.05$0.04
Diluted – Non-GAAP$0.01$0.10$0.06
Shares used in computing per share amounts (GAAP)
Basic53,31352,95950,085
Diluted53,31354,63752,141
Shares used in computing per share amounts (Non-GAAP)
Basic53,31352,95950,085
Diluted53,68454,63752,141
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.

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 a warrant-related charge 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. 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.

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