Press Release

Support.com Reports Second Quarter and 2015 Financial Results

Redwood City, CA – July 29, 2015Support.com, Inc. (NASDAQ: SPRT), makers of cloud-based Nexus® software for Support Interaction Optimization (SIO) and a leading provider of tech support and turnkey support center services, today reported unaudited financial results for its second quarter ended June 30, 2015.

“We are continuing to see results from our focus on growing and diversifying our services programs,” said CEO Elizabeth Cholawsky. “During Q2 we welcomed Staples back as a Support.com customer and began several initiatives with new and current customers, including working with DISH on their home automation efforts and the expansion of our Xfinity Home program with Comcast. We are also making progress with Nexus, adding customers, increasing usage and enhancing the functionality to include more developer tools and self-service. Customer feedback has also shown strong demand for using Nexus to solve challenging self-service issues, and we plan on bringing these capabilities to the market later this year.”

Q2 2015 Financial Summary

For the second quarter of 2015, total revenue was $20.6 million compared to $20.2 million in the second quarter of 2014 and $23.2 million in the first quarter of 2015.

On a non-GAAP basis, loss from continuing operations for the second quarter of 2015 was $(1.6) million, or $(0.03) per share, compared to income of $478,000, or $0.01 per share in the second quarter of 2014 and a loss of $(1.4) million, or $(0.03) per share, in the first quarter of 2015.

On a GAAP basis, loss from continuing operations for the second quarter of 2015 was $(15.6) million, or $(0.29) per share, compared to $(649,000), or $(0.01) per share, in the second quarter of 2014 and $(2.5) million or $(0.05) per share, in the first quarter of 2015. Loss from continuing operations for the second quarter of 2015 included a non-cash goodwill impairment charge of $14.2 million and an associated tax benefit of $1.3 million.

Non-GAAP income (loss) from continuing operations excludes 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 (benefit) associated with acquired goodwill. Collectively, these items impacted income (loss) from continuing operations by $14 million in the second quarter of 2015, $1.1 million in the second quarter of 2014 and $1.1 million in the first quarter of 2015. A reconciliation of GAAP to non-GAAP results is presented in the tables below.

Balance Sheet Information

At June 30, 2015 cash, cash equivalents and investments were $71.8 million, compared to $73.0 million at March 31, 2015.

Recent Company Highlights 

  • Launched a new program with Staples for branded tech support services to be sold both online and in stores
  • Signed multi-year agreements renewing services programs with Suddenlink and DISH®
  • Extended Internet of Things (IoT) leadership with expanded Comcast Xfinity® Home services program and a new initiative with DISH
  • Released Nexus® Connect SDK to embed support in mobile apps
  • Bolstered management team by adding Alex Poulos as Vice President, Marketing, and Michelle Johnson as Vice President, General Counsel

Support.com will host a conference call discussing the Company’s second quarter 2015 results on Wednesday, July 29, 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 83623445. A live audio webcast and replay of the call will be available at the Investor Relations section of the Support.com website at https://www.support.com/about-us/investor-relations/investor-webinars-events.

About Support.com

Support.com, Inc. (NASDAQ:SPRT) is the leading provider of cloud-based software (Nexus®) and services to deliver next-generation technical support. Support.com helps leading brands in software, electronics, communications, retail, Internet of Things (IoT) and other connected technology industries deepen their customer relationships. Customers want technology that works the way it’s intended. By using Support.com software and services, companies can deliver a fantastic customer experience, leading to happier customers, a stronger brand and growing revenues.

For more information, please visit www.support.com or follow us @support_comSupport.com, Inc. is an Equal Opportunity Employer. For more information, visit https://www.support.com/about-us/careers.

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 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 (benefit) 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, as described in A through G below. 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.  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 $783,000 in the second quarter of 2015, compared to $633,000 in the second quarter of 2014 and $711,000 in the first quarter of 2015.

B.  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 $267,000 in the second quarter of 2015, compared to $273,000 in the second quarter of 2014 and $268,000 in the first quarter of 2015.

C.  Restructuring and impairment charges. Management excludes restructuring and impairment charges when evaluating its operating performance because the Company does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance. Goodwill impairment charge was $14.2 million in the second quarter of 2015, compared to zero in the second quarter of 2014 and the first quarter of 2015.

D.  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 second quarter of 2015, the second quarter of 2014 and the first quarter of 2015.

E.  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 second quarter of 2015, expense of $150,000 in the second quarter of 2014 and no expense or benefit the first quarter of 2015.

F.  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 zero in the second quarter of 2015, the second quarter of 2014 and the first quarter of 2015.

G.  Tax expense (benefit) associated with acquired goodwill. The Company does not amortize goodwill in its consolidated financial statements. Goodwill created through Asset Purchase Agreement transactions is amortizable for tax purposes and a deferred tax liability is recorded as the tax deduction is realized. The deferred tax liability will not be reversed unless and until the goodwill is disposed of or impaired. The Company excludes the tax expense (benefit) associated with acquired goodwill when evaluating its operating performance because the Company does not acquire businesses on a predictable cycle and excluding such expense (benefit) enables more consistent evaluation of the Company’s operating performance. Tax expense (benefit) associated with acquired goodwill was benefit of $1.3 million in the second quarter of 2015, compared to expense of $71,000 in the second quarter of 2014 and the first quarter of 2015.

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,
2015 (1) 2014 (2)
Assets
Current assets:
Cash, cash equivalents and short-term investments $71,754 $73,793
Accounts receivable, net 13,154 14,627
Prepaid expenses and other current assets 1,217 1,403
Total current assets 86,125 89,823
Property and equipment, net 434 417
Goodwill 14,240
Intangible assets, net 1,828 2,363
Other assets 1,058 1,144
Total assets $89,445 $107,987
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued compensation $3,627 $4,417
Other accrued liabilities 3,557 3,029
Short-term deferred revenue 2,277 2,619
Total current liabilities 9,461 10,065
Long-term deferred revenue 59 72
Other long-term liabilities 758 2,129
Total liabilities 10,278 12,266
Stockholders’ equity:
Common stock 5 5
Additional paid-in-capital 263,834 262,253
Treasury stock (5,117) (5,036)
Accumulated other comprehensive loss (2,042) (2,028)
Accumulated deficit (177,513) (159,473)
Total stockholders’ equity 79,167 95,721
Total liabilities and stockholders’ equity $89,445 $107,987
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, 2014.
SUPPORT.COM, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2015 (1) June 30, 2014 June 30, 2015 (1) June 30, 2014     
Revenue:
    Services (3) $19,295 $18,743 $41,107 $35,795
    Software and other (3) 1,305 1,435 2,587 2,996
       Total revenue 20,600 20,178 43,757 38,791
Cost of revenue:
   Cost of services (4) 15,804 14,531 34,198 27,493
   Cost of software and other (4) 131 228 281 467
      Total cost of revenue 15,935 14,759 34,479 27,960
Gross profit 4,665 5,419 9,278 10,831
Operating expenses:
   Research and development (4) 1,930 1,057 3,454 2,411
   Sales and marketing (4) 2,089 1,688 4,297 3,239
   General and administrative (4) 3,076 2,980 6,136 5,643
   Amortization of intangible assets and other 267 273 535 546
   Goodwill impairment 14,240 14,240
      Total operating expenses 21,602 5,998 28,662 11,839
Loss from operations (16,937) (579) (19,384) (1,008)
Interest income and other, net 106 62 206 140
Loss from continuing operations, before income taxes (16,831) (517) (19,178) (868)
Income tax provision (benefit) (1,227) 132 (1,101) 257
Loss from continuing operations, after income taxes (15,604) (649) (18,077) (1,125)
Income (loss) from discontinued operations, net of income taxes (5) (6) 37 (12)
Net loss $(15,609) $(655) $(18,040) $(1,137)
Loss from continuing operations, after income taxes
   Basic $(0.29) $(0.01) $(0.33) $(0.02)
   Diluted $(0.29) $(0.01) $(0.33) $(0.02)
Income (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:
   Basic 54,441 53,798 54,380 53,557
   Diluted 54,441 53,798 54,380 53,557
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 year 2014 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 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 Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Cost of revenue:
   Cost of services $63 $195 $125 $282
   Cost of software and other 2 4 6 7
Operating expenses:
   Research and development 155 (3) 286 163
   Sales and marketing 101 94 166 171
   General and administrative 462 494 911 782
   Total $783 $783 $1,494 $1,405
SUPPORT.COM, INC.
RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
GAAP cost of revenue $15,935 $14,759 $34,479 $27,960
   Stock-based compensation expense (Cost of revenue portion only) (65) (49) (131) (139)
   Other non-recurring items (Cost of revenue portion only) (150) (150)
Non-GAAP cost of revenue $15,870 $14,560 $34,348 $27,671
GAAP operating expenses $21,602 $5,998 $28,662 $11,839
   Stock-based compensation expense (Excl. cost of revenue portion) (718) (584) (1,363) (1,116)
   Amortization of intangible assets and other (267) (273) (535) (546)
   Restructuring and impairment charges (14,240) (14,240)
Non-GAAP operating expenses $6,377 $5,141 $12,524 $10,177
GAAP income tax provision (benefit) $(1,227) $132 $(1,101) $257
   Tax expense (benefit) associated with acquired goodwill 1,275 (71) 1,204 (142)
Non-GAAP income tax provision $48 $61 $103 $115
GAAP loss from continuing operations, after income taxes $(15,604) $(649) $(18,077) $(1,125)
   Stock-based compensation expense 783 633 1,494 1,255
   Amortization of intangible assets and other 267 273 535 546
   Tax expense (benefit) associated with acquired goodwill (1,275) 71 (1,204) 142
   Other non-recurring items 150 150
   Restructuring and impairment charges 14,240 14,240
Total impact of Non-GAAP exclusions 14,015 1,127 15,065 2,093
Non-GAAP income (loss) from continuing operations, after income taxes $(1,589) $478 $(3,012) $968
Loss from continuing operations, after income taxes
   Basic – GAAP $(0.29) $(0.01) $(0.33) $(0.02)
   Basic – Non-GAAP $(0.03) $0.01 $(0.06) $0.02
   Diluted – GAAP $(0.29) $(0.01) $(0.33) $(0.02)
   Diluted – Non-GAAP $(0.03) $0.01 $(0.06) $0.02
Shares used in computing per share amounts (GAAP)
   Basic 54,441 53,798 54,380 53,557
   Diluted 54,441 53,798 54,380 53,557
Shares used in computing per share amounts (Non-GAAP)
   Basic 54,441 53,798 54,380 53,557
   Diluted 54,441 53,864 54,380 53,818
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 stock-based compensation expense, amortization of intangible assets and other, restructuring and impairment charges, acquisition expense, other non-recurring items and tax expense (benefit) 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.
2015 Amounts are subject to completion of management’s customary closing and review procedures.

Contact Information:

Media Contact
Kate Lynch
Director, Content and Communications
Support.com
(650) 678-8658 mobile
kate.lynch@support.com

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

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