SOURCE: SupportSoft Inc.

July 31, 2008 16:02 ET

SupportSoft Reports Second Quarter 2008 Financial Results

REDWOOD CITY, CA--(Marketwire - July 31, 2008) - SupportSoft, Inc. (NASDAQ: SPRT), a leading provider of software and services that make technology work, today reported unaudited financial results for its second quarter ended June 30, 2008.

Financial Summary

Total revenue for the second quarter of 2008 was $11.6 million, as compared to $11.6 million in the first quarter of 2008 and $13.4 million in the second quarter of 2007.

For the second quarter of 2008, Enterprise revenue was $10.7 million as compared to $10.9 million in the first quarter of 2008 and $13.2 million in the year ago quarter. Second quarter 2008 Enterprise revenue consisted of $2.9 million of license revenue, $3.9 million of maintenance revenue and $3.9 million of service revenue.

For the second quarter of 2008, Consumer revenue was $891,000 as compared to $703,000 in the first quarter of 2008 and $262,000 in the second quarter of 2007.

On a GAAP basis, net loss for the second quarter of 2008 was $4.3 million, or $(0.09) per share, compared to a net loss of $3.6 million, or $(0.08) per share, in the first quarter of 2008 and $4.9 million, or $(0.11) per share, in the second quarter of 2007.

Non-GAAP net loss for the second quarter of 2008 was $3.0 million, or $(0.06) per share, compared to a non-GAAP net loss of $2.4 million, or $(0.05) per share, in the first quarter of 2008 and $3.3 million, or $(0.07) per share, in the second quarter of 2007. Non-GAAP results exclude stock compensation expenses of $1.3 million, $1.2 million, and $1.3 million in the second quarter of 2008, first quarter of 2008 and second quarter of 2007, respectively, and amortization of intangible assets of $58,000, $30,000 and $272,000 in the second quarter of 2008, first quarter of 2008 and second quarter of 2007, respectively. A reconciliation of GAAP to non-GAAP results is presented in the tables below.

Cash and total marketable securities at June 30, 2008 were $100.9 million, compared to $107.4 million at March 31, 2008. The change in cash and marketable securities reflects approximately $3.4 million used for operations, $2.9 million associated with the acquisition and integration of YourTechOnline.com, and $169,000 of incremental unrealized loss for auction rate securities.

"Q2 was a solid quarter in which we laid important groundwork for the future," said Josh Pickus, CEO of SupportSoft. "Our Enterprise segment delivered a second consecutive quarter of non-GAAP profitability while our Consumer segment grew revenue 27% sequentially, added new partners and strengthened operations. We plan to increase investment levels in the Consumer business in the third quarter to support ongoing rollouts as well as planned launches of new pilots."

Recent Company Highlights

--  SupportSoft added to the Russell 2000 Index
    

Consumer Segment

--  Q2 Consumer revenue increases 27% sequentially
--  Office Depot rollout reaches 400 stores in Q2, up from 84 in Q1;
    national rollout continuing in the third quarter
--  Relationships established with two new retail partners; pilots
    expected to commence in the fall
--  Transition to North American work-from-home agents completed
    successfully
--  Multi-tenant technology platform for scalable partner deployments
    released
    

Enterprise Segment

--  Second consecutive quarter of non-GAAP profitability
--  Agreement with Lockheed Martin expands growing customer base of
    outsourcing firms
--  Three new emerging market telecommunication firms deploy the Company's
    service provider solutions
    

Financial Outlook

For the third quarter of 2008, SupportSoft currently expects total revenue of $11.9 million to $12.4 million and a non-GAAP net loss of $(0.10) to $(0.12) per share. Anticipated non-GAAP results exclude stock-based compensation expenses and amortization of intangible assets. We do not provide guidance on a GAAP basis because the Company does not forecast its future stock based compensation expenses.

Conference Call

SupportSoft will host a conference call discussing the Company's second quarter 2008 results and third quarter activities on Thursday, July 31, 2008 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 website at 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 (888) 286-8010 and entering passcode 5171-3844.

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," "continuing," "seeks," "forecasts," "estimates," "goal," 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 and non-GAAP net loss for the second quarter of 2008; expectations regarding the progress of our collaboration with partners (including the Office Depot rollout) and the anticipated impact of those relationships on our business; anticipated new partner relationships; anticipated pilots; contribution to our revenue from our consumer operations; our continuing ability to run our enterprise business profitably; 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; our ability to establish new partnerships and the potential that such partnerships take longer than we expect to produce revenue or do not produce revenue; the potential that cancellations or delays in rolling out our consumer partner programs (including Office Depot) could decrease our revenues; the cancellation or delay of pilots with new consumer partners or the failure of those pilots to mature into full rollouts; our ability to hire, train and manage home-based consumer technology support agents effectively; our ability to achieve broad adoption and acceptance of our offerings; the potential for a decrease in revenue in our enterprise segment 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 successfully integrate any acquisitions including YourTechOnline.com; our ability to profitably manage our enterprise business, including our professional services organization and its cost structure; 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 and enforce sufficient patent protection; the uncertain economic conditions in the United States and in international markets; further weakness or changes in the market for auction rate securities or in other investments we may hold; a determination, upon completion of further quarterly closing and review procedures, that the financial results for the second 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 May 9, 2008. You can locate these filings on the Investor Relations page of our website, 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 expenses, amortization/write-down of intangible assets and restructuring charges from its GAAP results in order to determine the non-GAAP financial measures of net income/loss and net income/loss per share. Each of the excluded items (as such items are applicable to particular time periods) is discussed in more detail below.

Stock-based compensation -- we believe that the non-GAAP measures, excluding stock-based compensation expenses, when viewed in addition to and not in lieu of our reported GAAP results, assist investors in understanding our results of operations. 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.

Amortization/write-down of intangible assets -- 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. The Company also excludes such charges as they represent non-cash expenses.

Restructuring charges -- 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. The Company does not undertake significant restructurings on a predictable basis and, as result, 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.

SupportSoft uses these non-GAAP financial measures internally to evaluate its performance from period to period and against the performance of other software companies, many of which present similar non-GAAP financial measures. We also believe that investors benefit from seeing "through the eyes of management" as our operating budgets and compensation programs are based on the non-GAAP financial measures we present in this press release.

Finally, SupportSoft 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. As such, the non-GAAP measures provided by the Company facilitate an "apples to apples" comparison of our performance with the financial projections published by the analysts.

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.

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 reevaluate which non-GAAP measures are appropriate.

Amounts related to second quarter of 2008 are subject to completion of management's and its independent registered public accounting firm's customary closing and review procedures.

About SupportSoft

SupportSoft (NASDAQ: SPRT) provides software and services that make technology work. 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 also provides Instant Technology Relief® to consumers and small businesses through a series of channel partners and www.support.com. For more information about the Company and its enterprise offerings, visit www.supportsoft.com. For Instant Technology Relief to consumer and small business technology problems, visit 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     Six Months Ended
                                    June 30,              June 30,
                              --------------------  --------------------
                                 2008 (1)   2007 (2)   2008 (1)   2007 (2)
                              ---------  ---------  ---------  ---------
Revenue:

    License                   $   2,897  $   5,891  $   5,871  $   9,138
    Maintenance                   3,895      3,910      7,898      7,834
    Services                      3,934      3,370      7,883      6,464
    Consumer revenue                891        262      1,593        423
                              ---------  ---------  ---------  ---------
        Total revenue            11,617     13,433     23,245     23,859

Costs and expenses:
    Cost of license                  92         52        143         90
    Cost of maintenance             465        661      1,014      1,299
    Cost of services              3,496      4,174      7,249      7,834
    Cost of consumer revenue      1,871      1,017      3,110      1,876
    Amortization of intangible
     assets                          58        272         88        544
    Research and development      2,184      2,434      4,420      4,705
    Sales and marketing           5,710      8,623     12,096     16,029
    General and administrative    2,725      2,519      5,081      5,061
                              ---------  ---------  ---------  ---------

        Total costs and
         expenses                16,601     19,752     33,201     37,438

Loss from operations             (4,984)    (6,319)    (9,956)   (13,579)

Interest income and other, net      721      1,531      2,170      3,384
                              ---------  ---------  ---------  ---------

Loss before income taxes         (4,263)    (4,788)    (7,786)   (10,195)

Provision for income taxes          (84)      (131)      (192)      (346)
                              ---------  ---------  ---------  ---------

Net loss                      $  (4,347) $  (4,919) $  (7,978) $ (10,541)
                              ---------  ---------  ---------  ---------

Net loss per share:
    Basic                     $   (0.09) $   (0.11) $   (0.17) $   (0.23)
                              ---------  ---------  ---------  ---------
    Diluted                   $   (0.09) $   (0.11) $   (0.17) $   (0.23)
                              ---------  ---------  ---------  ---------

Shares used in computing per
 share amounts:
    Basic                        46,076     45,418     46,065     45,175
                              ---------  ---------  ---------  ---------
    Diluted                      46,076     45,418     46,065     45,175
                              ---------  ---------  ---------  ---------



Note 1:  2008 amounts are subject to completion of management's and its
independent registered public accounting firm's customary closing and
review procedures.

Note 2:  In January 2008, we reorganized the Company and created two
business units, consumer and enterprise.
Prior to 2008, the Company conducted its business in one segment.  Revenue
and cost of revenue are provided on a segment basis, all other operating
expenses are incorporated into the overall company results for these
periods.  See the segment information table included in this press release
for more information.





                            SUPPORTSOFT, INC.
RECONCILIATION OF GAAP FINANCIAL RESULTS TO NON-GAAP FINANCIAL MEASURES (1)
                 (in thousands, except per share amounts)
                              (unaudited)


                               Three Months Ended     Six Months Ended
                                    June 30,              June 30,
                              --------------------  --------------------
                                2008  (1)   2007 (2)   2008 (1)   2007 (2)
                              ---------  ---------  ---------  ---------

GAAP costs and expenses       $  16,601  $  19,752  $  33,201  $  37,438
   Amortization of intangible
    assets                          (58)      (272)       (88)      (544)
   Restructuring charges             (2)         -         (2)       (17)
   Stock-based compensation      (1,333)    (1,319)    (2,507)    (2,503)
                              ---------  ---------  ---------  ---------
Non-GAAP costs and expenses      15,208     18,161     30,604     34,374

Detail of costs and operating
 expenses:
   GAAP cost of maintenance         465        661      1,014      1,299
      Restructuring charges           -          -          -          -
      Stock-based
       compensation                 (19)       (22)       (39)       (38)
                              ---------  ---------  ---------  ---------
   Non-GAAP cost of
    maintenance                     446        639        975      1,261

   GAAP cost of services          3,496      4,174      7,249      7,834
   Restructuring charges              -          -          -         (7)
      Stock-based
       compensation                (178)      (187)      (352)      (371)
                              ---------  ---------  ---------  ---------
   Non-GAAP cost of services      3,318      3,987      6,897      7,456

   GAAP cost of consumer
    revenue                       1,871      1,017      3,110      1,876
      Restructuring charges           -          -          -         (6)
      Stock-based
       compensation                 (36)         -        (48)         -
                              ---------  ---------  ---------  ---------
   Non-GAAP cost of
    consumer revenue              1,835      1,017      3,062      1,870

   GAAP cost of research and
    development                   2,184      2,434      4,420      4,705
      Restructuring charges           -          -          -          -
      Stock-based
       compensation                (115)      (122)      (260)      (238)
                              ---------  ---------  ---------  ---------
   Non-GAAP cost of research
    and development               2,069      2,312      4,160      4,467

   GAAP cost of sales and
    marketing                     5,710      8,623     12,096     16,029
      Restructuring charges           -          -          -         (4)
      Stock-based
       compensation                (458)      (484)      (863)      (938)
                              ---------  ---------  ---------  ---------
   Non-GAAP cost of sales and
    marketing                     5,252      8,139     11,233     15,087

   GAAP cost of general and
    administrative                2,725      2,519      5,081      5,061
      Restructuring charges          (2)         -         (2)         -
      Stock-based
       compensation                (527)      (504)      (945)      (918)
                              ---------  ---------  ---------  ---------
   Non-GAAP cost of general
    and administrative            2,196      2,015      4,134      4,143

GAAP loss from operations        (4,984)    (6,319)    (9,956)   (13,579)
   Amortization of intangible
    assets                           58        272         88        544
   Restructuring charges              2          -          2         17
   Stock-based compensation       1,333      1,319      2,507      2,503
                              ---------  ---------  ---------  ---------
Non-GAAP loss from operations    (3,591)    (4,728)    (7,359)   (10,515)

GAAP loss before income taxes    (4,263)    (4,788)    (7,786)   (10,195)
   Amortization of intangible
    assets                           58        272         88        544
   Restructuring charges              2          -          2         17
   Stock-based compensation       1,333      1,319      2,507      2,503
                              ---------  ---------  ---------  ---------
Non-GAAP loss before income
 taxes                           (2,870)    (3,197)    (5,189)    (7,131)

GAAP net loss                 $  (4,347) $  (4,919) $  (7,978) $ (10,541)
   Amortization of intangible
    assets                           58        272         88        544
   Restructuring charges              2          -          2         17
   Stock-based compensation       1,333      1,319      2,507      2,503
                              ---------  ---------  ---------  ---------
Non-GAAP net loss             $  (2,954) $  (3,328) $  (5,381) $  (7,477)
                              =========  =========  =========  =========

Basic net loss per share
   GAAP                       $   (0.09) $   (0.11) $   (0.17) $   (0.23)
   Non-GAAP                   $   (0.06) $   (0.07) $   (0.12) $   (0.17)

Diluted net loss per share
   GAAP                       $   (0.09) $   (0.11) $   (0.17) $   (0.23)
   Non-GAAP                   $   (0.06) $   (0.07) $   (0.12) $   (0.17)

Shares used in computing per
 share amounts (GAAP)
   Basic                         46,076     45,418     46,065     45,175
   Diluted                       46,076     45,418     46,065     45,175

Shares used in computing per
 share amounts (Non-GAAP)
   Basic                         46,076     45,418     46,065     45,175
   Diluted                       46,076     45,418     46,065     45,175




Note 1:  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, stock-
based compensation and amortization of intangible assets 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.

2008 amounts are subject to completion of management's and its independent
registered public accounting firm's customary closing and review
procedures.

Note 2:  In January 2008, we reorganized the Company and created two
business units, consumer and enterprise.
Prior to 2008, the Company conducted its business in one segment.  Revenue
and cost of revenue are provided on a segment basis, all other operating
expenses are incorporated into the overall company results for these
periods.  See the segment information table included in this press release
for more information.





                            SUPPORTSOFT, INC.
                GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)



                                               June 30,     December 31,
                                                 2008   (1)    2007    (2)
                                            -------------  -------------
                                             (unaudited)
Assets
Current assets:
  Cash and short-term marketable securities $      77,619  $     112,940
  Accounts receivable, net                          9,523         10,087
  Prepaid expenses and other current assets         1,812          2,531
                                            -------------  -------------
    Total current assets                           88,954        125,558
                                            -------------  -------------
Long-term marketable securities                    23,265              -
Property and equipment, net                         1,848          2,086
Goodwill                                           12,646          9,792
Purchased technology                                1,375              -
Intangible assets, net                                531            340
Other assets                                          649            682
                                            -------------  -------------

Total assets                                $     129,268  $     138,458
                                            =============  =============

Liabilities and Stockholders' Equity
Liabilities:
  Accounts payable and accrued compensation $       2,602  $       2,781
  Other accrued liabilities                         2,786          3,421
  Deferred revenue                                  8,932         10,502
  Other long-term liabilities                       1,076            892
                                            -------------  -------------
    Total liabilities                       $      15,396  $      17,596
                                            -------------  -------------

Stockholders' equity:
  Common stock                              $           5  $           5
  Additional paid-in-capital                      214,891        212,188
  Accumulated other comprehensive loss             (2,487)          (772)
  Accumulated deficit                             (98,537)       (90,559)
                                            -------------  -------------
    Total stockholders' equity              $     113,872  $     120,862
                                            -------------  -------------

Total liabilities and stockholders' equity  $     129,268  $     138,458
                                            =============  =============




Note 1: 2008 amounts are subject to completion of management's and its
independent registered public accounting firm's customary closing and
review procedures.


Note 2: Derived from audited financial statements






                            SUPPORTSOFT, INC.
                           SEGMENT INFORMATION
                              (in thousands)
                               (unaudited)


                                   Three Months Ended June 30,
                                              2008
                        --------------------------------------------------
                                                              Consolidated
                        Enterprise     Consumer      Other        Total
                        -----------  -----------  -----------  -----------
Revenue:
   License              $     2,897  $         -  $         -  $     2,897
   Maintenance                3,895            -            -        3,895
   Services                   3,934            -            -        3,934
   Consumer                       -          891            -          891
                        -----------  -----------  -----------  -----------
Total revenue                10,726          891            -       11,617
                        -----------  -----------  -----------  -----------
Segment operating
 costs and expenses          (7,589)      (5,424)           -      (13,013)
   Amortization of
    intangible assets           (30)         (28)           -          (58)
   Common corporate
    expenses                      -            -       (2,197)      (2,197)
   Stock-based
    compensation                  -            -       (1,333)      (1,333)
   Interest income
    and other, net                -            -          721          721
                        -----------  -----------  -----------  -----------
Income (loss) before
 income taxes           $     3,107  $    (4,561) $    (2,809) $    (4,263)
                        ===========  ===========  ===========  ===========


                                     Six Months Ended June 30,
                                               2008
                        --------------------------------------------------
                                                              Consolidated
                        Enterprise     Consumer      Other        Total
                        -----------  -----------  -----------  -----------
Revenue:
   License              $     5,871  $         -  $         -  $     5,871
   Maintenance                7,898            -            -        7,898
   Services                   7,883            -            -        7,883
   Consumer                       -        1,593            -        1,593
                        -----------  -----------  -----------  -----------
Total revenue                21,652        1,593            -       23,245
                        -----------  -----------  -----------  -----------
Segment operating
 costs and expenses         (15,711)     (10,760)           -      (26,471)
   Amortization of
    intangible assets           (60)         (28)                      (88)
   Common corporate
    expenses                      -            -       (4,135)      (4,135)
   Stock-based
    compensation                  -            -       (2,507)      (2,507)
   Interest income
    and other, net                -            -        2,170        2,170
                        -----------  -----------  -----------  -----------
Income (loss) before
 income taxes           $     5,881  $    (9,195) $    (4,472) $    (7,786)
                        ===========  ===========  ===========  ===========


Consumer Segment.  In our consumer segment, we provide premium technology
support to consumers over the phone and the internet for a fee.  We offer
our services to consumers through retailers, digital service providers and
other companies who provide technology products and services to consumers.
We also provide our services directly to consumers through www.support.com.

Enterprise Segment.  Our enterprise customers use our software to resolve
technical problems for their customers.  Digital service providers use our
products to automate the installation, activation and verification of
broadband services, to reduce the cost and improve the quality of support
for customers, and to enable the remote management of devices located at
customer premises.  Corporate IT departments and IT outsourcing firms use
our software to improve the cost-effectiveness and efficiency of their
support through an integrated portfolio of proactive service, self service
and assisted service products.

Other. This category consists of common corporate expenses such as general
and administrative expenses, stock-based compensation expense, interest
income, and other income or expenses, which are items that we do not
allocate to our business units.


2008 amounts are subject to completion of management's and its independent
registered public accounting firm's customary closing and review
procedures.

Contact Information