SOURCE: SupportSoft, Inc.

October 30, 2007 16:01 ET

SupportSoft Reports Third Quarter 2007 Results

REDWOOD CITY, CA--(Marketwire - October 30, 2007) - SupportSoft, Inc. (NASDAQ: SPRT), a leading provider of software and services for technology problem resolution, today reported unaudited financial results for its third quarter ended September 30, 2007.

Total revenue for the third quarter of 2007 was $11.3 million, a decrease of 5 percent from $11.9 million in the third quarter of 2006. License revenue for the third quarter of 2007 was $2.6 million, down 42 percent from $4.5 million in the third quarter of 2006. Services revenue for the third quarter of 2007 was $4.5 million, up 31 percent from $3.5 million in the third quarter of 2006. Maintenance revenue was $4.2 million for the third quarter of 2007, up 7 percent from $3.9 million in the third quarter of 2006.

Non-GAAP net loss for the third quarter of 2007 was $3.8 million, or $(0.08) per share, compared to a non-GAAP net loss of $127,000, or $(0.00) per share, in the third quarter of 2006. Non-GAAP results exclude stock compensation expense of $1.2 million and $804,000 for the third quarter of 2007 and the third quarter of 2006, respectively, and restructuring charges of $756,000 for the third quarter of 2006. A reconciliation of GAAP to non-GAAP results is presented in the tables below.

On a GAAP basis, net loss for the third quarter of 2007 was $5.0 million, or $(0.11) per share, compared to a net loss of $1.7 million, or $(0.04) per share, in the third quarter of 2006.

Cash and marketable securities at September 30, 2007 was $114.2 million, compared to $114.9 million at June 30, 2007 and $119.9 million at December 31, 2006.

"We are moving forward aggressively with our business notwithstanding recent setbacks," said Josh Pickus, President and CEO of SupportSoft. "In the consumer arena, we are ramping existing partners, including our U.S. retail partner, and establishing new relationships, including three new partnerships in the third quarter. While these partnerships clearly take time to become productive, we believe we are laying a foundation for revenue growth in 2008 and beyond. In our base business, we are squarely focused on achieving consistent profitability. In order to achieve this goal, we recently implemented a reduction in force, which will bring the quarterly expense rate for the base business below $11 million. To ensure that each part of our business is focused, accountable and transparent, we plan to operate in two business units, Consumer Solutions and Enterprise Solutions, starting in 2008."

Recent Highlights

--  Increase in number of stores with U.S. retail partner expected to
    occur in December
--  TechGuys, a unit of DSG International, Europe's leading specialist
    electronics retailing group, selects System TuneUp for delivery of PC
    Healthchecks to consumers
--  Major anti-virus provider chooses support.com to deliver consumer
    technology support services
--  Google selects support.com to deliver set up services to Google Apps
    users
--  British Telecom licenses customer care solutions for use in major new
    relationship with U.K. Post Office
--  Leading cable provider Cox Communications licenses ServiceVerify
    solution for enhanced technician efficiency
    

Financial Outlook

As indicated in our October 4th preannouncement, we expect revenue of approximately $47 million and a non-GAAP net loss per share of ($0.35) to ($0.37) for the full 2007 year. For the fourth quarter, we expect revenue of approximately $12 million and a non-GAAP net loss per share of ($0.09) to ($0.11). In connection with the fourth quarter reduction in force, we expect a restructuring charge of $1.7 million to $1.9 million. Non-GAAP results exclude stock-based compensation expense and restructuring charges.

SupportSoft will host a conference call discussing the Company's third quarter 2007 results and fourth quarter activities on Tuesday, October 30, 2007 starting at 4:30 p.m. EDT (1:30 p.m. PDT). A live webcast of the call will be available on the Investor Relations section of the Company's web site at http://www.supportsoft.com/investors. For those unable to listen to the live webcast, a replay of the call will also be available on the SupportSoft website or by dialing (617) 801-6888 and entering passcode 9603-5503.

Cautionary Note Regarding Forward Looking Statements.

This press release contains forward-looking statements regarding our expected future performance as well as assumptions underlying or relating to such statements of expectation, all of which are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We are subject to many risks and uncertainties that may materially affect our business and future performance and cause those forward-looking statements to be inaccurate. All statements in this press release, other than statements that are purely historical, are forward-looking statements. Words such as "outlook," "anticipates," "expects," "believes," "intends," "plans," "seeks," "forecasts," "estimates," "goal," "moving forward," "ramping," "laying a foundation," "focused on," "contribute to," " achieving consistent profitability" and similar expressions often identify such forward-looking statements. Forward-looking statements in this press release include, without limitation, the following: the Company's expected revenue, non-GAAP and GAAP net loss for the fourth quarter and full year of 2007; the anticipated restructuring charge for the fourth quarter of 2007; the expected impact of our reduction in force; expectations regarding the progress of our collaboration with partners (including the partners and customers mentioned herein) and the anticipated impact of those relationships on our business; anticipated contribution to our revenue from our consumer operations; the potential for us to run our base business profitably, the timing of any such profitability, and our other plans for the base business; assessments of our future growth; and our future plans, investments and opportunities.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in these forward-looking statements. These risks and uncertainties include, but are not limited to: our dependence on our third-party alliances and partnerships to help us provide our software and services to consumers; the potential that such partnerships take longer than we expect to produce revenue or do not produce revenue; the potential that delays or cancellation of third-party programs that include our software and services could decrease our revenues; our ability to achieve broad adoption and acceptance of our offerings; the potential for a decrease in revenue caused by our reliance on a few large transactions that generally occur at the end of reporting periods; long sales cycles; the ability of our software to operate with hardware and software platforms that are used by our customers now or in the future; our ability to compete successfully in the consumer technology support market and the support automation software market; our limited experience in servicing consumers directly; our ability to manage headcount changes including reductions in force; our ability to manage consumer technology support call centers; our ability to profitably manage our professional services organization; expectations regarding our international business; fluctuation in our quarterly results; diversion of management attention to strategic matters or litigation; our ability to accurately predict performance; our ability to attract and retain key employees; our ability to obtain sufficient patent protection; the uncertain economic conditions in the United States and in international markets; a determination, upon completion of further quarterly closing and review procedures, that the financial results for the third quarter are different than the results set forth in this press release; as well as other risks detailed from time to time in our SEC filings, including those described in the "Risk Factors" section in our most recent Quarterly Report on Form 10-Q filed with the SEC on August 2, 2007. You can locate these filings on the Investor Relations page of our website, http://www.supportsoft.com/investors.

Statements included in this release are based upon information known to SupportSoft as of the date of this release, and SupportSoft assumes no obligation to publicly revise or update any forward-looking statement for any reason.

Disclosure Regarding Non-GAAP Financial Measures

SupportSoft has excluded stock-based compensation expense and restructuring charges from its GAAP results in order to determine the non-GAAP financial measures of net loss and net loss per share.

We believe that the non-GAAP measures, excluding stock-based compensation expense, when viewed in addition to and not in lieu of our reported GAAP results, assist investors in understanding our results of operations. SupportSoft uses these non-GAAP financial measures internally to evaluate its performance from period to period and against the performance of other software companies which present similar non-GAAP financial measures. We believe the non-GAAP measures, excluding restructuring charges, provide meaningful supplemental information to investors in understanding our ongoing operational costs and expenses, without the broad-based termination costs that comprised our restructuring expense. We also believe that investors benefit from seeing "through the eyes of management" as our internal plans are based on the non-GAAP financial measures we present in this press release. SupportSoft also believes the non-GAAP measures provide useful supplemental information for investors to evaluate our operating results in the same manner as the research analysts that follow SupportSoft, all of whom present non-GAAP projections in their published reports.

The economic substance behind our decision to use such non-GAAP measures is that such measures approximate our controllable operating performance more closely than the most directly comparable GAAP financial measures. For example, the Company's management has no control over certain variables that have a significant influence in the determination of stock-based compensation such as the volatility of its stock price and changing interest rates.

The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of the Company's activities and reliance solely on non-GAAP measures may lead management to make business decisions with unanticipated economic consequences on the Company's GAAP financial results. We compensate for this limitation by not relying exclusively on non-GAAP financial measures to make business decisions. We also continuously re-evaluate which non-GAAP measures are appropriate.

About SupportSoft

SupportSoft (NASDAQ: SPRT) is a leading provider of software and services for technology problem resolution. The Company's solutions reduce technology support costs, improve customer satisfaction and enable new revenue streams for companies reaching 50 million users worldwide. The Company has expanded its offerings and now provides Instant Technology Relief(SM) to frustrating technology problems directly to consumers through http://www.support.com/. For more information about the Company and its corporate offerings, visit http://supportsoft.com/; for Instant Technology Relief (SM) to consumer technology problems, visit http://www.support.com/ or dial 1-800-PC-SUPPORT.

                            SUPPORTSOFT, INC.
           GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share amounts)
                                (unaudited)


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
Revenues:
  License                       $   2,586  $   4,479  $  11,725  $  10,013
  Services                          4,536      3,462     11,423      9,106
  Maintenance                       4,201      3,917     12,035     11,740
                                ---------  ---------  ---------  ---------
    Total revenues                 11,323     11,858     35,183     30,859

Costs and expenses:
  Cost of license                      52        119        141        333
  Cost of services                  5,279      3,606     14,933      9,579
  Cost of maintenance                 630        349      1,929        863
  Amortization of intangible
   assets                             272        272        817        816
  Research and development          2,366      2,267      7,071      7,125
  Sales and marketing               6,959      6,013     23,081     16,993
  General and administrative        2,211      2,689      7,235      7,677
                                ---------  ---------  ---------  ---------

    Total costs and expenses       17,769     15,315     55,207     43,386

Loss from operations               (6,446)    (3,457)   (20,024)   (12,527)

Interest income and other, net      1,636      1,842      5,019      4,705
                                ---------  ---------  ---------  ---------

Loss before income taxes           (4,810)    (1,615)   (15,005)    (7,822)

Provision for income taxes           (212)       (72)      (558)      (333)
                                ---------  ---------  ---------  ---------

Net loss                        $  (5,022) $  (1,687) $ (15,563) $  (8,155)
                                ---------  ---------  ---------  ---------

Net loss per share:
  Basic                         $   (0.11) $   (0.04) $   (0.34) $   (0.19)
                                ---------  ---------  ---------  ---------
  Diluted                       $   (0.11) $   (0.04) $   (0.34) $   (0.19)
                                ---------  ---------  ---------  ---------

Shares used in computing per
 share amounts:
  Basic                            45,614     44,152     45,449     44,000
                                ---------  ---------  ---------  ---------
  Diluted                          45,614     44,152     45,449     44,000
                                ---------  ---------  ---------  ---------

2007 amounts are subject to completion of management's and its independent
auditor's customary closing and review procedures.


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


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------

GAAP costs and expenses         $  17,769  $  15,315  $  55,207  $  43,386
   Total restructuring charges          -       (756)         -       (756)
   Total stock-based
    compensation                   (1,229)      (804)    (3,731)    (2,327)
                                ---------  ---------  ---------  ---------
Non-GAAP costs and expenses        16,540     13,755     51,476     40,303

Detail of costs and operating
 expenses:
   GAAP cost of services            5,279      3,606     14,933      9,579
      Restructuring charges             -       (151)         -       (151)
      Stock-based compensation       (193)       (69)      (564)      (175)
                                ---------  ---------  ---------  ---------
   Non-GAAP cost of services        5,086      3,386     14,369      9,253

   GAAP cost of maintenance           630        349      1,929        863
      Restructuring charges             -        (33)         -        (33)
      Stock-based compensation        (22)       (18)       (59)       (35)
                                ---------  ---------  ---------  ---------
   Non-GAAP cost of maintenance       608        298      1,870        795

   GAAP research and
    development expense             2,366      2,267      7,071      7,125
      Restructuring charges             -        (40)         -        (40)
      Stock-based compensation       (129)       (83)      (366)      (301)
                                ---------  ---------  ---------  ---------
   Non-GAAP research and
    development expense             2,237      2,144      6,705      6,784

   GAAP sales and marketing
    expense                         6,959      6,013     23,081     16,993
      Restructuring charges             -       (338)         -       (338)
      Stock-based compensation       (493)      (219)    (1,431)      (592)
                                ---------  ---------  ---------  ---------
   Non-GAAP sales and marketing
    expense                         6,466      5,456     21,650     16,063

   GAAP general and
    administrative expense          2,211      2,689      7,235      7,677
      Restructuring charges             -       (194)         -       (194)
      Stock-based compensation       (392)      (415)    (1,311)    (1,224)
                                ---------  ---------  ---------  ---------
   Non-GAAP general and
    administrative expense          1,819      2,080      5,924      6,259

GAAP loss from operations          (6,446)    (3,457)   (20,024)   (12,527)
   Total restructuring charges                   756                   756
   Total stock-based
    compensation                    1,229        804      3,731      2,327
                                ---------  ---------  ---------  ---------
Non-GAAP loss from operations      (5,217)    (1,897)   (16,293)    (9,444)

GAAP loss before income taxes      (4,810)    (1,615)   (15,005)    (7,822)
   Total restructuring charges          -        756          -        756
   Total stock-based
    compensation                    1,229        804      3,731      2,327
                                ---------  ---------  ---------  ---------
Non-GAAP loss before income
 taxes                             (3,581)       (55)   (11,274)    (4,739)

GAAP net loss                   $  (5,022) $  (1,687) $ (15,563) $  (8,155)
   Total restructuring charges          -        756          -        756
   Total stock-based
    compensation                    1,229        804      3,731      2,327
                                ---------  ---------  ---------  ---------
Non-GAAP net loss               $  (3,793) $    (127) $ (11,832) $  (5,072)
                                =========  =========  =========  =========

Basic net loss per share
   GAAP                         $   (0.11) $   (0.04) $   (0.34) $   (0.19)
   Non-GAAP                     $   (0.08) $   (0.00) $   (0.26) $   (0.12)

Diluted net loss per share
   GAAP                         $   (0.11) $   (0.04) $   (0.34) $   (0.19)
   Non-GAAP                     $   (0.08) $   (0.00) $   (0.26) $   (0.12)

Shares used in computing per
 share amounts
   Basic                           45,614     44,152     45,449     44,000
   Diluted                         45,614     44,152     45,449     44,000



The adjustments above reconcile the Company's GAAP financial results to
the non-GAAP financial measures used by the Company. The Company's non-GAAP
financial measures exclude restructuring charges and stock-based
compensation expense from the GAAP financial results. The Company believes
that presentation of these non-GAAP items provides meaningful supplemental
information to investors, when viewed in conjunction with, and not in lieu
of, the Company's GAAP results. However, the non-GAAP financial measures
have not been prepared under a comprehensive set of accounting rules or
principles. Non-GAAP information should not be considered in isolation
from, or as a substitute for, information prepared in accordance with
GAAP. Moreover, there are material limitations associated with the use of
non-GAAP financial measures. See the text of this press release for more
information on non-GAAP financial measures.

2007 amounts are subject to completion of management's and its independent
auditor's customary closing and review procedures.


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



                                              September 30,  December 31,
                                                  2007           2006
                                              -------------  -------------
                                               (unaudited)
Assets
Current assets:
  Cash and marketable securities              $     114,232  $     119,891
  Accounts receivable, net                            8,425         15,144
  Prepaid expenses and other current assets           2,241          2,894
                                              -------------  -------------
   Total current assets                             124,898        137,929
                                              -------------  -------------
Property and equipment, net                           2,317            937
Goodwill                                              9,792          9,792
Intangible assets, net                                2,338          3,155
Other assets                                            849            792
                                              -------------  -------------

Total assets                                  $     140,194  $     152,605
                                              =============  =============

Liabilities and Stockholders' Equity
Liabilities:
  Accounts payable and accrued compensation   $       2,446  $       2,443
  Other accrued liabilities                           3,878          3,813
  Deferred revenue                                    7,824         13,613
  Other long-term liabilities                           830            233
                                              -------------  -------------
   Total liabilities                          $      14,978  $      20,102
                                              -------------  -------------

Stockholders' equity:
  Common stock                                $           4  $           4
  Additional paid-in-capital                        210,735        202,440
  Accumulated other comprehensive loss                 (770)          (751)
  Accumulated deficit                               (84,753)       (69,190)
                                              -------------  -------------
   Total stockholders' equity                 $     125,216  $     132,503
                                              -------------  -------------

Total liabilities and stockholders' equity    $     140,194  $     152,605
                                              =============  =============

2007 amounts are subject to completion of management's and its independent
auditor's customary closing and review procedures.

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