☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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94-3282005
|
|
(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
(Do not check if a smaller reporting company)
|
Smaller reporting company ☐
|
Emerging growth company ☐
|
Page
|
||
Part I. Financial Information
|
||
Item 1.
|
3
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
Item 2.
|
19
|
|
Item 3.
|
24
|
|
Item 4.
|
25
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|
Part II. Other Information
|
||
Item 1.
|
26
|
|
Item 1A.
|
26
|
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Item 6.
|
38
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|
39
|
||
40
|
PART I.
|
FINANCIAL INFORMATION
|
June 30,
2017
|
December 31,
2016
|
||||||
(Unaudited)
|
|||||||
ASSETS
|
|||||||
Current assets:
|
|||||||
Cash and cash equivalents
|
$
|
19,336
|
$
|
16,890
|
|||
Short-term investments
|
32,323
|
36,519
|
|||||
Accounts receivable, net
|
9,561
|
9,567
|
|||||
Prepaid expenses and other current assets
|
723
|
1,211
|
|||||
Total current assets
|
61,943
|
64,187
|
|||||
Property and equipment, net
|
1,411
|
1,706
|
|||||
Intangible assets, net
|
250
|
266
|
|||||
Other assets
|
1,005
|
1,070
|
|||||
Total assets
|
$
|
64,609
|
$
|
67,229
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||
Current liabilities:
|
|||||||
Accounts payable
|
$
|
648
|
$
|
1,085
|
|||
Accrued compensation
|
2,650
|
2,974
|
|||||
Other accrued liabilities
|
1,848
|
2,496
|
|||||
Short-term deferred revenue
|
2,566
|
2,759
|
|||||
Total current liabilities
|
7,712
|
9,314
|
|||||
Long-term deferred revenue
|
66
|
106
|
|||||
Other long-term liabilities
|
510
|
501
|
|||||
Total liabilities
|
8,288
|
9,921
|
|||||
Commitments and contingencies (Note 3) | |||||||
Stockholders’ equity:
|
|||||||
Common stock; par value $0.0001, 50,000,000 shares authorized; 19,093,307 issued and 18,610,393 outstanding at June 30, 2017; 19,030,024 issued and 18,548,180 outstanding at December 31, 2016
|
2
|
2
|
|||||
Additional paid-in capital
|
267,694
|
267,400
|
|||||
Treasury stock, at cost (482,914 shares at June 30, 2017 and 481,844 shares at December 31, 2016)
|
(5,297
|
)
|
(5,295
|
)
|
|||
Accumulated other comprehensive loss
|
(2,157
|
)
|
(2,329
|
)
|
|||
Accumulated deficit
|
(203,921
|
)
|
(202,470
|
)
|
|||
Total stockholders’ equity
|
56,321
|
57,308
|
|||||
Total liabilities and stockholders’ equity
|
$
|
64,609
|
$
|
67,229
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Revenue:
|
||||||||||||||||
Services
|
$
|
13,147
|
$
|
13,609
|
$
|
26,062
|
$
|
28,892
|
||||||||
Software and other
|
1,360
|
1,320
|
2,735
|
2,634
|
||||||||||||
Total revenue
|
14,507
|
14,929
|
28,797
|
31,526
|
||||||||||||
Cost of revenue:
|
||||||||||||||||
Cost of services
|
10,990
|
12,696
|
22,201
|
26,556
|
||||||||||||
Cost of software and other
|
92
|
138
|
186
|
257
|
||||||||||||
Total cost of revenue
|
11,082
|
12,834
|
22,387
|
26,813
|
||||||||||||
Gross profit
|
3,425
|
2,095
|
6,410
|
4,713
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
875
|
1,420
|
1,798
|
3,128
|
||||||||||||
Sales and marketing
|
583
|
1,866
|
1,390
|
3,938
|
||||||||||||
General and administrative
|
2,235
|
4,235
|
4,851
|
7,483
|
||||||||||||
Amortization of intangible assets and other
|
6
|
267
|
16
|
534
|
||||||||||||
Restructuring
|
-
|
423
|
-
|
423
|
||||||||||||
Total operating expenses
|
3,699
|
8,211
|
8,055
|
15,506
|
||||||||||||
Loss from operations
|
(274
|
)
|
(6,116
|
)
|
(1,645
|
)
|
(10,793
|
)
|
||||||||
Interest income and other, net
|
154
|
126
|
287
|
259
|
||||||||||||
Loss from continuing operations, before income taxes
|
(120
|
)
|
(5,990
|
)
|
(1,358
|
)
|
(10,534
|
)
|
||||||||
Income tax provision
|
45
|
36
|
93
|
88
|
||||||||||||
Loss from continuing operations, after income taxes
|
(165
|
)
|
(6,026
|
)
|
(1,451
|
)
|
(10,622
|
)
|
||||||||
Income (loss) from discontinued operations, after income taxes
|
-
|
-
|
-
|
284
|
||||||||||||
Net Loss
|
$
|
(165
|
)
|
$
|
(6,026
|
)
|
$
|
(1,451
|
)
|
$
|
(10,338
|
)
|
||||
Basic and diluted loss per share:
|
||||||||||||||||
Loss from continuing operations
|
$
|
(0.01
|
)
|
$
|
(0.33
|
)
|
$
|
(0.08
|
)
|
$
|
(0.58
|
)
|
||||
Income (loss) from discontinued operations
|
(0.00
|
)
|
(0.00
|
)
|
(0.00
|
)
|
0.02
|
|||||||||
Basic and diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.33
|
)
|
$
|
(0.08
|
)
|
$
|
(0.56
|
)
|
||||
Shares used in computing basic net loss per share
|
18,591
|
18,373
|
18,574
|
18,334
|
||||||||||||
Shares used in computing diluted net loss per share
|
18,591
|
18,373
|
18,574
|
18,334
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Net loss
|
$
|
(165
|
)
|
$
|
(6,026
|
)
|
$
|
(1,451
|
)
|
$
|
(10,338
|
)
|
||||
Change in foreign currency translation adjustment
|
22
|
(48
|
)
|
166
|
(38
|
)
|
||||||||||
Change in net unrealized gain (loss) on investments
|
2
|
27
|
6
|
122
|
||||||||||||
Other comprehensive income (loss)
|
24
|
(21
|
)
|
172
|
84
|
|||||||||||
Comprehensive loss
|
$
|
(141
|
)
|
$
|
(6,047
|
)
|
$
|
(1,279
|
)
|
$
|
(10,254
|
)
|
Six Months Ended
June 30,
|
||||||||
2017
|
2016
|
|||||||
Operating Activities:
|
||||||||
Net loss
|
$
|
(1,451
|
)
|
$
|
(10,338
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation
|
329
|
331
|
||||||
Amortization of premiums and discounts on investments
|
49
|
191
|
||||||
Amortization of intangible assets and other
|
16
|
534
|
||||||
Stock-based compensation
|
267
|
1,115
|
||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable, net
|
6
|
580
|
||||||
Prepaid expenses and other current assets
|
492
|
(104
|
)
|
|||||
Other long-term assets
|
88
|
9
|
||||||
Accounts payable
|
(436
|
)
|
1,034
|
|||||
Accrued compensation
|
(321
|
)
|
338
|
|||||
Other accrued liabilities
|
(645
|
)
|
(771
|
)
|
||||
Other long-term liabilities
|
15
|
(312
|
)
|
|||||
Deferred revenue
|
(233
|
)
|
210
|
|||||
Net cash used in operating activities
|
(1,824
|
)
|
(7,183
|
)
|
||||
Investing Activities:
|
||||||||
Purchases of property and equipment
|
(34
|
)
|
(457
|
)
|
||||
Purchases of investments
|
(14,681
|
)
|
(12,678
|
)
|
||||
Maturities of investments
|
18,833
|
13,719
|
||||||
Net cash provided by investing activities
|
4,118
|
584
|
||||||
Financing Activities:
|
||||||||
Proceeds from employee stock purchase plan
|
27
|
44
|
||||||
Repurchase of common stock
|
(2
|
)
|
(67
|
)
|
||||
Net cash provided by (used in) financing activities
|
25
|
(23
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
127
|
17
|
||||||
Net increase (decrease) in cash and cash equivalents
|
2,446
|
(6,605
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
16,890
|
27,598
|
||||||
Cash and cash equivalents at end of period
|
$
|
19,336
|
$
|
20,993
|
||||
Supplemental schedule of cash flow information:
|
||||||||
Income taxes paid
|
$
|
67
|
$
|
94
|
· |
Persuasive evidence of an arrangement exists;
|
· |
Delivery has occurred;
|
· |
Collection is considered probable; and
|
· |
The fees are fixed or determinable.
|
· |
Hourly-Based Services - In connection with the provisions of certain services programs, fees are calculated based on contracted hourly rates with partners. For these programs, we recognize revenue as services are performed, based on billable hours of work delivered by our technology specialists. These services programs also include performance standards, which may result in incentives or penalties, which are recognized as earned or incurred.
|
· |
Subscription-Based Services - Customers purchase subscriptions or “service plans” under which certain services are provided over a fixed subscription period. Revenues for subscriptions are recognized ratably over the respective subscription periods.
|
· |
Incident-Based Services - Customers purchase a discrete, one-time service. Revenue recognition occurs at the time of service delivery. Fees paid for services sold but not yet delivered are recorded as deferred revenue and recognized at the time of service delivery.
|
· |
Service Cards / Gift Cards - Customers purchase a service card or a gift card, which entitles the cardholder to redeem a certain service at a time of their choosing. For these sales, revenue is deferred until the card has been redeemed and the service has been provided.
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
As of June 30, 2017
|
||||||||||||||||
Cash
|
$
|
7,561
|
$
|
—
|
$
|
—
|
$
|
7,561
|
||||||||
Money market funds
|
8,277
|
—
|
—
|
8,277
|
||||||||||||
Certificates of deposit
|
1,190
|
—
|
—
|
1,190
|
||||||||||||
Commercial paper
|
5,993
|
—
|
—
|
5,993
|
||||||||||||
Corporate notes and bonds
|
22,760
|
1
|
(29
|
)
|
22,732
|
|||||||||||
U.S. government agency securities
|
5,913
|
—
|
(7
|
)
|
5,906
|
|||||||||||
$
|
51,694
|
$
|
1
|
$
|
(36
|
)
|
$
|
51,659
|
||||||||
Classified as:
|
||||||||||||||||
Cash and cash equivalents
|
$
|
19,336
|
$
|
—
|
$
|
—
|
$
|
19,336
|
||||||||
Short-term investments
|
32,358
|
1
|
(36
|
)
|
32,323
|
|||||||||||
$
|
51,694
|
$
|
1
|
$
|
(36
|
)
|
$
|
51,659
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
As of December 31, 2016
|
||||||||||||||||
Cash
|
$
|
7,593
|
$
|
—
|
$
|
—
|
$
|
7,593
|
||||||||
Money market funds
|
9,297
|
—
|
—
|
9,297
|
||||||||||||
Certificates of deposit
|
1,273
|
—
|
—
|
1,273
|
||||||||||||
Commercial paper
|
4,989
|
—
|
—
|
4,989
|
||||||||||||
Corporate notes and bonds
|
19,357
|
—
|
(40
|
)
|
19,317
|
|||||||||||
U.S. government agency securities
|
10,941
|
1
|
(2
|
)
|
10,940
|
|||||||||||
$
|
53,450
|
$
|
1
|
$
|
(42
|
)
|
$
|
53,409
|
||||||||
Classified as:
|
||||||||||||||||
Cash and cash equivalents
|
$
|
16,890
|
$
|
—
|
$
|
—
|
$
|
16,890
|
||||||||
Short-term investments
|
36,560
|
1
|
(42
|
)
|
36,519
|
|||||||||||
$
|
53,450
|
$
|
1
|
$
|
(42
|
)
|
$
|
53,409
|
June 30, 2017
|
December 31, 2016
|
|||||||
Due within one year
|
$
|
25,066
|
$
|
27,730
|
||||
Due within two years
|
7,257
|
8,789
|
||||||
$
|
32,323
|
$
|
36,519
|
· |
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
· |
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
· |
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
As of June 30, 2017
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Money market funds
|
$
|
8,277
|
$
|
—
|
$
|
—
|
$
|
8,277
|
||||||||
Certificates of deposit
|
—
|
1,190
|
—
|
1,190
|
||||||||||||
Commercial paper
|
—
|
5,993
|
—
|
5,993
|
||||||||||||
Corporate notes and bonds
|
—
|
22,732
|
—
|
22,732
|
||||||||||||
U.S. government agency securities
|
—
|
5,906
|
—
|
5,906
|
||||||||||||
Total
|
$
|
8,277
|
$
|
35,821
|
$
|
—
|
$
|
44,098
|
As of December 31, 2016
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Money market funds
|
$
|
9,297
|
$
|
—
|
$
|
—
|
$
|
9,297
|
||||||||
Certificates of deposit
|
—
|
1,273
|
—
|
1,273
|
||||||||||||
Commercial paper
|
—
|
4,989
|
—
|
4,989
|
||||||||||||
Corporate notes and bonds
|
—
|
19,317
|
—
|
19,317
|
||||||||||||
U.S. government agency securities
|
—
|
10,940
|
—
|
10,940
|
||||||||||||
Total
|
$
|
9,297
|
$
|
36,519
|
$
|
—
|
$
|
45,816
|
Foreign
Currency
Translation
Losses
|
Unrealized
Losses on
Investments
|
Total
|
||||||||||
Balance as of December 31, 2016
|
$
|
(2,288
|
)
|
$
|
(41
|
)
|
$
|
(2,329
|
)
|
|||
Current-period other comprehensive income
|
166
|
6
|
172
|
|||||||||
Balance as of June 30, 2017
|
$
|
(2,122
|
)
|
$
|
(35
|
)
|
$
|
(2,157
|
)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Stock Option Plan:
|
||||||||||||||||
Risk-free interest rate
|
—
|
0.84
|
%
|
1.43
|
%
|
0.92
|
%
|
|||||||||
Expected term
|
—
|
3.90 years
|
3.58 years
|
3.89 years
|
||||||||||||
Volatility
|
—
|
48.32
|
%
|
46.21
|
%
|
48.31
|
%
|
|||||||||
Expected dividend
|
—
|
0
|
%
|
0
|
%
|
0
|
%
|
|||||||||
Weighted average fair value (per share)
|
—
|
$
|
0.96
|
$
|
0.96
|
$
|
0.96
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Employee Stock Purchase Plan:
|
||||||||||||||||
Risk-free interest rate
|
1.02
|
%
|
0.38
|
%
|
1.02
|
%
|
0.38
|
%
|
||||||||
Expected term
|
0.5 years
|
0.5 years
|
0.5 years
|
0.5 years
|
||||||||||||
Volatility
|
33.66
|
%
|
48.86
|
%
|
33.66
|
%
|
48.86
|
%
|
||||||||
Expected dividend
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
||||||||
Weighted average fair value (per share)
|
$
|
.59
|
$
|
0.84
|
$
|
.59
|
$
|
0.84
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Stock-based compensation expense related to grants of:
|
||||||||||||||||
Stock options
|
$
|
45
|
$
|
177
|
$
|
59
|
$
|
413
|
||||||||
Employee Stock Purchase Plan (“ESPP”)
|
5
|
11
|
11
|
22
|
||||||||||||
Restricted Stock Units (“RSU”)
|
127
|
266
|
197
|
680
|
||||||||||||
$
|
177
|
$
|
454
|
$
|
267
|
$
|
1,115
|
|||||||||
Stock-based compensation expense recognized in:
|
||||||||||||||||
Cost of services
|
$
|
22
|
$
|
35
|
$
|
64
|
$
|
91
|
||||||||
Cost of software and other
|
—
|
—
|
3
|
2
|
||||||||||||
Research and development
|
39
|
92
|
80
|
190
|
||||||||||||
Sales and marketing
|
15
|
(42
|
)
|
22
|
42
|
|||||||||||
General and administrative
|
101
|
369
|
98
|
790
|
||||||||||||
$
|
177
|
$
|
454
|
$
|
267
|
$
|
1,115
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Net loss
|
$
|
(165
|
)
|
$
|
(6,026
|
)
|
$
|
(1,451
|
)
|
$
|
(10,338
|
)
|
||||
Basic:
|
||||||||||||||||
Weighted-average shares of common stock outstanding
|
18,591
|
18,373
|
18,574
|
18,334
|
||||||||||||
Shares used in computing basic loss per share
|
18,591
|
18,373
|
18,574
|
18,334
|
||||||||||||
Basic loss per share
|
(0.01
|
)
|
(0.33
|
)
|
(0.08
|
)
|
(0.56
|
)
|
||||||||
Diluted:
|
||||||||||||||||
Weighted-average shares of common stock outstanding
|
18,591
|
18,373
|
18,574
|
18,334
|
||||||||||||
Add: Common equivalent shares outstanding
|
-
|
-
|
-
|
-
|
||||||||||||
Shares used in computing diluted loss per share
|
18,591
|
18,373
|
18,574
|
18,334
|
||||||||||||
Diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.33
|
)
|
$
|
(0.08
|
)
|
$
|
(0.56
|
)
|
As of June 30,
|
||||||||
2017
|
2016
|
|||||||
Stock options
|
532
|
1,590
|
||||||
RSUs
|
211
|
413
|
||||||
Warrants
|
-
|
163
|
||||||
Total common share equivalents
|
743
|
2,166
|
Non-
compete
|
Partner
Relationships
|
Customer
Base
|
Technology
Rights
|
Tradenames
|
Indefinite
Life
Intangibles
|
Total
|
||||||||||||||||||||||
As of June 30, 2017
|
||||||||||||||||||||||||||||
Gross carrying value
|
$
|
593
|
$
|
145
|
$
|
641
|
$
|
5,330
|
$
|
760
|
$
|
250
|
$
|
7,719
|
||||||||||||||
Accumulated amortization
|
(593
|
)
|
(145
|
)
|
(641
|
)
|
(5,330
|
)
|
(760
|
)
|
—
|
(7,469
|
)
|
|||||||||||||||
Net carrying value
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
250
|
$
|
250
|
||||||||||||||
As of December 31, 2016
|
||||||||||||||||||||||||||||
Gross carrying value
|
$
|
593
|
$
|
145
|
$
|
641
|
$
|
5,330
|
$
|
760
|
$
|
250
|
$
|
7,719
|
||||||||||||||
Accumulated amortization
|
(581
|
)
|
(145
|
)
|
(637
|
)
|
(5,330
|
)
|
(760
|
)
|
—
|
(7,453
|
)
|
|||||||||||||||
Net carrying value
|
$
|
12
|
$
|
—
|
$
|
4
|
$
|
—
|
$
|
—
|
$
|
250
|
$
|
266
|
June 30,
2017
|
December 31,
2016
|
|||||||
Accrued expenses
|
$
|
922
|
$
|
842
|
||||
Self-insurance accruals
|
780
|
911
|
||||||
Customer deposits
|
—
|
556
|
||||||
Restructuring obligations
|
—
|
81
|
||||||
Other accrued liabilities
|
146
|
106
|
||||||
Total other accrued liabilities
|
$
|
1,848
|
$
|
2,496
|
Number of
Shares
|
Weighted
Average
Exercise Price
per Share
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||||||||||
Outstanding options at December 31, 2016
|
1,381,843
|
$
|
5.88
|
4.95
|
$
|
50
|
||||||||||
Granted
|
2,000
|
$
|
2.57
|
|||||||||||||
Exercised
|
—
|
—
|
||||||||||||||
Forfeited
|
(851,515
|
)
|
$
|
6.09
|
||||||||||||
Outstanding options at June 30, 2017
|
532,328
|
$
|
5.52
|
6.20
|
$
|
0
|
||||||||||
Options vested and expected to vest
|
532,328
|
$
|
5.52
|
6.20
|
$
|
0
|
||||||||||
Exercisable at June 30, 2017
|
304,338
|
$
|
7.50
|
4.49
|
$
|
0
|
Number of
Shares
|
Weighted
Average
Grant-Date
Fair Value
per Share
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||||||||||
Outstanding RSUs at December 31, 2016
|
351,921
|
$
|
4.59
|
1.06
|
$
|
908
|
||||||||||
Awarded
|
—
|
—
|
||||||||||||||
Released
|
(48,781
|
)
|
$
|
4.79
|
||||||||||||
Forfeited
|
(92,299
|
)
|
$
|
7.30
|
||||||||||||
Outstanding RSUs at June 30, 2017
|
210,841
|
$
|
3.36
|
0.59
|
$
|
493
|
Contract
Terminations
|
Severance
|
Total
|
||||||||||
Restructuring obligations, December 31, 2016
|
$
|
31
|
$
|
50
|
$
|
81
|
||||||
Cash payments
|
(31
|
)
|
(50
|
)
|
(81
|
)
|
||||||
Restructuring obligations, June 30, 2017
|
$
|
—
|
$
|
—
|
$
|
—
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Revenue:
|
||||||||||||||||
Services
|
91
|
%
|
91
|
%
|
91
|
%
|
92
|
%
|
||||||||
Software and other
|
9
|
9
|
9
|
8
|
||||||||||||
Total revenue
|
100
|
100
|
100
|
100
|
||||||||||||
Costs of revenue:
|
||||||||||||||||
Cost of services
|
76
|
85
|
77
|
84
|
||||||||||||
Cost of software and other
|
1
|
1
|
1
|
1
|
||||||||||||
Total cost of revenue
|
77
|
86
|
78
|
85
|
||||||||||||
Gross profit
|
23
|
14
|
22
|
15
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
6
|
10
|
6
|
10
|
||||||||||||
Sales and marketing
|
4
|
12
|
5
|
12
|
||||||||||||
General and administrative
|
15
|
28
|
17
|
24
|
||||||||||||
Amortization of intangible assets and other
|
—
|
2
|
—
|
2
|
||||||||||||
Restructuring
|
—
|
3
|
—
|
1
|
||||||||||||
Total operating expenses
|
25
|
55
|
28
|
49
|
||||||||||||
Loss from operations
|
(2
|
)
|
(41
|
)
|
(6
|
)
|
(34
|
)
|
||||||||
Interest and other income, net
|
1
|
1
|
1
|
1
|
||||||||||||
Loss from continuing operations, before income taxes
|
(1
|
)
|
(40
|
)
|
(5
|
)
|
(33
|
)
|
||||||||
Income tax provision
|
—
|
—
|
—
|
—
|
||||||||||||
Loss from continuing operations, after income taxes
|
(1
|
)
|
(40
|
)
|
(5
|
)
|
(34
|
)
|
||||||||
Income (loss) from discontinued operations, after income taxes
|
—
|
—
|
—
|
1
|
||||||||||||
Net loss
|
(1
|
)%
|
(40
|
)%
|
(5
|
)%
|
(33
|
)%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||
In thousands, except percentages
|
2017
|
2016
|
$
Change
|
%
Change
|
2017
|
2016
|
$
Change
|
%
Change
|
||||||||||||||||||||||||
Services
|
$
|
13,147
|
$
|
13,609
|
$
|
(462
|
)
|
(3
|
)%
|
$
|
26,062
|
$
|
28,892
|
$
|
(2,830
|
)
|
(10
|
)%
|
||||||||||||||
Software and other
|
1,360
|
1,320
|
40
|
3
|
%
|
2,735
|
2,634
|
101
|
4
|
%
|
||||||||||||||||||||||
Total revenue
|
$
|
14,507
|
$
|
14,929
|
$
|
(422
|
)
|
(3
|
)%
|
$
|
28,797
|
$
|
31,526
|
$
|
(2,729
|
)
|
(9
|
)%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||
In thousands, except percentages
|
2017
|
2016
|
$
Change
|
%
Change
|
2017
|
2016
|
$
Change
|
%
Change
|
|||||||||||||||||||||||||
Cost of services
|
$
|
10,990
|
$
|
12,696
|
$
|
(1,706
|
)
|
(13
|
)%
|
$
|
22,201
|
$
|
26,556
|
$
|
(4,355
|
)
|
(16
|
)%
|
|||||||||||||||
Cost of software and other
|
92
|
138
|
(46
|
)
|
(33
|
)%
|
186
|
257
|
(71
|
)
|
(28
|
)%
|
|||||||||||||||||||||
Total cost of revenue
|
$
|
11,082
|
$
|
12,834
|
$
|
(1,752
|
)
|
(14
|
)%
|
$
|
22,387
|
$
|
26,813
|
$
|
(4,426
|
)
|
(17
|
)%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||
In thousands, except percentages
|
2017
|
2016
|
$
Change
|
%
Change
|
2017
|
2016
|
$
Change
|
%
Change
|
|||||||||||||||||||||||||
Research and development
|
$
|
875
|
$
|
1,420
|
$
|
(545
|
)
|
(38
|
)%
|
$
|
1,798
|
$
|
3,128
|
$
|
(1,330
|
)
|
(43
|
)%
|
|||||||||||||||
Sales and marketing
|
$
|
583
|
$
|
1,866
|
$
|
(1,283
|
)
|
(69
|
)%
|
$
|
1,390
|
$
|
3,938
|
$
|
(2,548
|
)
|
(65
|
)%
|
|||||||||||||||
General and administrative
|
$
|
2,235
|
$
|
4,235
|
$
|
(2,000
|
)
|
(47
|
)%
|
$
|
4,851
|
$
|
7,483
|
$
|
(2,632
|
)
|
(35
|
)%
|
|||||||||||||||
Amortization of intangibles assets and other
|
$
|
6
|
$
|
267
|
$
|
(261
|
)
|
(98
|
)%
|
$
|
16
|
$
|
534
|
$
|
(518
|
)
|
(97
|
)%
|
|||||||||||||||
Restructuring
|
$
|
—
|
$
|
423
|
$
|
(423
|
)
|
(100
|
)%
|
$
|
—
|
$
|
423
|
$
|
(423
|
)
|
(100
|
)%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||
In thousands, except percentages
|
2017
|
2016
|
$
Change
|
%
Change
|
2017
|
2016
|
$
Change
|
%
Change
|
|||||||||||||||||||||||||
Interest income and other, net
|
$
|
154
|
$
|
126
|
$
|
28
|
22
|
%
|
$
|
287
|
$
|
259
|
$
|
28
|
11
|
%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||
In thousands, except percentages
|
2017
|
2016
|
$
Change
|
%
Change
|
2017
|
2016
|
$
Change
|
%
Change
|
|||||||||||||||||||||||||
Income tax provision (benefit)
|
$
|
45
|
$
|
36
|
$
|
9
|
25
|
%
|
$
|
93
|
$
|
88
|
$
|
5
|
6
|
%
|
PART II.
|
OTHER INFORMATION
|
● |
Our expectations and beliefs regarding future financial results;
|
● |
Our expectations regarding partners, renewal of contracts with these partners and the anticipated timing and magnitude of revenue from programs with these partners;
|
● |
Our ability to offer subscriptions to our services in a profitable manner;
|
● |
Our expectations regarding our ability to deliver technology services efficiently and through arrangements that are profitable, including both in SKU-based and time-based pricing models and other pricing models we may employ;
|
● |
Our ability to successfully license, implement and support our Support.com Cloud offering;
|
● |
Our expectations regarding sales of our end-user software products, and our ability to source, develop and distribute enhanced versions of these products;
|
● |
Our ability to successfully monetize customers who receive free versions of our end-user software products;
|
● |
Our ability to expand and diversify our customer base;
|
● |
Our ability to execute effectively in the SMB market;
|
● |
Our ability to attract and retain qualified management and employees;
|
● |
Our ability to hire, train, manage and retain technology specialists in a home-based model in quantities sufficient to meet forecast requirements, and our ability to continue to enhance the flexibility of our staffing model;
|
● |
Our ability to match staffing levels with service volume in a cost-effective manner;
|
● |
Our ability to manage contract labor as a component of our workforce;
|
● |
Our ability to operate successfully in a time-based billing model;
|
● |
Our ability to adapt to changes in the market for technology support services;
|
● |
Our ability to manage sales costs in programs where we are responsible for sales;
|
● |
Our ability to successfully manage marketing costs associated with our software products;
|
● |
Our beliefs and expectations regarding the introduction of new services and products, including additional cloud application software products and service offerings for devices beyond computers and routers;
|
● |
Our expectations regarding revenues, cash flows, expenses, including cost of revenue, sales and marketing, research and development efforts, and administrative expenses, and profits, including the expected effects of our cost reduction plans;
|
● |
Our assessment of seasonality, mix of revenue, and other trends for our business and the business of our partners;
|
● |
Our ability to deliver projected levels of profitability;
|
● |
Our expectations regarding the costs and other effects of acquisition and disposition transactions;
|
● |
Our expectations regarding unit volumes, pricing and other factors in the market for computers and other technology devices, and the effects of such factors on our business;
|
● |
Our ability to successfully operate in markets that are subject to extensive regulation, such as support for home security systems;
|
● |
Our expectations regarding the results of pending, threatened or future litigation;
|
● |
Our expectations regarding the results of pending, threatened or future government investigations and audits, including, without limitation, those investigations and audits described in Item 1 Legal Proceedings of this report;
|
● |
The assumptions underlying our Critical Accounting Policies and Estimates, including our assumptions regarding revenue recognition; assumptions used to estimate self-insurance accruals, assumptions used to estimate the fair value of stock-based compensation; assumptions regarding the impairment of goodwill and intangible assets; and expected accounting for income taxes; and
|
● |
Maintain our current relationships and service programs, and develop new relationships, with service partners and licensees of our Support.com Cloud offering on acceptable terms or at all;
|
● |
Reach prospective customers for our software products in a cost-effective fashion;
|
● |
Reduce our dependence on a limited number of partners for a substantial majority of our revenue;
|
● |
Successfully license and grow our revenue related to our Support.com Cloud and other software offerings;
|
● |
Attract and retain qualified management and employees in competitive markets for talent;
|
● |
Hire, train, manage and retain our home-based technology specialists and enhance the flexibility of our staffing model in a cost-effective fashion and in quantities sufficient to meet forecast requirements;
|
● |
Manage substantial headcount changes, including in connection with our cost reduction plan, over short periods of time;
|
● |
Manage contract labor efficiently and effectively;
|
● |
Meet revenue targets;
|
● |
Maintain gross and operating margins;
|
● |
Match staffing levels with demand for services and forecast requirements;
|
● |
Obtain bonuses and avoid penalties in contractual arrangements;
|
● |
Operate successfully in a time-based pricing model;
|
● |
Operate effectively in the SMB market;
|
● |
Offer subscriptions to our products and services in a profitable manner;
|
● |
Successfully introduce new, and adapt our existing, services and products for consumers and businesses;
|
● |
Respond effectively to changes in the market for technology support services;
|
● |
Respond effectively to changes in the online advertising markets in which we participate;
|
● |
Respond effectively to competition;
|
● |
Respond to changes in macroeconomic conditions as they affect our and our partners’ operations;
|
● |
Realize benefits of any acquisitions we make;
|
● |
Adapt to changes in the markets we serve, including the decline in sales of personal computers, the proliferation of tablets and other mobile devices and the introduction of new devices into the connected home and the “Internet of Things”;
|
● |
Adapt to changes in our industry, including consolidation;
|
● |
Respond to government regulations relating to our current and future business;
|
● |
Manage and respond to present, threatened, and future litigation;
|
● |
Manage and respond to present, threatened or future government investigations and audits, including, without limitation, those audits and investigations described in Item 1 Legal Proceedings of this report; and
|
● |
Manage our operations and implement and improve our operational, financial and management controls.
|
● |
Demand for our services and products;
|
● |
The performance of our partners;
|
● |
Change, or reduction in or discontinuance of our principal programs with partners;
|
● |
Our reliance on a small number of partners for a substantial majority of our revenue;
|
● |
Instability or decline in the global macroeconomic climate and its effect on our and our partners’ operations;
|
● |
Our ability to successfully license and grow revenue related to our Support.com Cloud and other software offerings;
|
● |
The availability and cost-effectiveness of advertising placements for our software products and our ability to respond to changes in the online advertising markets in which we participate;
|
● |
Our ability to serve the SMB market;
|
● |
Our ability to attract and retain qualified management and employees in competitive markets;
|
● |
The efficiency and effectiveness of our technology specialists;
|
● |
Our ability to effectively match staffing levels with service volumes on a cost-effective basis;
|
● |
Our ability to manage contract labor;
|
● |
Our ability to hire, train, manage and retain our home-based technology specialists and enhance the flexibility of our staffing model in a cost-effective fashion and in quantities sufficient to meet forecast requirements;
|
● |
Our ability to manage substantial headcount changes over short periods of time;
|
● |
Our ability to manage costs under our self-funded health insurance program;
|
● |
Our ability to manage sales costs in programs where we are responsible for sales;
|
● |
Our ability to operate successfully in a time-based pricing model;
|
● |
Our ability to attract and retain partners;
|
● |
The price and mix of products and services we or our competitors offer;
|
● |
Pricing levels and structures in the market for technology support services;
|
● |
Usage rates on the subscriptions we offer;
|
● |
The rate of expansion of our offerings and our investments therein;
|
● |
Changes in the markets for computers and other technology devices relating to unit volume, pricing and other factors, including changes driven by declines in sales of personal computers and the growing popularity of tablets, and other mobile devices and the introduction of new devices into the connected home;
|
● |
Our ability to adapt to our customers’ needs in a market space defined by frequent technological change;
|
● |
The amount and timing of operating costs and capital expenditures in our business;
|
● |
Diversion of management’s attention from other business concerns, incurrence of costs and disruption of our ongoing business activities as a result of acquisitions or divestitures by us;
|
● |
Costs related to the defense and settlement of litigation which can also have an additional adverse impact on us because of negative publicity, diversion of management resources and other factors;
|
● |
Costs related to the defense and settlement of government investigations and audits which can also have an additional adverse impact on us because of negative publicity, diversion of management resources and other factors, including, without limitation, those audits and investigations described in Item 1 Legal Proceedings of this report;
|
● |
Potential losses on investments, or other losses from financial instruments we may hold that are exposed to market risk; and
|
● |
The exercise of judgment by our management in making accounting decisions in accordance with our accounting policies.
|
● |
Unanticipated costs and liabilities and unforeseen accounting charges or fluctuations;
|
● |
Delays and difficulties in delivery of services and products;
|
● |
Failure to effectively integrate or separate management information systems, personnel, research and development, marketing, sales and support operations;
|
● |
Loss of key employees;
|
● |
Economic dilution to gross and operating profit;
|
● |
Diversion of management’s attention from other business concerns and disruption of our ongoing business;
|
● |
Difficulty in maintaining controls and procedures;
|
● |
Uncertainty on the part of our existing customers about our ability to operate after a transaction;
|
● |
Loss of customers;
|
● |
Loss of partnerships;
|
● |
Inability to execute our growth plans;
|
● |
Declines in revenue and increases in losses;
|
● |
Declines in cash balances as a result of cash usage on any acquisitions;
|
● |
Failure to realize the potential financial or strategic benefits of the acquisition or divestiture; and
|
● |
Failure to successfully further develop the combined or remaining technology, resulting in the impairment of amounts recorded as goodwill or other intangible assets.
|
● |
Risks of product malfunction after new technology is integrated;
|
● |
Risks that we may be unable to obtain or continue to obtain support, maintenance and updates from the technology supplier;
|
● |
The diversion of resources from the development of our own proprietary technology; and
|
● |
Our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs.
|
● |
Laws and contractual restrictions may not adequately prevent infringement of our proprietary rights and misappropriation of our technologies or deter others from developing similar technologies; and
|
● |
Policing infringement of our patents, trademarks and copyrights, misappropriation of our trade secrets, and unauthorized use of our products is difficult, expensive and time-consuming, and we may be unable to determine the existence or extent of this infringement or unauthorized use.
|
● |
We may not be issued patents we may seek to protect our technology;
|
● |
Competitors may independently develop similar technologies or design around any of our patents;
|
● |
Patents issued to us may not be broad enough to protect our proprietary rights; and
|
● |
Our issued patents could be successfully challenged.
|
● |
Localization of our services, including translation into foreign languages and adaptation for local practices and regulatory requirements;
|
● |
Lack of familiarity with and unexpected changes in foreign regulatory requirements;
|
● |
Longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
|
● |
Difficulties in managing and staffing international operations;
|
● |
Fluctuations in currency exchange rates;
|
● |
Potentially adverse tax consequences, including the complexities of foreign value added or other tax systems and restrictions on the repatriation of earnings;
|
● |
Dependence on certain third parties, including channel partners with whom we do not have extensive experience;
|
● |
The burdens of complying with a wide variety of foreign laws and legal standards;
|
● |
Increased financial accounting and reporting burdens and complexities;
|
● |
Political, social and economic instability abroad, terrorist attacks and security concerns in general; and
|
● |
Reduced or varied protection for intellectual property rights in some countries.
|
● |
be exploited by our competitors, cause concern to our current or potential clients,
|
● |
result in the loss of current customers or potential business opportunities, or
|
● |
make it more difficult to attract and retain qualified personnel and business partners.
|
10.1
|
Second Amended and Restated Executive Incentive Compensation Plan approved on May 8, 2017 by the Compensation Committee of the Board of Directors of the Company (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on May 11, 2017)
|
10.2
|
Chris Koverman Bonus Letter, dated May 8, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on May 11, 2017)
|
10.3
|
Change Management Form 15 to Statement of Work #3, between Comcast and Company, signed May 17, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on May 23, 2017) (1)
|
10.4
|
Change Management Form between Comcast and Company, signed July 6, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on July 13, 2017)
|
10.5
|
Amendment #3 to Master Services Agreement Call Handling Services, between Comcast and Company, entered into July 24, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on July 27, 2017)
|
31.1
|
Chief Executive Officer Section 302 Certification
|
31.2
|
Principal Financial Officer Section 302 Certification
|
32.1
|
Statement of the Chief Executive Officer under 18 U.S.C. § 1350 (2)
|
32.2
|
Statement of the Principal Financial Officer under 18 U.S.C. § 1350 (2)
|
(1) |
Confidential treatment has been requested for portions of this exhibit.
|
(2)
|
The certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.
|
August 9, 2017
|
SUPPORT.COM, INC.
|
|
By:
|
/s/ Richard Bloom
|
|
Richard Bloom
|
||
Interim President and Chief Executive Officer
|
10.1
|
Second Amended and Restated Executive Incentive Compensation Plan approved on May 8, 2017 by the Compensation Committee of the Board of Directors of the Company (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on May 11, 2017 )
|
|
10.2
|
Chris Koverman Bonus Letter, dated May 8, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on May 11, 2017 )
|
|
10.3
|
Change Management Form 15 to Statement of Work #3, between Comcast and Company, signed May 17, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on May 23, 2017 ) (1)
|
|
10.4
|
Change Management Form between Comcast and Company, signed July 6, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on July 13, 2017 )
|
|
10.5
|
Amendment #3 to Master Services Agreement Call Handling Services, between Comcast and Company, entered into July 24, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on July 27, 2017 )
|
|
Chief Executive Officer Section 302 Certification
|
||
Principal Financial Officer Section 302 Certification
|
||
Statement of the Chief Executive Officer under 18 U.S.C. § 1350 (2)
|
||
Statement of the Chief Financial Officer under 18 U.S.C. § 1350 (2)
|
(1)
|
Confidential treatment has been requested for portions of this exhibit.
|
|
(2)
|
The certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.
|
Date: August 9, 2017
|
By:
|
/s/ RICHARD BLOOM
|
Richard Bloom
|
||
Interim President and Chief Executive Officer
|
Date: August 9, 2017
|
By:
|
/s/ Richard Bloom
|
Richard Bloom
|
||
Principal Financial Officer
|
(i)
|
the Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2017 (the “Report”), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: August 9, 2017
|
/s/ RICHARD BLOOM
|
Richard Bloom
|
|
Interim President and Chief Executive Officer
|
(2)
|
The material contained in this Exhibit 32.1 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.
|
(i)
|
the Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2017 (the “Report”), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: August 9, 2017
|
/s/ Richard Bloom
|
Richard Bloom
|
|
Principal Financial Officer
|
(2)
|
The material contained in this Exhibit 32.2 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.
|
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jul. 31, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Support.com, Inc. | |
Entity Central Index Key | 0001104855 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 18,705,560 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 19,093,307 | 19,030,024 |
Common stock, shares outstanding (in shares) | 18,610,393 | 18,548,180 |
Treasury stock (in shares) | 482,914 | 481,844 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS [Abstract] | ||||
Net loss | $ (165) | $ (6,026) | $ (1,451) | $ (10,338) |
Change in foreign currency translation adjustment | 22 | (48) | 166 | (38) |
Change in net unrealized gain (loss) on investments | 2 | 27 | 6 | 122 |
Other comprehensive income (loss) | 24 | (21) | 172 | 84 |
Comprehensive loss | $ (141) | $ (6,047) | $ (1,279) | $ (10,254) |
Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies | Note 1. Significant Accounting Policies Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements include the accounts of Support.com, Inc. (the “Company”, “Support.com”, “We” or “Our”) and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated balance sheet as of June 30, 2017 and the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2017 and 2016 and the consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 are unaudited. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for, and as of, the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The condensed consolidated balance sheet information as of December 31, 2016 is derived from audited financial statements as of that date. These financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 7, 2017. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The accounting estimates that require management’s most significant, difficult and subjective judgments include accounting for revenue recognition, assumptions used to estimate self-insurance accruals, the valuation and recognition of investments, the assessment of recoverability of intangible assets and their estimated useful lives, the valuations and recognition of stock-based compensation and the recognition and measurement of current and deferred income tax assets and liabilities. Actual results could differ materially from these estimates. Revenue Recognition For all transactions, we recognize revenue only when all of the following criteria are met:
We consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is considered not to be fixed or determinable, revenue is recognized as payment becomes due from the customer provided all other revenue recognition criteria have been met. Services Revenue Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and small and medium business (“SMB”) markets, and include computer and mobile device set-up, security and support, virus and malware removal and wireless network set-up, and automation system onboarding and support. We offer technology services to consumers and SMBs, primarily through our partners (which include communications providers, retailers, technology companies and others) and to a lesser degree directly through our website at www.support.com. We transact with customers via reseller programs, referral programs and direct transactions. In reseller programs, the partner generally executes the financial transactions with the customer and pays a fee to us which we recognize as revenue when the service is delivered. In referral programs, we transact with the customer directly and pay a referral fee to the referring party. Referral fees are generally expensed in the period in which revenues are recognized. In such referral programs, since we are the primary obligor and bear substantially all risks associated with the transaction, we record the gross amount of revenue. In direct transactions, we sell directly to the customer at the retail price. The technology services described above include four types of offerings:
In certain cases, we are paid for services that are sold but not yet delivered. We initially record such balances as deferred revenue, and recognize revenue when the service has been provided or, on the non-subscription portion of these balances, when the likelihood of the service being redeemed by the customer is remote (“services breakage”). Based on our historical redemption patterns for these relationships, we believe that the likelihood of a service being delivered more than 90 days after sale is remote. We therefore recognize non-subscription deferred revenue balances older than 90 days as services revenue. For the six months ended June 30, 2017 and 2016, services breakage revenue was less than 1% of our total revenue. Partners are generally invoiced monthly. Fees from customers via referral programs and direct transactions are generally paid with a credit card at the time of sale. Revenue is recognized net of any applicable sales tax. We generally provide a refund period on services, during which refunds may be granted to customers under certain circumstances, including inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5 and 14 days. For referral programs and direct transactions, the refund period is generally 5 days. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material. Services revenue also includes fees from licensing of Support.com cloud-based software. In such arrangements, customers receive a right to use our Support.com Cloud applications in their own support organizations. We license our cloud based software using a software-as-a-service (“SaaS”) model under which customers cannot take possession of the technology and pay us on a per-user or usage basis during the term of the arrangement. In addition, services revenue includes fees from implementation services of our cloud-based software. Currently, revenues from implementation services are recognized ratably over the customer life which is estimated as the term of the arrangement once the Support.com Cloud services are made available to customers. We generally charge for these services on a time and material basis. Software and Other Revenue Software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners. Our software is sold to customers as a perpetual license or as a fixed period subscription. We act as the primary obligor and generally control fulfillment, pricing, product requirements, and collection risk and therefore we record the gross amount of revenue. We provide a 30-day money back guarantee for the majority of our end-user software products. For certain end-user software products, we sell perpetual licenses. We provide a limited amount of free technical support to customers. Since the cost of providing this free technical support is insignificant and free product enhancements are minimal and infrequent, we do not defer the recognition of revenue associated with sales of these products. For certain of our end-user software products (principally SUPERAntiSpyware), we sell licenses for a fixed subscription period. We provide regular, significant updates over the subscription period and therefore recognize revenue for these products ratably over the subscription period. Other revenue consists primarily of revenue generated through partners advertising to our customer base in various forms, including toolbar advertising, email marketing, and free trial offers. We recognize other revenue in the period in which our partners notify us that the revenue has been earned. Cash, Cash Equivalents and Investments All liquid instruments with an original maturity at the date of purchase of 90 days or less are classified as cash equivalents. Cash equivalents and short-term investments consist primarily of money market funds, certificates of deposit, commercial paper, corporate and municipal bonds. Our interest income on cash, cash equivalents and investments is recorded monthly and reported as interest income and other in our condensed consolidated statements of operations. Our cash equivalents and short-term investments are classified as available-for-sale, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders’ equity on the condensed consolidated balance sheets. We view our available-for-sale portfolio as available for use in our current operations, and therefore we present our marketable securities as short-term assets. We monitor our investments for impairment on a quarterly basis and determine whether a decline in fair value is other-than-temporary by considering factors such as current economic and market conditions, the credit rating of the security’s issuer, the length of time an investment’s fair value has been below our carrying value, the Company’s intent to sell the security and the Company’s belief that it will not be required to sell the security before the recovery of its amortized cost. If an investment’s decline in fair value is deemed to be other-than-temporary, we reduce its carrying value to its estimated fair value, as determined based on quoted market prices or liquidation values. Declines in value judged to be other-than-temporary, if any, are recorded in operations as incurred. At June 30, 2017, we evaluated our unrealized gains/losses on available-for-sale securities and determined them to be temporary. We currently do not intend to sell securities with unrealized losses and we concluded that we will not be required to sell these securities before the recovery of their amortized cost basis. At June 30, 2017 and December 31, 2016, the fair value of cash, cash equivalents and investments was $51.7 million and $53.4 million, respectively. The following is a summary of cash, cash equivalents and investments at June 30, 2017 and December 31, 2016 (in thousands):
The following table summarizes the estimated fair value of our available-for-sale securities classified by the stated maturity date of the security (in thousands):
Fair Value Measurements Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value according to ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
In accordance with ASC 820, the following table represents our fair value hierarchy for our financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
For short-term investments, measured at fair value using Level 2 inputs, we review trading activity and pricing for these investments as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data. Our policy is to recognize the transfer of financial instruments between levels at the end of our quarterly reporting period. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, investments and trade accounts receivable. Our investment portfolio consists of investment grade securities. Except for obligations of the United States government and securities issued by agencies of the United States government, we diversify our investments by limiting our holdings with any individual issuer. We are exposed to credit risks in the event of default by the issuers to the extent of the amount recorded on the consolidated balance sheets. The credit risk in our trade accounts receivable is substantially mitigated by our evaluation of the customers’ financial conditions at the time we enter into business and reasonably short payment terms. For the three months ended June 30, 2017, Comcast accounted for 62% of our total revenue. For the three months ended June 30, 2016, Comcast and Office Depot accounted for 58% and 16%, respectively, of our total revenue. For the six months ended June 30, 2017, Comcast accounted for 64% of our total revenue. For the six months ended June 30, 2016, Comcast and Office Depot accounted for 59% and 17%, respectively, of our total revenue. There were no other customers that accounted for 10% or more of total revenue for the three and six months ended June 30, 2017 and 2016. The credit risk in our trade accounts receivable is substantially mitigated by our evaluation of the customers’ financial conditions at the time we enter into business and reasonably short payment terms. As of June 30, 2017 and December 31, 2016, Comcast accounted for 71% and 70% of our total accounts receivable, respectively. There were no other customers that accounted for 10% or more of our total accounts receivable as of June 30, 2017 and December 31, 2016. Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are recorded at the invoiced amount. We perform evaluations of our customers’ financial condition and generally do not require collateral. We make judgments as to our ability to collect outstanding receivables and provide allowances for a portion of receivables when collection becomes doubtful. Reserves are made based on a specific review of all significant outstanding invoices. For those invoices not specifically provided for, reserves are recorded at differing rates, based on the age of the receivable. In determining these rates, we analyze our historical collection experience and current payment trends. The determination of past-due accounts is based on contractual terms. We had an allowance for doubtful accounts of $3,000 and $19,000 at June 30, 2017 and December 31, 2016, respectively. Self-Funded Health Insurance The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for medical claims. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of June 30, 2017, the Company had approximately $780,000 in reserve for its self-funded health insurance program. As of December 31, 2016, the Company had approximately $911,000 in reserve for its self-funded health insurance program. The reserve is included in “other accrued liabilities” in the condensed consolidated balance sheets. The Company regularly analyzes its reserves for incurred but not reported claims and for reported but not paid claims related to its self-funded insurance program. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):
Realized gains/losses on investments reclassified from accumulated other comprehensive loss are reported as interest income and other, net in our consolidated statements of operations. The amounts noted in the condensed consolidated statements of comprehensive loss are shown before taking into account the related income tax impact. The income tax effect allocated to each component of other comprehensive loss for each of the periods presented is not significant. Stock-Based Compensation We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of stock, restricted stock awards and options to purchase stock, made to employees and directors based on estimated fair values. The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three and six months ended June 30, 2017 and 2016. There were no stock option grants during the three months ended June 30, 2017.
We recorded the following stock-based compensation expense for the three and six months ended June 30, 2017 and 2016 (in thousands):
Earnings (Loss) Per Share Basic earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding, including the effect of the potential issuance of common stock such as stock issuable pursuant to the exercise of stock options and warrants and vesting of RSUs using the treasury stock method when dilutive. The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):
The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):
Warranties and Indemnifications We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances, including our inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5-14 days. For referral programs and direct transactions, the refund period is generally 5 days. For the majority of our end-user software products, we provide a 30-day money back guarantee. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material to date. We generally agree to indemnify our customers against legal claims that our end-user software products infringe certain third-party intellectual property rights. As of June 30, 2017, we have not been required to make any payment resulting from infringement claims asserted against our customers and have not recorded any related accruals. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition and has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective in the first quarter of 2018. Early adoption is permitted although the Company does not intend to early adopt the standard. In adopting ASU 2014-09, companies may use either a full retrospective approach or a modified retrospective approach. Under the modified retrospective approach, the Company would not restate the prior financial statements presented. This guidance requires a company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017. The adoption of ASU 2015-17 did not have a material effect on our consolidated financial statements or disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits were previously recorded in equity and as financing activity under the prior rules. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of ASU 2016-09 did not have a material effect on our consolidated financial statements or disclosures. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position or results of operations. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of a Business (Topic 805), with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position and results of operations. |
Income Taxes |
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Income Taxes [Abstract] | |
Income Taxes | Note 2. Income Taxes We recorded an income tax provision of $45,000 and $93,000 for the three and six months ended June 30, 2017, respectively. We recorded an income tax provision of $36,000 and $88,000 for the three and six months ended June 30, 2016, respectively. The provision for income taxes is comprised of estimates of current taxes due in domestic and foreign jurisdictions. This provision reflects tax expense associated with state income tax and foreign taxes. As of June 30, 2017, our deferred tax assets are fully offset by a valuation allowance except in those jurisdictions where it is determined that a valuation allowance is not required. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against our net U.S. deferred tax assets and a partial valuation allowance against our foreign deferred tax assets. We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made. During Q1 2016, ASC 740-10 reserves and related interest were released in the amount of $284,000 due to the expiration of statutes which resulted in a tax benefit to discontinued operations. The Company does not anticipate a material change in the total amount or composition of its unrecognized tax benefits of $244,000 within 12 months of June 30, 2017. |
Commitments and Contingencies |
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Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 3. Commitments and Contingencies Legal contingencies On October 11, 2016, the Wage and Hour Division of the U.S. Department of Labor (the “DOL”) notified the Company that it would be conducting an audit of the Company relating to compliance with the Fair Labor Standards Act (“FLSA”). The DOL has indicated that the focus of the audit is directed to compliance with overtime requirements related to our technology specialists who work from home providing technical support services. The audit commenced on October 20, 2016, and is ongoing as of the date of this report. While a loss may be reasonably possible, an estimate of loss, if any, cannot reasonably be determined as of the date of this report. On January 24, 2017, the DOL notified the Company that it would be conducting an audit of the Company relating to compliance with the Family and Medical Leave Act of 1993. As of the date of this report, the audit has not commenced and on May 5, 2017 the DOL verbally notified the Company that it would not proceed with such audit. On December 20, 2016, the Federal Trade Commission (“FTC”) issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck, a software program provided by the Company to certain third parties. The FTC has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On January 17, 2017, the Consumer Protection Division of the Office of Attorney General, State of Washington (“Washington AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Washington AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On May 30, 2017, the Consumer Protection Division of the Office of Attorney General, State of Texas (“Texas AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Texas AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. The Company is in the process of responding to these Civil Investigative Demands and cooperating with the FTC, Washington AG and Texas AG with respect to these matters. We are also subject to other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business, potentially including assertions that we may be infringing patents or other intellectual property rights of others. We currently do not believe that the ultimate amount of liability, if any, for any pending claims of any type (alone or combined) will materially affect our financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, any unfavorable outcomes could have a material negative impact on our financial condition and operating results. Regardless of outcome, litigation can have an adverse impact on us because of defense costs, negative publicity, diversion of management resources and other factors. Guarantees We have identified guarantees in accordance with ASC 450, Contingencies. This guidance stipulates that an entity must recognize an initial liability for the fair value, or market value, of the obligation it assumes under the guarantee at the time it issues such a guarantee, and must disclose that information in its interim and annual financial statements. We have entered into various service level agreements with our partners, in which we may guarantee the maintenance of certain service level thresholds. Under some circumstances, if we do not meet these thresholds, we may be liable for certain financial costs. We evaluate costs for such guarantees under the provisions of ASC 450. We consider such factors as the degree of probability that we would be required to satisfy the liability associated with the guarantee and the ability to make a reasonable estimate of the resulting cost. During the six months ended June 30, 2017, we did not incur any costs as a result of such obligations. We have not accrued any liabilities related to such obligations in the condensed consolidated financial statements as of June 30, 2017 and December 31, 2016. |
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Intangible Assets | Note 4. Intangible Assets The Company amortizes intangible assets, which consist of purchased technologies that have estimated useful lives ranging from 1 to 6 years, using the straight-line method when the consumption pattern of the asset is not apparent. The Company reviews such assets for impairment whenever an impairment indicator exists and continually monitors events and changes in circumstances that could indicate carrying amounts of the intangible assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets exceed the estimates of future undiscounted future cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s estimated fair value. There was no impairment of intangible assets recorded for the six months ended June 30, 2017. Amortization of intangible assets and other for the three and six months ended June 30, 2017 was $6,000 and $16,000 respectively. Amortization of intangible assets and other for the three and six months ended June 30, 2016 was $267,000 and $534,000, respectively. The following table summarizes the components of intangible assets (in thousands):
In December 2006, we acquired the use of a toll-free telephone number for cash consideration of $250,000. This asset has an indefinite useful life. As of June 30, 2017, all intangible assets have been fully amortized with the exception of the indefinite-life intangibles. |
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Other Accrued Liabilities | Note 5. Other Accrued Liabilities Other accrued liabilities consist of the following (in thousands):
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Stockholders' Equity | Note 6. Stockholder’s Equity Stock Options The following table represents the stock option activity for the six months ended June 30, 2017:
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had they all exercised their options on June 30, 2017. This amount changes based on the fair market value of our stock. The aggregate intrinsic value of options exercised under our stock option plans was zero during the three and six months ended June 30, 2017, and zero during the three and six months ended June 30, 2016. Total fair value of options vested was $49,000 and $132,000 during the three and six months ended June 30, 2017, respectively, and $209,000 and $419,000 during the three and six months ended June 30, 2016, respectively. At June 30, 2017, there was $217,000 of unrecognized compensation cost related to existing options outstanding which is expected to be recognized over a weighted average period of 2.3 years. During the first quarter of 2017, as a result of the resignation of the Company’s Chief Financial Officer (CFO), 50,000 total market-based stock options granted in 2014 and 2016 were forfeited. Previously recognized Stock-based compensation expense of approximately $58,000 was reversed in Q1 2017, related to the portion of those market-based grants unvested at the time of the CFO’s resignation. Employee Stock Purchase Plan In the second quarter of 2011, to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward eligible employees and by motivating such persons to contribute to the growth and profitability of the Company, the Company’s Board of Directors (the “Board”) and stockholders approved an ESPP and reserved 333,333 shares of our common stock for issuance effective as of May 15, 2011. The ESPP continues in effect for ten (10) years from its effective date unless terminated earlier by the Company. The ESPP consists of six-month offering periods during which employees may enroll in the plan. The purchase price on each purchase date shall not be less than eighty‑five percent (85%) of the lesser of (a) the fair market value of a share of stock on the offering date of the offering period or (b) the fair market value of a share of stock on the purchase date. During the six months ended June 30, 2017, 14,542 shares were purchased under ESPP. Restricted Stock Units The following table represents RSU activity for the six months ended June 30, 2017:
At June 30, 2017, there was $282,000 of unrecognized compensation cost related to RSUs which is expected to be recognized over a weighted average period of 0.9 years. Stock Repurchase Program On April 27, 2005, our Board authorized the repurchase of up to 666,666 outstanding shares of our common stock. As of June 30, 2017 the maximum number of shares remaining that can be repurchased under this program was 602,467. The Company does not intend to repurchase shares without further approval from its Board. |
Restructuring Obligations and Charges |
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Restructuring Obligations and Charges | Note 7. Restructuring Obligations and Charges Severance As of June 30, 2017, all severance and benefit related costs related to the termination of 78 employees worldwide as a result of cost reduction efforts initiated during 2016 have been paid. Contract Terminations As of June 30, 2017, all obligations related to the 2016 termination of contracts as a result of cost reduction efforts have been paid.
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Subsequent Event |
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Jun. 30, 2017 | |
Subsequent Event [Abstract] | |
Subsequent Event | Note 8. Subsequent Event On July 28, 2017, Office Depot provided written notice of its intent not to renew the Professional Services Agreement between the Company and Office Depot dated July 26, 2007, and such Agreement will terminate on September 30, 2017. Revenue attributed to Office Depot, Inc. for 2016 was $8.9 million. Revenue attributed to Office Depot for the six months ended June 30, 2017 was $1.6 million. |
Significant Accounting Policies (Policies) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements include the accounts of Support.com, Inc. (the “Company”, “Support.com”, “We” or “Our”) and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated balance sheet as of June 30, 2017 and the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2017 and 2016 and the consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 are unaudited. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for, and as of, the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The condensed consolidated balance sheet information as of December 31, 2016 is derived from audited financial statements as of that date. These financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 7, 2017. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The accounting estimates that require management’s most significant, difficult and subjective judgments include accounting for revenue recognition, assumptions used to estimate self-insurance accruals, the valuation and recognition of investments, the assessment of recoverability of intangible assets and their estimated useful lives, the valuations and recognition of stock-based compensation and the recognition and measurement of current and deferred income tax assets and liabilities. Actual results could differ materially from these estimates. |
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Revenue Recognition | Revenue Recognition For all transactions, we recognize revenue only when all of the following criteria are met:
We consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is considered not to be fixed or determinable, revenue is recognized as payment becomes due from the customer provided all other revenue recognition criteria have been met. Services Revenue Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and small and medium business (“SMB”) markets, and include computer and mobile device set-up, security and support, virus and malware removal and wireless network set-up, and automation system onboarding and support. We offer technology services to consumers and SMBs, primarily through our partners (which include communications providers, retailers, technology companies and others) and to a lesser degree directly through our website at www.support.com. We transact with customers via reseller programs, referral programs and direct transactions. In reseller programs, the partner generally executes the financial transactions with the customer and pays a fee to us which we recognize as revenue when the service is delivered. In referral programs, we transact with the customer directly and pay a referral fee to the referring party. Referral fees are generally expensed in the period in which revenues are recognized. In such referral programs, since we are the primary obligor and bear substantially all risks associated with the transaction, we record the gross amount of revenue. In direct transactions, we sell directly to the customer at the retail price. The technology services described above include four types of offerings:
In certain cases, we are paid for services that are sold but not yet delivered. We initially record such balances as deferred revenue, and recognize revenue when the service has been provided or, on the non-subscription portion of these balances, when the likelihood of the service being redeemed by the customer is remote (“services breakage”). Based on our historical redemption patterns for these relationships, we believe that the likelihood of a service being delivered more than 90 days after sale is remote. We therefore recognize non-subscription deferred revenue balances older than 90 days as services revenue. For the six months ended June 30, 2017 and 2016, services breakage revenue was less than 1% of our total revenue. Partners are generally invoiced monthly. Fees from customers via referral programs and direct transactions are generally paid with a credit card at the time of sale. Revenue is recognized net of any applicable sales tax. We generally provide a refund period on services, during which refunds may be granted to customers under certain circumstances, including inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5 and 14 days. For referral programs and direct transactions, the refund period is generally 5 days. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material. Services revenue also includes fees from licensing of Support.com cloud-based software. In such arrangements, customers receive a right to use our Support.com Cloud applications in their own support organizations. We license our cloud based software using a software-as-a-service (“SaaS”) model under which customers cannot take possession of the technology and pay us on a per-user or usage basis during the term of the arrangement. In addition, services revenue includes fees from implementation services of our cloud-based software. Currently, revenues from implementation services are recognized ratably over the customer life which is estimated as the term of the arrangement once the Support.com Cloud services are made available to customers. We generally charge for these services on a time and material basis. Software and Other Revenue Software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners. Our software is sold to customers as a perpetual license or as a fixed period subscription. We act as the primary obligor and generally control fulfillment, pricing, product requirements, and collection risk and therefore we record the gross amount of revenue. We provide a 30-day money back guarantee for the majority of our end-user software products. For certain end-user software products, we sell perpetual licenses. We provide a limited amount of free technical support to customers. Since the cost of providing this free technical support is insignificant and free product enhancements are minimal and infrequent, we do not defer the recognition of revenue associated with sales of these products. For certain of our end-user software products (principally SUPERAntiSpyware), we sell licenses for a fixed subscription period. We provide regular, significant updates over the subscription period and therefore recognize revenue for these products ratably over the subscription period. Other revenue consists primarily of revenue generated through partners advertising to our customer base in various forms, including toolbar advertising, email marketing, and free trial offers. We recognize other revenue in the period in which our partners notify us that the revenue has been earned. |
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Cash, Cash Equivalents and Investments | Cash, Cash Equivalents and Investments All liquid instruments with an original maturity at the date of purchase of 90 days or less are classified as cash equivalents. Cash equivalents and short-term investments consist primarily of money market funds, certificates of deposit, commercial paper, corporate and municipal bonds. Our interest income on cash, cash equivalents and investments is recorded monthly and reported as interest income and other in our condensed consolidated statements of operations. Our cash equivalents and short-term investments are classified as available-for-sale, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders’ equity on the condensed consolidated balance sheets. We view our available-for-sale portfolio as available for use in our current operations, and therefore we present our marketable securities as short-term assets. We monitor our investments for impairment on a quarterly basis and determine whether a decline in fair value is other-than-temporary by considering factors such as current economic and market conditions, the credit rating of the security’s issuer, the length of time an investment’s fair value has been below our carrying value, the Company’s intent to sell the security and the Company’s belief that it will not be required to sell the security before the recovery of its amortized cost. If an investment’s decline in fair value is deemed to be other-than-temporary, we reduce its carrying value to its estimated fair value, as determined based on quoted market prices or liquidation values. Declines in value judged to be other-than-temporary, if any, are recorded in operations as incurred. At June 30, 2017, we evaluated our unrealized gains/losses on available-for-sale securities and determined them to be temporary. We currently do not intend to sell securities with unrealized losses and we concluded that we will not be required to sell these securities before the recovery of their amortized cost basis. At June 30, 2017 and December 31, 2016, the fair value of cash, cash equivalents and investments was $51.7 million and $53.4 million, respectively. The following is a summary of cash, cash equivalents and investments at June 30, 2017 and December 31, 2016 (in thousands):
The following table summarizes the estimated fair value of our available-for-sale securities classified by the stated maturity date of the security (in thousands):
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Fair Value Measurements | Fair Value Measurements Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value according to ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
In accordance with ASC 820, the following table represents our fair value hierarchy for our financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
For short-term investments, measured at fair value using Level 2 inputs, we review trading activity and pricing for these investments as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data. Our policy is to recognize the transfer of financial instruments between levels at the end of our quarterly reporting period. |
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Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, investments and trade accounts receivable. Our investment portfolio consists of investment grade securities. Except for obligations of the United States government and securities issued by agencies of the United States government, we diversify our investments by limiting our holdings with any individual issuer. We are exposed to credit risks in the event of default by the issuers to the extent of the amount recorded on the consolidated balance sheets. The credit risk in our trade accounts receivable is substantially mitigated by our evaluation of the customers’ financial conditions at the time we enter into business and reasonably short payment terms. For the three months ended June 30, 2017, Comcast accounted for 62% of our total revenue. For the three months ended June 30, 2016, Comcast and Office Depot accounted for 58% and 16%, respectively, of our total revenue. For the six months ended June 30, 2017, Comcast accounted for 64% of our total revenue. For the six months ended June 30, 2016, Comcast and Office Depot accounted for 59% and 17%, respectively, of our total revenue. There were no other customers that accounted for 10% or more of total revenue for the three and six months ended June 30, 2017 and 2016. The credit risk in our trade accounts receivable is substantially mitigated by our evaluation of the customers’ financial conditions at the time we enter into business and reasonably short payment terms. As of June 30, 2017 and December 31, 2016, Comcast accounted for 71% and 70% of our total accounts receivable, respectively. There were no other customers that accounted for 10% or more of our total accounts receivable as of June 30, 2017 and December 31, 2016. |
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Trade Accounts Receivable and Allowance for Doubtful Accounts | Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are recorded at the invoiced amount. We perform evaluations of our customers’ financial condition and generally do not require collateral. We make judgments as to our ability to collect outstanding receivables and provide allowances for a portion of receivables when collection becomes doubtful. Reserves are made based on a specific review of all significant outstanding invoices. For those invoices not specifically provided for, reserves are recorded at differing rates, based on the age of the receivable. In determining these rates, we analyze our historical collection experience and current payment trends. The determination of past-due accounts is based on contractual terms. We had an allowance for doubtful accounts of $3,000 and $19,000 at June 30, 2017 and December 31, 2016, respectively. |
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Self-Funded Health Insurance | Self-Funded Health Insurance The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for medical claims. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of June 30, 2017, the Company had approximately $780,000 in reserve for its self-funded health insurance program. As of December 31, 2016, the Company had approximately $911,000 in reserve for its self-funded health insurance program. The reserve is included in “other accrued liabilities” in the condensed consolidated balance sheets. The Company regularly analyzes its reserves for incurred but not reported claims and for reported but not paid claims related to its self-funded insurance program. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. |
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Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):
Realized gains/losses on investments reclassified from accumulated other comprehensive loss are reported as interest income and other, net in our consolidated statements of operations. The amounts noted in the condensed consolidated statements of comprehensive loss are shown before taking into account the related income tax impact. The income tax effect allocated to each component of other comprehensive loss for each of the periods presented is not significant. |
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Stock-Based Compensation | Stock-Based Compensation We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of stock, restricted stock awards and options to purchase stock, made to employees and directors based on estimated fair values. The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three and six months ended June 30, 2017 and 2016. There were no stock option grants during the three months ended June 30, 2017.
We recorded the following stock-based compensation expense for the three and six months ended June 30, 2017 and 2016 (in thousands):
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Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding, including the effect of the potential issuance of common stock such as stock issuable pursuant to the exercise of stock options and warrants and vesting of RSUs using the treasury stock method when dilutive. The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):
The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):
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Warranties and Indemnifications | Warranties and Indemnifications We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances, including our inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5-14 days. For referral programs and direct transactions, the refund period is generally 5 days. For the majority of our end-user software products, we provide a 30-day money back guarantee. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material to date. We generally agree to indemnify our customers against legal claims that our end-user software products infringe certain third-party intellectual property rights. As of June 30, 2017, we have not been required to make any payment resulting from infringement claims asserted against our customers and have not recorded any related accruals. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition and has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective in the first quarter of 2018. Early adoption is permitted although the Company does not intend to early adopt the standard. In adopting ASU 2014-09, companies may use either a full retrospective approach or a modified retrospective approach. Under the modified retrospective approach, the Company would not restate the prior financial statements presented. This guidance requires a company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017. The adoption of ASU 2015-17 did not have a material effect on our consolidated financial statements or disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits were previously recorded in equity and as financing activity under the prior rules. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of ASU 2016-09 did not have a material effect on our consolidated financial statements or disclosures. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position or results of operations. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of a Business (Topic 805), with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position and results of operations. |
Significant Accounting Policies (Tables) |
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Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Cash, Cash Equivalents and Investments | The following is a summary of cash, cash equivalents and investments at June 30, 2017 and December 31, 2016 (in thousands):
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Summary of Estimated Fair Value of Available-for-sale Securities Classified by Stated Maturity Date | The following table summarizes the estimated fair value of our available-for-sale securities classified by the stated maturity date of the security (in thousands):
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Financial Assets (Cash Equivalents and Investments) Measured at Fair Value on Recurring Basis | In accordance with ASC 820, the following table represents our fair value hierarchy for our financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
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Components of Accumulated Other Comprehensive Loss | The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):
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Fair Value of Stock-based Awards Valuation Assumptions | The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three and six months ended June 30, 2017 and 2016. There were no stock option grants during the three months ended June 30, 2017.
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Stock-based Compensation Expense | We recorded the following stock-based compensation expense for the three and six months ended June 30, 2017 and 2016 (in thousands):
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Computation of Basic and Diluted Net Earnings (Loss) per Share | The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):
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Potential Common Shares Outstanding Excluded from Computation of Diluted Loss per Share | The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):
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Intangible Assets (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Components of Intangible Assets | The following table summarizes the components of intangible assets (in thousands):
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Other Accrued Liabilities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Liabilities | Other accrued liabilities consist of the following (in thousands):
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Stockholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity | The following table represents the stock option activity for the six months ended June 30, 2017:
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Summary of Restricted Stock Units Activity | The following table represents RSU activity for the six months ended June 30, 2017:
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Restructuring Obligations and Charges (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Obligations and Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Obligations | As of June 30, 2017, all obligations related to the 2016 termination of contracts as a result of cost reduction efforts have been paid.
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Significant Accounting Policies, Revenue Recognition (Details) - Type |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
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Deferred Revenue Arrangement [Line Items] | ||
Payment terms for arrangements to be considered fixed or determinable | 90 days | |
Number of types of offerings | 4 | |
Maximum [Member] | ||
Deferred Revenue Arrangement [Line Items] | ||
Services breakage revenue | 1.00% | 1.00% |
End-User Software Products [Member] | ||
Deferred Revenue Arrangement [Line Items] | ||
Refund period | 30 days | |
Partnerships [Member] | Minimum [Member] | ||
Deferred Revenue Arrangement [Line Items] | ||
Refund period | 5 days | |
Partnerships [Member] | Maximum [Member] | ||
Deferred Revenue Arrangement [Line Items] | ||
Refund period | 14 days | |
Referral Programs and Direct Transactions [Member] | ||
Deferred Revenue Arrangement [Line Items] | ||
Refund period | 5 days |
Significant Accounting Policies, Investment Maturity (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Summary of estimated fair value of available-for-sale securities classified by stated maturity date [Abstract] | ||
Due within one year | $ 25,066 | $ 27,730 |
Due within two years | 7,257 | 8,789 |
Total fair value | $ 32,323 | $ 36,519 |
Significant Accounting Policies, Concentrations of Credit Risk, Revenue (Details) - Revenue [Member] - Customer Concentration Risk [Member] |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Comcast [Member] | ||||
Concentration Risk [Line Items] | ||||
Customer concentration risk | 62.00% | 58.00% | 64.00% | 59.00% |
Office Depot [Member] | ||||
Concentration Risk [Line Items] | ||||
Customer concentration risk | 16.00% | 17.00% |
Significant Accounting Policies, Concentrations of Credit Risk, Accounts Receivable (Details) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
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Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Comcast [Member] | ||
Concentration Risk [Line Items] | ||
Customer concentration risk | 71.00% | 70.00% |
Significant Accounting Policies, Trade Accounts Receivable and Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Receivables [Abstract] | ||
Allowance for doubtful accounts | $ 3 | $ 19 |
Significant Accounting Policies, Self-Funded Health Insurance (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Self-Funded Health Insurance [Abstract] | ||
Reserve for self-funded health insurance program | $ 780 | $ 911 |
Significant Accounting Policies, Fair Value of Stock-based Awards Valuation Assumptions (Details) - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Stock Options [Member] | ||||
Weighted average assumptions used for estimating fair value of stock-based awards [Abstract] | ||||
Risk-free interest rate | 0.00% | 0.84% | 1.43% | 0.92% |
Expected term | 0 years | 3 years 10 months 24 days | 3 years 6 months 29 days | 3 years 10 months 20 days |
Volatility | 0.00% | 48.32% | 46.21% | 48.31% |
Expected dividend | 0.00% | 0.00% | 0.00% | 0.00% |
Weighted average grant-date fair value (in dollars per share) | $ 0 | $ 0.96 | $ 0.96 | $ 0.96 |
Employee Stock Purchase Plan ("ESPP") [Member] | ||||
Weighted average assumptions used for estimating fair value of stock-based awards [Abstract] | ||||
Risk-free interest rate | 1.02% | 0.38% | 1.02% | 0.38% |
Expected term | 6 months | 6 months | 6 months | 6 months |
Volatility | 33.66% | 48.86% | 33.66% | 48.86% |
Expected dividend | 0.00% | 0.00% | 0.00% | 0.00% |
Weighted average fair value (per share) (in dollars per share) | $ 0.59 | $ 0.84 | $ 0.59 | $ 0.84 |
Significant Accounting Policies, Warranties and Indemnifications (Details) |
6 Months Ended |
---|---|
Jun. 30, 2017 | |
End-User Software Products [Member] | |
Product Warranty Liability [Line Items] | |
Refund period | 30 days |
Partnerships [Member] | Minimum [Member] | |
Product Warranty Liability [Line Items] | |
Refund period | 5 days |
Partnerships [Member] | Maximum [Member] | |
Product Warranty Liability [Line Items] | |
Refund period | 14 days |
Referral Programs and Direct Transactions [Member] | |
Product Warranty Liability [Line Items] | |
Refund period | 5 days |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Income Taxes [Abstract] | |||||
Income tax provision | $ 45 | $ 36 | $ 93 | $ 88 | |
Reserves and related interest released due to expiration of statues | $ 284 | ||||
Unrecognized tax benefits | $ 244 | $ 244 |
Other Accrued Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Other Accrued Liabilities [Abstract] | ||
Accrued expenses | $ 922 | $ 842 |
Self-insurance accruals | 780 | 911 |
Customer deposits | 0 | 556 |
Restructuring obligations | 0 | 81 |
Other accrued liabilities | 146 | 106 |
Total other accrued liabilities | $ 1,848 | $ 2,496 |
Stockholders' Equity, Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan ("ESPP") [Member] - shares |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2011 |
Jun. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares reserved for issuance (in shares) | 333,333 | |
Term for employee stock purchase plan | 10 years | |
Offering period of employee stock purchase plan | 6 months | |
Minimum percentage of fair market value of the specified conditions used to determine purchase price of ESPP | 85.00% | |
Employee stock purchase plan, shares purchased (in shares) | 14,542 |
Stockholders' Equity, Stock Repurchase Program and Treasury Stock (Details) - shares |
Jun. 30, 2017 |
Apr. 27, 2005 |
---|---|---|
Stock Repurchase Program [Abstract] | ||
Stock repurchase program, number of shares authorized to be repurchased (in shares) | 666,666 | |
Stock repurchase program, remaining number of shares authorized to be repurchased (in shares) | 602,467 |
Restructuring Obligations and Other Charges (Details) |
6 Months Ended |
---|---|
Jun. 30, 2017
USD ($)
Employee
| |
Restructuring Reserve [Roll Forward] | |
Restructuring obligations, beginning of period | $ 81 |
Cash payments | (81) |
Restructuring obligations, end of period | 0 |
Contract Terminations [Member] | |
Restructuring Reserve [Roll Forward] | |
Restructuring obligations, beginning of period | 31 |
Cash payments | (31) |
Restructuring obligations, end of period | $ 0 |
Severance [Member] | |
Restructuring Cost and Reserve [Line Items] | |
Reduction in number of employees | Employee | 78 |
Restructuring Reserve [Roll Forward] | |
Restructuring obligations, beginning of period | $ 50 |
Cash payments | (50) |
Restructuring obligations, end of period | $ 0 |
Subsequent Event (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Revenue | $ 14,507 | $ 14,929 | $ 28,797 | $ 31,526 | |
Office Depot [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Revenue | $ 1,600 | $ 8,900 |
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