☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Quarterly Period Ended March 31, 2019
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OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from to
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Delaware
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94-3282005
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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(I.R.S.
Employer
Identification
No.)
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Large
accelerated filer ☐
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Accelerated
filer ☐
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Non-accelerated
filer ☐
(Do
not check if a smaller reporting company)
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Smaller
reporting company ☒
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Emerging growth company
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☐
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Page
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Part I. Financial Information
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4
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4
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5
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6
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7
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8
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9
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22
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26
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27
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Part II. Other Information
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28
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29
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44
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45
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46
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March
31,
2019
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December
31,
2018
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|
(Unaudited)
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|
ASSETS
|
|
|
Current
assets:
|
|
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Cash and cash
equivalents
|
$29,584
|
$25,182
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Short-term
investments
|
18,404
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24,467
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Accounts
receivable, net
|
14,871
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12,292
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Prepaid expenses
and other current assets
|
958
|
999
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Total current
assets
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63,817
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62,940
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Property and
equipment, net
|
637
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703
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Intangible
assets
|
250
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250
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Right of use
assets, net
|
186
|
-
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Other
assets
|
708
|
707
|
|
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Total
assets
|
$65,598
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$64,600
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
liabilities:
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Accounts
payable
|
$356
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$368
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Accrued
compensation
|
2,389
|
3,423
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Other accrued
liabilities
|
1,009
|
978
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Accrued legal
settlement
|
10,000
|
10,000
|
Short-term lease
liability
|
175
|
-
|
Short-term deferred
revenue
|
1,315
|
1,135
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Total current
liabilities
|
15,244
|
15,904
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Long-term lease
liability
|
13
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-
|
Other long-term
liabilities
|
801
|
800
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Total
liabilities
|
16,058
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16,704
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Commitments and
contingencies (Note 3)
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Stockholders’
equity:
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Common stock; par
value $0.0001, 50,000,000 shares authorized; 19,438,178 issued and
18,955,264 outstanding at March 31, 2019 and December 31,
2018
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2
|
2
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Additional paid-in
capital
|
268,846
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268,794
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Treasury stock, at
cost (482,914 shares at March 31, 2019 and December 31,
2018)
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(5,297)
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(5,297)
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Accumulated other
comprehensive loss
|
(2,358)
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(2,507)
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Accumulated
deficit
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(211,653)
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(213,096)
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Total
stockholders’ equity
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49,540
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47,896
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|
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Total
liabilities and stockholders’ equity
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$65,598
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$64,600
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Three Months
Ended
March
31,
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|
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2019
|
2018
|
Revenue:
|
|
|
Services
|
$16,864
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$15,200
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Software and
other
|
1,200
|
1,322
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Total
revenue
|
18,064
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16,522
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Cost of
revenue:
|
|
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Cost of
services
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13,798
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14,111
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Cost of software
and other
|
54
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55
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Total cost of
revenue
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13,852
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14,166
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Gross
profit
|
4,212
|
2,356
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Operating
expenses:
|
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Research and
development
|
749
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711
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Sales and
marketing
|
392
|
550
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General and
administrative
|
1,896
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2,146
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Total operating
expenses
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3,037
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3,407
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Income (loss) from
operations
|
1,175
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(1,051)
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Interest income and
other, net
|
296
|
205
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Income (loss)
before income taxes
|
1,471
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(846)
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Income tax
(benefit) provision
|
28
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(80)
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Net income
(loss)
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$1,443
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$(766)
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Basic and diluted
earnings per share:
|
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Net income
(loss)
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$0.08
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$(0.04)
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Shares used in
computing basic net income (loss) per share
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18,955
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18,729
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Shares used in
computing diluted net income (loss) per share
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19,004
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18,729
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Three Months
Ended
March
31,
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2019
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2018
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Net income
(loss)
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$1,443
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$(766)
|
|
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Other comprehensive
income (loss):
|
|
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Change in foreign
currency translation adjustment
|
99
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(90)
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Change in net
unrealized gain (loss) on investments
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50
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(56)
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Other comprehensive
income (loss)
|
149
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(146)
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Comprehensive
income (loss)
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$1,592
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$(912)
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Common
Stock
|
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Shares
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Amount
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Additional
Paid-In
Capital
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Treasury
Stock
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Accumulated
Other
Comprehensive
Loss
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Accumulated
Deficit
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Total
Stockholders’
Shares
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Balances at December 31,
2017
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18,728,912
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$2
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$267,857
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$(5,297)
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$(2,108)
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$(203,996)
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$56,458
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Net loss
|
—
|
—
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—
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—
|
—
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(766)
|
(766)
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Other comprehensive
loss
|
—
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—
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—
|
—
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(146)
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—
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(146)
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Stock-based compensation
expense
|
|
—
|
376
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|
—
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—
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376
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Balances at March 31,
2018
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18,728,912
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$2
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$268,233
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$(5,297)
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$(2,254)
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$(204,762)
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$55,922
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Balances at December 31,
2018
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18,955,264
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$2
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$268,794
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$(5,297)
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$(2,507)
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$(213,096)
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$47,896
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Net income
|
—
|
—
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—
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—
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—
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1,443
|
1,443
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Other comprehensive
income
|
—
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—
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—
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—
|
149
|
—
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149
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Stock-based compensation
expense
|
|
—
|
52
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|
—
|
—
|
52
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Balances at March 31,
2019
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18,955,264
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$2
|
$268,846
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$(5,297)
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$(2,358)
|
$(211,653)
|
$49,540
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Three Months
Ended
March
31,
|
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|
2019
|
2018
|
Operating
Activities:
|
|
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Net income
(loss)
|
$1,443
|
$(766)
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
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Depreciation
|
75
|
159
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Amortization of
premiums and discounts on investments
|
37
|
18
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Stock-based
compensation
|
52
|
376
|
Changes in assets
and liabilities:
|
|
|
Accounts
receivable, net
|
(2,579)
|
236
|
Prepaid expenses
and other current assets
|
50
|
(157)
|
Other long-term
assets
|
72
|
150
|
Accounts
payable
|
(11)
|
(193)
|
Accrued
compensation
|
(1,028)
|
(718)
|
Accrued expense and
other current liabilities
|
37
|
27
|
Other long-term
liabilities
|
-
|
(143)
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Deferred
revenue
|
180
|
(338)
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Net cash used in
operating activities
|
(1,672)
|
(1,349)
|
|
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Investing
Activities:
|
|
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Purchases of
property and equipment
|
(9)
|
(174)
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Purchases of
investments
|
(3,570)
|
(2,481)
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Maturities of
investments
|
9,645
|
5,694
|
Net cash provided
by investing activities
|
6,066
|
3,039
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Effect of exchange
rate changes on cash and cash equivalents
|
8
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(65)
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Net increase in
cash and cash equivalents
|
4,402
|
1,625
|
Cash and cash
equivalents at beginning of period
|
25,182
|
18,050
|
Cash and cash
equivalents at end of period
|
$29,584
|
$19,675
|
|
|
|
Supplemental
schedule of cash flow information:
|
|
|
Income taxes
paid
|
$-
|
$47
|
|
Three Months
Ended
|
|
|
March
31,
|
|
Revenue from
Contracts with Customers:
|
2019
|
2018
|
Services
|
$16,864
|
$15,200
|
Software and
other
|
1,200
|
1,322
|
Total
revenue
|
$18,064
|
$16,522
|
Changes in
deferred revenues were as
follows:
|
March
31,
2019
|
Balance
as of December 31, 2018
|
$1,135
|
Deferred revenue
|
751
|
Recognition of unearned
revenue
|
(571)
|
Balance
as of March 31, 2019
|
$1,315
|
As of March 31,
2019
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Cash
|
$6,445
|
$—
|
$—
|
$6,445
|
Money market
funds
|
22,211
|
—
|
—
|
22,211
|
Certificates of
deposit
|
463
|
—
|
—
|
463
|
Commercial
paper
|
2,426
|
—
|
(1)
|
2,425
|
Corporate notes and
bonds
|
15,465
|
—
|
(19)
|
15,446
|
U.S. government
agency securities
|
998
|
—
|
—
|
998
|
|
$48,008
|
$—
|
$(20)
|
$47,988
|
Classified
as:
|
|
|
|
|
Cash and cash
equivalents
|
$29,585
|
$—
|
$(1)
|
$29,584
|
Short-term
investments
|
18,423
|
—
|
(19)
|
18,404
|
|
$48,008
|
$—
|
$(20)
|
$47,988
|
As of December
31, 2018
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Cash
|
$8,391
|
$—
|
$—
|
$8,391
|
Money market
funds
|
14,295
|
—
|
—
|
14,295
|
Certificates of
deposit
|
1,171
|
—
|
(1)
|
1,170
|
Commercial
paper
|
3,986
|
—
|
(66)
|
3,985
|
Corporate notes and
bonds
|
14,899
|
—
|
(1)
|
14,833
|
U.S. government
agency securities
|
6,976
|
—
|
(1)
|
6,975
|
|
$49,718
|
$—
|
$(69)
|
$49,649
|
Classified
as:
|
|
|
|
|
Cash and cash
equivalents
|
$25,182
|
$—
|
$—
|
$25,182
|
Short-term
investments
|
24,536
|
—
|
(69)
|
24,467
|
|
$49,718
|
$—
|
$(69)
|
$49,649
|
|
March
31,
2019
|
December
31,
2018
|
Due within one
year
|
$12,812
|
$20,874
|
Due within two
years
|
5,592
|
3,593
|
|
$18,404
|
$24,467
|
As of March 31,
2019
|
Level
1
|
Level
2
|
Level
3
|
Total
|
Money market
funds
|
$22,211
|
$—
|
$—
|
$22,211
|
Certificates of
deposit
|
—
|
463
|
—
|
463
|
Commercial
paper
|
—
|
2,425
|
—
|
2,425
|
Corporate notes and
bonds
|
—
|
15,446
|
—
|
15,446
|
U.S. government
agency securities
|
—
|
998
|
—
|
998
|
Total
|
$22,211
|
$19,332
|
$—
|
$41,543
|
As of December
31, 2018
|
Level
1
|
Level
2
|
Level
3
|
Total
|
Money market
funds
|
$14,295
|
$—
|
$—
|
$14,295
|
Certificates of
deposit
|
—
|
1,170
|
—
|
1,170
|
Commercial
paper
|
—
|
3,985
|
—
|
3,985
|
Corporate notes and
bonds
|
—
|
14,833
|
—
|
14,833
|
U.S. government
agency securities
|
—
|
6,975
|
—
|
6,975
|
Total
|
$14,295
|
$26,963
|
$—
|
$41,258
|
|
Foreign Currency
Translation Losses
|
Unrealized
Losses on Investments
|
Total
|
Balance as of
December 31, 2018
|
$(2,438)
|
$(69)
|
$(2,507)
|
Current-period
other comprehensive income
|
99
|
50
|
149
|
Balance as of March
31, 2019
|
$(2,339)
|
$(19)
|
$(2,358)
|
|
Stock Option
Plan
|
Employee Stock
Purchase Plan
|
||
|
Three Months Ended
March 31,
|
|||
|
2019(1)
|
2018
|
2019
|
2018
|
Risk-free interest
rate
|
0%
|
2.4%
|
2.52%
|
0.5%
|
Expected term (in
years)
|
0.0
|
3.0
|
0.5
|
0.5
|
Volatility
|
0%
|
41.3%
|
25.5%
|
39.0%
|
Expected
dividend
|
0%
|
0%
|
0%
|
0%
|
Weighted average
grant-date fair value
|
$0.00
|
$0.84
|
$0.62
|
$0.39
|
|
Three Months
Ended
March
31,
|
|
Stock-based
compensation expense related to grants of:
|
2019
|
2018
|
Stock
options
|
$33
|
$288
|
Employee Stock
Purchase Plan (“ESPP”)
|
-
|
5
|
Restricted stock
units (“RSUs”)
|
19
|
83
|
|
$52
|
$376
|
Stock-based
compensation expense recognized in:
|
|
|
Cost of
service
|
$8
|
$21
|
Research and
development
|
7
|
14
|
Sales and
marketing
|
12
|
19
|
General and
administrative
|
25
|
322
|
|
$52
|
$376
|
|
Three Months
|
|
|
Ended
|
|
|
March
31,
|
|
|
2019
|
2018
|
Net income
(loss)
|
$1,443
|
$(766)
|
|
|
|
Basic:
|
|
|
Weighted-average
shares of common stock outstanding
|
18,955
|
18,729
|
Shares used in
computing basic income (loss) per share
|
18,955
|
18,729
|
Basic earnings
(loss) per share
|
0.08
|
(0.04)
|
Diluted:
|
|
|
Weighted-average
shares of common stock outstanding
|
18,955
|
18,729
|
Add: Common
equivalent shares outstanding
|
49
|
-
|
Shares used in
computing diluted earnings (loss) per share
|
19,004
|
18,729
|
Diluted earnings
(loss) per share
|
$0.08
|
$(0.04)
|
|
Three Months
Ended
March
31,
|
|
|
2019
|
2018
|
Stock
options
|
765
|
721
|
RSUs
|
78
|
69
|
Total common share
equivalents
|
843
|
790
|
|
March
31,
2019
|
December
31,
2018
|
Accrued
expenses
|
$430
|
$338
|
Self-insurance
accruals
|
501
|
585
|
Other accrued
liabilities
|
78
|
55
|
Total other accrued
liabilities
|
$1,009
|
$978
|
|
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, 2018
|
803,320
|
$2.89
|
8.43
|
$54
|
Granted
|
—
|
—
|
|
|
Exercised
|
—
|
—
|
|
|
Forfeited
|
(26,750)
|
$2.71
|
|
|
Outstanding options
at March 31, 2019
|
776,570
|
$2.90
|
8.18
|
$-
|
Options vested and
expected to vest
|
764,988
|
$2.90
|
8.18
|
$-
|
Exercisable at
March 31, 2019
|
584,182
|
$3.08
|
8.09
|
$-
|
|
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, 2018
|
96,230
|
$2.78
|
0.60
|
$227
|
Awarded
|
—
|
—
|
|
|
Released
|
—
|
—
|
|
|
Forfeited
|
(18,181)
|
—
|
|
|
Outstanding RSUs at
March 31, 2019
|
78,049
|
$2.27
|
0.35
|
$177
|
|
Three
Months Ended
March 31,
2019
|
Operating
leases
|
|
Operating lease
right-of-use assets
|
$186
|
|
|
Operating lease
liabilities – short term
|
$175
|
Operating lease
liabilities – long-term
|
13
|
Total operating
lease liabilities
|
$188
|
Weighted Average
Remaining Lease Term
|
|
Operating
leases
|
1.1
years
|
Weighted Average
Discount Rate
|
|
Operating
leases
|
4.5%
|
|
Operating Leases
|
Reminder of
2019
|
$135
|
2020
|
58
|
Total undiscounted cash flows
|
193
|
Less imputed
interest
|
(5)
|
Present value of lease liabilities
|
$188
|
Supplemental cash flow information related to
leases are as follows (in thousands):
|
|
|
Three Months
Ended
|
|
March 31,
2019
|
Cash paid for amounts
included in the measurement of lease liabilities:
|
|
Operating cash flows from
operating leases
|
$44
|
Right-of-use assets obtained in exchange for lease
obligations:
|
|
Operating
leases
|
$0
|
|
Three Months Ended
March 31,
|
|
|
2019
|
2018
|
Revenue:
|
|
|
Services
|
93%
|
92%
|
Software and
other
|
7
|
8
|
|
|
|
Total
revenue
|
100
|
100
|
|
|
|
Cost of
revenue:
|
|
|
Cost of
services
|
76
|
85
|
Cost of software
and other
|
1
|
1
|
Total cost of
revenue
|
77
|
86
|
Gross
profit
|
23
|
14
|
Operating
expenses:
|
|
|
Research and
development
|
4
|
4
|
Sales and
marketing
|
2
|
3
|
General and
administrative
|
10
|
13
|
|
|
|
Total operating
expenses
|
16
|
20
|
|
|
|
Income (loss) from
operations
|
7
|
(6)
|
Interest income and
other, net
|
1
|
1
|
|
|
|
Income (loss) from
continuing operations, before income taxes
|
8
|
(5)
|
Income tax
provision
|
-
|
-
|
Net income
(loss)
|
8%
|
(5)%
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
$
|
%
|
|
In thousands,
except percentages
|
2019
|
2018
|
Change
|
Change
|
Services
|
$16,864
|
$15,200
|
$1,664
|
11%
|
Software and
other
|
1,200
|
1,322
|
(122)
|
(9)%
|
Total
revenue
|
$18,064
|
$16,522
|
$1,542
|
9%
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
$
|
%
|
|
In thousands,
except percentages
|
2019
|
2018
|
Change
|
Change
|
Cost of
services
|
$13,798
|
$14,111
|
$(313)
|
(2)%
|
Cost of software
and other
|
54
|
55
|
(1)
|
-
|
Total
cost of revenue
|
$13,852
|
$14,166
|
$(314)
|
(2)%
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
$
|
%
|
|
In thousands,
except percentages
|
2019
|
2018
|
Change
|
Change
|
Research and
development
|
$749
|
$711
|
$38
|
5%
|
Sales and
marketing
|
$392
|
$550
|
$(158)
|
(29)%
|
General and
administrative
|
$1,896
|
$2,146
|
$(250)
|
(12)%
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
$
|
%
|
|
In thousands,
except percentages
|
2019
|
2018
|
Change
|
Change
|
Interest and other,
net
|
$297
|
$205
|
$92
|
45%
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
$
|
%
|
|
In thousands,
except percentages
|
2019
|
2018
|
Change
|
Change
|
Income tax provision
(benefit)
|
$28
|
$(80)
|
$108
|
(135)%
|
|
Chief
Executive Officer Section 302 Certification.
|
|
|
Chief
Financial Officer Section 302 Certification.
|
|
|
Statement
of the Chief Executive Officer under 18 U.S.C.
§ 1350(1)
|
|
|
Statement
of the Chief Financial Officer under 18 U.S.C.
§ 1350(1)
|
|
SUPPORT.COM,
INC.
|
|
|
|
|
|
|
May 13, 2019 |
By:
|
/s/
Richard A. Bloom
|
|
|
|
Richard A. Bloom |
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
Chief
Executive Officer Section 302 Certification
|
|
|
Principal
Financial Officer Section 302 Certification
|
|
|
Statement
of the Chief Executive Officer under 18 U.S.C. § 1350
(1)
|
|
|
Statement
of the Chief Financial Officer under 18 U.S.C. § 1350
(1)
|
Date:
May 13, 2019
|
|
By:
|
/s/
RICHARD A. BLOOM
|
|
|
|
Richard A. Bloom
|
|
|
|
President and Chief Executive Officer
|
Date:
May 13, 2019
|
|
By:
|
/s/
Richard A. Bloom
|
|
|
|
Richard A. Bloom
|
|
|
|
Principal Financial Officer
|
Date:
May 13, 2019
|
/s/
RICHARD A. BLOOM
|
|
Richard A. Bloom
|
|
President and Chief Executive Officer
|
(i)
|
|
the
Quarterly Report of the Company on Form 10-Q for the quarter ended
March 31, 2019 (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:
May 13, 2019
|
/s/
Richard A. Bloom
|
|
Richard A. Bloom
|
|
Principal Financial Officer
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 30, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Support.com, Inc. | |
Entity Central Index Key | 0001104855 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 18,955,264 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' equity: | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 19,438,178 | 19,438,178 |
Common stock, shares outstanding | 18,955,264 | 18,955,264 |
Treasury stock (in shares) | 482,914 | 482,914 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ 1,443 | $ (766) |
Other comprehensive income: | ||
Change in foreign currency translation adjustment | 99 | (90) |
Change in net unrealized gain (loss) on investments | 50 | (56) |
Other comprehensive income (loss) | 149 | (146) |
Comprehensive income (loss) | $ 1,592 | $ (912) |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands |
Common Stock [Member] |
Additional Paid-In Capital [Member] |
Treasury Stock [Member] |
Accumulated Other Comprehensive Loss [Member] |
Retained Earnings [Member] |
Total |
---|---|---|---|---|---|---|
Balance, beginning at Dec. 31, 2017 | $ 2 | $ 267,857 | $ (5,297) | $ (2,108) | $ (203,996) | $ 56,458 |
Balance, beginning (in shares) at Dec. 31, 2017 | 18,728,912 | |||||
Net income (loss) | (766) | (766) | ||||
Other comprehensive income (loss) | (146) | (146) | ||||
Stock-based compensation expense | 376 | 376 | ||||
Balance, ending at Mar. 31, 2018 | $ 2 | 268,233 | (5,297) | (2,254) | (204,762) | 55,922 |
Balance, ending (in shares) at Mar. 31, 2018 | 18,728,912 | |||||
Balance, beginning at Dec. 31, 2018 | $ 2 | 268,794 | (5,297) | (2,507) | (213,096) | $ 47,896 |
Balance, beginning (in shares) at Dec. 31, 2018 | 18,955,264 | 18,955,264 | ||||
Net income (loss) | 1,443 | $ 1,443 | ||||
Other comprehensive income (loss) | 149 | 149 | ||||
Stock-based compensation expense | 52 | 52 | ||||
Balance, ending at Mar. 31, 2019 | $ 2 | $ 268,846 | $ (5,297) | $ (2,358) | $ (211,653) | $ 49,540 |
Balance, ending (in shares) at Mar. 31, 2019 | 18,955,264 | 18,955,264 |
Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 March 31, 2019 and the consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2019 and 2018 and the consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 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, 2018 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, 2018, filed with the SEC on March 8, 2019.
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.
Leases
On January 1, 2019, we adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted the new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for finance leases remained substantially unchanged. See Note 7 — Leases in the notes to the condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q for additional information regarding the adoption.
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and short- and long-term lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets. As of adoption of ASC 842 and as of January 1, 2019, the Company was not party to finance lease arrangements.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Under the available practical expedient, we account for the lease and non-lease components as a single lease component.
There have been no other changes to the accounting policies except the Leases, which are disclosed in our most recent Annual Report on Form 10-K. The accompanying unaudited Condensed Consolidated Financial Statements we present in this report have been prepared in accordance with our policies.
Revenue Recognition
Disaggregation of Revenue
We generate revenue from the sale of services and sale of software fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners. The following table depicts the disaggregation of revenue (in thousands) according to revenue type and is consistent with how we evaluate our financial performance:
Services Revenue
Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and 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:
● 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.
● Subscriptions - 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.
The following table represent deferred revenue activity for the three months ended March 31, 2019 (in thousands):
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. As of March 31, 2019, revenues from implementation services are di minimus.
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 offer when-and-if-available software upgrades to our end-user products. Management has determined that these upgrades are not distinct, as the upgrades are an input into a combined output. In addition, Management has determined that the frequency and timing of the when-and-if-available upgrades are unpredictable and therefore we recognize revenue consistent with the sale of the perpetual license or subscription. We 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 control transfers to our partners.
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 investment, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders’ equity on the consolidated balance sheets and in the consolidated statements of comprehensive income (loss). We view this investment 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 December 31, 2018, the Company evaluated its unrealized losses on marketable 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 March 31, 2019 and December 31, 2018, the fair value of cash, cash equivalents and investments was $48.0 million and $49.6 million, respectively.
The following is a summary of cash, cash equivalents and investments at March 31, 2019 and December 31, 2018 (in thousands):
The following table summarizes the estimated fair value of our marketable 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 March 31, 2019 and December 31, 2018 (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 March 31, 2019, Comcast and Cox Communications accounted for 68% and 20%, respectively, of our total revenue. For the three months ended March 31, 2018, Comcast and Cox Communications accounted for 69% and 12%, respectively, of our total revenue. There were no other customers that accounted for 10% or more of total revenue for the three months ended March 31, 2019 and 2018.
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 March 31, 2019, Comcast and Cox Communications accounted for 75% and 18%, respectively, of our total accounts receivable. As of December 31, 2018, Comcast and Cox Communications accounted for 71% and 20%, respectively, of our total accounts receivable. There were no other customers that accounted for 10% or more of our total accounts receivable as of March 31, 2019 and December 31, 2018.
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 $7,000 and $13,000 at March 31, 2019 and December 31, 2018, respectively.
Self-Funded Health Insurance
Effective January 1, 2015, 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 March 31, 2019, the Company had approximately $501,000 in reserve for its self-funded health insurance program. As of December 31, 2018, the Company had approximately $585,000 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 months ended March 31, 2019 and 2018:
We recorded the following stock-based compensation expense for the three months ended March 31, 2019 and 2018 (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.
For the three months ended March 31, 2019 and 2018, diluted earnings per share was computed using our net income 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.
The following table sets forth the computation of basic and diluted earnings (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 March 31, 2018, 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
Accounting Standards Adopted in the Current Period
Lease Accounting
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-11 which provides an alternative transition method that allows entities to apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has adopted the requirements of ASU 2016-02 on January 1, 2019, the first day of fiscal year 2019, and using the option transition method. The Company took advantage of the practical expedient options, which allows an entity not to reassess whether any existing or expired contracts contain leases. There was an increase in assets of $230,000 and liabilities of $231,000 due to the recognition of the required right-of-use asset and corresponding liability for all lease obligations that are currently classified as operating leases with the difference of $1,000 related to existing deferred rent that reduced the ROU asset recorded. The standard did not have an impact in our consolidated income statements.
For information regarding the impact of Topic 842 adoption, see Significant Accounting Policies - Leases and Note 7— Leases.
New Accounting Standards to be adopted in Future Periods
Intangible Assets
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. This guidance will be effective for us in the first quarter of 2020 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | We recorded an income tax provision (benefit) of $28,000 and $(80,000) for the three months ended March 31, 2019 and 2018, respectively. The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and settlements with taxing authorities and foreign currency fluctuations.
As of March 31, 2019, 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.
The Company does not anticipate a material change in the total amount or composition of its unrecognized tax benefits as of March 31, 2019.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Legal contingencies
Federal Trade Commission Consent Order. As previously disclosed, on December 20, 2016 the Federal Trade Commission (“FTC”) issued a confidential Civil Investigative Demand, or CID, to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck, an obsolete software program that the Company developed on behalf of a third party for their use with their customers. The investigation relates to the Company providing software like PC Healthcheck to third parties for their use prior to December 31, 2016, when the Company was under management of the previous Board and executive team. Since issuing the CID, the FTC has sought additional written and testimonial evidence from the Company. We have cooperated fully with the FTC’s investigation and provided all requested information. In addition, the Company has not used PC Healthcheck nor provided it to any customers since December 2016.
On March 9, 2018, the FTC notified the Company that the FTC was willing to engage in settlement discussions. On November 6, 2018, the Company and the FTC entered into a proposed Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment, or the Consent Order. The Consent Order was approved by the Commission on March 26, 2019 and entered by the U.S. District Court for the Southern District of Florida on March 29, 2019. Entry of the Consent Order by the Court has finally resolved the FTC’s multi-year investigation of the Company.
Pursuant to the Consent Order, under which the Company neither admitted nor denied the FTC’s allegations (except as to the Court having jurisdiction over the matter), the FTC has agreed to accept a payment of $10 million in settlement of the $35 million judgement, subject to the factual accuracy of the information the Company has provided as part of our financial representations. The $10 million payment was made on April 1, 2019 and has been recognized in operating expenses within the Company’s consolidated statements of operations for the year ended December 31, 2018.
Additionally, pursuant to the Consent Order, the Company has agreed to implement certain new procedures and enhance certain existing procedures. For example, the Consent Order necessitates that the Company cooperate with representatives of the Commission on associated investigations if needed; imposes requirements on the Company regarding obtaining acknowledgements of the Consent Order and compliance certification, including record creation and maintenance; and prohibits the Company from making misrepresentations and misleading claims or providing the means for others to make such claims regarding, among other things, detection of security or performance issues on consumer’s Electronic Devices. Electronic Devices include, but are not limited to, cell phones, tablets and computers. The Company intends to monitor the impact of the Consent Order regularly and, while the Company currently does not expect the settlement to have a long-term and materially adverse impact on its business, the Company’s business may be negatively impacted as the Company adjusts to some of the changes. If the Company is unable to comply with the Consent Order, then this could result in a material and adverse impact to the Company’s results of operations and financial condition.
Other Matters. 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. Accordingly, the Company has responded to both the Washington AG Civil Investigative Demand and the Texas AG Civil Investigative Demand. To date, the Company has not received any follow-up communications from either state’s 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 three months ended March 31, 2019, 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 March 31, 2019 and December 31, 2018.
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Intangible Assets |
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Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | 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 March 31, 2019, all intangible assets have been fully amortized with the exception of the indefinite-life intangibles.
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Other Accrued Liabilities |
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Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Liabilities | Other accrued liabilities consist of the following (in thousands):
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Stockholder's Equity |
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Stockholders' Equity |
Stock Options
The following table represents the stock option activity for the three months ended March 31, 2019:
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 March 31, 2019. This amount changes based on the fair market value of our stock. Total fair value of options vested during the three months ended March 31, 2019 and 2018 was both $29,000.
At March 31, 2019, there was $128,000 of unrecognized compensation cost related to existing options outstanding which is expected to be recognized over a weighted average period of 1.5 years.
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 three months ended March 31, 2019 and 2018, no shares were purchased under ESPP. As of March 31, 2019, approximately 107,679 shares remain available for grant under the ESPP.
Restricted Stock Units
The following table represents RSU activity for the three months ended March 31, 2019:
At March 31, 2019, there was $52,000 of unrecognized compensation cost related to RSUs which is expected to be recognized over a weighted average period of 0.4 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 March 31, 2019 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.
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | We have entered into various non-cancelable operating lease agreements for certain of our offices, and certain equipment. Our leases have original lease periods expiring between 2019 and 2020.
The components of lease costs, lease term and discount rate are as follows (in thousands except lease term and discount rate):
The following represents maturities of operating lease liabilities as of March 31, 2019 (in thousands):
Supplemental cash flow information related to leases are as follows (in thousands):
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Subsequent Event |
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Mar. 31, 2019 | |
Subsequent Event | |
Subsequent Event | On April 1, 2019, the Company made a cash payment of $10.0 million to the FTC in settlement of the previously disclosed on-going investigation. See Note 3. Commitments and Contingencies: Legal contingencies. |
Significant Accounting Policies (Policies) |
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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 March 31, 2019 and the consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2019 and 2018 and the consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 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, 2018 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, 2018, filed with the SEC on March 8, 2019.
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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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Leases | On January 1, 2019, we adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted the new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for finance leases remained substantially unchanged. See Note 7 — Leases in the notes to the condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q for additional information regarding the adoption.
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and short- and long-term lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets. As of adoption of ASC 842 and as of January 1, 2019, the Company was not party to finance lease arrangements.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Under the available practical expedient, we account for the lease and non-lease components as a single lease component.
There have been no other changes to the accounting policies except the Leases, which are disclosed in our most recent Annual Report on Form 10-K. The accompanying unaudited Condensed Consolidated Financial Statements we present in this report have been prepared in accordance with our policies.
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Revenue Recognition | Disaggregation of Revenue
We generate revenue from the sale of services and sale of software fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners. The following table depicts the disaggregation of revenue (in thousands) according to revenue type and is consistent with how we evaluate our financial performance:
Services Revenue
Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and 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:
● 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.
● Subscriptions - 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.
The following table represent deferred revenue activity for the three months ended March 31, 2019 (in thousands):
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. As of March 31, 2019, revenues from implementation services are di minimus.
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 offer when-and-if-available software upgrades to our end-user products. Management has determined that these upgrades are not distinct, as the upgrades are an input into a combined output. In addition, Management has determined that the frequency and timing of the when-and-if-available upgrades are unpredictable and therefore we recognize revenue consistent with the sale of the perpetual license or subscription. We 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 control transfers to our partners.
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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 investment, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders’ equity on the consolidated balance sheets and in the consolidated statements of comprehensive income (loss). We view this investment 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 December 31, 2018, the Company evaluated its unrealized losses on marketable 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 March 31, 2019 and December 31, 2018, the fair value of cash, cash equivalents and investments was $48.0 million and $49.6 million, respectively.
The following is a summary of cash, cash equivalents and investments at March 31, 2019 and December 31, 2018 (in thousands):
The following table summarizes the estimated fair value of our marketable securities classified by the stated maturity date of the security (in thousands):
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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 March 31, 2019 and December 31, 2018 (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 | 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 March 31, 2019, Comcast and Cox Communications accounted for 68% and 20%, respectively, of our total revenue. For the three months ended March 31, 2018, Comcast and Cox Communications accounted for 69% and 12%, respectively, of our total revenue. There were no other customers that accounted for 10% or more of total revenue for the three months ended March 31, 2019 and 2018.
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 March 31, 2019, Comcast and Cox Communications accounted for 75% and 18%, respectively, of our total accounts receivable. As of December 31, 2018, Comcast and Cox Communications accounted for 71% and 20%, respectively, of our total accounts receivable. There were no other customers that accounted for 10% or more of our total accounts receivable as of March 31, 2019 and December 31, 2018.
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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 $7,000 and $13,000 at March 31, 2019 and December 31, 2018, respectively.
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Self-Funded Health Insurance | Effective January 1, 2015, 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 March 31, 2019, the Company had approximately $501,000 in reserve for its self-funded health insurance program. As of December 31, 2018, the Company had approximately $585,000 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 | 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 | 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 months ended March 31, 2019 and 2018:
We recorded the following stock-based compensation expense for the three months ended March 31, 2019 and 2018 (in thousands):
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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.
For the three months ended March 31, 2019 and 2018, diluted earnings per share was computed using our net income 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.
The following table sets forth the computation of basic and diluted earnings (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 | 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 March 31, 2018, 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 | Accounting Standards Adopted in the Current Period
Lease Accounting
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-11 which provides an alternative transition method that allows entities to apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has adopted the requirements of ASU 2016-02 on January 1, 2019, the first day of fiscal year 2019, and using the option transition method. The Company took advantage of the practical expedient options, which allows an entity not to reassess whether any existing or expired contracts contain leases. There was an increase in assets of $230,000 and liabilities of $231,000 due to the recognition of the required right-of-use asset and corresponding liability for all lease obligations that are currently classified as operating leases with the difference of $1,000 related to existing deferred rent that reduced the ROU asset recorded. The standard did not have an impact in our consolidated income statements.
For information regarding the impact of Topic 842 adoption, see Significant Accounting Policies - Leases and Note 7— Leases.
New Accounting Standards to be adopted in Future Periods
Intangible Assets
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. This guidance will be effective for us in the first quarter of 2020 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.
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Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue |
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Summary of Cash, Cash Equivalents and Investments |
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Summary of Estimated Fair Value of Available-for-sale Securities Classified by Stated Maturity Date |
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Financial Assets (Cash Equivalents and Investments) Measured at Fair Value on Recurring Basis |
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Components of Accumulated Other Comprehensive Loss |
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Fair Value of Stock-based Awards Valuation Assumptions |
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Stock-based Compensation Expense |
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Computation of basic and diluted earnings (loss) per share |
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Potential Common Shares Outstanding Excluded from Computation of Diluted Loss per Share |
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Other Accrued Liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Liabilities |
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Stockholder's Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity |
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Summary of Restricted Stock Units Activity |
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Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases Tables Abstract | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases costs |
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Operating lease liabilities |
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Supplemental cash flow information |
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Significant Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenue | $ 18,064 | $ 16,522 |
Service [Member] | ||
Revenue | 16,864 | 15,200 |
Software and Other [Member] | ||
Revenue | $ 1,200 | $ 1,322 |
Significant Accounting Policies (Details 2) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Summary of estimated fair value of available-for-sale securities classified by stated maturity date [Abstract] | ||
Due within one year | $ 12,812 | $ 20,874 |
Due within two years | 5,592 | 3,593 |
Total fair value | $ 18,404 | $ 24,467 |
Significant Accounting Policies (Details 4) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Balance, beginning | $ 47,896 | $ 56,458 |
Current-period other comprehensive loss | 149 | (146) |
Balance, ending | 49,540 | $ 55,922 |
Foreign Currency Translation Losses [Member] | ||
Balance, beginning | (2,438) | |
Current-period other comprehensive loss | 99 | |
Balance, ending | (2,339) | |
Unrealized Losses on Investments [Member] | ||
Balance, beginning | (69) | |
Current-period other comprehensive loss | 50 | |
Balance, ending | $ (19) |
Significant Accounting Policies (Details 5) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Stock Options [Member] | ||
Risk-free interest rate | 0.00% | 2.40% |
Expected term | 0 years | 3 years |
Volatility | 0.00% | 41.30% |
Expected dividend | 0.00% | 0.00% |
Weighted average grant-date fair value (in dollars per share) | $ 0.00 | $ 0.84 |
Employee Stock Purchase Plan [Member] | ||
Risk-free interest rate | 2.52% | 0.50% |
Expected term | 6 months | 6 months |
Volatility | 25.50% | 39.00% |
Expected dividend | 0.00% | 0.00% |
Weighted average grant-date fair value (in dollars per share) | $ 0.62 | $ 0.39 |
Significant Accounting Policies (Details 6) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Stock-based compensation expense | $ 52 | $ 376 |
Cost of Sales [Member] | Service [Member] | ||
Stock-based compensation expense | 8 | 21 |
Research and Development Expense [Member] | ||
Stock-based compensation expense | 7 | 14 |
Selling and Marketing Expense [Member] | ||
Stock-based compensation expense | 12 | 19 |
General and Administrative Expense [Member] | ||
Stock-based compensation expense | 25 | 322 |
Stock Options [Member] | ||
Stock-based compensation expense | 33 | 288 |
Employee Stock Purchase Plan [Member] | ||
Stock-based compensation expense | 0 | 5 |
RSUs [Member] | ||
Stock-based compensation expense | $ 19 | $ 83 |
Significant Accounting Policies (Details 7) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Accounting Policies [Abstract] | ||
Net income (loss) | $ 1,443 | $ (766) |
Basic: | ||
Weighted-average shares of common stock outstanding | 18,955 | 18,729 |
Shares used in computing basic loss per share | 18,955 | 18,729 |
Basic earnings (loss) per share | $ 0.08 | $ (0.04) |
Diluted: | ||
Weighted average shares of common stock outstanding | 18,955 | 18,729 |
Add: Common equivalent shares outstanding | 49 | 0 |
Shares used in computing diluted earnings (loss) per share | 19,004 | 18,729 |
Diluted earnings (loss) per share | $ 0.08 | $ (0.04) |
Significant Accounting Policies (Details 8) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Potential common shares outstanding excluded from computation of diluted loss per share | 843 | 790 |
Stock Options [Member] | ||
Potential common shares outstanding excluded from computation of diluted loss per share | 765 | 721 |
RSUs [Member] | ||
Potential common shares outstanding excluded from computation of diluted loss per share | 78 | 69 |
Significant Accounting Policies (Details Narrative) - Customer Concentration Risk [Member] |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Sales Revenue, Goods, Net [Member] | Comcast [Member] | |||
Customer concentration risk | 68.00% | 69.00% | |
Sales Revenue, Goods, Net [Member] | Coxcom [Member] | |||
Customer concentration risk | 20.00% | 12.00% | |
Trade Accounts Receivable [Member] | Comcast [Member] | |||
Customer concentration risk | 75.00% | 71.00% | |
Trade Accounts Receivable [Member] | Coxcom [Member] | |||
Customer concentration risk | 18.00% | 20.00% |
Income Taxes (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Income tax (benefit) provision | $ 28 | $ (80) |
Other Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Accrued expenses | $ 430 | $ 338 |
Self-insurance accruals | 501 | 585 |
Other accrued liabilities | 78 | 55 |
Total other accrued liabilities | $ 1,009 | $ 978 |
Stockholder's Equity (Details 1) - RSUs [Member] $ / shares in Units, $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
$ / shares
shares
| |
Restricted stock units, number of shares | |
Outstanding RSUs, beginning of period | shares | 96,230 |
Awarded | shares | 0 |
Released | shares | 0 |
Forfeited | shares | (18,181) |
Outstanding RSUs, end of period | shares | 78,049 |
Restricted stock units, weighted average grant-date fair value | |
Outstanding RSUs, beginning of period | $ / shares | $ 2.78 |
Awarded | $ / shares | 0.00 |
Released | $ / shares | 0.00 |
Forfeited | $ / shares | 0.00 |
Outstanding RSUs, end of period | $ / shares | $ 2.27 |
Restricted stock units, additional disclosures | |
Outstanding RSUs, weighted average remaining contractual term | 4 months 6 days |
Outstanding RSUs, aggregate intrinsic value | $ | $ 177 |
Stockholder's Equity (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Stockholders' Equity Note [Abstract] | ||
Fair value of options vested | $ 29 | $ 29 |
Unrecognized compensation cost related to stock options | $ 128 | |
Weighted average period of recognition for unrecognized compensation cost | 1 year 6 months | |
Unrecognized compensation cost related to restricted stock units | $ 52 | |
Weighted average period of recognition for unrecognized compensation cost | 4 months 24 days | |
Stock repurchase program, remaining number of shares authorized to be repurchased | 602,467 |
Leases (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases Details Abstract | ||
Operating lease right-of-use assets | $ 186 | $ 0 |
Operating lease liabilities – short term | 175 | $ 0 |
Operating lease liabilities – long-term | 13 | |
Total operating lease liabilities | $ 188 | |
Weighted Average Remaining Lease Term Operating leases | 1 year 1 month 6 days | |
Weighted Average Discount Rate Operating leases | 4.50% |
Leases (Details 1) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Leases Details 1Abstract | |
Reminder of 2019 | $ 135 |
2020 | 58 |
Total undiscounted cash flows | 193 |
Less imputed interest | (5) |
Present value of lease liabilities | $ 188 |
Leases (Details 2) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases Details 2Abstract | |
Operating cash flows from operating leases | $ 44 |
Right-of-use assets obtained in exchange for lease obligation: Operating leases | $ 0 |
18
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