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SupportSoft Inc. (SPRT)
Q1 2009 Earnings Call
April 29, 2009 4:30 pm ET
Josh Pickus - President and CEO
Shelly Schaffer - EVP and CFO
Anne-Marie Eileraas - SVP and General Counsel
Chad Bennett - Northland Securities
Gregg Speicher - Moss Creek
Ted Ketterer - TK Associates
Shawn Boyd - WestCliff Capital Management
Gene Weber - Weber Capital Management
Previous Statements by SPRT
» SupportSoft Inc. Q4 2008 Earnings Call Transcript
» SupportSoft Inc. Q3 2008 Earnings Call Transcript
» SupportSoft Inc. Q2 2008 Earnings Call Transcript
Good afternoon. This is Anne-Marie Eileraas, General Counsel of SupportSoft. Joining me here in Redwood City are Josh Pickus, our Chief Executive Officer, and Shelly Schaffer, our Chief Financial Officer.
Before we begin, I would like to remind everyone that our remarks today will include forward-looking statements about our financial results and other matters. There are a number of risks and uncertainties that could cause our actual results to differ materially from expectations. These risks are detailed in today's press release and the reports we have filed with the SEC, all of which can be found through the investor relations page of our website.
I would also like to point out that we will like to present certain non-GAAP information on this call. The reconciliation of GAAP to non-GAAP financial measures is included with today's press release and is available on our investor relations webpage. The statements we'll make in this conference call are based on information we know as of today, and we assume no obligation to update any of those statements.
With that, I'll turn it over to Josh.
Thanks Anne-Marie. Today we are going to cover four topics: our Q1 results, the status of the sale of our Enterprise business to Consona Corporation, progress in our Consumer activities, and the outline of our go-forward plan for the standalone Consumer business.
Shelly is going to cover the first two topics, starting with her Q1 results.
Thanks Josh. First quarter 2009 was $10.5 million at the upper end of our guided range of $9.5 million to $10.3 million. We saw continued growth in our Consumer segment. In our Consumer segment Q1 revenue of $3.6 million represents an increase of16% as compared to Q4 revenue of $3.1 million and growth of 414% as compared to Q1 2008 revenue of $703,000. Consumer revenue out performance was driven by our partner channel.
In our Enterprise segment total revenue in Q1 was $6.9 million, down 29% from the prior quarter and down 36.7% versus Q1 of '08. The reduction of Enterprise revenue is primarily due to reduced license revenue although other Enterprise revenues also declined. Notwithstanding lower revenue, Q1 marks the 5th consecutive quarter of non-GAAP profitability for the enterprise segment.
Although Q1 gross margin in the Consumer segment was negative, it improved sequentially and on a year-over-year basis as a result of increased efficiencies in service delivery which Josh will later discuss. We believe that we are well positioned to achieve our stated full year goal of exiting 2009 year with a positive gross margin for our Consumer business.
Our operating expense lines for research and development and G&A for both businesses were consistent with the prior quarter. Sales and marketing was down by $1 million over Q4 of 2008 driven by headcount reductions in the Enterprise business as well as reduced commissions. Restructuring charges related to the first quarter headcount reductions and office closures were $896,000, in line with our expectations.
As mentioned in today's press release, we recently reduced the headquarters staff for the Consumer business to a lower go forward cost structure for that business. We will quantify the consumer restructuring charges and their effects on the go forward P&L in our Q2 2009 call.
Interest income in Q1 was $202,000, below our forecasted range of $250,000 to $290,000. This income was more than offset by approximately $285,000 in losses related to foreign currency fluctuations as well as the loss of $218,000 on the put value related to our UBS auction rate securities. The resulting total for other income and expenses for the quarter was a negative $302,000, as compared to a positive $177,000 in the prior quarter.
First quarter non-GAAP loss share of $0.11 was better than our guided loss per share of $0.12 to $0.14. This reduced loss primarily resulted from better consumer revenues and gross margin, as well as incremental cost savings across the P&L, primarily as a result of restructuring.
Let me briefly discuss the balance sheet. As a reminder, our total cash and investments reflect the sum of three line items on the balance sheet; cash and short-term investments, long-term investments, and our auction rate security put option.
Our total cash and investments totaled $89.9 million at March 31, 2009, as compared to $95 million at December 31, 2008, a net reduction of $5.1 million as expected. The change in cash and investments reflect approximately $4.4 million used for operations, 1.25 million related to restructuring activities, and 550,000 of incremental write-up in the values related to our auction rate securities.
With respect to auction rate securities specifically, I’d like to note that we held a par value of $24.5 million in auction rate securities at March 31, 2009, $20.9 million of this balance is held with UBS. Last year we accepted the UBS auction rate securities “Rights offer.” This offer gives us the right to sell the auction rate securities back to UBS at par, beginning June 30, 2010, five quarters from today.