Support.com 2006 Annual Report Download - page 36

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Stock−based compensation
We account for stock−based compensation in accordance with the provisions of SFAS 123R. We adopted SFAS 123R using the
modified prospective transition method which requires the application of the accounting standard starting from January 1, 2006. Under
the fair value recognition provisions of SFAS 123R, stock−based compensation cost is estimated at the grant date based on the fair
value of the award and is recognized as expense ratably over the requisite service period of the award. We estimate the fair value of
stock−based awards on the grant date using the Black−Scholes−Merton option−pricing model. Determining the appropriate fair value
model and calculating the fair value of stock−based awards requires judgment, including estimating stock price volatility, forfeiture
rates and expected life. If any of these assumptions used in the option−pricing models changes significantly, stock−based
compensation may differ materially in the future from that recorded in the accompanying financial statements.
Results of Operations
The following table presents certain consolidated statements of operations data for the periods indicated as a percentage of total
revenue.
Years Ended
December 31,
2006 2005 2004
Revenue:
License fees 36% 53% 63%
Maintenance 35 23 18
Services 29 24 19
Total revenue 100 100 100
Costs and expenses:
Cost of license fees 1 1 0
Cost of maintenance 3 2 1
Cost of services 30 21 15
Amortization of intangible assets 2 2 1
Research and development 20 18 16
Sales and marketing 52 40 40
General and administrative 23 14 11
In−process research and development 0 0 3
Amortization of deferred compensation 0 0 0
Total costs and expenses 131 98 87
Income (loss) from operations (31) 2 13
Interest income and other, net 14 6 4
Income (loss) before income taxes (17) 8 17
Provision for income taxes (1) (1) 0
Net income (loss) (18)% 7% 17%
Years Ended December 31, 2006, 2005, and 2004
Revenue ($ in thousands)
2006 % Change
2005 to 2006 2005 % Change
2004 to 2005 2004
License fees $ 16,415 (50)% $ 32,737 (14)% $ 37,923
Maintenance 15,672 9% 14,317 30% 11,002
Services 12,941 (13)% 14,877 27% 11,692
Total revenue $ 45,028 (27)% $ 61,931 2% $ 60,617
32
Source: SUPPORTSOFT INC, 10−K, March 16, 2007