Support.com 2006 Annual Report Download - page 38

Download and view the complete annual report

Please find page 38 of the 2006 Support.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

Revenue Mix. The components of revenue by type, expressed as a percentage of total revenue were:
Year Ended
December 31,
2006 2005 2004
Perpetual license revenue 32% 48% 47%
Term license revenue 4% 5% 16%
Maintenance revenue 35% 23% 18%
Services revenue 29% 24% 19%
Total revenue 100% 100% 100%
We currently anticipate that license revenue will comprise approximately 30% to 40% of total revenue over the next 12 months,
with services and maintenance revenue comprising the balance. We expect that revenue from perpetual licensing arrangements will
comprise almost all of our license revenue and term license revenue will represent a small percentage of our license revenue over the
next 12 months. Therefore, our future revenue will depend upon sales of perpetual licenses, generally with up−front license revenue
recognition, resulting in less predictability of future operating results.
The year over year decreases in term license revenue, which is recognized ratably over the duration of the agreement, are largely
related to new customers who have purchased perpetual licenses and existing customers who initially licensed our software on a term
license basis choosing, at or near the end of the initial term, to renew their licenses on a perpetual license basis.
For the years ended December 31, 2006 and 2005, no customers accounted for 10% or more of our total revenue. For the year
ended December 31, 2004, two customers accounted for 13% and 10%, respectively, of our total revenue.
Revenue from customers outside the United States accounted for approximately 23%, 21% and 11% of our total revenue in 2006,
2005 and 2004, respectively. Although the percentage of revenue we recognize in the future from international customers will vary
from period to period, we are expanding our international sales and marketing activities and we currently anticipate that revenue from
international customers will increase as a percentage of revenue over the next 12 months.
Cost of license fees, maintenance, services and the amortization of intangible assets
($ in thousands)
2006 % Change
2005 to 2006 2005 % Change
2004 to 2005 2004
Cost of license fees $ 499 (10)% $ 555 88% $ 295
Cost of maintenance 1,225 24% 988 136% 418
Cost of services 13,599 4% 13,128 37% 9,592
Amortization of
intangible assets 1,090 0% 1,090 200% 363
Total cost of
revenues $ 16,413 4% $ 15,761 48% $ 10,668
Cost of license fees. Cost of license fees consists primarily of third−party royalty fees under license arrangements for technology
embedded into or sold with our products and represented approximately 1% or less of total revenue in each year. Cost of license fees
was $499,000 in 2006, $555,000 in 2005, and $295,000 in 2004. Cost of license fees in 2006 was generally in line with 2005 and
increased $260,000, or 88%, in 2005 from 2004. The increase in cost of license fees in 2005 from 2004 was due primarily to royalties
for a third−party product that was resold with our products during 2005, which we did not sell in 2004.
34
Source: SUPPORTSOFT INC, 10−K, March 16, 2007