Support.com 2007 Annual Report Download - page 46

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Operating Activities
Net cash used in operating activities was $10.5 million in 2007, $3.0 million in 2006, and $844,000 in 2005. Amounts included in net income (loss), which
do not require the use of cash, primarily include the depreciation of fixed assets, amortization of premiums and discounts on marketable securities, stock-based
compensation expense, and amortization/write-down of intangible assets. The sum of these items totaled $8.0 million, $5.5 million, and $2.4 million in 2007,
2006 and 2005, respectively. Net cash used in operating activities during 2007 was primarily the result of the net loss of $21.4 million and a decrease in deferred
revenue of $3.1 million, offset by a decrease in accounts receivable of $5.1 million. Net cash used in operating activities during 2006 was the result of the net
loss of $8.2 million and a decrease in deferred revenue of $1.4 million, offset by a decrease in accounts receivable of $2.3 million. Net cash used in operating
activities during 2005 was a result of net income of $4.4 million, an increase in accounts receivable of $7.8 million and a decrease in deferred revenues of
$1.6 million, offset by a decrease in prepaid expenses and other current assets of $1.1 million.
Our accounts receivable and deferred revenue balances fluctuate from period to period and are primarily dependent on (i) the timing of the closure of our
license arrangements, especially larger contracts concluded late in the period, (ii) the related invoicing and payment provisions under those contracts, (iii) the
timing of maintenance renewals and consulting billings, and (iv) collections.
Accounts receivable was $10.1 million, $15.1 million and $17.4 million at December 31 2007, 2006 and 2005, respectively. The decreases in accounts
receivable have been primarily due to the presence of fewer large customer balances in accounts receivable as we have sold fewer large license transactions (and
related maintenance renewals) in recent years.
For example, there were four customers with balances greater than $500,000, $4.2 million in the aggregate, at December 31, 2007. By comparison at
December 31, 2006 there were ten customers with balances greater than $500,000, $9.7 million in the aggregate. Similarly, at December 31, 2005, there were
several large license and maintenance renewal invoices raised in December 2005 for six customers. These six customers each had accounts receivable balances
greater than $1.0 million and together accounted for approximately $11.1 million.
Total deferred revenue was $10.5 million, $13.6 million and $15.0 million at December 31, 2007, 2006 and 2005 respectively. Deferred revenue decreased
in each of the last three years. Customers typically purchase maintenance contracts when they license our products. The decrease in deferred maintenance
revenue is consistent with the lower level of license revenue over the same three year period. Additionally, deferred revenue had decreased due to the ongoing
amortization of term-based licenses originally recorded in deferred revenue at the outset of those arrangements.
In 2008, we expect to continue making substantial investments in support of consumer business initiatives that we believe are essential to creating long term
revenue growth. We expect that these investments will precede any material revenue from our new business initiatives. We therefore expect to use a significantly
higher level of cash from operations in 2008 than in 2007.
Investing Activities
Net cash provided by (used in) investing activities was $3.2 million in 2007, $(8.0) million in 2006, and $5.5 million in 2005. Net cash provided by
investing activities in 2007 was primarily due to sales and maturities of $112.5 million in marketable securities offset by the purchase of $106.9 million in
marketable securities and $2.4 million in property and equipment, primarily related to the build out of our new headquarters office. Net cash used in investing
activities in 2006 was primarily due to the purchase of $92.4 million in marketable securities and to a lesser extent the purchase of $964,000 in property and
equipment, offset by the sale and maturity of $85.3 million in marketable securities. Net cash provided by investing activities in 2005 was primarily due to sales
and maturities of $98.0 million
42
Source: SUPPORTSOFT INC, 10-K, March 13, 2008