Support.com 2014 Annual Report Download - page 29

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Table of Contents
Cost of software and other. Cost of software and other fees consists primarily of third-party royalty fees for our end-user software products. Certain of these products were developed using third-party research
and development resources, and the third party receives royalty payments on sales of products it developed. The decrease of $332,000 in cost of software and other for the year ended December 31, 2014 compared
to 2013 was primarily due to lower sales of end-user software products driven by our decision to discontinue our largest advertising placements in the second half of 2013. The decrease of $249,000 in cost of
software and other for the year ended December 31, 2013 compared to 2012 was primarily due to a reduction of third-party royalty fees as the Company reduced the reliance on third-party software products.
Operating expenses
($ in thousands) 2014
% Change
2013 to 2014 2013
% Change
2012 to 2013 2012
Research and development $ 5,078 (11)% $ 5,735 (15)% $ 6,773
Sales and marketing 7,206 (51)% 14,599 (20)% 18,285
General and administrative 11,320 (0)% 11,376 (7)% 12,234
Amortization of intangible assets and other 1,091 (17)% 1,321 (13)% 1,522
Total operating expenses $ 24,695 (25)% $ 33,031 (15)% $ 38,814
Research and development. Research and development expense consists primarily of compensation costs, third-party consulting expenses and related overhead costs for research and development personnel.
Research and development costs are expensed as they are incurred. The decrease of $657,000 in research and development expense for the year ended December 31, 2014 compared to 2013 resulted primarily
from decreases in salary and employee related expenses including stock-based compensation expense due to a decrease in headcount. The decrease of $1.0 million in research and development expense for the
year ended December 31, 2013 compared to 2012 resulted primarily from decreases in salary and employee related expenses including stock-based compensation expense due to a decrease in headcount.
Sales and marketing. Sales and marketing expense consists primarily of compensation costs of business development, program management and marketing personnel, as well as expenses for lead generation
and promotional activities, including public relations, advertising and marketing. The decrease of $7.4 million in sales and marketing expense for the year ended December 31, 2014 compared to 2013 resulted from
our decision to discontinue our largest advertising placements in the second half of 2013.
The decrease of $3.7 million in sales and marketing expense for the year ended December 31, 2013 compared to 2012 resulted from a $3.4 million decrease in wages and employee related expenses, a $1.0
million decrease in contracted labor and a $270,000 decrease in telecommunication expenses due to reduction in contact sales agent workforce completed at the end of second quarter of 2012. The decrease was
offset by a $1.0 million increase in advertising costs for end-user software products (prior to our decision to discontinue our largest advertising placements in the second half of 2013).
General and administrative. General and administrative expense consists primarily of compensation costs and related overhead costs for administrative personnel and professional fees for legal, accounting and
other professional services. General and administrative expense was consistent year-over-year at $11.3 million. The decrease of $858,000 in general and administrative expense for the year ended December 31,
2013 compared to 2012 resulted from a $683,000 decrease in stock-based compensation expense, a $262,000 decrease in franchise taxes and a $241,000 decrease in professional services and legal related fees,
offset by a $541,000 increase in recruiting fees for certain corporate positions and hiring expenses to support the growth in our services programs.
Amortization of intangible assets and other. The decrease of $230,000 in amortization of intangible assets and other for the year ended December 31, 2014 compared to 2013 was due to certain intangible
assets becoming fully amortized as of the end of 2013. The decrease of $201,000 in amortization of intangible assets and other for the year ended December 31, 2013 compared to 2012 was due to the re-
measurement of milestone based earn-outs associated with the acquisitions of RightHand IT Corporation in January 2012 and SUPERAntiSpyware in June 2011.
Interest income and other, net
($ in thousands) 2014
% Change
2013 to 2014 2013
% Change
2012 to 2013 2012
Interest income and other, net $ 294 (20)% $ 369 24% $ 297
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