Good day, ladies and gentlemen, and welcome to the Support.com Preliminary Fourth Quarter 2013 Results and Initial First Quarter 2014 Outlook Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Greg Wrenn, General Counsel. Sir, you may begin.

Thank you, operator. Good afternoon, everyone. Joining me here today is Josh Pickus, our Chief Executive Officer. Before we begin, I would like to remind everyone that our remarks today will include forward-looking statements about our future 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 file with the SEC, all of which can be found through the Investor Relations page of our website at www.support.com. I would also like to point out that we will present certain non-GAAP information on this call. All numbers presented today are non-GAAP unless otherwise stated. The reconciliation of GAAP to non-GAAP financial measures is included with today's press release and also on our Investor Relations web page. The statements we'll make in this conference call are based on information we know of as of today, and we assume no obligation to update any of these statements. With that, I'll turn it over to our CEO, Josh Pickus.

Thanks, Greg, and thanks to everyone on the call for joining us on short notice. Our Chief Operating Officer and Chief Financial Officer, Roop Lakkaraju, is also here with us today. This afternoon, we released preliminary results for the fourth quarter of 2013 and provided an initial outlook for the first quarter of 2014. The purpose of today's call is to provide insight into the results and the outlook and to answer your questions. Starting with the 2013 results; for the fourth quarter, we currently expect non-GAAP revenue, excluding warrant-related charges, in the range of $24.5 million to $25 million and non-GAAP income from continuing operations of $0.08 to $0.09 per share. This compares to our guidance of $24 million to $26 million and $0.06 to $0.08 per share. We finished the quarter with cash, cash equivalents and investments of approximately $72 million; up from $68.5 million at the end of the third quarter of 2013. The fourth quarter results complete an exceptionally strong year, in which we grew non-GAAP revenue from approximately $72 million in 2012 to approximately $89 million in 2013; improved non-GAAP income from continuing operations from $0.02 per share in 2012 to $0.30 per share in 2013; and added almost $16 million in cash to the balance sheet. Turning to 2014, in our last financial results call, we indicated that revenue and profitability would decline sequentially in the first quarter. We can now estimate the extent of the decline based on the resolution of questions regarding certain customer programs at the end of 2013. Based on the information we have today, we currently expect the following results for the first quarter of 2014: Revenue in the range of $16 million to $18 million; a revenue mix of approximately 90% services and 10% software; overall non-GAAP gross…

[Operator Instructions] Our first question comes from Chad Bennett of Craig-Hallum.

So it's great to get the color on kind of where things are going in the March quarter. Should we view the March quarter as a trough quarter from a revenue and profitability standpoint for the next year? Or do you have visibility into that?

Right now, our forecast for the full year does show the quarters following Q1 to be increases in revenue. We're obviously starting off a different and lower base, but we do show an uptick over the balance of the year. From a P&L standpoint, we think that Q2 may have a modestly larger loss because there's some high-margin revenue that won't be present in Q2, but then things should also move upwards. So it's a changing of the baseline, but we do think that, from that point forward, we'll see movement in the positive direction.

Okay. And the agent decline that you indicated in the 8-K last night, is that across all partners, specific to ODP OfficeMax? Or kind of any other -- any additional color there would be helpful.

The agent decline was targeted to the agents who were serving the Xfinity Signature Support program that ended. As you know, we have different types of agents, and while we actually did some hiring for agents on the bundle program, we did not have other things for the Xfinity Signature Support agents to do, and so that's really what composed the REV.

Okay. So can you give us an update of where you are in -- or where your partner is in the bundle rollout, and how far along we are there, and what the progression should be looking out into next year?

Sure. Where we are is that by the end of the fourth quarter, we had rolled out the bundled home networking support program to all of the Comcast divisions. What's going on now is that Comcast is assessing the number of gateways out there, the contact volumes that the gateways are driving; and making some determinations about what headcount is going to be necessary as we go forward. What you see reflected in the guidance is the lower end being our current staffing levels with no increases. We do have very high volumes right now, and so it's quite possible that later this quarter, that number will increase. And some of that is reflected in the higher end of our guidance. So I can tell you the process which is really an assessment of call volumes. I can't tell you the exact slope of the curve because that awaits a determination from Comcast after they've had an opportunity to assess what things look like post-holiday. I will say that I'm very proud of the contact center team, which has handled the bundle rollout extremely well. I think Comcast is very pleased with the way it's gone. And I'm optimistic that we can do a really terrific job for them and that they'll be very pleased with that over the course of the year.

Okay. So we're fully rolled out as of the end of December from a regional standpoint or a population standpoint. Growth post the March quarter or even in the March quarter is more based on gateway growth or usage, is that a good way of thinking about it?

The only thing I would change about your statement is I would reverse the order. I would say usage and then gateway growth. There is some seasonality to contact volumes, and contact volumes towards the end of the year were extremely high. What we're all trying to assess is what does it look like in a more steady-state situation and what's the right staffing level for that. That really goes to contact rate per person with the gateway. And then, as we get later in the year and that's sort of stabilized, I think it'll be driven more by the number of devices out there.

Okay. Last question for me, the software mix that you indicated for the March quarter, is that the run rate we should think about going forward, Josh, from a revenue standpoint?

Here's the way I would think about that. We did about $2.5 million, a little bit north of $2.5 million in Q4 in software overall. Because of the cancellation of that remaining ad placement that was no longer generating positive results, assume that, that number comes down to around $1.8 million. And then we expect that to grow over the course of the year as we get the SaaS business to contribute increasingly to that. So that's where I would begin it, and then I would trend it upwards based on progress on SaaS. And, of course, SaaS has a ratable revenue recognition, so while we're feeling very positive about that, the results of contract signings always take a number of quarters to play out.

Our next question comes from Lauren Slabaugh of Stephens.

First one is in regards to the referral program. I know you mentioned that earlier, but curious if you could give us a little more color in terms of what the magnitude of that could be and how many agents could participate in that.

Yes. Here's what I would say about that, Lauren. When we started down that path, the contemplation was that it might be a very substantial program because it could potentially touch all or a large percentage of the Comcast technical support agents. For legal reasons, it ended up getting narrowed pretty considerably. And what it really boils down to at this stage is, our agents who are doing the home networking support and the bundled program, to the extent that there are calls that are beyond that, they are allowed, subject to the appropriate Comcast policies, to transfer them to us in our branded business. So there are simply fewer agents who are going to be transferring calls, and that means that the program to us looks like it will contribute. And it'll be a terrific program in the sense that it will be our customer in a high-margin program. But I think it's fair to say that we're in the high 6-figures, low 7-figure type of numbers for that program, which is considerably smaller than I think we originally hoped for.

Okay, that helps. And then also on the home security opportunity, I know you've given us a little bit of an update on that, but any more thoughts on the timing of that? And is that only within Comcast, or are you talking to some others on that?

There are a number of opportunities in that market. And I would say that, in the best case, we get rolling on that opportunity, let's say, early in the second quarter, maybe even late in the first quarter. And there is a lot of activity. As I'm sure you know just from reading the paper this particular week, CES is all about the new Internet of Things and the many new devices that are going to be connected to the Internet. And there was a fascinating story in the journal yesterday about the fact that the Internet of Things has a little bit of a challenge in getting everything to work together. And to me, that sounds very familiar to situations we've been in before where there's a technology that has tremendous promise and can deliver great value, but it needs someone to make it all work. And that's kind of what we do here. So both home security and automation and beyond that to many new types of connected devices as we go through this 2014 year. We think that the Internet of Things and supporting it is a very interesting opportunity for us, so we're feeling bullish about that. Of course, as with these things at their beginnings, you never know what the pace is going to be, but the level of activities seem quite different and more positive than they did in 2013.

Okay. And then one more for me on Office Depot-OfficeMax where you mentioned these store closures. Can you maybe give any commentary on, before modeling that line item, revenue model by customer and looking at that one, how we should really think about modeling that now that that's closing?

Yes. We can only speculate because they have not yet announced what the store closures will be or what percentage of stores will be closed and they haven't given us any information that's not public. If you were to think in the range of $3 million or $4 million in terms of down from 2013 to '14, that's roughly one possibility for it. And we'll obviously be able to true that up and understand it better once we have an opportunity to understand exactly how that merger is going to roll out.

Our next question comes from Kevin Liu of B. Riley and Company.

Just one more question on Comcast. I think, initially, when we were making this transition to the bundled support offering, you had thought Comcast could be at least similar size to the Xfinity Signature Support program, if not a bit bigger. With the changes to the referral program and also the SMB program coming to end, maybe you could update us on your thoughts as to how big the new bundled support program can be relative to the former program.

Yes, that's a fair question. What I would say is that the statement we made in Q3, based on everything we knew then, was exactly as you laid it out; that Comcast revenue overall would be at or even above in 2014, notwithstanding being less profitable. I think, at this point, we would change that somewhat and we would say that it's likely to be down, not down gigantically but, in total, maybe down $5 million or $6 million. And of course, as we indicated, it's also going to be meaningfully less profitable. But the big changes in our thinking relate to really the 3 things we've mentioned already: One is a smaller referral program; the other is the absence of a small business program; and the third one is what I would say is uncertainty about the rollout of the full staffing for the bundled program. I would say we're quite optimistic about the bundled program filling a large need and needing incremental staffing, but we just don't know enough to really predict it. So it's some combination of those factors that's responsible for the revised view of Comcast revenue 2014 versus 2013.

Got it. And would you guys happen to have the ending agent headcount number coming out of Q4?

Yes. The ending agent headcount number is 1,179.

And at this point, it sounds like Comcast will be dependent on whether volumes tick up. But what about for the other programs you had out there, whether it was on some of the SMB initiatives or perhaps a DISH Network win? Are you anticipating scaling up the agent headcount around those initiatives?

Yes, over the course of the year, we do think that there will be some growth in agent headcount. The question is how much. And obviously, we've taken a point of view of it. And I think we're indicating pretty clearly here that it's going to take some time to make up from the reduction associated with these Comcast things, but we do think, from the much lower base, that there should be some growth over the course of the year.

Got it. And then just one more on the software side of things. Of the $1.8 million or so in software revenues that we're looking at, how much of that is from the Nexus SaaS platform? And are there any wins you can speak to that might have closed during Q4?

There are a couple more wins. We're going to defer details of who exactly with. I would characterize them as sort of a premium tech support providers, but we have made progress in continuing to win deals. And the general commentary I would give you on that is that we are finding that there are more of those opportunities out there than I think we believed originally, so we're encouraged by that. Remember that SaaS is still a pretty small percentage of overall revenue. If you think of it last year as being maybe 2% of total revenue, we think that's going to grow in a meaningful way, but remember, it's coming off a very small base. So we're optimistic about it, but the question is how do you get it to a place where it's really material? And that's definitely something we need to work very hard on.

Got it. And actually, if I could just sneak one more in. Just given where the stock is today and perhaps if it were to come in tomorrow given the Q1 guidance, just curious as to your updated thoughts on how aggressive you'd like to be with respect to pursuing buybacks versus acquisitions.

Well, let me talk to both of them. In some respects, the answer is the same. I think that they're both things that merit active investigation and they're both things that our board will talk about. And I'm not in a position to predict any outcomes, but they're obviously relevant discussions to have as we think about how, given this set of circumstances, we would properly create value for shareholders.

[Operator Instructions] Our next question comes from Mike Latimore of Northland Capital.

Just, I guess, on Comcast. So it's rolled out to all the regions. I guess, did you hire -- separately, did you hire against their forecast in the fall? Or did their forecast change during the quarter for agents?

No, their forecast's been pretty consistent. We -- there was a period where we were considerably overstaffed, at their request, to make sure that we were really ready for volumes. And we sort of stayed in that position, did some attrition replacement, did a little bit of incremental hiring, but we're not in a wildly different place at this moment. And then future hiring, as I indicated, will be driven by the views of what the contact rates are likely to be in a steady-state mode.

Okay. And then just to be clear, the 1,179 agents, that's after the 210 reduction. Is that right?

Yes. That's total after the REV.

Okay. And then with regard to the small business opportunity, any more color on why they may not pursue that route? It seems like other big retailers and communications operators are at least considering it. So what's your view on kind of the small business opportunity now generally, broadly speaking?

Well, let me talk to you first about sort of what happened at Comcast, and then I can comment more generally. At Comcast, it was really some situation-specific things. As you know, when the decision was made to launch the bundle and then to conclude the residential Signature Support program, ownership for the small business program shifted and moved from the Signature Support group, which was disbanded, into the small business organization, which they call business class. And that group of folks was initially quite enthusiastic about the opportunities in the small business premium tech support area. But as they got deeper into their 2014 planning, I think the summary would be they decided to be increasingly focused on sales of the core broadband services as opposed to ancillary things, and the result of that was a decision not to pursue the program further. So I think that that's a very situation-specific reason, and I don't know that it has much applicability to the small-business market generally. As you know, there are a number of successful programs out there and there are opportunities that we are pursuing right now that are small business oriented. So I would wait before I reached any conclusions about anything other than the Comcast small business program.

Okay. And then just lastly, to the extent that there's revenue growth after the March quarter, is it -- I guess, is it fair to say that most of the growth would come from Comcast? Or would it come from sort of non-Comcast or any incremental revenues?

I would actually say both. I think that we do see growth if, in fact, the bundled staffing increases, so that's one thing. And you could also see some growth in the referral program and potentially some new programs there. So part of thinking that, as I answered the very first question, we would see an uptick over the course of the year is Comcast, but it's also and in meaningful part about other programs. Some of those are programs we've talked about, like the DISH Network's one that continues to really show a lot of promise and is now in some new exciting channels. It's also things like the large SaaS customer that we announced but couldn't name last quarter where we think there's real interesting opportunity for growth and that may spawn a services opportunity as well; as well as some of the things in our pipeline. So I think I would characterize it as both being sources of growth. And I don't want to be unduly optimistic in the sense that we do think revenue for this year, for the full year, will be down materially from 2013, it's just too big a hit to make up quickly. But we do think the trajectory will be upwards, from a top line perspective, during 2014.

Thank you. And with that, I turn the call over to our CEO, Josh Pickus, for concluding remarks.

Okay. I appreciate your joining us today on short notice. I know that not everybody will be able to join this call, so if you're listening to this on a recording or hearing about it later, Roop and I will be available this afternoon and Wednesday and then for part of Thursday to answer questions. And we do want to make sure that we answer all of your questions. Then we'll go back into the quiet period until we formally announce the results on February 12. So thanks for joining today, and we'll talk with you later. Bye-bye.

Thank you, sir. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.