Good day, ladies and gentlemen and welcome to the Support.com Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference Michelle Johnson, General Counsel, Ma'am, you may begin.

Thank you. Good afternoon, everyone. Joining me here today is Elizabeth Cholawsky, our President and Chief Executive Officer; and Roop Lakkaraju, our Chief Financial Officer and Chief Operating 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 webpage. The statements we'll make on 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 President and CEO, Elizabeth Cholawsky.

Thanks Michelle. Good afternoon, everyone and welcome to our second quarter 2016 earnings conference call. In today's call we will discuss a number of accomplishments that continue to show progress in growing our cloud offering and diversifying our services programs. Let me start with a quick overview of the financials for the quarter and then Roop will discuss further details later in the call. We met the revenue and EPS guidance that we provided. Revenue came in at $14.9 million at the high end of our revenue guidance of $14.2 million to $15 million. Non-GAAP loss from continuing operations for the quarter came in at $0.09 per share within our guidance of a loss of $0.08 to $0.10 per share. [At the order] where we implemented a cost reduction plan in April where we reduced our corporate headcount by approximately 20%. We have completed the actions as planned and we'll see the expected savings in Q3 and the full impact in Q4 and beyond. Turning first to our SaaS online Support.com cloud, I am pleased to say that the second quarter saw a number of key accomplishments. We won our first enterprise customer, expanded sales to additional vertical market segments and continued growing customer usage. These accomplishments propel the second quarter's new bookings to be the highest number in a quarter that we had to date. These events further validate our cloud offering's compelling product market fit and the capabilities of our streamlined sales and marketing organizations. This allows us to reaffirm our 2016 goals of achieving $2 million in annual recurring revenue and 2,600 to 3,000 seats. In the second quarter, we closed our first enterprise deal with a large company that is in eCommerce marketplace connecting consumers to local businesses. Enterprise customers are important to growing our cloud…

Thank you, Elizabeth. Total revenue for Q2 was $14.9 million compared to $20.6 million in Q2 2015 and $16.6 million in Q1 2016. Services revenue for the quarter was $13.6 million compared to $19.3 million in Q2 of 2015 and $15.3 million in Q1 2016. Sequentially, services revenue decreased as Comcast was at the lower end of the previously provided guidance range of $8.5 million to $10 million and in line with what we communicated on our Q1 call. Office Depot was lower due to traditional seasonality. The year-over-year decline is primarily due to Comcast customer experience improvement efforts. Software and other revenue was $1.3 million in Q2 2016, flat from Q2 2015 and from Q1 2016. The Q2 2016 revenue mix was 91% services and 9% software compared to 94% and 6% in Q2 2015 and 92% and 8% in Q1 2016. In Q2, Comcast represented 58% of our total revenue and Office Depot represented 17%. During Q2 2016, our services our services and overall gross margins were negatively impacted by continued higher than expected large medical claims as a result of us being self insured. Overall, non-GAAP gross margin for Q2 2016 was 14%, compared to 23% in Q2 2015 and 16% in Q1 2016. In Q2 2016, non-GAAP services gross margin was 7% compared to 18% in Q2 2015 and 10% in Q1 2016. The impact of these large medical claims decreased our overall gross margins by approximately 300 basis points. Excluding the impact of these medical claims, overall gross margins would have been 17% within the guidance range we have provided on our Q1 earnings call. As a reminder, last year we moved to a self-insured model for our medical benefits, the change to a self-insured model resulted in a cost savings in fiscal year 2015.…

[Operator Instructions] Our first question comes from the line of Joe Fadgen with Craig-Hallum. Your line is now open.

Yeah, thanks. I am here for Chad, thanks for taken the question. First one, little housekeeping question, looks like the G&A expense in the quarter was pretty significantly, is that due to the proxy contest and some of the other things you talked about and how much and then where should we expect that line to go next quarter and the rest of the year?

Hey, Joe its Roop. Good evening. Yes the uptick in the operating expenses and specifically the G&A is associated with the proxy contest related cost because that’s where they would be mapped and as we think about looking forward, you can assume that that 1.5 comes out of that area of G&A and that kind of run rate is what you should expect. So, if you think about the 25% reduction that we talked about overall for operating expenses from the 7.1% it takes you down to around 5.3% or so that should be our go forward run rate on operating expenses for Q3, Q4 and beyond.

Okay. And then I guess on this Sears agreement, can you may be give a little bit of detail, I think if I remember right, I think you said that was a competitive win. Can you talk a little bit about in a little more detail about what you’re going to be doing for them? What services you're providing them and if you can give any indication of how large a customer you think they could end up being, this is something that could end up being like say 10% customer over time.

Yeah, so well obviously really we're pretty pleased to have Sears in the portfolio. The program itself is connected home program. So we'll be working with some of the larger brands that Sears has that are now all connected to the internet. It’s part of the whole IOT evolution and we'll be providing support on them. As I mentioned in the prepared remarks, it is a new program for them along with their warranty provider. So it's a bundled offering, but they have to build, we have to build with them a subscriber base from scratch and those programs take time. They're starting with pilots and then the full ramp will be into the next year. So this will be a small program to start with and it will evolve over time. On that one program could be a 10% customer that's a long way to speculate on that, but a company like Sears with what they're doing and their forward-looking in the market interested to see how all their plans and programs evolve.

Okay. And then last one, I’ll ask and I guess answer as much as you can in light of the new Board of Directors as there -- are there any changes in your overall strategy or level of maybe a level of investment in the software business or services business that we should start thinking about that we can expect to see?

So the end of June we welcomed five new Board Members to the Support.com Board and they've been very engaged in discussions with us. Their main focus has been really to really understand the business end to end now that they have access to all the details that they need to really do the evaluation. So we're looking and evaluating everything that we're doing as we always do. We don't have anything to say externally now. But as the new Board comes together and starts looking at things, we'll let you know if anything changes.

Okay. Fair enough. That will be all for me thank you.

Thanks Joe.

Thanks Joe.

[Operator Instructions]

Okay. Maybe operator, if there is no other questions, we’ll close the calls.

Yeah. Thanks everyone on the call for joining and spending your time today and have a good day.

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may all disconnect. Everyone have a wonderful day.