Welcome to the SupportSoft first quarter 2009 financial results conference call. Today's conference is being recorded. At this time, for opening remarks and introduction, I would like to turn the conference over to SupportSoft’s Chief Counsel, Ms. Anne-Marie Eileraas. Please go ahead.

Good afternoon. This is Anne-Marie Eileraas, General Counsel of SupportSoft. Joining me here in Redwood City are Josh Pickus, our Chief Executive Officer, and Shelly Schaffer, our Chief Financial Officer. Before we begin, I would like to remind everyone that our remarks today will include forward-looking statements about our 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 have filed with the SEC, all of which can be found through the investor relations page of our website. I would also like to point out that we will like to present certain non-GAAP information on this call. The reconciliation of GAAP to non-GAAP financial measures is included with today's press release and is available on our investor relations webpage. The statements we'll make in this conference call are based on information we know as of today, and we assume no obligation to update any of those statements. With that, I'll turn it over to Josh.

Thanks Anne-Marie. Today we are going to cover four topics: our Q1 results, the status of the sale of our Enterprise business to Consona Corporation, progress in our Consumer activities, and the outline of our go-forward plan for the standalone Consumer business. Shelly is going to cover the first two topics, starting with her Q1 results.

Thanks Josh. First quarter 2009 was $10.5 million at the upper end of our guided range of $9.5 million to $10.3 million. We saw continued growth in our Consumer segment. In our Consumer segment Q1 revenue of $3.6 million represents an increase of16% as compared to Q4 revenue of $3.1 million and growth of 414% as compared to Q1 2008 revenue of $703,000. Consumer revenue out performance was driven by our partner channel. In our Enterprise segment total revenue in Q1 was $6.9 million, down 29% from the prior quarter and down 36.7% versus Q1 of '08. The reduction of Enterprise revenue is primarily due to reduced license revenue although other Enterprise revenues also declined. Notwithstanding lower revenue, Q1 marks the 5th consecutive quarter of non-GAAP profitability for the enterprise segment. Although Q1 gross margin in the Consumer segment was negative, it improved sequentially and on a year-over-year basis as a result of increased efficiencies in service delivery which Josh will later discuss. We believe that we are well positioned to achieve our stated full year goal of exiting 2009 year with a positive gross margin for our Consumer business. Our operating expense lines for research and development and G&A for both businesses were consistent with the prior quarter. Sales and marketing was down by $1 million over Q4 of 2008 driven by headcount reductions in the Enterprise business as well as reduced commissions. Restructuring charges related to the first quarter headcount reductions and office closures were $896,000, in line with our expectations. As mentioned in today's press release, we recently reduced the headquarters staff for the Consumer business to a lower go forward cost structure for that business. We will quantify the consumer restructuring charges and their effects on the go forward P&L in our Q2 2009 call. Interest…

Thanks, Shelly. Turning now to Consumer. There are a number of developments to report. Q1 revenue performance was strong, notwithstanding the economic environment, as a result of growth in our consumer partnerships. In our Office Depot Program performance continue to accelerate, driven primarily by sales of attached services. Store level performance improved substantially, which more than offset a reduction in store count due to closings. While business conditions remain challenging for office superstores, Tech services is a bright spot. With Office Depot noting in its call on Tuesday, the tech services delivered positive sales trends and attach rates above their expectation. In Q2, we are focused on expanding the break/fix side of the program and plan to launch several new service offerings in related marketing campaigns. In our pilot with the major US retailer a roll out plan for a more substantial program has been established. Having defined a service model, which integrates our platform and services with the retailer’s existing program, we expect to expand the pilot to a full region and then offer certain skews, chain-wide, in the back half of the year. Under this program, our services are available through service cards. Meaning, the consumer purchases a in the store and redeems it later from home or office. In addition to the expansion of the service card program, the retailer also plans to trial in-store delivery of services by our remote agents. Because we believe this program has significant potential, we have recently hired a veteran retail executive with experience in scaling services program at both Circuit City and CompUSA to manage the roll out. As discussed in our last call, we have been reviewing our pilot with the European retailer. Based on the review, we've recently decided to discontinue this pilot. While the retailer is committed…

(Operator Instructions) And we'll go first to Chad Bennett, Northland Securities.

Yeah, hi thanks. A couple of questions; First Josh on, the latest thing you said about consumer revenue guidance in Q2, understanding that some of the new deals you have signed recently are ramping or ramping to the second half. Can you give us any indication for kind of the amount of revenue recognition we could see on this pilot moving into a more expanded program and skews and what not. And then also what to expect from maybe something like a TigerDirect. I guess I’m trying to get a sense in your Q2 revenue guidance for Consumer, how much of it would be “partner signed” in the first quarter contribution versus kind of steady state stuff we had at the end of last year.

Sure, so here's the way I’d answer that Chad. With respect to both the US retailer that’s now decided to expand from a pilot into a more substantial program, and with Tiger, our planning for the full year involves substantial revenue contributions from each of them. But we expect that much more in the back half of the year. We expect both of them to contribute to Q2 revenue, but not in a material fashion. And the reasons for that are that in the case of the retailer, the expansion of that program geographically doesn’t even begin until the end of the quarter And in the case of Tiger, the parts of that program that we expect to be the most material revenue contributions, the channels we expect to be most effective such as television, don’t begin until fairly late in the quarter. So we continue to believe that both of those programs are going to matter, and we’re very positive on them. But we want to be very cautious in Q2 just because the timing of when certain things happen is relatively late in Q2, and that limits their ability to affect the Q2 results.

Okay. And Josh, just on the North American retailer expanding the program, it sounds like it is in extended pilot at this time. Maybe it’s a full-fledged deal. And then, potentially some remote in-store service skews in the second half. I guess, is there some type of reasoning behind the rolling it out this way on the retailer side, and maybe the argument is, why wouldn’t they be going after this more aggressively? And kind of, what’s the thought process there, is basically what I’m asking?

Sure. So there are two different things going on with that and let me try to break them down and be specific about each of them. First of all, there is a decision to move forward with both a broader region, but also chain wide sales of certain skews. So you could look at that and say, well that's a pilot, you're actually going into a full nationwide rollout with particular skews. And I think that's an accurate description. There is also a pilot with respect to delivering the services, not through service cards, but through people selling them in-store and that service is being delivered in store by our remote agent and at this point, that's just a pilot. So there are two separate things going on in roughly the same timeframe and the reason I think for doing it that way is, that if recall, this retailer has an existing program and we are fitting in with that program and so things that are more like that program happen more quickly than do things that are genuinely new, such as in-store delivery by remote agents. And so this is different from the program that we did with Office Depot, in the sense that there really wasn't a program there before, we did it with them as it happened. Here there is a program, and so we're building on that and that tends to dictate the speed at which various things are happening. But I will say that this retailer is now we believe, serious about growing in a meaningful way their service program and we are excited to be partnering with them and look forward to actually making this program more substantial.

Okay. And one more the service cards being nationwide, is that what at the end of the quarter Josh or no?

No, that at the end of the quarter what we'll have is expansion to something regional. We expect that in the back-half of the year is when you will see the chain-wide availability of certain skews.

Okay, Alright.

And again that's why you see relatively muted revenue growth in Q2, because none of that will occur until later in the year.

Okay. And then maybe a question for Shelly, you reiterated that the long-term or medium term target I guess I would say exiting the year gross margin positive on the Consumer side. Should we assume gross margin percentage improves throughout the year Shelly, from where it ended or where it was in Q1?

Well I think the goal is obviously highly sensitive to two things. One that Josh talked about, which is just the actual blocking and tackle is simply driving al the plan and also it is sensitive to volume too. But our goal was saying the exit coming out of 2009 would be a gross margin positive. Now, I mean it's hard to do that if you don't keep making progress each quarter, but what percentage do you think it is? It's really on a day-by-day basis that we view this.

Okay, Josh is it material to talk about a $1 amount that you've reduced costs on the Consumer side?

It will Chad, I think that what we're going to try to do is with numbers like that, that are still a little bit in flux, we are going to provide details and color when the quarter is over, the Enterprise transaction is complete, we've finished some of the work on these other cost reduction measures that I mentioned in my facilities and executive comp. And I think if we give bits and pieces of it now it's more confusing than anything else. The overall view that I would have to guide you in thinking about this is that, we do obviously believe that substantial revenue ramp is absolutely critical to get us across the line in terms of profitability and we don’t believe it will happen without that. But what we're seeing today, a little bit more strongly than what we've said before is, we also want to hasten that time and to do that there is another lever that you can turn and that relates to cost and so we have done just this week, a reduction in our headquarters staff and there will be incremental cost savings that will work out through some of these other areas and we hope to be available to talk to you with all of this work through and identified when we do our call following Q2.

Okay. And one last question. With Office Deport, Josh where do you think you're at now that all the stores are up and running? What do you think the organic growth of that business, where do you think we are at in terms of growth with that specific partner?

I believe that there is still material room for that program to get meaningfully bigger.

Okay.

We've established a good base line but I think both we and OD, expect and are planning for and working very hard to grow it from where it is. Remember OD is a $14 billion company and while they are very pleased about this program, you know it came up several times in their call earlier this week. It’s got to get bigger to really be material to a company of that size. And so, as happy as we are with what we’ve got, there’s no sense in which we believe we are at steady state.

Got it.

The particular piece that we’re trying to expand as we go forward relates to the break/fix services. The program has been heavily oriented towards attached services, and we’re really trying to grow break/fix as we go later into the year.

Okay. Thanks, that’s all I have.

(Operator Instructions) And we’ll go next to Gregg Speicher, Moss Creek.

Hey guys, congratulations on getting this consumer thing going. Now, did I understand correctly that the new partnership or the new retail agreement is going to be done through card services? We buy the card and do it from the home or the office?

Yeah. So let me clarify that. That program is not so much new. It’s the major US retailer that we have been piloting for a while, and now is really getting serious and going in the more of a rollout mode. The default way in which that program operates, the way in which it operates today, and the way in which it will go chain-wide is through service cards. So you go into the store, you purchase a card, it’s got an authorization code on it, and then you redeem it later; that is what that will be. The other thing that I mentioned is that separate from that we will be piloting with this retailer, the approach that we use elsewhere, which involves sale and delivery of the services in the store, [door service card], with our agents remoting in to the PC, which is connected to the Internet at the store. So that's specifically what's going on with that program.

Okay, that helps. I was kind of just trying to figure out that if each new partnership you get up and going is sort of a different delivery model or are they converging or diverging depending on the partner?

Converging. We feel like we've really developed some deep expertise around retail programs, we know what the moving pieces are and we will see them vary from case-to-case, in terms of how much of this or how much of that. But there is a common set of elements that we believe is important and for example, in this case, the reason that we are doing the work around the in-store delivery is we believe that that's a model that's capable of faster growth and the retailers heard us say that and is saying let's give that a whirl in addition to the stuff that they've done themselves. So we think our expertise is actually growing and that the programs are converging in terms of what they look like.

Okay, good. And I know for Q2, there is a lot of moving parts, but can you talk about the cash burn or is there is sort of a minimum amount of cash you want to keep on the balance sheet?

Sure. I think what you said about it being a complex quarter is really right. And let me give you sort of a three sentenced answer to that and then if you want more color I can do it, here is sort of the net. We believe that assuming we close the transaction with Consona, we will have a substantial cash infusion and we've estimated that at $20 million subject to these adjustments for the deal cost. Second, you got a whole bunch of other onetime charges that occur and whether they are deal cost or whether they are severance cost or something like that. And there are quite a few of those that we need to work through. And that the net result of that is we will end up with meaningfully more cash than we have on the balance sheet today, but there is so many different pieces that we are quantifying it. And what we will do is give you a very specific bridge when we report in Q2 about here is what came in and here is what we're now and here is where we ended up where we are. So that's kind of the overview of what's going on with cash.

Okay fair enough. One last question, how many at-home agents do you have now, has that been scaling up significantly?

Yes, in total at this moment, we have around 350 agents and that includes supervisors. The most interesting thing about the first quarter was that we really didn't grow that in a material way. I think the last time this question got asked, I said around 300 and frankly I could give back same answer today, there it hasn't been a material increase. What really happened in Q1 that was exciting around the agents was, we were able to get substantially increased efficiency and productivity. And that enabled us to add some meaningful revenue, really without adding any material number of agents and that is the game going forward. We actually believe that if we can continue to drive efficiencies, we can scale revenue without having to make major agent additions. Now, obviously, that excludes some kind of discontinuous events, where some huge partner comes to us and says, two weeks from now we are going to do a full launch. But in a sort of steady state type of world, where we're adding partners and they're rolling out in a measured way, our focus is less about agent addition at this moment than it is around agent efficiency and being able to drive substantially greater revenue without adding substantially greater cost.

Okay, great. Thanks a lot.

And we'll go next to Ted Ketterer, TK Associates.

Hey Josh. I got a question for if you step back. This has been a fairly long road from the time you started. I don’t remember, was it 2005? And now we have a company doing lets just say annualized revenue at $20 million with 40 million share plus and you trend in the $100 million market cap and you have mentioned for a couple of years and on a number of conference calls, the goal and the dream to build a substantial company and I guess what my question is, what's the range in your mind and in your planning that you would define as substantial?

Sure, substantial companies are denominated in revenues of hundreds of millions, not tens of millions. That’s the direct answer to your question.

Okay. Well its self explanatory. Okay. Thank you.

And we'll go next to Shawn Boyd, WestCliff Capital Management.

Josh, just a couple of follow-ups. The Office Depot story you mentioned they did have some closures. What were they at the end of Q1?

They've gone down by roughly 100 or so stores and they have not announced anything further, beyond what they announced that they were going to -- in Q4 that they would do in Q1. So there used to be 1200 and change and now they're 1100 and change.

Got it and you expect that to stay fairly constant here?

We don’t have any information from them about additional store closings, but I do have to say, I don’t know everything that they know. They seem very focused to me in moving the business forward, and that issue has not come up at all in any discussions we have had with them. So our assumptions right now are that’s roughly the store count going forward, and the question is, how do we drive additional revenue out of that?

Right. And of course the more relevant point here is that the growth at the per-store level is clearly overwhelming, got impacted, and you feel like you still have a lot of headroom on that.

That is correct.

One follow-up to that is, the launch of the US retailer. Let’s think about maybe as we exit 2009, at that point would we be at scales such that we would be equivalent to where we are now in Office Depot, in terms of the national rollout being complete and starting to work on increasing the per-store growth.

I can speculate about that, but it really is just speculation because there is so much to be done. That is certainly among the possibilities. If we had the upside case for the way these rollouts went, and then they actually liked what they saw in the pilot with the in-store type of services, that’s absolutely possible. But at some level, I don’t know any more than you do about whether that will actually be the outcome. And so the most I can say is, that is within the realm of possibility. We are obviously driving everything we can to make it happen, but there’s a lot of miles to be walked in terms of what that rollout looks like. Our main focus at this point is, as you know, it’s taken a while for this retailer to nearly decide to get serious about expanding this program and we feel now that, that is the case and that to us is like a very important milestone and our goal now is to really excel and make it go. As to exactly where that leaves us at the end of 2009, I have got my hopes, but they are not yet predictions.

Okay, that's fair. Switching the questions just for a second to the 350 agents that you mentioned earlier. Why would you say is the current revenue capacity of that work force? And then the follow-up to that of course is given the efficiency improvements that you're pushing and succeeding with right now, what is it today and where do you think it can go with those process improvements?

Well, let me answer that this way, I think that there is substantially more revenue capacity in the agent pool than we are generating today. And I am not going to quantify exactly what that means, because I think it is a lot more effective if I just show you, but I will say that in Q1 the level of progress we made in dramatically diminishing the service times or in key skews was really remarkable. And what I will tell you generally is that with respect to the attached services, they are more straightforward services, we are now doing better than we forecast we would ever do in terms of the [store-turnout] times and what we're actually doing in there. And we believe we can go further with respect to that, because the technology is really doing some remarkable things for us and the solution set of management is really kicking in. The next week that we need to make, it's a really get where we need to get is we need to get that same kind of improvement on the more complex diag and repair services. And that's some thing that is a big focus for us and it offers very substantial opportunity for us, to keep adding revenue without adding agents. And so, we are very excited about this part of the business, because we are finally seeing this happen. And the best word I can use, is to say, we think there is substantial incremental capacity that we had, based on the improvements we have made and improvements to come.

Got it. Well look forward to seeing them. Thank you Josh.

You bet.

And we'll go next to Gene Weber, Weber Capital Management.

Hi Josh. First of all, I want to congratulate you for making the move in your European business, because I think at this point in time that's the right decision, as tough as it may have been for you. And maybe you can just help me on some of the totally unrelated and this will probably be a difficult question to answer, but can you give me sense as to where that headcount was at December 31st, where it is now and where it might be at June 30th, assuming your closed by then?

You are talking about the Consumer agents or the overall headcount? Gene Weber – Weber Capital Management: Well, yes that's why it's difficult, whichever is the easiest way -- whichever way you can answer best. Let me leave it like that?

Okay, well here is kind of the way I would tackle that. The Enterprise unit, I think assuming we close the deal will go away completely. So that part of the business will not be there. The agent headcount we expect to be very consistent with, what it is today and the Consumer headcount we've announced that we did a reduction of about a little north of 20 people and this is not going to be a big organization going forward. If you take it all in assuming that the Enterprise unit has moved on I think that will probably have around 100 employees. Do not hold me to that number because we are still specifically working through things and there could be a lot of ups and downs on that, but it’s a very rough order of magnitude. That’s kind of what I expect as the business moves forward outside of the agents.

Fine I appreciate that and I wont hold you to it but that’s just what I was looking for. Thanks Josh.

And it appears we have no further questions. At this time I would like to turn it back over to management for any additional closing remarks.

Okay so thanks for being with us today. There is obviously a lot going on and we look forward to providing further clarity on the future and telling you better business when we report after the second quarter. Thank you.

And this concludes today's conference. Thank you for your participation.