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CST: 08/12/2019 19:46:40   

Synchronoss Technologies Announces Second Quarter 2019 Results

125 Days ago

BRIDGEWATER, N.J., Aug. 05, 2019 (GLOBE NEWSWIRE) -- Synchronoss Technologies Inc. (NASDAQ: SNCR), a global leader and innovator in cloud, messaging, digital and IoT platforms and products, today announced financial results for its second quarter ended June 30, 2019.

Second quarter highlights:

  • Revenue was $77.8 million, including 80.4 percent recurring revenue, up 1.4 percent compared to $76.7 million in the second quarter of 2018.
  • GAAP net loss for the quarter was $25.0 million, or 61 cents per share, compared to $47.3 million or $1.20 per share in the prior year’s second quarter.
  • Non-GAAP net loss from continuing operations was $11.3 million or 28 cents per share, compared to $18.9 million or 48 cents per share in the prior year’s second quarter.
  • Synchronoss delivered $8.7 million of adjusted EBITDA, compared to break-even adjusted EBITDA in the second quarter of 2018. Adjusted EBITDA margin in the second quarter was 11.1 percent compared to zero percent in last year’s second quarter.

Glenn Lurie, president and chief executive officer, stated, “The second quarter results demonstrate continued progress for Synchronoss. We have now delivered four consecutive quarters of positive adjusted EBITDA, combined with year over year growth in both revenue and EBITDA, enabled by our ongoing focus on meeting customer needs and cost containment. Revenue increased 1.4 percent from the comparable quarter in 2018, and down compared to Q1 2019 as expected, due to seasonality, the large messaging license we recorded during the first quarter, and other items. I’m very pleased with our momentum on the new business development front, as we expanded on our success in 2019 with a new deal for our Out-Of-The-Box Experience (OOBE) platform with AT&T, one of the leading global carriers; a new agreement with Wireless Advocates and Telkom Indonesia for our DXP platform; new IoT partnerships with Arrow Electronics and Tridium, and a Smart Buildings deployments with Rackspace, in partnership with Microsoft and their Azure Cloud Service. Between the deals we have announced in the first quarter of 2019 and those that are in our pipeline and expected to close in the second half, we believe we can deliver accelerating revenue growth through the balance of 2019 and continued improvement into 2020.”

Three Months Ended June 30,
$000s   2019     2018   % Change
Revenues $ 77,846   $ 76,742   1.4 %
Net Loss   (25,030 )   (47,265 ) (47.0 %)
Adjusted EBITDA     8,669     12   72,142 %


Six Months Ended June 30,
$000s   2019     2018   % Change
Revenues $ 165,951   $ 160,451   3.4 %
Net Loss    (52,617 )   (87,310 ) (39.7 %)
Adjusted EBITDA      15,299     (10,773 ) NM  

New customer agreements and partnerships that the company has announced include:

  • Synchronoss has announced a commercial agreement for its Digital Experience Platform (DXP) with Wireless Advocates, a leading provider of wireless products and services with more than 600 retail locations in the United States. Wireless Advocates is utilizing every aspect of the Synchronoss DXP platform to optimize their omnichannel sales environment, including Journey Creator, Journey Publisher, Journey Integrator, and Data Analytics across multiple sales channels and multiple paths.
  • Telkom Indonesia has chosen the Synchronoss DXP platform to transform its business processes and to enhance and unify its customer relationship management interactions across all channels. Telekom Indonesia will use DXP to improve its operational agility and support the expansion of digital services that incorporate new media, content and ecommerce offerings.
  • We are partnering with Microsoft to deliver an industry-leading Smart Buildings solution. Our first initiative is a live proof of concept with global technology services provider Rackspace, deploying a smart buildings service to monitor, control, and optimize energy usage and reduce costs at Rackspace’s one-million-square-foot San Antonio headquarters.
  • Synchronoss also announced a partnership with Arrow Electronics, a leading global value-added supply chain and logistics partner to over 200,000 customers worldwide, in which the Synchronoss Smart Buildings Platform will combine with Arrow’s expertise in creating and configuring hardware-based in-building management systems. This partnership will deliver a single, integrated package which telecom operators, system integrators and other service providers can offer to large multi-national companies and organizations to remotely manage their premises’ on-site automated features.
  • Synchronoss is today announcing that it has signed a Developer Agreement with Tridium, a subsidiary of Honeywell and one of the global leaders in smart buildings, to integrate its flagship open framework, Niagara, with the Synchronoss Smart Buildings Solutions to provide data-rich insights for enterprise customers and bring new digital solutions to Tridium's partners across the globe. Synchronoss and Tridium will deliver a scalable solution that provides complete visibility via a single pane-of-glass view into building facility systems as well as the ability to act on real-time alerts, resulting in increased efficiencies, cost savings and security.
  • Earlier this quarter, Synchronoss announced that AT&T will expand how it uses the Synchronoss Out-of-the-Box-Experience (OOBE) by integrating additional mobile offerings into its digital customer onboarding process. This allows new and current AT&T subscribers to effortlessly select value-added third-party products and services offered by AT&T during their device upgrading or activation process and enables frictionless personalized digital journeys as well as the opportunity to drive net new revenue.

Other new business deals announced by Synchronoss in 2019 include:

  • The company signed a substantial new customer for its white label cloud platform, which is expected to launch in the third quarter. Synchronoss expects to provide additional details on this new cloud deal at that time.
  • A partnership with Amazon, in which Synchronoss will become a global service integrator of Amazon products with mobile operators worldwide. As part of this agreement, the Synchronoss DXP platform will be utilized to enable mobile network operators to offer Amazon consumer services such as Amazon Prime, Prime Video, and Amazon Music, and others directly to subscribers as part of their invoice. Amazon and Synchronoss have identified the first six worldwide mobile operators that will be launched under this partnership, and during the quarter we initiated our first integration projects using our DXP Platform. We plan to share more details as these operators launch Amazon services through our efforts.
  • The company joined Microsoft’s Internet of Things (IoT) Accelerate Program and will develop and offer best-of-breed Smart Buildings solutions for enterprises globally.
  • The continued progress of the second phase of the company’s advanced messaging platform in Japan.
  • An agreement with Assurant, a leading provider of device protection insurance, which will utilize the Synchronoss white label cloud platform for its Pocket Geek solution which is offered in their device protection bundles.

David Clark, chief financial officer, added, ”We continue to deliver on our commitment to investors, and financial metrics continue to improve materially for Synchronoss, as demonstrated by the second quarter results. Adjusted EBITDA was $ 8.7 million, a significant improvement from break-even adjusted EBITDA in last year’s second quarter. This was in turn driven by a 15.4 percent improvement in adjusted gross margins, and a 32 percent or $10.9 million reduction in selling, general, and administrative expense, compared to last year’s second quarter. At quarter end, Synchronoss had $78.9 million of cash, cash equivalents, and marketable securities, giving the company ample liquidity to fund ongoing operations and repay the remaining $47 million balance on its convertible debt when it matures in August.”

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is included below under the heading "Non-GAAP Financial Measures."

Conference Call Details
Synchronoss will host a conference call on Monday, August 5, 2019, at 5:00 p.m. (ET) to discuss the company’s financial results. To access this call, dial 1-201-493-6784. Additionally, a live web cast of the conference call will be available on the Investor Relations page on the company’s web site at www.synchronoss.com.

Following the conference call, a replay will be available for a limited time at 1-412-317-6671. The replay pass code is 13692691. An archived web cast of this conference call will also be available on the Investor Relations page of the company’s web site, www.synchronoss.com.

Non-GAAP Financial Measures
Synchronoss has provided in this release selected financial information that has not been prepared in accordance with GAAP. This information includes historical non-GAAP revenues, gross profit, operating income (loss), net income (loss), effective tax rate, earnings (loss) per share and cash flows from operating activities. Synchronoss uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Synchronoss’ ongoing operational performance. Synchronoss believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in Synchronoss’ industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial results discussed above add back fair value stock-based compensation expense, acquisition-related costs which includes integration costs, restructuring and cease-use lease expense, deferred compensation expense related to earn outs and amortization of intangibles associated with acquisitions.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures as detailed above. As previously mentioned, a reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release.

About Synchronoss Technologies, Inc.

Synchronoss transforms the way companies create new revenue, reduce costs and delight their subscribers with cloud, messaging, digital and IoT products, supporting hundreds of millions of subscribers across the globe. Synchronoss’ secure, scalable and groundbreaking new technologies, trusted partnerships, and talented people change the way TMT customers grow their businesses. For more information, visit us at www.synchronoss.com.

Forward-looking Statements

This press release includes statements concerning Synchronoss and its future expectations, plans and prospects that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “believes,” “potential” or “continue” or other similar expressions are intended to identify forward-looking statements. Synchronoss has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions including, without limitation, risks relating to the Company’s ability to sustain or increase revenue from its larger customers and generate revenue from new customers, the Company’s expectations regarding expenses and revenue, the sufficiency of the Company’s cash resources and its ability to satisfy or refinance its existing debt obligations, the Company’s growth strategies, the anticipated trends and challenges in the business and the market in which the Company operates, the Company’s expectations regarding federal, state and foreign regulatory requirements, the pending lawsuits against the Company described in its most recent SEC filings, and other risks and factors that are described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which is on file with the SEC and available on the SEC’s website at www.sec.gov. The company does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

Contact:

Investors:
Joe Crivelli
Vice President, Investor Relations
908-566-3131
investor@synchronoss.com

Media:                                                                 
CCgroup
US: Diane Rose, +1 727-238-7567 or International: Anais Merlin, +44 20 3824 9219                                             
synchronoss@ccgrouppr.com 


SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)   June 30, 2019   December 31, 2018
ASSETS        
Current assets:        
Cash and cash equivalents   $ 34,229     $ 103,771  
Restricted cash   381     6,089  
Marketable securities, current   44,259     28,230  
Accounts receivable, net of allowances of $3,455 and $4,599 at June 30, 2019 and December 31, 2018, respectively   99,928     102,798  
Prepaid expenses   28,460     45,058  
Other current assets   10,252     8,508  
Total current assets   217,509     294,454  
Marketable securities, non-current   67     6,658  
Property and equipment, net   44,164     67,937  
Operating lease right-of-use assets   63,416      
Goodwill   224,335     224,899  
Intangible assets, net   86,649     98,706  
Other assets   7,764     8,982  
Equity method investment       1,619  
Total assets   $ 643,904     $ 703,255  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 18,458     $ 13,576  
Accrued expenses   54,247     59,545  
Deferred revenues, current   59,574     57,101  
Short-term convertible debt, net of debt issuance costs   47,076     113,542  
Total current liabilities   179,355     243,764  
Lease financing obligation       9,494  
Operating lease liabilities, non-current   65,141      
Deferred tax liabilities   638     1,347  
Deferred revenues, non-current   44,128     59,841  
Other non-current liabilities   6,118     10,797  
Redeemable noncontrolling interest   12,500     12,500  
Commitments and contingencies        
Series A Convertible Participating Perpetual Preferred Stock, $0.0001 par value; 10,000 shares authorized; 202 shares issued and outstanding at June 30, 2019   184,668     176,603  
Stockholders’ equity:        
Common stock, $0.0001 par value; 100,000 shares authorized, 51,578 and 49,836 shares issued; 44,416 and 42,674 outstanding at June 30, 2019 and December 31, 2018, respectively   5     5  
Treasury stock, at cost (7,162 and 7,162 shares at June 30, 2019 and December 31, 2018, respectively)   (82,087 )   (82,087 )
Additional paid-in capital   531,282     534,673  
Accumulated other comprehensive loss   (30,897 )   (30,383 )
Accumulated deficit   (266,947 )   (233,299 )
Total stockholders’ equity   151,356     188,909  
Total liabilities and stockholders’ equity   $ 643,904     $ 703,255  


SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

  Three Months Ended June 30,   Six Months Ended June 30,
  2019   2018   2019   2018
               
Net revenues $ 77,846     $ 76,742     $ 165,951     $ 160,451  
Costs and expenses:              
Cost of revenues 33,403     39,525     72,356     84,074  
Research and development 19,026     20,200     38,707     41,105  
Selling, general and administrative 23,080     33,938     52,326     72,048  
Net change in contingent consideration obligation              
Restructuring charges 356     2,778     777     3,886  
Depreciation and amortization 20,269     23,401     40,412     46,672  
Total costs and expenses 96,134     119,842     204,578     247,785  
Loss from continuing operations (18,288 )   (43,100 )   (38,627 )   (87,334 )
Interest income 299     3,763     488     7,315  
Interest expense (463 )   (1,318 )   (1,048 )   (2,565 )
Gain on extinguishment of debt 430         817      
Other (expense) income, net (24 )   (23 )   439     4,259  
Equity method investment loss (376 )   (7 )   (1,619 )   (212 )
Loss from continuing operations, before taxes (18,422 )   (40,685 )   (39,550 )   (78,537 )
Benefit (provision) for income taxes 1,844     (579 )   3,235     (704 )
Net loss (16,578 )   (41,264 )   (36,315 )   (79,241 )
Net (income) loss attributable to redeemable noncontrolling interests (593 )   1,259     (906 )   2,544  
Preferred stock dividend (7,859 )   (7,260 )   (15,396 )   (10,613 )
Net loss attributable to Synchronoss $ (25,030 )   $ (47,265 )   $ (52,617 )   $ (87,310 )
               
Earnings per share:              
Basic $ (0.61 )   $ (1.20 )   $ (1.30 )   $ (2.14 )
Diluted $ (0.61 )   $ (1.20 )   $ (1.30 )   $ (2.14 )
               
Weighted-average common shares outstanding:              
Basic 40,810     39,456     40,566     40,812  
Diluted 40,810     39,456     40,566     40,812  


SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands) (Unaudited)

  Six Months Ended June 30,
  2019   2018
Operating activities:      
Net loss (36,315 )   (79,241 )
Adjustments to reconcile Net Loss to net cash used in operating activities:      
Depreciation and amortization 40,412     46,672  
Change in fair value of financial instruments     (3,849 )
Amortization of debt issuance costs 237     706  
(Gain) loss on extinguishment of debt (817 )    
Accrued PIK interest     (7,037 )
(Earnings) loss from equity method investments 1,619     212  
Amortization of bond premium (34 )   44  
Deferred income taxes (702 )   (1,223 )
Non-cash interest on leased facility     547  
Stock-based compensation 11,028     14,824  
Changes in operating assets and liabilities:      
Accounts receivable, net of allowance for doubtful accounts 2,870     29,334  
Prepaid expenses and other current assets 17,635     (13,415 )
Other assets 2,042     1,260  
Accounts payable 5,151     8,109  
Accrued expenses (9,569 )   (24,685 )
Other liabilities (1,826 )   632  
Lease obligation interest payment     (483 )
Deferred revenues (13,167 )   (43,788 )
Net cash provided by (used for) operating activities 18,564     (71,381 )
Investing activities:      
Purchases of property and equipment (4,940 )   (3,820 )
Purchases of capitalized software (5,959 )   (8,201 )
Purchases of marketable securities available for sale (37,542 )   (13,383 )
Maturity of marketable securities available for sale 28,191     1,970  
Business acquired, net of cash     (9,798 )
Net cash (used for) investing activities (20,250 )   (33,232 )
Financing activities:      
Extinguishment of outstanding Convertible Senior Notes (65,887 )    
Proceeds from issuance of preferred stock     86,220  
Preferred dividend payment (7,075 )    
Payments for finance leases (612 )   (718 )
Net cash (used for) provided by financing activities (73,574 )   85,502  
Effect of exchange rate changes on cash 10     (749 )
Net decrease in cash, restricted cash and cash equivalents (75,250 )   (19,860 )
Cash, restricted cash and cash equivalents, beginning of period 109,860     246,125  
Cash, restricted cash and cash equivalents, end of period $ 34,610     $ 226,265  


SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

    Three Months Ended Jun 30,   Six Months Ended Jun 30,
    2019   2018   2019   2018
Non-GAAP financial measures and reconciliation:                
GAAP Revenue   $ 77,846     $ 76,742     $ 165,951     $ 160,451  
Less: Cost of revenues   33,403     39,525     72,356     84,074  
Gross Profit   44,443     37,217     93,595     76,377  
Add / (Less):                
Stock-based compensation expense   657     1,300     1,343     2,412  
Adjusted Gross Profit   $ 45,100     $ 38,517     $ 94,938     $ 78,789  
Adjusted Gross Margin   57.9 %   50.2 %   57.2 %   49.1 %
                 
GAAP loss from continuing operations   (18,288 )   (43,100 )   (38,627 )   (87,334 )
Add / (Less):                
Stock-based compensation expense   5,474     7,638     11,028     14,822  
Acquisition costs   (42 )   (10 )   (230 )   111  
Restructuring and cease-use lease expense   474     2,778     1,214     3,886  
Amortization expense   7,123     8,396     13,252     16,650  
One-Time Expenses due to Restatement, etc.   782     9,305     1,502     15,970  
Non-GAAP loss from continuing operations   $ (4,477 )   $ (14,993 )   $ (11,861 )   $ (35,895 )
                 
GAAP Net loss attributable to Synchronoss   $ (25,030 )   $ (47,265 )   $ (52,617 )   $ (87,310 )
Add / (Less):                
Stock-based compensation expense   5,474     7,638     11,028     14,822  
Acquisition costs   (42 )   (10 )   (230 )   111  
Restructuring and cease-use lease expense   474     2,778     1,214     3,886  
Amortization expense   7,123     8,396     13,252     16,650  
Non-GAAP Expenses attributable to Non-Controlling Interest   (39 )   (373 )   (76 )   (746 )
One-Time Expenses due to Restatement, etc.   782     9,305     1,502     15,970  
Income Tax Effect at Statutory Tax Rates       579         (4,931 )
Non-GAAP Net loss from continuing operations attributable to Synchronoss   $ (11,258 )   $ (18,952 )   $ (25,927 )   $ (41,548 )
                 
Diluted Non-GAAP Net loss from continuing operations per share   $ (0.28 )   $ (0.48 )   $ (0.64 )   $ (1.02 )
                 
Weighted shares outstanding - Basic   40,810     39,456     40,566     40,812  


SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

    Three Months Ended   Six Months Ended
    Jun 30, 2018   Sep 30, 2018   Dec 31, 2018   Mar 31, 2019   Jun 30, 2019   Jun 30, 2019   Jun 30, 2018
                             
Net (loss) income attributable to Synchronoss   $ (47,265 )   $ (54,529 )   $ (101,909 )   $ (27,587 )   $ (25,030 )   $ (52,617 )   $ (87,310 )
Add / (Less):                            
Restructuring and cease-use lease expense   2,778     4,539     3,950     740     474     1,214     3,886  
Depreciation and amortization   23,401     23,658     47,324     20,143     20,269     40,412     46,672  
Interest income   (3,763 )   (203 )   (252 )   (189 )   (299 )   (488 )   (7,315 )
Interest Expense   1,318     1,370     976     585     463     1,048     2,565  
Gain on Extinguishment of debt           (1,760 )   (387 )   (430 )   (817 )    
Other Income (expense), net   23     13,439     65,737     (463 )   24     (439 )   (4,259 )
Equity method investment income (loss), net   7     (283 )   28,671     1,243     376     1,619     212  
Benefit for income taxes   579     (2,308 )   (16,290 )   (1,391 )   (1,844 )   (3,235 )   704  
Net (loss) income attributable to noncontrolling interests   (1,259 )   422     (6,715 )   313     593     906     (2,544 )
Preferred dividend   7,260     7,463     7,517     7,537     7,859     15,396     10,613  
Stock-based compensation expense   7,638     7,216     5,566     5,554     5,474     11,028     14,822  
Acquisition costs   (10 )   38     109     (188 )   (42 )   (230 )   111  
One-Time Expenses due to Restatement, etc.   9,305     3,638     800     720     782     1,502     15,970  
Net income from discontinued operations, net of taxes           (18,288 )                
Reclassification of expenses       4,900                     (4,900 )
Adjusted EBITDA (non-GAAP)   $ 12     $ 9,360     $ 15,436     $ 6,630     $ 8,669     $ 15,299     $ (10,773 )


    Three Months Ended Jun 30,   Six Months Ended Jun 30,
    2019   2018   2019   2018
Net Cash (used in) provided by operating activities   $ 24,248     $ (61,992 )   $ 18,564     $ (71,381 )
Add / (Less):                
Capitalized software   (3,255 )   (1,154 )   (5,959 )   (8,201 )
Property and equipment   (2,313 )   (2,727 )   (4,940 )   (3,820 )
Free Cashflow   $ 18,680     $ (65,873 )   $ 7,665     $ (83,402 )
Add: One-Time Expenses due to Restatement, etc.   782     9,305     1,502     15,970  
Adjusted Free Cashflow   $ 19,462     $ (56,568 )   $ 9,167     $ (67,432 )

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