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CST: 08/12/2019 21:24:21   

Synchronoss Technologies Announces Third Quarter 2019 Results; Signs New U.S.-based Tier 1 Cloud Customer; And Provides Update on relationship with Sequential Technology International

34 Days ago

BRIDGEWATER, N.J., Nov. 04, 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 third quarter ended September 30, 2019.

Glenn Lurie, president and chief executive officer, stated, “Thus far, 2019 has been an extremely active year for Synchronoss and our platforms are executing well with new customers, new partners and revenue in each. We have announced partnerships with leading companies in the TMT industry such as Amazon, AT&T, BT, Microsoft, Rackspace and others embracing Synchronoss solutions to accelerate revenue growth, reduce costs, and accelerate digital transformations. Many of these partnerships are success-based revenue-share models that are expected to drive meaningful and material revenue for the company in 2020 and beyond.”

Lurie added, “We are very excited to announce our third new cloud deal of the year, this time with a major U.S.-based Tier 1 carrier. This new customer, along with our previously announced new cloud deals, demonstrate that the Synchronoss white-label cloud is in the sweet spot of what carriers need as they prepare for the widespread launch of 5G cellular and continue to seek out new sources of revenue and profitability.”

David Clark, Chief Financial Officer, stated, “As Sequential Technology International (STI) is evaluating strategic alternatives, based on this process we have decided to take a more conservative approach to our financial relationship. As a result, in the third quarter, we wrote off $26 million of STI-related accounts receivable which are now deemed uncollectible. This revenue relationship with STI falls under the new lease accounting standards, so the write-down is accounted for as a cumulative adjustment to revenue recognized in 2018 and 2019, and as such reduces third-quarter GAAP revenue from $78.2 million to $52.2 million. Going forward, quarterly revenue from STI will be recognized based on the amount of cash we collect in payment for our services, currently estimated to be in the range of $2.5-$3.0 million per quarter. We believe this will enable Synchronoss management and our investors to focus on the future of the company; in particular, execution and delivery of the transactions we have announced this year. Before the STI prior period revenue adjustment, operationally we were trending toward our original revenue and EBITDA guidance for the year.”

Third quarter highlights:

  • Excluding the non-recurring STI revenue write-down, revenue for the quarter would have been $78.2 million. The non-cash $26.0 million write-down of STI’s accounts receivable balance, which is accounted for as a cumulative adjustment to prior revenue under the new lease accounting standards, resulted in GAAP revenue totaling $52.2 million.
  • GAAP net loss for the quarter, which includes the $26 million STI write-down, was $69.4 million, or $1.70 per share, compared to $54.5 million or $1.38 per share in the prior year’s third quarter. Excluding the STI write-down, Non-GAAP net loss attributable to Synchronoss was $25.3 million or 62 cents per share, compared to $33.5 million in the year-ago quarter or 84 cents per share.
  • Synchronoss delivered $5.8 million of adjusted EBITDA, compared to $9.4 million in the third quarter of 2018.
  Three Months Ended September 30,
$000s 2019 2018 % Change
Revenues $ 52,210   $ 83,286   (37.3 )%
Non-GAAP Revenue Excluding STI Write-Down 78,210   83,286     (6.0 )%
Net Loss (69,432 ) (54,529 ) (27.3 )%
Non-GAAP Net Loss From Cont. Ops. Attributable to Synchronoss (25,361 ) (33,457 ) 24.2 %
Adjusted EBITDA 5,799   9,360   (38.0 )%


  Nine Months Ended September 30,  
$000s 2019 2018 % Change  
Revenues $ 218,161   $ 243,737     (10.5 )%
Non-GAAP Revenue Excluding STI Write-Down     244,161     243,737      0.2
Net Loss (122,049 ) (141,839 )   14.0  %
Non-GAAP Net Loss From Cont. Ops. Attributable to Synchronoss     (51,276 )   (75,005 )   31.6
Adjusted EBITDA 21,098   (1,413 )   NM  

New Business Update

New customer agreements and partnerships that the company has completed since the last earnings announcement include:

  • The new major U.S.-based Tier 1 cloud customer announced today, that is expected to launch the Synchronoss white label cloud service in 2020.
  • A partnership with Accruent, the world’s leading provider of physical resource management solutions, to combine Synchronoss’ expertise in smart building analytics with Accruent’s asset monitoring system. The collaboration will deliver valuable insights and efficiencies to enterprises, across facilities, and greatly expand the effectiveness of enterprise IoT solutions.
  • A letter of intent with CityFM to combine their expertise in facility management engineering with Synchronoss’ expertise in software analytics to create an end-to-end IoT facility management offering which is scalable and is expected to drive greater efficiencies.
  • Indosat Ooredoo, a leading telecom service provider in Indonesia, has chosen the Synchronoss Digital Experience Platform (DXP) to deliver a unified, interconnected user experience for customers across all of its engagement channels. The Synchronoss platform will also support Indosat Ooredoo’s “future digital economy ecosystem” project, a nationwide initiative to encourage collaboration and develop new ideas, products and use cases involving IoT technology to help drive economic growth.
  • British American Tobacco (BAT) is launching a multi-country pilot of the Synchronoss Digital Experience Platform across 25 of its 2,000 retail locations in Europe. The Synchronoss DXP solution will provide BAT with the ability to quickly design, deploy, manage and optimize customer journeys while providing a unified experience across all its owned retail locations. This is Synchronoss’ first DXP deployment outside of its traditional TMT customer base and is expected to provide a powerful proof case for traditional brick and mortar retailers.
  • The first live deployments using Synchronoss DXP with Amazon are underway with carriers in Singapore and Mexico. These carriers are in the process of being integrated with Amazon and are expected to begin offering Amazon services in the fourth quarter. Three other Amazon deployments are under way and we anticipate a number of larger deployments in 2020 and beyond.
  • Rackspace has signed a three-year agreement to deploy the Synchronoss Smart Building solution at five of its facilities in North America, including “The Castle,” Rackspace’s 1.2 million square foot global headquarters in San Antonio, Texas.
  • In addition, Rackspace has licensed the company’s Financial Analytics platform to manage costs and provide visibility and deliver savings by checking and validating the accuracy of its largest and most complex third-party partner expenses and invoices.

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, November 4, 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 13695428. 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 as well as certain non-recurring adjustments.

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)

    September 30, 2019   December 31, 2018
ASSETS        
Current assets:        
Cash and cash equivalents   $ 19,193     $ 103,771  
Restricted cash   21     6,089  
Marketable securities, current   897     28,230  
Accounts receivable, net of allowances for bad debt of $3,318 and $4,599 at September 30, 2019 and December 31, 2018, respectively   73,574     102,798  
Prepaid expenses   17,096     45,058  
Other current assets   4,934     8,508  
Total current assets   115,715     294,454  
Restricted cash        
Marketable securities, non-current       6,658  
Property and equipment, net   35,631     67,937  
Operating lease right-of-use assets   55,308      
Goodwill   220,367     224,899  
Intangible assets, net   81,172     98,706  
Other assets   7,769     8,982  
Equity method investment       1,619  
Total assets   $ 515,962     $ 703,255  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 15,496     $ 13,576  
Accrued expenses   54,219     59,545  
Deferred revenues, current   53,789     57,101  
Short-term convertible debt, net of debt issuance costs       113,542  
Mandatorily redeemable financial instrument        
Total current liabilities   123,504     243,764  
Lease financing obligation       9,494  
Operating lease liabilities, non-current   62,863      
Long-term convertible debt, net of debt issuance costs        
Deferred tax liabilities   1,270     1,347  
Deferred revenues, non-current   34,018     59,841  
Other non-current liabilities   4,624     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; 210 shares issued and outstanding at September 30, 2019   192,596     176,603  
Stockholders’ equity:        
Common stock, $0.0001 par value; 100,000 shares authorized, 51,608 and 49,836 shares issued; 44,446 and 42,674 outstanding at September 30, 2019 and December 31, 2018, respectively   5     5  
Treasury stock, at cost (7,162 and 7,162 shares at September 30, 2019 and December 31, 2018, respectively)   (82,087 )   (82,087 )
Additional paid-in capital   528,734     534,673  
Accumulated other comprehensive loss   (33,880 )   (30,383 )
Accumulated deficit   (328,185 )   (233,299 )
Total stockholders’ equity   84,587     188,909  
Total liabilities and stockholders’ equity   $ 515,962     $ 703,255  

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

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
               
Net revenues $ 52,210     $ 83,286       $ 218,161     $ 243,737  
Costs and expenses:              
Cost of revenues 35,602     43,714       107,958     127,788  
Research and development 18,575     18,684       57,282     59,789  
Selling, general and administrative 30,536     27,320       82,862     99,368  
Restructuring charges (39 )   4,539       738     8,425  
Depreciation and amortization 18,508     23,658       58,920     70,330  
Total costs and expenses 103,182     117,915     307,760     365,700  
Loss from continuing operations (50,972 )   (34,629 )   (89,599 )   (121,963 )
Interest income 228     203     716     7,518  
Interest expense (203 )   (1,370 )   (1,251 )   (3,935 )
Gain on extinguishment of debt 5         822      
Other (expense) income, net (422 )   (13,439 )   17     (9,180 )
Equity method investment (loss) income     283     (1,619 )   71  
Loss from continuing operations, before taxes (51,364 )   (48,952 )   (90,914 )   (127,489 )
(Provision) benefit for income taxes (9,849 )   2,308     (6,614 )   1,604  
Net loss (61,213 )   (46,644 )   (97,528 )   (125,885 )
Net loss attributable to redeemable noncontrolling interests (25 )   (422 )   (931 )   2,122  
Preferred stock dividend (8,194 )   (7,463 )   (23,590 )   (18,076 )
Net loss attributable to Synchronoss $ (69,432 )   $ (54,529 )   $ (122,049 )   $ (141,839 )
               
Earnings per share:              
Basic $ (1.70 )   $ (1.38 )   $ (3.01 )   $ (3.51 )
Diluted $ (1.70 )   $ (1.38 )   $ (3.01 )   $ (3.51 )
Weighted-average common shares outstanding:              
Basic 40,910     39,612     40,564     40,405  
Diluted 40,910     39,612     40,564     40,405  


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

  Nine Months Ended September 30,
  2019   2018
Operating activities:      
Net loss $ (97,528 )   $ (125,885 )
Adjustments to reconcile Net Loss to net cash used in operating activities:      
Depreciation and amortization 58,921     70,330  
Change in fair value of financial instruments     (3,849 )
Amortization of debt issuance costs 272     1,060  
(Gain) loss on extinguishment of debt (822 )    
Accrued PIK interest*     (7,037 )
Allowance for loan losses*     18,225  
(Earnings) loss from equity method investments* 1,619     (71 )
Loss (Gain) on disposals 15     277  
Amortization of bond premium (34 )   75  
Deferred income taxes (25 )   (1,648 )
           
Stock-based compensation 17,033     22,040  
 Cumulative adjustment to STI receivable 26,044      
ROU Asset Impairment 6,268      
Changes in operating assets and liabilities:      
Accounts receivable, net of allowance for doubtful accounts 3,180     28,789  
Prepaid expenses and other current assets 34,052     (12,844 )
Other assets 1,966     947  
Accounts payable 2,615     8,195  
Accrued expenses (9,418 )   (24,539 )
Other liabilities (3,736 )   (3,886 )
           
Deferred revenues (28,583 )   (30,841 )
Net cash provided by (used for) operating activities 11,839     (60,662 )
Investing activities:      
Purchases of property and equipment (7,077 )   (8,565 )
Purchases of capitalized software (9,289 )   (11,012 )
Purchases of marketable securities available for sale (47,703 )   (15,784 )
Maturity of marketable securities available for sale 81,794     3,050  
Business acquired, net of cash     (9,734 )
Net cash used for investing activities 17,725     (42,045 )
Financing activities:      
Extinguishment of outstanding Convertible Senior Notes (112,993 )    
Proceeds from issuance of preferred stock     86,220  
Preferred dividend payment (7,075 )    
Payments for finance leases (925 )   (1,018 )
Net cash (used for) provided by financing activities (120,993 )   85,202  
Effect of exchange rate changes on cash 783     (1,805 )
Net decrease in cash, restricted cash and cash equivalents (90,646 )   (19,310 )
Cash, restricted cash and cash equivalents, beginning of period 109,860     246,125  
Cash, restricted cash and cash equivalents, end of period $ 19,214     $ 226,815  

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

    Three Months Ended Sep 30,   Nine Months Ended Sep 30,
    2019   2018   2019   2018
Non-GAAP financial measures and reconciliation:                
GAAP Revenue   $ 52,210     $ 83,286     $ 218,161     $ 243,737  
Less: Cost of revenues   35,602     43,714     107,958     127,788  
Gross Profit   16,608     39,572     110,203     115,949  
Add / (Less):                
Stock-based compensation expense   803     1,035     2,147     3,447  
Restructuring and cease-use lease expense   141         405      
Cumulative adjustment to STI receivable   26,044         26,044      
Adjusted Gross Profit   $ 43,596     $ 40,607     $ 138,799     $ 119,396  
Adjusted Gross Margin   83.5 %   48.8 %   63.6 %   49.0 %
                 
GAAP loss from continuing operations   (50,972 )   (34,629 )   (89,599 )   (121,963 )
Add / (Less):                
Stock-based compensation expense   6,000     7,216     17,028     22,038  
Acquisition costs       38     (230 )   149  
Restructuring and cease-use lease expense   6,215     4,539     7,429     8,425  
Amortization expense   5,808     8,472     19,072     25,122  
Cumulative adjustment to STI receivable   26,044         26,044      
One-Time Expenses due to Restatement, etc.   4     3,638     1,506     19,608  
Non-GAAP loss from continuing operations   $ (6,901 )   $ (10,726 )   $ (18,750 )   $ (46,621 )
                 
GAAP Net loss attributable to Synchronoss   $ (69,432 )   $ (54,529 )   $ (122,049 )   $ (141,839 )
Add / (Less):                
Stock-based compensation expense   6,000     7,216     17,028     22,038  
Acquisition costs       38     (230 )   149  
Restructuring and cease-use lease expense   6,215     4,539     7,429     8,425  
Amortization expense   5,808     8,472     19,072     25,122  
Non-GAAP Expenses attributable to Non-Controlling Interest       (523 )   (76 )   (1,269 )
One-Time Expenses due to Restatement, etc.   4     3,638     1,506     19,608  
Cumulative adjustment to STI receivable   26,044         26,044      
Income Tax Effect at Statutory Tax Rates       (2,308 )       (7,239 )
Non-GAAP Net loss from continuing operations attributable to Synchronoss   $ (25,361 )   $ (33,457 )   $ (51,276 )   $ (75,005 )
                 
Diluted Non-GAAP Net loss from continuing operations per share   $ (0.62 )   $ (0.84 )   $ (1.26 )   $ (1.86 )
                 
Weighted shares outstanding - Basic   40,910     39,612     40,564     40,405  

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

    Three Months Ended   Nine Months Ended
    Sep 30, 2018   Dec 31, 2018   Mar 31, 2019   Jun 30, 2019   Sep 30, 2019   Sep 30, 2019   Sep 30, 2018
                             
Net (loss) income attributable to Synchronoss   $ (54,529 )   $ (101,909 )   $ (27,587 )   $ (25,030 )   $ (69,432 )   $ (122,049 )   $ (141,839 )
Add / (Less):                            
Restructuring and cease-use lease expense   4,539     3,950     740     474     6,215     7,429     8,425  
Net change in contingent consideration obligation                            
Depreciation and amortization   23,658     47,324     20,143     20,269     18,508     58,920     70,330  
Interest income   (203 )   (252 )   (189 )   (299 )    ( 228 )   (716 )   (7,518 )
Interest Expense   1,370     976     585     463     203     1,251     3,935  
Gain on Extinguishment of debt       (1,760 )   (387 )   (430 )    ( 5 )   (822 )    
Other Income (expense), net   13,439     65,737     (463 )   24     422     (17 )   9,180  
Equity method investment income (loss), net   (283 )   28,671     1,243     376         1,619     (71 )
Benefit for income taxes   (2,308 )   (16,290 )   (1,391 )   (1,844 )   9,849     6,614     (1,604 )
Net (loss) income attributable to noncontrolling interests   422     (6,715 )   313     593     25     931     (2,122 )
Preferred dividend   7,463     7,517     7,537     7,859     8,194     23,590     18,076  
Stock-based compensation expense   7,216     5,566     5,554     5,474     6,000     17,028     22,038  
Acquisition costs   38     109     (188 )   (42 )       (230 )   149  
Integration                            
Cumulative adjustment to STI receivable                   26,044     26,044      
One-Time Expenses due to Restatement, etc.   3,638     800     720     782     4     1,506     19,608  
Net income from discontinued operations, net of taxes       (18,288 )                    
Reclassification of expenses   4,900                          
Adjusted EBITDA (non-GAAP)   $ 9,360     $ 15,436     $ 6,630     $ 8,669     $ 5,799     $ 21,098     $ (1,413 )


    Three Months Ended Sep 30,   Nine Months Ended Sep 30,
    2019   2018   2019   2018
Net Cash (used in) provided by operating activities   $ (6,725 )     $ 10,719     $ 11,839     $ (60,662 )
Add / (Less):                
Capitalized software   (3,330 )     (2,811 )   (9,289 )   (11,012 )
Property and equipment   (2,137     (4,745 )   (7,077 )   (8,565 )
Free Cashflow   $ (12,192 )     $ 3,163     $ (4,527 )   $ (80,239 )
Add: One-Time Expenses due to Restatement, etc.   4       3,638     1,506     19,608  
Adjusted Free Cashflow   $ (12,188 )     $ 6,801     $ (3,021 )   $ (60,631 )

 

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