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Edited Transcript of SNCR.OQ earnings conference call or presentation 10-Aug-20 12:00pm GMT

Q2 2020 Synchronoss Technologies Inc Earnings Call

BRIDGEWATER Aug 22, 2020 (Thomson StreetEvents) -- Edited Transcript of Synchronoss Technologies Inc earnings conference call or presentation Monday, August 10, 2020 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David D. Clark

Synchronoss Technologies, Inc. - CFO

* Glenn Lurie

Synchronoss Technologies, Inc. - President, CEO & Director

* Leslie Gahagan

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Conference Call Participants

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* Michael James Latimore

Northland Capital Markets, Research Division - MD & Senior Research Analyst

* Thomas Michael Walkley

Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst

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Presentation

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Leslie Gahagan, [1]

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Good morning, everyone. I am Leslie Gahagan, Investor Relations analyst for Synchronoss Technologies.

Welcome to our second quarter 2020 earnings call. Joining me here is Synchronoss's President and CEO, Glenn Lurie; David Clark, our Chief Financial Officer; and Joe Crivelli, Senior Vice President of Investor Relations.

During today's call, we will make statements about expectations for the second half of 2020 and beyond. These may be considered forward-looking statements within the meaning of federal securities laws and include statements about financial trends, future results of operations and financial position and market opportunities. Generally, forward-looking statements are identified by words such as expects, believes, anticipates, intends and other indications of future expectation.

Forward-looking statements are based on the business environment as we currently see it and include risks and uncertainties. Please refer to our SEC filings for more information on the risk factors that may cause actual results to differ.

Forward-looking statements on this call are based on assumptions as of today, and we undertake no obligation to update any statement as a result of the new information or future events.

In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to GAAP. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliation of the GAAP measures to their non-GAAP in addition to the description of the non-GAAP measures can be found on today's press release.

(Operator Instructions) Thank you again for joining us today, and I'll now turn the call over to Glenn Lurie.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [2]

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Thanks, Wesley. And thank you, everybody, for joining us this morning. It's a big day for Synchronoss and a busy morning. Earlier this morning, we announced the renewal of a Verizon contract for an additional 5 years as well as earnings for the second quarter. I'll cover earnings first.

As you can see, we continue to build our momentum from the start of the year despite the most challenging economic environment of the last 2 decades. As COVID-19 continues to disrupt the economy, we delivered revenue of $76.5 million and adjusted EBITDA of $11.5 million as well as $13 million in adjusted free cash flow, which all exceeded internal and external expectations.

The robust EBITDA result brings us back to a double-digit EBITDA margin and reflects the prudent cost-cutting we executed before and after the pandemic struck. Furthermore, liquidity to continue to build and topped $42.8 million at the end of the quarter, up from $31 million at the end of the first quarter.

Based on these financial results, it is clearer that Synchronoss was able to perform and execute well during the quarter. We are responsibly navigating through the pandemic to maintain overall company health for the short and long term. The last 2 quarters are a testament to the diligence of the entire Synchronoss team, which had to adapt, evolve and adjust to an work-from-home environment. Most of us have been working from home for over 5 months now as most of our offices remain close. Despite this continued global challenge, we've been able to close and deliver new deals, source new business and move the ball forward with customers and prospects alike.

I want to give a shout out to our technology team, headed by our CTO, Pat Doran, which reacted quickly when COVID-19 first became an issue and made sure we had best-in-class business tools to maintain our business momentum and help our more than 1,500 employees transition to the new paradigm and remain productive.

It is their hard work that has helped set the stage for the strong second quarter results we are discussing today. In addition, the execution of our cost reduction initiatives has gone well. We are on track to achieve the $45 million in year cost savings and $55 million annualized cost savings we announced earlier this year. David will provide more commentary on this when he discusses our financials.

I'd like to take a few moments now to discuss some key commercial activity in the quarter. I'm incredibly proud of the customer wins our sales team headed by our CCO, Jeff Miller, was able to receive in the second quarter. This team has truly risen to the occasion to find new ways to reach customers despite a virtual work environment and critical industry events being canceled.

Let me start off cloud now let met turn to the Verizon deal. We secured our new commercial agreements with Verizon, including a 5-year extension to our long-standing personal cloud relationship at substantially similar structure and financial terms to our previous cloud agreement. This is a great for Synchronoss and its shareholders long-term because of the increase certainty and stability. This new contract extension with our largest customer also demonstrates Verizon's commitment to the Verizon Cloud and to Synchronoss. This extension further solidifies our relationship with Verizon and shows the value they and their subscribers see in our personal cloud platform, which delivered solid incremental revenue and profits for Verizon and a better user experience for their subscribers.

Another important component of our extension with Verizon is a joint marketing agreement to step up our marketing efforts to sell Verizon Cloud to their wireless subscriber base. We have not previously had, to this degree, a dedicated and coordinated direct marketing effort to Verizon's existing wireless customers. To date, we are predominantly focused on the cloud adoption in the setup flow when Verizon is onboarding a new customer or an existing customer upgrades to their device.

We believe this joint marketing effort will be powerful catalysts to drive adoption of Verizon Cloud and deliver incremental growth and revenue for both us and Verizon as we move forward. We also expanded our relationship by securing additional cloud initiatives in the quarter that will augment Verizon's service offerings in other areas, which provides us with expanded access to Verizon customers and help us continue to grow cloud revenue. We will share additional details regarding these new initiatives as they are launched to the marketplace. Verizon Cloud subscriber performance continued to grow during the quarter and is ahead of our business plan objectives and projections. Also we delivered a family cloud enhancement offering that leverage artificial intelligence and machine learning to enhance the customer experience for Verizon subscribers during the quarter.

So to recap the developments with the Verizon relationship, we have extended our relationship with our largest and longest-standing cloud customer. We are organically growing our collective subscriber base platform in the setup flow when new customers switch to Verizon or existing customers upgrade their devices. A new joint marketing agreement will enable us to intensify the marketing of our services to a way broader Verizon customer base and have added new bundles with the potential to add even more Verizon Cloud subscribers. We are jointly developing and launching new product enhancements that will increase the value proposition for their customers. And we are working with Verizon on new cloud initiatives that will expand our access to Verizon customers beyond what we have today. We have always had a strong relationship with Verizon. But if there was ever a question out about this facts - those developments we put to bed once in for all.

With this renewal, over the past 18 months, we have now renewed 4 of our legacy cloud customers with multiyear agreements, Verizon; BT, British Telecom; SFR; and Proximus. During that period, we also launched 3 new customers in AT&T, TracFone and Assurant.

Again, we feel this demonstrates the outstanding value proposition our white label personal cloud offering provides to our customers and to their subscribers.

I want to highlight our progress with AT&T's personal cloud launch and provide an update on where we stand. Since during our Investor Day in June, we shared that the COVID-19 had delayed our cloud-related initiatives with Verizon. Starting earlier this quarter, AT&T announced a growing list of Android devices that are being preloaded with the Synchronoss, Out of Box Experience, or OOBE, with the cloud embedded. OOBE offers an enhanced device setup flow for customers. And as you've heard us talk about, has been proven successful for driving cloud adoption, as seen with our other carrier customers globally.

Now every new and upgrade Android subscriber will go through the OOBE flow at AT&T. Regarding TracFone, we started with simple mobile and are now preparing for the launch of the next set of brands within the TracFone family for personal cloud. Following our launch of Spectrum Mobile with Assurant, we have now launched a second brand with our cloud integration to their Pocket Geek application during the second quarter with 2 more cloud customers to follow.

Across our personal cloud customers, we're launching targeted campaigns to their existing base of customers and new acquisitions, plus using new digital and social tools to highlight the customer experience and benefits of digitally protecting their assets on broadband and mobile devices.

Turning to messaging. The work on our advanced messaging solution with CCMI joint venture of AT&T, Sprint, T-Mobile and Verizon continues to move forward. During the quarter, we won 2 additional contracts with CCMI totaling mid 7 figures. An example of our momentum in Japan, during the quarter, the top financial institutions in Japan selected the RCS-based plus message service provided by Synchronoss to enable a common user interface for safe and secure transactions. The service called Airpost provides a digital transformation to enhance the experience, value and efficiency for customers. Participating companies include Mitsubishi, UFJ Bank, Musashino Bank, JCB and Tokio Marine Nichido, more than 30 additional companies are also investigating this application. This bodes well that the advents of A2P advanced messaging is here. And that this new revenue source may be nearing an inflection point, where we believe we can grow into a material new revenue stream for Synchronoss for years to come.

We are also seeing continued good traction and additional advanced messaging pursuits and are actively engaged in proposals with global telecom providers in APAC and EMEA for multiple new opportunities. We believe our status is the only company that has launched advanced messaging and the provider of advanced messaging technology in both Japan and the U.S. will be one of those things that differentiates us in these pursuits.

Turning to core messaging, e-mail platform. During the quarter, we won a competitive battle for e-mail expansion with Proximus. This was a very nice win for our highly profitable legacy e-mail business.

Moving to digital. The financial pressures of COVID-19 have presented continued opportunities to our digital access management portfolio. With most multiple recent new customer sales and the on-boarding of customers to our integrated financial analytics, iNOW, and new spatial cloud offerings. These include a 7-figure financial analytic SaaS agreement with a nationwide service provider and a spatial management contract with Globe Telecom in the Philippines.

We also executed a 5-year contract extension with Sage Management, who is our partner providing audit services to our financial analytics customer base. We believe this commercial agreement will continue to contribute millions of dollars of revenue to our digital business unit per year and continue to add value to our financial analytics customers.

Through our continued work with Wireless Advocates, we delivered the DXP care activation accelerator pack in the second quarter, which enables the integration and management for third-party companies to sell activations for AT&T and Verizon with T-Mobile expected to follow later this year.

A quick update on Sequential Technologies, or STI. Under the new leadership team, STI quickly competed -- completed its minority business enterprise certification, which we believe will lead to New Fortune 500 opportunities and future growth for both STI and Synchronoss.

Turning to IoT. While access to physical customer locations due to the pandemic slowed some of our customer deployments, our Smart Building solutions are receiving increased interest from businesses as they prepare to return to work.

As a result of COVID-19, every building owner and operator will be looking to understand real-time wellness and health information of their building. We plan to leverage our Smart Buildings platform, which already provides visibility and control to a broad array of sensor technologies by exploring pathogen, remediation solutions for inclusion in our offering.

During the quarter, we enhanced our Smart Building solutions with the new technical -- excuse me, technician application to further expedite the integration process for new sensors and providing visibility to those insights through our dashboards. We're also making steady progress in a number of our multisite deployment opportunities, which we expect to communicate during the second half of the year.

In conclusion, we are very happy with -- and very proud of our second quarter results. The team's execution and our ability during the quarter to overcome the extremely challenging COVID-19 economy and environment and delivering strong financial results. We renewed our largest customer to a 5-year deal, won new deals and set the stage for short and long-term growth in each of our business platforms. And we delivered positive free cash flow of $13 million built on our cash and liquidity to $42.8 million and ensured that we have sufficient cash to execute on our business objectives. All while we continue on the target to reduce cost by $45 million in year and $55 million on an annualized basis.

This is a great accomplishment on the part of the entire Synchronoss team, and I thank every one of our employees for their role in making it happen.

With that, David will provide additional financial details. David?

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David D. Clark, Synchronoss Technologies, Inc. - CFO [3]

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Thanks, Glenn, and thanks, everyone, for joining us. I'll review our second quarter results. Revenue for the quarter was $76.5 million, down slightly compared to $77.8 million in the year-ago quarter as increases in cloud and messaging revenue were offset by a decrease in digital revenue due to the new operating agreement with STI and the sunsetting of our Universal ID product.

For the 6 months ended June 30, 2020, revenue was $154.1 million compared to $166 million in the first 6 months of 2019, again, driven by a decrease in digital revenue.

Our recurring revenue was 78.4% of total revenue in the second quarter compared to 72% in the first quarter and 80% in the second quarter a year ago. As we noted at investor day, approximately 85% of our revenue is under multiyear contracts, which provides strong foundation and base of revenue that has served us well in the COVID-19 economy.

Cloud revenue was $42.4 million in the second quarter, a 5% increase compared to $40.4 million in the year-ago quarter, driven by additional subscriber and professional services revenue.

A note on the Verizon renewal. Due to the extension of the contract, approximately $10 million deferred revenue that was on our balance sheet on the renewal date and would have been amortized over the remaining quarters of 2020 will now be amortized over the new term of the contract. While this will reduce recognition of noncash deferred revenue 2020 by approximately $5 million per quarter, or $10 million for the balance of the year, it will also result in a more cohesive match between EBITDA and free cash flow generation in the future on a quarter-by-quarter basis.

Quarterly recognition of noncash deferred revenue is expected to be negligible going forward. Messaging revenue was $19.1 million in the second quarter compared to $15.2 million in the year over quarter, a 25.7% increase, largely driven by the continued success in Japan and additional revenue from the work with the CCMi joint venture.

Digital revenue was $15 million in the quarter compared to $22.2 million in the year-ago quarter. The decrease is due to lower revenue from STI under the new operating agreement compared to the agreement that was in place last year and in sunsetting of our Universal ID product.

I'll now discuss profitability metrics. Total costs and expenses were $88 million in the second quarter, down 8.4% compared to $96.1 million in last year second quarter. For the 6 months, total cost and expenses were $182.4 million, and that's down 10.9% compared to $204.6 million in the first 6 months of 2019. For both the 3 months and 6-month period, the change was largely driven by lower cost of goods sold and lower depreciation, which in turn related to our migration from company-owned data centers to the cloud. These were offset by higher restructuring charges in the current period. The reduction in total costs and expenses reflect that the cost reduction initiatives we executed in 2020 are delivering the expected results. As noted in the prior earnings call and at Investor Day, in total, we have targeted a reduction of $55 million in annual operating cost from our expense base, of which we expect to realize approximately $45 million of savings in 2020.

Adjusted gross profit in the second quarter was $47.9 million compared to $45.1 million in last year's second quarter. Adjusted gross margin in the second quarter was 62.6% compared to 57.9% in last year's second quarter. The second quarter improvement in gross profit and gross margin was due to better cost management in this year period.

For the 6 months ended June 30, 2020, gross profit was $90.4 million compared to $94.9 million in the first 6 months of 2019. For the 6 months ended June 30, 2020, adjusted gross profit was 58.8% compared to 57.2% in the first 6 months of 2019. The decrease in the 6-month period primarily resulted from a decrease in digital revenue due to the new operating agreement with STI and the sunsetting of our Universal ID product.

Adjusted EBITDA in the quarter was $11.5 million compared to $8.7 million in last year's second quarter and this is largely driven by execution of cost reductions. Adjusted EBITDA margin was 15%, well in the double digits, up from 11.1% in last year's second quarter. And this is our highest EBITDA margin since Q4 of 2018.

Turning to the balance sheet and cash flow statement. Liquidity at the end of the quarter, which is primarily cash and marketable securities totaled $42.8 million. Note that our $10 million line of credit from Citizens Bank remains fully drawn at the second quarter and is included in this balance. We generated $13 million of cash in the quarter. At the quarter end, liquidity was bolstered by our utilization of the CARES Act at the quarter end. The utilization of the CARES Act provision provided liquidity, which enable -- under the provision that enables companies to carry back net operating loss over the tax years for 2018, 2019 and 2020. Accordingly after quarter end, in mid-July, we received approximately $10 million refund in taxes paid in 2016, which further bolstered our liquidity.

We feel very good about our liquidity throughout 2020. And as Glenn discussed, we've taken several actions to conserve cash in year, and our business plan is calibrated to ensure that we have sufficient liquidity throughout on the year.

Refinancing our preferred stock and position the company with a cost-effective and permanent capital structure is the top priority for Synchronoss. We were actively evaluating financing alternatives, and we believe it is essential that we are positioned to meet them quickly when markets move our way.

In connection with that objective, we expect to file at a universal shelf in conjunction with our 10-Q later this month, which enables us to quickly access public markets when it is prudent.

The shelf filing will mean -- will not mean financing is at all imminent, but rather we are positioning ourselves to move quickly at some point in the future.

On our last call, we maintained our original adjusted EBITDA guidance of $25 million to $35 million for the year. As I noted earlier, the Verizon renewal removes approximately $10 million of noncash deferred revenue from the latter half this year. Under 606 accounting rules, this remaining $10 million of deferred revenue will now be amortized over the new term of the contract. The implied adjusted EBITDA range would be $15 million to $25 million. However, we are narrowing the range of the top half of the range. Accordingly, we are now expecting adjusted EBITDA for the year of $20 million to $25 million.

Again, I wanted to reiterate, the only reason for the change in EBITDA guidance is due to the amortization of the $10 million of noncash deferred revenue over the life of the new contract instead of over the next 2 quarters.

Before we open Q&A, I want to mention that Joe Crivelli, who had served as our Vice President of Investor Relations since December of 2018, will be leaving the company on August 14. Joe will remain part of the Synchronoss team in a consulting capacity and will assist Leslie Gahagan, who will take over the day-to-day responsibility for Investor Relations as an Investor Relations analyst.

Joe and I have collaborated for quite a long time, and I want to thank Joe for his contributions over the past 1.5 years and wish him well in the future.

I will now turn it back over to Glenn.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [4]

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Thank you, David. Before we open for questions, I want to recap everything that we just discussed with these critical points. First, we are incredibly proud of our team for delivering revenue, adjusted EBITDA and free cash flow that exceeded internal and external expectation. Our prudent cost-cutting initiatives and execution drove a robust double-digit EBITDA margin. We have demonstrated the strength of our long-term customer relationship with multiple renewals and with the closing of several important new deals. We are obviously very excited about our 5-year contract extension with Verizon. This renewal should give shareholders comfort about our long-term stability and predictability of our revenue base.

If you have not seem this morning's press release related to this announcement, please visit our website for more information. Along with the renewal, we've expanded our relationship with Verizon, which in turn expands access to Verizon's customer base. We have secured a joint marketing agreement, and we believe will accelerate growth and cloud revenue.

At the same time, we're moving to a new stage of deployment with AT&T Cloud, and we believe that having the cloud embedded in OOBE device flow, our new Android devices will enable revenue from AT&T to begin to accelerate as well. All of this, along with strong second quarter results, represents good news for the company and our shareholders.

With that, I will now open for questions. Leslie, do we have anybody in the queue?

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Questions and Answers

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Leslie Gahagan, [1]

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We'll go ahead and kick off it with Sterling Auty.

Seems he might have a technical difficulty. I'll just ask the question directly.

What is the average contract -- excuse me, contract length of the extensions?

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [2]

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Average cost of the multiple extensions? I mean, some of the extensions, Sterling, are 3 years and some are 5. And obviously, we were very upfront on Verizon extension being 5 years. I think on the other extensions, some of our customers are a little shier and don't want to discuss how long the extensions are, but you should assume between 3 and 5 years.

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Leslie Gahagan, [3]

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Okay. Next question is from Mike Walkley.

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Thomas Michael Walkley, Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst [4]

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So I guess first question for me is just on the strong free cash flow in the quarter with the Verizon renewal, was there an aspect of upfront cash for that? Or can you maybe walk through the steps that drove the strong cash flow?

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [5]

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I'll let David answer that. I'll just say, there's no cash from that. No. So go ahead, David.

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David D. Clark, Synchronoss Technologies, Inc. - CFO [6]

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Yes. So the Verizon renewal, obviously, is this quarter and there was no cash in the second quarter. Really second quarter cash-driven by just good liquidity management and obviously, stronger EBITDA, certainly than was expected, both internal and externally.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [7]

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Yes. And I'd add, Mike, that David and the team did a fantastic job. Once we made the decisions on the cost-cutting initiatives that we already -- if you remember, we already had some cost-cutting going on when we started the year. We obviously added to that with COVID hitting. The team has just executed fantastically, and that's what you're seeing.

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Thomas Michael Walkley, Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst [8]

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Okay. And I guess while I have the line here, a follow-up question. Just on the strong cost reduction, how should we think about operating expenses levels going forward? Is there more cost coming out of the model? If so, where it is coming out of more? Cost of goods sold or OpEx or just trends we should think about on the cost line?

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David D. Clark, Synchronoss Technologies, Inc. - CFO [9]

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Yes. Well, the cost reduction are across the board. Costs will kind of be flat to slightly down for the remainder of the year, by quarter, is our expectation. We took cost out of the business across the board. Obviously, our largest cost components will probably be a little larger because that's where the cost is, and that's where we take out the majority.

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Thomas Michael Walkley, Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst [10]

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Okay, great. And then Glenn, a follow-up question for you, just on kind of the fundamentals and dealing with operators. Can you talk about some of your cloud trends now that smartphones slowly picking up of some of the bottoms, maybe earlier in the quarter. And just with AT&T and the timing, when do you think some of these Android deals, you start to see like a step-up in subscriber base based on ay add you can share over the last couple months.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [11]

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Yes, actually, I appreciate that. A couple of things to think about in this environment that we're living in. You're absolutely right. The carriers, obviously, had closed stores. Carriers had announced that they're not going to reopen some of the stores. The good thing is we're still seeing strong results. As we said, we're ahead of the plan with our largest customer. One of the reasons is that actually these enhancements that we've been working with them on have obviously led to very decent gross adds, but we've also see the churn drop way down with these customers. So we are actually in a good spot with the majority of our customers as far as how they've executed working with us. And as I said in my comments, we have marketing work we're doing, which we are hoping to increase in the second half of the year, not just with Verizon, but with all. And then when you ask about AT&T, yes, we were very candid as we would plan to always be that some things got pushed back based on COVID. But you saw AT&T make announcements around their devices and did some very exciting announcements that they're going to focus on cloud in those android devices. So we expect to start seeing that up immediately here in the third quarter. I think the opportunity, though, Mike, is there. I mean, the carriers are looking for opportunities to grow revenue. This is a fantastic opportunity that they see and understand.

I'm very, very optimistic that we can continue that trend for the remainder of the year and into '21.

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Thomas Michael Walkley, Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst [12]

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Last question, then I'll pass on the Zoom call here. Just overall, it sounds like IoT maybe some digital, some things that got pushed out because it's just tougher to engage with customers face-to-face. Can you talk about any deals that have been lost or for just things that may be pushed out a little bit? Or just kind of how your remote sales is interacting in this tough environment?

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [13]

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Yes. I'd tell you this, first of all, we haven't lost anything. The environment is, as we all know, you've got to work twice as hard to get it done, and we are doing that. Digital, actually, is performing very well. I hope from my comments, you didn't take that way. The digital business is doing well. Most people when they hear us talk about digital, think about DXP, but we have a host of products in our digital platform.

As I said, we cut numerous deals during the quarter that were very, very exciting for us. And whether on the financial analytics side or the spatial side as well as the continued work. I would tell you, Mike, that this environment, the future is all about digital. The future is all about touchless experiences, the future is -- and every company that we do business with is looking at how they're going to make it work in the new normal.

And we have a lot of opportunity in our digital business to continue to grow it. On the IoT side, without question, we've done well. But the future of IoT is not just smart building, it's a healthy building. And we have a SaaS platform that's extensible and flexible with machine learning and analytics attached. And candidly, a lot of people are coming to us now on the IoT side to talk about how not only can they make their building smart, but how can they make it healthy and know real-time that it's healthy. The other thing that we're talking about is real-time remediation of pathogens in a building. And I would just say there's not going to be a building, a venue, a restaurant that as we go forward, people aren't going to want to know it’s safe. And we believe we have a platform that can help do that. So we're -- I'm -- my enthusiasm around IoT has actually gone up. And I think we've got work to do, but so do others. And I think we've got a very competitive platform and product to offer.

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Leslie Gahagan, [14]

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Our next question will come from Mike Latimore with Northland.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [15]

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So I guess on the Verizon deal, that was great, congratulations on that and also the quarter, obviously. A lot of times these big deals they get renewed a month or 2 before they're kind of set to expiry. You guys renew this fairly early here. I guess, can you talk through what was the catalysts to do this kind of early renewal?

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [16]

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Sure I mean, I think a couple of things. One, the success that we've been having for a long time with them and I would throw out the relationship as well. This is a very important product for Verizon. It is for us, obviously, we see them as our largest customer. But as carriers -- not speaking outside of Verizon, as carriers look to how they're going to find incremental revenue and the dollars, they're all spending on 5G massive amounts of billions of CapEx. We're going to continue to work on these opportunities. Verizon, obviously, has been a customer of ours for many years. We sat down with them and talk about our future and it just made just sense for us to relook at the whole agreement. You also heard me talking about the fact that we now have a joint marketing agreement for the first time, which is really exciting for us because the majority of the success we had with them has been in that start-up flow that we talk about for new and upgrades, and we've done great. But my push and ask is that we have so much more opportunity to go back to their base, which obviously, we are now going to do and do it together. The second piece of this is that the other initiatives that I mentioned. Obviously, we're excited about those and having conversations about where we want to take this platform. And by the way, we do this with all of our customers, right? Our customers -- we have a beautiful personal cloud platform that then they obviously wanted to have advantages. And so that's how we work with our customers individually. And so the opportunity on both side, we're really wanting to elongate the agreement. Timing was not about when our first agreement ends, it's about where we want to go in the future. And that really was a catalyst.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [17]

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Great. Great. And then just on the rev rec standpoint. I know you didn't talked about $5 million a quarter roughly this year. How should we think about the influence next year from this [rev].

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David D. Clark, Synchronoss Technologies, Inc. - CFO [18]

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So that was specifically the deferred revenue. We had deferred revenue that we've been recognizing over the past couple of years that would have basically been amortized out by the end of this year. As a result of the renewal, it gets extended for the remaining contract or the new contract life, I should say. So our deferred revenue runoff from this contract, in particular, will be under $1 million for each quarter going forward. So that's the change. There would have been $5 million recognized in each of the next 2 quarters. We're not going to recognize that, it's going to be pushed out.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [19]

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Yes. And Mike, really important, obviously, I'll repeat, and David said it numerous times, this is a noncash, right? So not impacting our cash. I do think David's comments are important for folks to know this should really simplify how you all look at us from an EBITDA perspective as well. And then I think really important, as David said, going out, it's a negligible when you think about the total amount and where it's going to be.

So cleaned up a lot as well at the same time.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [20]

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Glenn, did you say that going forward, pretty much every new Android subscriber at AT&T will go through the OOBE process. Is that kind of [exiting as more than anything]?.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [21]

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Yes, not every. Obviously, it's by device. And as they get -- you actually wrote a nice note about the devices that were coming out, we'll see more of those devices coming out, and that will continue to move up based upon their new device launches. So, yes, we're starting to see that flow and we're excited about it.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [22]

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And then just last one, on CCMI, you mentioned some additional business there. What does that relate to? And then when do you expect kind of the -- maybe the first official service launches there?

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [23]

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Yes. Well, as you know, Mike, and I appreciate the question. We can't answer and speak for CCMI, they've said 2020. And we'll leave it at that as far as the launch. As far as other business, yes, we are working with them hand in hand. They are picking and looking at their strategies and situations have asked for help with other things, which is what those agreements are. And that's really all I can say at this point in time.

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Leslie Gahagan, [24]

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And with that, that concludes all of our questions.

All right. And that concludes the call.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [25]

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If I can, Leslie, one last thing. I just want to thank everybody again for coming on the call this morning. I'm very proud of the Synchronoss team, very proud of the results that we were able to deliver during the environment that we were in. The team has been incredibly prudent about its execution, taking care of our customers. I want to again thank Pat, our CTO; and Jeff, our Chief Commercial Officer, for the results that they and their teams have driven. And we are looking forward to the second half of the year. Thank you, guys.

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David D. Clark, Synchronoss Technologies, Inc. - CFO [26]

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Hey, Glenn. Real quick, Rich Baldry asked a question about -- he wanted to know about the pipeline changes from any of the global carrier prospects.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [27]

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Great. Rich, thank you. So far, as far as pipeline changes, really not a lot of pipeline changes. Obviously, as I said earlier, we've not lost business. We've had obviously, things are going to take a bit more time. I would say our pipeline is still strong and growing. We are candidly having to be -- and changed the way we think about how you drive pipeline. We've seen our events, our industry events be canceled. We expect that going into '21, the CESs of the world, the Mobile World Congress of the world, they're going to have a hard time putting those events on.

Obviously, CES already announced there's going to be a digital event. So we're looking at other ways and actually executing on other ways to continue to have conversation with our carrier partners, with new carrier partners looking at channels of distribution.

So all of those things are in play. But right now, I'd say we feel good about where our funnels are.

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David D. Clark, Synchronoss Technologies, Inc. - CFO [28]

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Glenn, Sterling has 1 more question.

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Glenn Lurie, Synchronoss Technologies, Inc. - President, CEO & Director [29]

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Sure.

Okay. We can follow-up with Sterling next day or so. Again, folks appreciate the new technology. We are -- I think Zoom is great, and we are going to continue to work with this. But thank you all very much for joining, and look forward to speaking with many of you over the next couple of days.

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Leslie Gahagan, [30]

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Goodbye.