U.S. Markets closed

Edited Transcript of SYNC earnings conference call or presentation 13-Mar-19 9:00pm GMT

Q4 2018 Synacor Inc Earnings Call

Buffaclo Mar 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Synacor Inc earnings conference call or presentation Wednesday, March 13, 2019 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Himesh Bhise

Synacor, Inc. - President, CEO & Director

* Timothy J. Heasley

Synacor, Inc. - CFO & Secretary

================================================================================

Conference Call Participants

================================================================================

* Austin William Moldow

Canaccord Genuity Limited, Research Division - Associate

* George Frederick Sutton

Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst

* John David Godin

Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst

* Laura Anne Martin

Needham & Company, LLC, Research Division - Senior Analyst

* David C. Calusdian

Sharon Merrill Associates, Inc. - President

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good afternoon. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Synacor Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. (Operator Instructions) Thank you.

I would now like to turn the call over to David Calusdian from Sharon Merrill. Please go ahead.

--------------------------------------------------------------------------------

David C. Calusdian, Sharon Merrill Associates, Inc. - President [2]

--------------------------------------------------------------------------------

Thank you, and good evening. Welcome to Synacor's Fourth Quarter 2018 Financial Results Conference Call. On the call today to discuss the company's results are CEO, Himesh Bhise; and CFO, Tim Heasley.

Please note that management will make forward-looking statements during the call that are subject to various risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Further information on these and other factors that could affect the company's financial results is included in Synacor's filings with the Securities and Exchange Commission.

Also, during this call, management will reference non-GAAP financial measures in discussing the company's performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables included in today's press release.

I'll now turn the call over to Himesh Bhise, Synacor's CEO.

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thank you, David. Hello, everyone, and welcome to our Q4 and full year 2018 conference call. Today, we will review our financial performance for the fourth quarter and the year, provide an update on recent customer wins and tee up our move to segment reporting starting with our Q1 2019 earnings announcement.

I would like to reinforce 3 takeaways on this call. First, our solid fourth quarter and full year 2018 financial results reflect our continuing focus on enhancing profitability and driving recurring revenue. Second, we continue to deliver compelling customer wins. And third, we are moving to segment reporting in 2019 to deliver better investor visibility into each of our software and advertising businesses.

Takeaway one, our continuing focus on profitability and recurring revenue. We had a strong fourth quarter, exceeding our revenue guidance and delivering at the very high end of our adjusted EBITDA guidance. Q4 revenue totaled $39.4 million, and we delivered adjusted EBITDA of $4 million, over 10% of revenue. For full year 2018, our adjusted EBITDA totaled $8.5 million, up more than 260% from $2.3 million in 2017. Revenue totaled $144 million, up about 3% over 2017 even as we deliberately shifted away from low-margin advertising revenue.

More importantly, our recurring software revenue grew 11% year-over-year. In fact, our recurring software revenue totaled about $36 million for the full year, representing 73% of our $49 million software business and 25% of total company revenue. Software gross margins in 2018 were about 75%.

These themes of profitability and high-margin recurring revenue carried through to our focus for 2019. We are guiding to $10 million to $12 million of adjusted EBITDA, which is 18% to 42% higher than 2018. We plan to stay disciplined around high-quality revenue and hence are guiding to $137 million to $145 million of 2019 revenue.

And in keeping with these themes, I am pleased to welcome Kevin Rendino, CEO of 180 Degree Capital, to Synacor's Board of Directors. 180 Degree Capital is a significant shareholder of Synacor, and I have come to know Kevin over the past 18 months. Kevin worked at BlackRock for over 20 years. He was a valued team leader overseeing 11 funds and $13 billion in assets, was a member of BlackRock's Leadership Committee and has been impressed with Synacor's transformation. I am excited to have Kevin join this distinguished board of executives who are on our board, and I look forward to his insights in helping to drive shareholder and customer value.

Takeaway two. We continue to deliver compelling customer wins. Our product value proposition is resonating with customers, and our sales pipeline is strong. Our recent notable wins include Newsy, a next-generation national news network that we have signed to the growing list of content providers using our Synacor Cloud ID authentication platform; a $3 million user cloud-based e-mail deal for a large Japanese telecommunications company that we closed in partnership with IIJ, a leading network solutions provider in Japan. We signed 116 new Zimbra e-mail business and government customers worldwide, bringing the 2018 total to 426 new customers. Fourth quarter wins include Cameroon-based CCA Bank, which operates more than 40 bank branches; payment solutions company, ArsBlue; and the University of Dodoma in Tanzania.

At the same time, revenue renewal rates for Zimbra again topped 100%. Zimbra X is now powered by Oracle Cloud and is available in the Oracle Cloud Marketplace. This collaboration with Oracle simplifies Zimbra X deployment and extends our reach to new potential customers. And on that note, I am pleased to announce today that we have signed our first commercial service provider customer for Zimbra X, a service provider in Canada. As you know, Zimbra X is our new generational, cloud-based e-mail and collaboration platform that was in beta last year. This initial customer win inaugurates the commercialization of Zimbra X as service providers in 2019.

Additionally, we remain in active discussions with AT&T regarding a longer-term agreement to provide [border] platform and managed services for ATT.net. Our current commercial term with AT&T runs through the end of March, but that agreement also accommodates a continuation of service, if needed, beyond March while our discussions with AT&T progress.

Tim will now review our Q4 numbers in greater detail and provide first quarter and full year 2019 guidance. I will follow up after that with some additional points regarding our upcoming segment reporting. Tim?

--------------------------------------------------------------------------------

Timothy J. Heasley, Synacor, Inc. - CFO & Secretary [4]

--------------------------------------------------------------------------------

Thanks, Himesh, and hello, everyone. At the outset, please note that our non-GAAP financial measures exclude stock-based compensation, other income and expense, capitalized software impairment, restructuring costs and certain legal and professional service fees. Today's press release and our SEC filings include the GAAP to non-GAAP reconciliations.

For the fourth quarter of 2018, revenue was $39.4 million, down 14% compared with the fourth quarter of 2017 and reflecting our deliberate steering away from certain low-margin, publisher-based advertising contracts. Our adjusted EBITDA for the fourth quarter was $4 million or 10.2% of revenue, which was at the high end of our guidance and was a 12.7% increase compared with the fourth quarter of 2017.

Drilling down to the different components of our fourth quarter revenue, software revenue was $12.4 million compared with $13.6 million in the fourth quarter of 2017. The decline was primarily due to a large $2 million nonrecurring deal that closed in Q4 2017. Recurring software revenue of $9.1 million was up 7.3% from the prior year.

Portal and advertising revenue was $27 million compared with $32.4 million in the fourth quarter of 2017, again, due to our deliberate pivot away from certain low-margin, publisher-based advertising revenue.

Cost of revenue was 53% in the fourth quarter versus 55% in the fourth quarter a year ago. This was primarily due to the improved advertising margins and our growing high-margin recurring software revenue. As a result, gross margin in the fourth quarter of 2018 increased to 47% compared with 45% in the same quarter last year.

Total operating expense, exclusive of depreciation and amortization expense and also excluding stock-based comp of $0.4 million, restructuring costs and certain legal and professional service fees of $0.6 million and capitalized software impairment of $0.6 million, was $14.7 million for the fourth quarter, down $2.3 million or 14% from the fourth quarter last year. This is primarily a result of the cost reductions announced in Q2 and Q3, along with better control over discretionary spending.

GAAP net loss for Q4 was $0.4 million or $0.01 per share compared with a net loss of $0.1 million or $0.00 per share in the fourth quarter of 2017. As mentioned, the Q4 results were negatively impacted by the $0.6 million capitalized software impairment.

The EPS calculation for the fourth quarter of 2018 and '17 is based on 39.0 million and 38.7 million weighted average common shares outstanding, respectively.

Q4 adjusted EBITDA of $4 million was at the high end of our guidance and was up 12.7% from $3.6 million in the same quarter a year ago. The increase is primarily the result of our growth in higher-margin reoccurring software revenue and our cost reduction initiatives. Our adjusted EBITDA margin for the fourth quarter of 10.2% is the highest level we've had since Q4 2014. The reconciliation of GAAP net income to adjusted EBITDA is included in our earnings release.

Capital expenditures for the quarter, which are primarily capitalized software, were $1 million, and capital lease payments for the quarter were $0.6 million.

We ended the quarter with $15.9 million in cash and cash equivalents compared with $15.7 million at the end of Q3, and we continue to have no borrowings on our $12 million credit facility.

Turning to guidance for Q1 and full year 2019. For the first quarter, we expect revenue to be in the range of $31 million to $33 million with a net loss of $2.6 million to $3.1 million and adjusted EBITDA of $1 million to $1.5 million. We expect approximately 39 million weighted average shares outstanding in the first quarter. For full year 2019, our guidance for revenue is in the range of $137 million to $145 million with a net loss in the range of $2.2 million to $4.2 million and adjusted EBITDA in the range of $10 million to $12 million. A GAAP to non-GAAP reconciliation of our guidance is included in our earnings release.

With that, I'll turn the call back over to Himesh.

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Thank you, Tim. Let me now tee up Takeaway 3. We are moving to segment reporting starting with our Q1 2019 earnings release in order to deliver better investor visibility into each of our software and advertising businesses. Synacor has long been known for its white label portal and advertising business. Over the last 3 years, we have also built, in parallel, a high-margin, recurring revenue weighted software business, which is comprised of our Zimbra e-mail and collaboration platform and our cloud-based identity platform. In 2018, we began sharing recurring and nonrecurring revenue for our software and advertising product lines. This helped introduce you to our $49 million, 73% recurring, 75% gross margin, 100% revenue renewal software business. Beginning in 2019, we are formalizing these product segments in our accounting processes, and going forward, we will be able to report revenue and profitability for both of our software and advertising segments. Our software segment comprises Zimbra collaboration and cloud-based identity, while our advertising segment comprises white label portals and publisher-based advertising.

Along with financial reporting, we are also aligning our organizational processes to better drive performance in each of these businesses. We are doing this to provide more transparency to investors into how we are optimizing each of these segments for growth and profitability and to provide the necessary information for investors to better value Synacor as a sum of our $49 million software business and our $95 million advertising business. The management team, the board and I, remain excited about the prospects of Synacor, and I look forward to reporting our progress to you throughout 2019. We will now open the call to questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from the line of Austin Moldow from Canaccord.

--------------------------------------------------------------------------------

Austin William Moldow, Canaccord Genuity Limited, Research Division - Associate [2]

--------------------------------------------------------------------------------

Certainly looking forward to the new segment reporting. Really appreciate you being able to break out revenue and profit going forward, so looking forward to that. My first question is about -- I know you commented on the AT&T contract renewal discussions. But I'm just wondering how AT&T's contract factors into your current guidance. What are you currently assuming happens?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Sounds good. First of all, Austin, thank you. Thank you for the question, and thank you for the comment on segment reporting. We're actually excited about being able to provide you and the other analysts and investors that information as well because we are excited about each of these segments, and we believe that will provide a level of transparency that will help you understand and better value Synacor. Regarding AT&T and our guidance, our guidance includes and is based on our best judgment given the information we currently have. But let me kind of perhaps describe a few additional facts that might be helpful. First off, our product performance as it relates to the ATT portal remains strong. As you will probably see in our 10-K, the ATT portal yielded approximately $12 million of revenue in Q4. That's good performance for us, good performance for our customer. And on the basis of that good performance, we remain in active discussions with AT&T about a longer-term agreement that is mutually beneficial to both parties. The current agreement accommodates a scenario in -- like this. So it accommodates us continuing to provide these services, if needed, beyond March while the parties continue to remain in discussions. And finally, as you know, our products require a lot of systems integrations. They require user migration. They require customization, which makes all of them quite sticky and can -- just as we have many months before we start booking revenue on a new customer, in the same way, migration period tends to be very long as well. And so all of that is kind of factored in our current guidance. And that's what we believe, and that's what we are working to deliver.

--------------------------------------------------------------------------------

Austin William Moldow, Canaccord Genuity Limited, Research Division - Associate [4]

--------------------------------------------------------------------------------

Okay. Great. I appreciate the commentary. My next question is I'm wondering if you might be able to update 2 products from Q1 of 2018. So hopefully, if you're able to, can you update us on the roll out and progress of the RefleX suite of ad monetization products and Forever Login for TV Everywhere subscribers that you announced much earlier in 2018?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Absolutely. So for those who may not remember, our RefleX suite of advertising products is really the basis of a number of monetization tools that we have been taking to market, making them available in our white label portals but also making them available to our publisher partners. That has actually been going well. You've heard us talk about this on this call and through our Q3 call as well about our shift in our focus on high-margin advertising revenue. That requires a number of things to happen. It requires the right choice of publishers, the right kind of inventory and the right kind of engagement mechanisms with our publisher partners. We believe that, that growth and the deeper relationship we are driving with many of our publisher partners is in part based on the suite of advertising products and offerings that we bring to them. So I'd say that is going well, Austin. And it continues to be a key element in the way we engage with a growing base of publisher partners to drive, again, a growing margin number in our publisher-based advertising business. As it relates to Cloud ID -- so Forever Login, again, for those who may not remember, was a unique, was a very innovative feature that we announced last year that allowed our users to never have to use a password as long as we could recognize their device. And there was a lot of special sauce we built to enable our customers to be able to do that. We're actually not selling that separately. It's actually part of a package of Cloud ID services we offer and part of various tiers of service that we offer in Cloud ID. We've been announcing a new Cloud ID customer pretty much every quarter. You've heard us announce Newsy this time. In addition to that, we announced on our last call a partnership or a collaboration with a systems integrator who is working with several service providers in the U.S. to deploy Cloud ID. So suffice to say, our sales performance on Cloud ID is strong, and our sales pipeline for Cloud ID is really strong. And each of these product features and innovations, like Forever Login, are certainly playing a part in that business.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

Your next question comes from the line of Mark Argentino (sic) [Mark Argento] from Lake Street Capital.

--------------------------------------------------------------------------------

John David Godin, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [7]

--------------------------------------------------------------------------------

This is John on for Mark. Just wanted to drill in on the recurring software a little bit. What are you guys seeing as far as mix between the e-mail versus the identity platforms? And number two, as we look at 2019 and gross margins, how are you kind of seeing those trending throughout the year?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [8]

--------------------------------------------------------------------------------

Great. Thanks for the question, John. Let me start with the second one first. Our gross margins in the software business remains strong. I think you've seen us announce gross margins in the mid-70s pretty consistently now on several calls. That's how we think about the business going forward. And as we grow the software aspect of the business, that is goodness that you see applied to the overall gross margin levels of the company, and you heard Tim talk about that a little bit on this call. Your first one in terms of mix, right now, the mix is e-mail weighted. And again, you heard us on multiple calls now over the last several quarters. And it was pretty clear that while we were innovating in Cloud ID, there was a lot of activity happening in the e-mail space, on our core platform, which is Zimbra 8, on the development of our new platform, Zimbra X, bringing that to beta, deploying that on the Oracle Cloud, making it available to a new set of customers. And you just heard us announce the first one. So I'd say that activity right now is weighted on Zimbra. But as I just mentioned to Austin on the last question, our Cloud ID pipeline is really strong. Some of the larger customers, service provider customers, content provider customers, tend to have longer sales cycles but tend to be larger deals when they do pop. And so based on that, we certainly expect Cloud ID to play a starring role in our revenues in 2019 and going forward.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

Your next question comes from the line of Laura Martin from Needham.

--------------------------------------------------------------------------------

Laura Anne Martin, Needham & Company, LLC, Research Division - Senior Analyst [10]

--------------------------------------------------------------------------------

Can you guys hear me okay?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [11]

--------------------------------------------------------------------------------

We can, Laura.

--------------------------------------------------------------------------------

Laura Anne Martin, Needham & Company, LLC, Research Division - Senior Analyst [12]

--------------------------------------------------------------------------------

Great. Let me revisit Austin's question a little bit. So you did $144 million, kudos to you, in '18. You're sort of holding the high end of guidance flat in '19. And like you say, you've been focusing on the quality of revenue. Those EBITDA numbers are quite strong, and the growth. So if it's not AT&T that you're sort of moderating, what's going to happen with AT&T? What are the lower-quality revenues that you're pulling out such that we're not going to have growth in '19, we're just going to have flat revenue in '19 even though our EBITDA is growing?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [13]

--------------------------------------------------------------------------------

Sounds good. Thanks for the question, Laura. And again, thank you for the comments on the quarter. Clearly, we are pleased with the results as well. A couple of thoughts to your question. First of all, exactly as you said, we are prioritizing, and the focus we want to draw is on our EBITDA growth, right? So even you look at our guidance, even at the $10 million to $12 million guidance range, we're looking at roughly 18% to 40% EBITDA growth year-over-year, which we feel is pretty good. Then when we look at revenue, the lower margin revenue was certain kinds of publishers, certain kinds of advertising inventory that we were monetizing on behalf of these publishers that was not generating the kind of return that we were expecting and just creating cycles inside of the company. You heard us kind of starting to strip that away late Q3 and Q4. But from a year-over-year comparison basis, that revenue is still represented in almost 2/3 of last year. And so that's the year-over-year comparison that you are seeing us strip away.

--------------------------------------------------------------------------------

Laura Anne Martin, Needham & Company, LLC, Research Division - Senior Analyst [14]

--------------------------------------------------------------------------------

So that can continue into 1Q and [1 3], will you still have those sort of low-quality forms of revenue, still? Is that the implication?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [15]

--------------------------------------------------------------------------------

Just from a year-over-year comparison point of view, right? I mean, the business -- like we said, we're guiding to $137 million to $145 million, which is a range, as you know, with some of the longer sale cycles in our business. So it kind of accommodates for -- it takes into account the first half of last year, which had some of this higher revenue with lower margin. But if you kind of go back to the bottom of the chart, which is the punchline, which is the EBITDA number, you will see regardless of our revenue expectation, the EBITDA still comes out strong as a way of showing you that that's kind of what we're focused on, and we're making these kinds of revenue decisions ultimately based on the EBITDA that drives the company.

--------------------------------------------------------------------------------

Laura Anne Martin, Needham & Company, LLC, Research Division - Senior Analyst [16]

--------------------------------------------------------------------------------

Okay. So it sounds like not only do we have some more of this low-quality revenue, but you're making a point which is valid, which is the revenue you stripped out in Q3 and Q4 is still missing in Q1, 2 and half of 3Q this year, so that limits revenue growth because it's actually down from some of those sources that you ended last year. Right, that's what you're saying?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [17]

--------------------------------------------------------------------------------

Right.

--------------------------------------------------------------------------------

Laura Anne Martin, Needham & Company, LLC, Research Division - Senior Analyst [18]

--------------------------------------------------------------------------------

Okay. So -- what I take that to mean is if we don't renew AT&T, we have $40 million of down side-ish to the going forward number in '19 and '20. So there's no -- you didn't, like, shave some of these numbers for the AT&T possibility, like, probability weighted that AT&T would have renewed. Do I interpret that correctly?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [19]

--------------------------------------------------------------------------------

So Laura, I'm going to just reinforce, I mean, we're in active discussions with AT&T. We believe we are in a good spot given the performance we've had for them and with them leading up to even the Q4 numbers. And you add the -- add to that the fact that the contract accommodates us, continuing to offer service beyond March. And these kinds of decisions, even if they happen even in the scenario you described, take a long time to put into place. I mean, we've had some of our customers that have taken over a year and more to migrate users away. So there is always that aspect of it. And hence, we've kind of accounted for all of that as we put our 2019 guidance together.

--------------------------------------------------------------------------------

Laura Anne Martin, Needham & Company, LLC, Research Division - Senior Analyst [20]

--------------------------------------------------------------------------------

Okay. That's actually super helpful. And then my last thing was the 6 million -- I can't remember here. I can't see my notes. $6 million or $600,000 software impairment, was that related to an acquisition you made? Was that some of the base, the core business that we're pivoting away from? What was that software impairment charge related to? What software specifically?

--------------------------------------------------------------------------------

Timothy J. Heasley, Synacor, Inc. - CFO & Secretary [21]

--------------------------------------------------------------------------------

Yes. Laura, this is Tim. Basically, that's related to some previously internal capitalized software expenses that we had. In this particular case, it related to our e-mail product. And we review these routinely every quarter to look for potential impairment, and we ended up going down a different path. We're coming up with a even better solution. So some of the expenses related to that were no longer being used or no longer had any future economic value. So that's why we reflected that as an impairment. So that's just something we normally look at every single quarter.

--------------------------------------------------------------------------------

Laura Anne Martin, Needham & Company, LLC, Research Division - Senior Analyst [22]

--------------------------------------------------------------------------------

Okay. Perfect. I -- that's perfect. That's what I need to know. Any blockchain activity, just as I leave, any blockchain activity?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [23]

--------------------------------------------------------------------------------

Nothing new to report. We were -- we have the blockchain version of Zimbra X. It was kind of -- it's actually live. It's in beta with a customer. We continue to do our pilot, so we continue to be happy with our foothold in the blockchain space. But no new news beyond that, Laura.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

(Operator Instructions) Your next question comes from the line of George Sutton from Craig-Hallum.

--------------------------------------------------------------------------------

George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [25]

--------------------------------------------------------------------------------

An AT&T-related question but from a different angle. You were actually recently, it looks like, hiring a new engineer on the AT&T platform. Kind of an odd move if you have any concerns about your ongoing work with AT&T. Can you just address it from that perspective?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [26]

--------------------------------------------------------------------------------

First of all, thank you for the question, George. We continue to work with AT&T. We have a team on the ground. We had a good Q4 with them. The team is working hard on delivering Q1, both for us and for our customer. Like I said, we, if we need to, can continue working with them beyond March, and we continue to talk to them about a longer-term agreement. And in that context, we're going to hire people to get this done.

--------------------------------------------------------------------------------

George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [27]

--------------------------------------------------------------------------------

Moving on to the Oracle Cloud advantages that you talk about. I just want to make sure we understand what those advantages are. What were you moving from?

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [28]

--------------------------------------------------------------------------------

We're moving from what were primarily private cloud environments, right, so data center style environment, into a public cloud environment, where it's easier to scale up, to scale down, to use utilities in the cloud without purchasing and provisioning every single one of them. And then to make that service then available to several participants in the Oracle Cloud Marketplace in a much easier way.

--------------------------------------------------------------------------------

George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [29]

--------------------------------------------------------------------------------

Got you. Okay. I understand. And then lastly, for Tim, the cost realignment, can you just give us an update of -- is that done? Have we seen the benefits of that? Or where are we in that program?

--------------------------------------------------------------------------------

Timothy J. Heasley, Synacor, Inc. - CFO & Secretary [30]

--------------------------------------------------------------------------------

Yes, George. We basically recognize or realize, I guess, is probably a better term, roughly about $1.7 million of cost reductions related to the cost reductions that were announced earlier in the year. And there are still some amount that we'll be carrying over for us into 2019. We believe for total year 2018, we -- the number is somewhere around $3.2 million of that cost reduction that we recognize -- or, I'm sorry, realized again. And then we'll be carrying over the remainder into 2019 and 2020.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

And there are no further questions at this time. I will now turn the call back to management for closing remarks.

--------------------------------------------------------------------------------

Himesh Bhise, Synacor, Inc. - President, CEO & Director [32]

--------------------------------------------------------------------------------

Thank you, operator. And thank you, everyone, for joining us today. Please note that we will be at the Sidoti & Company Spring Conference in New York City on March 28. We will also be at the Ladenburg Thalmann Technology Expo in New York on May 30. We hope to see you at one or both of these events. Thank you, again, and have a nice evening.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

This concludes today's conference call. You may now disconnect.