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Synchronoss Announces Financial Results for the Full Year 2017 and First Quarter of 2018

BRIDGEWATER, N.J.--(BUSINESS WIRE)--

  • Filed Form 10-K for 2017, including restated results for 2015 and 2016, and Form 10-Q for the first quarter of 2018

Synchronoss Technologies, Inc. (SNCR), a global leader and innovator in cloud, messaging, digital, and IoT products and platforms, today announced that on June 29, 2018 it filed its Annual Report on Form 10-K for the year ended December 31, 2017, including the previously announced restatement of prior period results and its Quarterly Report on Form 10-Q for the first quarter of 2018. The Form 10-K also includes relevant quarterly, unaudited financial information for the first, second and third quarters of 2017.

Glenn Lurie, President and CEO of Synchronoss, said “Synchronoss’ filings represent a significant step towards reaching our SEC financial reporting obligations and Nasdaq listing requirements.” Lurie added, “As we look ahead, we believe that Synchronoss is well positioned for long-term success. We have re-focused the company on the telecommunications market while also adding the related media and technology sectors, expanding our market with an overall TMT focus. Synchronoss is differentiated by our tremendous product portfolio, domain expertise, and experienced team. We are pursuing a number of exciting new opportunities, which I am confident will drive growth and profitability for the company over time."

Lawrence Irving, Chief Financial Officer of Synchronoss, said “We are very pleased to have filed our Form 10-K for 2017 and to have completed the restatement of our financial statements. This was a comprehensive undertaking that involved a detailed and thorough examination of our current and historical financial statements, as well as our accounting policies and work processes.” Irving added, “Our next step is to complete the process to resolve any outstanding issues with Nasdaq.”

Summary Financial Highlights:

Mr. Irving continued, “Our financial performance in the first quarter of 2018 reflects the 2017 impact of transitioning our business, as well as management’s focus on completing the financial statement refiling process. The company wound down its enterprise strategy and re-focused on a TMT strategy that leverages its telecom roots, in addition to transitioning its Digital Cloud business to a premium subscriber model. With these distractions now behind us, and a new, re-focused strategy in place along with a meaningful infusion of new leadership brought into the company, we believe Synchronoss is much better positioned to generate solid growth from a long-term perspective.”

First Quarter 2018 Financial Results

Synchronoss adopted the new revenue recognition standard, ASC 606, as of January 1, 2018. The company’s first quarter 2018 financial results are presented according to ASC 606. The company’s full year 2017 results are presented under the previous accounting standard, ASC 605.

  • Revenue: Total Revenue was $83.7 million, compared to $86.1 million in the first quarter of 2017. Revenue in the first quarter of 2018 was favorably impacted by $11.0 million due to the implementation of ASC 606. Digital Cloud Revenue was $61.3 million, a 19.9% decrease year-over-year, and Messaging Revenue was $22.4 million, a 133.7% increase year-over-year. The year-over-year decrease in Digital Cloud revenue reflects the transition of our Cloud business to a focus on a premium subscriber model. The year-over-year increase in Messaging revenue reflects new sales in the Japanese market and revenue related to the delivery and launch of a new advanced messaging solution.
  • Gross profit: Gross profit was $39.2 million, representing a 46.8% gross margin. Non-GAAP gross profit was $40.3 million, representing a 48.1% non-GAAP gross margin.
  • Operating Income (Loss) from continuing operations: Loss from continuing operations was ($44.2) million, compared to a loss of ($51.3) million in the year-ago period.

    Non-GAAP loss from continuing operations was ($20.9) million, compared to a loss of ($27.1) million in the year-ago period. Non-GAAP loss from continuing operations excludes stock-based compensation expense, acquisition costs, restructuring, amortization expense, integration costs, and one-time expenses due to restatement.
  • Adjusted EBITDA: Adjusted EBITDA was ($5.9) million, compared to ($12.4) million in the year-ago period. Adjusted EBITDA represents GAAP operating loss plus stock-based compensation expense, acquisition and restructuring charges, the net change in contingent consideration obligation, depreciation and amortization and restatement expenses.
  • Net Income (Loss) from continuing operations net of loss attributable to non-controlling interests: Net loss from continuing operations net of loss attributable to non-controlling interests was ($40.0) million, or ($0.95) per share based on 42.2 million weighted-average shares outstanding. This compares to a net loss of ($58.7) million, or ($1.33) per share based on 44.2 million weighted-average shares outstanding in 2017.

    Non-GAAP net loss from continuing operations net of loss attributable to non-controlling interests was ($22.6) million, or ($0.54) per share, based on 42.2 million weighted-average shares outstanding. This compares to a net loss of ($27.9) million, or ($0.63) per share based on 44.2 million weighted-average shares outstanding in the year-ago period.
  • Cash and Cash Flow: As of March 31, 2018, Synchronoss had $320.0 million in cash, cash equivalents, short-term investments and restricted cash. Synchronoss had $228.1 million of convertible senior notes, net of issuance costs as of March 31, 2018 and $165.2 million of redeemable convertible preferred stock, net of issuance costs and discount. Synchronoss used 9.4 million in cash from operations, $1.1 million in purchase of fixed assets and $7.0 of capitalized software costs, leading to negative free cash flow of $17.5 million, compared to negative free cash flow of $19.4 million in the year-ago period.

Full Year 2017 Financial Results

  • Revenue: Total Revenue was $402.4 million, compared to $426.3 million in 2016. Digital Cloud Revenue was $348.5 million, a 9.6% decrease year-over-year, and Messaging Revenue was $53.9 million, a 31.8% increase year-over-year.
  • Gross profit: Gross profit was $220.9 million, representing a 54.9% gross margin. Non-GAAP gross profit was $227.3 million, representing a 56.5% non-GAAP gross margin.
  • Operating Income (Loss) from continuing operations: Loss from continuing operations was ($129.6) million, compared to a loss from continuing operations of ($122.6) million in 2016.

    Non-GAAP loss from continuing operations was $3.6 million in 2017, compared to non-GAAP income from continuing operations of $14.4 million in 2016.
  • Adjusted EBITDA: Adjusted EBITDA was $56.5 million, compared to $69.8 million in the year-ago period.
  • Net Income (Loss) from continuing operations net of (loss) income attributable to non-controlling interests: Net loss from continuing operations net of loss attributable to non-controlling interests was ($184.9) million, or ($4.14) per share based on 44.7 million weighted-average shares outstanding. This compares to a net loss of ($78.7) million, or ($1.81) per share based on 43.6 million weighted-average shares outstanding in 2016. Net loss reflects the impact of higher interest expense, a loss on the extinguishment of debt, an equity method investment loss, and other expense.

    Non-GAAP net loss from continuing operations net of loss attributable to non-controlling interests was ($84.1) million, or ($1.88) per share based on 44.7 million weighted-average shares outstanding. This compares to non-GAAP net income of $12.6 million, or $0.29 per share, based on 43.6 million weighted-average shares outstanding in the year-ago period.
  • Cash and Cash Flow: As of December 31, 2017, Synchronoss had $249.2 million in cash, cash equivalents, short-term investments and restricted cash. Synchronoss had $227.7 million of convertible senior notes, net of issuance costs as of December 31, 2017. Synchronoss used $18.2 million in cash from operations during 2017, $12.2 million related to the purchase of fixed assets and $9.1 million related to capitalized software costs, leading to free cash flow of negative $39.5 million, compared to free cash flow of $54.3 million in the year-ago period. 2017 free cash flow was impacted of approximately $37.2 million of one-time cash expenses related to the Company’s restatement process.

Summary of Restatement Effects on Prior Year Periods

The company’s Annual Report on Form 10-K for 2017 includes the restatement of its financial statements for the years ended December 31, 2016 and December 31, 2015. The company’s 10-K filing also includes restated selected financial data for the fiscal years ended December 31, 2016, 2015, 2014 and 2013, as well as restated unaudited financial information for each of the quarterly and year-to-date periods in 2015 and 2016 and unaudited financial information for the first three quarterly and year-to-date periods in 2017. The company has also filed its Quarterly Report on Form 10-Q for first quarter of 2018.

The circumstances that led to the restatement were in three primary areas:

Revenue Recognition Related to Hosting Services: Historically, the company entered into hosting arrangements that included various components in the fee structure, with certain fees accelerated during the initial years of the arrangement. In these instances the company recognized the accelerated fees as billed and the remaining fees were recognized on a straight-line basis over the term of the contract.

The company has determined to revise the accounting treatment for these hosting services to recognize revenue on a straight-line basis for such fees over the appropriate period of time when the benefits of hosting services were provided to the customer or the customer benefitted from the set-up fees. In certain cases, the company had entered into a separate hosting services contract with a customer, which the company has now determined should have been combined with the software license agreement and treated as part of a larger multiple element arrangement.

In other cases, certain hosting arrangements with customers included a perpetual software license that the company recognized on an upfront basis, as well as hosting fees that were recognized ratably over the term of the contract. The company has determined to revise the accounting treatment of such license fees to recognize them ratably over a period of time due to the inclusion of hosting services as part of the same multiple element arrangement. In certain cases, the company had entered into a separate hosting services contract with the customer.

The net result of these changes is that the revenue recognized on an accelerated or upfront basis has been deferred to future periods and will be recognized ratably over the term of the contract.

Revenue Recognition Related to Establishing Persuasive Evidence of an Arrangement:

Historically the company had, and continues to have, contractual arrangements with certain customers whereby there is an established master services agreement that includes general terms and conditions. Such master services agreements contemplate the customer delivering purchasing documentation for purposes of completing orders, indicating the nature, price and quantity of the products and services ordered. In certain cases, the company had historically formed a view that persuasive evidence of an arrangement existed relating to such orders based upon its receipt from the customer of written confirmation of the order and commitment to pay the agreed price, such as a quote approval sent by the customer in response to a quote issued by the company, but prior to that customer’ subsequent delivery to the company an executed statement of work or, in some instances, a purchase order pursuant to a master services agreement.

The company has determined, in certain situations, to revise the timing of revenue recognition to when it received final formal contract documentation, which occurred in a future period. In those cases where the adjustment to defer revenue has been recorded prior to when cash payment was received from the customer, the balance sheet impact has been to reduce the related accounts receivable balance, whereas the balance sheet impact of these adjustments after the receipt of cash payment from the customer has been to increase accrued liabilities.

In certain situations, these adjustments represent issues related to the timing of revenue recognition, while in other cases, these adjustments represent amounts that had subsequently been written-off to bad debt expense (whereas now both the revenue and the related bad debt expense has been reversed).

Revenue Recognition Related to Accounting for Acquisitions and Divestitures

The company identified and corrected errors related to fees received under license agreements entered into with parties of certain historical acquisitions and a divestiture. In each case, we had originally treated the license agreement as a separate transaction and recorded the license fees as revenue. The company has determined to revise the accounting treatment of such license arrangements to record the license fees as part of the accounting for the acquisition or divestiture. Accordingly, this revenue has been reversed in the company’s restated financials and will not be recognized as revenue in subsequent periods.

Summary of Impact to Revenue, Income (Loss) from Operations, and Earnings (Loss) per share:

             
In $ 000's   REVENUE ADJUSTMENTS    
      Evidence of    
Fiscal Year As Previously Hosting Arrangement Acquisitions & As Restated
Reported Revenue and Other Divestiture
            Revenue        
2016 $ 476,750 $ (39,492 ) $ 9,435 $ (20,399 ) $ 426,294
2015 $ 428,117 $ (26,908 ) $ 1,442 $ (30,090 ) $ 372,561
2014 $ 307,301 $ (14,563 ) $ (53,322 ) $ (6,000 ) $ 233,416
2013   $ 225,368   $ (5,544 )   $ (4,508 )   $ -     $ 215,316
         
In $ 000's   INCOME (LOSS) FROM OPERATIONS ADJUSTMENTS    
      Evidence of     Capitalized  
Fiscal As Previously Hosting Arrangement Acquisitions & Software and As Restated
Year Reported Revenue and Other Divestiture Other
            Revenue            
2016 $ (71,809 ) $ (39,647 ) $ 13,905 $ (6,629 ) $ (18,424 ) $ (122,604 )
2015 $ 15,131 $ (26,908 ) $ 4,484 $ (30,692 ) $ 872 $ (37,113 )
2014 $ (3,541 ) $ (14,563 ) $ (53,322 ) $ (5,960 ) $ (4,064 ) $ (81,450 )
2013   $ (19,305 )   $ (5,544 )   $ (4,508 )   $ -     $ 77     $ (29,280 )
 

Conference call details

In conjunction with this announcement, Synchronoss will host a conference call on Monday, July 2, 2018, at 8:00 a.m. (ET). To access this call, dial 877-407-9208 (domestic) or 201-493-6784 (international). Additionally, a live web cast of the conference call, and an associated presentation, will be available on the “Investor Relations” page on the company’s web site www.synchronoss.com.

Following the conference call, a replay will be available for a limited time at 844-512-2921 (domestic) or 412-317-6671 (international). The replay pass code is 13681155. 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 the deferred revenue write-down associated with acquisitions, fair value stock-based compensation expense, acquisition-related costs which includes integration costs, changes in the contingent consideration obligation, deferred compensation expense related to earn outs and amortization of intangibles associated with acquisitions.

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

About Synchronoss

Synchronoss transforms the way companies create new revenue, reduce costs and delight their subscribers with cloud, messaging, and digital products and platforms 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 and uncertainties relating to the Company’s restatement of its financial statements, its ability to regain compliance with its SEC reporting obligations, its ability to regain compliance with applicable Nasdaq listing standards and other 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, 2017 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, which are on file with the SEC and available on the SEC’s website at www.sec.gov. Additional factors may be described in those sections of the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017, to be filed with the SEC as soon as practicable. 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.

 
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
   
March 31, 2018 December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 310,426 $ 156,299
Restricted cash 1,312 89,826
Marketable securities 2,028 3,111
Accounts receivable, net of allowances of $3,235 and $3,107 at March 31, 2018 and December 31, 2017, respectively 42,033 78,186
Prepaid expenses and other current assets   34,782     43,557  
Total current assets 390,581 370,979
Marketable securities 6,272 -
Property and equipment, net 99,701 111,825
Goodwill 240,035 237,303
Intangible assets, net 130,038 132,167
Other assets 5,130 5,236
Note receivable from related party 80,724 73,984
Equity method investment   30,419     33,917  
Total assets $ 982,900   $ 965,411  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 14,518 $ 5,959
Accrued expenses 64,660 72,739
Deferred revenues 34,732 75,829
Mandatorily redeemable financial instrument   -     37,959  
Total current liabilities 113,910 192,486
Lease financing obligation 10,855 11,183
Convertible debt, net of debt issuance costs 228,057 227,704
Deferred tax liabilities 14,018 13,735
Deferred revenues 41,240 25,241
Other liabilities 6,255 6,195
Redeemable noncontrolling interest 12,500 25,280
Series A Convertible Participating Perpetual Preferred Stock, $0.0001 par value; 10,000 shares authorized; 185 shares issued and outstanding at March 31, 2018 165,246 -
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000 shares authorized, 52,274 and 52,024 shares issued; 41,220 and 46,965 outstanding at March 31, 2018 and December 31, 2017, respectively 5 5
Treasury stock, at cost (11,054 and 5,059 shares at March 31, 2018 and December 31, 2017, respectively) (150,414 ) (105,584 )
Additional paid-in capital 615,529 597,553
Accumulated other comprehensive loss (19,693 ) (23,373 )
Accumulated deficit   (54,608 )   (5,014 )
Total stockholders’ equity   390,819     463,587  
Total liabilities and stockholders’ equity $ 982,900   $ 965,411  
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
       
Three Months Ended March 31,
2018   2017
 
Net revenues $ 83,709 $ 86,097
Costs and expenses:
Cost of revenues* 44,549 46,055
Research and development 20,905 25,489
Selling, general and administrative 38,110 38,815
Restructuring charges 1,108 2,998
Depreciation and amortization   23,271     24,087  
Total costs and expenses 127,943 137,444
Loss from continuing operations (44,234 ) (51,347 )
Interest income 3,552 2,857
Interest expense (1,247 ) (10,617 )
Other expense, net 4,282 4,186
Equity method investment (loss) income   (205 )   748  
Loss from continuing operations, before taxes (37,852 ) (54,173 )
(Provision) benefit for income taxes   (125 )   8,721  
Net loss from continuing operations (37,977 ) (45,452 )
Net loss from discontinued operations, net of tax   -     (16,134 )
Net loss (37,977 ) (61,586 )
Net loss attributable to redeemable noncontrolling interests 1,285 2,889
Preferred stock dividend   (3,353 )   -  
Net loss attributable to Synchronoss common shareholders (40,045 ) (58,697 )
 
Basic:
Continuing operations $ (0.95 ) $ (0.96 )
Discontinued operations   -     (0.37 )
$ (0.95 ) $ (1.33 )
Diluted:
Continuing operations $ (0.95 ) $ (0.96 )
Discontinued operations   -     (0.37 )
$ (0.95 ) $ (1.33 )
Weighted-average common shares outstanding:
Basic   42,181     44,212  
Diluted   42,181     44,212  
 
 
* Cost of services excludes depreciation and amortization which is shown separately.
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  Three months ended March 31,
2018   2017
 
Operating activities:
Net Income (Loss) - SNCR $ (37,977 ) $ (45,452 )
Net Income (Loss) - IL - (16,134 )
 
Adjustments to reconcile Net Income (Loss) - SNCR to net cash provided by operating activities:
Depreciation and amortization expense 23,272 24,087
Change in fair value of financial instruments (3,849 ) -
Amortization of debt issuance costs 353 1,870
Accrued PIK interest (3,447 ) (2,752 )
Earnings (loss) from equity method investments 205 (748 )
Gain on disposals - (4,947 )
Assets of discontinued operations - 26,183
Amortization of bond premium 17 91
Deferred income taxes 191 5,119
Non-cash interest on leased facility 275 269
Stock-based compensation 7,184 8,112
Contingent consideration obligation - (2 )
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts 36,153 9,320
Prepaid expenses and other current assets 9,402 (21,055 )
Other assets 710 (4,925 )
Accounts payable 8,646 11,082
Accrued expenses (10,873 ) (18,821 )
Other liabilities (137 ) (39 )
Deferred revenues   (39,514 )   16,143  
Net cash used in operating activities (9,389 ) (12,599 )
 
Investing activities:
Purchases of fixed assets (1,093 ) (4,402 )
Purchases of intangible assets and capitalized software (7,047 ) (2,409 )
Proceeds from the sale of Speechcycle - 13,500
Purchases of marketable securities available for sale (6,676 ) (219 )
Maturity of marketable securities available for sale 1,450 3,975
Investing in discontinued operations - (2,704 )
Business acquired, net of cash   -     (815,008 )
Net cash used in investing activities (13,366 ) (807,267 )
 
Financing activities:
Share-based compensation-related proceeds, net of taxes paid on withholding shares 263 2,406
Debt issuance costs related to the Credit Facility - (3,692 )
Debt issuance costs related to long term debt - (19,887 )
Proceeds from issuance of long term debt - 900,000
Repayment of revolving line of credit - (29,000 )
Proceeds from sale of Treasury Shares - 1,047
Proceeds from issuance of preferred stock 86,220 -
Payments on capital obligations   (369 )   (664 )
Net cash provided by financing activities 86,114 850,210
Effect of exchange rate changes on cash   2,253     1,020  
Net increase in cash, restricted cash and cash equivalents 65,612 31,364
Cash, restricted cash and cash equivalents, beginning of period   246,126     211,433  
Cash, restricted cash and cash equivalents, end of period $ 311,738   $ 240,757  
 
Supplemental disclosures of non-cash investing and financing activities:
Issuance of common stock in connection with Intralinks acquisition $ - $ 4,700
 
Cash and cash equivalents per the Consolidated Balance Sheets $ 310,426 $ 221,178
Restricted cash per the Consolidated Balance Sheets $ 1,312   $ 19,579  
Total cash, cash equivalents and restricted cash $ 311,738   $ 240,757  
 
   
SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)

(Unaudited)

 

   
Three Months Three Months
Ended March 31, Ended March 31,
2018 2017

Non-GAAP financial measures and reconciliation:

GAAP Revenue 83,709 86,097
Less: Cost of revenues 44,549   46,055  
GAAP Gross Profit 39,160 40,042
Add: Stock-based compensation expense 1,112 1,737
Add: Acquisition costs - (2 )
Add: Integratiion -   649  
Non-GAAP Gross Profit 40,272   42,427  
Non-GAAP Gross Margin 48.1 % 49.3 %
 
GAAP (loss) income from continuing operations (44,234 ) (51,347 )
Add: Stock-based compensation expense 7,184 8,112
Add: Acquisition costs 121 1,246
Add: Restructuring 1,108 2,998
Add: Amortization expense 8,254 9,390
Add: Integration - 2,535
Add: One-Time Expenses due to Restatement, etc. 6,665   -  
Non-GAAP loss from continuing operations (20,902 ) (27,067 )
 
GAAP Net (loss) income attributable to Synchronoss (40,045 ) (58,697 )
Add: Net loss from discontinued operations, net of taxes -   16,134  

Net (loss) income from continuing operations attributable to Synchronoss

(40,045 ) (42,563 )
Add: Stock-based compensation expense 7,184 8,112
Add: Acquisition costs 121 1,246
Add: Restructuring 1,108 2,998
Add: Amortization expense 8,254 9,390
Less: Non-GAAP Expenses attributable to Non-Controlling Interest (373 ) (618 )
Add: One-Time Expenses due to Restatement, etc. 6,665 -
Add: Integration - 2,535
Less: Income Tax Effect at Stautotory Tax Rates (5,510 ) (8,992 )

Non-GAAP net (loss) income from continuing operations attributable to Synchronoss

(22,596 ) (27,892 )
 
Diluted Non-GAAP net (loss) income from continuing operations per share (0.54 ) (0.63 )
 
Weighted shares outstanding - Basic 42,181   44,212  
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)

(Unaudited)

 

       
Three Months Three Months
Ended March 31, Ended March 31,
2018 2017
GAAP Income from Operations (44,234 ) (51,347 )
Add: Stock-based compensation 7,184 8,112
Add: Acquisition, Restructuring & Integration 1,229 6,779
Add: Depreciation & Amortization 23,271 24,087
Add: Restatement Expenses 6,665   -  
Adjusted EBITDA (5,885 ) (12,370 )
 
   
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

NON-GAAP Reconciliation

(In thousands)

 
Three Months Three Months
Ended March 31, Ended March 31,
2018 2017
       
Net Cash (used in) provided by operating activities   (9,389 ) (12,599 )
Add: SW Capitalization 7,047 2,409
Add: Fixed Assets   1,093   4,402  
Free Cashflow   (17,529 ) (19,410 )
Less: One-Time Restatement Expenses   6,665   -  
Adjusted Free Cashflow   (10,864 ) (19,410 )
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
   
December 31,
2017 2016
  (Restated)
ASSETS
Current assets:
Cash and cash equivalents $ 156,299 $ 169,801
Restricted cash 89,826 41,632
Marketable securities 3,111 12,506
Accounts receivable, net of allowance for doubtful receivables of $3,107 and $1,459 at December 31, 2017 and December 31, 2016, respectively 78,186 107,474
Prepaid expenses - -
Prepaid and other current assets   43,557     38,277  
Total current assets 370,979 369,690
Marketable securities - 2,974
Property and equipment, net 111,825 158,205
Goodwill 237,303 224,651
Intangible assets, net 132,167 162,968
Deferred tax assets - 13,286
Other assets 5,236 8,658
Note receivable from related party, net of allowance for loan losses of $14,562 at December 31, 2017 73,984 70,269
Equity method investment   33,917     43,650  
Total assets $ 965,411   $ 1,054,351  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 5,959 $ 17,057
Accrued expenses 72,739 76,882
Deferred revenues 75,829 57,430
Contingent consideration obligation - 2,833
Short-term debt - 29,000
Mandatorily redeemable financial instrument   37,959     -  
Total current liabilities 192,486 183,202
Lease financing obligation 11,183 12,450
Convertible debt, net of debt issuance costs 227,704 226,291
Deferred tax liabilities 13,735 3,508
Deferred revenues 25,241 65,630
Other liabilities 6,195 8,193
Commitments and contingencies (Note 10)
Redeemable noncontrolling interest 25,280 25,280
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000 shares authorized, 52,024 and 50,388 shares issued; 46,965 and 45,292 outstanding at December 31, 2017 and December 31, 2016, respectively 5 5
Treasury stock, at cost (5,059 and 5,096 shares at December 31, 2017 and December 31, 2016, respectively) (105,584 ) (106,631 )
Additional paid-in capital 597,553 571,153
Accumulated other comprehensive loss (23,373 ) (42,350 )
Retained earnings   (5,014 )   107,620  
Total stockholders’ equity   463,587     529,797  
Total liabilities and stockholders’ equity $ 965,411   $ 1,054,351  
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
     
Year Ended December 31,
2017 2016 2015
  (Restated) (Restated)
 
Net revenues $ 402,361 $ 426,294 $ 372,561
Costs and expenses:
Cost of revenues* 181,453 194,684 154,810
Research and development 90,850 114,493 92,763
Selling, general and administrative 154,037 126,228 84,591
Net change in contingent consideration obligation - 1,194 1,515
Restructuring charges 10,739 6,333 4,946
Depreciation and amortization   94,884     105,966     71,049  
Total costs and expenses 531,963 548,898 409,674
Loss from continuing operations (129,602 ) (122,604 ) (37,113 )
Interest income 12,502 1,907 2,047
Interest expense (55,771 ) (7,414 ) (5,711 )
Loss on extinguishment of debt (29,413 ) - -
Other (expense) income, net (17,678 ) 1,022 607
Equity method investment loss   (9,125 )   -     -  
Loss from continuing operations, before taxes (229,087 ) (127,089 ) (40,170 )
Benefit for income taxes   34,863     33,220     2,388  
Net loss from continuing operations (194,224 ) (93,869 ) (37,782 )
Net income from discontinued operations, net of taxes   75,495     90,560     40,267  
Net (loss) income (118,729 ) (3,309 ) 2,485
Net loss attributable to noncontrolling interests   (9,291 )   (15,203 )   (628 )
Net (loss) income attributable to Synchronoss $ (109,438 ) $ 11,894   $ 3,113  
 
Basic
Continuing operations $ (4.14 ) $ (1.81 ) $ (0.88 )
Discontinued operations   1.69     2.08     0.95  
$ (2.45 ) $ 0.27   $ 0.07  
Diluted
Continuing operations $ (4.14 ) $ (1.81 ) $ (0.88 )
Discontinued operations   1.69     2.08     0.95  
$ (2.45 ) $ 0.27   $ 0.07  
Weighted-average common shares outstanding:
Basic   44,669     43,551     42,284  
Diluted   44,669     43,551     42,284  
 
 
* Cost of services excludes depreciation and amortization which is shown separately.
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
     
Year Ended Year ended December 31,
2017 2016 2015
  (Restated) (Restated)
Operating activities:
Net loss from continuing operations $ (194,224 ) $ (93,869 ) $ (37,782 )
Net loss from discontinued operations 75,495 90,560 40,267
Gain (loss) on sale of discontinued operations, net of tax (122,842 ) (113,129 ) -
 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense 93,924 94,911 71,049
Impairment of long-lived assets and capitalized software 960 11,055 -
Change in fair value of financial instruments 4,367 - -
Amortization of debt issuance costs 12,771 1,607 1,501
Extinguishment of debt 29,413 - -
Accrued PIK interest (12,090 ) (34 ) -
Allowance for loan losses 14,562 - -
Earnings (loss) from equity method investments 9,125 - -
Gain (loss) on disposals (4,947 ) (122 ) 16
Discontinued operations non-cash and working capital adjustments 48,647 371 -
Amortization of bond premium 244 1,416 1,705
Deferred income taxes 19,243 17,148 (453 )
Non-cash interest on leased facility 1,203 1,392 924
Stock-based compensation 22,495 34,178 31,404
Contingent consideration obligation (2,711 ) 1,194 (15 )
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts 29,283 (13,650 ) (19,774 )
Prepaid expenses and other current assets (5,513 ) 31,648 (9,057 )
Other assets 3,237 8,880 (3,751 )
Accounts payable (9,098 ) (10,089 ) (7,763 )
Accrued expenses (4,949 ) (7,523 ) (710 )
Other liabilities (3,337 ) (6,558 ) 2,128
Deferred revenues   (23,506 )   55,173     22,297  
Net cash (used in) provided by operating activities (18,248 ) 104,559 91,986
 
Investing activities:
Purchases of fixed assets (12,151 ) (42,570 ) (57,666 )
Purchases of intangible assets and capitalized software (9,119 ) (7,677 ) (2,553 )
Proceeds from the sale of Speechcycle 13,500 - -
Purchases of marketable securities available-for-sale (219 ) (13,445 ) (139,569 )
Maturities of marketable securities available-for-sale 12,371 82,904 106,210
Equity investment 608 - -
Investing in discontinued operations (13,721 ) - -
Investment In Note Receivable (6,187 ) - -
Proceeds from the sale of discontinued operations 928,171 27,335 -
Businesses acquired, net of cash   (815,008 )   (86,322 )   (101,502 )
Net cash provided by (used in) investing activities 98,245 (39,775 ) (195,080 )
 
Financing activities:
Proceeds from the exercise of stock options 2,584 13,633 19,936
Taxes paid on withholding shares (442 ) - -
Payments on contingent consideration obligation (122 ) - (4,468 )
Debt issuance costs related to the Credit Facility and Revolving Facility (3,692 ) (1,346 ) -
Debt issuance costs related to the 2017 Term Facility (19,887 ) - -
Debt amendment costs related to the 2017 Credit Agreement (16,776 ) - -
Proceeds from issuance of long term debt 900,000 - -
Repayment of long term debt (900,000 ) - -
Borrowings on revolving line of credit - 144,000 -
Repayment of revolving line of credit (29,000 ) (115,000 ) -
Excess tax benefits from stock option exercises 17 - -
Repurchases of common stock - (40,025 ) -
Proceeds from the sale of treasury stock in connection with an employee stock purchase plan 1,047 2,183 1,902
Proceeds from mandatorily redeemable financial instruments 33,592 - -
Repayments of capital lease obligations   (2,985 )   (3,815 )   (2,021 )
Net cash (used in) provided by financing activities (35,664 ) (370 ) 15,349
Effect of exchange rate changes on cash   (9,641 )   (853 )   (350 )
Net increase in cash, restricted cash and cash equivalents 34,692 63,561 (88,095 )
Cash, restricted cash and cash equivalents at beginning of period   211,433     147,872     235,967  
Cash, restricted cash and cash equivalents at end of period $ 246,125   $ 211,433   $ 147,872  
 
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 7,612   $ 4,661   $ 29,868  
Cash paid for interest $ 55,957   $ 6,981   $ 5,791  
 
Supplemental disclosures of non-cash investing and financing activities:
Issuance of common stock in connection with Openwave acquisition $ -   $ 22,000   $ -  
Issuance of common stock in connection with Intralinks acquisition $ 4,700   $ -   $ -  
 
Cash and cash equivalents per Consolidated Balance Sheets $ 156,299 $ 169,801 $ 147,872
Restricted cash $ 89,826   $ 41,632   $ -  
Total cash, cash equivalents and restricted cash $ 246,125   $ 211,433   $ 147,872  
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)

(Unaudited)

 

           
Twelve Months Ended December 31,
2017   2016   2015

Non-GAAP financial measures and reconciliation:

GAAP Revenue 402,361 426,294 372,561
Less: Cost of revenues 181,453   194,684   154,810  
GAAP Gross Profit 220,908 231,610 217,751
Add: Stock-based compensation expense 4,602 7,310 6,922
Add: Acquisition costs (2 ) 10 1
Add: Integratiion 1,744   17,472   8,838  
Non-GAAP Gross Profit 227,252   256,401   233,512  
Non-GAAP Gross Margin 56.5 % 60.1 % 62.7 %
 
GAAP (loss) income from continuing operations (129,602 ) (122,604 ) (37,113 )
Add: Stock-based compensation expense 22,495 34,178 31,404
Add: Acquisition costs 13,023 10,527 1,325
Add: Restructuring 10,739 6,333 4,946
Add: Amortization expense 34,695 50,646 28,381
Add: Integration 7,804 34,174 16,252
Add: Net change in contingent consideration obligation - 1,194 1,515
Add: One-Time Expenses due to Restatement, etc. 37,197   -   -  
Non-GAAP (loss) income from continuing operations (3,649 ) 14,448   46,711  
 
GAAP Net (loss) income attributable to Synchronoss (109,438 ) 11,894 3,113
Less: Net income from discontinued operations, net of taxes (75,495 ) (90,560 ) (40,267 )

Net (loss) income from continuing operations attributable to Synchronoss

(184,933 ) (78,666 ) (37,154 )
Add: Stock-based compensation expense 22,495 34,178 31,404
Add: Acquisition costs 13,023 10,527 1,325
Add: Restructuring 10,739 6,333 4,946
Add: Amortization expense 34,695 50,646 28,381
Add: Net change in contingent consideration obligation - 1,194 1,515
Add: Loss on Extinguishment of Debt 29,413 - -
Add: Net (loss) income attributable to noncontrolling interests 9,291 15,203 628
Less: Non-GAAP Expenses attributable to Non-Controlling Interest (1,955 ) (4,999 ) (128 )
Add: One-Time Expenses due to Restatement, etc. 37,197 - -
Add: Integration 7,804 34,174 16,252
Less: Income Tax Effect at Stautotory Tax Rates (61,827 ) (55,957 ) (32,043 )

Non-GAAP net (loss) income from continuing operations attributable to Synchronoss

(84,058 ) 12,633   15,127  
 
Diluted Non-GAAP net (loss) income from continuing operations per share (1.88 ) 0.29   0.36  
 
Weighted shares outstanding - Basic 44,669   43,551   42,284  
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(Unaudited)
         
Twelve Months Ended December 31,
2017     2016     2015  
GAAP Income from Operations (129,602 ) (122,604 ) (37,113 )
Add: Stock-based compensation 22,495 34,178 31,404
Add: Acquisition, Restructuring & Integration 31,566 51,034 22,523
Add: Net change in contingent consideration obligation -

 

1,194

 

1,515
Add: Depreciation & Amortization 94,884 105,966 71,049
Add: One-time Restatement Expenses 37,197   -   -  
Adjusted EBITDA 56,540 69,768 89,378
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NONGAAP Reconciliation

(In thousands)

   

 

Twelve Months Ended December 31,
2017   2016   2015
Net Cash (used in) provided by operating activities   (18,248 ) 104,559 91,986
Add: SW Capitalization 9,119 7,677 2,553
Add: Fixed Assets   12,151   42,570 57,666
Free Cashflow   (39,518 ) 54,312 31,767
Less: One-Time Restatement Expenses   37,197   - -
Adjusted Free Cashflow   (2,321 ) 54,312 31,767
 

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