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Synchronoss Technologies Announces First Quarter 2019 Results

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BRIDGEWATER, N.J., May 09, 2019 (GLOBE NEWSWIRE) -- Synchronoss Technologies Inc. (SNCR), a global leader and innovator in cloud, messaging, digital and IoT platforms and products, today announced financial results for its first quarter ended March 31, 2019.

First quarter highlights:

  • Revenue was $88.1 million, including 73 percent recurring revenue, up 5.3 percent compared to $83.7 million in the first quarter of 2018.

  • GAAP net loss for the quarter was $27.6 million, or 68 cents per share, compared to $40.0 million or 95 cents per share in the prior year’s first quarter.

  • Non-GAAP net loss from continuing operations per share was $14.7 million or 36 cents per share, compared to $22.6 million or 54 cents per share in the prior year’s first quarter.

  • Synchronoss delivered $6.6 million of adjusted EBITDA, compared to an adjusted EBITDA loss of $10.8 million in the first quarter of 2018. Adjusted EBITDA margin in the first quarter was 7.5 percent compared to negative 12.9 percent in the prior year’s first quarter.

Glenn Lurie, president and chief executive officer, stated, “The first quarter was another positive step for Synchronoss as we continue to deliver on our commitments to shareholders and execute on our financial and operational objectives. We delivered healthy revenue growth on both a sequential and year-over-year basis due to strength in our messaging business, as well as positive adjusted EBITDA for the third consecutive quarter. In addition, we continue to build sales momentum with the announcement of several transformational new customer agreements including a white label cloud platform deal with a significant new customer. These agreements are expected to deliver meaningful revenue growth going forward.”

Three Months Ended March 31,

$000s

2019

2018

% Change

Revenues

$88,105

$83,709

5.25%

Net Loss

(27,587)

(40,045)

31.1%

Adjusted EBITDA

6,630

(10,785)

161.5%

New customer agreements and partnerships that the company is announcing include:

  • The company has signed a substantial new customer for its white label cloud platform. The customer expects to launch the cloud service in the third quarter of 2019, and we plan to provide additional details at that time.

  • A partnership with Amazon, in which Synchronoss will become a global service integrator of Amazon products with mobile operators worldwide. As part of this agreement, the Synchronoss Digital Experience Platform, or DXP, will be utilized to enable mobile network operators to offer Amazon consumer services such as Amazon Prime, Prime Video, and Amazon Music, and others directly to subscribers as part of their invoice.

  • The company has joined Microsoft’s Internet of Things (IoT) Accelerate Program and will develop and offer best-of-breed Smart Buildings solutions for enterprises globally. The first initiative in this partnership will be a live proof of concept with global IT services provider Rackspace, deploying a smart buildings service to monitor, control, and optimize energy usage and reduce costs at Rackspace’s San Antonio headquarters, which spans more than one million square feet.

  • The launch of Phase II of the company’s advanced messaging platform in Japan, which will enable application-to-person, or A2P messaging, giving brands the ability to interact directly with the entire Japanese Plus Messaging subscriber base.

  • Earlier this year, the company also announced an agreement with Assurant, a leading provider of device protection insurance, which will utilize the Synchronoss white label cloud platform for its Pocket Geek solution which is offered in their device protection bundles.

David Clark, chief financial officer, added, “The first quarter financial results demonstrate the hard work the entire Synchronoss team has done over the past year to reduce costs and improve financial leverage across our business. Compared to the first quarter of 2018, gross margins are up 850 basis points, driving a 24 percent improvement in gross profit. Operating expenses were likewise down 17%, driving a $17.4 million improvement in adjusted EBITDA and a $12.5 million improvement in the GAAP net loss on a year-over-year basis. To date in 2019, we have repurchased another approximately $50 million of our convertible notes prior to maturity at a discount. We continue to be confident in our cash position and cash generating ability, and at present, we have approximately $101 million of cash on the balance sheet and the balance of convertible notes due is down to approximately $64 million.”

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

Conference Call Details
Synchronoss will host a conference call on Thursday, May 9, 2019, at 5:00 p.m. (ET) to discuss the company’s financial results. To access this call, dial 1-201-493-6784. Additionally, a live web cast of the conference call will be available on the Investor Relations page on the company’s web site at www.synchronoss.com.

Following the conference call, a replay will be available for a limited time at 1-412-317-6671. The replay pass code is 13689764. An archived web cast of this conference call will also be available on the Investor Relations page of the company’s web site, www.synchronoss.com.

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

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

About Synchronoss Technologies, Inc.

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

Forward-looking Statements

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

Contact:

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

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



SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)

March 31, 2019

December 31, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

88,768

$

103,771

Restricted cash

1,526

6,089

Marketable securities, current

19,674

28,230

Accounts receivable, net of allowances of $5,139 and $4,599 at March 31, 2019 and December 31, 2018, respectively

108,939

102,798

Prepaid expenses

41,932

45,058

Other current assets

10,045

8,508

Total current assets

270,884

294,454

Marketable securities, non-current

369

6,658

Property and equipment, net

52,128

67,937

Operating lease right-of-use assets

64,747

Goodwill

223,359

224,899

Intangible assets, net

92,759

98,706

Other assets

10,013

8,982

Equity method investment

376

1,619

Total assets

$

714,635

$

703,255

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

18,948

13,576

Accrued expenses

52,875

59,545

Deferred revenues, current

65,083

57,101

Short-term convertible debt, net of debt issuance costs

97,205

113,542

Total current liabilities

234,111

243,764

Lease financing obligation

9,494

Operating lease liabilities, non-current

66,559

Deferred tax liabilities

796

1,347

Deferred revenues, non-current

46,700

59,841

Other non-current liabilities

7,504

10,797

Redeemable noncontrolling interest

12,500

12,500

Commitments and contingencies

Series A Convertible Participating Perpetual Preferred Stock, $0.0001 par value; 10,000 shares authorized; 195 shares issued and outstanding at March 31, 2019

177,065

176,603

Stockholders’ equity:

Common stock, $0.0001 par value; 100,000 shares authorized, 49,908 and 49,836 shares issued; 42,746 and 42,674 outstanding at March 31, 2019 and December 31, 2018, respectively

5

5

Treasury stock, at cost (7,162 and 7,162 shares at March 31, 2019 and December 31, 2018, respectively)

(82,087

)

(82,087

)

Additional paid-in capital

533,224

534,673

Accumulated other comprehensive loss

(31,966

)

(30,383

)

Accumulated deficit

(249,776

)

(233,299

)

Total stockholders’ equity

169,400

188,909

Total liabilities and stockholders’ equity

$

714,635

$

703,255

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

Three Months Ended March 31,

2019

2018

Net revenues

$

88,105

$

83,709

Costs and expenses:

Cost of revenues

38,953

44,549

Research and development

19,681

20,905

Selling, general and administrative

29,246

38,110

Restructuring charges

421

1,108

Depreciation and amortization

20,143

23,271

Total costs and expenses

108,444

127,943

Loss from operations

(20,339

)

(44,234

)

Interest income

189

3,552

Interest expense

(585

)

(1,247

)

Gain on extinguishment of debt

387

Other Income

463

4,282

Equity method investment loss, net

(1,243

)

(205

)

Loss from operations, before taxes

(21,128

)

(37,852

)

Benefit (provision) for income taxes

1,391

(125

)

Net loss

(19,737

)

(37,977

)

Net (income) loss attributable to redeemable noncontrolling interests

(313

)

1,285

Preferred stock dividend

(7,537

)

(3,353

)

Net loss attributable to Synchronoss

$

(27,587

)

$

(40,045

)

Earnings per share:

Basic

$

(0.68

)

$

(0.95

)

Diluted

$

(0.68

)

$

(0.95

)

Weighted-average common shares outstanding:

Basic

40,320

42,181

Diluted

40,320

42,181

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

Three Months Ended March 31,

2019

2018

Operating activities:

Net loss from operations

$

(19,737

)

$

(37,977

)

Adjustments to reconcile Net Loss to net cash used in operating activities:

Depreciation and amortization

20,143

23,272

Change in fair value of financial instruments

(3,849

)

Amortization of debt issuance costs

155

353

(Gain) loss on extinguishment of debt

(387

)

Accrued PIK interest

(3,447

)

(Earnings) loss from equity method investments

1,243

205

Amortization of bond premium

(36

)

17

Deferred income taxes

(525

)

191

Non-cash interest on leased facility

275

Stock-based compensation

5,555

7,184

Changes in operating assets and liabilities:

Accounts receivable, net of allowance for doubtful accounts

(6,141

)

36,153

Prepaid expenses and other current assets

4,272

9,402

Other assets

(242

)

710

Accounts payable

6,084

8,646

Accrued expenses

(10,780

)

(10,873

)

Other liabilities

(370

)

(137

)

Deferred revenues

(4,918

)

(39,514

)

Net cash used for operating activities

(5,684

)

(9,389

)

Investing activities:

Purchases of property and equipment

(2,627

)

(1,093

)

Purchases of capitalized software

(2,704

)

(7,047

)

Purchases of marketable securities available for sale

(11,278

)

(6,676

)

Maturity of marketable securities available for sale

26,207

1,450

Net cash provided by (used for) investing activities

9,598

(13,366

)

Financing activities:

Share-based compensation-related proceeds, net of taxes paid on withholding shares

263

Extinguishment of outstanding Convertible Senior Notes

(16,106

)

Proceeds from issuance of preferred stock

86,220

Preferred dividend payment

(7,075

)

Payments on capital obligations

(280

)

(369

)

Net cash (used for) provided by financing activities

(23,461

)

86,114

Effect of exchange rate changes on cash

(19

)

2,253

Net decrease in cash, restricted cash and cash equivalents

(19,566

)

65,612

Cash, restricted cash and cash equivalents, beginning of period

109,860

246,126

Cash, restricted cash and cash equivalents, end of period

$

90,294

$

311,738

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

Three Months Ended March 31,

2019

2018

Non-GAAP financial measures and reconciliation:

GAAP Revenue

$

88,105

$

83,709

Less: Cost of revenues

38,953

44,549

Gross Profit

49,152

39,160

Add / (Less):

Stock-based compensation expense

686

1,112

Adjusted Gross Profit

$

49,838

$

40,272

Adjusted Gross Margin

56.6

%

48.1

%

GAAP Net loss from continuing operations

(20,339

)

(44,234

)

Add / (Less):

Stock-based compensation expense

5,554

7,184

Acquisition costs

(188

)

121

Restructuring and cease-use lease expense

740

1,108

Amortization expense

6,129

8,254

One-Time Expenses due to Restatement, etc.

720

6,665

Non-GAAP Net (loss) income from continuing operations

$

(7,384

)

$

(20,902

)

GAAP Net (loss) income attributable to Synchronoss

$

(27,587

)

$

(40,045

)

Add / (Less):

Stock-based compensation expense

5,554

7,184

Acquisition costs

(188

)

121

Restructuring and cease-use lease expense

740

1,108

Amortization expense

6,129

8,254

Non-GAAP Expenses attributable to Non-Controlling Interest

(37

)

(373

)

One-Time Expenses due to Restatement, etc.

720

6,665

Income Tax Effect at Statutory Tax Rates

(5,510

)

Non-GAAP Net loss from continuing operations attributable to Synchronoss

$

(14,669

)

$

(22,596

)

Diluted Non-GAAP Net loss from continuing operations per share

$

(0.36

)

$

(0.54

)

Weighted shares outstanding - Basic

40,320

42,181

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

Three Months Ended

Mar 31,
2018

Jun 30,
2018

Sep 30,
2018

Dec 31,
2018

Mar 31,
2019

Net (loss) income attributable to Synchronoss

$

(40,045

)

$

(47,265

)

$

(54,529

)

$

(101,909

)

$

(27,587

)

Add / (Less):

Restructuring and cease-use lease expense

1,108

2,778

4,539

3,950

740

Depreciation and amortization

23,271

23,401

23,658

47,324

20,143

Interest income

(3,552

)

(3,763

)

(203

)

(252

)

(189

)

Interest Expense

1,247

1,318

1,370

976

585

Gain on Extinguishment of debt

(1,760

)

(387

)

Other Income (expense), net

(4,282

)

23

13,439

65,737

(463

)

Equity method investment income (loss), net

205

7

(283

)

28,671

1,243

Benefit for income taxes

125

579

(2,308

)

(16,290

)

(1,391

)

Net (loss) income attributable to noncontrolling interests

(1,285

)

(1,259

)

422

(6,715

)

313

Preferred dividend

3,353

7,260

7,463

7,517

7,537

Stock-based compensation expense

7,184

7,638

7,216

5,566

5,554

Acquisition costs

121

(10

)

38

109

(188

)

One-Time Expenses due to Restatement, etc.

6,665

9,305

3,638

800

720

Net income from discontinued operations, net of taxes

(18,288

)

Reclassification of expenses

(4,900

)

4,900

Adjusted EBITDA (non-GAAP)

$

(10,785

)

$

12

$

9,360

$

15,436

$

6,630


Three Months Ended March 31,

2019

2018

Net Cash (used in) provided by operating activities

$

(5,684

)

$

(9,389

)

Add / (Less):

Capitalized software

(2,704

)

(7,047

)

Property and equipment

(2,627

)

(1,093

)

Free Cashflow

$

(11,015

)

$

(17,529

)

Add: One-Time Expenses due to Restatement, etc.

720

6,665

Adjusted Free Cashflow

$

(10,295

)

$

(10,864

)