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Synchronoss Technologies Announces Second Quarter 2020 Results: Revenue $76.5 million, Adjusted EBITDA $11.5 million, Adjusted Free Cash Flow $13 million; Renewal of Verizon contract also announced

Synchronoss Technologies, Inc.

BRIDGEWATER, N.J., Aug. 10, 2020 (GLOBE NEWSWIRE) -- Synchronoss Technologies Inc. (NASDAQ: SNCR), a global leader and innovator in cloud, messaging, digital and IoT platforms and products, today announced financial results for its second quarter ended June 30, 2020.

Second quarter highlights:

  • Revenue was $76.5 million, compared to $77.8 million in the second quarter of 2019. Recurring revenue was 78.4 percent.

  • GAAP net loss for the quarter was $10.15 million, or 24 cents per share, compared to $25.0 million or 61 cents per share in the prior year’s second quarter.

  • Non-GAAP net income from continuing operations attributable to Synchronoss was $6.6 million or 16 cent per share, compared to a Non-GAAP net loss of $11.3 million or 28 cents per share in the prior year’s second quarter.

  • Synchronoss delivered $11.5 million of adjusted EBITDA, compared to $8.7 million in the second quarter of 2019. Adjusted EBITDA margin in the second quarter was 15 percent compared to 11.2 percent in last year’s second quarter.

  • Positive Adjusted Free Cash Flow of $13 million drove an increase in cash and liquidity to $42.8 million at quarter end up from $31m at the end of Q1.

  • This morning, in a separate release, the company announced the 5-year renewal of its white-label cloud agreement with its largest customer, Verizon Wireless.

Glenn Lurie, president and chief executive officer, stated, “Synchronoss continued to overcome the many challenges posed by the global pandemic and delivered a solid second quarter. The strength of our customer relationships is highlighted by new wins with some of our largest customers, including the 5-year renewal of our personal cloud contract with Verizon, our largest customer, that we announced this morning in a separate press release. Adjusted EBITDA margins were at the highest level since the fourth quarter of 2018, and free cash flow was $13 million. I am proud of the Synchronoss team as they remained productive and committed to servicing our customers while still working from home, and these results speak to their passion and resilience.”

 

 

Three Months Ended June 30,

 

 

 

$000s

 

2020

 

 

  2019

 

% Change

Revenues

 

$76,535

 

 

$77,846

 

(1.7

%)

Net Loss

 

(10,148

)

 

(25,030

)

(59.5

%)

Adjusted EBITDA

 

11,549

 

 

8,669

 

33.2

%


 

 

  Six Months Ended June 30,

 

 

 

$000s

 

2020

 

 

    2019

 

% Change

Revenues

 

$153,657

 

 

$165,951

 

(7.4

%)

Net Loss

 

(22,423

)

 

(52,617

)

(57.4

%)

Adjusted EBITDA

 

13,307

 

 

15,299

 

(13.0

%)

David Clark, chief financial officer, added, “Our cost cutting efforts remain on track to deliver $45 million of in-year savings and $55 million of annualized savings. These efforts and execution were one of the main drivers of improved financial results including 62.6 percent adjusted gross margins, 15 percent EBITDA margin, and positive free cash flow of $13 million.”

Guidance

The company’s original 2020 Adjusted EBITDA guidance was $25-$35 million. The Verizon renewal reduces non-cash deferred revenue by approximately $10 million in the latter half of 2020. Under accounting standard ASC 606, this remaining $10 million of deferred revenue will now be amortized over the new term of the contract. The implied Adjusted EBITDA guidance range would be $15-$25 million. However, the company is also narrowing guidance to the top half of the range. Accordingly, the company now expects Adjusted EBITDA for the year of $20-$25 million.

New Business Update

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

  • The 5-year contract extension of our personal cloud agreement with Verizon. This extension further solidifies our long-term relationship with Verizon and shows the value they see in our Cloud solution, which delivers solid incremental revenue and profitability for them, and a better user experience for their subscribers.

  • This new personal cloud contract with Verizon includes a joint market agreement to more directly target their existing base of subscribers.

  • We secured additional cloud initiatives in the quarter that will augment Verizon’s service offerings in other areas and expand our access to Verizon customers and help us continue to grow cloud revenue.

  • In Advanced Messaging, we signed two additional Agreements with CCMI to expand our role in preparing for the launch of RCS-based messaging service to be offered by the joint venture between AT&T, Sprint, T-Mobile and Verizon.

  • In Core Messaging, we won new business and expanded our relationship with Proximus to provide Messaging services.

  • In our Digital Platform, we signed a 5-year extension to our relationship with Sage Management, who provides audit services as a complement to our Financial Analytics product.  Additionally, we signed a seven-figure Financial Analytics contract with a nationwide service provider.

  • Finally, we signed Globe Telecom to a Spatial Managed Services contract in the Philippines.

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 at 8:00 a.m. (ET) that morning to discuss the financial results.
Please click the following link to join the webinar:
https://synchronoss.zoom.us/j/99626412696?pwd=bDJQRlF6MjNoN3c3amJySHFKemx1dz09

Password: 015747

To join by telephone, please dial one of the following numbers based on your location:
US: +1 253 215 8782
+1 346 248 7799 
+1 408 638 0968
+1 669 900 6833
+1 301 715 8592
+1 312 626 6799
+1 646 876 9923
Webinar ID: 996 2641 2696
Password: 015747

International numbers are also available: https://synchronoss.zoom.us/u/ab5P87e92z.  

Following the conference call, an archived webcast of the conference call will be available on the Investor Relations section of the company’s website at 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, and earnings (loss) per share. 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, 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, 2019, 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:
Leslie Gahagan
Investor Relations Analyst
623-745-4046
investor@synchronoss.com


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

 

 

June 30, 2020

 

December 31, 2019

Assets

 

 

 

 

Cash and cash equivalents

 

$

42,771

 

 

$

39,001

 

Accounts receivable, net

 

57,332

 

 

65,863

 

Operating lease right-of-use assets

 

46,913

 

 

53,965

 

Goodwill

 

222,854

 

 

222,969

 

Other Assets

 

151,782

 

 

150,225

 

Total assets

 

$

521,652

 

 

$

532,023

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Accounts Payable and Accrued expenses

 

$

96,454

 

 

$

87,538

 

Debt, current

 

10,000

 

 

 

Deferred revenues

 

63,273

 

 

87,799

 

Operating lease liabilities, non-current

 

53,495

 

 

60,976

 

Other liabilities

 

17,946

 

 

18,768

 

Preferred Stock

 

218,482

 

 

200,865

 

Stockholders’ equity

 

62,002

 

 

76,077

 

Total liabilities and stockholders’ equity

 

$

521,652

 

 

$

532,023

 

 

 

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

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

76,535

 

 

 

$

77,846

 

 

 

$

153,657

 

 

 

$

165,951

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of revenues

 

29,480

 

 

 

33,403

 

 

 

64,951

 

 

 

72,356

 

 

Research and development

 

19,096

 

 

 

19,026

 

 

 

38,884

 

 

 

38,707

 

 

Selling, general and administrative

 

24,640

 

 

 

23,080

 

 

 

50,984

 

 

 

52,326

 

 

Restructuring charges

 

4,493

 

 

 

356

 

 

 

5,943

 

 

 

777

 

 

Depreciation and amortization

 

10,284

 

 

 

20,269

 

 

 

21,640

 

 

 

40,412

 

 

Total costs and expenses

 

87,993

 

 

 

96,134

 

 

 

182,402

 

 

 

204,578

 

 

Loss from continuing operations

 

(11,458

)

 

 

(18,288

)

 

 

(28,745

)

 

 

(38,627

)

 

Interest income

 

1,509

 

 

 

299

 

 

 

1,568

 

 

 

488

 

 

Interest expense

 

(84

)

 

 

(463

)

 

 

(329

)

 

 

(1,048

)

 

Gain (loss) on extinguishment of debt

 

 

 

 

430

 

 

 

 

 

 

817

 

 

Other Income

 

1,367

 

 

 

(24

)

 

 

3,058

 

 

 

439

 

 

Equity method investment loss

 

 

 

 

(376

)

 

 

 

 

 

(1,619

)

 

Loss from continuing operations, before taxes

 

(8,666

)

 

 

(18,422

)

 

 

(24,448

)

 

 

(39,550

)

 

Benefit for income taxes

 

7,972

 

 

 

1,844

 

 

 

20,404

 

 

 

3,235

 

 

Net loss from continuing operations

 

(694

)

 

 

(16,578

)

 

 

(4,044

)

 

 

(36,315

)

 

Net loss attributable to redeemable noncontrolling interests

 

(165

)

 

 

(593

)

 

 

(182

)

 

 

(906

)

 

Preferred stock dividend

 

(9,289

)

 

 

(7,859

)

 

 

(18,197

)

 

 

(15,396

)

 

Net loss attributable to Synchronoss

 

$

(10,148

)

 

 

$

(25,030

)

 

 

$

(22,423

)

 

 

$

(52,617

)

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

(0.24

)

 

(0.61

)

 

(0.54

)

 

(1.30

)

Diluted

 

(0.24

)

 

(0.61

)

 

(0.54

)

 

(1.30

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

41,697

 

 

40,810

 

 

41,482

 

 

40,566

 

Diluted

 

41,697

 

 

40,810

 

 

41,482

 

 

40,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Six Months Ended June 30,

 

2020

 

2019

Net loss from continuing operations

$

(4,044

)

 

 

$

(36,315

)

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Non-cash items

30,122

 

 

 

51,743

 

 

Changes in operating assets and liabilities:

(24,470

)

 

 

3,136

 

 

Net cash provided by operating activities

1,608

 

 

 

18,564

 

 

 

 

 

 

Investing activities:

 

 

 

Purchases of fixed assets

(424

)

 

 

(4,940

)

 

Purchases of intangible assets and capitalized software

(8,685

)

 

 

(5,959

)

 

Other investing activities

2,175

 

 

 

(9,351

)

 

Net cash used in investing activities

(6,934

)

 

 

(20,250

)

 

 

 

 

 

Net cash provided by (used in) financing activities

9,991

 

 

 

(73,574

)

 

Effect of exchange rate changes on cash

(895

)

 

 

10

 

 

Net increase (decrease) in cash and cash equivalents

3,770

 

 

 

(75,250

)

 

 

 

 

 

Cash, restricted cash and cash equivalents, beginning of period

39,001

 

 

 

109,860

 

 

Cash, restricted cash and cash equivalents, end of period

$

42,771

 

 

 

$

34,610

 

 

 

 

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

 

 

Three Months Ended Jun 30,

 

Six Months Ended Jun 30,

 

 

2020

 

2019

 

2020

 

2019

Non-GAAP financial measures and reconciliation:

 

 

 

 

 

 

 

 

GAAP Revenue

 

$

76,535

 

 

 

$

77,846

 

 

 

$

153,657

 

 

 

$

165,951

 

 

Less: Cost of revenues

 

29,480

 

 

 

33,403

 

 

 

64,951

 

 

 

72,356

 

 

Gross Profit

 

47,055

 

 

 

44,443

 

 

 

88,706

 

 

 

93,595

 

 

Add / (Less):

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

641

 

 

 

657

 

 

 

1,394

 

 

 

1,343

 

 

Restructuring, transition, and cease-use lease expense

 

243

 

 

 

 

 

 

283

 

 

 

 

 

Adjusted Gross Profit

 

$

47,939

 

 

 

$

45,100

 

 

 

$

90,383

 

 

 

$

94,938

 

 

Adjusted Gross Margin

 

62.6

%

 

 

57.9

%

 

 

58.8

%

 

 

57.2

%

 

 

 

 

 

 

 

 

 

 

GAAP Net loss attributable to Synchronoss

 

$

(10,148

)

 

 

$

(25,030

)

 

 

$

(22,423

)

 

 

$

(52,617

)

 

Add / (Less):

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

4,987

 

 

 

5,474

 

 

 

10,156

 

 

 

11,028

 

 

Acquisition costs

 

 

 

 

(42

)

 

 

 

 

 

(230

)

 

Restructuring, transition, and cease-use lease expense

 

7,003

 

 

 

474

 

 

 

8,699

 

 

 

1,214

 

 

Amortization expense

 

4,062

 

 

 

7,123

 

 

 

8,696

 

 

 

13,252

 

 

Litigation, remediation and refiling costs

 

733

 

 

 

782

 

 

 

1,557

 

 

 

1,502

 

 

Non-GAAP Expenses attributable to Non-Controlling Interest

 

 

 

 

(39

)

 

 

 

 

 

(76

)

 

Non-GAAP Net Income (loss) from continuing operations attributable to Synchronoss

 

$

6,637

 

 

 

$

(11,258

)

 

 

$

6,686

 

 

 

$

(25,927

)

 

 

 

 

 

 

 

 

 

 

Diluted Non-GAAP Net Income (loss) from continuing operations per share

 

$

0.16

 

 

 

$

(0.28

)

 

 

$

0.16

 

 

 

$

(0.64

)

 

 

 

 

 

 

 

 

 

 

Weighted shares outstanding - Diluted

 

41,697

 

 

 

40,810

 

 

 

41,482

 

 

 

40,566

 

 

 

 

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

 

 

Three Months Ended

 

Six Months Ended

 

 

Jun 30, 2019

 

Sep 30, 2019

 

Dec 31, 2019

 

Mar 31, 2020

 

Jun 30, 2020

 

Jun 30, 2020

 

Jun 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Synchronoss

 

$

(25,030

)

 

 

$

(69,432

)

 

 

$

(14,678

)

 

 

$

(12,275

)

 

 

$

(10,148

)

 

 

$

(22,423

)

 

 

$

(52,617

)

 

Add / (Less):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

5,474

 

 

 

6,000

 

 

 

5,222

 

 

 

5,169

 

 

 

4,987

 

 

 

10,156

 

 

 

11,028

 

 

Acquisition costs

 

(42

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(230

)

 

Restructuring, transition, and cease-use lease expense

 

474

 

 

 

6,215

 

 

 

17

 

 

 

1,696

 

 

 

7,003

 

 

 

8,699

 

 

 

1,214

 

 

Cumulative adjustment to STI receivable

 

 

 

 

26,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation, remediation and refiling costs

 

782

 

 

 

4

 

 

 

1,320

 

 

 

824

 

 

 

733

 

 

 

1,557

 

 

 

1,502

 

 

Depreciation and amortization

 

20,269

 

 

 

18,508

 

 

 

18,116

 

 

 

11,356

 

 

 

10,284

 

 

 

21,640

 

 

 

40,412

 

 

Interest income

 

(299

)

 

 

(228

)

 

 

(542

)

 

 

(58

)

 

 

(1,509

)

 

 

(1,567

)

 

 

(488

)

 

Interest Expense

 

463

 

 

 

203

 

 

 

104

 

 

 

245

 

 

 

84

 

 

 

329

 

 

 

1,048

 

 

Gain on Extinguishment of debt

 

(430

)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(817

)

 

Other (Income) expense, net

 

24

 

 

 

422

 

 

 

(7,372

)

 

 

(1,692

)

 

 

(1,367

)

 

 

(3,059

)

 

 

(439

)

 

Equity method investment loss

 

376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,619

 

 

Provision (benefit) for income taxes

 

(1,844

)

 

 

9,849

 

 

 

(4,439

)

 

 

(12,432

)

 

 

(7,972

)

 

 

(20,404

)

 

 

(3,235

)

 

Net (loss) income attributable to noncontrolling interests

 

593

 

 

 

25

 

 

 

194

 

 

 

17

 

 

 

165

 

 

 

182

 

 

 

906

 

 

Preferred dividend

 

7,859

 

 

 

8,194

 

 

 

8,544

 

 

 

8,908

 

 

 

9,289

 

 

 

18,197

 

 

 

15,396

 

 

Adjusted EBITDA (non-GAAP)

 

$

8,669

 

 

 

$

5,799

 

 

 

$

6,486

 

 

 

$

1,758

 

 

 

$

11,549

 

 

 

$

13,307

 

 

 

$

15,299

 

 

 

 


 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Net Cash (used in) provided by operating activities

 

$

16,624

 

 

 

$

24,248

 

 

 

$

1,608

 

 

 

$

18,564

 

 

Add / (Less):

 

 

 

 

 

 

 

 

Capitalized software

 

(4,257

)

 

 

(3,255

)

 

 

(8,685

)

 

 

(5,959

)

 

Property and equipment

 

(175

)

 

 

(2,313

)

 

 

(424

)

 

 

(4,940

)

 

Free Cashflow

 

$

12,192

 

 

 

$

18,680

 

 

 

$

(7,501

)

 

 

$

7,665

 

 

Add: Litigation, remediation and refiling costs

 

733

 

 

 

782

 

 

 

1,557

 

 

 

1,502

 

 

Adjusted Free Cashflow

 

$

12,925

 

 

 

$

19,462

 

 

 

$

(5,944

)

 

 

$

9,167