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 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 DetailsSynchronoss 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 MeasuresSynchronoss 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 CrivelliVice President, Investor
Relations908-566-3131investor@synchronoss.com
Media:
CCgroupUS: 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 |
) |
Synchronoss Technologies (NASDAQ:SNCR)
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