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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2020
 
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from          to
 
Commission file number 000-52049

SYNCHRONOSS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1594540
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
   
200 Crossing Boulevard, 8th Floor
Bridgewater, New Jersey
08807
(Address of principal executive offices) (Zip Code)
 
(866) 620-3940
(Registrant’s telephone number, including area code) 

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer   Accelerated filer x
Non-accelerated filer Smaller Reporting Company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
Securities registered pursuant to Section 12(b) of the Act:
Title of each class  Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $.0001 par value
 SNCR The Nasdaq Stock Market, LLC
As of August 10, 2020, there were 45,735,138 shares of common stock issued and outstanding.


SYNCHRONOSS TECHNOLOGIES, INC.
FORM 10-Q INDEX

  Page No.
3
   
3
   
 
3
   
 
4
5
   
6
 
8
   
 
9
   
   
   
   
   
   
   
   
 
   
   
   
   
   



PART I.  FINANCIAL INFORMATION
 
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
  June 30, 2020 December 31, 2019
ASSETS
Current assets:
Cash, restricted cash and cash equivalents $ 42,771    $ 39,001   
Marketable securities, current —    11   
Accounts receivable, net 57,332    65,863   
Prepaid & Other Current Assets 47,888    38,022   
Total current assets 147,991    142,897   
Non-Current Assets:
Property and equipment, net 18,659    26,525   
Operating lease right-of-use assets 46,913    53,965   
Goodwill 222,854    222,969   
Intangible assets, net 72,910    77,613   
Other Assets, non-current 12,325    8,054   
Total Non-Current Assets 373,661    389,126   
Total assets $ 521,652    $ 532,023   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 22,948    $ 21,551   
Accrued expenses 73,506    65,987   
Deferred revenues, current 46,958    65,858   
Debt, current 10,000    —   
Total current liabilities 153,412    153,396   
Deferred tax liabilities 2,161    1,679   
Deferred revenues, non-current 16,315    21,941   
Leases, non-current 53,495    60,976   
Other non-current liabilities 3,285    4,589   
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; 233 shares issued and outstanding at June 30, 2020
218,482    200,865   
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000 shares authorized, 51,619 and 51,704 shares issued; 44,457 and 44,542 outstanding at June 30, 2020 and December 31, 2019, respectively
   
Treasury stock, at cost (7,162 and 7,162 shares at June 30, 2020 and December 31, 2019, respectively)
(82,087)   (82,087)  
Additional paid-in capital 517,794    525,739   
Accumulated other comprehensive loss (34,397)   (33,261)  
Accumulated deficit (339,313)   (334,319)  
Total stockholders’ equity 62,002    76,077   
Total liabilities and stockholders’ equity $ 521,652    $ 532,023   

See accompanying notes to condensed consolidated financial statements.
3

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, net 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 (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   
________________________________
* Cost of revenues excludes depreciation and amortization which are shown separately.

See accompanying notes to condensed consolidated financial statements.





4

SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited) (In thousands)

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net loss $ (694)   $ (16,578)   $ (4,044)   $ (36,315)  
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments 1,872    802    (2,069)   507   
Unrealized loss on available for sale securities —      751    (902)  
Net income (loss) on inter-company foreign currency transactions 554    264    182    (119)  
Total other comprehensive income (loss) 2,426    1,069    (1,136)   (514)  
Comprehensive loss 1,732    (15,509)   (5,180)   (36,829)  
Comprehensive loss attributable to redeemable noncontrolling interests (165)   (593)   (182)   (906)  
Comprehensive loss attributable to Synchronoss $ 1,567    $ (16,102)   $ (5,362)   $ (37,735)  

See accompanying notes to condensed consolidated financial statements.
5

SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited) (In thousands)

Three Months Ended June 30, 2020
Common Stock Treasury Stock Additional Accumulated Other Total
Shares Amount Shares Amount Paid-In Capital Comprehensive Income (Loss) Accumulated deficit Stockholders' Equity
Balance at March 31, 2020 51,758    $   (7,162)   $ (82,087)   $ 522,164    $ (36,823)   $ (338,454)   $ 64,805   
Stock based compensation —    —    —    —    4,754    —    —    4,754   
Issuance of restricted stock (138)   —    —    —    —    —    —    —   
Preferred stock dividends declared —    —    —    —    (8,454)   —    —    (8,454)  
Amortization of preferred stock issuance costs —    —    —    —    (835)   —    —    (835)  
Shares withheld for taxes in connection with issuance of restricted stock (1)   —    —    —    —    —    —    —   
Net loss attributable to Synchronoss —    —    —    —    —    —    (694)   (694)  
Non-controlling interest —    —    —    —    165    —    (165)   —   
Total other comprehensive income (loss) —    —    —    —    —    2,426    —    2,426   
Balance at June 30, 2020 51,619    $   (7,162)   $ (82,087)   $ 517,794    $ (34,397)   $ (339,313)   $ 62,002   

Three Months Ended June 30, 2019
Common Stock Treasury Stock Additional Accumulated Other Total
Shares Amount Shares Amount Paid-In Capital Comprehensive Income (Loss) Accumulated deficit Stockholders' Equity
Balance at March 31, 2019 49,908    $   (7,162)   $ (82,087)   $ 533,224    $ (31,966)   $ (249,776)   $ 169,400   
Stock based compensation —    —    —    —    5,329    —    —    5,329   
Issuance of restricted stock 1,670    —    —    —    —    —    —    —   
Preferred stock dividends declared —    —    —    —    (7,331)   —    —    (7,331)  
Amortization of preferred stock issuance costs —    —    —    —    (528)   —    —    (528)  
Shares withheld for taxes in connection with issuance of restricted stock —    —    —    —    (5)   —    —    (5)  
Net income attributable to Synchronoss —    —    —    —    —    —    (17,171)   (17,171)  
Non-controlling interest —    —    —    —    593    —    —    593   
Total other comprehensive income (loss) —    —    —    —    —    1,069    —    1,069   
Balance at June 30, 2019 51,578    $   (7,162)   $ (82,087)   $ 531,282    $ (30,897)   $ (266,947)   $ 151,356   



6

Six Months Ended June 30, 2020
Common Stock Treasury Stock Additional Accumulated Other Total
Shares Amount Shares Amount Paid-In Capital Comprehensive Income (Loss) Accumulated deficit Stockholders' Equity
Balance at December 31, 2019 51,704    $   (7,162)   $ (82,087)   $ 525,739    $ (33,261)   $ (334,319)   $ 76,077   
Stock based compensation —    —    —    —    10,070    —    —    10,070   
Issuance of restricted stock (83)   —    —    —    —    —    —    —   
Preferred stock dividends declared —    —    —    —    (16,612)   —    —    (16,612)  
Amortization of preferred stock issuance costs —    —    —    —    (1,585)   —    —    (1,585)  
Shares withheld for taxes in connection with issuance of restricted stock (2)   —    —    —    —    —    —    —   
Net loss attributable to Synchronoss —    —    —    —    —    —    (4,044)   (4,044)  
Non-controlling interest —    —    —    —    182    —    (182)   —   
Total other comprehensive income (loss) —    —    —    —    —    (1,136)   —    (1,136)  
Adoption of new credit loss accounting standard —    —    —    —    —    —    (768)   (768)  
Balance at June 30, 2020 51,619    $   (7,162)   $ (82,087)   $ 517,794    $ (34,397)   $ (339,313)   $ 62,002   


Six Months Ended June 30, 2019
Common Stock Treasury Stock Additional Accumulated Other Total
Shares Amount Shares Amount Paid-In Capital Comprehensive Income (Loss) Accumulated deficit Stockholders' Equity
Balance at December 31, 2018 49,836    $   (7,162)   $ (82,087)   $ 534,673    $ (30,383)   $ (233,299)   $ 188,909   
Stock based compensation —    —    —    —    11,108    —    —    11,108   
Issuance of restricted stock 1,743    —    —    —    —    —    —    —   
Preferred stock dividends declared —    —    —    —    (14,406)   —    —    (14,406)  
Amortization of preferred stock issuance costs —    —    —    (990)   (990)  
Shares withheld for taxes in connection with issuance of restricted stock (1)   —    —    —    (9)   —    —    (9)  
ASC 842 Lease implementation Adjustments —    —    —    —    —    —    3,573    3,573   
Net income attributable to Synchronoss —    —    —    —    —    —    (37,221)   (37,221)  
Non-controlling interest —    —    —    —    906    —    —    906   
Total other comprehensive income (loss) —    —    —    —    —    (514)   —    (514)  
Balance at June 30, 2019 51,578    $   (7,162)   $ (82,087)   $ 531,282    $ (30,897)   $ (266,947)   $ 151,356   

See accompanying notes to condensed consolidated financial statements.

7

SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
Six Months Ended June 30,
2020 2019
Operating activities:
Net loss $ (4,044)   $ (36,315)  
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 21,640    40,412   
Amortization of debt issuance costs —    237   
(Gain) loss on extinguishment of debt —    (817)  
Loss (earnings) from Equity method investments —    1,619   
(Gain) loss on Disposals of fixed assets 12    —   
(Gain) loss on Disposals of intangible assets (2,164)   —   
Amortization of bond premium —    (34)  
Deferred income taxes 478    (702)  
Stock-based compensation 10,156    11,028   
Changes in operating assets and liabilities:
Accounts receivable, net 904    2,870   
Prepaid expenses and other current assets (10,031)   17,635   
Other assets 502    2,042   
Accounts payable 3,514    5,151   
Accrued expenses 7,002    (9,569)  
Other liabilities (1,748)   (1,826)  
Deferred revenues (24,613)   (13,167)  
Net cash provided by (used in) 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)  
Proceeds from the sale of intangibles 2,164    —   
Purchases of marketable securities available for sale —    (37,542)  
Maturity of marketable securities available for sale 11    28,191   
Net cash provided by (used in) investing activities (6,934)   (20,250)  
Financing activities:
Taxes paid on withholding shares (9)   —   
Retirement of Convertible Senior Notes & related costs —    (65,887)  
Borrowings on revolving line of credit 10,000    —   
Preferred dividend payment —    (7,075)  
Payments on capital obligations —    (612)  
Net cash provided by (used in) financing activities 9,991    (73,574)  
Effect of exchange rate changes on cash (895)   10   
Net increase in cash and cash equivalents 3,770    (75,250)  
Cash and cash equivalents, beginning of period 39,001    109,860   
Cash and cash equivalents, end of period $ 42,771    $ 34,610   
Supplemental disclosures of non-cash investing and financing activities:
Paid in kind dividends on Series A Convertible Participating Perpetual Preferred Stock $ 17,616    $ 7,332   

 See accompanying notes to condensed consolidated financial statements.
8

SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


1. Description of Business

General

Synchronoss Technologies, Inc. (“Synchronoss” or the “Company”) Digital, Cloud, Messaging and IoT platforms help the world’s leading companies, including operators, original equipment manufacturers (“OEMs”), and Technology, Media and Telecom (“TMT”) providers to deliver continuously transformative customer experiences that create high value engagement and new monetization opportunities.

The Company currently operates in and markets solutions and services directly through the Company’s sales organizations in North America, Europe and Asia-Pacific. The Company’s platforms give customers new opportunities in the TMT space, taking advantage of the rapidly converging services, connected devices, networks and applications.

The Company delivers platforms, products and solutions including:

Cloud sync, backup, storage, device set up, content transfer and content engagement for user generated content
Advanced, multi-channel messaging peer-to-peer (“P2P”) communications and application-to-person (“A2P”) commerce solutions
Digital experience management (Platform as a Service) - including digital journey creation, and journey design products that use analytics that power digital advisor products for IT and Business Channel Owners
IoT management technology for Smart Cities, Smart Buildings and more

The Synchronoss Personal Cloud Platform™ is a secure and highly scalable white label platform designed to store and sync subscriber’s personally created content seamlessly to and from current and new devices. This allows an Operator’s customers to protect, engage with and manage their personal content and gives the Company’s Operator customers the ability to increase average revenue per user (“ARPU”) through a new monthly recurring charge (“MRC”) and opportunities to mine valuable data that will give subscribers access to new, beneficial services. Additionally, the Synchronoss Personal Cloud Platform performs an expanding set of value-add services including facilitating an Operator’s initial device setup and enhancing visibility and control across disparate devices within subscribers’ smart homes.

The Synchronoss Messaging Platform powers hundreds of millions of subscribers’ mail boxes worldwide. The Company’s Advanced Messaging Product is a powerful, secure and intelligent white label messaging platform that expands capabilities for Operators and TMT companies to offer P2P messaging via Rich Communications Services (“RCS”). Additionally, the Company’s Advanced Messaging Product powers commerce and a robust ecosystem for Operators, brands and advertisers to execute Application to Person (“A2P”) commerce and data-rich dialogue with subscribers.

The Synchronoss Digital Experience Platform (“DXP”) is a purpose-built experience management toolset that sits between the Company’s customers end-user facing applications and their existing back end systems, enabling the authoring and management of customer journeys in a cloud-native no/low-code environment. This platform uses products such as Journey Creator, Journey Advisor, CX Baseline and Digital Coach to create a wide variety of insight-driven customer experiences across existing channels (digital and analogue) including creating the ability to pause and resume continuous, intelligent experiences in an omni-channel environment. DXP can be operated by IT professionals and “citizen” developers (business analysts, etc.) enabling the Company’s customers to bring more compelling and complex experiences to market in less time with fewer and more diverse resources in a real-time, collaborative environment.

The Synchronoss IoT Platform creates an easy to use environment and extensible ecosystem making the management of disparate devices, sensors, data pools and networks easier to manage by IoT administrators and drives the propagation of new IoT applications and monetization models for TMT companies. The Company’s IoT platform utilizes Synchronoss platforms (DXP, Cloud, Messaging), products and solutions to make IoT more accessible and actionable for Smart Building facility managers, Smart City planners, Automotive OEMs and TMT ecosystem players.



9

SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

2. Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying interim unaudited condensed consolidated financial statements have been prepared by Synchronoss and in the opinion of management, include all adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and variable interest entities (“VIE”) in which the Company is the primary beneficiary and entities in which the Company has a controlling interest. Investments in less than majority-owned companies in which the Company does not have a controlling interest, but does have significant influence, are accounted for as equity method investments. Investments in less than majority-owned companies in which the Company does not have the ability to exert significant influence over the operating and financial policies of the investee are accounted for using the cost method. All material intercompany transactions and accounts are eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation.

For further information about the Company’s basis of presentation and consolidation or its significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Risks and Uncertainties

There are many uncertainties regarding the current coronavirus ("COVID-19") pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels. While the pandemic did not materially affect the Company’s financial results and business operations for the three and six months ended June 30, 2020, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.


10

SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Recently Issued Accounting Standards

Recent accounting pronouncements adopted

Standard Description Effect on the financial statements
ASU 2016-13, ASU 2019-4 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued ASU 2016-13 which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The ASU is effective for public companies in annual periods beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted beginning after December 15, 2018 and interim periods within those years.
We adopted Topic 326 beginning on January 1, 2020 using the modified retrospective approach with a cumulative effect adjustment to opening retained earnings recorded at the beginning of the period of adoption. Upon adoption, we changed our impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost, including our accounts receivable. CECL estimates on accounts receivable are recorded as general and administrative expenses on our condensed consolidated statements of income. The cumulative effect adjustment from adoption was immaterial to our condensed consolidated financial statements.
Date of adoption: January 1, 2020.

Standards issued not yet adopted

Standard Description Effect on the financial statements
Update 2019-12 - Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes The ASU removes the exception to the general principles in ASC 740, Income Taxes, associated with the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments and interim-period income tax accounting for year-to-date losses that exceed anticipated losses. In addition, the ASU improves the application of income tax related guidance and simplifies U.S. GAAP when accounting for franchise taxes that are partially based on income, transactions with government resulting in a step-up in tax basis goodwill, separate financial statements of legal entities not subject to tax, and enacted changes in tax laws in interim periods. Different transition approaches, retrospective, modified retrospective, or prospective, will apply to each income tax simplification provision.
The Company is still evaluating these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.

Date of adoption: January 1, 2021.


3. Revenue

Disaggregation of revenue

The Company disaggregates revenue from contracts with customers into the nature of the products and services and geographical regions. The Company’s geographic regions are the Americas, Europe, the Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”). The majority of the Company’s revenue is from the Technology, Media and Telecom (collectively, “TMT”) sector.
11

SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Cloud Digital Messaging Total Cloud Digital Messaging Total
Geography
Americas $ 40,761    $ 12,637    $ 8,500    $ 61,898    $ 38,582    $ 20,508    $ 2,281    $ 61,371   
APAC —    1,019    6,708    7,727    —    1,157    8,785    9,942   
EMEA 1,686    1,347    3,877    6,910    1,849    561    4,123    6,533   
Total $ 42,447    $ 15,003    $ 19,085    $ 76,535    $ 40,431    $ 22,226    $ 15,189    $ 77,846   
Service Line
Professional Services $ 4,984    $ 2,736    $ 5,972    $ 13,692    $ 3,641    $ 3,989    $ 4,881    $ 12,511   
Transaction Services 1,474    2,215    —    3,689    1,521    1,144    —    2,665   
Subscription Services 35,989    9,251    11,112    56,352    35,199    16,137    8,557    59,893   
License —    801    2,001    2,802    70    956    1,751    2,777   
Total $ 42,447    $ 15,003    $ 19,085    $ 76,535    $ 40,431    $ 22,226    $ 15,189    $ 77,846   



Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Cloud Digital Messaging Total Cloud Digital Messaging Total
Geography
Americas $ 80,083    $ 23,574    $ 19,403    $ 123,060    $ 77,496    $ 41,272    $ 4,350    $ 123,118   
APAC —    1,577    15,883    17,460    —    2,155    26,940    29,095   
EMEA 3,408    2,604    7,125    13,137    3,645    1,650    8,443    13,738   
Total $ 83,491    $ 27,755    $ 42,411    $ 153,657    $ 81,141    $ 45,077    $ 39,733    $ 165,951   
Service Line
Professional Services $ 9,145    $ 7,272    $ 11,202    $ 27,619    $ 7,359    $ 8,292    $ 17,368    $ 33,019   
Transaction Services 2,781    3,289    —    6,070    2,883    3,160    —    6,043   
Subscription Services 71,565    16,253    21,729    109,547    70,793    32,539    17,722    121,054   
License —    941    9,480    10,421    106    1,086    4,643    5,835   
Total $ 83,491    $ 27,755    $ 42,411    $ 153,657    $ 81,141    $ 45,077    $ 39,733    $ 165,951   

Trade Accounts Receivable and Contract balances

The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, the Company recognizes a receivable for revenues related to its time and materials and transaction or volume-based contracts. The Company presents such receivables in Trade accounts receivable, net in its condensed consolidated statements of financial position at their net estimated realizable value. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other economic indicators.

A contract asset is a right to consideration that is conditional upon factors other than the passage of time. For example, the Company would record a contract asset if it records revenue on a professional services engagement but are not entitled to bill until the Company achieves specified milestones. Contract assets balance at June 30, 2020 is $12.8 million.

12

SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Amounts collected in advance of services being provided are accounted for as contract liabilities, which are presented as deferred revenue on the accompanying Condensed Consolidated Balance Sheets and are realized with the associated revenue recognized under the contract. Nearly all of the Company's contract liabilities balance is related to services revenue, primarily subscription services contracts.

The Company’s contract assets and liabilities are reported in a net position on a customer basis at the end of each reporting period.

Significant changes in the contract liabilities balance (current and noncurrent) during the period are as follows (in thousands):
Contract Liabilities*
Balance - January 1, 2020 $ 87,799   
Revenue recognized in the period (149,666)  
Amounts billed but not recognized as revenue 125,140   
Balance - June 30, 2020 $ 63,273   
________________________________
* Comprised of Deferred Revenue

Transaction price allocated to the remaining performance obligations

Topic 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2020. The Company has elected not to disclose transaction price allocated to remaining performance obligations for:

1.Contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty;
2.Contracts for which the Company recognizes revenues based on the right to invoice for services performed;
3.Variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with Topic 606 Section 10-25-14(b), for which the criteria in Topic 606 Section 10-32-40 have been met. This applies to a limited number of situations where the Company is dependent upon data from a third party or where fees are highly variable.

Many of the Company’s performance obligations meet one or more of these exemptions. Specifically, the Company has excluded the following from the Company’s remaining performance obligations, all of which will be resolved in the period in which amounts are known:
consideration for future transactions, above any contractual minimums
consideration for success-based transactions contingent on third party data
credits for failure to meet future service level requirements

As of June 30, 2020, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $140.6 million, of which approximately 85.2 percent is expected to be recognized as revenues within 2 years, and the remainder thereafter.

Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase services that do not represent material rights to the customer. Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services.



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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

4. Fair Value Measurements

In accordance with accounting principles generally accepted in the United States, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy prioritizes the inputs used to measure fair value as follows:

Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;
Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets; and
Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and require the Company to develop relevant assumptions.

The following is a summary of assets, liabilities and redeemable noncontrolling interests and their related classifications under the fair value hierarchy:
June 30, 2020
Total (Level 1) (Level 2) (Level 3)
Assets
Cash, cash equivalents and restricted cash (1)
$ 42,771    $ 42,771    $ —    $ —