Synchronoss Technologies Announces First Quarter 2019 Results

Date : 05/09/2019 @ 9:00PM
Source : GlobeNewswire Inc.
Stock : Synchronoss Technologies, Inc. (SNCR)
Quote : 7.37  -0.06 (-0.81%) @ 11:00PM

Synchronoss Technologies Announces First Quarter 2019 Results

Synchronoss Technologies, Inc. (NASDAQ:SNCR)
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3 Months : From Apr 2019 to Jul 2019

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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,
$000s20192018% Change
Revenues$88,105$83,7095.25%
Net Loss(27,587)(40,045)31.1%
Adjusted EBITDA6,630(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 cash1,526  6,089 
Marketable securities, current19,674  28,230 
Accounts receivable, net of allowances of $5,139 and $4,599 at March 31, 2019 and December 31, 2018, respectively108,939  102,798 
Prepaid expenses41,932  45,058 
Other current assets10,045  8,508 
Total current assets270,884  294,454 
Marketable securities, non-current369  6,658 
Property and equipment, net52,128  67,937 
Operating lease right-of-use assets64,747   
Goodwill223,359  224,899 
Intangible assets, net92,759  98,706 
Other assets10,013  8,982 
Equity method investment376  1,619 
Total assets$714,635  $703,255 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable18,948  13,576 
Accrued expenses52,875  59,545 
Deferred revenues, current65,083  57,101 
Short-term convertible debt, net of debt issuance costs97,205  113,542 
Total current liabilities234,111  243,764 
Lease financing obligation  9,494 
Operating lease liabilities, non-current66,559   
Deferred tax liabilities796  1,347 
Deferred revenues, non-current46,700  59,841 
Other non-current liabilities7,504  10,797 
Redeemable noncontrolling interest12,500  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, 2019177,065  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, respectively5  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 capital533,224  534,673 
Accumulated other comprehensive loss(31,966) (30,383)
Accumulated deficit(249,776) (233,299)
Total stockholders’ equity169,400  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 amortization20,143  23,272 
Change in fair value of financial instruments  (3,849)
Amortization of debt issuance costs155  353 
(Gain) loss on extinguishment of debt(387)  
Accrued PIK interest  (3,447)
(Earnings) loss from equity method investments1,243  205 
Amortization of bond premium(36) 17 
Deferred income taxes(525) 191 
Non-cash interest on leased facility  275 
Stock-based compensation5,555  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 assets4,272  9,402 
Other assets(242) 710 
Accounts payable6,084  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 sale26,207  1,450 
Net cash provided by (used for) investing activities9,598  (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 period109,860  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)

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