- Announces shift to segment reporting in
Q1 2019 for its Software and Advertising businesses
- 2018 total revenue of $143.9 million
exceeded guidance; recurring software revenue of $35.8 million grew
11% YoY
- 2018 net loss narrowed to $7.6 million;
Adj. EBITDA of $8.5 million, up 262% from a year ago
- Notable Q4 customer wins include 116
new Zimbra email enterprise and government customers,
three-million-user Zimbra deal in Japan, and a new Cloud ID
agreement with Newsy
Synacor, Inc. (Nasdaq: SYNC), the trusted technology
development, multiplatform services and revenue partner for video,
internet and communications providers, device manufacturers,
governments and enterprises, today announced its financial results
for the fourth quarter and full year ended December 31, 2018.
“We delivered strong operating results,” said Himesh Bhise,
Synacor’s chief executive officer. “Our 2018 adjusted EBITDA of
$8.5 million was up significantly from $2.3 million a year ago.
High-margin recurring software revenue from our collaboration and
identity platforms was $35.8 million, growing 11% year over
year.”
“In 2019, we will continue to focus on this high-margin,
recurring revenue. Along with our shift to segment reporting, we
are aligning organizational processes to better drive performance
in each of our Software and Advertising businesses. This is
reflected in our adjusted EBITDA guidance of $10 million to $12
million, which is 18% to 42% higher than 2018,” added Bhise.
Recent Highlights
- Closed a three-million-user,
cloud-based email deal for a large Japanese telecommunications
company, in partnership with IIJ.
- Signed 116 new Zimbra email business
and government customers worldwide, bringing the 2018 total to 426
new customers.
- Signed Newsy, a next-generation
national news network, to the growing list of content providers
that use Synacor Cloud ID.
- The Zimbra X email and collaboration
platform is now powered by Oracle Cloud and is available in the
Oracle Cloud Marketplace.
FY 2018 and Q4 2018 Financial Results
Revenue: For the fourth quarter of 2018, revenue was
$39.4 million, exceeding the Company’s financial guidance.
Advertising revenue was down 17% as the Company proactively steered
away from low-margin publisher-based advertising revenue. Recurring
software revenue grew 7.3% compared with the fourth quarter of
2017.
For fiscal 2018, revenue was $143.9 million. Recurring software
revenue was up 11% and Advertising revenue was up 2%.
Net Income: For the fourth quarter of 2018, net
loss was $0.4 million, or $(0.01) per share, compared with a net
loss of $0.1 million, or $(0.00) per share, in the fourth quarter
of 2017. The fourth quarter of 2018 was negatively impacted by a
$0.6 million capitalized software impairment.
For fiscal 2018, net loss narrowed to $7.6 million, or $(0.19)
per share, compared with a net loss of $9.8 million, or $(0.27) per
share, in fiscal 2017.
Adjusted EBITDA: For the fourth quarter of 2018, adjusted
EBITDA increased 12.7% to $4.0 million from $3.6 million for the
fourth quarter of 2017. Adjusted EBITDA excludes stock-based
compensation, other income and expense, capitalized software
impairment, restructuring costs, and certain legal and professional
fees.
For fiscal 2018, adjusted EBITDA increased to $8.5 million, up
from $2.3 million for fiscal 2017, an increase of 262%.
Cash: The Company ended the fourth quarter of 2018 with
$15.9 million in cash and cash equivalents, compared with $15.7
million at the end of the third quarter of 2018.
Guidance
The Company will be moving to segment-based reporting in Q1 2019
to provide better transparency into its Software and Advertising
businesses. Based on information available as of March 13, 2019,
the Company is providing financial guidance for the first quarter
and full year 2019 as follows:
- Q1 2019 Guidance: Revenue for
the first quarter of 2019 is projected to be in the range of $31
million to $33 million. The Company expects to report a net loss of
$2.6 million to $3.1 million and adjusted EBITDA of $1.0 million to
$1.5 million, which excludes stock-based compensation expense of
$0.5 million, certain legal and professional service fees of $0.8
million, depreciation and amortization expense of $2.5 million, and
tax, interest expense and other income and expense of $0.3
million.
- Fiscal 2019 Guidance: Revenue
for full year 2019 is expected to be in the range of $137 million
to $145 million. The Company expects to report a net loss in the
range of $2.2 million to $4.2 million and adjusted EBITDA in the
range of $10 million to $12 million, which excludes stock-based
compensation expense of $2.0 million, certain legal and
professional service fees of $1.0 million, depreciation and
amortization expense of $10.0 million, and tax, interest expense,
and other income and expense of $1.2 million.
Conference Call Details
Synacor will host a conference call today at 5:00 p.m. ET to
discuss the fourth-quarter and fiscal year-end 2018 financial
results with the investment community. The live webcast of
Synacor’s earnings conference call can be accessed at
http://investor.synacor.com/events.cfm. To participate, please log
in approximately 10 minutes prior to the webcast. The call may be
accessed toll-free via phone at (833) 235-2655, with conference ID
8556108, or callers outside the U.S. may dial (647) 689-4151.
Following completion of the call, a recorded webcast replay will be
available on Synacor's website. To listen to the telephone replay
through March 20, 2019, call toll-free (800) 585-8367, or callers
outside the U.S. may dial (416) 621-4642. The conference ID is
8556108.
About Synacor
Synacor (Nasdaq: SYNC) is the trusted technology development,
multiplatform services and revenue partner for video, Internet and
communications providers, device manufacturers, governments and
enterprises. Synacor's mission is to enable its customers to better
engage with their consumers. Its customers use Synacor's technology
platforms and services to scale their businesses and extend their
subscriber relationships. Synacor delivers managed portals,
advertising solutions, email and collaboration platforms, and
cloud-based identity management. www.synacor.com
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures in this
release. Generally, a non-GAAP financial measure is a numerical
measure of a company's performance, financial position or cash
flows that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable
measure calculated and presented in accordance with generally
accepted accounting principles (GAAP).
We report adjusted EBITDA because it is a key measure used by
our management and Board of Directors to understand and evaluate
our core operating performance and trends, to prepare and approve
our annual budget and to develop short- and long-term operational
plans. In particular, the exclusion of certain expenses in
calculating adjusted EBITDA can provide a useful measure for
period-to-period comparisons of our core business. Accordingly, we
believe that adjusted EBITDA provides useful information to
investors and others in understanding and evaluating our operating
results in the same manner as our management and Board of
Directors.
For a reconciliation of adjusted EBITDA to net loss, the most
directly comparable financial measure calculated and presented in
accordance with GAAP, please refer to the table “Reconciliation of
GAAP to Non-GAAP Measures” in this press release.
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995
"Safe Harbor" statement under the Private Securities Litigation
Reform Act of 1995: This press release contains forward-looking
statements concerning Synacor's expected financial performance
including, without limitation, its first-quarter and fiscal-year
2019 guidance, the statements and quotations from management and
Synacor's strategic and operational plans. The achievement or
success of the matters covered by such forward-looking statements
involves risks, uncertainties and assumptions. If any such risks or
uncertainties materialize or if any of the assumptions prove
incorrect, the Company's results could differ materially from the
results expressed or implied by the forward-looking statements the
Company makes.
The risks and uncertainties referred to above include - but are
not limited to - risks associated with: execution of our plans and
strategies, including the loss of a significant customer; execution
against our agreement with AT&T the pace and degree to which
the AT&T portal can be monetized; our ability to obtain new
customers; our ability to integrate the assets and personnel from
acquisitions; expectations regarding consumer taste and user
adoption of applications and solutions; developments in internet
browser software and search advertising technologies; general
economic conditions; expectations regarding the Company's ability
to timely expand the breadth of services and products
or introduction of new services and products; consolidation
within the cable and telecommunications industries; changes in the
competitive dynamics in the market for online search and digital
advertising; the risk that security measures could be breached
and unauthorized access to subscriber data could be obtained;
potential third party intellectual property infringement claims or
other legal claims against Synacor; and the price volatility of our
common stock.
Further information on these and other factors that could affect
the Company’s financial results is included in filings it makes
with the Securities and Exchange Commission from time to time,
including the section entitled "Risk Factors" in the Company's most
recent Form 10-K filed with the SEC. These documents are available
on the SEC Filings section of the Investor Information section of
the Company's website at http://investor.synacor.com/. All
information provided in this release and in the attachments is
available as of March 13, 2019, and Synacor undertakes no duty to
update this information.
Synacor, Inc. Condensed
Consolidated Balance Sheets (In thousands)
(Unaudited) December 31, December 31,
2018 2017 Assets Current assets: Cash and cash
equivalents $ 15,921 $ 22,476 Accounts receivable, net 25,567
31,696 Prepaid expenses and other current assets 3,779
4,516 Total current assets 45,267 58,688
Property and equipment, net 18,707 20,505 Goodwill 15,941 15,955
Intangible assets 10,553 12,695 Other assets 995
937
Total Assets $ 91,463
$ 108,780 Liabilities and
Stockholders' Equity Current liabilities: Accounts payable $
19,174 $ 25,931 Accrued expenses and other current liabilities
7,849 7,075 Current portion of deferred revenue 6,672 11,605
Current portion of capital lease obligations 2,328
2,444 Total current liabilities 36,023 47,055
Long-term portion of capital lease obligations 1,367 3,371 Deferred
revenue 2,214 3,682 Deferred income taxes 231 264 Other long-term
liabilities 457 63
Total
Liabilities 40,292 54,435
Stockholders' Equity: Common stock 399 396 Treasury
stock (1,899 ) (1,881 ) Additional paid-in capital 144,739 142,486
Accumulated deficit (91,726 ) (86,627 ) Accumulated other
comprehensive loss (342 ) (29 ) Total stockholders’
equity 51,171 54,345
Total
Liabilities and Stockholders' Equity $ 91,463
$ 108,780
Synacor, Inc.
Condensed Consolidated Statements of
Operations
(In thousands except share and per share amounts)
(Unaudited) Three months ended Twelve
months ended December 31, December 31,
2018 2017 2018 2017 Revenue $
39,398 $ 46,002 $ 143,879 $ 140,027 Costs and operating expenses:
Cost of revenue (1) 20,888 25,409 72,547 70,053 Technology and
development (1)(2) 5,737 6,692 24,510 27,642 Sales and marketing
(2) 5,609 5,916 24,116 24,941 General and administrative (1)(2)
4,838 4,980 19,454 17,800 Depreciation and amortization
2,325 2,816 9,641 9,820
Total costs and operating expenses 39,397
45,813 150,268 150,256
Gain (loss) from operations 1 189 (6,389 ) (10,229 )
Gain on sale of investment — 85 — 1,987 Other expense - net (166 )
(174 ) (212 ) (2 ) Interest expense (73 ) (105 )
(338 ) (433 ) Loss before income taxes (238 ) (5 )
(6,939 ) (8,677 ) Provision for income taxes 138
101 616 1,100 Net loss $
(376 ) $ (106 ) $ (7,555 ) $ (9,777 ) Net loss per
share: Basic $ (0.01 ) $ (0.00 ) $ (0.19 ) $ (0.27 ) Diluted $
(0.01 ) $ (0.00 ) $ (0.19 ) $ (0.27 ) Weighted average
shares used to compute net loss per share: Basic 39,009,442
38,727,724 38,895,301
36,381,299 Diluted 39,009,442
38,727,724 38,895,301 36,381,299
Notes: (1) Exclusive of depreciation shown separately. (2)
Includes stock-based compensation as follows:
Three months
ended Twelve months ended December 31,
December 31, 2018 2017 2018 2017
Technology and development $ 120 $ 140 $ 489 $ 744 Sales and
marketing 100 136 474 636 General and administrative 133
286 841 1,110 $
353 $ 562 $ 1,804 $ 2,490
Synacor, Inc. Condensed Consolidated Statements of Cash
Flows (In thousands) (Unaudited)
Twelve months ended December 31,
2018 2017 Cash Flows from Operating
Activities: Net loss $ (7,555 ) $ (9,777 ) Adjustments to
reconcile net loss to net cash provided (used in) by operating
activities: Depreciation and amortization 9,832 9,820 Loss on
disposal of property and equipment — 203 Capitalized software
impairment 552 256 Stock-based compensation expense 1,804 2,490
Gain on sale of investment — (1,987 ) Provision for deferred income
taxes (248 ) 137 Change in allowance for doubtful accounts 126 (164
) Increase in estimated value of contingent consideration — 107
Change in operating assets and liabilities net of effect of
acquisition: Accounts receivable, net 6,002 (4,146 ) Prepaid
expenses and other assets 737 346 Other long-term assets 142 15
Accounts payable, accrued expenses, and other current liabilities
(5,785 ) 3,261 Deferred revenue (3,945 ) (779 ) Other long-term
liabilities 394 (45 )
Net cash provided
(used in) by operating activities 2,056
(263 ) Cash Flows from Investing
Activities: Proceeds from sale of investment — 2,645 Purchases
of property and equipment (6,256 ) (7,876 )
Net
cash used in investing activities (6,256 )
(5,231 ) Cash Flows from Financing
Activities: Net proceeds from offering of common stock — 20,258
Payments of public offering issuance costs — (212 ) Repayments of
long-term debt — (5,000 ) Repayments on capital lease obligations
(2,422 ) (1,866 ) Proceeds from exercise of common stock options
385 2,149 Purchase of treasury stock and shares received to
satisfy minimum tax withholding liabilities (18 ) (334 ) Deferred
acquisition payment — (1,300 )
Net cash
(used in) provided by financing activities (2,055
) 13,695 Effect of exchange rate
changes on cash and cash equivalents (300 ) (40 ) Net
(decrease) increase in Cash and Cash Equivalents (6,555 ) 8,161
Cash and Cash Equivalents at beginning of period 22,476
14,315 Cash and Cash Equivalents at end of
period
$ 15,921 $ 22,476
Synacor,
Inc. Reconciliation of GAAP to Non-GAAP Measures (In
thousands) (Unaudited) The following table
presents a reconciliation of net loss to adjusted EBITDA for each
of the periods indicated:
Three months ended
Twelve months ended December 31, December 31,
2018 2017 2018 2017
Reconciliation of Adjusted EBITDA: Net loss $ (376 ) $ (106
) $ (7,555 ) $ (9,777 ) Provision for income taxes 138 101 616
1,100 Interest expense 73 105 338 433 Gain on sale of investment —
(85 ) — (1,987 ) Other expense 166 174 212 2 Depreciation and
amortization 2,516 2,816 9,832 9,820 Capitalized software
impairment 552 — 552 256 Stock-based compensation expense 353 562
1,804 2,490 Restructuring costs 77 — 1,111 — Certain legal
expenses* 367 — 1,400 — Certain professional services fees**
154 — 154 —
Adjusted EBITDA $ 4,020 $
3,567 $ 8,464 $
2,337
* "Certain legal expenses" include legal fees and other related
expenses associated with legal proceedings outside the ordinary
course of our business, including the class action securities
litigation, and arbitration costs related to the dissolution of a
former joint venture.
** “Certain professional services fees” includes fees and
expenses related to merger and acquisition activities.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190313005813/en/
Investor Contact:David CalusdianSharon Merrill
Associatesir@synacor.com617-542-5300
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