- Q2 2019 GAAP net loss of $2.5 million, adjusted net loss of
$2.2 million; improved from adjusted net loss of $2.3 million in Q2
2018
- Adjusted EBITDA of $1.62 million, just above the high end of
guidance, and up 37% from the year-ago quarter
- Revenue of $31.8 million, in line with guidance
- 103 new customers and 220 contract expansions for Zimbra email
and collaboration platform
Synacor, Inc. (Nasdaq: SYNC), the trusted technology,
multiplatform services and revenue partner for video, internet and
communications providers, device manufacturers, governments and
enterprises, today announced its financial results for the second
quarter ended June 30, 2019.
“Our second-quarter results reflect our emphasis on
profitability as we focus on building our high-margin,
recurring-revenue software business,” said Himesh Bhise, Synacor’s
chief executive officer. “Our revenue was in line with our
expectations, while our adjusted EBITDA was slightly above our
guidance range and up significantly from a year ago.”
“This improved financial performance is enabling us to invest in
our high-margin, recurring-revenue-driven enterprise software
business,” added Bhise. “We are accelerating our transformation to
becoming a collaboration and identity SaaS business. The pipeline
for our software business is very strong, as we transition our
Zimbra email and collaboration platform to a recurring revenue
model and expand Cloud ID Identity and access management solutions
into broader enterprise applications. While this transition is
having a short-term effect on revenue growth, on a trailing twelve
month basis we have grown recurring software revenue more than
7%.”
Recent Highlights
- Zimbra customer wins in Q2 include 103 new deployments and 220
deal expansions.
- Extended and upgraded PenTeleData, a strategic partnership of
local cable and telephone companies, to Zimbra X through 2022.
- Expanded reseller relationship with AZTi, to incorporate Zimbra
into a secure messaging collaboration service for business
customers in Japan.
- Four major multichannel video programming distributors (MVPD)
now live on Cloud ID through the previously announced ETI reseller
relationship.
- Expanded margins in publisher-based advertising four-fold and
the number of active publishers grew over 18% year over year.
Financial Results
Revenue: For the second quarter of 2019, total revenue
was $31.8 million, in line with the Company’s financial guidance,
and down from $35.9 million in the second quarter of 2018.
Software & Services revenue totaled $10.6 million in the
second quarter of 2019, compared with $12.8 million in the second
quarter of 2018. The second quarter of 2018 included $1.4 million
in revenue from discontinued product lines and non-recurring
services. Portal & Advertising revenue totaled $21.3 million in
the second quarter of 2019, compared with $23.1 million in the
year-ago period.
Net Income: For the second quarter of 2019, GAAP net loss
narrowed to $2.5 million, or $(0.06) per share, from a net loss of
$2.6 million, or $(0.07) per share, in the second quarter of 2018.
Adjusted net loss was $2.2 million, or $(0.05) per share, compared
with an adjusted net loss of $2.3 million, or $(0.06) per share, in
the second quarter of 2018. Adjusted net loss excludes
restructuring charges and certain legal and professional fees.
Adjusted EBITDA: In the second quarter of 2019, adjusted
EBITDA increased 37% to $1.6 million from $1.2 million for the
second quarter of 2018. Adjusted EBITDA excludes stock-based
compensation, other income and expense, restructuring charges and
certain legal and professional fees.
On a segment basis, adjusted EBITDA margin was 26.4% for
Software & Services and 11.9% for Portal & Advertising.
Cash: The Company ended the second quarter of 2019 with
$13.4 million in cash and cash equivalents, compared with $13.5
million at the end of the first quarter of 2019.
Guidance
Based on information available as of August 7, 2019, the Company
is providing guidance for the third quarter and updating full-year
2019 guidance to account for a range of outcomes regarding the
wind-down of ATT.net from as early as late Q3 2019 to the end of
the year. Negotiations are still in progress.
- Q3 2019 Guidance: Revenue for the third quarter of 2019
is projected to be in the range of $28.5 million to $33.5 million.
The Company expects to report a net loss of $1.6 million to $4.3
million and adjusted EBITDA of $1.8 million to $2.3 million.
- Fiscal 2019 Guidance: Revenue for full year 2019 is
expected to be in the range of $124 million to $140 million. The
Company expects to report a net loss in the range of $3.6 million
to $10.5 million and adjusted EBITDA in the range of $8 million to
$12 million.
Conference Call Details
Synacor will host a conference call today at 5:00 p.m. ET to
discuss the second-quarter 2019 financial results. 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
5694795, 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 August 14, 2019, call toll-free (800) 585-8367, or callers
outside the U.S. may dial (416) 621-4642.
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.
We report adjusted net loss and adjusted diluted earnings per
share because we believe these measures provide investors with
additional information to assess our financial performance. These
measures should be viewed as supplemental data, rather than
substitutes or alternatives to the comparable GAAP measures. For a
reconciliation of our GAAP Condensed Consolidated Statements of
Operations to our adjusted non-GAAP measures, please refer to the
table “Reconciliation of Adjusted Financial 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 third quarter and full-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; the
nature and terms of a wind-down and migration plan with AT&T;
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 August 7, 2019, and Synacor undertakes no duty to
update this information.
Synacor, Inc. Condensed Consolidated Balance
Sheets (In thousands) (Unaudited) June
30, December 31,
2019
2018
Assets Current assets: Cash and cash equivalents
$
13,417
$
15,921
Accounts receivable, net
21,894
25,567
Prepaid expenses and other current assets
3,871
3,779
Total current assets
39,182
45,267
Property and equipment, net
18,384
18,707
Operating lease right-of-use assets
6,333
— Goodwill
15,947
15,941
Intangible assets
9,482
10,553
Other assets
926
995
Total Assets
$
90,254
$
91,463
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable
$
17,096
$
19,174
Accrued expenses and other current liabilities
5,830
7,849
Current portion of deferred revenue
6,219
6,672
Current portion of long-term debt and finance leases
3,547
2,328
Current portion of operating lease liabilities
2,823
— Total current liabilities
35,515
36,023
Long-term portion debt and finance leases
491
1,367
Deferred revenue
2,860
2,214
Long-term portion of operating lease liabilities
3,696
— Deferred income taxes
270
231
Other long-term liabilities
278
457
Total Liabilities
43,110
40,292
Stockholders' Equity: Common stock
399
399
Treasury stock
(1,905
)
(1,899
)
Additional paid-in capital
145,464
144,739
Accumulated deficit
(96,457
)
(91,726
)
Accumulated other comprehensive loss
(357
)
(342
)
Total stockholders’ equity
47,144
51,171
Total Liabilities and Stockholders' Equity
$
90,254
$
91,463
Synacor, Inc. Condensed Consolidated Statements of
Operations (In thousands except share and per share
amounts) (Unaudited) Three months ended
Six months ended June 30, June 30,
2019
2018
2019
2018
Revenue
$
31,849
$
35,923
$
63,673
$
68,838
Costs and operating expenses: Cost of revenue (1)
17,152
18,506
33,658
34,041
Technology and development (1)(2)
4,577
5,819
9,123
12,188
Sales and marketing (2)
5,550
6,904
11,541
12,840
General and administrative (1)(2)
3,955
4,320
8,420
9,337
Depreciation and amortization
2,567
2,444
5,002
4,879
Total costs and operating expenses
33,801
37,993
67,744
73,285
Loss from operations
(1,952
)
(2,070
)
(4,071
)
(4,447
)
Other (expense) income - net
(207
)
(133
)
9
(14
)
Interest expense
(55
)
(88
)
(119
)
(185
)
Loss before income taxes
(2,214
)
(2,291
)
(4,181
)
(4,646
)
Provision for income taxes
273
293
550
313
Net loss
$
(2,487
)
$
(2,584
)
$
(4,731
)
$
(4,959
)
Net loss per share: Basic
$
(0.06
)
$
(0.07
)
$
(0.12
)
$
(0.13
)
Diluted
$
(0.06
)
$
(0.07
)
$
(0.12
)
$
(0.13
)
Weighted average shares used to compute net loss per share:
Basic
39,056,381
38,823,056
39,047,561
38,808,690
Diluted
39,056,381
38,823,056
39,047,561
38,808,690
Notes: (1) Exclusive of depreciation and amortization shown
separately. (2) Includes stock-based compensation as follows:
Three months ended Six months ended June 30,
June 30,
2019
2018
2019
2018
Technology and development
$
92
$
134
$
195
$
268
Sales and marketing
111
126
226
264
General and administrative
121
277
234
558
$
324
$
537
$
655
$
1,090
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 Six months ended June 30, June 30,
2019
2018
2019
2018
Reconciliation of Adjusted EBITDA: Net loss
$ (2,487)
$ (2,584)
$ (4,731)
$ (4,959)
Provision for income taxes
273
293
550
313
Interest expense
55
88
119
185
Other expense (income)
207
133
(9)
14
Depreciation and amortization
2,986
2,444
5,473
4,879
Capitalized software impairment — —
226
— Stock-based compensation expense
324
537
655
1,090
Restructuring costs —
268
—
268
Certain legal expenses*
257
—
523
— Certain professional services fees** — —
513
—
Adjusted EBITDA
$ 1,615
$ 1,179
$ 3,319
$ 1,790
* "Certain legal expenses" includes legal fees and other
related expenses outside the ordinary course of business. **
“Certain professional services fees” includes fees and expenses
related to merger and acquisition activities.
Synacor, Inc.
Condensed Consolidated Statements of Cash Flows (In
thousands) (Unaudited) Six Months Ended
June 30,
2019
2018
Cash Flows from Operating Activities: Net loss
$
(4,731
)
$
(4,959
)
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization
5,473
4,879
Capitalized software impairment
226
— Stock-based compensation expense
655
1,090
Provision for deferred income taxes
40
(119
)
Change in allowance for doubtful accounts
34
—
Change in operating assets and liabilities: Accounts receivable,
net
3,639
9,942
Prepaid expenses and other assets
(92
)
(882
)
Other long-term assets
69
—
Operating lease right-of-use assets and liabilities, net
36
—
Accounts payable, accrued expenses and other liabilities
(4,030
)
(10,586
)
Deferred revenue
193
(1,946
)
Net cash provided by (used in) operating activities
1,512
(2,581
)
Cash Flows from Investing Activities: Purchases of property
and equipment
(2,444
)
(3,978
)
Net cash used in investing activities
(2,444
)
(3,978
)
Cash Flows from Financing Activities: Payments on long-term
debt and finance leases
(1,585
)
(867
)
Proceeds from exercise of common stock options
40
103
Treasury stock shares received to satisfy minimum tax withholdings
(6
)
(12
)
Net cash used in financing activities
(1,551
)
(776
)
Effect of exchange rate changes on cash and cash equivalents
(21
)
(187
)
Net decrease in Cash and Cash Equivalents
(2,504
)
(7,522
)
Cash and Cash Equivalents at beginning of period
15,921
22,476
Cash and Cash Equivalents at end of period
$
13,417
$
14,954
Synacor, Inc. Segment Results (In thousands
except percentages) (Unaudited) Effective March
31, 2019, the Company concluded that we now have two reportable
segments which were determined on the basis of the products and
services provided to customers, identified as follows: (i) Software
& Services, which includes email / collaboration (Zimbra) and
identity management (Cloud ID). (ii) Portal & Advertising,
which includes managed portals and advertising solutions for
publishers. The following table presents the key segment financial
measures for the periods indicated. Please refer to the
Reconciliation of GAAP to Non-GAAP Measures schedule for the
reconciliation of Adjusted EBITDA.
Three months ended
Six months ended June 30, June 30,
2019
2018
% Change
2019
2018
% Change
Segment Revenue: Software & Services
$
10,588
$
12,827
-17.5
%
$
21,746
$
23,512
-7.5
%
Portal & Advertising
21,261
23,096
-7.9
%
41,927
45,326
-7.5
%
Total
$
31,849
$
35,923
-11.3
%
$
63,673
$
68,838
-7.5
%
Segment Adjusted EBITDA: Software & Services
$
2,794
$
4,393
-36.4
%
$
5,588
$
6,890
-18.9
%
Portal & Advertising
2,534
964
162.9
%
5,155
4,012
28.5
%
Unallocated Corporate G&A Expense
(3,713
)
(4,178
)
-11.1
%
(7,424
)
(9,112
)
-18.5
%
Total
$
1,615
$
1,179
37.0
%
$
3,319
$
1,790
85.4
%
Segment Adjusted EBITDA margin*: Software & Services
26.4
%
34.3
%
-790 bps
25.7
%
29.3
%
-360 bps Portal & Advertising
11.9
%
4.2
%
770 bps
12.3
%
8.9
%
350 bps Total
5.1
%
3.3
%
180 bps
5.2
%
2.6
%
260 bps
* Adjusted EBITDA as a percent of revenue The
following tables presents a disaggregation of segment revenue for
the periods indicated based upon the accounting definition of
revenue recognition: (i) Recurring = revenue recognized over time
(ii) Non-recurring = revenue recognized at a point in time
Three
months ended Six months ended June 30, June
30,
2019
2018
% Change
2019
2018
% Change
Software & Services Revenue: Recurring
$
8,388
$
8,682
-3.4
%
$
16,903
$
17,006
-0.6
%
Non-recurring
2,200
3,784
-41.9
%
4,483
5,683
-21.1
%
Discontinued Products**
—
360
-100.0
%
360
822
-56.2
%
Total
$
10,588
$
12,826
-17.4
%
$
21,746
$
23,511
-7.5
%
Portal & Advertising Revenue: Recurring
$
1,202
$
1,964
-38.8
%
$
2,708
$
4,051
-33.2
%
Non-recurring
20,059
21,133
-5.1
%
39,219
41,276
-5.0
%
Total
$
21,261
$
23,097
-7.9
%
$
41,927
$
45,327
-7.5
%
Total Revenue: Recurring
$
9,590
$
10,646
-9.9
%
$
19,611
$
21,057
-6.9
%
Non-recurring
22,259
24,917
-10.7
%
43,702
46,959
-6.9
%
Discontinued Products**
—
360
-100.0
%
360
822
-56.2
%
Total
$
31,849
$
35,923
-11.3
%
$
63,673
$
68,838
-7.5
%
** VAM video product line which was discontinued during Q1
2019.
Synacor, Inc. Reconciliation of Adjusted Financial
Measures (In thousands except per share amounts)
(Unaudited) Three months ended June 30, 2019
Per GAAPStatements RestructuringCosts Certain
Legal &ProfessionalFees Adjusted NonGAAP
Revenue
$
31,849
$
31,849
Costs and operating expenses: Cost of revenue
17,152
17,152
Technology and development (1)(2)
4,577
4,577
Sales and marketing (2)
5,550
5,550
General and administrative (1)(2)
3,955
(257
)
3,698
Depreciation and amortization
2,567
2,567
Total costs and operating expenses
33,801
—
(257
)
33,544
Loss from operations
(1,952
)
257
(1,695
)
Other expense - net
(207
)
(207
)
Interest expense
(55
)
(55
)
Loss before income taxes
(2,214
)
—
257
(1,957
)
Provision for income taxes (3)
273
273
Net loss
$
(2,487
)
$
—
$
257
$
(2,230
)
Diluted EPS
$
(0.06
)
$
—
$
0.01
$
(0.05
)
Three months ended June 30, 2018 Per
GAAPStatements RestructuringCosts Certain Legal
&ProfessionalFees Adjusted Non-GAAP
Revenue
$
35,923
$
35,923
Costs and operating expenses: Cost of revenue
18,506
18,506
Technology and development (1)(2)
5,819
5,819
Sales and marketing (2)
6,904
6,904
General and administrative (1)(2)
4,320
(268
)
—
4,052
Depreciation and amortization
2,444
2,444
Total costs and operating expenses
37,993
(268
)
—
37,725
Loss from operations
(2,070
)
268
—
(1,802
)
Other expense - net
(133
)
(133
)
Interest expense
(88
)
(88
)
Loss before income taxes
(2,291
)
268
—
(2,023
)
Provision for income taxes (3)
293
293
Net loss
$
(2,584
)
$
268
$
—
$
(2,316
)
Diluted EPS
$
(0.07
)
$
0.01
$
—
$
(0.06
)
Notes: (1) Exclusive of depreciation and amortization shown
separately. (2) Includes stock-based compensation (3) No income tax
effects to adjustments presented due to full valuation allowance.
Synacor's management believes that certain non-GAAP measures
of Adjusted Net Loss and Adjusted Diluted Earnings per Share
provide investors with additional information to assess the
Company's financial performance. These measures should be viewed as
supplemental data, rather than substitutes or alternatives to the
comparable GAAP measures.
Synacor, Inc. Reconciliation of
Adjusted Financial Measures (In thousands except per share
amounts) (Unaudited) Six months ended June 30,
2019 Per GAAPStatements
CapitalizedSoftwareImpairment RestructuringCosts
Certain Legal &ProfessionalFees Adjusted Non-GAAP
Revenue
$
63,673
$
63,673
Costs and operating expenses: Cost of revenue
33,658
33,658
Technology and development (1)(2)
9,123
9,123
Sales and marketing (2)
11,541
11,541
General and administrative (1)(2)
8,420
(226
)
(1,036
)
7,158
Depreciation and amortization
5,002
5,002
Total costs and operating expenses
67,744
(226
)
—
(1,036
)
66,482
Loss from operations
(4,071
)
226
1,036
(2,809
)
Other income - net
9
9
Interest expense
(119
)
(119
)
Loss before income taxes
(4,181
)
226
—
1,036
(2,919
)
Provision for income taxes (3)
550
550
Net loss
$
(4,731
)
$
—
$
—
$
1,036
$
(3,469
)
Diluted EPS
$
(0.12
)
$
—
$
—
$
0.03
$
(0.09
)
Six months ended June 30, 2018 Per
GAAPStatements CapitalizedSoftwareImpairment
RestructuringCosts Certain Legal
&ProfessionalFees
Adjusted Non- GAAP
Revenue
$
68,838
$
68,838
Costs and operating expenses: Cost of revenue
34,041
34,041
Technology and development (1)(2)
12,188
12,188
Sales and marketing (2)
12,840
12,840
General and administrative (1)(2)
9,337
(268
)
9,069
Depreciation and amortization
4,879
4,879
Total costs and operating expenses
73,285
—
(268
)
—
73,017
Loss from operations
(4,447
)
—
268
—
(4,179
)
Other expense - net
(14
)
(14
)
Interest expense
(185
)
(185
)
Loss before income taxes
(4,646
)
—
268
—
(4,378
)
Provision for income taxes (3)
313
313
Net loss
$
(4,959
)
$
—
$
268
$
—
$
(4,691
)
Diluted EPS
$
(0.13
)
$
—
$
0.01
$
—
$
(0.12
)
Notes: (1) Exclusive of depreciation and amortization shown
separately. (2) Includes stock-based compensation (3) No income tax
effects to adjustments presented due to full valuation allowance.
Synacor's management believes that certain non-GAAP measures
of Adjusted Net Loss and Adjusted Diluted Earnings per Share
provide investors with additional information to assess the
Company's financial performance. These measures should be viewed as
supplemental data, rather than substitutes or alternatives to the
comparable GAAP measures.
Synacor, Inc.
Reconciliation of GAAP to Non-GAAP Guidance Measures (In
thousands) (Unaudited) Q3-2019 FY
2019 Net Loss $(1.6) - $(4.3) $(3.6) - $(10.5) Taxes, Interest
& Other Income/Expense
0.3
1.2
Depreciation & Amortization
3.0
11.5
Stock-based Compensation
0.4
1.4
Restructuring 0 - 1.5 0 - 2.0 Certain Legal and Professional Fees
0.2 - 0.4 1.3 - 1.7 Capitalized Software Impairment 0 - 0.5 0.2 -
0.7 Adjusted EBITDA $1.8 - $2.3 $8.0 - $12.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005847/en/
Investor Contact: David Calusdian Sharon Merrill Associates
ir@synacor.com 617-542-5300
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