Synacor, Inc. (Nasdaq: SYNC), a cloud-based software and
services company serving global video, internet and communications
providers, device manufacturers, governments and enterprises, today
announced its financial results for the first quarter ended March
31, 2020.
First Quarter Highlights
- First quarter revenue of $20.6 million
- First quarter GAAP net loss of $4.5 million and Adjusted EBITDA
of $0.3 million
- 260 new and expansion customers for Zimbra email and
collaboration platform. Ramping up the previously announced
significant new streaming services Cloud ID customer
- Software segment adjusted EBITDA margins grew to 31.9% from 25%
and unallocated corporate G&A declined 20% compared to the year
ago quarter
- Merger planning with Qumu continues; S-4 registration filing
has been slightly delayed due to COVID-19
“Our transition to a higher-margin, SaaS-focused software
company continued,” said Himesh Bhise, Synacor’s Chief Executive
Officer. “It is encouraging that our Software & Services
segment grew modestly in the face of economic turmoil, with revenue
excluding discontinued products up 2.4% and Segment Adjusted EBITDA
growing 26% year-over-year, representing a 31.9% margin. Our
collaboration and identity platforms are particularly relevant in
an environment of distributed work and higher streaming.”
“The COVID-driven impact on Synacor has been isolated to our
publisher advertising line of business,” continued Bhise. “We felt
a sharp reduction in March revenue, consistent with the
industry-wide reduction in media spend, and expect this slowdown to
continue through Q2. However, our active publishers grew 50% over
last year, validating an increased need for the monetization
services we provide and positioning us well when the economy
recovers.”
“We have been working hard to protect the health and safety of
our people, do our part to ‘flatten the curve’, deliver excellence
to our customers, maintain focus in growing our business, and
implement cost and cash-control measures. I could not be prouder of
the Synacor team for their hard work and dedication during these
volatile times. We have a resilient business, strong balance sheet,
and the access to capital to emerge on the other side of this
pandemic and accelerate our transformation into a SaaS-focused
software company,” Bhise concluded.
Recent Highlights
- 70 new customers and 190 contract expansions for Zimbra email
and collaboration platform delivered through worldwide channel
partners.
- Began ramping up the previously announced large subscription
services customer of Cloud ID to support digital streaming
growth.
- Signed two service providers and two content networks to Cloud
ID
- Active publisher customers for advertising were 133 in Q1,
growing 50% year-over-year, despite a decline in industry-wide
media spend due to COVID-19.
Financial Results:
Revenue
Revenue was $20.6 million, compared to $31.8 million or $22.5
million when excluding the ATT.net portal business in the first
quarter of 2019. The decline was driven by the COVID-19 impact on
the Publisher advertising business consistent with the
industry-wide decline in media spend.
Revenue in our Software & Services segment totaled $11.1
million, compared with $11.2 million or $10.8 million net of
discontinued product in the prior year. Revenue in our Portal &
Advertising segment totaled $9.5 million, compared with $20.7
million or $11.4 million net of the ATT.net portal business in the
prior year due to lower publisher based advertising revenue related
to the COVID-19 pandemic.
Net Loss
Net loss was $4.5 million, or $0.11 per share, compared with a
net loss of $2.2 million, or $0.06 per share in the prior year. The
current year quarter includes $1.4 million of M&A expenses
related to our pending merger with Qumu.
Adjusted EBITDA
Adjusted EBITDA was $0.3 million, or 1.5% of revenue, compared
with $1.7 million (5.4% of revenue) in the first quarter of 2019.
Adjusted EBITDA excludes stock-based compensation, other income and
expense, asset impairments, restructuring costs, and certain legal
and professional fees. The decline was driven by the COVID-19
impact on publisher based advertising revenue and margins.
Cash
The Company ended the quarter with $8.9 million in cash and cash
equivalents, compared with $11.0 million at the end of 2019.
Similar to prior years, the first quarter cash decline was driven
by the normal seasonality of some annual disbursements. In
addition, we also paid out approximately $0.5 million in
non-recurring expenses related to the pending merger with Qumu. The
company continues to have no borrowings on its credit facility and
had approximately $6.7 million of availability as of quarter-end.
The company has taken actions to reduce costs and preserve cash in
response to the pandemic, and believes that it has sufficient
liquidity for operations going forward.
Guidance
Due to the uncertainty surrounding the extent, duration, and
pace of recovery related to the COVID-19 pandemic, Synacor is
withdrawing its previously provided guidance for 2020 and
temporarily suspending its practice of providing quarterly guidance
updates until the current situation abates and our visibility
improves.
Conference Call Details
Synacor will host a conference call today at 5 p.m. ET to
discuss its first quarter 2020 financial results. The live webcast
of Synacor’s earnings conference call can be accessed at
https://www.synacor.com/investor-relations/events-and-presentations.
To participate, please dial 1-833-235-2655 (toll free) or
1-647-689-4151 (international) and reference conference ID
5194062.
Following the conclusion of the live call, a replay of the
webcast will be available on the Investor Relations section of the
Company's website for at least 90 days. A telephonic replay of the
conference call will also be available from 8 p.m. ET on May 6,
2020 until 11:59 p.m. ET on May 13, 2020 by dialing 1-800-585-8367
or 1-416-621-4642 and using the pin number 5194062.
About Synacor
Synacor (Nasdaq: SYNC) is a cloud-based software and services
company serving global 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 first-quarter and full-year 2020
guidance, anticipated benefits from the merger with Qumu, 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: Synacor and Qumu’s ability
or inability to obtain shareholder approval as required for the
merger or to satisfy other conditions the merger; the effect of the
announcement of the merger on Synacor and Qumu’s ability to retain
and hire key personnel and maintain relationships with customers,
suppliers and others with whom Synacor or Qumu does business;
disruption of Synacor management’s attention due to the merger; the
combined company’s ability to achieve cost reductions and cost
synergies from the merger; execution of our plans and strategies,
including the loss of a significant customer; 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.
No Offer or Solicitation
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval with respect to the proposed merger or
otherwise. No offer of securities shall be made except by means of
a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
Additional Information and Where to Find It
In connection with the proposed merger between Synacor and Qumu,
Synacor intends to file a registration statement on Form S-4
containing a joint proxy statement/prospectus of Synacor and Qumu
and other documents concerning the proposed merger with the SEC.
The definitive proxy statement will be mailed to the stockholders
of Synacor and Qumu in advance of the meeting. BEFORE MAKING ANY
VOTING DECISION, SYNACOR’S AND QUMU’S RESPECTIVE STOCKHOLDERS ARE
URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY
WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS FILED BY EACH OF
SYNACOR AND QUMU WITH THE SEC IN CONNECTION WITH THE PROPOSED
MERGER OR INCORPORATED BY REFERENCE THEREIN BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND
THE PARTIES TO THE PROPOSED TRANSACTION. Investors and security
holders will be able to obtain a free copy of the joint proxy
statement/prospectus and other documents containing important
information about Synacor and Qumu, once such documents are filed
with the SEC, through the website maintained by the SEC at
www.sec.gov. Synacor makes available free of charge at
www.synacor.com, copies of materials it files with, or furnishes
to, the SEC. The contents of the website referenced above are not
deemed to be incorporated by reference into the registration
statement or the joint proxy statement/prospectus.
Participants in the Solicitation
This document does not constitute a solicitation of proxy, an
offer to purchase or a solicitation of an offer to sell any
securities. Synacor, Qumu and their respective directors, executive
officers and certain employees may be deemed to be participants in
the solicitation of proxies from the stockholders of Synacor and
Qumu in connection with the proposed merger. Information regarding
the special interests of these directors and executive officers in
the proposed merger will be included in the joint proxy
statement/prospectus referred to above. Security holders may also
obtain information regarding the names, affiliations and interests
of Synacor’s directors and executive officers in Synacor’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2019,
which was filed with the SEC on March 6, 2020, its Current Report
on Form 8-K dated February 11, 2020, which was filed with the SEC
on February 11, 2020, its Current Report on Form 8-K dated March 3,
2020, which was filed with the SEC on March 3, 2020, and its
definitive proxy statement for the 2020 annual meeting of
stockholders, which was filed with the SEC on April 29, 2020.
Security holders may obtain information regarding the names,
affiliations and interests of Qumu’s directors and executive
officers in Qumu’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2019, which was filed with the SEC on March 6,
2020, and its definitive proxy statement for the 2019 annual
meeting of shareholders, which was filed with the SEC on April 9,
2019. To the extent the holdings of Synacor securities by Synacor’s
directors and executive officers or the holdings of Qumu securities
by Qumu’s directors and executive officers have changed since the
amounts set forth in Synacor’s proxy statement for its 2020 annual
meeting of stockholders or Qumu’s proxy statement for its 2019
annual meeting of stockholders, such changes have been or will be
reflected on Statements of Change in Ownership on Form 4 filed with
the SEC. Additional information regarding the interests of such
individuals in the proposed merger will be included in the joint
proxy statement/prospectus relating to the proposed merger when it
is filed with the SEC. These documents (when available) may be
obtained free of charge from the SEC’s website at www.sec.gov,
Synacor’s website at www.synacor.com and Qumu’s website at
www.qumu.com. The contents of the websites referenced above are not
deemed to be incorporated by reference into the registration
statement or the joint proxy statement/prospectus.
Synacor, Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
March 31, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
8,922
$
10,966
Accounts receivable, net
14,820
20,532
Prepaid expenses and other current
assets
4,181
2,989
Total current assets
27,923
34,487
Property and equipment, net
14,234
14,948
Operating lease right-of-use assets
4,051
4,765
Goodwill
15,934
15,948
Intangible assets
7,875
8,411
Other assets
1,136
1,319
Total Assets
$
71,153
$
79,878
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
12,588
$
12,583
Accrued expenses and other current
liabilities
3,313
5,878
Current portion of deferred revenue
5,952
6,509
Current portion of long-term debt and
finance leases
1,819
2,529
Current portion of operating lease
liabilities
1,826
2,165
Total current liabilities
25,498
29,664
Long-term portion debt and finance
leases
986
729
Deferred revenue
2,295
2,846
Long-term portion of operating lease
liabilities
2,411
2,366
Deferred income taxes
295
275
Other long-term liabilities
341
334
Total Liabilities
31,826
36,214
Stockholders' Equity:
Common stock
403
401
Treasury stock
(1,971
)
(1,931
)
Additional paid-in capital
146,844
146,460
Accumulated deficit
(105,272
)
(100,747
)
Accumulated other comprehensive loss
(677
)
(519
)
Total stockholders’ equity
39,327
43,664
Total Liabilities and Stockholders'
Equity
$
71,153
$
79,878
Synacor, Inc.
Condensed Consolidated Statement
of Operations
(In thousands except for share
and per share data)
(Unaudited)
Three Months Ended March
31,
2020
2019
Revenue
$
20,583
$
31,824
Costs and operating expenses:
Cost of revenue (1)
10,729
16,506
Technology and development (1)(2)
3,108
4,546
Sales and marketing (2)
4,368
5,991
General and administrative (1)(2)
4,466
4,465
Depreciation and amortization
2,214
2,435
Total costs and operating expenses
24,885
33,943
Loss from operations
(4,302
)
(2,119
)
Other income (expense), net
167
216
Interest expense
(59
)
(64
)
Loss before income taxes
(4,194
)
(1,967
)
Provision for income taxes
331
277
Net loss
$
(4,525
)
$
(2,244
)
Net loss per share:
Basic
$
(0.11
)
$
(0.06
)
Diluted
$
(0.11
)
$
(0.06
)
Weighted average shares used to compute
net loss per share:
Basic
39,677,738
39,038,642
Diluted
39,677,738
39,038,642
Notes:
(1) Exclusive of depreciation and
amortization shown separately.
(2) Includes stock-based compensation as
follows:
Three Months Ended March
31,
2020
2019
Technology and development
$
57
$
103
Sales and marketing
101
115
General and administrative
219
113
$
377
$
331
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 March
31,
2020
2019
Reconciliation of Adjusted
EBITDA:
Net loss
$
(4,525
)
$
(2,244
)
Provision for income taxes
331
277
Interest expense
59
64
Other expense, net
(167
)
(216
)
Depreciation and amortization
2,732
2,487
Asset impairment
—
226
Stock-based compensation expense
377
331
Restructuring costs
60
—
Certain professional services and legal
fees*
1,446
779
Adjusted EBITDA
$
313
$
1,704
*
Certain legal & professional services
fees" includes legal fees and other related expenses outside the
ordinary course of business, as well as fees and expenses related
to merger and acquisition activities.
Synacor, Inc.
Condensed Consolidated Statements
of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March
31,
2020
2019
Cash Flows from Operating
Activities:
Net loss
$
(4,525
)
$
(2,244
)
Adjustments to reconcile net loss to net
cash and cash equivalents provided by (used in) operating
activities:
Depreciation and amortization
2,740
2,487
Asset impairment
—
226
Stock-based compensation expense
377
331
Provision for deferred income taxes
20
20
Change in allowance for doubtful
accounts
4
38
Changes in operating assets and
liabilities:
Accounts receivable, net
5,708
4,522
Prepaid expenses and other assets
(1,017
)
(432
)
Operating lease right-of-use assets and
liabilities, net
(59
)
29
Accounts payable, accrued expenses and
other liabilities
(2,408
)
(4,598
)
Deferred revenue
(628
)
(684
)
Net cash provided by (used in)
operating activities
212
(305
)
Cash Flows from Investing
Activities:
Purchases of property and equipment
(965
)
(1,325
)
Net cash used in investing
activities
(965
)
(1,325
)
Cash Flows from Financing
Activities:
Repayments on long-term debt and finance
leases
(1,107
)
(694
)
Proceeds from exercise of common stock
options
—
37
Purchase of treasury stock and shares
received to satisfy minimum tax withholdings
(40
)
—
Net cash used in financing
activities
(1,147
)
(657
)
Effect of exchange rate changes on cash
and cash equivalents
(144
)
(140
)
Net decrease in Cash and Cash
equivalents
(2,044
)
(2,427
)
Cash and cash equivalents, beginning of
period
10,966
15,921
Cash and cash equivalents, end of
period
$
8,922
$
13,494
Synacor, Inc. Segment Results (In thousands except for percentages)
(Unaudited) The Company has two reportable segments which are
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 March
31,
2020
2019
% Change
Segment Revenue:
Software & Services
$
11,062
$
11,158
(0.9
)
%
Portal & Advertising
9,521
20,666
(53.9
)
%
Total
$
20,583
$
31,824
(35.3
)
%
Segment Adjusted EBITDA:
Software & Services
$
3,528
$
2,794
26.3
%
Portal & Advertising
(241
)
2,621
(109.2
)
%
Unallocated Corporate Expense
(2,974
)
(3,711
)
19.9
%
Total
$
313
$
1,704
(81.6
)
%
Segment Adjusted EBITDA margin*
Software & Services
31.9
%
25.0
%
690 bps
Portal & Advertising
(2.5
)
%
12.7
%
-1520 bps
Total
1.5
%
5.4
%
-380 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 March
31,
2020
2019
% Change
Software & Services Revenue:
Recurring
$
8,330
$
8,514
(2.2
)
%
Non-recurring
2,732
2,284
19.6
%
Discontinued Products **
—
360
(100.0
)
%
Total
$
11,062
$
11,158
(0.9
)
%
Portal & Advertising Revenue:
Recurring
$
1,224
$
1,506
(18.7
)
%
Non-recurring
8,297
19,160
(56.7
)
%
Total
$
9,521
$
20,666
(53.9
)
%
Total Revenue:
Recurring
$
9,554
$
10,020
(4.7
)
%
Non-recurring
11,029
21,444
(48.6
)
%
Discontinued Products **
—
360
(100.0
)
%
Total
$
20,583
$
31,824
(35.3
)
%
** 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 March 31,
2020
Per GAAP Statements
Asset Impairment
Restructuring Costs
Certain Legal &
Professional Fees
Adjusted Non-GAAP
Revenue
$
20,583
$
20,583
Costs and operating expenses:
Cost of revenue (1)
10,729
10,729
Technology and development (1)(2)
3,108
3,108
Sales and marketing (2)
4,368
4,368
General and administrative (1)(2)
4,466
—
(60
)
(1,446
)
2,960
Depreciation and amortization
2,214
2,214
Total costs and operating expenses
24,885
—
(60
)
(1,446
)
23,379
Loss from operations
(4,302
)
—
60
1,446
(2,796
)
Other income, net
167
167
Interest Expense
(59
)
(59
)
Loss before income taxes
(4,194
)
—
60
1,446
(2,688
)
Provision for income taxes (3)
331
331
Net loss
$
(4,525
)
$
—
$
60
$
1,446
$
(3,019
)
Diluted EPS
$
(0.11
)
$
—
$
—
$
0.04
$
(0.08
)
Three months ended March 31,
2019
Per GAAP Statements
Asset Impairment
Restructuring Costs
Certain Legal &
Professional Fees
Adjusted Non-GAAP
Revenue
$
31,824
$
31,824
Costs and operating expenses:
Cost of revenue (1)
16,506
16,506
Technology and development (1)(2)
4,546
4,546
Sales and marketing (2)
5,991
5,991
General and administrative (1)(2)
4,465
(226
)
(779
)
3,460
Depreciation and amortization
2,435
2,435
Total costs and operating expenses
33,943
(226
)
—
(779
)
32,938
Loss from operations
(2,119
)
226
—
779
(1,114
)
Other income, net
216
216
Interest Expense
(64
)
(64
)
Loss before income taxes
(1,967
)
226
—
779
(962
)
Provision for income taxes (3)
277
277
Net loss
$
(2,244
)
226
$
—
$
779
$
(1,239
)
Diluted EPS
$
(0.06
)
$
0.01
$
—
$
0.02
$
(0.03
)
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506006000/en/
FNK IR Rob Fink +1.646.809.4048 rob@fnkir.com
Meredith Roth VP, Marketing & Corporate Communications
Synacor +1.770.846.1911 mroth@synacor.com
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