Synchronoss Technologies, Inc. Announces Second Quarter 2015 Financial Results

PDF Version
July 29, 2015

Non-GAAP total revenue of $137.9 million increases 33% year-over-year

Cloud Services revenue of $71.9 million increases 54% year-over-year

Activation Services revenue of $66.0 million increases 16% year-over-year

Non-GAAP EPS of $0.56 increases 37% year-over-year

BRIDGEWATER, N.J.--(BUSINESS WIRE)--Jul. 29, 2015-- Synchronoss Technologies, Inc. (NASDAQ: SNCR), the mobile innovation leader that provides cloud solutions and software-based activation for mobile carriers, retailers and OEMs around the world, today announced financial results for the second quarter 2015.

“Synchronoss reported strong second quarter results that met or exceeded the high end of expectations,” said Stephen G. Waldis, Founder, Chairman and Chief Executive Officer of Synchronoss. “Each of our businesses performed well in the quarter and we were pleased to see some of our new wins began to scale and drive volumes, particularly on the cloud side. We are gaining strong traction among international mobile operators who are increasingly realizing the significant value Synchronoss’ white-label cloud solution can deliver to their subscribers.”

On a GAAP basis, Synchronoss reported net revenues of $137.8 million, representing an increase of 33% compared to the second quarter of 2014. Gross profit was $82.9 million and income from operations was $23.6 million in the second quarter of 2015. Net income was $15.2 million, leading to diluted earnings per share of $0.33, compared to $0.20 for the second quarter of 2014.

On a non-GAAP basis, Synchronoss reported net revenues, which adds back the purchase accounting adjustment related to revenues for certain acquisitions, of $137.9 million, an increase of 33% compared to the second quarter of 2014. Gross profit for the second quarter of 2015 was $85.4 million, representing a gross margin of 62%. Income from operations was $40.2 million in the second quarter of 2015, representing a year-over-year increase of 55% and an operating margin of 29%. Net income was $26.0 million in the second quarter of 2015, up from $16.8 million in the year ago period. Diluted earnings per share were $0.56 for the second quarter of 2015, compared to $0.41 for the second quarter of 2014.

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 also included below under the heading "Non-GAAP Financial Measures."

“We are pleased with our second quarter performance, highlighted by improving operating leverage, better-than-expected profitability and solid cash flow,” said Karen L. Rosenberger, Chief Financial Officer and Treasurer. “We continue to execute at a high level, which is resulting in strong growth across both our cloud and activation services revenue, and we believe we are well positioned to maintain our strong momentum on a global basis.”

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call today, July 29, 2015, at 8:30 a.m. (ET) to discuss the company's financial results. To access this call, dial 877-930-7767 (domestic) or 253-336-7416 (international). The pass code for the call is 87150024. Additionally, a live web cast of the conference call will be available on the “Investor Relations” page on the company’s web site www.synchronoss.com.

Following the conference call, a replay will be available for a limited time at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 87150024. 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 Measures

Synchronoss 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, net income, effective tax rate, earnings 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 the deferred revenue write-down associated with acquisitions, fair value stock-based compensation expense, acquisition-related costs which includes integration costs, changes in the contingent consideration obligation, 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 Technologies, Inc. (NASDAQ:SNCR), is the mobile innovation leader that provides cloud solutions and software-based activation for connected devices across the globe. The company’s proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers to live in a connected world. For more information visit us at: www.synchronoss.com

Forward-looking Statements

This document may include certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," “outlook” or words of similar meanings. These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption "Risk Factors" in Synchronoss’ Annual Report on Form 10-K for the year ended December 31, 2014 and other documents filed with the U.S. Securities and Exchange Commission. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors. Synchronoss does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

The Synchronoss logo, Synchronoss and Synchronoss Integrated Life are trademarks of Synchronoss Technologies, Inc. All other trademarks are property of their respective owners.

 
SYNCHRONOSS TECHNOLOGIES, INC.
BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
     
June 30, 2015 December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents $ 176,053 $ 235,967
Marketable securities 65,939 51,097

Accounts receivable, net of allowance for doubtful accounts
of $117 and $88 at June 30, 2015
and December 31, 2014, respectively

136,391 118,371
Prepaid expenses and other assets 43,275 35,023
Deferred tax assets   5,151   1,475
Total current assets 426,809 441,933
Marketable securities 7,324 3,313
Property and equipment, net 164,142 151,171
Goodwill 175,611 147,135
Intangible assets, net 105,529 99,489
Deferred tax assets 4,355 1,232
Other assets   18,009   18,549
Total assets $ 901,779 $ 862,822
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 19,476 $ 25,059
Accrued expenses 37,933 42,679
Deferred revenues 14,424 11,897
Contingent consideration obligation   —   8,000
Total current liabilities 71,833 87,635
Lease financing obligation - long term 13,836 9,204
Convertible debt 230,000 230,000
Deferred tax liability 10,879 3,698
Other liabilities 3,309 3,178
Stockholders’ equity:

Preferred stock, $0.0001 par value;
10,000 shares authorized, 0 shares issued and outstanding
at June 30, 2015 and December 31, 2014

— —

Common stock, $0.0001 par value;
100,000 shares authorized, 47,514 and 46,444 shares issued;
43,810 and 42,711 outstanding at June 30, 2015 and December 31, 2014, respectively

4 4

Treasury stock, at cost
(3,704 and 3,733 shares at June 30, 2015 and December 31, 2014, respectively)

(65,969) (66,336)
Additional paid-in capital 484,161 454,740
Accumulated other comprehensive loss (32,702) (20,014)
Retained earnings   186,428   160,713
Total stockholders’ equity   571,922   529,107
Total liabilities and stockholders’ equity $ 901,779 $ 862,822
 
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
         
Three Months Ended June 30,   Six Months Ended June 30,
2015 2014 2015 2014
 
Net revenues $ 137,820 $ 103,451 $ 270,746 $ 201,928
Costs and expenses:
Cost of services (1)(2)(3)* 54,920 41,290 108,575 81,269
Research and development (1)(2)(3) 22,462 17,305 44,486 32,845
Selling, general and administrative (1)(2)(3) 18,717 17,149 39,600 34,274
Net change in contingent consideration obligation — 115 — 1,326
Restructuring charges 1,451 — 4,691 —
Depreciation and amortization   16,632   13,758   31,467   26,024
Total costs and expenses   114,182   89,617   228,819   175,738
Income from operations 23,638 13,834 41,927 26,190
Interest income 471 154 937 286
Interest expense (1,418) (371) (2,760) (874)
Other income   415   256   429   1,052
Income before income tax expense 23,106 13,873 40,533 26,654
Income tax expense   (7,952)   (5,509)   (14,818)   (10,705)
Net income $ 15,154 $ 8,364 $ 25,715 $ 15,949
 
Net income attributable to Synchronoss 15,154 8,364 25,715 15,949
Add: After-tax interest on convertible debt   514   —   995   —
Net income for diluted EPS calculation $ 15,668 $ 8,364 $ 26,710 $ 15,949
 
Net income per common share:
Basic $ 0.36 $ 0.21 $ 0.61 $ 0.40
Diluted $ 0.33 $ 0.20 $ 0.56 $ 0.39
 
Weighted-average common shares outstanding:
Basic   41,870   40,139   41,898   39,961
Diluted   47,271   40,978   47,371   40,878
 

* Cost of services excludes depreciation
and amortization which is shown separately.

* Includes an add back for the
convertible debt interest

 

(1) Amounts include fair value stock-based
compensation as follows:

Cost of services $ 1,603 $ 1,454 $ 3,085 $ 2,712
Research and development 1,645 1,375 3,127 2,645
Selling, general and administrative   3,210   4,011   6,875   7,325

Total fair value stock-based
compensation expense

$ 6,458 $ 6,840 $ 13,087 $ 12,682
 

(2) Amounts include acquisition
costs as follows:

Cost of services $ 898 $ — $ 898 $ 31
Research and development 1,508 29 2,643 77
Selling, general and administrative   71   214   315   353
Total acquisition costs $ 2,477 $ 243 $ 3,856 $ 461
 

(3) Amounts include fair value earn-out
cash and stock compensation as follows:

Cost of services $ — $ 16 $ — $ 16
Research and development — — — —
Selling, general and administrative   —   408   —   832

Total fair value earn-out cash and stock
compensation expense

$ — $ 424 $ — $ 848
 

 

 
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(Unaudited)
         
Three Months Ended June 30,   Six Months Ended June 30,
2015 2014 2015 2014
 
Non-GAAP financial measures and reconciliation:
 
GAAP Revenue $ 137,820 $ 103,451 $ 270,746 $ 201,928
Add: Deferred revenue write-down   38   109   217   333
Non-GAAP Revenue $ 137,858 $ 103,560 $ 270,963 $ 202,261
 
GAAP Revenue $ 137,820 $ 103,451 $ 270,746 $ 201,928
Less: Cost of services   54,920   41,290   108,575   81,269
GAAP Gross Margin 82,900 62,161 162,171 120,659
Add: Deferred revenue write-down 38 109 217 333
Add: Fair value stock-based compensation 1,603 1,454 3,085 2,712
Add: Acquisition and restructuring costs 898 — 898 31
Add: Deferred compensation expense - earn-out   —   16   —   16
Non-GAAP Gross Margin $ 85,439 $ 63,740 $ 166,371 $ 123,751
Non-GAAP Gross Margin % 62% 62% 61% 61%
 
GAAP income from operations $ 23,638 $ 13,834 $ 41,927 $ 26,190
Add: Deferred revenue write-down 38 109 217 333
Add: Fair value stock-based compensation 6,458 6,840 13,087 12,682
Add: Acquisition and restructuring costs 3,928 243 8,547 461
Add: Net change in contingent consideration obligation — 115 — 1,326
Add: Deferred compensation expense - earn-out — 424 — 848
Add: Amortization expense   6,150   4,383   11,325   8,296
Non-GAAP income from operations $ 40,212 $ 25,948 $ 75,103 $ 50,136
 
GAAP net income attributable to common stockholders $ 15,154 $ 8,364 $ 25,715 $ 15,949
Add: Deferred revenue write-down, net of tax 21 75 148 226
Add: Fair value stock-based compensation, net of tax 4,234 4,721 8,931 8,612
Add: Acquisition and restructuring costs, net of taxes 2,559 168 5,832 313

Add: Net change in contingent consideration obligation,
net of Fx change

— 115 — 1,326
Add: Deferred compensation expense - earn-out, net of tax — 293 — 576
Add: Amortization expense, net of tax   4,060   3,025   7,726   5,634
Non-GAAP net income $ 26,028 $ 16,761 $ 48,352 $ 32,636
 
Net income attributable to Synchronoss 26,028 16,761 48,352 32,636
Add: After-tax interest on convertible debt   514   —   1,028   —
Net income for diluted EPS calculation $ 26,542 $ 16,761 $ 49,380 $ 32,636
 
Diluted non-GAAP net income per share $ 0.56 $ 0.41 $ 1.04 $ 0.80
Weighted shares outstanding - Diluted   47,271   40,978   47,371   40,878
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
 
    Six Months Ended June 30,
2015   2014
Operating activities:
Net income $ 25,715 $ 15,949

Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation and amortization expense 31,467 26,024
Amortization of debt issuance costs 750
Amortization of bond premium 756 166
Deferred income taxes 2,065 2,128
Non-cash interest on leased facility 464 460
Stock-based compensation 13,087 12,682
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts (19,758) (21,806)
Prepaid expenses and other current assets (4,749) (3,913)
Other assets (282) 933
Accounts payable 2,869 (2,220)
Accrued expenses (7,897) (10,095)
Contingent consideration obligation (1,532) 2,127
Excess tax benefit from the exercise of stock options (3,898) (1,224)
Other liabilities (172) 1,152
Deferred revenues   2,882   (3,160)
Net cash provided by operating activities 41,767 19,203
 
Investing activities:
Purchases of fixed assets (34,947) (15,672)
Purchases of marketable securities available-for-sale (72,015) (4,070)
Maturities of marketable securities available-for-sale 52,375 880
Business acquired, net of cash   (59,481)   (6,322)
Net cash used in investing activities (114,068) (25,184)
 
Financing activities:
Proceeds from the exercise of stock options 11,828 7,870
Payments on contingent consideration obligation (4,468) —
Excess tax benefit from the exercise of stock options 3,898 1,224

Proceeds from the sale of treasury stock in connection
with an employee stock purchase plan

975 740
Repayments of capital obligations   (564)   (618)
Net cash provided by financing activities 11,669 9,216
Effect of exchange rate changes on cash   718   193
Net (decrease) increase in cash and cash equivalents (59,914) 3,428
Cash and cash equivalents at beginning of period   235,967   63,512
Cash and cash equivalents at end of period $ 176,053 $ 66,940
 
     
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
 
Six Months Ended June 30,
2015 2014
 
Non-GAAP cash provided by operating activities and reconciliation:
 
Net cash provided by operating activities (GAAP) $ 41,767 $ 19,203
Add: Tax benefits from stock options exercised 3,898 1,224
Add: Cash payments on settlement of earn-out   3,532   —
Adjusted cash flow provided by operating activities (Non-GAAP) $ 49,197 $ 20,427
 

Source: Synchronoss Technologies, Inc.

Synchronoss Technologies, Inc.
Media:
Stacie Hiras, +1-908-674-0758
Stacie.hiras@synchronoss.com
or
Investor:
Seth Potter, +1-646-277-1230
investor@synchronoss.com