Synchronoss Technologies, Inc. Announces Strong Second Quarter Results

PDF Version
August 3, 2016

GAAP total revenue for the second quarter was $157.6 million, increasing 14% year-over-year

Non-GAAP total revenue for the second quarter was $161.5 million, increasing 17% year-over-year

GAAP EPS for the second quarter was ($0.10); Non-GAAP EPS was $0.57

BRIDGEWATER, N.J.--(BUSINESS WIRE)--Aug. 3, 2016-- Synchronoss Technologies, Inc. (NASDAQ:SNCR), the leader in mobile cloud innovation and software-based activation for mobile carriers, enterprises, retailers and OEMs around the world, today announced financial results for the second quarter of 2016.

“We are very proud of the Synchronoss team for delivering a healthy second quarter with momentum especially around cloud heading into the rest of the year”, said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “Cloud was strong this quarter, as solid subscriber growth in our core customer base is setting the stage for incremental cloud opportunities while investments in the enterprise initiatives are already generating significant customer activity in the field. We are continuing to execute on our long-term strategy which is laying the foundation for the future growth of Synchronoss.”

Financial Highlights for the Second Quarter of 2016:

  • Total Revenue: $157.6 million GAAP compared to $137.8 million in the second quarter of 2015. $161.5 million non-GAAP compared to $137.9 million in the second quarter of 2015.
  • Gross profit: $86.1 million GAAP compared to $82.9 million in the second quarter of 2015. $96.9 million non-GAAP compared to $85.4 million in the second quarter of 2015.
  • Operating (Loss) Income: ($3.5 million) GAAP compared to $23.6 million in the second quarter of 2015. $37.3 million non-GAAP compared to $40.2 million in the second quarter of 2015.
  • Net (Loss) Income attributable to Synchronoss: ($4.4 million) GAAP compared to $15.2 million in the second quarter of 2015. $26.9 million non-GAAP compared to $26.0 million in the second quarter of 2015.
  • Earnings (Loss) per Diluted Share: $(0.10) GAAP compared to $0.33 in the second quarter of 2015. $0.57 non-GAAP compared to $0.56 in the second quarter of 2015.
  • Operating Cash Flow: $33.7 million GAAP compared to $62.6 million in the second quarter of 2015. $33.7 million non-GAAP compared to $60.6 million in the second quarter of 2015.

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 another quarter that exceeded our expectations, particularly our ability to deliver strong top-line growth,” said Karen L. Rosenberger, Chief Financial Officer and Treasurer. “We believe our ability to drive growth, while investing in our enterprise and international initiatives positions Synchronoss well heading into the second half of 2016 and beyond.”

Second Quarter and Recent Business Highlights:

  • Cloud Services revenue accounted for $95.2 million of non-GAAP revenue, representing approximately 59% of total non-GAAP revenue and growing 33% on a year-over-year basis.
  • Launched the general availability of our Enterprise Secure Mobility Platform (SMP) in June.
  • Free cash flow of $20.0 million delivered in the quarter as generating free cash flow continues to be a major focal point of the Company.
  • Share repurchases of $23.4 million completed in the quarter.
  • Held our annual analyst day in NYC, outlining the Company’s core strategic and growth initiatives.

Second Quarter Investor Conference Participation Schedule:

  • Oppenheimer Annual Technology, Internet & Communication ConferenceAugust 9, 2016-Boston, MA
  • Drexel Hamilton TMT ConferenceSeptember 8, 2016-New York, NY
  • Deutsche Bank Technology ConferenceSeptember 14, 2016-Las Vegas, NV
  • Credit Suisse US Small & Mid Cap ConferenceSeptember 15, 2016-New York, NY

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call today, at 5:00 p.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 42244350. 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 42244350. 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 (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 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 (NASDAQ:SNCR) is the mobile innovation leader that provides personal 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. 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, 2015 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, 2016   December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents $ 111,028 $ 147,634
Marketable securities 62,274 66,357

Accounts receivable, net of allowance for doubtful accounts of $1,508 and $3,029 at
June 30, 2016 and December 31, 2015, respectively

162,386 143,692
Prepaid expenses and other assets   49,947     49,262  
Total current assets 385,635 406,945
Marketable securities 13,949 19,635
Property and equipment, net 167,135 168,280
Goodwill 317,586 221,271
Intangible assets, net 222,045 174,322
Deferred tax assets 1,902 3,560
Other assets   14,780     16,215  
Total assets $ 1,123,032   $ 1,010,228  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 35,150 $ 26,038
Accrued expenses 52,534 45,819
Deferred revenues 28,009 8,323
Contingent consideration obligation 7,657 —
Short term debt   47,000     —  
Total current liabilities 170,350 80,180
Lease financing obligation - long term 13,623 13,343
Contingent consideration obligation - long-term — 930
Convertible debt 225,585 224,878
Deferred tax liability 29,716 16,404
Other liabilities 22,545 3,227
Redeemable noncontrolling interest 55,459 61,452
Stockholders’ equity:

Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and
outstanding at June 30, 2016 and December 31, 2015

— —

Common stock, $0.0001 par value; 100,000 shares authorized, 49,132 and 48,084 shares
issued; 45,079 and 44,405 outstanding at June 30, 2016 and December 31, 2015,
respectively

4 4

Treasury stock, at cost (4,053 and 3,679 shares at June 30, 2016 and December 31, 2015,
respectively)

(95,812 ) (65,651 )
Additional paid-in capital 547,970 512,802
Accumulated other comprehensive loss (34,880 ) (38,684 )
Retained earnings   188,472     201,343  
Total stockholders’ equity   605,754     609,814  
Total liabilities and stockholders’ equity $ 1,123,032   $ 1,010,228  
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
2016   2015 2016   2015
 
Net revenues $ 157,551 $ 137,820 $ 300,237 $ 270,746
Costs and expenses:
Cost of services (1)(2)* 71,468 54,920 139,774 108,575
Research and development (1)(2) 26,170 22,462 50,267 44,486
Selling, general and administrative (1)(2) 30,618 18,717 58,199 39,600
Net change in contingent consideration obligation 6,386 — 6,727 —
Restructuring charges 1,191 1,451 4,162 4,691
Depreciation and amortization   25,262     16,632     49,317     31,467  
Total costs and expenses   161,095     114,182     308,446     228,819  
(Loss) income from operations (3,544 ) 23,638 (8,209 ) 41,927
Interest income 591 471 1,221 937
Interest expense (1,834 ) (1,418 ) (3,410 ) (2,760 )
Other income   865     415     (19 )   429  
(Loss) income before income tax expense (3,922 ) 23,106 (10,417 ) 40,533
Income tax expense   (3,381 )   (7,952 )   (7,969 )   (14,818 )
Net (loss) income (7,303 ) 15,154 (18,386 ) 25,715
Net loss attributable to noncontrolling interests   (2,864 )   —     (5,993 )   —  
Net (loss) income attributable to Synchronoss $ (4,439 ) $ 15,154   $ (12,393 ) $ 25,715  
 
Net income attributable to Synchronoss (4,439 ) 15,154 (12,393 ) 25,715
Add: After-tax interest on convertible debt   —     514     —     995  
Net (loss) income for diluted EPS calculation ** $ (4,439 ) $ 15,668   $ (12,393 ) $ 26,710  
 
Net (loss) income per common share attributable to Synchronoss:
Basic $ (0.10 ) $ 0.36   $ (0.29 ) $ 0.61  
Diluted $ (0.10 ) $ 0.33   $ (0.29 ) $ 0.56  
 
Weighted-average common shares outstanding:
Basic   43,450     41,870     43,449     41,898  
Diluted   43,450     47,271     43,449     47,371  
 
* 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 $ 1,821 $ 1,603 $ 3,840 $ 3,085
Research and development 2,026 1,645 3,856 3,127
Selling, general and administrative   4,278     3,210     8,730     6,875  
Total fair value stock-based compensation expense $ 8,125   $ 6,458   $ 16,426   $ 13,087  
 
(2) Amounts include acquisition costs as follows:
Cost of services $ 5,057 $ 898 $ 10,985 $ 898
Research and development 3,113 1,508 6,688 2,643
Selling, general and administrative   1,335     71     4,368     315  
Total acquisition costs $ 9,505   $ 2,477   $ 22,041   $ 3,856  
 

 

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,
2016   2015 2016   2015
Non-GAAP financial measures and reconciliation:
 
GAAP Revenue $ 157,551 $ 137,820 $ 300,237 $ 270,746
Add: Deferred revenue write-down   3,939     38     6,830     217  
Non-GAAP Revenue $ 161,490   $ 137,858   $ 307,067   $ 270,963  
 
GAAP Revenue $ 157,551 $ 137,820 $ 300,237 $ 270,746
Less: Cost of services   71,468     54,920     139,774     108,576  
GAAP Gross Margin 86,083 82,900 160,463 162,170
Add: Deferred revenue write-down 3,939 38 6,830 217
Add: Fair value stock-based compensation 1,821 1,603 3,840 3,084
Add: Acquisition and restructuring costs   5,057     898     10,985     898  
Non-GAAP Gross Margin $ 96,900   $ 85,439   $ 182,118   $ 166,369  
Non-GAAP Gross Margin % 60 % 62 % 59 % 61 %
 
GAAP income from operations $ (3,544 ) $ 23,638 $ (8,209 ) $ 41,927
Add: Deferred revenue write-down 3,939 38 6,830 217
Add: Fair value stock-based compensation 8,125 6,458 16,426 13,087
Add: Acquisition and restructuring costs 10,696 3,928 26,203 8,547
Add: Net change in contingent consideration obligation 6,386 — 6,727 —
Add: Amortization expense   11,701     6,150     22,509     11,325  
Non-GAAP income from operations $ 37,303   $ 40,212   $ 70,486   $ 75,103  
 
GAAP net (loss) income attributable to Synchronoss $ (4,439 ) $ 15,154 $ (12,393 ) $ 25,715
Add: Deferred revenue write-down, net of tax 2,784 21 5,004 148
Add: Fair value stock-based compensation, net of tax 5,660 4,234 12,035 8,931
Add: Acquisition and restructuring costs, net of taxes 7,535 2,559 19,844 5,832
Add: Net change in contingent consideration obligation, net of Fx change 6,386 — 6,727 —
Add: Amortization expense, net of tax   8,932     4,060     18,047     7,726  
Non-GAAP net income attributable to Synchronoss 26,858 26,028 $ 49,264 $ 48,352
Add: After-tax interest on convertible debt   549     514     1,098     1,028  
Net income for diluted EPS calculation $ 27,407   $ 26,542   $ 50,362   $ 49,380  
 
Diluted non-GAAP net income per share $ 0.57   $ 0.56   $ 1.05   $ 1.04  
 
Weighted shares outstanding - Diluted   48,132     47,271     48,120     47,371  
 
 

SYNCHRONOSS TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
 
  Six Months Ended June 30,
2016   2015
Operating activities:
Net (loss) income $ (18,386 ) $ 25,715
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization expense 49,317 31,467
Loss on disposals 68 —
Amortization of debt issuance costs 750 750
Amortization of bond premium 754 756
Deferred income taxes 5,980 2,065
Non-cash interest on leased facility 458 464
Stock-based compensation 16,426 13,087
Contingent consideration obligation 6,727 (1,532 )
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts (18,170 ) (19,758 )
Prepaid expenses and other current assets 2,948 (4,749 )
Other assets 2,580 (282 )
Accounts payable 51 2,869
Accrued expenses 1,110 8,947
Other liabilities (6,811 ) (172 )
Deferred revenues   30,388     2,882  
Net cash provided by operating activities 74,190 62,509
 
Investing activities:
Purchases of fixed assets (26,864 ) (34,947 )
Purchases of marketable securities available-for-sale (11,592 ) (72,015 )
Maturities of marketable securities available-for-sale 20,567 52,375
Businesses acquired, net of cash   (98,428 )   (59,481 )
Net cash used in investing activities (116,317 ) (114,068 )
 
Financing activities:
Proceeds from the exercise of stock options 4,945 11,828
Taxes paid on withholding shares (5,380 ) (16,844 )
Payments on contingent consideration obligation — (4,468 )
Borrowings on revolving line of credit 50,000 —
Repayment of revolving line of credit (3,000 ) —
Repurchases of common stock (40,025 ) —
Proceeds from the sale of treasury stock in connection with an employee stock purchase plan 955 975
Repayments of capital lease obligations   (1,484 )   (564 )
Net cash provided by (used in) financing activities 6,011 (9,073 )
Effect of exchange rate changes on cash   (490 )   718  
Net decrease in cash and cash equivalents (36,606 ) (59,914 )
Cash and cash equivalents at beginning of period   147,634     235,967  
Cash and cash equivalents at end of period $ 111,028   $ 176,053  
 
 

SYNCHRONOSS TECHNOLOGIES, INC.

Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
 
Six Months Ended June 30,
2016 2015
 
Non-GAAP cash provided by operating activities and reconciliation:
 
Net cash provided by operating activities (GAAP) $ 74,190 $ 62,509
Add: Cash payments on settlement of earn-out   —     3,532  
Adjusted cash flow provided by operating activities (Non-GAAP) $ 74,190   $ 66,041  

Source: Synchronoss Technologies, Inc.

Synchronoss Technologies, Inc.
Investor and Media:
Daniel Ives, +1 908-524-1047
daniel.ives@synchronoss.com