SEC Filing | Synchronoss

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sncr-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-40574

SYNCHRONOSS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware			06-1594540
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

200 Crossing Boulevard, 8th Floor Bridgewater, New Jersey			08807
(Address of principal executive offices)			(Zip Code)

(866) 620-3940

(Registrant’s telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller Reporting Company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.0001 par value

SNCR

The Nasdaq Stock Market, LLC

8.375% Senior Notes due 2026

SNCRL

The Nasdaq Stock Market, LLC

As of August 8, 2023, there were 93,396,059 shares of common stock issued and outstanding.

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

FORM 10-Q INDEX


		Page No.
PART I.	FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements and Notes	3

	Condensed Consolidated Balance Sheets (unaudited)	3

	Condensed Consolidated Statements of Operations (unaudited)	4

	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6

	Condensed Consolidated Statements of Cash Flows (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35


PART II.	OTHER INFORMATION	36

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

SIGNATURES		40

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)


	June 30, 2023		December 31, 2022

ASSETS
Current assets:
Cash and cash equivalents	$	19,329	$	21,921


Accounts receivable, net	39,841		47,024
Prepaid & other current assets	38,628		36,342


Total current assets	97,798		105,287
Non-current assets:

Property and equipment, net	4,384		4,582
Operating lease right-of-use assets	17,529		20,863
Goodwill	212,125		210,889
Intangible assets, net	44,087		47,536
Loan receivable	4,834		4,834

Other assets, non-current	3,372		4,081



Total non-current assets	286,331		292,785
Total assets	$	384,129	$	398,072
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,780	$	14,209
Accrued expenses	51,470		52,115
Deferred revenues, current	19,696		13,859




Total current liabilities	82,946		80,183



Long-term debt, net of debt issuance costs	135,379		134,584
Deferred tax liabilities	477		466
Deferred revenues, non-current	3,950		324

Leases, non-current	26,806		29,637
Other non-current liabilities	2,575		3,933

Total liabilities	252,133		249,127
Commitments and contingencies:

Series B Non-Convertible Perpetual Preferred Stock, $0.0001 par value; 150 shares authorized, 71 and 71 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	68,348		68,348
Redeemable noncontrolling interest	12,500		12,500
Stockholders’ equity:
Common stock, $0.0001 par value; 150,000 shares authorized, 93,522 and 90,853 issued and outstanding at June 30, 2023 and December 31, 2022, respectively	9		9

Additional paid-in capital	486,579		488,848
Accumulated other comprehensive loss	(39,390)		(44,131)
Accumulated deficit	(396,050)		(376,629)
Total stockholders’ equity	51,148		68,097
Total liabilities and stockholders’ equity	$	384,129	$	398,072

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022


Net revenues	$	59,713	$	65,236	$	117,421	$	131,102
Costs and expenses:
Cost of revenues1	21,782		22,316		42,163		47,155
Research and development	15,043		13,460		29,778		29,251
Selling, general and administrative	19,875		15,288		38,184		33,185
Restructuring charges	21		1,019		366		1,704
Depreciation and amortization	6,939		8,259		14,459		16,293
Total costs and expenses	63,660		60,342		124,950		127,588
(Loss) income from operations	(3,947)		4,894		(7,529)		3,514
Interest income	127		118		222		210
Interest expense	(3,461)		(3,343)		(6,915)		(6,668)
Gain on divestiture	—		2,622		—		2,622
Other (expense) income, net	(454)		4,065		(3,385)		5,769

(Loss) income from operations, before taxes	(7,735)		8,356		(17,607)		5,447
Provision for income taxes	(783)		(435)		(1,842)		(563)


Net (loss) income	(8,518)		7,921		(19,449)		4,884
Net income (loss) attributable to redeemable noncontrolling interests	14		(75)		28		(190)
Preferred stock dividend	(2,475)		(2,519)		(4,949)		(4,957)
Net (loss) income attributable to Synchronoss	$	(10,979)	$	5,327	$	(24,370)	$	(263)



Earnings (loss) per share:



Basic	$	(0.13)	$	0.06	$	(0.28)	$	—



Diluted	$	(0.13)	$	0.06	$	(0.28)	$	—
Weighted-average common shares outstanding:
Basic	86,785		87,124		86,644		86,031
Diluted	86,785		89,249		86,644		86,031

________________________________

1 Cost of revenues excludes depreciation and amortization which are shown separately.

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited) (In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net (loss) income	$	(8,518)	$	7,921	$	(19,449)	$	4,884
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	171		(12,157)		4,741		(15,316)

Net income on inter-company foreign currency transactions	—		62		—		80
Total other comprehensive income (loss)	171		(12,095)		4,741		(15,236)
Comprehensive loss	(8,347)		(4,174)		(14,708)		(10,352)
Comprehensive income (loss) attributable to redeemable noncontrolling interests	14		(75)		28		(190)
Comprehensive loss attributable to Synchronoss	$	(8,333)	$	(4,249)	$	(14,680)	$	(10,542)

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited) (In thousands)


	Three Months Ended June 30, 2023
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated deficit		Total Stockholders' Equity
Balance at March 31, 2023	93,547	$	9	$	487,673	$	(39,561)	$	(387,546)	$	60,575
Stock based compensation	—	—		1,526		—		—		1,526
Issuance of restricted stock	118	—		—		—		—		—



Preferred stock dividend	—	—		(2,475)		—		—		(2,475)






Shares withheld for taxes in connection with issuance of restricted stock	(143)	—		(131)		—		—		(131)



Net income (loss) attributable to Synchronoss	—	—		—		—		(8,518)		(8,518)
Non-controlling interest	—	—		(14)		—		14		—
Total other comprehensive income (loss)	—	—		—		171		—		171





Balance at June 30, 2023	93,522	$	9	$	486,579	$	(39,390)	$	(396,050)	$	51,148


	Three Months Ended June 30, 2022
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated deficit		Total Stockholders' Equity
Balance at March 31, 2022	88,244	$	9	$	491,966	$	(36,126)	$	(371,865)	$	83,984
Stock based compensation	—	—		1,152		—		—		1,152
Issuance of restricted stock	868	—		—		—		—		—



Preferred stock dividend	—	—		(2,376)		—		—		(2,376)
Amortization of preferred stock issuance costs	—	—		(143)		—		—		(143)





Shares withheld for taxes in connection with issuance of restricted stock	(67)	—		(80)		—		—		(80)



Net income (loss) attributable to Synchronoss	—	—		—		—		7,921		7,921
Non-controlling interest	—	—		75		—		(75)		—
Total other comprehensive income (loss)	—	—		—		(12,095)		—		(12,095)





Balance at June 30, 2022	89,045	$	9	$	490,594	$	(48,221)	$	(364,019)	$	78,363

See accompanying notes to condensed consolidated financial statements.

Table of Contents


	Six Months Ended June 30, 2023
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated deficit		Total Stockholders' Equity
Balance at December 31, 2022	90,853	$	9	$	488,848	$	(44,131)	$	(376,629)	$	68,097
Stock based compensation	—	—		2,840		—		—		2,840
Issuance of restricted stock	2,813	—		—		—		—		—

Preferred stock dividend	—	—		(4,949)		—		—		(4,949)
Amortization of preferred stock issuance costs	—	—		—		—		—		—
Issuance of common stock on exercise of options	—	—		—		—		—		—




Shares withheld for taxes in connection with issuance of restricted stock	(144)	—		(132)		—		—		(132)



Net income (loss) attributable to Synchronoss	—	—		—		—		(19,449)		(19,449)
Non-controlling interest	—	—		(28)		—		28		—
Total other comprehensive income (loss)	—	—		—		4,741		—		4,741







Balance at June 30, 2023	93,522	$	9	$	486,579	$	(39,390)	$	(396,050)	$	51,148


	Six Months Ended June 30, 2022
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated deficit		Total Stockholders' Equity
Balance at December 31, 2021	88,305	$	9	$	492,512	$	(32,985)	$	(368,713)	$	90,823
Stock based compensation	—	—		2,929		—		—		2,929
Issuance of restricted stock	807	—		—		—		—		—

Preferred stock dividend	—	—		(4,814)		—		—		(4,814)
Amortization of preferred stock issuance costs	—	—		(143)		—		—		(143)





Shares withheld for taxes in connection with issuance of restricted stock	(67)	—		(80)		—		—		(80)



Net income (loss) attributable to Synchronoss	—	—		—		—		4,884		4,884
Non-controlling interest	—	—		190		—		(190)		—
Total other comprehensive income (loss)	—	—		—		(15,236)		—		(15,236)







Balance at June 30, 2022	89,045	$	9	$	490,594	$	(48,221)	$	(364,019)	$	78,363

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Six Months Ended June 30,
	2023		2022
Operating activities:
Net (loss) income from continuing operations	$	(19,449)	$	4,884




Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	14,459		16,293



Amortization of debt issuance costs	748		678






Loss on disposals of fixed assets	24		1

Gain on sale of DXP Business	—		(2,622)

Amortization of bond discount	47		44

Deferred income taxes	10		(28)

Stock-based compensation	3,364		2,891


Operating lease impairment, net	2,075		175
Changes in operating assets and liabilities:
Accounts receivable, net	7,328		3,661
Prepaid expenses and other current assets	(2,275)		(314)
Accounts payable	(2,478)		(5,237)
Accrued expenses	(1,221)		(2,650)


Deferred revenues	9,344		(3,015)
Other liabilities	580		(8,033)

Net cash provided by operating activities	12,556		6,728

Investing activities:
Purchases of fixed assets	(994)		(573)
Additions to capitalized software	(9,350)		(10,695)



Proceeds from the sale of DXP Business	—		7,500







Net cash used in investing activities	(10,344)		(3,768)

Financing activities:

Taxes paid on withholding shares	(132)		80









Drawdown on A/R Facility	3,500		—
Repayment of A/R Facility	(3,500)		—






Series B Preferred dividend paid in cash	(4,772)		(1,859)
Redemption of Series B Preferred stock	—		(6,738)


Net cash used in financing activities	(4,904)		(8,517)

Effect of exchange rate changes on cash	100		(435)

Net decrease in cash and cash equivalents	(2,592)		(5,992)
Cash and cash equivalents, beginning of period	21,921		31,504
Cash and cash equivalents, end of period	$	19,329	$	25,512










Supplemental disclosures of non-cash investing and financing activities:

Paid in kind dividends on Series B Preferred stock	$	—	$	2,581

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

1. Description of Business

General

Synchronoss Technologies, Inc. (“Synchronoss” or the “Company”) is a leading provider of white label cloud, messaging, digital and network management solutions that enable our customers to keep subscribers, systems, networks and content in sync.

The Synchronoss Personal CloudTM solution is designed to create an engaging and trusted customer experience through ongoing content management and engagement. The Synchronoss Personal CloudTM platform is a secure and highly scalable, white label platform that allows our customers’ subscribers to backup and protect, engage with, and manage their personal content and gives our operator customers the ability to increase average revenue per user (“ARPU”) and reduce churn. Our Synchronoss Personal CloudTM platform is specifically designed to support smartphones, tablets, desktops computers, laptops, wearables for health and wellness, cameras, TVs, security cameras, routers, as well as connected automobiles and homes.

Synchronoss’ Messaging platform powers mobile messaging and mailboxes for hundreds of millions of telecommunication subscribers. Our Advanced Messaging platform is a powerful, secure, intelligent, white label messaging platform that expands capabilities for communications service provider and multi-service providers to offer P2P messaging via Rich Communications Services (“RCS”). Our Mobile Messaging Platform (“MMP”) is poised to provide a single standard ecosystem for onboarding and management to brands, advertisers and message wholesalers.

The Synchronoss NetworkX (formerly Digital) products provide operators with the tools and software to design their physical network, streamline their infrastructure purchases, and manage and optimize comprehensive network expenses for leading top tier carriers around the globe.

2. Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying interim unaudited condensed consolidated financial statements have been prepared by Synchronoss and in the opinion of management, include all adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and variable interest entities (“VIE”) in which the Company is the primary beneficiary and entities in which the Company has a controlling interest. Investments in less than majority-owned companies in which the Company does not have a controlling interest, but does have significant influence, are accounted for as equity method investments. Investments in less than majority-owned companies in which the Company does not have the ability to exert significant influence over the operating and financial policies of the investee are accounted for using the cost method. All material intercompany transactions and accounts are eliminated in consolidation.

For further information about the Company’s basis of presentation and consolidation or its significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Recently Issued Accounting Standards

Recent accounting pronouncements adopted

Standard

Description

Effect on the financial statements

Update 2022-04 - Liabilities—Supplier Finance Programs
(Subtopic 405-50). Disclosure of Supplier Finance Program Obligations

The amendments in this Update apply to all entities that use supplier finance programs in connection with the purchase of goods and services (herein described as buyer parties). Supplier finance programs, which also may be referred to as reverse factoring, payables finance, or structured payables arrangements, allow a buyer to offer its suppliers the option for access to payment in advance of an invoice due date, which is paid by a third-party finance provider or intermediary on the basis of invoices that the buyer has confirmed as valid.
The amendments in this Update require that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs.

The Company evaluated these changes and determined that they have no material impact on the Company’s consolidated financial position or results of operations upon adoption.

Date of adoption: January 1, 2023

Digital Experience Platform and Activation Solutions Sale

On March 7, 2022, Synchronoss Technologies, Inc. and iQmetrix Global Ltd. (“iQmetrix ”), entered into an Asset Purchase Agreement, pursuant to which Synchronoss has agreed to sell its Digital Experience Platform and activation solutions (the “DXP Business”) to iQmetrix for up to a total purchase price of $14 million. The purchase price is payable as follows: (i) $7.5 million on the closing date of the Transaction, (ii) $0.5 million deposited into an escrow account on the Closing Date, (iii) $1 million paid twelve (12) months from the Closing Date, and (iv) $5 million that may be payable as an earn-out.

This transaction closed on May 11, 2022. The Company received the $7.5 million cash payment on the transaction close date. The Company received the $0.5 million payment in escrow during the third quarter of 2022 in accordance with the terms of the Asset Purchase Agreement. The remaining $1 million escrow payment is reflected net in other current assets. This consideration is not contingent on any further actions.

The Company determined the fair value of the earn-out provision was $3.6 million of which $3.0 million was recorded as an other current asset and the remaining portion was recorded as non-current other asset. In the fourth quarter of fiscal 2022, iQmetrix and the Company agreed that the required performance conditions were not met. This resulted in a write-off of the asset recorded within the Selling, general and administrative expenses line item on the income statement.

The book value of the divested intangible assets associated with the DXP Business was $2.3 million. For the goodwill allocation, the fair value of the core reporting unit was estimated using a combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. Based on the fair value of the core reporting unit and the aggregate consideration received in the transaction, the Company determined the attributable fair value of goodwill to the DXP Business was $7.6 million. The transaction resulted in a $2.5 million gain for the year ended December 31, 2022.

Accounts Receivable Securitization Facility

On June 23, 2022 (the “Closing Date”), the Company and certain of its subsidiaries (together with the Company, the “Company Group”) entered into a $15 million accounts receivable securitization facility (the “A/R Facility”) with Norddeutsche Landesbank Girozentrale.

The A/R Facility transaction includes (i) Receivables Purchase Agreements (the “Receivables Purchase Agreements”) dated as of the Closing Date, among the Company, as initial servicer, SN Technologies, LLC, a wholly owned special purpose subsidiary of the Company (“SN Technologies”), as seller, Norddeutsche Landesbank Girozentrale, as administrative agent (the

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

“Administrative Agent”), and the purchasers party thereto, the group agents party thereto and the originators party thereto; (ii) Purchase and Sale Agreements (the “Purchase and Sale Agreements”) dated as of the Closing Date, between the Company Group, as originators (the “Originators”), and SN Technologies, as purchaser; (iii) the Administration Agreement (the “Administration Agreement”) dated as of the Closing Date, between the Company, as servicer, and Finacity Corporation, as administrator; and (iv) the Performance Guaranty (the “Performance Guaranty”) dated as of the Closing Date made by the Company in favor of the Administrative Agent.

Pursuant to the Purchase and Sale Agreements, the Originators will sell existing and future accounts receivable [and related assets] (the “Receivables”) to SN Technologies in exchange for cash and/or subordinated notes. The Originators and SN Technologies intend the transactions contemplated by the Purchase and Sale Agreements to be true sales to SN Technologies by the respective Originators. Pursuant to the Receivables Purchase Agreement, SN Technologies will in turn grant an undivided security interest to the Administrative Agent in the Receivables in exchange for a credit facility permitting borrowings of up to $15 million outstanding from time to time. Yield is payable to the Administrative Agent under the Receivables Purchase Agreements at a variable rate based on the Norddeutsche Landesbank Girozentrale’s Hanover funding rate plus a 2.35% margin. The Company pays a commitment fee that shall equal 0.85% per annum on the average daily unused outstanding capital. Pursuant to the Performance Guaranty, the Company guarantees the performance of the Originators of their obligations under the Purchase and Sale Agreements.

The Company has not agreed to guarantee any obligations of SN Technologies or the collection of any of the receivables and will not be responsible for any obligations to the extent the failure to perform such obligations by the Company or any Originators results from receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness or other financial inability to pay of the related obligor.

Unless earlier terminated or subsequently extended pursuant to the terms of the Receivables Purchase Agreement, the A/R Facility will expire on June 23, 2025.

The foregoing description of the A/R Facility and the respective transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full text of the Receivables Purchase Agreements, Purchase and Sale Agreements, Administration Agreement and Performance Guaranty, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, on Form 8-K filed with Securities and Exchange Commission on June 23, 2022.

The Company drew $3.5 million on the A/R Facility in April of 2023, and had repaid the balance in full in May of 2023. The interest associated with the draw and repayment was not material for the period. The draw down and subsequent repayment of the A/R Facility represent financing activity, as reported in the Statement of Cash Flows. As of June 30, 2023 approximately $12 million of the Company’s receivables are held by SN Technologies.

The Company drew $2.5 million on the A/R Facility in July of 2023.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

3. Revenue

Disaggregation of revenue

The Company disaggregates revenue from contracts with customers into the nature of the products and services and geographical regions. The Company’s geographic regions are the Americas, Europe, the Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”). The majority of the Company’s revenue is from the TMT sector.


	Three Months Ended June 30, 2023								Three Months Ended June 30, 2022
	Cloud		NetworkX		Messaging		Total		Cloud		NetworkX		Messaging		Total
Geography:
Americas	$	37,546	$	7,056	$	1,604	$	46,206	$	41,843	$	8,985	$	2,309	$	53,137
APAC	1,147		778		6,702		8,627		7		907		6,345		7,259
EMEA	1,744		—		3,136		4,880		1,627		545		2,668		4,840
Total	$	40,437	$	7,834	$	11,442	$	59,713	$	43,477	$	10,437	$	11,322	$	65,236

Service Line:
Professional Services	$	4,369	$	294	$	2,072	$	6,735	$	3,234	$	1,380	$	2,642	$	7,256
Transaction Services	58		905		—		963		210		1,721		33		1,964
Subscription Services	36,010		5,395		7,657		49,062		40,033		6,438		8,037		54,508
License	—		1,240		1,713		2,953		—		898		610		1,508
Total	$	40,437	$	7,834	$	11,442	$	59,713	$	43,477	$	10,437	$	11,322	$	65,236


	Six Months Ended June 30, 2023								Six Months Ended June 30, 2022
	Cloud		NetworkX		Messaging		Total		Cloud		NetworkX		Messaging		Total
Geography:
Americas	$	74,960	$	13,409	$	3,598	$	91,967	$	81,558	$	19,440	$	5,001	$	105,999
APAC	2,794		1,570		11,617		15,981		63		1,666		13,161		14,890
EMEA	3,761		—		5,712		9,473		3,357		1,495		5,361		10,213
Total	$	81,515	$	14,979	$	20,927	$	117,421	$	84,978	$	22,601	$	23,523	$	131,102

Service Line:
Professional Services	$	9,030	$	640	$	3,763	$	13,433	$	6,588	$	3,016	$	5,783	$	15,387
Transaction Services	185		1,758		—		1,943		546		2,749		56		3,351
Subscription Services	71,896		10,745		15,425		98,066		77,844		14,648		16,552		109,044
License	404		1,836		1,739		3,979		—		2,188		1,132		3,320
Total	$	81,515	$	14,979	$	20,927	$	117,421	$	84,978	$	22,601	$	23,523	$	131,102

Trade Accounts Receivable and Contract balances

The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, the Company recognizes a receivable for revenues related to its time and materials and transaction or volume-based contracts. The Company presents such receivables in Trade accounts receivable, net in its Condensed Consolidated Statements of Financial Position at their net estimated realizable value. The Company maintains an allowance for credit losses to provide

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other economic indicators.

A contract asset is a right to consideration that is conditional upon factors other than the passage of time. For example, the Company would record a contract asset if it records revenue on a professional services engagement but are not entitled to bill until the Company achieves specified milestones. Contract assets balance at June 30, 2023 is $8.4 million.

Amounts collected in advance of services being provided are accounted for as contract liabilities, which are presented as deferred revenue on the accompanying Condensed Consolidated Balance Sheets and are realized with the associated revenue recognized under the contract. Nearly all of the Company's contract liabilities balance is related to services revenue, primarily subscription services contracts.

The Company’s contract assets and liabilities are reported in a net position on a customer basis at the end of each reporting period.

Significant changes in the contract liabilities balance (current and non-current) during the period are as follows:


	Contract Liabilities1
Balance - January 1, 2023	$	14,183
Revenue recognized in the period	(117,191)
Amounts billed but not recognized as revenue	126,654


Balance - June 30, 2023	$	23,646

________________________________

1 Comprised of Deferred Revenue. $11.5 million of revenue recognized in the period was included in the contract liability balance at the beginning of the period.

Transaction price allocated to the remaining performance obligations

Topic 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2023. The Company has elected not to disclose transaction price allocated to remaining performance obligations for:

1.Contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty;

2.Contracts for which the Company recognizes revenues based on the right to invoice for services performed;

3.Variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with Topic 606 Section 10-25-14(b), for which the criteria in Topic 606 Section 10-32-40 have been met. This applies to a limited number of situations where the Company is dependent upon data from a third party or where fees are highly variable.

Many of the Company’s performance obligations meet one or more of these exemptions. Specifically, the Company has excluded the following from the Company’s remaining performance obligations, all of which will be resolved in the period in which amounts are known:

•consideration for future transactions, above any contractual minimums

•consideration for success-based transactions contingent on third party data

•credits for failure to meet future service level requirements

As of June 30, 2023, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $79.8 million, of which approximately 96.0 percent is expected to be recognized as revenues within 2 years, and the remainder thereafter.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase services that do not represent material rights to the customer. Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services.

4. Fair Value Measurements

In accordance with accounting principles generally accepted in the United States, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy prioritizes the inputs used to measure fair value as follows:

•Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;

•Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets; and

•Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and require the Company to develop relevant assumptions.

The following is a summary of assets, liabilities and redeemable noncontrolling interests and their related classifications under the fair value hierarchy:


	June 30, 2023
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Cash and cash equivalents	$	19,329	$	19,329	$	—	$	—


Total assets	$	19,329	$	19,329	$	—	$	—



Temporary equity
Redeemable noncontrolling interests1	$	12,500	$	—	$	—	$	12,500
Total temporary equity	$	12,500	$	—	$	—	$	12,500


	December 31, 2022
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Cash and cash equivalents	$	21,921	$	21,921	$	—	$	—


Total assets	$	21,921	$	21,921	$	—	$	—



Temporary Equity
Redeemable noncontrolling interests1	$	12,500	$	—	$	—	$	12,500
Total temporary equity	$	12,500	$	—	$	—	$	12,500

________________________________

1 Put arrangements held by the noncontrolling interests in certain of the Company’s joint venture.

Redeemable Noncontrolling Interests

The redeemable noncontrolling interests recorded at fair value are put arrangements held by the noncontrolling interests in certain of the Company’s joint ventures. The Company recognizes changes in the redemption value immediately as they occur and adjusts the carrying value of the noncontrolling interest to the greater of the estimated redemption value, which approximates fair value, at the end of each reporting period or the initial carrying amount.

The fair value of the redeemable noncontrolling interests was estimated by applying an income approach using a discounted cash flow analysis. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Significant changes in the underlying assumptions used to value the redeemable

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

noncontrolling interests could significantly increase or decrease the fair value estimates recorded in the Condensed Consolidated Balance Sheets.

5. Leases

The Company has entered into contracts with third parties to lease a variety of assets, including certain real estate, equipment, automobiles and other assets. The Company’s leases frequently allow for lease payments that could vary based on factors such as inflation or the degree of utilization of the underlying asset. For example, certain of the Company’s real estate leases could require us to make payments that vary based on common area maintenance charges, insurance and other charges. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company is party to certain sublease arrangements, primarily related to the Company’s real estate leases, where it acts as the lessee and intermediate lessor.

The Company reflects finance leases as a component of Leases, non-current on the Condensed Consolidated Balance Sheet. The finance leases were not material for the period ended June 30, 2023.

The following table presents information about the Company's Right of Use (ROU) assets and lease liabilities:


	June 30, 2023		December 31, 2022
ROU assets:
Non-current operating lease ROU assets	$	17,529	$	20,863



Operating lease liabilities:
Current operating lease liabilities1	$	5,833	$	5,497
Non-current operating lease liabilities	26,338		29,222
Total operating lease liabilities	$	32,171	$	34,719

________________________________

1 Amounts are included in Accrued Expenses on the Condensed Consolidated Balance Sheet.

The following table presents information about lease expense and sublease income:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost1	$	1,591	$	1,972	$	3,208	$	4,014
Other lease costs and income:
Variable lease costs1	477		736		826		1,171
Operating lease impairments, net1	2,078		(268)		2,075		175
Sublease income1	(822)		(713)		(1,538)		(1,359)

Total net lease cost	$	3,324	$	1,727	$	4,571	$	4,001

________________________________

1 Amounts are included in Cost of revenues, Selling, general and administrative and/or Research and development based on the function that the underlying leased asset supports which are reflected in the Condensed Consolidated Statements of Operations.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

The following table provides the undiscounted amount of future cash flows included in our lease liabilities at June 30, 2023 for each of the five years subsequent to December 31, 2022 and thereafter, as well as a reconciliation of such undiscounted cash flows to our lease liabilities at June 30, 2023:


Year	Operating Leases
2023	$	4,134
2024	8,192
2025	7,968
2026	7,897
2027	6,268
Thereafter	4,274
Total future lease payments	38,733
Less: amount representing interest	(6,562)
Present value of future lease payments (lease liability)	$	32,171

The following table provides the weighted-average remaining lease term and weighted-average discount rates for our leases:


	June 30, 2023	December 31, 2022
Operating Leases:
Weighted-average remaining lease term (years), weighted based on lease liability balances	4.67	5.31
Weighted-average discount rate (percentages), weighted based on the remaining balance of lease payments	7.8%	8.0%

The following table provides certain cash flow and supplemental noncash information related to our lease liabilities:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating Leases:
Cash paid for amounts included in the measurement of lease liabilities	$	2,009	$	2,436	$	4,006	$	5,039

6. Loan Receivable

Sequential Technology International, LLC

During the second quarter of 2020, the Company entered into an agreement with Sequential Technology International, LLC (“STIN”) and AP Capital Holdings II, LLC (“APC”) to divest its remaining equity interest in STIN as well as settle its paid-in-kind purchase money note (“PIK note”) and certain amounts due as of December 31, 2019 in consideration for a $9.0 million secured promissory note (the “Note”), which includes contingent consideration of up to $16.0 million. The Note has an 8% interest rate and the maturity date is April 27, 2025. As of June 30, 2023 and December 31, 2022, the carrying value of the Note after the consideration of the allowance for credit loss was approximately $4.8 million. The Company determined the allowance on the Note using a discounted cash flow analysis, which discounts the expected future cash flows of the asset to determine the collectible amount.

In accordance with the terms of the agreement, STIN has made the required payments to the Company as of June 30, 2023.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

7. Debt

Offering of Senior Notes

On June 30, 2021, the Company closed its underwritten public offering of $120.0 million aggregate principal amount of 8.375% senior notes due 2026 at a par value of $25.00 per senior note (the “Senior Notes”). The offering was conducted pursuant to an underwriting agreement (the “Notes Underwriting Agreement”) dated June 25, 2021, by and among the Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Notes Underwriters”). At the closing, the Company issued $125.0 million aggregate principal amount of Senior Notes, inclusive of $5.0 million aggregate principal amount of Senior Notes issued pursuant to the full exercise of the Notes Underwriters’ option to purchase additional Senior Notes.

The Notes Underwriting Agreement contains customary representations, warranties and covenants of the Company, customary conditions to closing, indemnification obligations of the Company and the Notes Underwriters, including for liabilities under the Securities Act, other obligations of the parties and termination provisions.

On June 30, 2021, the Company entered into an indenture (the “Base Indenture”) and a supplemental indenture (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”) with The Bank of New York Mellon Trust Company National Association, as trustee (the “Trustee”), between the Company and the Trustee. The Indenture establishes the form and provides for the issuance of the Senior Notes.

The Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. The Senior Notes are effectively subordinated in right of payment to all of the Company’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s subsidiaries, including trade payables. The Senior Notes bear interest at the rate of 8.375% per annum. Interest on the Senior Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on July 31, 2021. The Senior Notes will mature on June 30, 2026, unless redeemed prior to maturity.

The Company may, at its option, at any time and from time to time, redeem the Senior Notes for cash in whole or in part (i) on or after June 30, 2022 and prior to June 30, 2023, at a price equal to $25.75 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a price equal to $25.50 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (iii) on or after June 30, 2024 and prior to June 30, 2025, at a price equal to $25.25 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iv) on or after June 30, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Senior Notes.

The Company has not redeemed any of the Senior Notes as of June 30, 2023.

The Indenture contains customary events of default and cure provisions. If an uncured default occurs and is continuing, the Trustee or the holders of at least 25% of the principal amount of the Senior Notes may declare the entire amount of the Senior Notes, together with accrued and unpaid interest, if any, to be immediately due and payable. In the case of an event of default involving the Company’s bankruptcy, insolvency or reorganization, the principal of, and accrued and unpaid interest on, the principal amount of the Senior Notes, together with accrued and unpaid interest, if any, will automatically, and without any declaration or other action on the part of the Trustee or the holders of the Senior Notes, become due and payable.

On October 25, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between the Company and B. Riley Securities, Inc. (the “Agent”), a related party, pursuant to which the Company may offer and sell, from time to time, up to $18.0 million of the Company’s 8.375% Senior Notes due 2026. Sales of the additional Senior Notes pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Under the Sales Agreement, the Agent will be entitled to compensation of 2.0% of the gross proceeds of all notes sold through it as the Company’s agent.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

During the fourth quarter of 2021, the Company sold an additional $16.1 million aggregate principal amount of Senior Notes pursuant to the Sales Agreement. The additional Senior Notes sold have terms identical to the initial Senior Notes and are fungible and vote together with, the initial Senior Notes. The Senior Notes are listed and trade on The Nasdaq Global Market under the symbol “SNCRL.”

The carrying amounts of the Company’s borrowings were as follows:


Senior Notes	June 30, 2023		December 31, 2022
8.375% Senior Notes due 2026	$	141,077	$	141,077
Unamortized discount and debt issuance cost1	(5,698)		(6,493)
Carrying value of Senior Notes	$	135,379	$	134,584

________________________________

1 Debt issuance costs are deferred and amortized into interest expense using the effective interest method.

The total fair value of the outstanding Senior Notes was $104.4 million as of June 30, 2023. The Company is in compliance with its debt covenants as of June 30, 2023.

Interest expense

The following table summarizes the Company’s interest expense:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022			2023		2022
2021 Non-Convertible Senior Notes due 2026:
Amortization of debt issuance costs	$	378	$	343		$	748	$	678
Interest on borrowings	2,954		2,954			5,908		5,908
Amortization of debt discount	24		22			47		44




Tax - ASC 740/FIN 48 Interest	75		—			148		—
Other	30		24			64		38
Total	$	3,461	$	3,343		$	6,915	$	6,668

8. Accumulated Other Comprehensive (Loss) / Income

The changes in accumulated other comprehensive (loss) income during the six months ended June 30, 2023 were as follows:


	Balance at December 31, 2022		Other comprehensive income		Tax effect		Balance at June 30, 2023
Foreign currency	$	(40,611)	$	4,741	$	—	$	(35,870)
Unrealized loss on intercompany foreign currency transactions	(3,520)		—		—		(3,520)

Total	$	(44,131)	$	4,741	$	—	$	(39,390)