Synchronoss Technologies, Inc. Announces First Quarter 2013 Financial Results

PDF Version
May 1, 2013
  • First quarter non-GAAP total revenue of $79.5 million increases 22% year-over-year
  • First quarter non-GAAP operating income of $15.9 million represents 20% non-GAAP operating margin and drives non-GAAP EPS of $0.28

BRIDGEWATER, N.J.--(BUSINESS WIRE)--May. 1, 2013-- Synchronoss Technologies, Inc. (NASDAQ: SNCR), the mobile innovation leader that provides personal cloud solutions and software-based activation for connected devices across the globe, today announced financial results for the first quarter of 2013.

“Our strong business momentum entering 2013 led to first quarter revenue that exceeded our expectations,” said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “We have recently launched our Personal Cloud platform with multiple customers, and our additional cloud services deployments remain on track. 2013 is a pivotal year for Synchronoss as our Personal Cloud customers across the globe deploy our platform and begin scaling their cloud services in the latter half of 2013. We remain highly focused on ensuring that our mobile operator customers benefit from a superior customer experience, increasing adoption rates of their cloud services, and ultimately creating new revenue streams and lowering churn.”

On a GAAP basis, Synchronoss reported net revenues of $78.3 million, representing an increase of 21% compared to the first quarter of 2012. Gross profit was $46.1 million and income from operations was $201 thousand in the first quarter of 2013. Net income applicable to common stock was $476 thousand, leading to diluted earnings per share of $0.01, compared to $0.14 for the first quarter of 2012.

On a non-GAAP basis, Synchronoss reported net revenues of $79.5 million, an increase of 22% compared to the first quarter of 2012. Gross profit for the first quarter of 2013 was $48.5 million, representing a gross margin of 61%. Income from operations was $15.9 million in the first quarter of 2013, representing an operating margin of 20%. Net income was $10.9 million in the first quarter of 2013, compared to $10.1 million in the year ago period. Diluted earnings per share were $0.28 for the first quarter of 2013, compared to $0.26 for the first quarter of 2012.

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."

Lawrence R. Irving, Chief Financial Officer and Treasurer, said “Synchronoss delivered a strong operational performance in the first quarter, which enabled us to meet our profitability objectives while continuing to invest in our industry leading Personal Cloud Platform. We plan to continue to increase investments in our business to meet growing customer demand as we believe there will be significant payback over time. Our cloud services revenue continues to be the fastest growing portion of our business and we believe we are well positioned to scale with our portfolio of global, tier one mobile operator customers.”

Other First Quarter and Recent Business Highlights:

  • Cloud Services revenue accounted for approximately $23.8 million of non-GAAP revenue, representing approximately 30% of total revenue and growing 29% on a year-over-year basis.
  • Activation Services revenue accounted for approximately $55.7 million of non-GAAP revenue, representing approximately 70% of total revenue and growing 20% on a year-over-year basis.
  • The Company expanded its executive team with the appointment of Nick Lazzaro as President of North America. Mr. Lazzaro will oversee the Company’s North American operations under Bob Garcia, President and Chief Operating Officer. Mr. Lazzaro has over 20 years of experience in technology and telecommunications, including executive positions at Vonage and Amdocs.

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call on Wednesday, May 1, 2013, at 4:30 p.m. (ET) to discuss the company's financial results. To access this call, dial 866-700-6293 (domestic) or 617-213-8835 (international). The pass code for the call is 23643945. 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 at 888-286-8010 (domestic) or 617-801-6888 (international). The replay pass code is 94312991. 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, 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 (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 to live in a connected world. For more information visit us at:

Web:      

www.synchronoss.com

Blog:

http://blog.synchronoss.com

Twitter:

http://twitter.com/synchronoss

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, 2012 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.

SYNCHRONOSS TECHNOLOGIES, INC.
BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
         
March 31, 2013 December 31, 20121
 
ASSETS
Current assets:
Cash and cash equivalents $ 51,116 $ 36,028
Marketable securities 15,392 20,188
Accounts receivable, net of allowance for doubtful accounts of $664 and $258 at March 31, 2013 and December 31, 2012, respectively 69,461 74,980
Prepaid expenses and other assets 19,883 24,012
Deferred tax assets   4,127   4,114
 
Total current assets 159,979 159,322
Marketable securities 583 653
Property and equipment, net 64,023 58,162
Goodwill 126,106 127,322
Intangible assets, net 105,902 110,760
Deferred tax assets 7,009 6,961
Other assets   3,698   3,482
 
Total assets $ 467,300 $ 466,662
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 6,342 $ 8,980
Accrued expenses 30,653 41,658
Deferred revenues 24,280 20,954
Contingent consideration obligation   8,619   3,279
 
Total current liabilities 69,894 74,871
Lease financing obligation - long term 9,259 9,540
Contingent consideration obligation - long-term - 5,100
Other liabilities 3,700 2,494
Stockholders’ equity:

Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at March 31, 2013 and December 31, 2012

— —

Common stock, $0.0001 par value; 100,000 shares authorized, 43,396 and 42,533 shares issued; 39,572 and 38,674 outstanding at March 31, 2013 and December 31, 2012, respectively

4 4
Treasury stock, at cost (3,824 and 3,859 shares at March 31, 2013 and December 31, 2012, respectively) (67,487) (67,918)
Additional paid-in capital 355,829 344,469
Accumulated other comprehensive loss (2,842) (365)
Retained earnings   98,943   98,467
 
Total stockholders’ equity   384,447   374,657
 
Total liabilities and stockholders’ equity $ 467,300 $ 466,662
 
 
1 Certain prior period amounts have been recast in connection with ASC 805, Business Combinations.
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
         
Three Months Ended March 31,
 
2013 2012
 
 
Net revenues $ 78,276 $ 64,560
Costs and expenses:
Cost of services (2)(3)(4)* 32,131 28,621
Research and development (2)(3)(4) 16,718 12,876
Selling, general and administrative (2)(3)(4) 14,652 10,390
Net change in contingent consideration obligation 433 (780 )
Restructuring charges 5,172 -
Depreciation and amortization   8,969     5,171  
 
Total costs and expenses   78,075     56,278  
 
Income from operations 201 8,282
Interest income 86 398
Interest expense (232 ) (239 )
Other (expense) income (5)   (258 )   14  
 
(Loss) income before income tax expense (203 ) 8,455
Income tax benefit (expense)   679     (2,972 )
 
Net income $ 476   $ 5,483  
 
 
Net income per common share:
Basic (1) $ 0.01   $ 0.14  
 
Diluted (1) $ 0.01   $ 0.14  
 
 
Weighted-average common shares outstanding:
Basic   38,121     38,099  
 
Diluted   39,089     39,258  
 
* Cost of services excludes depreciation which is shown separately.
 
(1) Adjustment to net income for equity mark-to-market on contingent consideration obligation:
Net income $ 476 $ 5,483
Income effect for equity mark-to-market on contingent consideration obligation, net of tax   -     -  
 
Net income applicable to shares of common stock for earnings per share $ 476   $ 5,483  
 
 
(2) Amounts include fair value stock-based compensation as follows:
Cost of services $ 1,200 $ 1,245
Research and development 1,296 1,428
Selling, general and administrative   2,414     2,538  
 
Total fair value stock-based compensation expense $ 4,910   $ 5,211  
 
 
(3) Amounts include acquisition costs as follows:
Research and development $ - $ 1
Selling, general and administrative   574     265  
 
Total acquisition costs $ 574   $ 266  
 
 
(4) Amounts include fair value earn-out cash and stock compensation as follows:
Cost of services $ (57 ) $ -
Research and development (66 ) 214
Selling, general and administrative   (49 )   252  
 
Total fair value earn-out cash and stock compensation expense $ (172 ) $ 466  
 
 
(5) Amounts include Fx change of the contingent consideration obligation as follows:
Other (expense) income $ 30 $ 233
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(Unaudited)
         
Three Months Ended March 31,
 
2013 2012
 
 
Non-GAAP financial measures and reconciliation:
 
GAAP Revenue $ 78,276 $ 64,560
Add: Deferred Revenue Write-Down   1,204     346  
 
Non-GAAP Revenue $ 79,480   $ 64,906  
 
 
GAAP Revenue $ 78,276 $ 64,560
Less: Cost of Services   32,131     28,621  
 
GAAP Gross Margin 46,145 35,939
 
Add: Deferred revenue write-down 1,204 346
Add: Fair value stock-based compensation 1,200 1,245
Add: Acquisition and restructuring costs - -
Add: Deferred compensation expense - earn-out   (57 )   -  
 
Non-GAAP Gross Margin $ 48,492   $ 37,530  
 
Non-GAAP Gross Margin % 61 % 58 %
 
GAAP income from operations $ 201 $ 8,282
Add: Deferred revenue write-down 1,204 346
Add: Fair value stock-based compensation 4,910 5,211
Add: Acquisition and restructuring costs 5,746 266
Add: Net change in contingent consideration obligation 433 (780 )
Add: Deferred compensation expense - earn-out (172 ) 466
Add: Amortization expense   3,622     1,475  
 
Non-GAAP income from operations $ 15,944   $ 15,266  
 
 
GAAP net income attributable to common stockholders $ 476 $ 5,483
Add: Deferred revenue write-down, net of tax 791 223
Add: Fair value stock-based compensation, net of tax 3,224 3,351
Add: Acquisition and restructuring costs, net of taxes 3,773 171
Add: Net change in contingent consideration obligation, net of Fx change, net of tax 403 (352 )
Add: Deferred compensation expense - earn-out, net of tax (113 ) 300
Add: Amortization expense, net of tax   2,379     949  
 
Non-GAAP net income $ 10,933   $ 10,125  
 
Diluted non-GAAP net income per share $ 0.28   $ 0.26  
   
Weighted shares outstanding - Diluted   39,089     39,258  
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
      Three Months Ended March 31,
   
2013 2012
 
Operating activities:
Net income $ 476 $ 5,483
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 8,969 5,171
Amortization of bond premium 86 332
Deferred income taxes (118) 1,995
Non-cash interest on leased facility 229 230
Stock-based compensation 4,910 5,211
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts 5,519 (1,314)
Prepaid expenses and other current assets 4,499 2,361
Other assets (384) (131)
Accounts payable (2,639) (2,422)
Accrued expenses (11,126) (6,928)
Contingent consideration obligation 241 (3,307)
Excess tax benefit from the exercise of stock options - (269)
Other liabilities 1,247 124
Deferred revenues   3,325   89
 
Net cash provided by operating activities 15,234 6,625
 
Investing activities:
Purchases of fixed assets (10,964) (4,873)
Purchases of marketable securities available-for-sale (13) (2,729)
Maturity of marketable securities available-for-sale 4,791 3,482
Business acquired, net of cash   -   (14)
 
Net cash used in investing activities (6,186) (4,134)
 
Financing activities:
Proceeds from the exercise of stock options 6,212 3,564
Payments on contingent consideration obligation - (575)
Excess tax benefit from the exercise of stock options - 269
Proceeds from the sale of Treasury Stock in connection with an employee stock purchase plan 670 —
Payments on capital obligations   (760)   (224)
 
Net cash provided by financing activities 6,122 3,034
 
Effect of exchange rate changes on cash   (82)   143
 
Net increase in cash and cash equivalents 15,088 5,668
Cash and cash equivalents at beginning of year   36,028   69,430
 
Cash and cash equivalents at end of period $ 51,116 $ 75,098
 
 
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
Three Months Ended March 31,
 
2013 2012
 
 
Non-GAAP cash provided by operating activities and reconciliation:
 
Net cash provided by operating activities (GAAP) $ 15,234 $ 6,625
Add: Tax benefits from stock options exercised - 269
Add: Cash payments on settlement of Earn-out   -   3,226
 
Adjusted cash flow provided by operating activities (Non-GAAP) $ 15,234 $ 10,120

Source: Synchronoss Technologies, Inc.

Synchronoss Technologies, Inc.
Investor:
Brian Denyeau, 646-277-1251
investor@synchronoss.com
or
Media:
Stacie Hiras, 908-547-1260
Stacie.hiras@synchronoss.com