Synchronoss Technologies, Inc. Announces Fourth Quarter and Full Year 2016 Financial Results

PDF Version
February 8, 2017
  • GAAP combined total revenue was $145.6 million
  • Non-GAAP combined total revenue was $147.8 million
  • GAAP total revenue from continuing operations for the fourth quarter was $121.7 million
  • Non-GAAP total revenue from continuing operations for the fourth quarter was $123.9 million
  • GAAP EPS from continuing operations for the fourth quarter was ($0.51)
  • Non-GAAP EPS from continuing operations for the fourth quarter was $0.24

BRIDGEWATER, N.J.--(BUSINESS WIRE)--Feb. 8, 2017-- Synchronoss Technologies, Inc. (NASDAQ:SNCR), the leader in mobile cloud innovation for mobile carriers, enterprises, retailers and OEMs around the world, today announced financial results for the fourth quarter of 2016.

“Synchronoss has transformed its strategy with the Intralinks acquisition and divestiture of its traditional activation business as the company now looks to expand the scale and scope of its enterprise and cloud initiatives to drive the new SNCR 3.0 vision.” said Ronald Hovsepian, Chief Executive Officer of Synchronoss. “The Synchronoss team is laying the foundation for the next chapter of growth.”

“It has been an exciting time at Synchronoss over the past few months as we view the acquisition of Intralinks to be a major step forward in our enterprise strategy with Ron leading the team to successfully integrate both companies into a single portfolio,” said Founder and Executive Chairman Stephen Waldis. “I look forward to working with Ron during this pivotal time for Synchronoss’ employees, customers, and partners around the globe.”

Financial Highlights for the Fourth Quarter of 2016:

  • Total revenues from continuing operations: $121.7 million GAAP compared to $121.2 million in the fourth quarter of 2015. $123.9 million non-GAAP compared to $121.8 million in the fourth quarter of 2015. Total combined revenue from continuing and discontinued operations was $145.6 million. Non-GAAP combined total revenue from continuing and discontinued operations was $147.8 million.
  • Gross profit from continuing operations: $71.5 million GAAP compared to $75.7 million in the fourth quarter of 2015. $78.1 million non-GAAP compared to $83.4 million in the fourth quarter of 2015.
  • Operating (loss) income from continuing operations: ($30.4) million GAAP compared to $1.5 million in the fourth quarter of 2015. $13.1 million non-GAAP compared to $29.9 million in the fourth quarter of 2015.
  • Net (loss) income from continuing operations attributable to Synchronoss: ($22.6) million GAAP compared to ($3.2) million in the fourth quarter of 2015. $11.0 million non-GAAP compared to $20.0 million in the fourth quarter of 2015.
  • (Loss) earnings per diluted share from continuing operations: ($0.51) GAAP compared to ($0.07) in the fourth quarter of 2015. $0.24 non-GAAP compared to $0.43 in the fourth quarter of 2015.
  • Operating cash flow: $86 million GAAP and non-GAAP compared to $63.2 million GAAP and non-GAAP in the fourth quarter of 2015.

Financial Highlights for the Full Year 2016:

  • Total revenues from continuing operations: $476.7 million GAAP compared to $428.1 million in 2015. $490.2 million non-GAAP compared to $429.4 million in 2015.
  • Gross profit from continuing operations: $282.5 million GAAP compared to $272.8 million in 2015. $319.2 million non-GAAP compared to $288.0 million in 2015.
  • Operating (loss) income from continuing operations: ($71.9) million GAAP compared to $15.1 million in 2015. $82 million non-GAAP compared to $96.2 million in 2015.
  • Net (loss) income from continuing operations attributable to Synchronoss: ($55.7) million GAAP compared to $1.3 million in 2015. $59.8 million non-GAAP compared to $63.6 million in 2015.
  • (Loss) earnings per diluted share from continuing operations: ($1.28) GAAP compared to $0.03 in 2015. $1.28 non-GAAP compared to $1.38 in 2015.
  • Operating cash flow: $142.5 million GAAP compared to $139.8 million in 2015. $142.5 million non-GAAP compared to $143.4 million in 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."

Fourth Quarter and Recent Business Highlights:

  • GAAP Cloud Services revenue from continuing operations accounted for $121.7 million in the fourth quarter. Non-GAAP Cloud Services revenue from continuing operations accounted for $123.9 million in the fourth quarter. This was led by cloud deployments at new and existing customers.
  • Completed the acquisition of Intralinks together with the closing of the $1.1 Billion credit facility.
  • Completed the divestiture of our carrier activation business to Sequential Technology International as well as the sale of our SpeechCycle and Mirapoint Software activation businesses.
  • Strong progress at international customers in EMEA and APAC as they move towards scaling our Messaging and Personal Cloud Platforms.

First Quarter Investor Conference Participation Schedule:

  • Raymond James Investor Conference March 7, 2017-Orlando, FL

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call on Wednesday, February 8, 2017, 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 52260549. 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 52260549. An archived webcast 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 an innovative software company that helps both service providers and enterprises realize and execute their goals for mobile transformation. Our simple, powerful and flexible solutions serve millions of mobile subscribers and a large portion of the Fortune 500 worldwide today. 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.

Synchronoss and the Synchronoss logo 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)
      December 31, 2016     December 31, 2015
ASSETS            
Current assets:            
Cash and cash equivalents     $ 181,018       $ 147,634  
Marketable securities       12,506         66,357  
Accounts receivable, net of allowance for doubtful accounts of $1,756 and $3,029 at December 31, 2016 and December 31, 2015, respectively       137,561         136,117  
Prepaid expenses and other assets       33,488         48,127  
Assets of discontinued operations, current       —         8,710  
Total current assets       364,573         406,945  
Restricted cash       30,000         —  
Marketable securities       2,974         19,635  
Property and equipment, net       155,599         168,280  
Goodwill       273,710         182,000  
Intangible assets, net       203,864         174,322  
Deferred tax assets       1,503         3,560  
Other assets       7,541         10,350  
Receivable from related party       83,000         —  
Equity method investments       45,890         —  
Assets of discontinued operations, non-current       —         45,136  
Total assets     $ 1,168,654       $ 1,010,228  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable     $ 15,770       $ 26,038  
Accrued expenses       72,705         45,819  
Deferred revenues       22,602         8,323  
Contingent consideration obligation       11,860         —  
Short term debt       29,000         —  
Total current liabilities       151,937         80,180  
Lease financing obligation - long term       12,121         13,343  
Contingent consideration obligation - long-term       —         930  
Convertible debt       226,291         224,878  
Deferred tax liability       50,838         16,404  
Deferred revenues       16,724         559  
Other liabilities       3,782         2,668  
Redeemable noncontrolling interest       49,856         61,452  
Stockholders’ equity:            
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at December 31, 2016 and December 31, 2015       —         —  
Common stock, $0.0001 par value; 100,000 shares authorized, 49,317 and 48,084 shares issued; 45,323 and 44,405 outstanding at December 31, 2016 and December 31, 2015, respectively       5         4  
Treasury stock, at cost (3,994 and 3,679 shares at December 31, 2016 and December 31, 2015, respectively)       (95,183 )       (65,651 )
Additional paid-in-capital       575,093         512,802  
Accumulated other comprehensive loss       (43,252 )       (38,684 )
Retained earnings       220,442         201,343  
Total stockholders’ equity       657,105         609,814  
Total liabilities and stockholders’ equity     $ 1,168,654       $ 1,010,228  
                     
                         

SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)**
                         
     

Three Months Ended December 31,

    

Year ended December 31,
     

2016

    

2015

    

2016

    

2015
Net Revenues     $ 121,717       $ 121,213       $ 476,671       $ 428,117  
Costs and Expenses:                        
Cost of services (1)(2)*       50,210         45,512         194,198         155,287  
Research and development (1)(2)       28,273         22,958         106,681         91,430  
Selling, general and administrative (1)(2)       43,297         29,539         131,106         88,411  
Net change in contingent consideration obligation       3,631         760         10,930         760  
Restructuring charges       1,360         (34 )       6,333         4,946  
Depreciation and amortization       25,302         20,931         99,311         72,152  
Total costs and expenses       152,073         119,666         548,559         412,986  
(Loss) income from continuing operations       (30,356 )       1,547         (71,888 )       15,131  
Interest income       936         564         2,428         2,047  
Interest expense       (2,007 )       (1,503 )       (7,013 )       (5,711 )
Other income (expense), net       2,117         973         1,931         372  
(Loss) income from continuing operations, before taxes       (29,310 )       1,581         (74,542 )       11,839  
Provision for income taxes       3,996         1,310         7,290         (4,477 )
Net income (loss) from continuing operations       (25,314 )       2,891         (67,252 )       7,362  
Net income (loss) from discontinued operations, net of taxes       46,848         8,431         75,233         39,320  
Net income       21,534         11,322         7,981         46,682  
Net (loss) income attributable to noncontrolling interests       (2,760 )       6,052         (11,596 )       6,052  
Net income attributable to Synchronoss     $ 24,294       $ 5,270       $ 19,577       $ 40,630  
                         
Net income (loss) from continuing operations attributable to Synchronoss     $ (22,554 )     $ (3,161 )     $ (55,656 )     $ 1,310  
Income effect for interest on convertible debt, net of tax       —         —         —         1,951  
Net income (loss) from continuing operations adjusted for the convertible debt     $ (22,554 )     $ (3,161 )     $ (55,656 )     $ 3,261  
                         
Basic:                        
Continuing operations     $ (0.51 )     $ (0.07 )     $ (1.28 )     $ 0.03  
Discontinued operations       1.06         0.19         1.73         0.93  
      $ 0.55       $ 0.12       $ 0.45       $ 0.96  
Diluted:                        
Continuing operations     $ (0.51 )     $ (0.07 )     $ (1.28 )     $ 0.03  
Discontinued operations       1.06         0.19         1.73         0.93  
      $ 0.55       $ 0.12       $ 0.45       $ 0.96  
                         
Weighted-average common shares outstanding:                        
Basic       43,814         42,817         43,571         42,284  
Diluted       43,814         42,817         43,571         42,284  
                         
* This presentation reflects the discontinued operations associated with the divestiture of our activation business.
** Cost of services excludes depreciation and amortization which is shown separately.
                         
                         
(1) Amounts include fair value stock-based compensation as follows:                        
Cost of services     $ 1,076       $ 1,493       $ 5,669       $ 5,091  
Research and development       2,451         2,374         8,817         7,487  
Selling, general and administrative       4,837         6,137         17,854         17,289  
Total fair value stock-based compensation expense     $ 8,364       $ 10,004       $ 32,340       $ 29,867  
                         
(2) Amounts include acquisition costs as follows:                        
Cost of services     $ 3,344       $ 5,612       $ 17,482       $ 8,814  
Research and development       4,030         2,375         13,751         7,307  
Selling, general and administrative       9,253         963         14,739         1,412  
Total acquisition costs     $ 16,627       $ 8,950       $ 45,972       $ 17,533  
                                         
                         
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(Unaudited)
                         
      Three Months Ended December 31,     Year ended December 31,
        2016         2015         2016         2015  
Non-GAAP financial measures and reconciliation:                        
                         
GAAP Revenue     $ 121,717       $ 121,213       $ 476,671       $ 428,117  
Add: Deferred revenue write-down       2,151         568         13,535         1,260  
Non-GAAP Revenue     $ 123,868       $ 121,781       $ 490,206       $ 429,377  
                         
GAAP Revenue     $ 121,717       $ 121,213       $ 476,671       $ 428,117  
Less: Cost of services       50,210         45,512         194,198         155,287  
GAAP Gross Margin       71,507         75,701         282,473         272,830  
Add: Deferred revenue write-down       2,151         568         13,535         1,260  
Add: Fair value stock-based compensation       1,076         1,493         5,669         5,091  
Add: Acquisition and restructuring costs       3,344         5,612         17,482         8,814  
Non-GAAP Gross Margin     $ 78,078       $ 83,374       $ 319,159       $ 287,995  
Non-GAAP Gross Margin %       63 %       68 %       65 %       67 %
                         
GAAP (loss) income from operations     $ (30,356 )     $ 1,547       $ (71,888 )     $ 15,131  
Add: Deferred revenue write-down       2,151         568         13,535         1,260  
Add: Fair value stock-based compensation       8,364         10,004         32,340         29,867  
Add: Acquisition and restructuring costs       17,987         8,916         52,305         22,479  
Add: Net change in contingent consideration obligation       3,631         760         10,930         760  
Add: Amortization expense       11,308         8,150         44,738         26,659  
Non-GAAP income from operations     $ 13,085       $ 29,945       $ 81,960       $ 96,156  
                         
GAAP Net income (loss) from continuing operations attributable to Synchronoss     $ (22,554 )     $ (3,161 )     $ (55,656 )     $ 1,310  
Add: Deferred revenue write-down       2,151         568         13,535         1,260  
Add: Fair value stock-based compensation       8,364         10,004         32,340         29,867  
Add: Acquisition and restructuring costs       17,987         8,916         52,305         22,479  
Add: Net change in contingent consideration obligation, net of Fx change       3,631         760         10,930         760  
Add: Amortization expense       11,308         8,150         44,738         26,659  
Less: Noncontrolling interest non-GAAP adjustments       (1,148 )       (183 )       (5,523 )       (183 )
Less: Tax effect       (8,720 )       (5,101 )       (32,904 )       (18,592 )
Non-GAAP Net income from continuing operations attributable to Synchronoss       11,019         19,953         59,765         63,560  
Income effect for interest on convertible debt, net of tax       549         669         2,197         2,302  
Net income from continuing operations for diluted EPS calculation     $ 11,568       $ 20,622       $ 61,962       $ 65,862  
                         
Diluted non-GAAP net income per share from continuing operations     $ 0.24       $ 0.43       $ 1.28       $ 1.38  
                         
Weighted shares outstanding - Diluted       49,012         47,862         48,518         47,653  
                                         
             
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
      December 31,
        2016         2015  
Operating activities:           (As Adjusted)
Net income     $ 7,981       $ 46,682  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization expense       99,311         72,152  
Amortization of debt issuance costs       1,607         1,501  
(Loss) gain on disposals       (952 )       16  
Gain on discontinued operations       (95,311 )       —  
Amortization of bond premium       1,416         1,705  
Deferred income taxes       29,296         8,319  
Non-cash interest on leased facility       1,111         924  
Stock-based compensation       33,979         31,711  
Contingent consideration obligation       10,930         (772 )
Changes in operating assets and liabilities:            
Accounts receivable, net of allowance for doubtful accounts       (1,662 )       (27,577 )
Prepaid expenses and other current assets 1       12,649         (8,543 )
Other assets       10,054         (4,282 )
Accounts payable       (11,139 )       6,185  
Accrued expenses 1       25,479         16,333  
Other liabilities       (6,546 )       (402 )
Deferred revenues       24,298         (4,130 )
Net cash provided by operating activities       142,501         139,822  
             
Investing activities:            
Purchases of fixed assets       (58,542 )       (59,960 )
Purchases of intangible assets       —         (1,200 )
Purchases of marketable securities available-for-sale       (13,445 )       (139,569 )
Maturities of marketable securities available-for-sale       82,904         106,210  
Change in restricted cash       (30,000 )       —  
Proceeds from the sale of discontinued operations       18,135         —  
Businesses acquired, net of cash       (98,428 )       (131,592 )
Net cash used in investing activities       (99,376 )       (226,111 )
             
Financing activities:            
Proceeds from the exercise of stock options       13,912         19,936  
Taxes paid on withholding shares 1       (8,885 )       (17,043 )
Payments on contingent consideration obligation       —         (4,468 )
Debt issuance costs       (1,346 )       —  
Borrowings on revolving line of credit       144,000         —  
Repayment of revolving line of credit       (115,000 )       —  
Repurchases of common stock       (40,025 )       —  
Proceeds from the sale of treasury stock in connection with an employee stock purchase plan       2,183         1,902  
Repayments of capital lease obligations       (3,815 )       (2,021 )
Net cash used in financing activities       (8,976 )       (1,694 )
Effect of exchange rate changes on cash       (765 )       (350 )
Net increase (decrease) in cash and cash equivalents       33,384         (88,333 )
Cash and cash equivalents at beginning of period       147,634         235,967  
Cash and cash equivalents at end of period     $ 181,018       $ 147,634  
             
1 Certain prior year amounts have been adjusted to conform with the adoption of ASU 2016-09.
 
             
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
      December 31,
      2016     2015
             
Non-GAAP cash provided by operating activities and reconciliation:            
             
Net cash provided by operating activities (GAAP)     $ 142,501     $ 139,822
Add: Cash payments on settlement of earn-out       —       3,532
Adjusted cash flow provided by operating activities (Non-GAAP)     $ 142,501     $ 143,354

 

Source: Synchronoss Technologies, Inc.

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