CORRECTION: Synchronoss Technologies Announces Fourth Quarter and Full Year 2019 Financial Results; AT&T set to deploy the Synchronoss Personal Cloud Solution

PDF Version
March 9, 2020

BRIDGEWATER, N.J., March 09, 2020 (GLOBE NEWSWIRE) -- Synchronoss Technologies Inc. (NASDAQ: SNCR), a global leader and innovator in cloud, messaging, digital and IoT platforms and products, today announced financial results for its fourth quarter and year ended December 31, 2019. Synchronoss is also announced this morning that AT&T is set to deploy the Synchronoss Personal Cloud Solution for AT&T Mobility wireless customers.

Financial highlights:

  • Revenue for the quarter was $90.6 million. For the full year, revenue was $308.7 million.
  • GAAP net loss for the quarter was $14.7 million. For the full year, GAAP net loss was $136.7 million.
  • Synchronoss delivered $6.5 million of adjusted EBITDA for the quarter. For the full year, adjusted EBITDA was $27.6 million.
  • Total costs and expenses were down 13 percent year over year in the fourth quarter and 15 percent for the year.
  • Synchronoss ended the year with $39.0 million of cash on the balance sheet.
  Three Months Ended December 31,
$000s 2019   2018   % Change
Revenues $ 90,588     $ 82,102     10.3 %
           
Net Loss Attributable to Synchronoss (14,671 )   (101,909 )   85.6 %
Non-GAAP Net Loss From Cont. Ops. Attributable to Synchronoss  (2,502 )   (80,837 )   96.9 %
Adjusted EBITDA 6,486     15,436     (58.0 )%


  Twelve Months Ended December 31,
$000s 2019   2018   % Change
Revenues $ 308,749     $ 325,839     (5.2 )%
           
Net Loss Attributable to Synchronoss (136,720 )   (243,748 )   (43.9 )%
Non-GAAP Net Loss From Cont. Ops. Attributable to Synchronoss
 (53,777 )   (176,914 )   (69.6 )%
Adjusted EBITDA 27,584     14,023     96.7 %

Glenn Lurie, president and chief executive officer, stated “Synchronoss finished 2019 on a strong note, with our highest revenue quarter in two years. And 2020 is off to a good start, as we have already launched two new cloud customers - TracFone and Assurant - and we are launching AT&T this week. In addition, our advanced messaging work with the CCMI joint venture of AT&T, Sprint, T-Mobile, and Verizon is well underway, and we are already seeing upside to the original contract in the form of additional technology integration and professional services work.”

Mr. Lurie added, “With the new business wins we closed in 2019, we have the business in hand along with the quality of our sales funnel to energize profitable growth for the next several years. We have worked hard to right size our expense base and see additional opportunities to reduce costs and grow operating margins in the new year."

David Clark, chief financial officer, added, “Synchronoss ended the year with $39 million of cash, up from $20 million at the end of the third quarter. In 2019, we reduced total costs and expenses 13 percent, which drove a significant improvement in financial results. For the full year, Adjusted EBITDA was $27.6 million, up from $14.0 million in 2018. We believe we can deliver approximately $15 million of additional cost savings in 2020.”

New Business Update

New customer agreements and partnerships that the company has completed since the last earnings announcement include:

  • AT&T Mobility is launching the Synchronoss Personal Cloud solution for its wireless customers. The Synchronoss Personal Cloud solution will fully integrate into a suite of AT&T services, leveraging the cloud to vastly improve the subscriber’s overall experience. It will also give AT&T the ability to provide and monetize new value-added services to its wireless customers.
  • Synchronoss’ Personal Cloud Solution has been fully integrated with Pocket Geek by Assurant to provide an enhanced device and content protection solution to a leading North American carrier.
  • In November, the company was selected by the Cross-Carrier Messaging Initiative (CCMI), a joint venture of AT&T, Sprint, T-Mobile, and Verizon, to deliver an advanced mobile messaging experience across all four mobile networks.

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

Conference Call Details

Synchronoss will host a conference call on Monday, March 9, 2020, at 5:00 p.m. (ET) to discuss the company’s financial results. To access this call, dial 1-201-493-6784. Additionally, a live web cast of the conference call will be available on the Investor Relations page on the company’s web site at www.synchronoss.com.

Following the conference call, a replay will be available for a limited time at 1-412-317-6671. The replay pass code is 13698084. 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 fair value stock-based compensation expense, acquisition-related costs which includes integration costs, restructuring and cease-use lease expense, deferred compensation expense related to earn outs and amortization of intangibles associated with acquisitions as well as certain non-recurring adjustments.

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 transforms the way companies create new revenue, reduce costs and delight their subscribers with cloud, messaging, digital and IoT products, supporting hundreds of millions of subscribers across the globe. Synchronoss’ secure, scalable and groundbreaking new technologies, trusted partnerships, and talented people change the way TMT customers grow their businesses. For more information, visit us at www.synchronoss.com.

Forward-looking Statements

This press release includes statements concerning Synchronoss and its future expectations, plans and prospects that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “believes,” “potential” or “continue” or other similar expressions are intended to identify forward-looking statements. Synchronoss has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions including, without limitation, risks relating to the Company’s ability to sustain or increase revenue from its larger customers and generate revenue from new customers, the Company’s expectations regarding expenses and revenue, the Company’s growth strategies, the anticipated trends and challenges in the business and the market in which the Company operates, the Company’s expectations regarding federal, state and foreign regulatory requirements, the pending lawsuits against the Company described in its most recent SEC filings, and other risks and factors that are described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which is on file with the SEC and available on the SEC’s website at www.sec.gov. The company does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

Contact:

Investors:
Joe Crivelli
Vice President, Investor Relations
908-566-3131
investor@synchronoss.com

Media:                                                
CCgroup
US: Diane Rose, +1 727-238-7567 or International: Anais Merlin, +44 20 3824 9219                                   
synchronoss@ccgrouppr.com

SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)

  December 31, 2019   December 31, 2018
ASSETS
Current assets:      
Cash and cash equivalents $ 38,990     $ 103,771  
Restricted cash 11     6,089  
Marketable securities, current 11     28,230  
Accounts receivable, net of allowances for bad debt of $1,864 and $4,599 at December 31, 2019 and December 31, 2018, respectively 65,863     102,798  
Prepaid expenses 24,224     45,058  
Other current assets 4,792     8,508  
Total current assets 133,891     294,454  
Marketable securities, non-current —     6,658  
Property and equipment, net 26,525     67,937  
Operating lease right-of-use assets 53,965     —  
Goodwill 222,969     224,899  
Intangible assets, net 77,613     98,706  
Other assets 8,054     8,982  
Equity method investment —     1,619  
Total assets $ 523,017     $ 703,255  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable 21,551     13,576  
Accrued expenses 56,810     59,545  
Deferred revenues, current 65,858     57,101  
Short-term convertible debt, net of debt issuance costs —     113,542  
Total current liabilities 144,219     243,764  
Lease financing obligation —     9,494  
Operating lease liabilities, non-current 60,976     —  
Deferred tax liabilities 1,098     1,347  
Deferred revenues, non-current 21,941     59,841  
Other non-current liabilities 4,588     10,797  
Redeemable noncontrolling interest 12,500     12,500  
Commitments and contingencies      
Series A Convertible Participating Perpetual Preferred Stock, $0.0001 par value; 10,000 shares authorized; 217 shares issued and outstanding at December 31, 2019 200,865     176,603  
Stockholders’ equity:      
Common stock, $0.0001 par value; 100,000 shares authorized, 51,704 and 49,836 shares issued; 44,542 and 42,674 outstanding at December 31, 2019 and December 31, 2018, respectively 5     5  
Treasury stock, at cost (7,162 and 7,162 shares at December 31, 2019 and December 31, 2018, respectively) (82,087 )   (82,087 )
Additional paid-in capital 525,739     534,673  
Accumulated other comprehensive loss (32,515 )   (30,383 )
Accumulated deficit (334,312 )   (233,299 )
Total stockholders’ equity 76,830     188,909  
Total liabilities and stockholders’ equity $ 523,017     $ 703,255  


SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

    Three Months Ended December 31,   Twelve Months Ended December 31,
    2019   2018   2019   2018   2017
                     
Net revenues   $ 90,588     $ 82,102     $ 308,749     $ 325,839     $ 402,361  
Costs and expenses:                    
Cost of revenues   42,449     31,014     150,407     158,802     181,453  
Research and development   18,286     19,383     75,568     79,172     90,850  
Selling, general and administrative   29,909     22,744     112,771     122,112     154,037  
Restructuring charges   17     3,950     755     12,375     10,739  
Depreciation and amortization   18,116     47,324     77,036     117,654     94,884  
Total costs and expenses   108,777     124,415     416,537     490,115     531,963  
Loss from continuing operations   (18,189 )   (42,313 )   (107,788 )   (164,276 )   (129,602 )
Interest income   542     252     1,258     7,770     12,502  
Interest expense   (104 )   (976 )   (1,355 )   (4,911 )   (55,771 )
Gain (loss) on extinguishment of debt   —     1,760     822     1,760     (29,413 )
Other Income (expense), net   7,372     (65,737 )   7,389     (74,917 )   (17,678 )
Equity method investment loss   —     (28,671 )   (1,619 )   (28,600 )   (9,125 )
Loss from continuing operations, before taxes   (10,379 )   (135,685 )   (101,293 )   (263,174 )   (229,087 )
Benefit (provision) for income taxes   4,446     16,290     (2,167 )   17,894     34,863  
Net loss from continuing operations   (5,933 )   (119,395 )   (103,460 )   (245,280 )   (194,224 )
Net income from discontinued operations, net of tax   —     18,288     —     18,288     75,495  
Net loss   (5,933 )   (101,107 )   (103,460 )   (226,992 )   (118,729 )
Net (income) loss attributable to redeemable noncontrolling interests   (194 )   6,715     (1,126 )   8,837     9,291  
Preferred stock dividend   (8,544 )   (7,517 )   (32,134 )   (25,593 )   —  
Net loss attributable to Synchronoss   $ (14,671 )   $ (101,909 )   $ (136,720 )   $ (243,748 )   $ (109,438 )
                     
Earnings per share                    
Basic:                    
Continuing operations   $ (0.36 )   $ (3.01 )   $ (3.36 )   $ (6.51 )   $ (4.14 )
Discontinued operations   —     0.45     —     0.46     1.69  
    $ (0.36 )   $ (2.56 )   $ (3.36 )   $ (6.05 )   $ (2.45 )
Diluted:                    
Continuing operations   $ (0.36 )   $ (3.01 )   $ (3.36 )   $ (6.51 )   $ (4.14 )
Discontinued operations   —     0.45     —     0.46     1.69  
    $ (0.36 )   $ (2.56 )   $ (3.36 )   $ (6.05 )   $ (2.45 )
Weighted-average common shares outstanding:                    
Basic   41,085     39,885     40,694     40,277     44,669  
Diluted   41,085     39,885     40,694     40,277     44,669  


SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands) (Unaudited)

  Twelve Months Ended December 31,
  2019   2018   2017
Operating activities:          
Net loss continuing operations $ (103,460 )   $ (245,280 )   $ (194,224 )
Net loss from discontinued operations —     —     75,495  
Gain (loss) on Sale of discontinued operations, net of tax —     18,288     (122,842 )
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization 77,037     97,092     93,924  
Goodwill impairment —     9,100     —  
Impairment of long-lived assets and capitalized software —     11,462     960  
Change in fair value of financial instruments (163 )    (3,849 )   4,367  
Amortization of debt issuance costs 285     1,294     12,771  
(Gain) loss on extinguishment of debt (822 )   (1,760 )   29,413  
Accrued PIK interest —     (7,037 )   (12,090 )
Allowance for loan losses —     84,314     14,562  
Loss (earnings) from Equity method investments 1,619     28,600     9,125  
(Gain) loss on Disposals of fixed assets 15     277     (4,947 )
Discontinued operations non-cash and working capital adjustments —     —     48,647  
(Gain) loss on Disposals of intangible assets (5,429 )   —     —  
Amortization of bond premium (34 )   107     244  
Deferred income taxes (222 )   (12,350 )   19,243  
Non-cash interest on leased facility —         1,203  
Stock-based compensation 22,287     27,604     22,495  
Contingent consideration obligation —     —     (2,711 )
Cumulative adjustment to STI receivable 26,044     —      
ROU Asset Impairment 6,268     —      
Changes in operating assets and liabilities:          
Accounts receivable, net of allowance for doubtful accounts 10,891     (21,521 )   29,283  
Prepaid expenses and other current assets 27,215     (5,315 )   (5,513 )
Other assets 1,710     973     3,237  
Accounts payable 8,879     6,846     (9,098 )
Accrued expenses (7,059 )   (18,068 )   (4,949 )
Other liabilities (4,362 )   (4,675 )   (3,337 )
Deferred revenues (28,856 )   2,529     (23,506 )
Net cash provided by (used in) operating activities 31,843     (31,369 )   (18,248 )
           
Investing activities:          
Purchases of fixed assets (8,183 )   (11,656 )   (12,151 )
Purchases of intangible assets and capitalized software (13,008 )   (14,372 )   (9,119 )
Proceeds from the sale of intangibles 5,429     —     —  
Proceeds from the sale of Speechcycle —     —     13,500  
Purchases of marketable securities available for sale (51,745 )   (36,789 )   (219 )
Maturity of marketable securities available for sale 86,884     4,865     12,371  
Proceeds from the sale of discontinued operations —     —     928,171  
Equity investment —     404     608  
Investing activities in discontinued operations —     —     (13,721 )
Investment in note receivable —     —     (6,187 )
Business acquired, net of cash —     (9,734 )   (815,008 )
Net cash provided by (used in) investing activities 19,377     (67,282 )   98,245  
           
Financing activities:          
Share-based compensation-related proceeds, net of taxes paid on withholding shares 39     —     2,584  
Taxes paid on withholding shares (15 )   —     (442 )
Payments on contingent consideration —     —     (122 )
Debt issuance costs related to the Credit Facility —     —     (3,692 )
Debt issuance costs related to long-term debt —     —     (19,887 )
Debt amendment costs related to long-term debt —     —     (16,776 )
Proceeds from issuance of convertible notes —     —     900,000  
Retirement of Convertible Senior Notes & related costs (113,006 )   (113,696 )   —  
Repayment of long-term debt —     —     (900,000 )
Borrowings on revolving line of credit 2,000     —      
Repayment of revolving line of credit (2,000 )   —     (29,000 )
Excess tax benefits from stock option exercises —     —     17  
Proceeds from the sale of treasury stock in connection with an employee stock purchase plan —     —     1,047  
Proceeds from issuance of preferred stock —     86,220     —  
Preferred dividend payment (7,075 )   (7,075 )   —  
Proceeds from mandatorily redeemable financial instruments —     —     33,592  
Payments on capital obligations (1,200 )   (1,334 )   (2,985 )
Net cash used in financing activities (121,257 )   (35,885 )   (35,664 )
           
Effect of exchange rate changes on cash (822 )   (1,729 )   (9,641 )
           
Net decrease in cash and cash equivalents (70,859 )   (136,265 )   34,692  
Cash and cash equivalents, beginning of period 109,860     246,125     211,433  
Cash and cash equivalents, end of period $ 39,001     $ 109,860     $ 246,125  
           
Supplemental disclosures of cash flow information:          
Cash paid for income taxes $ 3,598     $ 22,549     $ 7,612  
Cash refund for income taxes $ 20,733     $ —     $ —  
Cash paid for interest $ 666     $ 3,258     $ 55,957  
           
Supplemental disclosures of non-cash investing and financing activities:          
Supplemental disclosures of non-cash investing and financing activities:          
Accrued dividends on Series A Convertible Participating Perpetual Preferred Stock $ 22,005     $ 7,075     $ —  
Issuance of common stock in connection with Intralinks acquisition $ —     $ —     $ 4,700  
           
Cash and cash equivalents per Consolidated Balance Sheets $ 38,990     $ 103,771     $ 156,299  
Restricted cash $ 11     $ 6,089     $ 89,826  
Total cash, cash equivalents and restricted cash $ 39,001     $ 109,860     $ 246,125  


SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

    Three Months Ended Dec 31,   Twelve Months Ended Dec 31,
    2019   2018   2019   2018
Non-GAAP financial measures and reconciliation:                
GAAP Revenue   $ 90,588     $ 82,102     $ 308,749     $ 325,839  
Less: Cost of revenues   42,449     31,014     150,407     158,802  
Gross Profit   48,139     51,088     158,342     167,037  
Add / (Less):                
Stock-based compensation expense   782     1,035     2,928     3,447  
Restructuring and cease-use lease expense   —         405      
Cumulative adjustment to STI receivable   —         26,044      
Adjusted Gross Profit   $ 48,921     $ 52,123     $ 187,719     $ 170,484  
Adjusted Gross Margin   54.0 %   63.5 %   60.8 %   52.3 %
                 
GAAP Net loss attributable to Synchronoss   $ (14,671 )   $ (101,909 )   $ (136,720 )   $ (243,748 )
Add / (Less):                
Stock-based compensation expense   5,222     7,216     22,250     22,038  
Acquisition costs   —     38     (230 )   149  
Restructuring and cease-use lease expense   17     4,539     7,446     8,425  
Amortization expense   5,610     8,472     24,683     25,122  
Non-GAAP Expenses attributable to Non-Controlling Interest   —     (523 )   (76 )   (1,269 )
One-Time Expenses due to Restatement, etc.   1,320     3,638     2,826     19,608  
Cumulative adjustment to STI receivable   —         26,044      
Income Tax Effect at Statutory Tax Rates   —     (2,308 )   —     (7,239 )
Non-GAAP Net loss from continuing operations attributable to Synchronoss   $ (2,502 )   $ (80,837 )   $ (53,777 )   $ (176,914 )
                 
Diluted Non-GAAP Net loss from continuing operations per share   $ (0.06 )   $ (2.04 )   $ (1.32 )   $ (4.39 )
                 
Weighted shares outstanding - Basic   41,085     39,612     40,694     40,277  


SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

    Three Months Ended   Twelve Months Ended
    Dec 31, 2018   Mar 31, 2019   Jun 30, 2019   Sep 30, 2019   Dec 31, 2019   Dec 31, 2019   Dec 31, 2018
                             
Net (loss) income attributable to Synchronoss   $ (101,909 )   $ (27,587 )   $ (25,030 )   $ (69,432 )   $ (14,671 )   $ (136,720 )   $ (243,748 )
Add / (Less):                            
Restructuring and cease-use lease expense   3,950     740     474     6,215     17     7,446     12,375  
Depreciation and amortization   47,324     20,143     20,269     18,508     18,116     77,036     117,654  
Interest income   (252 )   (189 )   (299 )   (228 )   (542 )   (1,258 )   (7,770 )
Interest Expense   976     585     463     203     104     1,355     4,911  
Gain on Extinguishment of debt   (1,760 )   (387 )   (430 )   (5 )   —     (822 )   (1,760 )
Other Income (expense), net   65,737     (463 )   24     422     (7,372 )   (7,389 )   74,917  
Equity method investment loss   28,671     1,243     376     —     —     1,619     28,600  
Provision (benefit) for income taxes   (16,290 )   (1,391 )   (1,844 )   9,849     (4,446 )   2,168     (17,894 )
Net (loss) income attributable to noncontrolling interests   (6,715 )   313     593     25     194     1,125     (8,837 )
Preferred dividend   7,517     7,537     7,859     8,194     8,544     32,134     25,593  
Stock-based compensation expense   5,566     5,554     5,474     6,000     5,222     22,250     27,604  
Acquisition costs   109     (188 )   (42 )   —     —     (230 )   258  
Cumulative adjustment to STI receivable               26,044     —     26,044      
One-Time Expenses due to Restatement, etc.   800     720     782     4     1,320     2,826     20,408  
Net income from discontinued operations, net of taxes   (18,288 )   —     —     —     —     —     (18,288 )
Adjusted EBITDA (non-GAAP)   $ 15,436     $ 6,630     $ 8,669     $ 5,799     $ 6,486     $ 27,584     $ 14,023  


    Three Months Ended Dec 31,   Twelve Months Ended Dec 31,
    2019   2018   2019   2018
                 
Net Cash (used in) provided by operating activities   $ 20,004     $ 29,293     $ 31,843     $ (31,369 )
Add / (Less):                
Capitalized software   (3,719 )   (3,360 )   (13,008 )   (14,372 )
Property and equipment   (1,106 )   (3,091 )   (8,183 )   (11,656 )
Free Cashflow   $ 15,179     $ 22,842     $ 10,652     $ (57,397 )
Add: One-Time Expenses due to Restatement, etc.   1,320     800     2,826     20,408  
Adjusted Free Cashflow   $ 16,499     $ 23,642     $ 13,478     $ (36,989 )

 

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Source: Synchronoss Technologies, Inc.