UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 5, 2017
SYNCHRONOSS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE | 000-52049 | 06-1594540 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
200 Crossing Boulevard, 8th Floor Bridgewater, New Jersey | 08807 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (866) 620-3940
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 7.01 Regulation FD Disclosure.
On January 5, 2017, members of the management of Synchronoss Technologies, Inc. (the “Company”) will make a presentation to potential lenders in connection with the Company’s previously announced term loan facility relating to the financing of the Company’s pending merger with Intralinks Holdings, Inc. Certain information from the lender presentation is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The information being furnished in this Item 7.01 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. | Description | |
99.1 | Excerpts from Preliminary Financing Materials dated January 5, 2017 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
SYNCHRONOSS TECHNOLOGIES, INC. | ||||
By: | /s/ Stephen G. Waldis | |||
Stephen G. Waldis | ||||
Chairman of the Board of Directors And Chief Executive Officer | ||||
Date: January 5, 2017
Exhibit 99.1
SYNCHRONOSS TECHNOLOGIES, INC.
EXCERPTS FROM PRELIMINARY FINANCING MATERIALS
DATED JANUARY 5, 2017
Unless otherwise indicated or the context otherwise requires, in these excerpts, we use the terms “we,” “us,” “our,” “Synchronoss” and the “Company” to refer to Synchronoss Technologies, Inc. and its subsidiaries, excluding Intralinks Holdings, Inc., we use the term “Intralinks” to refer to Intralinks Holdings, Inc. and its wholly owned subsidiaries. Unless otherwise indicated, Synchronoss’ financials are presented pro forma for the divestiture of certain components of its carrier activation ("BPO") business. References to “LTM” mean the last twelve month period as of September 30, 2016. References to “pro forma” or “PF” mean pro forma for the Transaction, (as defined below). References to the “combined company” refer to the Company assuming the consummation of the Merger, as defined below. References to“Merger Agreement” mean the Agreement and Plan of Merger, dated as of December 5, 2016 and as it may be further amended from time to time, by and among GL Merger Sub, Inc. (“Purchaser”); the term “Merger” mean the proposed aquisition of Intralinks by Synchronoss pursuant to the Merger Agreement. References to “Transactions” means the Merger, payment of related fees and expenses and the following debt financing transactions undertaken in connection with the Merger: the incurrence of indebtedness under a new first lien term loan (the “Term Loan”), and a new revolving credit facility (the “New Credit Facility”), the issuance of senior debt securities and the refinancing of certain of our existing indebtedness. You should not assume that the information set forth below is accurate as of any date other than January 5, 2017.
Additional Information
These excerpts are for the purposes set forth herein only and are not an offer to buy or the solicitation of an offer to sell any securities. The solicitation and the offer to buy shares of Intralinks common stock is made only pursuant to an offer to purchase and related materials that Synchronoss and Purchaser filed with the SEC on December 19, 2016 on Schedule TO. Intralinks also filed a solicitation/recommendation statement on Schedule 14D-9 with respect to the offer on December 19, 2016. Intralinks stockholders and other investors should read these materials carefully because they contain important information, including the terms and conditions of the offer. Intralinks stockholders and other investors may obtain copies of these materials without charge from the SEC through the SEC’s website at www.sec.gov, from Georgeson LLC, the information agent for the offer, at (888) 566-3252, or from Intralinks (with respect to documents filed by Intralinks with the SEC). Stockholders and other investors are urged to read carefully those materials prior to making any decisions with respect to the offer.
Cautionary statement concerning forward-looking information
These excerpts include “forward-looking statements” that involve risks and uncertainties within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The words “anticipate,” “may,” “believe,” “predict,” “potential,” “continue,” “could,” “should,” “contemplate,” “can,” “estimate,” “intend,” “likely,” “would,” “project,” “seek,” “target,” “anticipate,” “might,” “plan,” “strategy,” “will,” “expect” and similar expressions or variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
These statements are based on the beliefs and assumptions of our management based on information currently available. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or the timing of certain events could differ materially from the plans, intentions and expectations disclosed in the forward- looking statements we make as a result of a number of important factors. These important factors include the factors set forth under the caption “Risk Factors” and our “critical accounting policies and estimates” described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2015 and our Quarterly Report on Form 10-Q for the nine months ended September 30, 2016, filed with the SEC. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. Furthermore, such forward-looking statements speak only as of the date of these excerpts.
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SYNCHRONOSS TECHNOLOGIES, INC.
EXCERPTS FROM PRELIMINARY FINANCING MATERIALS
DATED JANUARY 5, 2017
Transaction overview
On December 19, 2016, Synchronoss commenced a cash tender offer to acquire all of the outstanding common stock of Intralinks for $13.00 per share at an equity value of $821 million. The transaction, which has been unanimously approved by the board of directors of both companies, is expected to close in the first quarter of 2017, subject to the completion of the tender offer and other customary closing conditions.
Synchronoss has also divested certain components of the carrier activation assets to a newly formed entity, Sequential Technology International LLC (“STI”), for a total purchase price of $146 million. The transaction was structured as a Joint Venture (“JV”), whereby Synchronoss contributed certain components of its carrier activation business, herein referred to as its “BPO” business, and owns 30% of STI. Sequential Technology Holdings, LLC will own the remaining 70% of the JV and financed the purchase of these assets through cash, a new term loan, and a sellers note issued by Synchronoss. As part of the divestiture, Synchronoss has entered into a three year transition services agreement (“TSA”) with STI to support various indirect activities. As part of the TSA Synchronoss will receive an annual payment of approximately $32 million.
Certain Unaudited Condensed Combined Financial Data
The summary unaudited pro forma financial information presented below is based on our condensed combined financial statements, adjusted to give effect to the Transactions. The unaudited condensed combined pro forma statements of income for the year ended December 31, 2015 and the nine months ended September 30, 2016 and 2015 give effect to the Transactions as if they had occurred as of January 1, 2015. The pro forma financial information presented below is unaudited and does not purport to be indicative of the results which actually would have occurred if the Transactions had been consummated as described herein, nor does it purport to represent the future results of operations for future periods. See “Unaudited Pro Forma Condensed Combined Financial Information.” The summary pro forma condensed combined financial information and other data for the twelve months ended September 30, 2016 presented below have been derived, unless otherwise noted, by arithmetically combining (x) the relevant line items for the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 and (y) the relevant line items for the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2016 and subtracting (z) the relevant line items for the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2015, in each case included elsewhere in these excerpts. The pro forma financial information should be read in conjunction with the historical audited consolidated financial statements and accompanying notes of Synchronoss' and Intralinks' for the year ended December 31, 2015, the historical unaudited condensed consolidated financial statements and accompanying notes of Synchronoss' and Intralinks' for the nine months ended September 30, 2016 appearing in Synchronoss' and Intralinks' most recent Annual Reports on Form 10-K for the year ended December 31, 2015 and most recent Quarterly Reports on Form 10-Q for the period ended September 30, 2016, the pro forma "Unaudited Condensed Consolidated Financial Information" filed in Form 8K/A on January 5, 2017 and the pro forma financial statements contained in herein in the “Unaudited Pro Forma Condensed Combined Financial Information.”
Non-GAAP Financial Measures Pro Forma Information
Some of these pro forma figures do not represent “pro forma” amounts determined in accordance with the SEC’s rules and regulations, including Article 11 of Regulation S-X, and should not be taken to represent how Synchronoss would have performed on a historical basis had Intralinks' operations been included in the period presented, or how Synchronoss will perform in any future period. These non-GAAP financial measures, as well as the other information in these excerpts should be read in conjunction with Synchronoss' and Intralinks' financial statements appearing elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2015 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2016.
This press release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Synchronoss’ management believes these non-GAAP measures provide a greater understanding of ongoing operations and enhance
2
SYNCHRONOSS TECHNOLOGIES, INC.
EXCERPTS FROM PRELIMINARY FINANCING MATERIALS
DATED JANUARY 5, 2017
comparability of results with prior periods as well as demonstrate the effects of significant gains and charges in the current period. Synchronoss’ management believes that these non-GAAP metrics are useful supplements for it and investors to Synchronoss’ GAAP financial information because these measures exclude significant elements which management believes may not be reflective of Synchronoss’ operating results. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. In addition, it is subject to inherent limitations as it reflects the exercise of judgments by management in determining these non-GAAP financial measures. These non-GAAP financial measures, as presented, may not be comparable to similarly titled measures reported by other companies since not all companies may calculate these measures in an identical manner and, therefore, they are not necessarily an accurate measure of comparison between companies.
3
SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(In thousands)
Nine months ended September 30, 2016 | |||||||||||||||
Historical | Pro Forma Adjustments | Pro Forma Condensed Combined | |||||||||||||
Synchronoss 1 | Intralinks | ||||||||||||||
Net revenues | $ | 354,954 | $ | 219,088 | $ | — | $ | 574,042 | |||||||
Costs and expenses: | — | ||||||||||||||
Cost of services | 143,822 | 59,007 | (23,411 | ) | B | 179,418 | |||||||||
Research and development | 78,408 | 20,828 | (433 | ) | B | 98,803 | |||||||||
Selling, general and administrative | 87,809 | 147,031 | (13,840 | ) | B | 221,000 | |||||||||
Net change in contingent consideration obligation | 7,299 | — | — | 7,299 | |||||||||||
Restructuring charges | 5,139 | — | — | 5,139 | |||||||||||
Depreciation and amortization | 74,009 | — | 60,950 | B | 134,959 | ||||||||||
Total costs and expenses | 396,486 | 226,866 | 23,266 | 646,618 | |||||||||||
Loss from operations | (41,532 | ) | (7,778 | ) | (23,266 | ) | (72,576 | ) | |||||||
Interest income | 1,492 | — | — | 1,492 | |||||||||||
Interest expense | (5,006 | ) | (3,415 | ) | (18,819 | ) | C | (27,240 | ) | ||||||
Amortization of Debt Issuance Costs | — | (429 | ) | (1,314 | ) | D | (1,743 | ) | |||||||
Other expense, net | (186 | ) | (979 | ) | — | (1,165 | ) | ||||||||
Equity method investment earnings | 6,736 | — | — | 6,736 | |||||||||||
Loss before income tax expense | (38,496 | ) | (12,601 | ) | (43,399 | ) | (94,496 | ) | |||||||
Income tax benefit (expense) | 667 | (1,474 | ) | 16,926 | E | 16,119 | |||||||||
Net loss | (37,829 | ) | (14,075 | ) | (26,473 | ) | (78,377 | ) | |||||||
Net loss attributable to noncontrolling interests | (8,836 | ) | — | — | (8,836 | ) | |||||||||
Net loss attributable to Synchronoss | $ | (28,993 | ) | $ | (14,075 | ) | $ | (26,473 | ) | $ | (69,541 | ) | |||
1 Synchronoss historical amounts per the 8K/A filed on January 5, 2017, which represents Synchronoss pro forma balances after the divestiture of its BPO business.
4
SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(In thousands)
Nine months ended September 30, 2015 | |||||||||||||||
Historical | Pro Forma Adjustments | Pro Forma Condensed Combined | |||||||||||||
Synchronoss 1 | Intralinks | ||||||||||||||
Net revenues | $ | 306,904 | $ | 204,869 | $ | (15,031 | ) | A | $ | 496,742 | |||||
Costs and expenses: | — | ||||||||||||||
Cost of services | 109,665 | 57,189 | (23,888 | ) | B | 142,966 | |||||||||
Research and development | 68,472 | 19,107 | (430 | ) | B | 87,149 | |||||||||
Selling, general and administrative | 58,872 | 147,072 | (13,865 | ) | B | 192,079 | |||||||||
Net change in contingent consideration obligation | — | — | — | — | |||||||||||
Restructuring charges | 5,090 | — | — | 5,090 | |||||||||||
Depreciation and amortization | 51,221 | — | 61,633 | B | 112,854 | ||||||||||
Total costs and expenses | 293,320 | 223,368 | 23,450 | 540,138 | |||||||||||
Income (loss) from operations | 13,584 | (18,499 | ) | (38,481 | ) | (43,396 | ) | ||||||||
Interest income | 1,483 | — | — | 1,483 | |||||||||||
Interest expense | (4,208 | ) | (3,323 | ) | (22,588 | ) | C | (30,119 | ) | ||||||
Amortization of Debt Issuance Costs | — | (429 | ) | (1,385 | ) | D | (1,814 | ) | |||||||
Other expense, net | (601 | ) | (989 | ) | — | (1,590 | ) | ||||||||
Equity method investment earnings | 7,210 | — | — | 7,210 | |||||||||||
Income (loss) before income tax expense | 17,468 | (23,240 | ) | (62,454 | ) | (68,226 | ) | ||||||||
Income tax (expense) benefit | (8,599 | ) | (1,164 | ) | 24,357 | E | 14,594 | ||||||||
Net income (loss) | 8,869 | (24,404 | ) | (38,097 | ) | (53,632 | ) | ||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | |||||||||||
Net income (loss) attributable to Synchronoss | $ | 8,869 | $ | (24,404 | ) | $ | (38,097 | ) | $ | (53,632 | ) | ||||
1 Synchronoss historical amounts per the 8K/A filed on January 5, 2017, which represents Synchronoss pro forma balances after the divestiture of its BPO business.
5
SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(In thousands)
Year ended December 31, 2015 | |||||||||||||||
Historical | Pro Forma Adjustments | Pro Forma Condensed Combined | |||||||||||||
Synchronoss 1 | Intralinks | ||||||||||||||
Net revenues | $ | 428,117 | $ | 276,153 | $ | (15,031 | ) | A | $ | 689,239 | |||||
Costs and expenses: | — | ||||||||||||||
Cost of services | 155,143 | 75,966 | (31,601 | ) | B | 199,508 | |||||||||
Research and development | 91,430 | 25,790 | (573 | ) | B | 116,647 | |||||||||
Selling, general and administrative | 88,411 | 197,595 | (18,524 | ) | B | 267,482 | |||||||||
Net change in contingent consideration obligation | 760 | — | — | 760 | |||||||||||
Restructuring charges | 5,090 | — | — | 5,090 | |||||||||||
Depreciation and amortization | 72,152 | — | 81,963 | B | 154,115 | ||||||||||
Total costs and expenses | 412,986 | 299,351 | 31,265 | 743,602 | |||||||||||
Income (loss) from operations | 15,131 | (23,198 | ) | (46,296 | ) | (54,363 | ) | ||||||||
Interest income | 2,047 | — | — | 2,047 | |||||||||||
Interest expense | (5,711 | ) | (4,435 | ) | (29,458 | ) | C | (39,604 | ) | ||||||
Amortization of Debt Issuance Costs | — | (571 | ) | (1,847 | ) | D | (2,418 | ) | |||||||
Other income (expense), net | 372 | (1,335 | ) | — | (963 | ) | |||||||||
Equity method investment earnings | 8,482 | — | — | 8,482 | |||||||||||
Income (loss) before income tax expense | 20,321 | (29,539 | ) | (77,601 | ) | (86,819 | ) | ||||||||
Income tax (expense) benefit | (7,785 | ) | (845 | ) | 30,265 | E | 21,635 | ||||||||
Net income (loss) | 12,536 | (30,384 | ) | (47,336 | ) | (65,184 | ) | ||||||||
Net income attributable to noncontrolling interests | 6,052 | — | — | 6,052 | |||||||||||
Net income (loss) attributable to Synchronoss | $ | 6,484 | $ | (30,384 | ) | $ | (47,336 | ) | $ | (71,236 | ) | ||||
1 Synchronoss historical amounts per the 8K/A filed on January 5, 2017, which represents Synchronoss pro forma balances after the divestiture of its BPO business.
6
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands)
Note 1—Basis of Presentation
The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2016 and 2015 and for the year ended December 31, 2015, reflect Synchronoss’ results of operations as if the Merger had occurred on January 1, 2015.
We have accounted for the Merger using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we have used our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.
These unaudited pro forma condensed combined financial statements and the accompanying notes should be read in conjunction with:
I. | The audited consolidated financial statements and the accompanying notes and Management’s Discussion and Analysis of the Financial Condition and Results of Operations included in Synchronoss' Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and |
II. | The unaudited consolidated condensed financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Synchronoss’ Form 10-Q for the nine months ended September 30, 2016. |
III. | The unaudited pro forma condensed consolidated financial statements and the accompanying unaudited pro forma consolidated supplemental cash flow data in Synchronoss' Form 8K/A as filed on January 5, 2017. |
The unaudited pro forma condensed combined financial statements are provided for illustrative and informational purposes only and are not intended to represent or be indicative of what Synchronoss’ results of operations would have been had the Merger occurred on the dates indicated. The unaudited pro forma condensed combined financial statements also should not be considered representative of Synchronoss’ future results of operations.
In accordance with Article 11 of SEC Regulation S-X, the unaudited pro forma condensed combined financial statements reflect adjustments to the extent they are directly attributable to the Merger, factually supportable and, for statement of operations purposes, are expected to have a continuing impact on the Company’s results of operations.
The “Historical Synchronoss” column in the unaudited pro forma condensed combined financial statements reflects Synchronoss’ historical financial statements for the periods presented and does not reflect any adjustments related to the Merger and related events.
The “Historical Intralinks” column in the unaudited pro forma condensed combined financial statements reflects Intralinks' historical financial statements for the periods presented and does not reflect any adjustments related to the Merger and related events.
The “Pro Forma Adjustments” were developed based on Synchronoss' assumptions and estimates, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from Intralinks based on preliminary estimates of fair value. The final purchase price allocation will differ from what is currently reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized following the completion of the Merger. The final purchase price allocation could differ materially from the preliminary allocation used in the pro forma adjustments. Additionally, the Merger and related transaction costs will be funded primarily by new debt consisting of a $900 million Term Loan, cash proceeds from the Sequential Technology transaction and cash and cash equivalents on hand. The interest rates and other key terms of the new debt may differ from what is currently reflected in the unaudited pro forma condensed combined financial information after the new debt arrangements are finalized.
7
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands)
Note 2—Preliminary Allocation of Merger Consideration
Pursuant to the Merger Agreement, Synchronoss will pay $13.00 per share, or $821 million, in cash, to acquire all outstanding equity interests of Intralinks, assuming consummation of the Merger.
The following table summarizes the preliminary allocation of the assets acquired and liabilities assumed based on their fair values as if the Merger occurred on January 1, 2015:
Preliminary purchase price allocation: | ||||
Working capital | $ | 50,858 | ||
Property, plant and equipment | 16,245 | |||
Capitalized software, net | 39,798 | |||
Customer relationships | 105,170 | |||
Developed technology | 210,341 | |||
Goodwill | 474,545 | |||
Deferred taxes | (126,204 | ) | ||
Deferred revenue | 9,565 | |||
Total consideration, net of cash acquired | 780,318 | |||
Cash acquired | 40,682 | |||
Total purchase consideration | $ | 821,000 | ||
The purchase price is preliminary and the purchase price will not be final until the Company has completed the valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.
Note 3—Sources and Uses of Proceeds
The Merger, assuming consummation, will be financed primarily by new debt consisting of a $900 million Term Loan, cash proceeds from the Sequential Technology transaction and cash and cash equivalents on hand. The tables below provide an estimate of the sources and uses of cash as of the assumed closing date:
Sources of proceeds | ||||
(in millions) | ||||
Synchronoss balance sheet cash (9.30.16) | $ | 140 | ||
Intralinks balance sheet cash (9.30.16) | 48 | |||
Proceeds from BPO business divestiture | 17 | |||
Term Loan | 900 | |||
$ | 1,105 | |||
Use of proceeds | ||||
Intralinks equity purchase price | $ | 821 | ||
Estimated financing and M&A fees | 40 | |||
Existing Synchronoss credit facility | 38 | |||
Existing Intralinks term loan | 76 | |||
Existing Intralinks equipment financing | 4 | |||
Call premium on existing Intralinks term loan | 2 | |||
Cash to balance sheet | 124 | |||
$ | 1,105 | |||
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands)
Note 4—Pro Forma Adjustments
A.Adjustments to reflect the deferred revenue fair value adjustment related to the preliminary purchase price allocation as described in Note 2.
B.Adjustments to reflect reclassifications of depreciation and amortization to conform with Synchronoss' accounting policy for depreciation and amortization and increases in amortization of intangible assets as noted below:
Nine months ended September 30, | |||||||||||
Intralinks Historical Information: | 2016 | 2015 | December 31, 2015 | ||||||||
Amortization of intangibles: | |||||||||||
Cost of revenue | $ | 6,389 | $ | 6,248 | $ | 8,331 | |||||
Sales and Marketing | 10,648 | 10,648 | 14,197 | ||||||||
General and administrative | 1,108 | 1,065 | 1,421 | ||||||||
Total amortization | 18,145 | 17,961 | 23,949 | ||||||||
Intralinks depreciation: | |||||||||||
Cost of revenue | 4,248 | 3,416 | 4,762 | ||||||||
Sales and Marketing | 985 | 918 | 1,246 | ||||||||
General and administrative | 608 | 750 | 1,009 | ||||||||
Product development | 433 | 430 | 573 | ||||||||
Total depreciation | 6,274 | 5,514 | 7,590 | ||||||||
Amortization of capitalized software costs: | |||||||||||
Cost of revenue | 12,774 | 14,224 | 18,508 | ||||||||
Sales and Marketing | 163 | 117 | 162 | ||||||||
General and administrative | 328 | 367 | 489 | ||||||||
Total amortization of capitalized software costs | 13,265 | 14,708 | 19,159 | ||||||||
Total depreciation and amortization | $ | 37,684 | $ | 38,183 | $ | 50,698 | |||||
Reclassification amounts: | |||||||||||
Cost of services | $ | 23,411 | $ | 23,888 | $ | 31,601 | |||||
Selling, general and administrative | 13,840 | 13,865 | 18,524 | ||||||||
Research and development | 433 | 430 | 573 | ||||||||
$ | 37,684 | $ | 38,183 | $ | 50,698 | ||||||
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands)
For the nine months ended September 30, 2016: | Cost | Life in Years | Amortization | ||||||||
Customer relationships | $ | 105,170 | 8 | $ | 9,860 | ||||||
Developed technology | 210,341 | 5 | 31,551 | ||||||||
Reclassification of depreciation and amortization | 37,684 | ||||||||||
Less: historical amortization of Intralinks | (18,145 | ) | |||||||||
Adjustment to amortization expense | $ | 60,950 | |||||||||
For the nine months ended September 30, 2015: | |||||||||||
Customer relationships | $ | 105,170 | 8 | $ | 9,860 | ||||||
Developed technology | 210,341 | 5 | 31,551 | ||||||||
Reclassification of depreciation and amortization | 38,183 | ||||||||||
Less: historical amortization of Intralinks | (17,961 | ) | |||||||||
Adjustment to amortization expense | $ | 61,633 | |||||||||
For the year ended December 31, 2015: | |||||||||||
Customer relationships | $ | 105,170 | 8 | $ | 13,146 | ||||||
Developed technology | 210,341 | 5 | 42,068 | ||||||||
Reclassification of depreciation and amortization | 50,698 | ||||||||||
Less: historical amortization of Intralinks | (23,949 | ) | |||||||||
Adjustment to amortization expense | $ | 81,963 | |||||||||
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands)
C.Adjustments to reflect interest expense related to the $900 million 7 year Term Loan as noted below:
For the nine months ended September 30, 2016: | Amount | Expected Rate | Interest | ||||||||
Term loan | $ | 755,357 | 4.000 | % | $ | 22,661 | |||||
Revolver- unused commitment fee | 212,500 | 0.375 | % | 598 | |||||||
23,259 | |||||||||||
Less: Synchronoss commitment fee on current revolver | (272 | ) | |||||||||
Less: Synchronoss interest expense on current revolver | (753 | ) | |||||||||
Less: Intralinks interest expense on term loan | (3,415 | ) | |||||||||
Total interest expense adjustment | $ | 18,819 | |||||||||
For the nine months ended September 30, 2015: | |||||||||||
Term loan | $ | 851,786 | 4.000 | % | $ | 25,554 | |||||
Revolver- unused commitment fee | 212,500 | 0.375 | % | 598 | |||||||
26,152 | |||||||||||
Less: Synchronoss commitment fee on current revolver | (241 | ) | |||||||||
Less: Intralinks interest expense on term loan | (3,323 | ) | |||||||||
Total interest expense adjustment | $ | 22,588 | |||||||||
For the year ended December 31, 2015: | |||||||||||
Term loan | $ | 835,714 | 4.000 | % | $ | 33,429 | |||||
Revolver- unused commitment fee | 212,500 | 0.375 | % | 797 | |||||||
34,226 | |||||||||||
Less: Synchronoss commitment fee on current revolver | (333 | ) | |||||||||
Less: Intralinks interest expense on term loan | (4,435 | ) | |||||||||
Total interest expense adjustment | $ | 29,458 | |||||||||
11
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands)
D.Adjustments to reflect the amortization of the debt issuance costs related to the $900 million Term Loan as noted below:
For the nine months ended September 30, 2016: | Amount | Expense | ||||||
Estimated debt financing fees | $ | 17,331 | $ | 1,880 | ||||
Less: Synchronoss debt financing fee on current revolver | (137 | ) | ||||||
Less: Intralinks debt financing fee on term loan | (429 | ) | ||||||
Total debt financing amortization adjustment | $ | 1,314 | ||||||
For the nine months ended September 30, 2015: | ||||||||
Estimated debt financing fees | $ | 17,331 | $ | 1,880 | ||||
Less: Synchronoss debt financing fee on current revolver | (66 | ) | ||||||
Less: Intralinks debt financing fee on term loan | (429 | ) | ||||||
Total debt financing amortization adjustment | $ | 1,385 | ||||||
For the year ended December 31, 2015: | ||||||||
Estimated debt financing fees | $ | 17,331 | $ | 2,506 | ||||
Less: Synchronoss debt financing fee on current revolver | (88 | ) | ||||||
Less: Intralinks debt financing fee on term loan | (571 | ) | ||||||
Total debt financing amortization adjustment | $ | 1,847 | ||||||
E.The pro forma tax adjustments reflect the benefits from income tax, which were estimated using the applicable effective rate.
12
SYNCHRONOSS TECHNOLOGIES, INC.
SUPPLEMENTAL UNAUDITED NON-GAAP PRO FORMA FINANCIAL INFORMATION
(In thousands)
Adjusted EBITDA
We define adjusted EBITDA as GAAP net income (loss) plus (i) depreciation and amortization expense, income tax expense (benefit), other (income) expense, interest (income) expense, stock based compensation, restructuring charges, net change in contingent consideration, deferred compensation earn-out, deferred revenue write down and revenue related to the TSA, less (ii) equity method investment earnings.
Financing Adjusted EBITDA
We define financing adjusted EBITDA as adjusted EBITDA less capitalized software costs.
Non-GAAP Revenue
We define non-GAAP revenue as GAAP revenues adjusted for deferred revenue write-downs and revenue related to the TSA.
Intralinks Holdings, Inc. | Year ended December 31, | Nine months ended September 30, | |||||||||||||||||
2013 | 2014 | 2015 | 2015 | 2016 | |||||||||||||||
GAAP net income | $ | (15,278 | ) | $ | (26,496 | ) | $ | (30,384 | ) | $ | (24,404 | ) | $ | (14,075 | ) | ||||
Income tax (benefit) expense | (5,349 | ) | (1,765 | ) | 845 | 1,164 | 1,474 | ||||||||||||
Other expense, net | 239 | 1,746 | 1,335 | 989 | 979 | ||||||||||||||
Amortization of debt issuance costs | 358 | 579 | 571 | 429 | 429 | ||||||||||||||
Interest expense, net | 4,136 | 4,202 | 4,435 | 3,323 | 3,415 | ||||||||||||||
Depreciation and amortization | 20,864 | 25,627 | 26,749 | 20,222 | 19,539 | ||||||||||||||
Amortization of intangible assets | 23,644 | 23,791 | 23,949 | 17,961 | 18,145 | ||||||||||||||
Stock-based compensation | 8,286 | 10,384 | 11,560 | 8,932 | 8,288 | ||||||||||||||
Adjusted EBITDA | 36,900 | 38,068 | 39,060 | 28,616 | 38,194 | ||||||||||||||
Less: capitalized software costs | 20,495 | 27,076 | 25,440 | 18,594 | 19,108 | ||||||||||||||
Financing adjusted EBITDA | $ | 16,405 | $ | 10,992 | $ | 13,620 | $ | 10,022 | $ | 19,086 | |||||||||
13
SYNCHRONOSS TECHNOLOGIES, INC.
SUPPLEMENTAL UNAUDITED NON-GAAP PRO FORMA FINANCIAL INFORMATION
(In thousands)
Synchronoss Technologies, Inc. | Year ended December 31, | Nine months ended September 30, | |||||||||||||||||
2013 | 2014 | 2015 | 2015 | 2016 | |||||||||||||||
GAAP revenue | $ | 225,368 | $ | 307,301 | $ | 428,117 | $ | 306,904 | $ | 354,954 | |||||||||
Deferred revenue write-down | 3,460 | 1,299 | 1,260 | 692 | 11,384 | ||||||||||||||
Revenue from TSA | 32,000 | 32,000 | 32,000 | 24,000 | 24,000 | ||||||||||||||
Non-GAAP revenue | 260,828 | 340,600 | 461,377 | 331,596 | 390,338 | ||||||||||||||
GAAP net income | (7,000 | ) | 4,137 | 12,536 | 8,869 | (37,829 | ) | ||||||||||||
Income tax (benefit) expense | (8,178 | ) | (542 | ) | 7,785 | 8,599 | (667 | ) | |||||||||||
Other (income) expense, net | (217 | ) | (441 | ) | (372 | ) | 601 | 186 | |||||||||||
Interest expense | 3,178 | 3,430 | 5,711 | 4,208 | 5,006 | ||||||||||||||
Interest income | (2,646 | ) | (1,265 | ) | (2,047 | ) | (1,483 | ) | (1,492 | ) | |||||||||
Depreciation and amortization | 41,126 | 55,956 | 72,152 | 51,221 | 74,009 | ||||||||||||||
EBITDA | 26,263 | 61,275 | 95,765 | 72,015 | 39,213 | ||||||||||||||
Equity method investment earnings | (4,442 | ) | (8,860 | ) | (8,482 | ) | (7,209 | ) | (6,736 | ) | |||||||||
Stock-based compensation | 23,638 | 27,363 | 29,723 | 19,753 | 23,809 | ||||||||||||||
Acquisition and restructuring charges | 6,920 | 2,938 | 22,623 | 13,673 | 34,484 | ||||||||||||||
Net change in contingent consideration obligation | (5,324 | ) | 1,799 | 760 | — | 7,299 | |||||||||||||
Deferred revenue write-down | 3,460 | 1,299 | 1,260 | 692 | 11,384 | ||||||||||||||
Deferred compensation earn-out | 909 | 1,783 | — | — | — | ||||||||||||||
TSA | 32,000 | 32,000 | 32,000 | 24,000 | 24,000 | ||||||||||||||
Adjusted EBITDA | $ | 83,424 | $ | 119,597 | $ | 173,649 | $ | 122,924 | $ | 133,453 | |||||||||
14
SYNCHRONOSS TECHNOLOGIES, INC.
SUPPLEMENTAL UNAUDITED NON-GAAP PRO FORMA FINANCIAL INFORMATION
(In thousands)
Pro Forma | |||||||||||||||||||||||
LTM Q3 2016 | Synergies2 | Condensed | |||||||||||||||||||||
Synchronoss | Intralinks | TSA1 | Core | Combined | Combined | ||||||||||||||||||
GAAP Net Income | $ | (34,162 | ) | $ | (20,055 | ) | $ | 22,400 | $ | 28,000 | $ | 28,000 | $ | 24,183 | |||||||||
Income tax (benefit) expense | (1,481 | ) | 1,155 | 9,600 | 12,000 | 12,000 | 33,274 | ||||||||||||||||
Equity method investment earnings | (8,009 | ) | — | — | — | — | (8,009 | ) | |||||||||||||||
Other (income) expense, net | (787 | ) | 1,325 | — | — | — | 538 | ||||||||||||||||
Amortization of debt issuance costs | — | 571 | — | — | — | 571 | |||||||||||||||||
Interest expense, net | 4,453 | 4,527 | — | — | — | 8,980 | |||||||||||||||||
EBIT | (39,986 | ) | (12,477 | ) | 32,000 | 40,000 | 40,000 | 59,537 | |||||||||||||||
Depreciation and amortization | 94,940 | 26,066 | — | — | — | 121,006 | |||||||||||||||||
Amortization of intangible assets | — | 24,133 | — | — | — | 24,133 | |||||||||||||||||
EBITDA | 54,954 | 37,722 | 32,000 | 40,000 | 40,000 | 204,676 | |||||||||||||||||
Stock-based compensation | 33,779 | 10,916 | — | — | — | 44,695 | |||||||||||||||||
Restructuring charges | 43,434 | — | — | — | — | 43,434 | |||||||||||||||||
Net change in contingent consideration obligation | 8,059 | — | — | — | — | 8,059 | |||||||||||||||||
Deferred Revenue write-down | 11,952 | — | — | — | — | 11,952 | |||||||||||||||||
Adjusted EBITDA | 152,178 | 48,638 | 32,000 | 40,000 | 40,000 | 312,816 | |||||||||||||||||
Capitalized software costs | — | (25,954 | ) | — | — | — | (25,954 | ) | |||||||||||||||
Financing Adjusted EBITDA | $ | 152,178 | $ | 22,684 | $ | 32,000 | $ | 40,000 | $ | 40,000 | $ | 286,862 | |||||||||||
1 As part of the divestiture, Synchronoss has entered into a three year TSA with STI to support various indirect activities and will be receiving annual payments of approximately $32 million.
2 Represents annual synergies expected as a result of Synchronoss fourth quarter of 2016 restructuring as well as the combined reductions and cost cutting initiatives resulting from the Merger.
15