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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

☑	 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the quarterly period ended March 31, 2015
 
Or

☐	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the transition period from          to
 
Commission file number 000-52049
 
SYNCHRONOSS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware	 	06-1594540	
(State or other jurisdiction of
incorporation or organization)	 	(I.R.S. Employer
Identification No.)	
 	 	 	
200 Crossing Boulevard, 8th Floor
Bridgewater, New Jersey	 	08807	
(Address of principal executive offices)	 	(Zip Code)	
 
(866) 620-3940
(Registrant’s telephone number, including area code)
 
(Former name, former address, and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑  No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑   No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 	 	 	 	 	 	 	
Large accelerated filer☑	 	Accelerated filer ☐	 	Non-accelerated filer ☐	 	Smaller Reporting Company ☐	
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No☑
 
Shares outstanding of the Registrant’s common stock:

 	 	 	 	
Class	 	Outstanding at April 27, 2015	
Common stock, $0.0001 par value	 	43,279,832	

 

 
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SYNCHRONOSS TECHNOLOGIES, INC.
FORM 10-Q INDEX

PART I.	FINANCIAL INFORMATION	PAGE NO.	
 	 	 	
Item 1.	Consolidated Financial Statements and Notes	 	
 	 	 	
 	Consolidated Balance Sheets (unaudited)	3	
 	 	 	
 	Consolidated Statements of Income and Comprehensive Income (unaudited) 	4	
 	 	 	
 	Consolidated Statements of Cash Flows (unaudited)	5	
 	 	 	
 	Notes to Consolidated Financial Statements (unaudited)	6	

Item 2. 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17	
 	 	 	
Item 3. 	Quantitative and Qualitative Disclosures About Market Risk	24	
 	 	 	
Item 4. 	Controls and Procedures	25	

PART II. 	OTHER INFORMATION	25	
 	 	 	
Item 1. 	Legal Proceedings	25	
 	 	 	
Item 1A. 	Risk Factors	26	
 	 	 	
Item 2. 	Unregistered Sales of Equity Securities and Use of Proceeds	26	
 	 	 	
Item 3. 	Defaults Upon Senior Securities	26	
 	 	 	
Item 4. 	Mine Safety Disclosures	26	
 	 	 	
Item 5. 	Other Information	26	
 	 	 	
Item 6. 	Exhibits	27	
 	 	 	
SIGNATURES 	28	

 

 

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

 	 	 	 	 	 	
 	March 31, 2015	    	December 31, 2014	
 	 	 	 	 	 	
ASSETS	
Current assets:	 	 	 	 	 	
Cash and cash equivalents	$	152,487 	 	$	235,967 	
Marketable securities	 	54,955 	 	 	51,097 	
Accounts receivable, net of allowance for doubtful accounts of $220 and $88 at March 31, 2015 and December 31, 2014, respectively	 	138,011 	 	 	118,371 	
Prepaid expenses and other assets	 	30,775 	 	 	35,023 	
Deferred tax assets	 	3,123 	 	 	1,475 	
Total current assets	 	379,351 	 	 	441,933 	
Marketable securities	 	2,321 	 	 	3,313 	
Property and equipment, net	 	160,252 	 	 	151,171 	
Goodwill	 	173,367 	 	 	147,135 	
Intangible assets, net	 	109,766 	 	 	99,489 	
Deferred tax assets	 	2,903 	 	 	1,232 	
Other assets	 	18,532 	 	 	18,549 	
Total assets	$	846,492 	 	$	862,822 	
 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	
Current liabilities:	 	 	 	 	 	
Accounts payable	$	12,999 	 	$	25,059 	
Accrued expenses	 	33,606 	 	 	42,679 	
Deferred revenues	 	11,957 	 	 	11,897 	
Contingent consideration obligation	 	 —	 	 	8,000 	
Total current liabilities	 	58,562 	 	 	87,635 	
Lease financing obligation - long term	 	14,055 	 	 	9,204 	
Convertible debt	 	230,000 	 	 	230,000 	
Deferred tax liability	 	5,955 	 	 	3,698 	
Other liabilities	 	2,781 	 	 	3,178 	
Stockholders’ equity:	 	 	 	 	 	
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at March 31, 2015 and December 31, 2014	 	 —	 	 	 —	
Common stock, $0.0001 par value; 100,000 shares authorized, 46,940 and 46,444 shares issued; 43,236 and 42,711 outstanding at  March 31, 2015 and December 31, 2014, respectively	 	4 	 	 	4 	
Treasury stock, at cost (3,704 and 3,733 shares at March 31, 2015 and December 31, 2014, respectively)	 	(65,969)	 	 	(66,336)	
Additional paid-in capital	 	469,312 	 	 	454,740 	
Accumulated other comprehensive loss	 	(39,482)	 	 	(20,014)	
Retained earnings	 	171,274 	 	 	160,713 	
Total stockholders’ equity	 	535,139 	 	 	529,107 	
Total liabilities and stockholders’ equity	$	846,492 	 	$	862,822 	
 
See accompanying notes to consolidated financial statements.
 
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SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)

 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	
 	    	2015	 	2014	
 	 	 	 	 	 	 	
Net revenues	 	$	132,926 	 	$	98,477 	
Costs and expenses:	 	 	 	 	 	 	
Cost of services*	 	 	53,655 	 	 	39,979 	
Research and development	 	 	22,024 	 	 	15,541 	
Selling, general and administrative	 	 	20,883 	 	 	17,125 	
Net change in contingent consideration obligation	 	 	 —	 	 	1,211 	
Restructuring charges	 	 	3,240 	 	 	 —	
Depreciation and amortization	 	 	14,835 	 	 	12,266 	
Total costs and expenses	 	 	114,637 	 	 	86,122 	
Income from operations	 	 	18,289 	 	 	12,355 	
Interest income	 	 	466 	 	 	49 	
Interest expense	 	 	(1,342)	 	 	(420)	
Other income	 	 	14 	 	 	796 	
Income before income tax expense	 	 	17,427 	 	 	12,780 	
Income tax expense	 	 	(6,866)	 	 	(5,196)	
Net income	 	$	10,561 	 	$	7,584 	
Net income per common share:	 	 	 	 	 	 	
Basic	 	$	0.25 	 	$	0.19 	
Diluted	 	$	0.23 	 	$	0.19 	
Weighted-average common shares outstanding:	 	 	 	 	 	 	
Basic	 	 	41,626 	 	 	39,769 	
Diluted	 	 	47,080 	 	 	40,655 	
 	 	 	 	 	 	 	
Comprehensive (loss) income	 	$	(8,907)	 	$	8,583 	

 
 	 	
*  	Cost of services excludes depreciation and amortization which is shown separately.	

 

See accompanying notes to consolidated financial statements.
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SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	
 	    	2015	    	2014	
Operating activities:	 	 	 	 	 	 	
Net income	 	$	10,561 	 	$	7,584 	
Adjustments to reconcile net income to net cash used in operating activities:	 	 	 	 	 	 	
Depreciation and amortization expense	 	 	14,835 	 	 	12,266 	
Amortization of debt issuance costs	 	 	375 	 	 	 —	
Amortization of bond premium	 	 	474 	 	 	74 	
Deferred income taxes	 	 	(733)	 	 	3,112 	
Non-cash interest on leased facility	 	 	233 	 	 	230 	
Stock-based compensation	 	 	6,585 	 	 	5,842 	
Changes in operating assets and liabilities:	 	 	 	 	 	 	
Accounts receivable, net of allowance for doubtful accounts	 	 	(22,145)	 	 	(28,935)	
Prepaid expenses and other current assets	 	 	5,623 	 	 	816 	
Other assets	 	 	(443)	 	 	465 	
Accounts payable	 	 	106 	 	 	(3,388)	
Accrued expenses	 	 	(12,301)	 	 	(8,743)	
Contingent consideration obligation	 	 	(1,532)	 	 	1,611 	
Excess tax benefit from the exercise of stock options	 	 	(1,981)	 	 	(385)	
Other liabilities	 	 	(243)	 	 	1,249 	
Deferred revenues	 	 	451 	 	 	(3,204)	
Net cash used in operating activities	 	 	(135)	 	 	(11,406)	
 	 	 	 	 	 	 	
Investing activities:	 	 	 	 	 	 	
Purchases of fixed assets	 	 	(24,217)	 	 	(8,044)	
Purchases of marketable securities available-for-sale	 	 	(43,548)	 	 	(1,244)	
Maturities of marketable securities available-for-sale	 	 	40,285 	 	 	315 	
Business acquired, net of cash	 	 	(59,481)	 	 	 —	
Net cash used in investing activities	 	 	(86,961)	 	 	(8,973)	
 	 	 	 	 	 	 	
Financing activities:	 	 	 	 	 	 	
Proceeds from the exercise of stock options	 	 	5,398 	 	 	3,273 	
Payments on contingent consideration obligation	 	 	(4,468)	 	 	 —	
Excess tax benefit from the exercise of stock options	 	 	1,981 	 	 	385 	
Proceeds from the sale of treasury stock in connection with an employee stock purchase plan	 	 	975 	 	 	740 	
Repayments of capital obligations	 	 	(291)	 	 	(324)	
Net cash provided by financing activities	 	 	3,595 	 	 	4,074 	
Effect of exchange rate changes on cash	 	 	21 	 	 	64 	
Net decrease in cash and cash equivalents	 	 	(83,480)	 	 	(16,241)	
Cash and cash equivalents at beginning of period	 	 	235,967 	 	 	63,512 	
Cash and cash equivalents at end of period	 	$	152,487 	 	$	47,271 	
 	 	 	 	 	 	 	
Supplemental disclosures of cash flow information:	 	 	 	 	 	 	
Cash paid for income taxes	 	$	346 	 	$	717 	
 
See accompanying notes to consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
The consolidated financial statements as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the consolidated financial statements and notes in the Annual Report of Synchronoss Technologies, Inc. incorporated by reference in the Company's annual report on Form 10-K for the year ended December 31, 2014.  The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. The Company has no unconsolidated subsidiaries or investments accounted for under the equity method. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. Certain amounts from the prior year’s financial statements have been reclassified to conform to the current year’s presentation.
1. Description of Business
 
Synchronoss Technologies, Inc. (the “Company” or “Synchronoss”) is a mobile innovation company that provides software-based cloud and activation solutions for connected devices to enterprise customers on a global scale.  The Company’s software creates innovative consumer and enterprise solutions that drive billions of transactions on a wide range of connected devices across the world’s leading networks. The Company’s solutions include: intelligent connectivity management and content synchronization, backup and sharing service procurement, provisioning, activation, and support that enable communications service providers (CSPs), cable operators/multi-services operators (MSOs), original equipment manufacturers (OEMs) with embedded connectivity (e.g. smartphones, laptops, tablets and mobile Internet devices, such as automobiles, wearables for personal health and wellness, and connected homes), multi-channel retailers and other customers to accelerate and monetize value-add services for connected devices. This includes automating subscriber activation, order management, upgrades, service provisioning and connectivity and content management from any sales channel to any communication service (wireless or wireline), across any connected device type and managing the content transfer, synchronization and share.
 
The Company’s Synchronoss Personal Cloud™ platform is specifically designed to power the activation of the devices and technologies that seamlessly connect today’s consumer and leverage the Company’s cloud assets to manage these devices and content associated with them.  Synchronoss WorkSpace™ platform focuses on providing a secure, integrated file sharing and collaboration solution for small and medium businesses. The Company’s consumer and small business platforms and solutions enable Synchronoss to drive a natural extension of the Company’s mobile activations and cloud services with leading wireless networks around the world to link other non-traditional devices (i.e., automobiles, wearables for personal health and wellness, and connected homes).
 
The Company’s Activation Services, Synchronoss Personal Cloud™ and Synchronoss WorkSpace™ platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services or devices and “back-office” infrastructure-related systems and processes. The Company’s customers rely on the Company’s solutions and technology to automate the process of activation and content and settings management for their subscriber’s devices while delivering additional communication services. The Company’s Integrated Life™ platform brings together the capabilities of device/service activation with content and settings management to provide a seamless experience of activating and managing both traditional and non-traditional devices. The Company’s platforms also support automated customer care processes through use of accurate and effective speech processing technology and enable the Company’s customers to offer their subscribers the ability to store in and retrieve from the Cloud their personal and work content and data which resides on their connected mobile devices, such as personal computers, smartphones and tablets.  The Company’s platforms are designed to be carrier-grade, highly available, flexible and scalable to enable multiple converged communication services to be managed across multiple distribution channels including e-commerce, m-commerce, telesales, customer stores, indirect and other retail outlets allowing the Company to meet the rapidly changing and converging services and connected devices offered by the Company’s customers. Synchronoss enables its customers to acquire, retain and service subscribers quickly, reliably and cost-effectively by enabling backup, restore, synchronization and sharing of subscriber content.  Through the use of the Company’s platforms, the Company’s customers can simplify the processes associated with managing the
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
customer experience for procuring, activating, connecting, backing-up, synchronizing and social media and enterprise-wide sharing/collaboration with connected devices and contents from these devices and associated services.  The extensibility, scalability, reliability and relevance of the Company’s platforms enable new revenue streams and retention opportunities for the Company’s customers through new subscriber acquisitions, sale of new devices, accessories and new value-added service offerings in the Cloud, while optimizing their cost of operations and enhancing customer experience. The Company currently operates in and markets its solutions and services directly through the Company’s sales organizations in North America, Europe and Asia-Pacific.
 
The Company’s industry-leading customers include Tier 1 mobile service providers such as AT&T Inc., Verizon Wireless, Vodafone, Orange, Sprint, Telstra and U.S. Cellular, Tier 1 cable operators/MSOs and wireline operators like AT&T Inc., Comcast, Cablevision, Charter, CenturyLink, Mediacom and Level 3 Communications and large OEMs such as Apple and Ericsson.  These customers utilize the Company’s platforms, technology and services to service both consumer and business customers.
 
2. Basis of Presentation and Consolidation
 
For further information about the Company’s basis of presentation and consolidation or its significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014.
 
Impact of Recently Issued Accounting Standards
 
In March 2015, the Financial Accounting Standards Board issued Accounting issued Accounting Standards Update (ASU) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The amendments should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). The Company is currently evaluating the effects of ASU 2015-03 on the consolidated financial statements.
 
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact, if any, of the adoption of this guidance on the consolidated financial statements.
 
In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The new guidance eliminates the separate presentation of extraordinary items, net of tax and the related earnings per share, but does not affect the requirement to disclose material items that are unusual in nature or infrequently occurring. The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Entities have the option to apply the new guidance prospectively
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
or retrospectively, and can choose early adoption. The Company does not expect the adoption of this ASU to significantly impact the consolidated financial statements.
 
In May 2014, the FASB and the International Accounting Standards Board (“IASB”) (collectively, the “Boards”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. The standard’s core principle (issued as ASU 2014-09 by the FASB and as IFRS 15 by the IASB), is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The new guidance must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. The effective date is fiscal years beginning after December 15, 2016. Early application is not permitted. The Company is currently evaluating the methods of adoption and the impact that ASU 2014-09 will have on the consolidated financial statements. 
 
3. Earnings per Common Share
 
Basic earnings per share is calculated by using the weighted-average number of common shares outstanding during the period.
 
The diluted earnings per share calculation is based on the weighted-average number of shares of common stock outstanding adjusted for the number of additional shares that would have been outstanding had all potentially dilutive common shares been issued.
 
Potentially dilutive shares of common stock include stock options, convertible debt and unvested share awards.  The dilutive effects of stock options and restricted stock awards are based on the treasury stock method.  The dilutive effect of the assumed conversion of convertible debt is determined using the if-converted method. The after-tax effect of interest expense related to the convertible securities is added back to net income, and the convertible debt is assumed to have been converted into common shares at the beginning of the period.
 
The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income attributable to common stockholders per common share. Stock options that are anti-dilutive and excluded from the following table totaled 291 and 1,642 for the three months ended March 31, 2015 and 2014, respectively.

 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	
 	 	 	2015	 	 	2014	
Numerator:	 	 	 	 	 	 	
Net income attributable to common stockholders	 	$	10,561 	    	$	7,584 	
Income effect for interest on convertible debt, net of tax	 	 	475 	 	 	 —	
Numerator for diluted EPS- Income to common stockholders after assumed conversions	 	$	11,036 	 	$	7,584 	
Denominator:	 	 	 	 	 	 	
Weighted average common shares outstanding — basic	 	 	41,626 	 	 	39,769 	
Dilutive effect of:	 	 	 	 	 	 	
Shares from assumed conversion of convertible debt	 	 	4,326 	 	 	 —	
Options and unvested restricted shares	 	 	1,128 	 	 	886 	
Weighted average common shares outstanding — diluted	 	 	47,080 	 	 	40,655 	

 
4. Fair Value Measurements of Assets and Liabilities 
 
The Company classifies marketable securities as available-for-sale.  The fair value hierarchy established in the guidance adopted by the Company prioritizes the inputs used in valuation techniques into three levels as follows:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

 	·	 	Level 1 – Observable inputs – quoted prices in active markets for identical assets and liabilities;	

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

 	·	 	Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable and require the Company to develop relevant assumptions.	
 
The following is a summary of assets and liabilities held by the Company and their related classifications under the fair value hierarchy: 

 	 	 	 	 	 	
 	March 31, 2015	    	December 31, 2014	
Level 1 (A)	$	157,884 	 	$	241,364 	
Level 2 (B)	 	51,879 	 	 	49,013 	
Level 3 (C)	 	 —	 	 	(8,000)	
Total	$	209,763 	 	$	282,377 	
 
 	(A)	 	Level 1 assets include money market funds and enhanced income money market funds which are classified as cash equivalents and marketable securities, respectively.  	

 	(B)	 	Level 2 assets include certificates of deposit, municipal bonds and corporate bonds which are classified as marketable securities.	

 	(C)	 	Level 3 liabilities include the contingent consideration obligation.	
 
The Company utilizes the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The Company's marketable securities investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three months ended March 31, 2015.
 
The aggregate fair value of available-for-sale securities and aggregate amount of unrealized gains and losses for available-for-sale securities at March 31, 2015 were as follows:

 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Aggregate Amount of	
 	 	Aggregate	 	Unrealized	
 	    	Fair Value	    	Gains	    	Losses	
Due in one year or less	 	$	54,955 	 	$	8 	 	$	(89)	
Due after one year, less than five years	 	 	2,321 	 	 	2 	 	 	(3)	
 	 	$	57,276 	 	$	10 	 	$	(92)	
 
The aggregate fair value of available-for-sale securities and aggregate amount of unrealized gains and losses for available-for-sale securities at December 31, 2014 were as follows:

 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Aggregate Amount of	
 	 	Aggregate	 	Unrealized	
 	    	Fair Value	    	Gains	    	Losses	
Due in one year or less	 	$	51,097 	 	$	10 	 	$	(72)	
Due after one year, less than five years	 	 	3,313 	 	 	2 	 	 	(3)	
 	 	$	54,410 	 	$	12 	 	$	(75)	
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Unrealized gains and losses are reported as a component of accumulated other comprehensive loss in stockholders' equity. The cost of securities sold is based on the specific identification method. The Company evaluates investments with unrealized losses to determine if the losses are other than temporary. The Company has determined that the gross unrealized losses as of March 31, 2015 and December 31, 2014 are temporary. In making this determination, the Company considered the financial condition, credit ratings and near-term prospects of the issuers, the underlying collateral of the investments, and the magnitude of the losses as compared to the cost and the length of time the investments have been in an unrealized loss position. Additionally, while the Company classifies the securities as available-for-sale, the Company does not currently intend to sell such investments and it is more likely than not to recover the carrying value prior to being required to sell such investments.
 
The Company determined the fair value of the contingent consideration obligation using the probability-weighted income approach derived from quarterly revenue estimates and a probability assessment with respect to the likelihood of achieving the various performance criteria. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration obligation are the probabilities of achieving certain financial targets and contractual milestones.  Significant increases (decreases) in any of those probabilities in isolation may result in a higher (lower) fair value measurement.  As of December 31, 2014 all of the financial targets and contractual milestones were met and on February 20, 2015 the Company paid out $8 million related to the Strumsoft Earn-out.
 
The changes in fair value of the Company’s Level 3 contingent consideration obligation during the three months ended March 31, 2015 were as follows:

 	    	Level 3	
Balance at December 31, 2014	 	$	8,000 	
Payment of contingent consideration	 	 	(8,000)	
Balance at March 31, 2015	 	$	 —	

5. Acquisition
 
F-Secure Corporation (“F-Secure”)
 
On February 23, 2015, the Company acquired certain cloud assets from F-Secure, an online security and privacy company headquartered in Finland, for cash consideration of $59.5 million, net of liabilities assumed. The Company believes that the purchase will expand the Company’s cloud services customer base.
 
On February 18, 2015, the Company entered into a patent license and settlement agreement whereby the Company granted F-Secure a limited license to the Company's patents. As part of the business combination accounting rules, the Company calculated the fair value of the license using an income approach, specifically a relief from royalty method, which incorporates significant estimates and assumptions made by management, which by their nature are characterized by uncertainty. Inputs used to value the license are considered Level 3 inputs.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
The Company determined the preliminary fair value of the net assets acquired during the first quarter of 2015 as follows:

 	 	 	 	 	 	
 	 	Preliminary	 	 	
 	 	Purchase Price	 	 	
 	 	Allocation	 	 	
Intangible assets:	 	 	 	 	Wtd. Avg.	
Technology	 	$	3,071 	 	1 year	
Customer relationships	 	 	20,475 	 	5 years	
Goodwill	 	 	36,454 	 	 	
Total assets acquired	 	 	60,000 	 	 	
Accrued expenses	 	 	519 	 	 	
Net assets acquired	 	$	59,481 	 	 	
 
The goodwill recorded in connection with this acquisition is based on operating synergies and other benefits expected to result from the combined operations and the assembled workforce acquired. The goodwill acquired will not be deductible for tax purposes.
 
Acquisition-related costs recognized during the three months ended March 31, 2015, including transaction costs such as legal, accounting, valuation and other professional services, were $856 thousand .
 
Voxmobili SA (“Vox”)
 
On July 11, 2014, the Company acquired all outstanding shares of Vox, a French company, for $25.1 million, net of cash acquired and liabilities assumed, subject to certain working capital adjustments. The Company believes that this acquisition contributed to its position as the leading provider of personal cloud solutions to the world’s largest mobile operators.
 
The Company determined the preliminary fair value of the net assets acquired during the third quarter of 2014 as follows:

 	 	 	 	 	 	
 	 	Purchase Price	 	 	
 	 	Allocation	 	 	
Cash	 	$	1,414 	 	 	
Prepaid expenses and other assets	 	 	220 	 	 	
Accounts receivable	 	 	3,750 	 	 	
Intangible assets:	 	 	 	 	Wtd. Avg.	
Technology	 	 	4,900 	 	5 years	
Customer relationships	 	 	5,000 	 	5 years	
Goodwill	 	 	17,188 	 	 	
Total assets acquired	 	 	32,472 	 	 	
Accounts payable and accrued liabilities	 	 	2,118 	 	 	
Deferred revenues	 	 	457 	 	 	
Deferred taxes	 	 	3,338 	 	 	
Net assets acquired	 	$	26,559 	 	 	
 
The goodwill recorded in connection with this acquisition was based on operating synergies and other benefits expected to result from the combined operations and the assembled workforce acquired. The goodwill acquired is not  deductible for tax purposes.
 
Acquisition-related costs, including transaction costs such as legal, accounting, valuation and other professional services, were $1.5 million.

 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
6. Stockholders’ Equity
 
Stock Options
 
The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The weighted-average assumptions used in the Black-Scholes option pricing model are as follows:

 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	
 	    	2015	    	2014	
Expected stock price volatility	 	48 	%	 	63 	%	
Risk-free interest rate	 	1.26 	%	 	1.54 	%	
Expected life of options (in years)	 	4.01 	 	 	4.28 	 	
Expected dividend yield	 	0 	%	 	0 	%	
 
The weighted-average fair value (as of the date of grant) of the options was $15.86 and $16.20 per share for the three months ended March 31, 2015 and 2014, respectively.  During the three months ended March 31, 2015 and 2014, the Company recorded total pre-tax stock-based compensation expense of $6.6 million ($4.4 million after tax or $0.09 per diluted share) and $5.8 million ($3.8 million after tax or $0.09 per diluted share), respectively, which includes the fair value for equity awards issued. The total stock-based compensation cost related to unvested equity awards not yet recognized as an expense as of March 31, 2015 was approximately $42.8 million. The expense is expected to be recognized over a weighted-average period of approximately 2.63 years. 
 
The following table summarizes information about stock options outstanding as of March 31, 2015:

 	 	 	 	 	 	 	Weighted-	 	 	 	
 	 	 	 	 	 	 	Average	 	 	 	
 	 	 	 	Weighted-	 	Remaining	 	 	Aggregate	
 	 	Number of	 	Average	 	Contractual	 	 	Intrinsic	
Options	    	Options	    	Exercise Price	    	Term (Years)	    	 	Value	
Outstanding at December 31, 2014 	 	2,767 	 	$	25.81 	 	 	 	 	 	
Options Granted	 	299 	 	 	41.04 	 	 	 	 	 	
Options Exercised	 	(227)	 	 	23.80 	 	 	 	 	 	
Options Cancelled	 	(96)	 	 	30.91 	 	 	 	 	 	
Outstanding at March 31, 2015 	 	2,743 	 	$	27.45 	 	4.59 	 	$	54,877 	
Vested or expected to vest at March 31, 2015	 	2,524 	 	$	26.81 	 	4.44 	 	$	52,128 	
Exercisable at March 31, 2015	 	1,465 	 	$	22.40 	 	3.40 	 	$	36,708 	
 
A summary of the Company’s unvested restricted stock at March 31, 2015, and changes during the three months ended March 31, 2015, is presented below:

 	 	 	
 	 	Number of	
Non-Vested Restricted Stock	    	Awards	
Non-vested at December 31, 2014	 	1,342 	
Granted	 	328 	
Vested	 	(298)	
Forfeited	 	(59)	
Non-vested at March 31, 2015	 	1,313 	
 
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
Employee Stock Purchase Plan
 
On February 1, 2012, the Company established a ten year Employee Stock Purchase Plan (“ESPP” or the “Plan”) for certain eligible employees.  The Plan is to be administered by the Company’s Board of Directors.  The total number of shares available for purchase under the Plan is 500 thousand shares of the Company’s Common Stock.  Employees participate over a six month period through payroll withholdings and may purchase, at the end of the six month period, the Company’s Common Stock at the lower of 85% of the fair market value on the first day of the offering period or the fair market value on the purchase date.  No participant will be granted a right to purchase Common Stock under the Plan if such participant would own more than 5% of the total combined voting power of the Company.  In addition, no participant may purchase more than one thousand shares of Common Stock within any purchase period.
 
The expected life of ESPP shares is the average of the remaining purchase period under each offering period.  The weighted-average assumptions used to value employee stock purchase rights are as follows:

 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	
 	    	2015	    	2014	
Expected stock price volatility	 	40 	%	 	64 	%	
Risk-free interest rate	 	0.05 	%	 	0.08 	%	
Expected life (in years)	 	0.50 	 	 	0.50 	 	
Expected dividend yield	 	0 	%	 	0 	%	
 
During the three months ended March 31, 2015 and 2014, the Company recorded $150 thousand and $199 thousand, respectively, of compensation expense related to the ESPP.  During the three months ended March 31, 2015 and 2014, the Company sold a total of 29 thousand and 27 thousand shares, respectively, of its Treasury Stock pursuant to purchases under its ESPP. Cash received from purchases through the ESPP during the three months ended March 31, 2015 and 2014, was approximately $975 thousand and $740 thousand, respectively, and is included within the financing activities section of the consolidated statements of cash flows. The total unrecognized compensation expense related to the ESPP as of March 31, 2015 was approximately $201 thousand, which is expected to be recognized over the remainder of the offering period.
7. Accumulated Other Comprehensive Income (Loss)
 
Comprehensive (loss) income was as follows:

 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	
 	    	2015	    	2014	
 	 	 	 	 	 	 	
Net income	 	$	10,561 	 	$	7,584 	
Translation adjustments	 	 	(16,837)	 	 	995 	
Unrealized income on securities, (net of tax)	 	 	241 	 	 	4 	
Net loss on intra-entity foreign currency transactions	 	 	(2,872)	 	 	 —	
Total comprehensive (loss) income	 	$	(8,907)	 	$	8,583 	
 
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
The changes in accumulated other comprehensive income (loss) during the three months ended March 31, 2015, are as follows, net of tax:

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Unrealized (Loss)	 	 	 	 	 	
 	 	 	 	 	Income on	 	Unrealized Holding	 	 	 	
 	 	 	 	 	Intra-Entity	 	Gains (Losses) on	 	 	 	
 	 	Foreign	 	Foreign Currency	 	Available-for-Sale	 	 	 	
 	 	Currency	 	Transactions	 	Securities	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2014	 	$	(16,980)	 	$	(2,857)	 	$	(177)	 	$	(20,014)	
Other comprehensive (loss) income	 	 	(16,837)	 	 	(2,872)	 	 	241 	 	 	(19,468)	
Total comprehensive (loss) income	 	 	(16,837)	 	 	(2,872)	 	 	241 	 	 	(19,468)	
Balance at March 31, 2015	 	$	(33,817)	 	$	(5,729)	 	$	64 	 	$	(39,482)	

 
8. Goodwill and Intangibles
 
Goodwill
 
The Company recorded Goodwill which represents the excess of the purchase price over the fair value of assets acquired, including other definite-lived intangible assets. Goodwill is not amortized, but reviewed annually for impairment or upon the occurrence of events or changes in circumstances that would more likely than not reduce the fair value of the reporting unit below its carrying amount.
 
The changes in Goodwill during the three months ended March 31, 2015 are as follows:

Balance at December 31, 2014	    	$	147,135 	
F-Secure acquisition	 	 	36,454 	
Translation adjustments	 	 	(10,222)	
Balance at March 31, 2015	 	$	173,367 	
 
Other Intangible Assets
 
The Company’s intangible assets with definite lives consist primarily of trade names, technology, and customer lists and relationships. These intangible assets are being amortized on the straight‑line method over the estimated useful lives of the assets.
 
The Company’s intangible assets consist of the following:

 	 	 	 	 	 	 	 	 	 	 	
 	Weighted	March 31, 2015	
 	Average	 	 	 	 	Accumulated	 	 	 	
 	Life	 	Cost	 	Amortization	 	Net	
 	 	 	 	 	 	 	 	 	 	 	
Trade name	4 	 	$	1,529 	 	$	(1,293)	 	$	236 	
Technology	7 	 	 	65,310 	 	 	(25,227)	 	 	40,083 	
Customer lists and relationships	9 	 	 	86,246 	 	 	(22,938)	 	 	63,308 	
Capitalized software and patents	3 	 	 	8,745 	 	 	(2,606)	 	 	6,139 	
Order Backlog	 —	 	 	918 	 	 	(918)	 	 	 —	
 	 	 	$	162,748 	 	$	(52,982)	 	$	109,766 	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

 
 
9. Debt
 
Credit Facility
 
In September 2013, the Company entered into a Credit Agreement (the “Credit Facility”) with JP Morgan Chase Bank, N.A., as the administrative agent, Wells Fargo Bank, National Association, as the syndication agent and Capital One, National Association and KeyBank National Association, as co-documentation agents.  The Credit Facility, which can be used for general corporate purposes, is a $100 million unsecured revolving line of credit that matures on September 27, 2018.  The Company pays a commitment fee in the range of 25 to 35 basis points on the unused balance of the revolving credit facility under the Credit Agreement. Commitment fees totaled approximately $64 thousand and $62 thousand during the three months ended March 31, 2015 and 2014, respectively. Synchronoss has the right to request an increase in the aggregate principal amount of the Credit Facility to $150 million. 
 
The Credit Facility is subject to certain financial covenants.  As of March 31, 2015, the Company was in compliance with all required covenants and there were no outstanding balances on the Credit Facility. 
 
Convertible Senior Notes
 
On August 12, 2014, the Company issued $230.0 million aggregate principal amount of its 0.75% Convertible Senior Notes due in 2019 (the “2019 Notes”). The 2019 Notes mature on August 15, 2019, and bear interest at a rate of 0.75% per annum payable semi-annually in arrears on February 15 and August 15 of each year. The Company accounted for the $230.0 million face value of the debt as a liability and capitalized approximately $7.1 million of financing fees, related to the issuance.
 
The 2019 Notes are senior, unsecured obligations of the Company, and are convertible into shares of its common stock based on a conversion rate of 18.8072 shares per $1,000 principal amount of 2019 Notes which is equivalent to an initial conversion price of approximately $53.17 per share. The Company will satisfy any conversion of the 2019 Notes with shares of the Company’s common stock. The 2019 Notes are convertible at the note holders’ option prior to their maturity and if specified corporate transactions occur. The issue price of the 2019 Notes was equal to their face amount.
 
Holders of the 2019 Notes who convert their notes in connection with a qualifying fundamental change, as defined in the related indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. Additionally, following the occurrence of a fundamental change, holders may require that the Company repurchase some or all of the 2019 Notes for cash at a repurchase price equal to 100% of the principal amount of the notes being repurchased, plus accrued and unpaid interest, if any. As of March 31, 2015, none of these conditions existed with respect to the 2019 Notes and as a result, the 2019 Notes are classified as long term.
 
The 2019 Notes are the Company’s direct senior unsecured obligations and rank equal in right of payment to all of the Company’s existing and future unsecured and unsubordinated indebtedness.
 
At March 31, 2015, the carrying amount of the liability and the outstanding principal of the 2019 Notes was $230.0 million, with an effective interest rate of approximately 1.36%. The fair value of the 2019 Notes was $270.7 million at March 31, 2015.
 
The interest expense of the Company’s 2019 Notes related to the contractual interest coupon was $431 thousand for the three months ended March 31, 2015. There was no interest expense related to the 2019 Notes for the three months ended March 31, 2014.
 
10. Restructuring
 
In January 2015, the Company initiated the preliminary phase of a work-force reduction as part of a corporate restructuring, with reductions occurring across all levels and departments within the Company. This measure was intended to reduce costs and to align
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
 
the Company’s resources with its key strategic priorities.  As of March 31, 2015, there was $2.2 million of unpaid restructuring charges classified under accrued expenses on the balance sheet.
 
A summary of the Company’s restructuring accrual at March 31, 2015 and changes during the three months ended March 31, 2015, is presented below:

 

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Balance at	 	 	 	 	 	 	 	Balance at	
 	    	December 31, 2014	    	Charges	    	Payments	    	March 31, 2015	
Employment termination costs	 	$	 —	 	$	3,240 	 	$	(1,065)	 	$	2,175 	
Total	 	$	 —	 	$	3,240 	 	$	(1,065)	 	$	2,175 	

11. Legal Matters
 
On October 7, 2014, the company filed an amended complaint in the United States District Court for the District of New Jersey (Civ Act. No. 3:14-cv-06220) against F-Secure Corporation and F-Secure, Inc. (collectively, “F-Secure"), claiming that F-Secure has infringed, and continues to infringe, several of the Company’s patents. In February 2015, Synchronoss entered into a patent license and settlement agreement with F-Secure Corporation and F-Secure, Inc. whereby the Company granted each of these companies (but not their subsidiaries or affiliates) a limited license to Synchronoss’ patents. As a result of entering into the patent license and settlement agreement, the parties filed a joint stipulation to dismiss the above complaint.
 
The Company’s 2011 acquisition agreement with Miyowa SA provided that former shareholders of Miyowa SA would be eligible for earn-out payments, to the extent specified business milestones were achieved following the acquisition.  In December 2013, Eurowebfund and Bakamar, two former shareholders of Miyowa SA, filed a complaint against the Company in the Commercial Court of Paris, France claiming that they are entitled to certain earn-out payments under the acquisition agreement.  The Company was served with a copy of this complaint in January 2014.  The Company believes Miyowa SA failed to meet the criteria required for it to pay the claimed amounts and that no earn-out payments are owed.  Although the Company cannot predict the outcome of the lawsuit due to the inherent uncertainties of litigation, it believes the positions of Eurowebfund and Bakamar are without merit, and the Company intends to defend all claims brought by them.
 
The Company is not currently subject to any legal proceedings that could have a material adverse effect on its operations; however, it may from time to time become a party to various legal proceedings arising in the ordinary course of its business. The Company is currently the plaintiff in several patent infringement cases. The defendants in several of these cases have filed counterclaims. Although the Company cannot predict the outcome of the cases at this time due to the inherent uncertainties of litigation, the Company continues to pursue its claims and believes that the counterclaims are without merit, and the Company intends to defend all such counterclaims.
 
12. Subsequent Events Review
 
The Company has evaluated all subsequent events and transactions through the filing date.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read in conjunction with the information set forth in our consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and in our annual report Form 10-K for the year ended December 31, 2014. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management as of the date hereof based on information currently available to our management. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “hopes,” “should,” “continues,” “seeks,” “likely” or similar expressions, indicate a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Actual results may differ materially from the forward-looking statements we make. We caution investors not to place substantial reliance on the forward-looking statements included in this report. These statements speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.  All numbers are expressed in thousands unless otherwise stated.
 
Overview
 
We are a mobile innovation company that provides cloud solutions and software-based activation for connected devices globally.  Such services include intelligent connectivity management and content synchronization, backup and sharing, as well as device and service procurement, provisioning, activation, and support, that enable communications service providers (“CSPs”), cable operators/multi-services operators (“MSOs”), original equipment manufacturers (“OEMs”) with embedded connectivity (e.g. smartphones, laptops, tablets and mobile Internet devices, such as automobiles, wearables for personal health and wellness, and connected homes), multi-channel retailers and other customers to accelerate and monetize their go-to-market strategies for connected devices. This includes automating subscriber activation, order management, upgrades, service provisioning and connectivity and content management from any sales channel to any communication service (wireless or wireline), across any connected device type and managing the content transfer, synchronization and share.  Our global solutions touch all aspects of connected devices on the mobile Internet.
 
Our Synchronoss Personal Cloud™ solution targets individual consumers while our Synchronoss WorkSpace™ solution focuses on providing a secure, integrated file sharing and collaboration solution for small and medium businesses.  In addition, our Integrated Life™ platform is specifically designed to power the activation of the devices and technologies that seamlessly connect today’s consumer and leverage our cloud assets to manage these devices and contents associated with them. The Integrated Life™ platform enables us to drive a natural extension of our mobile activations and cloud services with leading wireless networks around the world to link other non-traditional devices (i.e., automobiles, wearables for personal health and wellness, and connected homes).
 
Our Activation Services, Synchronoss Personal Cloud™, Synchronoss WorkSpace™, and Synchronoss Integrated Life™ platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services, or devices and “back-office” infrastructure-related systems and processes. Our customers rely on our solutions and technology to automate the process of activation and content and settings management for their customers’ devices while delivering additional communication services. Our Synchronoss Integrated Life™ platform brings together the capabilities of device/service activation with content and settings management to provide a seamless experience of activating and managing non-traditional devices.  Our platforms also support automated customer care processes through use of accurate and effective speech processing technology and enable our customers to offer their subscribers the ability to store in and retrieve from the Cloud their personal and work content and data to their connected mobile devices, such as personal computers, smartphones and tablets.  Our platforms are designed to be carrier-grade, high availability, flexible and scalable to enable multiple converged communication services to be managed across multiple distribution channels, including e-commerce, m-commerce, telesales, customer stores, indirect and other retail outlets, allowing us to meet the rapidly changing and converging services and connected devices offered by our customers. We enable our customers to acquire, retain and service subscribers quickly, reliably and cost-effectively by enabling backup, restore, synchronization and sharing of subscriber content.  Through the use of our platforms, our customers can simplify the processes associated with managing the customer experience for procuring, activating, connecting, backing-up, synchronizing and social media and enterprise-wide sharing/collaboration connected devices and contents from these devices and associated services.  The extensibility, scalability, reliability and relevance of our platforms enable new revenue streams and retention opportunities for our customers through new subscriber acquisitions, sale of new devices, accessories and new value-added service offerings in the Cloud, while optimizing their cost of operations and enhancing customer experience.
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We currently operate in and market our solutions and services directly through our sales organizations in North America, Europe and Asia-Pacific.
 
Our industry-leading customers include Tier 1 mobile service providers such as AT&T Inc., Verizon Wireless, Vodafone, Orange, Sprint, Telstra and U.S. Cellular, Tier 1 cable operators/MSOs and wireline operators like AT&T Inc., Comcast, Cablevision, Charter, CenturyLink, Mediacom and Level 3 Communications, and large OEMs such as Apple and Ericsson.  These customers utilize our platforms, technology and services to service both consumer and business customers.
 
Revenues
 
We generate a substantial portion of our revenues on a per-transaction or subscription basis, which is derived from contracts that extend up to 60 months from execution. For the three months ended March 31, 2015 and 2014, we derived approximately 72% and 70%, respectively, of our revenues from transactions processed and subscription arrangements. This increase is a result of new subscription arrangements with our existing customers and increased transaction volumes.  The remainder of our revenues were generated from professional services and licenses.
 
Historically, our revenues have been directly impacted by the number of transactions processed.  The future success of our business depends on the continued growth of consumer and business transactions and, as such, the volume of transactions that we process could fluctuate on a quarterly basis.  See “Current Trends Affecting Our Results of Operations” for certain matters regarding future results of operations.
 
Most of our revenues are recorded in U.S. dollars but as we continue to expand our footprint with international carriers and increase the extent of recording our international activities in local currencies, we will become subject to currency translation risk that could affect our future net sales.
 
Each of AT&T and Verizon Wireless accounted for more than 10% of our revenues for the three months ended March 31, 2015 and 2014. AT&T and Verizon Wireless in the aggregate accounted for 70% and 67% of our revenues for the three months ended March 31, 2015 and 2014, respectively. See “Risk Factors” for certain matters bearing risks on our future results of operations.
 
Costs and Expenses
 
Our costs and expenses consist of cost of services, research and development, selling, general and administrative, depreciation and amortization, change in contingent consideration and interest and other expense.
 
Cost of services includes all direct materials, direct labor, cost of facilities and those indirect costs related to revenues such as indirect labor, materials and supplies. Our primary cost of services is related to our information technology and systems department, including colocation fees, network costs, data center maintenance, database management and data processing costs, as well as personnel costs associated with service implementation, customer deployment and customer care. Also included in cost of services are costs associated with our exception handling centers and the maintenance of those centers. Currently, we utilize a combination of employees and third-party providers to process transactions through these centers.
 
Research and development costs are expensed as incurred unless they meet U.S. Generally Accepted Accounting Principles (“GAAP”) criteria for deferral and amortization. Software development costs incurred prior to the establishment of technological feasibility do not meet these criteria, and are expensed as incurred. Research and development expense consists primarily of costs related to personnel, including salaries and other personnel-related expenses, consulting fees and the cost of facilities, computer and support services used in service technology development. We also expense costs relating to developing modifications and minor enhancements of our existing technology and services.
 
Selling, general and administrative expense consists of personnel costs including salaries, sales commissions, sales operations and other personnel-related expenses, travel and related expenses, trade shows, costs of communications equipment and support services, facilities costs, consulting fees, costs of marketing programs, such as internet and print and other overhead costs.
 
Net change in contingent consideration obligation consists of the changes to the fair value estimate of the obligation to the former equity holders which resulted from our acquisitions. The estimate is based on the weighted probability of achieving certain financial
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targets and milestones. The contingent consideration obligation earn-out periods are no longer than 12 months in duration.  As such, we recognize the changes in fair value over that period.  Final determination of the payment is done up to 90 days after the earn-out period.
 
Restructuring charges consist of the costs associated with the January 2015 work-force reduction plan to reduce costs and align our resources with our key strategic priorities. The restructuring charges consist of employee termination costs.
 
Depreciation relates to our property and equipment and includes our network infrastructure and facilities. Amortization primarily relates to trademarks, customer lists, technology acquired and internally developed software.
 
Interest expense consists primarily of interest on our lease financing obligations and our convertible senior notes.
 
Current Trends Affecting Our Results of Operations
 
Business from our Activation and Cloud Solutions has been driven by the unprecedented growth in mobile devices globally. Certain industry trends, such as Next programs from AT&T, have resulted in faster device upgrade cycles increasing device order transactions and activations. Our recent acquisition of the Personal Cloud assets of F-Secure is intended to provide additional penetration within our AT&T account. With mobile devices becoming content rich and starting to act as a replacement for other traditional devices like PC’s, the need to securely back up content from mobile devices, sync it with other devices and share it with others in their community of family, friends and business associates have become essential needs. The major Tier 1 carriers are also publicly discussing achieving 500% penetration (multiple connected devices per user) by enabling connectivity to non-traditional devices. Such devices include connected cars, health and wellness devices, connected home and health care. The need for these devices to be activated, managed and the contents from them to be stored in a common cloud are also expected to be drivers of our businesses in the long term.
 
Bring Your Own Technology is impacting the work environment for Small and Medium Businesses, which find themselves in a position where they need to offer their employees a safe environment to share and collaborate on their work documents and files via mobile devices. Leveraging our Synchronoss Personal Cloud™ solution infrastructure and technology to build our Synchronoss WorkSpace™ solution for this purpose is enabling us to serve a completely new market, which we believe will also contribute to our growth.
 
To support our expected growth driven by the favorable industry trends mentioned above, we continue to look for opportunities to improve our operating efficiencies, such as the utilization of offshore technical and non-technical resources for our exception handling center management as well as routine software maintenance activities. We also leverage modular components from our existing software platforms to build new products.   We believe that these opportunities will continue to provide future benefits and position us to support revenue growth. In addition, we anticipate further automation of the transactions generated by our more mature customers and additional transaction types. Our cost of services can fluctuate from period to period based upon the level of automation and the on-boarding of new transaction and service types. We are also making investments in new research and development for development of products designed to enable us to grow rapidly in the mobile wireless market. Our purchase of capital assets and equipment may also increase based on aggressive deployment, subscriber growth and promotional offers for storage incentives by our major Tier 1 carrier customers.
 
We continue to advance our plans for the expansion of our platforms' footprint with broadband carriers and international mobile carriers to support connected devices and multiple networks through our focus on transaction management and cloud-based services for back up, synchronization and sharing of content. Our initiatives with AT&T, Verizon Wireless, Vodafone and other CSPs continue to grow both with our current businesses as well as new products. We are also exploring additional opportunities through merger and acquisition activities to support our customer, product and geographic diversification strategies.
 
Critical Accounting Policies and Estimates
 
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements in accordance with GAAP requires us to utilize accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the consolidated financial statements and the reported amounts of
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revenues and expenses during a fiscal period. The Securities and Exchange Commission (“SEC”) considers an accounting policy to be critical if it is important to a company’s financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. We have discussed the selection and development of the critical accounting policies with the audit committee of our Board of Directors, and the audit committee has reviewed our related disclosures in this Form 10-Q.  Although we believe that our judgments and estimates are appropriate, correct and reasonable under the circumstances, actual results may differ from those estimates.  If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. See “Risk Factors” for certain matters bearing risks on our future results of operations.
 
We believe that of our significant accounting policies, which are described in Note 2 in our Annual Report on Form 10-K for the year ended December 31, 2014, the following accounting policies involve a greater degree of judgment and complexity.  Accordingly, these are the policies which we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations:
 
 	·	 	Revenue Recognition and Deferred Revenue	

 	·	 	Allowance for Doubtful Accounts	

 	·	 	Income Taxes	

 	·	 	Goodwill and Impairment of Long-Lived Assets	

 	·	 	Business Combinations 	

 	·	 	Stock-Based Compensation	
 
There were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K during the three months ended March 31, 2015.  Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2014 for a more complete discussion of our critical accounting policies and estimates.
 
Acquisitions
 
On February 23, 2015, the Company acquired certain cloud assets from F-Secure, an online security and privacy company headquartered in Finland, for cash consideration of $59.5 million, net of liabilities assumed. The Company believes that the purchase will expand the Company’s cloud services customer base.
 
Results of Operations
 
Three months ended March 31, 2015 compared to the three months ended March 31, 2014
 
The following table presents an overview of our results of operations for the three months ended March 31, 2015 and 2014:

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	 	 	 	 	
 	 	2015	 	2014	 	2015 vs 2014	
 	    	$	    	% of Revenue	    	$	    	% of Revenue	    	$ Change	    	% Change	
 	 	(in thousands)	
Net revenues	 	$	132,926 	 	100.0 	%	 	$	98,477 	 	100.0 	%	 	$	34,449 	 	35.0 	%	
Cost of services*	 	 	53,655 	 	40.4 	%	 	 	39,979 	 	40.6 	%	 	 	13,676 	 	34.2 	%	
Research and development	 	 	22,024 	 	16.6 	%	 	 	15,541 	 	15.8 	%	 	 	6,483 	 	41.7 	%	
Selling, general and administrative	 	 	20,883 	 	15.7 	%	 	 	17,125 	 	17.4 	%	 	 	3,758 	 	21.9 	%	
Net change in contingent consideration obligation	 	 	 —	 	 —	%	 	 	1,211 	 	1.2 	%	 	 	(1,211)	 	(100.0)	%	
Restructuring charges	 	 	3,240 	 	2.4 	%	 	 	 —	 	 —	%	 	 	3,240 	 	100.0 	%	
Depreciation and amortization	 	 	14,835 	 	11.2 	%	 	 	12,266 	 	12.5 	%	 	 	2,569 	 	20.9 	%	
Total costs and expenses	 	 	114,637 	 	86.2 	%	 	 	86,122 	 	87.5 	%	 	 	28,515 	 	33.1 	%	
      Income from operations	 	$	18,289 	 	13.8 	%	 	$	12,355 	 	12.5 	%	 	$	5,934 	 	48.0 	%	
 
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*  	Cost of services excludes depreciation and amortization which is shown separately.	
 
Net Revenues.  Net revenues increased $34.4 million to $132.9 million for the three months ended March 31, 2015, compared to the same period in 2014.  This increase was due primarily to the expansion of our services provided to our customers.  Transaction and subscription revenues as a percentage of sales were 72% or $96.3 million for the three months ended March 31, 2015 compared to 70% or $68.6 million for the same period in 2014.  The increase in transaction and subscription revenue is primarily due to new subscription arrangements and increased transactional services with our existing customers. Professional service and license revenues as a percentage of sales were 28% or $36.6 million for the three months ended March 31, 2015, compared to 30% or $29.9 million for the same period in 2014. The increase in professional services and license revenue is primarily due to new license agreements and expansion of services with existing and new customers.
 
Net revenues related to Activation Services increased $6.9 million to $61.7 million for the three months ended March 31, 2015 compared to the same period in 2014.  Activation Services revenue growth was largely attributed to an increased customer base and overall growth with existing customers. Net revenues related to Activation Services represented 46% for the three months ended March 31, 2015, compared to 56% for the same period in 2014. Net revenues related to our Cloud Services increased by $27.5 million to $71.2 million for the three months ended March 31, 2015 compared to the same period in 2014. The increase in our Cloud Service performance was a result of a strong adoption of our cloud offerings across our customer base. Net revenues related to our Cloud Services represented 54% for the three months ended March 31, 2015, compared to 44% for the same period in 2014.
 
Expenses
 
Cost of Services.  Cost of services increased $13.7 million to $53.7 million for the three months ended March 31, 2015, compared to the same period in 2014,  due primarily to an increase of $6.6 million in colocation costs related to the expansion of our hosting and storage offerings. There was also an increase of $4.1 million in outside consulting expense, due to our increased use of third party exception handling vendors related to expanded programs, operations and migration projects. Additionally, our personnel and related costs increased  $2.8 million as a result of our continued growth.  Cost of services as a percentage of revenues decreased to 40.4% for the three months ended March 31, 2015, as compared to 40.6% for the same period in 2014.  
 
Research and Development.  Research and development expense increased $6.5 million to $22.0 million for the three months ended March 31, 2015, compared to the same period in 2014 primarily due to an increase of $4.4 million in personnel and related costs due to continued growth and completing our initial phase of work on the Synchronoss Workspace™ platform.  Software development costs associated with the Synchronoss Workspace platform were capitalized for the three months ended March 31, 2014. Additionally, there was an increase of $1.1 million in facility costs. The majority of the remaining increase related to a one-time Strumsoft retention bonus. Research and development expense as a percentage of revenues increased to 16.6% for the three months ended March 31, 2015 as compared to 15.8% for the same period in 2014.
 
Selling, General and Administrative.    Selling, general and administrative expense increased $3.8 million to $20.9 million for the three months ended March 31, 2015, compared to the same period in 2014.  This was primarily driven by an increase of $1.9 million in personnel and related costs and an increase of $1.8 million in professional fees. The increase in personnel and related costs primarily relates to increased headcount as a result of our international expansion. Additionally, the increase in professional services relates to accounting and legal costs resulting from our acquisition of F-Secure and our patent licensing program.  Selling, general and administrative expense as a percentage of revenues decreased to 15.7% for the three months ended March 31, 2015, compared to 17.4% for the same period in 2014.
 
Net change in contingent consideration obligation.  The net change in contingent consideration obligation resulted in a $1.2 million decrease for the three months ended March 31, 2015.  There was no contingent consideration for the three months ended March 31, 2015 due to the completion of all earn-out periods.  The prior year consisted of  a $1.2 million fair value increase of contingent consideration associated with the Strumsoft earn-out.
 
Restructuring Charges. Restructuring charges were $3.2 million,  related to employment termination costs, as a result of the January 2015 work‑force reduction plan to reduce costs and align our resources with our key strategic priorities.
 
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Depreciation and amortization. Depreciation and amortization expense increased $2.6 million to $14.8 million for the three months ended March 31, 2015, compared to the same period in 2014. This was primarily related to the increase in depreciable fixed assets necessary for the continued expansion of our platforms and amortization of our newly acquired intangible assets related to our recent acquisitions.  Depreciation and amortization expense as a percentage of revenues decreased to 11.2% for the three months ended March 31, 2015, as compared to 12.5% for the three months ended March 31, 2014.
 
Income from Operations.  Income from operations increased $5.9 million to $18.3 million for the three months ended March 31, 2015, compared to the same period in 2014.  This was primarily due to increased revenues offset by increases in depreciable fixed assets, intangible amortization, restructuring charges related to our work‑force reduction to align our resources with our key strategic priorities and the additional costs associated with our acquired operations. Income from operations as a percentage of revenues increased to 13.8% for the three months ended March 31, 2015, as compared to 12.5% for the three months ended March 31, 2014.
 
Interest income.  Interest income increased $417 thousand to $466 thousand for the three months ended March 31, 2015, compared to the same period in 2014. Interest income increased primarily due to an increase in our cash, cash equivalents and investment balances.
 
Interest expense.  Interest expense increased $922 thousand to $1.3 million for the three months ended March 31, 2015, compared to the same period in 2014 due primarily to an increase of approximately $784 thousand related to the convertible debt contractual interest and deferred financing costs and an additional increase of $64 thousand related to our credit facility.
 
Other income.  Other income decreased $782 thousand to $14 thousand for the three months ended March 31, 2015, compared to the same period in 2014.  Other income decreased primarily due to foreign currency exchange rate fluctuations and prior year R&D tax credits taken that were taken in 2014 that were not available to us during the three months ended March 31, 2015.
 
Income Tax.  We recognized approximately $6.9 million and $5.2 million in related income tax expenses during the three months ended March 31, 2015 and 2014, respectively. Our effective tax rate was approximately 39.4% for the three months ended March 31, 2015, which was higher than our U.S. federal statutory rate primarily due to an unfavorable impact of Subpart F Income offset by a favorable impact of profit mix in foreign jurisdictions, which have lower tax rates. Our effective tax rate was approximately 40.7% for the three months ended March 31, 2014, which was higher than our U.S. federal statutory rate primarily due to an unfavorable impact of the change in fair market value for the contingent consideration obligation related to the Spatial earn-out and higher state taxes. We review the expected annual effective income tax rate and make changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, and changes resulting from the impact of tax law changes.
 
Liquidity and Capital Resources
 
Our principal source of liquidity has been cash provided by operations. Our cash, cash equivalents and marketable securities balance was $209.8 million at March 31, 2015,  a decrease of $80.6 million as compared to the balance at December 31, 2014.  This decrease was primarily due to $59.5 million paid for the purchase of F-Secure and $24.2 million related to purchases of fixed assets. We anticipate that our principal uses of cash in the future will be to fund the expansion of our business through both organic growth as well as possible acquisition activities and the expansion of our customer base internationally.  Uses of cash will also include facility and technology expansion, capital expenditures, and working capital.
 
On August 12, 2014, we issued $230.0 million aggregate principal amount of 0.75% Convertible Senior Notes due in 2019 (the “2019 Notes”). The 2019 Notes mature on August 15, 2019, and bear interest at a rate of 0.75% per annum payable semi-annually in arrears on February 15 and August 15 of each year. We accounted for the $230 million face value of the debt as a liability and capitalized approximately $7.1 million of financing fees, related to the issuance. At March 31, 2015, the carrying amount of the liability and the outstanding principal of the 2019 Notes was $230.0 million, with an effective interest rate of approximately 1.36%. The fair value of the 2019 Notes was $270.7 million at March 31, 2015.
 
In September 2013, we entered into a Credit Agreement (the “Credit Facility”) with JP Morgan Chase Bank, N.A., as the administrative agent, Wells Fargo Bank, National Association, as the syndication agent and Capital One, National Association and KeyBank National Association, as co-documentation agents.  The Credit Facility, which can be used for general corporate purposes, is a $100 million unsecured revolving line of credit that matures on September 27, 2018.  We have the right to request an increase in the
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aggregate principal amount of the Credit Facility to $150 million.
 
The Credit Facility is subject to certain financial covenants.  As of March 31, 2015, we were in compliance with all required covenants and there were no outstanding balances on the Credit Facility.
 
At March 31, 2015,  our non-U.S. subsidiaries held approximately $12.4 million of cash and cash equivalents that are available for use by all of our operations around the world.  At this time, we believe these funds will be permanently reinvested outside of the U.S.  However, if these funds were repatriated to the U.S. or used for U.S. operations, certain amounts could be subject to U.S. tax for the incremental amount in excess of the foreign tax paid.  Due to the timing and circumstances of repatriation of such earnings, if any, it is not practical to determine the unrecognized deferred tax liability related to the amount.
 
Discussion of Cash Flows
 
Cash flows from operations. Net cash used in operating activities for the three months ended March 31, 2015 was $135 thousand, as compared to $11.4 million used for the same period in 2014.  Cash flows from operations increased by approximately $11.3 million. The operating cash flows for the three months ended March 31, 2015 benefited from the increase in net income and non-cash items by $3.2 million. Net working capital, although negatively impacted by the timing of our receivable collections, increased by $15.2 million from the three months ended March 31, 2014.
 
Cash flows from investing.  Net cash used in investing activities for the three months ended March 31, 2015 was $87.0 million, as compared to $9.0 million used for the same period in 2014.  The increase in net cash used in investing activities for the three months ended March 31, 2015 of $78.0 million compared to 2014 was primarily due to the recent acquisition of F-Secure and increased capital expenditures.
 
Cash flows from financing.  Net cash provided by financing activities for the three months ended March 31, 2015 was $3.6 million, as compared to $4.1 million provided by financing activities for the same period in 2014.  The decrease in net cash provided by financing activities for the three months ended March 31, 2015 of $479 thousand as compared to 2014 was primarily due to the $8 million payment of the Strumsoft earn-out, of which $4.5 million was classified as cash flows from financing activities, offset by an increase in proceeds from the exercise of stock options.
 
We believe that our existing cash and cash equivalents, cash generated from our existing operations, our available credit facilities and other available sources of financing will be sufficient to fund our operations for the next twelve months based on our current business plans.
 
Effect of Inflation
 
Although inflation generally affects us by increasing our cost of labor and equipment, we do not believe that inflation has had any material effect on our results of operations for three months ended March 31, 2015 or 2014.
 
Impact of Recently Issued Accounting Standards
 
In March 2015, the Financial Accounting Standards Board issued Accounting issued Accounting Standards Update (ASU) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The amendments should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). Management is currently evaluating the effects of ASU 2015-03 on our consolidated financial statements.
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In February 2015, the FASB issued Accounting Standards Update ("ASU") No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. Management is currently assessing the impact, if any, of the adoption of this guidance on our consolidated financial statements.
 
In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The new guidance eliminates the separate presentation of extraordinary items, net of tax and the related earnings per share, but does not affect the requirement to disclose material items that are unusual in nature or infrequently occurring. The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Entities have the option to apply the new guidance prospectively or retrospectively, and can choose early adoption. Management does not expect the adoption of this ASU to significantly impact the consolidated financial statements.
 
In May 2014, the FASB and the International Accounting Standards Board (“IASB”) (collectively, the “Boards”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. The standard’s core principle (issued as ASU 2014-09 by the FASB and as IFRS 15 by the IASB), is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The new guidance must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. The effective date is fiscal years beginning after December 15, 2016. Early application is not permitted. Management is currently evaluating the methods of adoption and the impact that ASU 2014-09 will have on our consolidated financial statements.
 
Off-Balance Sheet Arrangements
 
We had no off-balance sheet arrangements as of March 31, 2015 and December 31, 2014,  that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Market Risk
 
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition or future results. We believe our exposure associated with these market risks has not changed materially since December 31, 2014.
 
Foreign Currency Exchange Risk
 
We conduct business outside of the U.S. in several currencies including the British Pound Sterling, Euro, Australian Dollar, and Indian Rupee. The functional currency is translated into U.S. dollars for balance sheet accounts using the month end rates in effect as of the balance sheet date and average exchange rate for revenue and expense accounts for each respective period. The translation adjustments are deferred as a separate component of stockholders’ equity within accumulated other comprehensive income. Gains or losses resulting from transactions denominated in foreign currencies are included in other income or expense, within the consolidated statements of income. The effects of the change in functional currency were not material to our consolidated financial statements.
 
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We do not hold any derivative instruments and do not engage in any hedging activities. Although our reporting currency is the U.S. dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials. As a result, we are subject to currency translation risk. Further, changes in exchange rates between foreign currencies and the U.S. dollar could affect our future net sales and cost of sales and could result in exchange losses.
 
We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase and hedging activities may be considered if appropriate.
 
Interest Rate Risk
 
We are exposed to the risk of interest rate fluctuations on the interest income earned on our cash and cash equivalents. A hypothetical 100 basis point movement in interest rates applicable to our cash and cash equivalents outstanding at March 31, 2015 would increase interest income by less than $399 thousand on an annual basis. We are subject to foreign currency exchange risk with respect to cash balances maintained in foreign currencies. As of March 31, 2015, there were no outstanding balances on the Credit Facility.
 
ITEM 4.  CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures.
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2015.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of March 31, 2015, the end of the period covered by this quarterly report, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
 
Changes in internal controls over financial reporting
 
We have implemented new financial systems that will continue in phases over the remainder of the year. In connection with this initiative and the resulting changes in our financial systems, the Company continues to enhance the design and documentation of our internal control processes to ensure that controls over our financial reporting remain effective. Except as noted, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II – OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
On October 7, 2014, we filed an amended complaint in the United States District Court for the District of New Jersey (Civ Act. No. 3:14-cv-06220) against F-Secure Corporation and F-Secure, Inc. (collectively, “F-Secure"), claiming that F-Secure has infringed, and continues to infringe, several of our patents. In February 2015, we entered into a patent license and settlement agreement with F-Secure Corporation and F-Secure, Inc. whereby we granted each of these companies (but not their subsidiaries or affiliates) a limited license to our patents. As a result of entering into the patent license and settlement agreement, the parties filed a joint stipulation to dismiss the above complaint.
 
Our 2011 acquisition agreement with Miyowa SA provided that former shareholders of Miyowa SA would be eligible for earn-out payments to the extent specified business milestones were achieved following the acquisition.  In December 2013, Eurowebfund and
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Bakamar, two former shareholders of Miyowa SA filed a complaint against us in the Commercial Court of Paris, France claiming that they are entitled to certain earn-out payments under the acquisition agreement.  We were served with a copy of this complaint in January 2014.  We believe Miyowa SA failed to meet the criteria required for us to pay the claimed amounts and that no earn-out payments are owed.  Although we cannot predict the outcome of the lawsuit due to the inherent uncertainties of litigation, we believe the positions of Eurowebfund and Bakamar are without merit, and we intend to vigorously defend against all claims brought by them. 
 
We are not currently subject to any legal proceedings that could have a material adverse effect on our operations; however, we may from time to time become a party to various legal proceedings arising in the ordinary course of our business.  The Company is currently the plaintiff in several patent infringement cases. The defendants in several of these cases have filed counterclaims. Although we cannot predict the outcome of the cases at this time due to the inherent uncertainties of litigation, we continue to pursue our claims and believe that any counterclaims are without merit, and we intend to defend against all such counterclaims.
 
ITEM 1A.  RISK FACTORS
 
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition or future results. The risks described in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.  If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our stock could decline, and our stockholders may lose part or all of their investment.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None.
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4.  MINE SAFETY DISCLOSURES
 
Not Applicable.
 
ITEM 5.  OTHER INFORMATION
 
None.
 
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ITEM 6.  EXHIBITS

Exhibit No.	Description	
 	 	
3.2	Restated Certificate of Incorporation of the Registrant, incorporated by reference to Registrant’s Registration Statement on Form S-1 (Commission File No. 333-132080).	
 	 	
3.4	Amended and Restated Bylaws of the Registrant, incorporated by reference to Registrant’s Registration Statement on Form S-1 (Commission File No. 333-132080).	
 	 	
4.2	Form of the Registrant’s Common Stock certificate, incorporated by reference to Registrant’s Registration Statement on Form S-1 (Commission File No. 333-132080).	
 	 	
10.8	Credit Agreement dated as of September 27, 2013 between the Registrant and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013.	
 	 	
10.8.1	Form of Indenture for Convertible Senior Notes, incorporated by reference to Registrants Form S-3 (Commission File No. 333-132080).	
 	 	
10.9	Cingular Mater Services Agreement, effective September 1, 2005 by and between the Registrant and Cingular Wireless LLC, incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.	
 	 	
10.9.1	Subordinate Material and Services Agreement No. SG021306.S.025 by and between the Registrant and AT&T Services, Inc. dated as of August 1, 2013, including order numbers  SG021306.S.025.S.001, SG021306.S.025.S.002, SG021306.S.025.S.003 and SG021306.S.025.S.004, incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013.	
 	 	
10.10†	Employment agreement dated as of January 1, 2015 between the Registrant and Daniel Rizer	
 	 	
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002	
 	 	
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002	
 	 	
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002	
 	 	
32.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002	
 	 	
101.INS	XBRL Instance Document	
 	 	
101.SCH	XBRL Schema Document	
 	 	
101.CAL	XBRL Calculation Linkbase Document	
 	 	
101.DEF	XBRL Taxonomy Extension Definition Linkbase	
 	 	
101.PRE	XBRL Presentation Linkbase Document	
 	 	 	
† 	Compensation Arrangement.	 	 	
 
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Table of Contents
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 	 	
 	Synchronoss Technologies, Inc.	

 	 	
 	 	
 	/s/ Stephen G. Waldis	
 	Stephen G. Waldis	
 	Chairman of the Board of Directors and	
 	Chief Executive Officer	
 	(Principal executive officer)	

 	 	
 	 	
 	/s/ Karen L. Rosenberger	
 	Karen L. Rosenberger	
 	Executive Vice President, Chief Financial Officer
and Treasurer	

May 1, 2015
 
28

Exhibit 10.10
Employment Agreement
This Agreement is entered into as of January 1, 2015, by and between Daniel Rizer (the “Executive”) and Synchronoss Technologies, Inc., a Delaware corporation (the “Company”).   Except as otherwise provided herein, defined terms are set forth in Section 10 below. 
 	1. Duties and Scope of Employment.	

 	(a) Position.  For the term of his employment under this Agreement (the “Employment”), the Company agrees to continue to employ Executive in the position of Executive Vice President,  of Marketing and Product Management.  Executive shall report to the Company’s Chief Executive Officer or his or her designee.  Executive’s principal workplace shall be in Bridgewater, New Jersey and shall be in such principal workplace a minimum of four days during each business week unless Executive is traveling to customers, investor or business meetings or for other work-related reasons or as otherwise agreed by the Company and Executive.	

 	(b) Obligations to the Company.  During his Employment, Executive (i) shall devote his full business efforts and time to the Company, (ii) shall not engage in any other employment, consulting or other business activity that would create a conflict of interest with the Company, (iii) shall not assist any person or entity in competing with the Company or in preparing to compete with the Company, and (iv) shall comply with the Company’s policies and rules, as they may be in effect from time to time.	

 	(c) No Conflicting Obligations.  Executive represents and warrants to the Company that he is under no obligations or commitments, whether contractual or otherwise, that are inconsistent with his obligations under this Agreement.  Executive represents and warrants that he will not use or disclose, in connection with his Employment, any trade secrets or other proprietary information or intellectual property in which Executive or any other person has any right, title or interest and that his Employment will not infringe or violate the rights of any other person. Executive represents and warrants to the Company that he has returned all property and confidential information belonging to any prior employer.	

 	(d) Commencement Date.  Executive has previously commenced full-time Employment.  This Agreement shall govern the terms of Executive’s Employment effective as of January 1, 2015 (the “Commencement Date”) through the Term (as defined in Section 5(a) below).	

 	2. Compensation	

 	(a) Salary.  The Company shall pay Executive as compensation for his services a base salary at a gross annual rate of not less than $318,270.  Such salary shall be payable in accordance with the Company’s standard payroll procedures.  (The annual compensation specified in this Subsection (a), together with any increases in such compensation that the Company may grant from time to time, is referred to in this Agreement as “Base Salary.”).	

 	(b) Incentive Bonuses.   Executive shall be eligible for an annual incentive bonus with a target amount equal to 60% of his Base Salary (the “Target Bonus”).  Executive’s  bonus (if any)
 
1	

 

shall be awarded based on criteria established by the Company’s Board of Directors (the “Board”) or its Compensation Committee.  Executive shall not be entitled to an incentive bonus if he is not employed by the Company on the last day of the fiscal year for which such bonus is payable or is provided notice of termination under Section 5(b) prior to such time.  Any bonus for a fiscal year shall be paid within 2½ months after the close of that fiscal year.  The determinations of the Board or its Compensation Committee with respect to such bonus shall be final and binding. 	

 	3. Paid Time Off and Employee Benefits.  During his Employment, Executive shall be eligible for paid time off in accordance with the Company’s paid time off policy, as it may be amended from time to time, with a minimum of 20 paid time off days per year, plus three floating holidays.  During his Employment, Executive shall be eligible to participate in the employee benefit plans maintained by the Company, subject in each case to the generally applicable terms and conditions of the plan in question and to the determinations of any person or committee administering such plan.	

 	4. Business Expenses.  During his Employment, Executive shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder.  The Company shall reimburse Executive for such expenses upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Company’s generally applicable policies; provided, however, in the event that Executive’s residence is not in Bridgewater, New Jersey, Executive shall not incur any expenses in traveling to or staying in Bridgewater, New Jersey.  Notwithstanding anything to the contrary herein, except to the extent any expense or reimbursement provided pursuant to this Agreement does not constitute a “deferral of compensation” within the meaning of Section 409A of the Code, (a) the amount of expenses eligible for reimbursement provided to Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to Executive in any other calendar year, (b) the reimbursements for expenses for which Executive is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred and (c) the right to payment or reimbursement hereunder may not be liquidated or exchanged for any other benefit. 	

 	5. Term of Employment.	

 	(a) Employment Term.  The Company hereby employs Executive to render services to the Company in the position and with the duties and responsibilities described in Section 1 for the period commencing on the Commencement Date and ending upon the earlier of (i) December 31, 2017, and (ii) the date Executive’s Employment is terminated in accordance with Section 5(b) (the “Term”).  After the initial term of this Agreement, Executive’s Employment shall be “at will” and either Executive or the Company shall be entitled to terminate Executive’s Employment at any time and for any reason, with or without cause.  However, this Agreement will not govern the terms of Executive’s employment after the Term;  provided, however, that Sections 1(b), 7, 8(a), 10(g), (h) and (i), and 11 shall survive the expiration of the Term.	

 	(b) Termination of Employment.  The Company may terminate Executive’s Employment at any time and for any reason (or no reason), and with or without Cause, by giving Executive 30 days’ advance notice in writing.  Executive may terminate his Employment by giving the Company 30 days’ advance notice in writing.  The Company shall have the right at any time
2	

 

during such 30-day period, to relieve Executive of his offices, duties and responsibilities and place him on a paid leave-of-absence status, provided that during such notice period, Executive shall remain a full-time employee of the Company and shall continue to receive his then current salary compensation and other benefits as provided in this Agreement.  Executive’s Employment shall terminate automatically in the event of his death.  The termination of Executive’s Employment shall not limit or otherwise affect his obligations under Section 7.	

 	(c) Rights Upon Termination.  Upon Executive’s termination of Employment for any reason, Executive shall be entitled to the compensation, benefits and reimbursements described in Sections 1, 2, 3, and 4 for the period preceding the effective date of such termination.  Upon the termination of Executive’s Employment under certain circumstances, Executive may be entitled to additional severance pay benefits described in Section 6.  The payments under this Agreement shall fully discharge all responsibilities of the Company to Executive.  This Agreement shall terminate when all obligations of the parties hereunder have been satisfied.	

 	(d) Rights Upon Death.  If Executive’s Employment ends due to death, Executive’s estate shall be entitled to receive an amount equal to his target bonus for the fiscal year in which his death occurred, prorated based on the number of days he was employed by the Company during that fiscal year.  All amounts under this Section 5(d) shall be paid on the first regularly scheduled payroll date that occurs on or after 60 days after Executive’s date of death. 	

 	(e) Rights Upon Permanent Disability.  If Executive’s Employment ends due to Permanent Disability and a Separation occurs, Executive shall be entitled to receive (i) an amount equal to his Target Bonus for the fiscal year in which his Employment ended, prorated based on the number of days he was employed by the Company during that fiscal year, and (ii) a lump sum amount equal to the product of (A) 24 and (B) the monthly amount the Company was paying on behalf of Executive and his eligible dependents with respect to the Company’s health insurance plans in which Executive and his eligible dependents were participants as of the date of Separation.  The amounts payable under this Section 5(e) shall be paid on the first regularly scheduled payroll date that occurs on or after 60 days after Executive’s Separation. 	

 	6. Termination Benefits.	

 	(a) Preconditions.  Any other provision of this Agreement notwithstanding, Subsections (b) and (c) below shall not apply unless Executive:	

 	i.	 	Has executed (or, with respect to Section 5(d), the executor or his estate has executed) a general release of all claims Executive (or his executor or estate) may have against the Company or persons affiliated with the Company (substantially in the form attached hereto as Exhibit A) (the “Release”);	

 	ii.	 	Complies with Executive’s obligations under Section 7 of this Agreement;	

 	iii.	 	Has returned all property of the Company in Executive’s possession; and	

 	iv.	 	If requested by the Board, has resigned as a member of the Board and as a member of the boards of directors of all subsidiaries of the Company, to the extent applicable.	
3

 

Executive must execute and return the Release within the period of time set forth in the Release (the “Release Deadline”).  The Release Deadline will in no event be later than 50 days after Executive’s Separation.  If Executive fails to return the Release on or before the Release Deadline or if Executive revokes the Release, then Executive will not be entitled to the benefits described in this Section 6. 
 	(b) Severance Pay in the Absence of a Change in Control.  If, during the term of this Agreement and prior to the occurrence of a Change in Control or more than 24 months following a Change in Control, Executive resigns his Employment for Good Reason and a Separation occurs or the Company terminates Executive’s Employment with the Company for a reason other than death, Cause or Permanent Disability and a Separation occurs, then the Company shall pay Executive a lump sum severance payment equal to (i) one and one-half times his Base Salary in effect at the time of the termination of Employment, (ii) his average annual bonus based on the actual amounts received in the immediately preceding two years and (iii) the product of (A) 24 and (B) the monthly amount the Company was paying on behalf of Executive and his eligible dependents with respect to the Company’s health insurance plans in which Executive and his eligible dependents were participants as of the date of Separation.   Notwithstanding anything herein to the contrary, in the event that Executive Employment is terminated for a reason other than death, Cause or Permanent Disability or Executive resigns his Employment for Good Reason under this Subsection (b) within two years after commencement of employment with the Company, then in lieu of using the average bonus received in the immediately preceding two years for the above calculation, such calculation shall use his Target Bonus in the year of termination if such termination under this Subsection (b) occurs in the first year of employment with the Company and the actual bonus Executive received during the first year of employment with the Company if such termination under this Subsection (b) occurs in the second year of employment with the Company.  However, the amount of the severance payment under this Subsection (b) shall be reduced by the amount of any severance pay or pay in lieu of notice that Executive receives from the Company under a federal or state statute (including, without limitation, the Worker Adjustment and Retraining Notification Act).  	

 	(c) Severance Pay in Connection with a Change in Control.  If, during the term of this Agreement and within 24 months following a Change in Control, Executive is subject to an Involuntary Termination, then (i) the Company shall pay Executive a lump sum severance payment equal to (x) two times his Base Salary in effect at the time of the termination of Employment plus two times Executive’s average bonus received in the immediately preceding two years and (y) a lump sum amount equal to the product of (A) 24 and (B) the monthly amount the Company was paying on behalf of Executive and his eligible dependents with respect to the Company’s health insurance plans in which Executive and his eligible dependents were participants as of the date of Separation , (ii) the vesting of all stock options and shares of restricted stock granted by the Company and held by Executive shall be accelerated in full as of the date of the Involuntary Termination.  Notwithstanding anything herein to the contrary, in the event that Executive is subject to an Involuntary Termination under this Subsection (c) within two years after commencement of employment with the Company, then in lieu of using the average bonus received in the immediately preceding two years for the above calculation, such calculation shall use his Target Bonus in the year of the Involuntary Termination if such termination under this Subsection (c) occurs in the first year of employment with the Company and the actual bonus Executive received during the first year of employment with the Company if such termination under this Subsection (c) occurs in the second year of employment with the Company.  However, the amount of the severance payment under this Subsection (c) shall be
4	

 

reduced by the amount of any severance pay or pay in lieu of notice that Executive receives from the Company under a federal or state statute (including, without limitation, the Worker Adjustment and Retraining Notification Act).  	

 	(d) Commencement of Severance Payments.  Payment of the severance pay provided for under this Agreement will be made on the first regularly scheduled payroll date that occurs on or after 60 days after Executive’s Separation, but only if Executive has complied with the release and other preconditions set forth in Subsection (a) (to the extent applicable). 	

 	7. Protective Covenants.	

 	(a) Non–Competition.  As one of the Company’s executive and management personnel and officer, Executive has acquired extensive and valuable knowledge and confidential information concerning the business of the Company, including certain trade secrets the Company wishes to protect. Executive further acknowledges that during his employment he will have access to and knowledge of Proprietary Information.  To protect the Company’s Proprietary Information, and in consideration of this Agreement, Executive agrees that during his employment with the Company and for a period of twelve (12) months after the termination of Executive’s employment with the Company for any reason, whether under this Agreement or otherwise (the “Restricted Period”), he will not directly or indirectly engage in (whether as an employee, consultant, proprietor, partner, director or otherwise), have any ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business that engages in a Restricted Business in a Restricted Territory.  It is agreed that ownership of (i) no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation or (ii) any stock he presently owns shall not constitute a violation of this Section.	

 	(b) Non-Solicitation and Non-Servicing.  During his employment with the Company and continuing until the Restricted Period, Executive shall not directly or indirectly, personally or through others,	
(i)attempt in any manner to solicit, persuade or induce any Client of the Company to terminate, reduce or refrain from renewing or extending its contractual or other relationship with the Company in regard to the purchase or licensing of products or services manufactured, marketed, licensed or sold by the Company, or to become a Client of or enter into any contractual or other relationship with Executive or any other individual, person or entity in regard to the purchase or license of products or services similar or identical to those manufactured, marketed or sold by the Company; or
(ii)attempt in any manner to solicit, persuade or induce any individual, person or entity which is, or at any time during Executive’s employment with the Company was, a supplier of any product or service to the Company or vendor of the Company (whether as a distributor, agent, employee or otherwise) to terminate, reduce or refrain from renewing or extending his, her or its contractual or other relationship with the Company; or
(iii)render to or for any Client any services of the type rendered by the Company; or
5

 

(iv)employ as an employee or retain as a consultant any person who is then, or at any time during the preceding twelve months was, an employee of or consultant to the Company (unless the Company had terminated the employment or engagement of such employee or exclusive consultant prior to the time of the alleged prohibited conduct), or persuade or attempt to persuade any employee of or consultant to the Company to leave the employ of the Company or to become employed as an employee or retained as a consultant by anyone other than the Company.
 	(c) Non-Disclosure.  Executive has entered into a Proprietary Information and Inventions Agreement with the Company, which is incorporated herein by reference.	

 	(d) Reasonable.  Executive agrees and acknowledges that the time limitation on the restrictions in this Section 7, combined with the geographic scope, is reasonable.  Executive also acknowledges and agrees that this provision is reasonably necessary for the protection of Proprietary Information, that through his Employment he shall receive adequate consideration for any loss of opportunity associated with the provisions herein, and that these provisions provide a reasonable way of protecting the Company’s business value which will be imparted to him.  If any restriction set forth in this Section 7 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.	

 	8. Successors.	

 	(a) Company’s Successors.  This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets.  For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which becomes bound by this Agreement.	

 	(b) Employee’s Successors.  This Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.	

 	9. Taxes.	

 	(a) Withholding Taxes.  All payments made under this Agreement shall be subject to reduction to reflect applicable withholding and payroll taxes or other deductions required to be withheld by law. 	

 	(b) Tax Advice.  Executive is encouraged to obtain his own tax advice regarding his compensation from the Company.  Executive agrees that the Company does not have a duty to design its compensation policies in a manner that minimizes Executive’s tax liabilities, and Executive shall not make any claim against the Company or the Board related to tax liabilities arising from Executive’s compensation.	

 	(c) Parachute Taxes.  Notwithstanding anything in this Agreement to the contrary, if  it shall be determined that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this
6	

 

Agreement or otherwise (“Total Payments”) to be made to Executive would otherwise exceed the amount (the “Safe Harbor Amount”) that could be received by Executive without the imposition of an excise tax under Section 4999 of Code, then the Total Payments shall be reduced to the extent, and only to the extent, necessary to assure that their aggregate present value, as determined in accordance the applicable provisions of Section 280G of the Code and the regulations thereunder, does not exceed the greater of the following dollar amounts (the “Benefit Limit”): (i) the Safe Harbor Amount, or (ii) the greatest after-tax amount payable to Executive after taking into account any excise tax imposed under section 4999 of the Code on the Total Payments.  All determinations to be made under this subparagraph (c) shall be made by an independent public accounting firm selected by the Company before the date of the Change in Control (the “Accounting Firm”).  In determining whether such Benefit Limit is exceeded, the Accounting Firm shall make a reasonable determination of the value to be assigned to the restrictive covenants in effect for Executive pursuant to Section 7 of this Agreement, and the amount of his potential parachute payment under Section 280G of the Code shall be reduced by the value of those restrictive covenants to the extent consistent with Section 280G of the Code and the regulations thereunder. To the extent a reduction to the Total Payments is required to be made in accordance with this subparagraph (c), such reduction and/or cancellation of acceleration of equity awards shall occur in the order that provides the maximum economic benefit to Executive.  In the event that acceleration of equity awards is to be reduced, such acceleration of vesting also shall be canceled in the order that provides the maximum economic benefit to Executive.  Notwithstanding the foregoing, any reduction shall be made in a manner consistent with the requirements of section 409A of the Code and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.  All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this subparagraph (c) shall be borne solely by the Company.  The Company agrees to indemnify and hold harmless the Accounting Firm from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to this subparagraph (c), except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm.	

 	(d) Section 409A.  Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.  If the Company determines that Executive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of his Separation, then (i) the severance payments under Section 6, to the extent that they are subject to Section 409A of the Code, shall commence on the first business day following (A) expiration of the six-month period measured from Executive’s Separation, or (B) the date of Executive’s death, and (ii) the installments that otherwise would have been paid prior to such date will be paid in a lump sum when such payments commence. 	

 	10. Definitions.	

 	(a) Cause.  For all purposes under this Agreement, “Cause” shall mean:	

 	i.	 	An unauthorized use or disclosure by Executive of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company;	

 	ii.	 	A material breach by Executive of any material agreement between Executive and
7	

 

the Company;	

 	iii.	 	A material failure by Executive to comply with the Company’s written policies or rules;	

 	iv.	 	Executive’s conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State thereof;	

 	v.	 	Executive’s gross negligence or willful misconduct which causes material harm to the Company;	

 	vi.	 	A continued failure by Executive to perform reasonably assigned duties after receiving written notification of such failure from the Board; or	

 	vii.	 	A failure by Executive to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested Executive’s cooperation.	

 	(b) Change in Control.  For all purposes under this Agreement, “Change in Control” shall mean the occurrence of:	

 	i.	 	The acquisition, by a person or persons acting as a group, of the Company's stock that, together with other stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the Company;	

 	ii.	 	The acquisition, during a 12-month period ending on the date of the most recent acquisition, by a person or persons acting as a group, of 30% or more of the total voting power of the Company;	

 	iii.	 	The replacement of a majority of the members of the Board, during any 12-month period, by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of such appointment or election; or	

 	iv.	 	The acquisition, during a 12-month period ending on the date of the most recent acquisition, by a person or persons acting as a group, of the Company's assets having a total gross fair market value (determined without regard to any liabilities associated with such assets) of 80% or more of the total gross fair market value of all of the assets of the Company (determined without regard to any liabilities associated with such assets) immediately prior to such acquisition or acquisitions.	
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur unless such transaction also qualifies as an event under Treas. Reg. §1.409A-3(i)(5)(v) (change in the ownership of a corporation), Treas. Reg. §1.409A-3(i)(5)(vi) (change in the effective control of a corporation), or Treas. Reg. §1.409A-3(i)(5)(vii) (change in the ownership of a substantial portion of a corporation's assets).
 	(c) Client.  For all purposes under this Agreement, “Client” shall mean (i) anyone who is a client of the Company as of, or at any time during the one-year period immediately preceding, the termination of Executive’s employment, but only if Executive had a direct relationship with, supervisory responsibility for or otherwise were involved with such client during Executive’s
8	

 

employment with the Company and (ii) any prospective client to whom the Company made a new business presentation (or similar offering of services) at any time during the one-year period immediately preceding, or six-month period immediately following, Executive’s employment termination (but only if initial discussions between the Company and such prospective client relating to the rendering of services occurred prior to the termination date, and only if Executive participated in or supervised such presentation and/or its preparation or the discussions leading up to it). 	

 	(d) Code.  For all purposes under this Agreement, “Code” shall mean the Internal Revenue Code of 1986, as amended.	

 	(e) Company.  For all purposes under this Agreement, “Company” shall include Synchronoss Technologies, Inc. and all of its subsidiaries and affiliates.	

 	(f) Good Reason.  For all purposes under this Agreement, “Good Reason” shall mean:	

 	i.	 	a change in Executive’s position with the Company that materially reduces his level of authority or responsibility;	

 	ii.	 	a reduction in Executive’s base salary by more than 10% unless pursuant to a Company-wide salary reduction affecting all Executives proportionately;	

 	iii.	 	relocation of Executive’s principal workplace by more than 50 miles from such workplace;	

 	iv.	 	a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to Executive immediately prior to such reduction; or	

 	v.	 	a material reduction in the kind or level of employee benefits to which Executive is entitled immediately prior to such reduction with the result that Executive’s overall benefits package is significantly reduced, unless such reduction is made in connection with a reduction in the kind or level of employee benefits of employees of the Company generally.	
A condition shall not be considered “Good Reason” unless Executive gives the Company written notice of such condition within 90 days after such condition comes into existence and the Company fails to remedy such condition within 30 days after receiving Executive’s written notice.  In addition, Executive’s resignation must occur within 12 months after the condition comes into existence.
 	(g) Involuntary Termination.  For all purposes under this Agreement, “Involuntary Termination” shall mean either (i) the Company terminates Executive’s Employment with the Company for a reason other than death, Cause or Permanent Disability and a Separation occurs, or (ii) Executive resigns his Employment for Good Reason and a Separation occurs.  	

 	(h) Permanent Disability.  For all purposes under this Agreement, “Permanent Disability” shall mean Executive’s inability to perform the essential functions of Executive’s position, with or without reasonable accommodation, for a period of at least 120 consecutive days because of a physical or mental impairment.	
9

 

 	(i) Proprietary Information.  For all purposes under this Agreement, “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company.  By way of illustration but not limitation, Proprietary Information includes (i) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know‑how, improvements, discoveries, developments, designs and techniques; and (ii) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (iii) information regarding the skills and compensation of other employees of the Company. 	

 	(j) Restricted Business.  For all purposes under this Agreement, “Restricted Business” shall mean the design, development, marketing or sales of software, or any other process, system, product, or service marketed, sold or under development by the Company at the time Executive’s employment with the Company ends, whether during or after the Term.	

 	(k) Restricted Territory.  For all purposes under this Agreement, “Restricted Territory” shall mean any state, county, or locality in the United States or around the world in which the Company conducts business.	

 	(l) Separation.  For all purposes under this Employment Agreement, “Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.	

 	(m) Solicit.  For all purposes under this Agreement, “solicit” shall mean (i) active solicitation of any Client or Company employee; (ii) the provision of information regarding any Client or Company employee to any third party where such information could be useful to such third party in attempting to obtain business from such Client or attempting to hire any such Company employee; (iii) participation in any meetings, discussions, or other communications with any third party regarding any Client or Company employee where the purpose or effect of such meeting, discussion or communication is to obtain business from such Client or employ such Company employee; and (iv) any other passive use of information about any Client or Company employee which has the purpose or effect of assisting a third party or causing harm to the business of the Company. 	

 	11. Miscellaneous Provisions.	

 	(a) Notice.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered, when delivered by FedEx with delivery charges prepaid, or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid.  In the case of Executive, mailed notices shall be addressed to him at the home address that he most recently communicated to the Company in writing.  In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.	

 	(b) Modifications and Waivers.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.	
10

 

 	(c) Whole Agreement.  This Agreement and the Proprietary Information and Inventions Agreement supersede and replace any prior agreements, representations or understandings (whether oral or written and whether express or implied) between Executive and the Company and constitute the complete agreement between Executive and the Company regarding the subject matter set forth herein. 	

 	(d) Choice of Law and Severability.  This Agreement shall be interpreted in accordance with the laws of the State of New Jersey (except their provisions governing the choice of law).  If any provision of this Agreement becomes or is deemed invalid, illegal or unenforceable in any applicable jurisdiction by reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision shall be stricken and the remainder of this Agreement shall continue in full force and effect.  If any provision of this Agreement is rendered illegal by any present or future statute, law, ordinance or regulation (collectively the “Law”), then such provision shall be curtailed or limited only to the minimum extent necessary to bring such provision into compliance with the Law.  All the other terms and provisions of this Agreement shall continue in full force and effect without impairment or limitation.	

 	(e) No Assignment.  This Agreement and all rights and obligations of Executive hereunder are personal to Executive and may not be transferred or assigned by Executive at any time.  The Company may assign its rights under this Agreement to any entity that assumes the Company’s obligations hereunder in connection with any sale or transfer of all or a substantial portion of the Company’s assets to such entity.	

 	(f) Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.	

 	(g) Survival.  The rights and obligations of the parties under the provisions of this Agreement (including without limitation Section 7 shall survive, and remaining binding and enforceable, notwithstanding the expiration of the Term, the termination of this Agreement the termination of Executive’s Employment hereunder or otherwise, to the extent necessary to preserve the intended benefits of such provision. 	
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.

 	Daniel Rizer	
 	Synchronoss Technologies, Inc.	
 	 	
By:	 	
 	Stephen G. Waldis	
 	Chief Executive Officer	
 
11

Exhibit 31.1
 
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 13a-14(a)
 
I, Stephen G. Waldis, certify that:
 
 	1.	 	I have reviewed this Quarterly Report on Form 10-Q of Synchronoss Technologies, Inc. for the quarter ended March 31, 2015;	

 	2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

 	3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

 	4.	 	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a.	 	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b.	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes  in accordance with generally accepted accounting principles;	

 	c.	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d.	 	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	5.	 	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):	

 	a.	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

 	b.	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
 
Date: May 1, 2015
 	 	
 	/s/ Stephen G. Waldis	
 	Stephen G. Waldis	
 	Chairman of the Board of Directors &
Chief Executive Officer	

Exhibit 31.2
 
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 13a-14(a)
 
I, Karen L. Rosenberger, certify that:
 
 	1.	 	I have reviewed this Quarterly Report on Form 10-Q of Synchronoss Technologies, Inc. for the quarter ended March 31, 2015;	

 	2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

 	3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

 	4.	 	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 	

 	a.	 	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b.	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes  in accordance with generally accepted accounting principles;	

 	c.	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d.	 	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	5.	 	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):	

 	a.	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

 	b.	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: May 1, 2015
 	 	
 	/s/ Karen L. Rosenberger	
 	Karen L. Rosenberger	
 	Executive Vice President, Chief Financial Officer &
Treasurer	

Exhibit 32.1
 
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 
 
In connection with the Quarterly Report on Form 10-Q of Synchronoss Technologies, Inc. (the “Company”) for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen G. Waldis, the Chairman of the Board of Directors, President & Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief that:
 	(1)	 	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and	

 	(2)	 	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.
 
Date: May 1, 2015
 	 	
 	/s/ Stephen G. Waldis	
 	Stephen G. Waldis	
 	Chairman of the Board of Directors &
Chief Executive Officer	
 
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2
 
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 
 
In connection with the Quarterly Report on Form 10-Q of Synchronoss Technologies, Inc. (the “Company”) for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Karen L. Rosenberger, the Chief Financial Officer & Treasurer of the Company, hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief that:
 	(1)	 	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and	

 	(2)	 	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.
 
Date: May 1, 2015
 	 	
 	/s/ Karen L. Rosenberger	
 	Karen L. Rosenberger	
 	Executive Vice President, Chief Financial Officer &
Treasurer	
 
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.