Synchronoss Technologies, Inc. (NASDAQ: SNCR), the leader in mobile cloud innovation and software-based activation for mobile carriers, retailers and OEMs around the world, today announced financial results for the fourth quarter and full year 2014.
“The fourth quarter provided a strong finish to 2014, with financial results that exceeded our expectations, and were highlighted by year-over-year Cloud Services revenue growth of 61% and improved Activation Services revenue growth of 16%,” said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “We’ve had a number of exciting business developments in recent months, including a major expansion of our multi-year agreement with Verizon Wireless and entering into an agreement to acquire certain F-Secure’s cloud assets. We believe that our expanding cloud services customer base, coupled with greater opportunities for subscriber adoption and utilization, provide a long runway for growth in this dynamic market.”
On a GAAP basis, Synchronoss reported net revenues of $130.2 million, representing an increase of 34% compared to the fourth quarter of 2013. Gross profit was $77.6 million and income from operations was $20.5 million in the fourth quarter of 2014. Net income was $13.6 million, leading to diluted earnings per share of $0.30, compared to $0.39 for the fourth quarter of 2013.
On a non-GAAP basis, Synchronoss reported net revenues, which adds back the purchase accounting adjustment related to revenues for certain acquisitions, of $130.9 million, an increase of 34% compared to the fourth quarter of 2013. Gross profit for the fourth quarter of 2014 was $79.9 million, representing a gross margin of 61%. Income from operations was $36.2 million in the fourth quarter of 2014, representing a year-over-year increase of 44% and an operating margin of 28%. Net income was $24.2 million in the fourth quarter of 2014, up from $16.4 million in the year ago period. Diluted earnings per share were $0.53 for the fourth quarter of 2014, compared to $0.41 for the fourth quarter of 2013.
A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
“We are pleased with our fourth quarter results from both a financial and operational perspective,” said Karen L. Rosenberger, Chief Financial Officer and Treasurer. “As we enter 2015, we remain focused on continuing to drive top line growth and increased profitability as a result of the investments we have been making and our global leadership position in both Activation and Personal Cloud.”
Other Fourth Quarter and Recent Business Highlights:
- Cloud Services revenue accounted for $63.4 million of non-GAAP revenue, representing approximately 48% of total non-GAAP revenue and growing 61% on a year-over-year basis.
- Activation Services revenue accounted for $67.5 million of non-GAAP revenue, representing approximately 52% of total non-GAAP revenue and growing 16% on a year-over-year basis.
- Subsequent to the end of the fourth quarter, Synchronoss entered into an agreement to acquire certain assets from F-Secure for $60 million in cash. The acquisition of F-Secure assets will significantly expand Synchronoss’ relationship with global customers worldwide while strengthening its competitive position in the Personal Cloud.
Full Year 2014 Summary Financial Results
- On a GAAP basis: revenues for the full year 2014 were $457.3 million, an increase of 31% compared to $349.0 million in the prior year. Gross profit was $272.9 million, income from operations was $62.3 million and net income was $38.9 million, leading to full year 2014 diluted earnings per share of $0.92.
- On a Non-GAAP basis: revenues for the full year 2014 were $458.6 million, an increase of 30% compared to $352.5 million in 2013. Gross profit was $280.2 million, representing a gross margin of 61%, and income from operations was $118.1 million, representing an operating margin of 26%. Net income was $76.8 million for the full year 2014, leading to diluted earnings per share of $1.79, an increase of 35% from $1.33 in the prior year.
Conference Call Details
In conjunction with this announcement, Synchronoss will host a conference call today, February 5, 2015, at 8:30 a.m. (ET) to discuss the company's financial results. To access this call, dial 877-703-6108 (domestic) or 857-244-7307 (international). The pass code for the call is 62594511. Additionally, a live web cast of the conference call will be available on the “Investor Relations” page on the company’s web site www.synchronoss.com.
Following the conference call, a replay will be available for a limited time at 888-286-8010 (domestic) or 617-801-6888 (international). The replay pass code is 89427171. An archived web cast of this conference call will also be available on the “Investor Relations” page of the company’s web site, www.synchronoss.com.
Non-GAAP Financial Measures
Synchronoss has provided in this release selected financial information that has not been prepared in accordance with GAAP. This information includes historical non-GAAP revenues, gross profit, operating income, net income, effective tax rate, earnings per share and cash flows from operating activities. Synchronoss uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Synchronoss’ ongoing operational performance. Synchronoss believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in Synchronoss’ industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial results discussed above add back the deferred revenue write-down associated with acquisitions, fair value stock-based compensation expense, acquisition-related costs which includes integration costs, changes in the contingent consideration obligation, deferred compensation expense related to earn outs and amortization of intangibles associated with acquisitions.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures as detailed above. As previously mentioned, a reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release.
About Synchronoss Technologies, Inc.
Synchronoss (NASDAQ: SNCR) is the mobile innovation leader that provides personal cloud solutions and software-based activation for connected devices across the globe. The company’s proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers to live in a connected world. For more information visit us at www.synchronoss.com.
Forward-looking Statements
This document may include certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," “outlook” or words of similar meanings. These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption "Risk Factors" in Synchronoss’ Annual Report on Form 10-K for the year ended December 31, 2013 and other documents filed with the U.S. Securities and Exchange Commission. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors. Synchronoss does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
The Synchronoss logo, Synchronoss and Synchronoss Integrated Life are trademarks of Synchronoss Technologies, Inc. All other trademarks are property of their respective owners.
| SYNCHRONOSS TECHNOLOGIES, INC. BALANCE SHEETS (in thousands, except per share data) (Unaudited) | ||||||||||
| December 31, 2014 | December 31, 2013 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 235,967 | $ | 63,512 | ||||||
| Marketable securities | 51,097 | 9,105 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $88
and $237 at | 118,371 | 64,933 | ||||||||
| Prepaid expenses and other assets | 35,023 | 19,451 | ||||||||
| Deferred tax assets | 1,475 | 4,626 | ||||||||
| Total current assets | 441,933 | 161,627 | ||||||||
| Marketable securities | 3,313 | 4,988 | ||||||||
| Property and equipment, net | 151,171 | 106,106 | ||||||||
| Goodwill | 147,135 | 137,743 | ||||||||
| Intangible assets, net | 99,489 | 101,963 | ||||||||
| Deferred tax assets | 1,232 | 4,210 | ||||||||
| Other assets | 18,549 | 10,382 | ||||||||
| Total assets | $ | 862,822 | $ | 527,019 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 25,059 | $ | 9,528 | ||||||
| Accrued expenses | 42,657 | 37,919 | ||||||||
| Deferred revenues | 11,897 | 15,372 | ||||||||
| Contingent consideration obligation | 8,022 | 22 | ||||||||
| Total current liabilities | 87,635 | 62,841 | ||||||||
| Lease financing obligation - long term | 9,204 | 9,252 | ||||||||
| Contingent consideration obligation - long-term | — | 4,468 | ||||||||
| Convertible debt | 230,000 | — | ||||||||
| Deferred tax liability | 3,698 | — | ||||||||
| Other liabilities | 3,178 | 2,819 | ||||||||
| Stockholders’ equity: | ||||||||||
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0
shares issued and outstanding at | — | — | ||||||||
Common stock, $0.0001 par value; 100,000 shares authorized, 46,444
and 44,456 shares issued; 42,711 | 4 | 4 | ||||||||
| Treasury stock, at cost (3,733 and 3,793 shares at December 31, 2014 and 2013, respectively) | (66,336) | (67,104) | ||||||||
| Additional paid-in capital | 454,740 | 393,644 | ||||||||
| Accumulated other comprehensive loss | (20,014) | (723) | ||||||||
| Retained earnings | 160,713 | 121,818 | ||||||||
| Total stockholders’ equity | 529,107 | 447,639 | ||||||||
| Total liabilities and stockholders’ equity | $ | 862,822 | $ | 527,019 | ||||||
| SYNCHRONOSS TECHNOLOGIES, INC. STATEMENT OF INCOME (in thousands, except per share data) (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net revenues | $ | 130,211 | $ | 97,207 | $ | 457,314 | $ | 349,047 | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of services (1)(2)(3)* | 52,649 | 40,447 | 184,414 | 146,238 | ||||||||||||
| Research and development (1)(2)(3) | 19,718 | 15,215 | 73,620 | 64,845 | ||||||||||||
| Selling, general and administrative (1)(2)(3) | 23,568 | 16,939 | 79,227 | 62,096 | ||||||||||||
| Net change in contingent consideration obligation | 118 | (8,000) | 1,799 | (5,324) | ||||||||||||
| Restructuring charges | — | — | — | 5,172 | ||||||||||||
| Depreciation and amortization | 13,664 | 12,334 | 55,956 | 41,126 | ||||||||||||
| Total costs and expenses | 109,717 | 76,935 | 395,016 | 314,153 | ||||||||||||
| Income from operations | 20,494 | 20,272 | 62,298 | 34,894 | ||||||||||||
| Interest income | 398 | 125 | 838 | 557 | ||||||||||||
| Interest expense | (1,172) | (375) | (3,003) | (1,089) | ||||||||||||
| Other (expense) income (4) | (614) | 543 | 441 | 217 | ||||||||||||
| Income before income tax expense | 19,106 | 20,565 | 60,574 | 34,579 | ||||||||||||
| Income tax expense | (5,486) | (4,692) | (21,679) | (11,228) | ||||||||||||
| Net income | $ | 13,620 | $ | 15,873 | $ | 38,895 | $ | 23,351 | ||||||||
| Net income attributable to Synchronoss | 13,620 | 15,873 | 38,895 | 23,351 | ||||||||||||
| Add: After-tax interest on convertible debt | 557 | — | 754 | — | ||||||||||||
| Net income for diluted EPS calculation | $ | 14,177 | $ | 15,873 | $ | 39,649 | $ | 23,351 | ||||||||
| Net income per common share: | ||||||||||||||||
| Basic | $ | 0.33 | $ | 0.40 | $ | 0.96 | $ | 0.60 | ||||||||
| Diluted | $ | 0.30 | $ | 0.39 | $ | 0.92 | $ | 0.58 | ||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | 41,210 | 39,378 | 40,418 | 38,891 | ||||||||||||
| Diluted | 46,785 | 40,473 | 43,297 | 40,009 | ||||||||||||
| * Cost of services excludes depreciation which is shown separately. | ||||||||||||||||
| (1) Amounts include fair value stock-based compensation as follows: | ||||||||||||||||
| Cost of services | $ | 1,638 | $ | 1,310 | $ | 5,924 | $ | 5,184 | ||||||||
| Research and development | 1,647 | 1,221 | 5,950 | 5,705 | ||||||||||||
| Selling, general and administrative | 5,232 | 4,371 | 17,113 | 14,325 | ||||||||||||
| Total fair value stock-based compensation expense | $ | 8,517 | $ | 6,902 | $ | 28,987 | $ | 25,214 | ||||||||
| (2) Amounts include acquisition costs as follows: | ||||||||||||||||
| Cost of services | $ | — | $ | (2) | $ | 31 | $ | 252 | ||||||||
| Research and development | 398 | (2) | 475 | 351 | ||||||||||||
| Selling, general and administrative | 146 | 477 | 2,432 | 1,145 | ||||||||||||
| Total acquisition costs | $ | 544 | $ | 473 | $ | 2,938 | $ | 1,748 | ||||||||
| (3) Amounts include fair value earn-out cash and stock compensation as follows: | ||||||||||||||||
| Cost of services | $ | — | $ | 10 | $ | 16 | $ | 257 | ||||||||
| Research and development | — | 23 | — | 128 | ||||||||||||
| Selling, general and administrative | 535 | 334 | 1,767 | 524 | ||||||||||||
| Total fair value earn-out cash and stock compensation expense | $ | 535 | $ | 367 | $ | 1,783 | $ | 909 | ||||||||
| (4) Amounts include Fx change of the contingent consideration obligation as follows: | ||||||||||||||||
| Other income (expense) | $ | 15 | $ | (29) | $ | 56 | $ | 93 | ||||||||
| SYNCHRONOSS TECHNOLOGIES, INC. Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share data) (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Non-GAAP financial measures and reconciliation: | ||||||||||||||||
| GAAP Revenue | $ | 130,211 | $ | 97,207 | $ | 457,314 | $ | 349,047 | ||||||||
| Add: Deferred Revenue Write-Down | 651 | 356 | 1,299 | 3,460 | ||||||||||||
| Non-GAAP Revenue | $ | 130,862 | $ | 97,563 | $ | 458,613 | $ | 352,507 | ||||||||
| GAAP Revenue | $ | 130,211 | $ | 97,207 | $ | 457,314 | $ | 349,047 | ||||||||
| Less: Cost of Services | 52,649 | 40,447 | 184,414 | 146,238 | ||||||||||||
| GAAP Gross Margin | 77,562 | 56,760 | 272,900 | 202,809 | ||||||||||||
| Add: Deferred revenue write-down | 651 | 356 | 1,299 | 3,460 | ||||||||||||
| Add: Fair value stock-based compensation | 1,638 | 1,310 | 5,924 | 5,184 | ||||||||||||
| Add: Acquisition and restructuring costs | — | (2) | 31 | 252 | ||||||||||||
| Add: Deferred compensation expense - earn-out | — | 10 | 16 | 257 | ||||||||||||
| Non-GAAP Gross Margin | $ | 79,851 | $ | 58,434 | $ | 280,170 | $ | 211,962 | ||||||||
| Non-GAAP Gross Margin % | 61% | 60% | 61% | 60% | ||||||||||||
| GAAP income from operations | $ | 20,494 | $ | 20,272 | $ | 62,298 | $ | 34,894 | ||||||||
| Add: Deferred revenue write-down | 651 | 356 | 1,299 | 3,460 | ||||||||||||
| Add: Fair value stock-based compensation | 8,517 | 6,902 | 28,987 | 25,214 | ||||||||||||
| Add: Acquisition and restructuring costs | 544 | 473 | 2,938 | 6,920 | ||||||||||||
| Add: Net change in contingent consideration obligation | 118 | (8,000) | 1,799 | (5,324) | ||||||||||||
| Add: Deferred compensation expense - earn-out | 535 | 367 | 1,783 | 909 | ||||||||||||
| Add: Amortization expense | 5,303 | 4,723 | 18,953 | 15,404 | ||||||||||||
| Non-GAAP income from operations | $ | 36,162 | $ | 25,093 | $ | 118,057 | $ | 81,477 | ||||||||
| GAAP net income attributable to common stockholders | $ | 13,620 | $ | 15,873 | $ | 38,895 | $ | 23,351 | ||||||||
| Add: Deferred revenue write-down, net of tax | 436 | 226 | 868 | 2,346 | ||||||||||||
| Add: Fair value stock-based compensation, net of tax | 5,696 | 4,591 | 19,358 | 17,095 | ||||||||||||
| Add: Acquisition and restructuring costs, net of taxes | 365 | 285 | 1,962 | 4,692 | ||||||||||||
| Add: Net change in contingent consideration obligation, net of Fx change, net of tax | 134 | (7,971) | 1,855 | (5,417) | ||||||||||||
| Add: Deferred compensation expense - earn-out, net of tax | 358 | 246 | 1,191 | 616 | ||||||||||||
| Add: Amortization expense, net of tax | 3,547 | 3,148 | 12,657 | 10,444 | ||||||||||||
| Non-GAAP net income | $ | 24,156 | $ | 16,398 | $ | 76,786 | $ | 53,127 | ||||||||
| Net income applicable to shares of common stock for earnings per share | $ | 24,156 | $ | 16,398 | $ | 76,786 | $ | 53,127 | ||||||||
| Add: After-tax interest on convertible debt | 543 | — | 776 | — | ||||||||||||
| Net income for diluted EPS calculation | $ | 24,699 | $ | 16,398 | $ | 77,562 | $ | 53,127 | ||||||||
| Diluted non-GAAP net income per share | $ | 0.53 | $ | 0.41 | $ | 1.79 | $ | 1.33 | ||||||||
| Weighted shares outstanding - Diluted | 46,785 | 40,473 | 43,297 | 40,009 | ||||||||||||
SYNCHRONOSS TECHNOLOGIES, INC. STATEMENT OF CASH FLOWS (in thousands) (Unaudited) | |||||||||
| Year Ended December 31, | |||||||||
| 2014 | 2013 | ||||||||
| Operating activities: | |||||||||
| Net income | $ | 38,895 | $ | 23,351 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization expense | 55,956 | 41,126 | |||||||
| Amortization of debt issuance costs | 618 | — | |||||||
| Loss on disposal of asset | 33 | — | |||||||
| Amortization of bond premium | 384 | 294 | |||||||
| Deferred income taxes | 3,207 | 1,575 | |||||||
| Non-cash interest on leased facility | 946 | 921 | |||||||
| Stock-based compensation | 28,987 | 25,214 | |||||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable, net of allowance for doubtful accounts | (50,924) | 10,167 | |||||||
| Prepaid expenses and other current assets | (14,660) | 8,022 | |||||||
| Other assets | (1,930) | (7,376) | |||||||
| Accounts payable | 4,169 | 348 | |||||||
| Accrued expenses | 1,263 | (7,155) | |||||||
| Contingent consideration obligation | 3,532 | (6,214) | |||||||
| Excess tax benefit from the exercise of stock options | (1,203) | (2,961) | |||||||
| Other liabilities | 5,825 | (320) | |||||||
| Deferred revenues | (4,119) | (5,900) | |||||||
| Net cash provided by operating activities | 70,979 | 81,092 | |||||||
| Investing activities: | |||||||||
| Purchases of fixed assets | (73,885) | (73,434) | |||||||
| Purchases of marketable securities available-for-sale | (50,275) | (8,366) | |||||||
| Sales and maturities of marketable securities available-for-sale | 9,265 | 14,825 | |||||||
| Business acquired, net of cash | (38,085) | (6,677) | |||||||
| Net cash used in investing activities | (152,980) | (73,652) | |||||||
| Financing activities: | |||||||||
| Proceeds from the exercise of stock options | 30,003 | 19,196 | |||||||
| Payments on contingent consideration obligation | — | (1,926) | |||||||
| Debt issuance costs related to convertible notes | (7,065) | — | |||||||
| Proceeds from issuance of convertible notes | 230,000 | — | |||||||
| Borrowings on revolving line of credit | 40,000 | — | |||||||
| Repayment of revolving line of credit | (40,000) | — | |||||||
| Excess tax benefit from the exercise of stock option | 1,203 | 2,961 | |||||||
Proceeds from the sale of Treasury Stock in connection with an employee stock purchase plan | 1,677 | 1,474 | |||||||
Repayments of capital obligations | (1,515) | (1,597) | |||||||
Net cash provided by financing activities | 254,303 | 20,108 | |||||||
Effect of exchange rate changes on cash | 153 | (64) | |||||||
Net increase in cash and cash equivalents | 172,455 | 27,484 | |||||||
Cash and cash equivalents at beginning of year | 63,512 | 36,028 | |||||||
Cash and cash equivalents at end of year | 235,967 | 63,512 | |||||||
| SYNCHRONOSS TECHNOLOGIES, INC. Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities (in thousands) (Unaudited) | ||||||||||
| Year Ended December 31, | ||||||||||
| 2014 | 2013 | |||||||||
| Non-GAAP cash provided by operating activities and reconciliation: | ||||||||||
| Net cash provided by operating activities (GAAP) | $ | 70,979 | $ | 81,092 | ||||||
| Add: Tax benefits from stock options exercised | 1,203 | 2,961 | ||||||||
| Add: Cash payments on settlement of Earn-out | — | (6,133) | ||||||||
| Adjusted cash flow provided by operating activities (Non-GAAP) | $ | 72,182 | $ | 77,920 | ||||||
Contacts:
Media:
Stacie Hiras,
+1-908-674-0758
Stacie.hiras@synchronoss.com
or
Investor:
Brian
Denyeau, +1-646-277-1251
investor@synchronoss.com
