Synchronoss Technologies, Inc. (NASDAQ:SNCR), the leader in mobile cloud innovation and software-based activation for mobile carriers, enterprises, retailers and OEMs around the world, today announced financial results for the third quarter of 2016.
“We are very proud of the Synchronoss team for delivering a strong third quarter with significant momentum around cloud and enterprise heading into year end and 2017,” said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “Cloud was very strong this quarter with both new and existing customers, as solid subscriber growth and expanded cloud initiatives in our core customer base set the stage for the next chapter of growth at Synchronoss.”
Financial Highlights for the Third Quarter of 2016:
- Total Revenue: $176.4 million GAAP compared to $150.9 million in the third quarter of 2015. $181.0 million non-GAAP compared to $151.3 million in the third quarter of 2015.
- Gross profit: $99.2 million GAAP compared to $87.4 million in the third quarter of 2015. $109.1 million non-GAAP compared to $92.1 million in the third quarter of 2015.
- Operating Income: $13.2 million GAAP compared to $22.3 million in the third quarter of 2015. $46.5 million non-GAAP compared to $43.2 million in the third quarter of 2015.
- Net Income attributable to Synchronoss: $7.7 million GAAP compared to $9.6 million in the third quarter of 2015. $32.5 million non-GAAP compared to $27.1 million in the third quarter of 2015.
- Earnings per Diluted Share: $0.16 GAAP compared to $0.21 in the third quarter of 2015. $0.68 non-GAAP compared to $0.58 in the third quarter of 2015.
- Operating cash flow: $(17.7) million GAAP and non-GAAP compared to $14.1 million in the third quarter of 2015.
A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
“We are pleased with our ability to deliver strong top-line growth with a growing cloud and enterprise pipeline,” said Karen L. Rosenberger, Chief Financial Officer and Treasurer. “We believe our ability to drive software growth, while investing in our enterprise and international initiatives, positions Synchronoss well heading into the fourth quarter and beyond.”
Third Quarter and Recent Business Highlights:
- Cloud Solution revenue: $101.9 million of GAAP revenue, representing approximately 58% of total GAAP revenues and growing 34% on a year-over-year basis. $106.4 million of non-GAAP revenue, representing approximately 59% of total non-GAAP revenue and growing 40% year-over-year.
- Activation Solution revenue: $74.5 million of GAAP revenue for the third quarter, representing 42% of our total GAAP revenues and remained flat year-over-year. $74.6 million of non-GAAP revenue, representing approximately 41% of our total non-GAAP revenues and was down one percent year-over-year.
- Completed key cloud migrations at international customers such as Softbank, America Movil, and British Telecom as they move towards scaling our Personal Cloud Platform.
- Enterprise Secure Mobility Platform (SMP) had numerous customer wins and competitive displacements during the quarter across the healthcare, legal, and financial verticals.
- Our Verizon UID partnership is helping provide us with access to approximately one-third of the US consumer market and a host of large enterprise customers in this new market.
Third Quarter Investor Conference Participation Schedule:
- Credit Suisse Technology Conference December 1, 2016-Phoenix, AZ
Conference Call Details
In conjunction with this announcement, Synchronoss will host a conference call today, at 5:00 p.m. (ET) to discuss the company’s financial results. To access this call, dial 877-930-7767 (domestic) or 253-336-7416 (international). The pass code for the call is 96591002. Additionally, a live web cast of the conference call will be available on the “Investor Relations” page on the company’s web site www.synchronoss.com.
Following the conference call, a replay will be available for a limited time at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 96591002. An archived web cast of this conference call will also be available on the “Investor Relations” page of the company’s web site, www.synchronoss.com.
Non-GAAP Financial Measures
Synchronoss has provided in this release selected financial information that has not been prepared in accordance with GAAP. This information includes historical non-GAAP revenues, gross profit, operating income (loss), net income (loss), effective tax rate, earnings (loss) per share and cash flows from operating activities. Synchronoss uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Synchronoss’ ongoing operational performance. Synchronoss believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in Synchronoss’ industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial results discussed above add back the deferred revenue write-down associated with acquisitions, fair value stock-based compensation expense, acquisition and restructuring related 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. For more information visit us at www.synchronoss.com.
Forward-looking Statements
This document may include certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," “outlook” or words of similar meanings. These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption "Risk Factors" in Synchronoss’ Annual Report on Form 10-K for the year ended December 31, 2015 and other documents filed with the U.S. Securities and Exchange Commission. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors. Synchronoss does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
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) | ||||||||
| September 30, 2016 | December 31, 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 123,319 | $ | 147,634 | ||||
| Marketable securities | 16,973 | 66,357 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $1,123 and $3,029 at September 30, 2016 and December 31, 2015, respectively | 217,307 | 143,692 | ||||||
| Prepaid expenses and other assets | 48,242 | 49,262 | ||||||
| Total current assets | 405,841 | 406,945 | ||||||
| Marketable securities | 3,968 | 19,635 | ||||||
| Property and equipment, net | 168,083 | 168,280 | ||||||
| Goodwill | 315,185 | 221,271 | ||||||
| Intangible assets, net | 215,666 | 174,322 | ||||||
| Deferred tax assets | 1,904 | 3,560 | ||||||
| Other assets | 14,082 | 16,215 | ||||||
| Total assets | $ | 1,124,729 | $ | 1,010,228 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 28,724 | $ | 26,038 | ||||
| Accrued expenses | 54,066 | 45,819 | ||||||
| Deferred revenues | 26,106 | 8,323 | ||||||
| Contingent consideration obligation | 8,229 | — | ||||||
| Short term debt | 38,000 | — | ||||||
| Total current liabilities | 155,125 | 80,180 | ||||||
| Lease financing obligation - long term | 13,082 | 13,343 | ||||||
| Contingent consideration obligation - long-term | — | 930 | ||||||
| Convertible debt | 225,938 | 224,878 | ||||||
| Deferred tax liability | 26,397 | 16,404 | ||||||
| Other liabilities | 20,399 | 3,227 | ||||||
| Redeemable noncontrolling interest | 52,616 | 61,452 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at September 30, 2016 and December 31, 2015 | — | — | ||||||
| Common stock, $0.0001 par value; 100,000 shares authorized, 49,309 and 48,084 shares issued; 45,315 and 44,405 outstanding at September 30, 2016 and December 31, 2015, respectively | 3 | 4 | ||||||
| Treasury stock, at cost (3,994 and 3,679 shares at September 30, 2016 and December 31, 2015, respectively) | (95,183 | ) | (65,651 | ) | ||||
| Additional paid-in-capital | 561,992 | 512,802 | ||||||
| Accumulated other comprehensive income | (31,788 | ) | (38,684 | ) | ||||
| Retained earnings | 196,148 | 201,343 | ||||||
| Total stockholders’ equity | 631,172 | 609,814 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,124,729 | $ | 1,010,228 | ||||
| SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net Revenues | $ | 176,421 | $ | 150,874 | $ | 476,658 | $ | 421,620 | ||||||||
| Costs and Expenses: | ||||||||||||||||
| Cost of services (1)(2)* | 77,230 | 63,438 | 217,004 | 172,013 | ||||||||||||
| Research and development (1)(2) | 28,141 | 23,986 | 78,408 | 68,472 | ||||||||||||
| Selling, general and administrative (1)(2) | 31,600 | 21,003 | 89,799 | 60,603 | ||||||||||||
| Net change in contingent consideration obligation | 572 | — | 7,299 | — | ||||||||||||
| Restructuring charges | 977 | 399 | 5,139 | 5,090 | ||||||||||||
| Depreciation and amortization | 24,692 | 19,754 | 74,009 | 51,221 | ||||||||||||
| Total costs and expenses | 163,212 | 128,580 | 471,658 | 357,399 | ||||||||||||
| Income from operations | 13,209 | 22,294 | 5,000 | 64,221 | ||||||||||||
| Interest income | 271 | 546 | 1,492 | 1,483 | ||||||||||||
| Interest expense | (1,596 | ) | (1,448 | ) | (5,006 | ) | (4,208 | ) | ||||||||
| Other income | (167 | ) | (1,030 | ) | (186 | ) | (601 | ) | ||||||||
| Income before income tax expense | 11,717 | 20,362 | 1,300 | 60,895 | ||||||||||||
| Income tax expense | (6,884 | ) | (10,717 | ) | (14,853 | ) | (25,535 | ) | ||||||||
| Net income (loss) | 4,833 | 9,645 | (13,553 | ) | 35,360 | |||||||||||
| Net loss attributable to noncontrolling interests | (2,843 | ) | — | (8,836 | ) | — | ||||||||||
| Net income (loss) attributable to Synchronoss | $ | 7,676 | $ | 9,645 | $ | (4,717 | ) | $ | 35,360 | |||||||
| Net income (loss) attributable to Synchronoss | 7,676 | 9,645 | (4,717 | ) | 35,360 | |||||||||||
| Add: After-tax interest on convertible debt | 323 | 377 | — | 1,366 | ||||||||||||
| Net income (loss) for diluted EPS calculation ** | $ | 7,999 | $ | 10,022 | $ | (4,717 | ) | $ | 36,726 | |||||||
| Net income (loss) per common share attributable to Synchronoss: | ||||||||||||||||
| Basic | $ | 0.18 | $ | 0.23 | $ | (0.11 | ) | $ | 0.84 | |||||||
| Diluted | $ | 0.16 | $ | 0.21 | $ | (0.11 | ) | $ | 0.77 | |||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | 43,560 | 42,491 | 43,488 | 42,077 | ||||||||||||
| Diluted | 48,590 | 47,692 | 43,488 | 47,505 | ||||||||||||
| * Cost of services excludes depreciation and amortization which is shown separately. | ||||||||||||||||
| ** Includes an add back for the convertible debt interest | ||||||||||||||||
| (1) Amounts include fair value stock-based compensation as follows: | ||||||||||||||||
| Cost of services | 2,184 | 1,884 | 6,024 | 4,969 | ||||||||||||
| Research and development | 2,510 | 1,986 | 6,366 | 5,113 | ||||||||||||
| Selling, general and administrative | 4,287 | 4,277 | 13,017 | 11,152 | ||||||||||||
| Total fair value stock-based compensation expense | $ | 8,981 | $ | 8,147 | $ | 25,407 | $ | 21,234 | ||||||||
| (2) Amounts include acquisition costs as follows: | ||||||||||||||||
| Cost of services | 3,153 | 2,304 | 14,138 | 3,202 | ||||||||||||
| Research and development | 3,033 | 2,289 | 9,721 | 4,932 | ||||||||||||
| Selling, general and administrative | 1,118 | 134 | 5,486 | 449 | ||||||||||||
| Total acquisition costs | $ | 7,304 | $ | 4,727 | $ | 29,345 | $ | 8,583 | ||||||||
| SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Non-GAAP financial measures and reconciliation: | ||||||||||||||||
| GAAP Revenue | $ | 176,421 | $ | 150,874 | $ | 476,658 | $ | 421,620 | ||||||||
| Add: Deferred revenue write-down | 4,554 | 475 | 11,384 | 692 | ||||||||||||
| Non-GAAP Revenue | $ | 180,975 | $ | 151,349 | $ | 488,042 | $ | 422,312 | ||||||||
| GAAP Revenue | $ | 176,421 | $ | 150,874 | $ | 476,658 | $ | 421,620 | ||||||||
| Less: Cost of services | 77,230 | 63,438 | 217,004 | 172,013 | ||||||||||||
| GAAP Gross Margin | 99,191 | 87,436 | 259,654 | 249,607 | ||||||||||||
| Add: Deferred revenue write-down | 4,554 | 475 | 11,384 | 692 | ||||||||||||
| Add: Fair value stock-based compensation | 2,184 | 1,884 | 6,024 | 4,969 | ||||||||||||
| Add: Acquisition and restructuring costs | 3,153 | 2,304 | 14,138 | 3,202 | ||||||||||||
| Non-GAAP Gross Margin | $ | 109,082 | $ | 92,099 | $ | 291,200 | $ | 258,470 | ||||||||
| Non-GAAP Gross Margin % | 60 | % | 61 | % | 60 | % | 61 | % | ||||||||
| GAAP income from operations | $ | 13,209 | $ | 22,294 | $ | 5,000 | $ | 64,221 | ||||||||
| Add: Deferred revenue write-down | 4,554 | 475 | 11,384 | 692 | ||||||||||||
| Add: Fair value stock-based compensation | 8,981 | 8,147 | 25,407 | 21,234 | ||||||||||||
| Add: Acquisition and restructuring costs | 8,281 | 5,126 | 34,484 | 13,673 | ||||||||||||
| Add: Net change in contingent consideration obligation | 572 | — | 7,299 | — | ||||||||||||
| Add: Amortization expense | 10,921 | 7,184 | 33,430 | 18,509 | ||||||||||||
| Non-GAAP income from operations | $ | 46,518 | $ | 43,226 | $ | 117,004 | $ | 118,329 | ||||||||
| GAAP net income (loss) attributable to Synchronoss | $ | 7,676 | $ | 9,645 | $ | (4,717 | ) | $ | 35,360 | |||||||
| Add: Deferred revenue write-down | 4,554 | 475 | 11,384 | 692 | ||||||||||||
| Add: Fair value stock-based compensation | 8,981 | 8,147 | 25,407 | 21,234 | ||||||||||||
| Add: Acquisition and restructuring costs | 8,281 | 5,126 | 34,484 | 13,673 | ||||||||||||
| Add: Net change in contingent consideration obligation, net of Fx change | 572 | — | 7,299 | — | ||||||||||||
| Add: Amortization expense | 10,921 | 7,184 | 33,430 | 18,509 | ||||||||||||
| Less: Noncontrolling interest non-GAAP adjustments | (1,373 | ) | — | (4,375 | ) | — | ||||||||||
| Less: Tax effect | (7,065 | ) | (3,488 | ) | (20,477 | ) | (14,025 | ) | ||||||||
| Non-GAAP net income attributable to Synchronoss | 32,547 | 27,089 | 82,435 | 75,443 | ||||||||||||
| Add: After-tax interest on convertible debt | 549 | 516 | 1,647 | 1,544 | ||||||||||||
| Net income for diluted EPS calculation | $ | 33,096 | $ | 27,605 | $ | 84,082 | $ | 76,987 | ||||||||
| Diluted non-GAAP net income per share | $ | 0.68 | $ | 0.58 | $ | 1.74 | $ | 1.62 | ||||||||
| Weighted shares outstanding - Diluted | 48,590 | 47,692 | 48,290 | 47,505 | ||||||||||||
| SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||
| STATEMENT OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (Unaudited) | ||||||||
Nine Months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Operating activities: | (As Adjusted) | |||||||
| Net (loss) income | $ | (13,553 | ) | $ | 35,360 | |||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization expense | 74,009 | 51,221 | ||||||
| Amortization of debt issuance costs | 1,197 | 1,125 | ||||||
| Loss on disposals | (70 | ) | — | |||||
| Amortization of bond premium | 1,214 | 1,261 | ||||||
| Deferred income taxes | 5,537 | (11,772 | ) | |||||
| Non-cash interest on leased facility | 763 | 694 | ||||||
| Stock-based compensation | 25,407 | 21,234 | ||||||
| Contingent consideration obligation | 7,299 | (1,532 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net of allowance for doubtful accounts | (72,871 | ) | (40,442 | ) | ||||
| Prepaid expenses and other current assets 1 | 5,315 | 8,020 | ||||||
| Other assets | 4,558 | (670 | ) | |||||
| Accounts payable | (5,679 | ) | 106 | |||||
| Accrued expenses 1 | 4,070 | 10,497 | ||||||
| Other liabilities | (6,596 | ) | (138 | ) | ||||
| Deferred revenues | 25,884 | 1,610 | ||||||
| Net cash provided by operating activities | 56,484 | 76,574 | ||||||
| Investing activities: | ||||||||
| Purchases of fixed assets | (46,189 | ) | (53,461 | ) | ||||
| Purchases of intangible assets | — | (1,200 | ) | |||||
| Purchases of marketable securities available-for-sale | (12,841 | ) | (105,817 | ) | ||||
| Maturities of marketable securities available-for-sale | 76,979 | 75,370 | ||||||
| Businesses acquired, net of cash | (98,428 | ) | (83,592 | ) | ||||
| Net cash used in investing activities | (80,479 | ) | (168,700 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from the exercise of stock options | 9,382 | 16,752 | ||||||
| Taxes paid on withholding shares 1 | (7,176 | ) | (15,472 | ) | ||||
| Payments on contingent consideration obligation | — | (4,468 | ) | |||||
| Debt issuance costs related to convertible notes | (1,346 | ) | — | |||||
| Borrowings on revolving line of credit | 144,000 | — | ||||||
| Repayment of revolving line of credit | (106,000 | ) | — | |||||
| Repurchases of common stock | (40,025 | ) | — | |||||
| Proceeds from the sale of treasury stock in connection with an employee stock purchase plan | 2,183 | 1,902 | ||||||
| Repayments of capital lease obligations | (2,933 | ) | (1,772 | ) | ||||
| Net cash used in financing activities | (1,915 | ) | (3,058 | ) | ||||
| Effect of exchange rate changes on cash | 1,595 | 2,569 | ||||||
| Net decrease in cash and cash equivalents | (24,315 | ) | (92,615 | ) | ||||
| Cash and cash equivalents at beginning of period | 147,634 | 235,967 | ||||||
| Cash and cash equivalents at end of period | $ | 123,319 | $ | 143,352 | ||||
| 1 Certain prior year amounts have been adjusted to conform with the adoption of ASU 2016-09. |
| SYNCHRONOSS TECHNOLOGIES, INC. | |||||||
| Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities | |||||||
| (in thousands) | |||||||
| (Unaudited) | |||||||
Nine Months Ended September 30, | |||||||
| 2016 | 2015 | ||||||
| Non-GAAP cash provided by operating activities and reconciliation: | |||||||
| Net cash provided by operating activities (GAAP) | $ | 56,484 | $ | 76,574 | |||
| Add: Cash payments on settlement of earn-out | — | 3,532 | |||||
| Adjusted cash flow provided by operating activities (Non-GAAP) | $ | 56,484 | $ | 80,106 | |||
View source version on businesswire.com: http://www.businesswire.com/news/home/20161107006262/en/
Contacts:
Investor and Media:
Daniel
Ives, +1 908-524-1047
daniel.ives@synchronoss.com
