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Synchronoss Technologies, Inc. Announces Second Quarter Results

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Synchronoss
Technologies, Inc.
(NASDAQ:SNCR), a global leader and innovator in
cloud, messaging, digital, and IoT products and platforms, today
announced financial results for the second quarter of 2018.

Glenn Lurie, President and CEO of Synchronoss, said "We made substantial
progress in the second quarter in returning Synchronoss to the path of
long-term growth and overall success, including completing our financial
restatement process and meeting our SEC financial reporting obligations.
Moving forward, Synchronoss will focus on providing platforms that
enable TMT customers to deliver compelling digital, cloud, messaging and
IoT experiences for their consumers."

Lurie added, "We believe we will begin delivering substantial
improvements in our financial results in the second half of 2018. We
currently expect revenue to grow sequentially in the second half of the
year and that we will generate adjusted EBITDA profitability and
positive free cash flow for the second half. We are confident that we
are positioned to return to a financial profile characterized by
significant top-line growth and substantial profitability over time."

Financial Highlights for the Second Quarter of 2018

GAAP

  • Total Revenue: $76.7 million compared to $119.0 million in the
    second quarter of 2017.
  • Gross profit: $37.2 million compared to $71.2 million in the
    second quarter of 2017.
  • Operating Loss: ($43.1 million) compared to ($8.9 million) in
    the second quarter of 2017.
  • Net Loss attributable to Synchronoss: ($47.3 million) compared
    to ($26.6 million) in the second quarter of 2017.
  • Loss per Diluted Share: ($1.20) compared to ($0.60) in the
    second quarter of 2017.

Non-GAAP

  • Gross profit: $38.5 million compared to $72.2 million in the
    second quarter of 2017.
  • Operating Income/Loss: ($15.0 million) compared to $18.4
    million in the second quarter of 2017.
  • Adjusted EBITDA: $0.0 million compared to $33.5 million in the
    second quarter of 2017.
  • Net Income/Loss attributable to Synchronoss: ($19.0 million)
    compared to $10.7 million in the second quarter of 2017.
  • Earnings/Loss per Diluted Share: ($0.48) compared to $0.24 in
    the second quarter of 2017.

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."

Conference Call Details

In conjunction with this announcement, Synchronoss will host a
conference call on Thursday, August 9, 2018, at 4:30 p.m. (ET) to
discuss the company's financial results. To access this call,
dial 877-407-9208 (domestic) or 201-493-6784 (international). The pass
code for the call is 13681828. Additionally, a live web cast of the
conference call will be available on the "Investor Relations" page on
the company's web site.

Following the conference call, a replay will be available for a limited
time at 844-512-2921 (domestic) or 412-317-6671 (international).
The replay pass code is 13681828. 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-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 transforms the way companies create new revenue, reduce
costs and delight their subscribers with cloud, messaging, digital and
IoT products and platforms supporting hundreds of millions of
subscribers across the globe. Synchronoss' secure, scalable and
groundbreaking new technologies, trusted partnerships and talented
people change the way TMT customers grow their businesses. For more
information, visit us at www.synchronoss.com.

Forward-looking Statements

This press release includes statements concerning Synchronoss and its
future expectations, plans and prospects that constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. For this purpose, any
statements contained herein that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "may," "should," "expects," "plans," "anticipates,"
"could," "intends," "believes," "potential" or "continue" or other
similar expressions are intended to identify forward-looking statements.
Synchronoss has based these forward-looking statements largely on its
current expectations and projections about future events and financial
trends that it believes may affect its business, financial condition and
results of operations. These forward-looking statements speak only as of
the date of this press release and are subject to a number of risks,
uncertainties and assumptions including, without limitation, risks
relating to the Company's ability to sustain or increase revenue from
its larger customers and generate revenue from new customers, the
Company's expectations regarding expenses and revenue, the sufficiency
of the Company's cash resources and its ability to satisfy or refinance
its existing debt obligations, the Company's growth strategies, the
anticipated trends and challenges in the business and the market in
which the Company operates, the Company's expectations regarding
federal, state and foreign regulatory requirements, the pending lawsuits
against the Company described in its most recent SEC filings, and other
risks and factors that are described in the "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" sections of the Company's Annual Report on Form 10-K/A
for the year ended December 31, 2017 and Quarterly Report on Form 10-Q/A
for the quarter ended March 31, 2018, which are on file with the SEC and
available on the SEC's website at www.sec.gov.
The company does not undertake any obligation to update any
forward-looking statements contained in this press release as a result
of new information, future events or otherwise.

   
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
June 30, 2018 December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents 222,785 156,299
Restricted cash 3,480 89,826
Marketable securities 5,411 3,111
Accounts receivable, net of allowances of $3,992 and $3,107 at June
30, 2018 and December 31, 2017, respectively
51,439 78,186
Prepaid expenses and other current assets 57,387 43,557
Total current assets 340,502 370,979
Marketable securities 9,021 -
Property and equipment, net 89,310 111,825
Goodwill 233,298 237,303
Intangible assets, net 128,164 132,167
Other assets 13,090 5,236
Note receivable from related party 84,314 73,984
Equity method investment 30,412 33,917
Total assets 928,111 965,411
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 13,924 5,959
Accrued expenses 54,540 72,739
Deferred revenues, current 31,391 75,829
Mandatorily redeemable financial instrument - 37,959
Total current liabilities 99,855 192,486
Lease financing obligation 10,319 11,183
Convertible debt, net of debt issuance costs 228,410 227,704
Deferred tax liabilities 12,472 13,735
Deferred revenues, non-current 39,475 25,241
Other liabilities 15,390 6,195
Redeemable noncontrolling interest 12,500 25,280
Commitments and contingencies (Note 12)

Series A Convertible Participating Perpetual Preferred Stock,
$0.0001 par value; 10,000 shares authorized; 188 shares issued and
outstanding
at June 30, 2018

168,945 -
Stockholders' equity:

Common stock, $0.0001 par value; 100,000 shares authorized, 49,439
and 52,024 shares issued; 42,277 and 46,965 outstanding
at
June 30, 2018 and December 31, 2017, respectively

5 5
Treasury stock, at cost (7,162 and 5,059 shares at June 30, 2018 and
December 31, 2017, respectively)
(82,084) (105,584)
Additional paid-in capital 554,218 597,553
Accumulated other comprehensive loss (28,938) (23,373)
Accumulated deficit (102,456)   (5,014)
Total stockholders' equity 340,745   463,587
Total liabilities and stockholders' equity 928,111   965,411
 
   
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
2018 2017
 
Net revenues 76,742 118,990
Costs and expenses:
Cost of revenues 39,525 47,755
Research and development 20,200 20,819
Selling, general and administrative 33,938 29,353
Restructuring charges 2,778 6,405
Depreciation and amortization 23,401 23,552
Total costs and expenses 119,842 127,884
Loss from continuing operations (43,100) (8,894)
Interest income 3,763 3,026
Interest expense (1,318) (11,844)
Other expense, net (23) (1,556)
Equity method investment (Loss) Income (7) 233
Loss from continuing operations, before taxes (40,685) (19,035)
(Provision) benefit for income taxes (579) (3,573)
Net loss from continuing operations (41,264) (22,608)
Net loss from discontinued operations, net of tax - (6,775)
Net loss (41,264) (29,383)
Net loss attributable to redeemable noncontrolling interests 1,259 2,815
Preferred stock dividend (7,260) -
Net loss attributable to Synchronoss (47,265) (26,568)
 
Basic:
Continuing operations (1.20) (0.44)
Discontinued operations - (0.16)
(1.20) (0.60)
Diluted:
Continuing operations (1.20) (0.44)
Discontinued operations - (0.16)
(1.20) (0.60)
Weighted-average common shares outstanding:
Basic 39,456 44,618
Diluted 39,456 44,618
 
   
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
2018 2017
Operating activities:
Net loss from continuing operations (79,241) (68,060)
Net loss from discontinued operations - (22,909)
Adjustments to reconcile Net Loss to net cash used in operating
activities:
Depreciation and amortization expense 46,672 47,639
Change in fair value of financial instruments (3,849) -
Amortization of debt issuance costs 706 3,147
Accrued PIK interest (7,037) (5,643)
Loss (earnings) from equity method investments 212 (981)
Gain on disposals - (4,947)
Discontinued operations non-cash and working capital adjustments - 59,278
Amortization of bond premium 44 177
Deferred income taxes (1,223) (13,304)
Non-cash interest on leased facility 547 533
Stock-based compensation 14,824 10,749
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts 29,334 623
Prepaid expenses and other current assets (13,415) (14,869)
Other assets 1,260 2,351
Accounts payable 8,109 (9,847)
Accrued expenses (24,685) (18,746)
Other liabilities 632 (31)
Lease obligation interest payment (483) -
Deferred revenues (43,788) 14,539
Net cash used in operating activities (71,381) (20,301)
Investing activities:
Purchases of fixed assets (3,820) (5,235)
Purchases of intangible assets and capitalized software (8,201) (5,300)
Proceeds from the sale of SpeechCycle - 13,500
Purchases of marketable securities available for sale (13,383) (219)
Maturity of marketable securities available for sale 1,970 7,191
Equity investment - 608
Investing in discontinued operations - (7,213)
Investment in note receivable - (6,187)
Business acquired, net of cash (9,798) (815,008)
Net cash used in investing activities (33,232) (817,863)
Financing activities:
Share-based compensation-related proceeds, net of taxes paid on
withholding shares
- 2,460
Debt issuance costs related to the Credit Facility - (3,692)
Debt issuance costs related to long term debt - (19,887)
Proceeds from issuance of long term debt - 900,000
Repayment of long term debt - (2,250)
Repayment of revolving line of credit - (29,000)
Proceeds from the sale of treasury stock in connection with an
employee stock purchase plan
- 1,047
Proceeds from issuance of preferred stock 86,220 -
Payments on capital obligations (718) (1,359)
Net cash provided by financing activities 85,502 847,319
Effect of exchange rate changes on cash (749) 2,550
Net decrease in cash, restricted cash and cash equivalents (19,860) 11,705
Cash, restricted cash and cash equivalents, beginning of period 246,125 211,433
Cash, restricted cash and cash equivalents, end of period 226,265 223,138
Supplemental disclosures of non-cash investing and financing
activities:
Issuance of common stock in connection with Intralinks acquisition - 4,700
Cash and cash equivalents per the Consolidated Balance Sheets 222,785 216,558
Restricted cash per the Consolidated Balance Sheets 3,480 6,580
Total cash, cash equivalents and restricted cash 226,265 223,138
 
   
SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(Unaudited)
   

Three Months
Ended June 30,

 

Three Months
Ended June 30,

2018 2017

Non-GAAP financial measures and
reconciliation:

GAAP Revenue 76,742 118,990
Less: Cost of revenues 39,525 47,755
GAAP Gross Profit 37,217 71,235
Add: Stock-based compensation expense 1,300 471
Add: Acquisition costs - -

Add: Integration

- 501
Non-GAAP Gross Profit 38,517 72,207
Non-GAAP Gross Margin 50% 61%
 
GAAP (loss) income from continuing operations (43,100) (8,894)
Add: Stock-based compensation expense 7,638 2,638
Add: Acquisition costs (10) 1,248
Add: Restructuring 2,778 6,405
Add: Amortization expense 8,396 8,449
Add: Integration - 2,756
Add: One-Time Expenses due to Restatement, etc. 9,305 5,839
Non-GAAP loss from continuing operations (14,993) 18,441
 
GAAP Net (loss) income attributable to Synchronoss (47,265) (26,568)
Add: Net loss from discontinued operations, net of taxes - (6,775)
Net (loss) income from continuing operations attributable to
Synchronoss
(47,265) (19,793)
Add: Stock-based compensation expense 7,638 2,638
Add: Acquisition costs (10) 1,248
Add: Restructuring 2,778 6,405
Add: Amortization expense 8,396 8,449
Less: Non-GAAP Expenses attributable to Non-Controlling Interest (373) (406)
Add: One-Time Expenses due to Restatement, etc. 9,305 5,839
Add: Integration - 2,756

Less: Income Tax Effect at Statutory Tax Rates

579 3,573
Non-GAAP net (loss) income from continuing operations
attributable to Synchronoss
(18,952) 10,709
 
Diluted Non-GAAP net (loss) income from continuing operations per
share
(0.48) 0.24
 
Weighted shares outstanding - Basic 39,456 44,618
 
   
SYNCHRONOSS TECHNOLOGIES, INC.
Consolidated Statement of Cash Flows
NON-GAAP Reconciliation
(in Thousands)
(Unaudited)
   

Six Months Ended
June 30,

 

Six Months Ended
June 30,

2018 2017
       
Net Cash (used in) provided by operating activities   (71,381) (20,301)
Add: SW Capitalization   8,201 5,300
Add: Fixed Assets   3,820 5,235
Free Cashflow   (83,402) (30,836)
Less: One-Time Restatement Expenses   15,970 5,839
Adjusted Free Cashflow   (67,432) (24,997)
 
   
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to NON-GAAP Financial Measures

(in thousands, except per share data)

(Unaudited)
   

Three Months Ended
June 30,

 

Three Months Ended
June 30,

2018 2017
   
GAAP Income from Operations (43,100) (8,894)
Add: Stock based compensation 7,638 2,638
Add: Acquisition, Restructuring & Integration 2,768 10,409
Add: Depreciation & Amortization 23,401 23,552
Add: Restatement Expenses 9,305 5,839
Adjusted EBITDA 12 33,544
 

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