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Synchronoss Technologies Announces First Quarter 2019 Results

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BRIDGEWATER, N.J., May 09, 2019 (GLOBE NEWSWIRE) -- Synchronoss Technologies Inc. (NASDAQ:SNCR), a global leader and innovator in cloud, messaging, digital and IoT platforms and products, today announced financial results for its first quarter ended March 31, 2019.

First quarter highlights:

  • Revenue was $88.1 million, including 73 percent recurring revenue, up 5.3 percent compared to $83.7 million in the first quarter of 2018.
  • GAAP net loss for the quarter was $27.6 million, or 68 cents per share, compared to $40.0 million or 95 cents per share in the prior year's first quarter.
  • Non-GAAP net loss from continuing operations per share was $14.7 million or 36 cents per share, compared to $22.6 million or 54 cents per share in the prior year's first quarter.
  • Synchronoss delivered $6.6 million of adjusted EBITDA, compared to an adjusted EBITDA loss of $10.8 million in the first quarter of 2018. Adjusted EBITDA margin in the first quarter was 7.5 percent compared to negative 12.9 percent in the prior year's first quarter.

Glenn Lurie, president and chief executive officer, stated, "The first quarter was another positive step for Synchronoss as we continue to deliver on our commitments to shareholders and execute on our financial and operational objectives. We delivered healthy revenue growth on both a sequential and year-over-year basis due to strength in our messaging business, as well as positive adjusted EBITDA for the third consecutive quarter. In addition, we continue to build sales momentum with the announcement of several transformational new customer agreements including a white label cloud platform deal with a significant new customer. These agreements are expected to deliver meaningful revenue growth going forward."

Three Months Ended March 31,
$000s 2019 2018 % Change
Revenues $88,105 $83,709 5.25%
Net Loss (27,587) (40,045) 31.1%
Adjusted EBITDA 6,630 (10,785) 161.5%

New customer agreements and partnerships that the company is announcing include:

  • The company has signed a substantial new customer for its white label cloud platform. The customer expects to launch the cloud service in the third quarter of 2019, and we plan to provide additional details at that time.
  • A partnership with Amazon, in which Synchronoss will become a global service integrator of Amazon products with mobile operators worldwide. As part of this agreement, the Synchronoss Digital Experience Platform, or DXP, will be utilized to enable mobile network operators to offer Amazon consumer services such as Amazon Prime, Prime Video, and Amazon Music, and others directly to subscribers as part of their invoice.
  • The company has joined Microsoft's Internet of Things (IoT) Accelerate Program and will develop and offer best-of-breed Smart Buildings solutions for enterprises globally. The first initiative in this partnership will be a live proof of concept with global IT services provider Rackspace, deploying a smart buildings service to monitor, control, and optimize energy usage and reduce costs at Rackspace's San Antonio headquarters, which spans more than one million square feet.
  • The launch of Phase II of the company's advanced messaging platform in Japan, which will enable application-to-person, or A2P messaging, giving brands the ability to interact directly with the entire Japanese Plus Messaging subscriber base.
  • Earlier this year, the company also announced an agreement with Assurant, a leading provider of device protection insurance, which will utilize the Synchronoss white label cloud platform for its Pocket Geek solution which is offered in their device protection bundles.

David Clark, chief financial officer, added, "The first quarter financial results demonstrate the hard work the entire Synchronoss team has done over the past year to reduce costs and improve financial leverage across our business. Compared to the first quarter of 2018, gross margins are up 850 basis points, driving a 24 percent improvement in gross profit. Operating expenses were likewise down 17%, driving a $17.4 million improvement in adjusted EBITDA and a $12.5 million improvement in the GAAP net loss on a year-over-year basis. To date in 2019, we have repurchased another approximately $50 million of our convertible notes prior to maturity at a discount. We continue to be confident in our cash position and cash generating ability, and at present, we have approximately $101 million of cash on the balance sheet and the balance of convertible notes due is down to approximately $64 million."

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 included below under the heading "Non-GAAP Financial Measures."

Conference Call Details
Synchronoss will host a conference call on Thursday, May 9, 2019, at 5:00 p.m. (ET) to discuss the company's financial results. To access this call, dial 1-201-493-6784. Additionally, a live web cast of the conference call will be available on the Investor Relations page on the company's web site at www.synchronoss.com.

Following the conference call, a replay will be available for a limited time at 1-412-317-6671. The replay pass code is 13689764. 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 fair value stock-based compensation expense, acquisition-related costs which includes integration costs, restructuring and cease-use lease expense, 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, 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 for the year ended December 31, 2018, which is 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.

Contact:

Investors:
Joe Crivelli
Vice President, Investor Relations
908-566-3131
investor@synchronoss.com

Media:                                                                 
CCgroup
US: Diane Rose, +1 727-238-7567 or International: Anais Merlin, +44 20 3824 9219                                             
synchronoss@ccgrouppr.com    



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

  March 31, 2019   December 31, 2018
       
ASSETS
Current assets:      
Cash and cash equivalents $ 88,768     $ 103,771  
Restricted cash 1,526     6,089  
Marketable securities, current 19,674     28,230  
Accounts receivable, net of allowances of $5,139 and $4,599 at March 31, 2019 and December 31, 2018, respectively 108,939     102,798  
Prepaid expenses 41,932     45,058  
Other current assets 10,045     8,508  
Total current assets 270,884     294,454  
Marketable securities, non-current 369     6,658  
Property and equipment, net 52,128     67,937  
Operating lease right-of-use assets 64,747      
Goodwill 223,359     224,899  
Intangible assets, net 92,759     98,706  
Other assets 10,013     8,982  
Equity method investment 376     1,619  
Total assets $ 714,635     $ 703,255  
 
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable 18,948     13,576  
Accrued expenses 52,875     59,545  
Deferred revenues, current 65,083     57,101  
Short-term convertible debt, net of debt issuance costs 97,205     113,542  
Total current liabilities 234,111     243,764  
Lease financing obligation     9,494  
Operating lease liabilities, non-current 66,559      
Deferred tax liabilities 796     1,347  
Deferred revenues, non-current 46,700     59,841  
Other non-current liabilities 7,504     10,797  
Redeemable noncontrolling interest 12,500     12,500  
Commitments and contingencies      
Series A Convertible Participating Perpetual Preferred Stock, $0.0001 par value; 10,000 shares authorized; 195 shares issued and outstanding at March 31, 2019 177,065     176,603  
Stockholders' equity:      
Common stock, $0.0001 par value; 100,000 shares authorized, 49,908 and 49,836 shares issued; 42,746 and 42,674 outstanding at March 31, 2019 and December 31, 2018, respectively 5     5  
Treasury stock, at cost (7,162 and 7,162 shares at March 31, 2019 and December 31, 2018, respectively) (82,087 )   (82,087 )
Additional paid-in capital 533,224     534,673  
Accumulated other comprehensive loss (31,966 )   (30,383 )
Accumulated deficit (249,776 )   (233,299 )
Total stockholders' equity 169,400     188,909  
Total liabilities and stockholders' equity $ 714,635     $ 703,255  
               
               

 SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

    Three Months Ended March 31,
    2019   2018
         
Net revenues   $ 88,105     $ 83,709  
Costs and expenses:        
Cost of revenues   38,953     44,549  
Research and development   19,681     20,905  
Selling, general and administrative   29,246     38,110  
Restructuring charges   421     1,108  
Depreciation and amortization   20,143     23,271  
Total costs and expenses   108,444     127,943  
Loss from operations   (20,339 )   (44,234 )
Interest income   189     3,552  
Interest expense   (585 )   (1,247 )
Gain on extinguishment of debt   387      
Other Income   463     4,282  
Equity method investment loss, net   (1,243 )   (205 )
Loss from operations, before taxes   (21,128 )   (37,852 )
Benefit (provision) for income taxes   1,391     (125 )
Net loss   (19,737 )   (37,977 )
Net (income) loss attributable to redeemable noncontrolling interests   (313 )   1,285  
Preferred stock dividend   (7,537 )   (3,353 )
Net loss attributable to Synchronoss   $ (27,587 )   $ (40,045 )
         
Earnings per share:        
Basic   $ (0.68 )   $ (0.95 )
Diluted   $ (0.68 )   $ (0.95 )
         
Weighted-average common shares outstanding:        
Basic   40,320     42,181  
Diluted   40,320     42,181  
             
             

SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)

  Three Months Ended March 31,
  2019   2018
Operating activities:      
Net loss from operations $ (19,737 )   $ (37,977 )
Adjustments to reconcile Net Loss to net cash used in operating activities:      
Depreciation and amortization 20,143     23,272  
Change in fair value of financial instruments     (3,849 )
Amortization of debt issuance costs 155     353  
(Gain) loss on extinguishment of debt (387 )    
Accrued PIK interest     (3,447 )
(Earnings) loss from equity method investments 1,243     205  
Amortization of bond premium (36 )   17  
Deferred income taxes (525 )   191  
Non-cash interest on leased facility     275  
Stock-based compensation 5,555     7,184  
Changes in operating assets and liabilities:      
Accounts receivable, net of allowance for doubtful accounts (6,141 )   36,153  
Prepaid expenses and other current assets 4,272     9,402  
Other assets (242 )   710  
Accounts payable 6,084     8,646  
Accrued expenses (10,780 )   (10,873 )
Other liabilities (370 )   (137 )
Deferred revenues (4,918 )   (39,514 )
Net cash used for operating activities (5,684 )   (9,389 )
Investing activities:      
Purchases of property and equipment (2,627 )   (1,093 )
Purchases of capitalized software (2,704 )   (7,047 )
Purchases of marketable securities available for sale (11,278 )   (6,676 )
Maturity of marketable securities available for sale 26,207     1,450  
Net cash provided by (used for) investing activities 9,598     (13,366 )
Financing activities:      
Share-based compensation-related proceeds, net of taxes paid on withholding shares     263  
Extinguishment of outstanding Convertible Senior Notes (16,106 )    
Proceeds from issuance of preferred stock     86,220  
Preferred dividend payment (7,075 )    
Payments on capital obligations (280 )   (369 )
Net cash (used for) provided by financing activities (23,461 )   86,114  
Effect of exchange rate changes on cash (19 )   2,253  
Net decrease in cash, restricted cash and cash equivalents (19,566 )   65,612  
Cash, restricted cash and cash equivalents, beginning of period 109,860     246,126  
Cash, restricted cash and cash equivalents, end of period $ 90,294     $ 311,738  
               
               

SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

    Three Months Ended March 31,
    2019   2018
Non-GAAP financial measures and reconciliation:        
GAAP Revenue   $ 88,105     $ 83,709  
Less: Cost of revenues   38,953     44,549  
Gross Profit   49,152     39,160  
Add / (Less):        
Stock-based compensation expense   686     1,112  
Adjusted Gross Profit   $ 49,838     $ 40,272  
Adjusted Gross Margin   56.6 %   48.1 %
         
GAAP Net loss from continuing operations   (20,339 )   (44,234 )
Add / (Less):        
Stock-based compensation expense   5,554     7,184  
Acquisition costs   (188 )   121  
Restructuring and cease-use lease expense   740     1,108  
Amortization expense   6,129     8,254  
One-Time Expenses due to Restatement, etc.   720     6,665  
Non-GAAP Net (loss) income from continuing operations   $ (7,384 )   $ (20,902 )
         
GAAP Net (loss) income attributable to Synchronoss   $ (27,587 )   $ (40,045 )
Add / (Less):        
Stock-based compensation expense   5,554     7,184  
Acquisition costs   (188 )   121  
Restructuring and cease-use lease expense   740     1,108  
Amortization expense   6,129     8,254  
Non-GAAP Expenses attributable to Non-Controlling Interest   (37 )   (373 )
One-Time Expenses due to Restatement, etc.   720     6,665  
Income Tax Effect at Statutory Tax Rates       (5,510 )
Non-GAAP Net loss from continuing operations attributable to Synchronoss   $ (14,669 )   $ (22,596 )
         
Diluted Non-GAAP Net loss from continuing operations per share   $ (0.36 )   $ (0.54 )
         
Weighted shares outstanding - Basic   40,320     42,181  
             
             

SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data) (Unaudited)

    Three Months Ended
    Mar 31,
2018
  Jun 30,
2018
  Sep 30,
2018
  Dec 31,
2018
  Mar 31,
2019
                     
Net (loss) income attributable to Synchronoss   $ (40,045 )   $ (47,265 )   $ (54,529 )   $ (101,909 )   $ (27,587 )
Add / (Less):                    
Restructuring and cease-use lease expense   1,108     2,778     4,539     3,950     740  
Depreciation and amortization   23,271     23,401     23,658     47,324     20,143  
Interest income   (3,552 )   (3,763 )   (203 )   (252 )   (189 )
Interest Expense   1,247     1,318     1,370     976     585  
Gain on Extinguishment of debt               (1,760 )   (387 )
Other Income (expense), net   (4,282 )   23     13,439     65,737     (463 )
Equity method investment income (loss), net   205     7     (283 )   28,671     1,243  
Benefit for income taxes   125     579     (2,308 )   (16,290 )   (1,391 )
Net (loss) income attributable to noncontrolling interests   (1,285 )   (1,259 )   422     (6,715 )   313  
Preferred dividend   3,353     7,260     7,463     7,517     7,537  
Stock-based compensation expense   7,184     7,638     7,216     5,566     5,554  
Acquisition costs   121     (10 )   38     109     (188 )
One-Time Expenses due to Restatement, etc.   6,665     9,305     3,638     800     720  
Net income from discontinued operations, net of taxes               (18,288 )    
Reclassification of expenses   (4,900 )       4,900          
Adjusted EBITDA (non-GAAP)   $ (10,785 )   $ 12     $ 9,360     $ 15,436     $ 6,630  


     
    Three Months Ended March 31,
    2019   2018
Net Cash (used in) provided by operating activities   $ (5,684 )   $ (9,389 )
Add / (Less):        
Capitalized software   (2,704 )   (7,047 )
Property and equipment   (2,627 )   (1,093 )
Free Cashflow   $ (11,015 )   $ (17,529 )
Add: One-Time Expenses due to Restatement, etc.   720     6,665  
Adjusted Free Cashflow   $ (10,295 )   $ (10,864 )

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