Synchronoss Technologies Reports 40% Increase Year Over Year in Third Quarter Adjusted EBITDA; Raises Adjusted EBITDA Guidance For Full Year 2020
Company Renews Largest Cloud Customer, Verizon, to Five Year Contract Extension During the Third Quarter
BRIDGEWATER, N.J., Nov. 09, 2020 (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 third quarter ended September 30, 2020.
Third quarter highlights:
- GAAP revenue was $68.6 million, compared to GAAP revenue of $52.2 million in the prior year’s third quarter (after giving effect to a $26 million unfavorable cumulative adjustment to prior year third quarter revenue).
- Recurring revenue represented 80% of total GAAP revenue, up from 69% in the year ago quarter.
- GAAP net loss for the quarter was $15.4 million, or $0.36 cents per share, compared to a GAAP net loss of $69.4 million, or $1.70 per share, in the prior year’s third quarter.
- Non-GAAP net income was $1.7 million, or $0.04 cent per share, compared to a non-GAAP net loss of $25.4 million, or $0.62 cents per share, in the prior year’s third quarter.
- Adjusted EBITDA increased 40% year over year to $8.1 million, compared to $5.8 million in the third quarter of 2019.
- Adjusted EBITDA margin was 12% compared to 11% in the prior year's third quarter.
- Cash and liquidity increased to $46.4 million at quarter end, up from $42.8 million at the end of the second quarter.
Commenting on the results, Jeff Miller, President and CEO of Synchronoss, said:
“We are taking a pragmatic approach to the business by focusing our resources on lines of business that are generating the highest return for shareholders and have the most potential for future growth and profitability. Despite the recent leadership change, we haven’t lost a step as an organization and we continue to execute and build momentum, including renewing our largest cloud client, Verizon, to a five-year contract extension. Our teams have deep relationships with our customers, and we look forward to building on that strength by expanding those relationships and adding new ones. Our improved adjusted EBITDA for the third quarter highlights our sharpened focus on increasing our profitability and cash flow going forward.”
| Three Months Ended September 30, | ||||||||||
| $000s | 2020 | 2019 | % Change | |||||||
| Revenues | $ | 68,636 | $ | 52,210 | 31.5 | % | ||||
| Net Loss | $ | (15,367 | ) | $ | (69,432 | ) | 77.9 | % | ||
| Adjusted EBITDA | $ | 8,128 | $ | 5,799 | 40.2 | % | ||||
| Nine Months Ended September 30, | ||||||||||
| $000s | 2020 | 2019 | % Change | |||||||
| Revenues | $ | 222,293 | $ | 218,161 | 1.9 | % | ||||
| Net Loss | $ | (37,790 | ) | $ | (122,049 | ) | 69.0 | % | ||
| Adjusted EBITDA | $ | 21,435 | $ | 21,098 | 1.6 | % | ||||
David Clark, CFO of Synchronoss, added:
“Our third quarter results reflect progress with our continued focus on expanding both our gross and adjusted EBITDA margins. We are continuing to see the benefits of our cost management efforts and remain on track to deliver $55 million of annualized savings by year-end.”
Guidance
The company is raising its adjusted EBITDA guidance range for the full year to $23-$26 million, up from $20-$25 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 at 4:30 p.m. (Eastern Time) today to discuss the financial results.
To access the live call, dial 866-269-4260 or (International) and give the participant passcode 6435387.
A live and archived webcast of the conference call will be accessible on the Investor Relations section of the company’s website at . In addition, a phone replay will be available approximately two hours following the end of the call, and will be available for one week. To access the call replay dial-in information, please click here.
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, and earnings (loss) per share. 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 .
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, 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, 2019, which is on file with the SEC and available on the SEC’s website at . 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:
Todd Kehrli or Joo-Hun Kim
MKR Investor Relations
623-745-4046
SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
| September 30, 2020 | December 31, 2019 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 46,359 | $ | 39,001 | ||||
| Accounts receivable, net | 47,705 | 65,863 | ||||||
| Operating lease right-of-use assets | 37,019 | 53,965 | ||||||
| Goodwill | 227,012 | 222,969 | ||||||
| Other Assets | 140,479 | 150,225 | ||||||
| Total assets | $ | 498,574 | $ | 532,023 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Accounts Payable and Accrued expenses | $ | 88,985 | $ | 87,538 | ||||
| Debt, current | 10,000 | — | ||||||
| Deferred revenues | 51,415 | 87,799 | ||||||
| Operating lease liabilities, non-current | 48,787 | 60,976 | ||||||
| Other liabilities | 18,271 | 18,768 | ||||||
| Preferred Stock | 227,861 | 200,865 | ||||||
| Stockholders’ equity | 53,255 | 76,077 | ||||||
| Total liabilities and stockholders’ equity | $ | 498,574 | $ | 532,023 | ||||
SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||
| Net revenues | $ | 68,636 | $ | 52,210 | $ | 222,293 | $ | 218,161 | ||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||
| Cost of revenues | 28,452 | 35,602 | 93,403 | 107,958 | ||||||||||||||||||||
| Research and development | 20,885 | 18,575 | 59,769 | 57,282 | ||||||||||||||||||||
| Selling, general and administrative | 23,265 | 30,536 | 74,249 | 82,862 | ||||||||||||||||||||
| Restructuring charges | 820 | (39 | ) | 6,763 | 738 | |||||||||||||||||||
| Depreciation and amortization | 12,212 | 18,508 | 33,852 | 58,920 | ||||||||||||||||||||
| Total costs and expenses | 85,634 | 103,182 | 268,036 | 307,760 | ||||||||||||||||||||
| Loss from continuing operations | (16,998 | ) | (50,972 | ) | (45,743 | ) | (89,599 | ) | ||||||||||||||||
| Interest income | 20 | 228 | 1,587 | 716 | ||||||||||||||||||||
| Interest expense | (72 | ) | (203 | ) | (401 | ) | (1,251 | ) | ||||||||||||||||
| Gain (loss) on extinguishment of debt | — | 5 | — | 822 | ||||||||||||||||||||
| Other Income (loss) | 2,684 | (422 | ) | 5,743 | 17 | |||||||||||||||||||
| Equity method investment loss | — | — | — | (1,619 | ) | |||||||||||||||||||
| Loss from continuing operations, before taxes | (14,366 | ) | (51,364 | ) | (38,814 | ) | (90,914 | ) | ||||||||||||||||
| Benefit (provision) for income taxes | 8,744 | (9,849 | ) | 29,148 | (6,614 | ) | ||||||||||||||||||
| Net loss from continuing operations | (5,622 | ) | (61,213 | ) | (9,666 | ) | (97,528 | ) | ||||||||||||||||
| Net loss attributable to redeemable noncontrolling interests | (60 | ) | (25 | ) | (242 | ) | (931 | ) | ||||||||||||||||
| Preferred stock dividend | (9,685 | ) | (8,194 | ) | (27,882 | ) | (23,590 | ) | ||||||||||||||||
| Net loss attributable to Synchronoss | $ | (15,367 | ) | $ | (69,432 | ) | $ | (37,790 | ) | $ | (122,049 | ) | ||||||||||||
| Earnings per share | ||||||||||||||||||||||||
| Basic | (0.36 | ) | (1.70 | ) | (0.90 | ) | (3.01 | ) | ||||||||||||||||
| Diluted | (0.36 | ) | (1.70 | ) | (0.90 | ) | (3.01 | ) | ||||||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||||||
| Basic | 42,360 | 40,910 | 41,777 | 40,564 | ||||||||||||||||||||
| Diluted | 42,360 | 40,910 | 41,777 | 40,564 | ||||||||||||||||||||
SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
| Nine Months Ended September 30, | |||||||
| 2020 | 2019 | ||||||
| Net loss continuing operations | $ | (9,666 | ) | $ | (97,528 | ) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
| Non-cash items | 52,835 | 109,291 | |||||
| Changes in operating assets and liabilities: | (34,508 | ) | 76 | ||||
| Net cash provided by operating activities | 8,661 | 11,839 | |||||
| Investing activities: | |||||||
| Purchases of fixed assets | (571 | ) | (7,077 | ) | |||
| Purchases of intangible assets and capitalized software | (12,610 | ) | (9,289 | ) | |||
| Other investing activities | 1,775 | 34,091 | |||||
| Net cash provided by (used in) investing activities | (11,406 | ) | 17,725 | ||||
| Net cash provided by (used in) financing activities | 9,991 | (120,993 | ) | ||||
| Effect of exchange rate changes on cash | 112 | 783 | |||||
| Net increase in cash and cash equivalents | 7,358 | (90,646 | ) | ||||
| Cash, restricted cash and cash equivalents, beginning of period | 39,001 | 109,860 | |||||
| Cash, restricted cash and cash equivalents, end of period | $ | 46,359 | $ | 19,214 | |||
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, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Non-GAAP financial measures and reconciliation: | ||||||||||||||||
| GAAP Revenue | $ | 68,636 | $ | 52,210 | $ | 222,293 | $ | 218,161 | ||||||||
| Less: Cost of revenues | 28,452 | 35,602 | 93,403 | 107,958 | ||||||||||||
| Gross Profit | 40,184 | 16,608 | 128,890 | 110,203 | ||||||||||||
| Add / (Less): | ||||||||||||||||
| Stock-based compensation expense | 505 | 803 | 1,899 | 2,147 | ||||||||||||
| Restructuring, transition, and cease-use lease expense | 89 | 141 | 372 | 405 | ||||||||||||
| Adjusted Gross Profit | $ | 40,778 | $ | 43,596 | $ | 131,161 | $ | 138,799 | ||||||||
| Adjusted Gross Margin | 59.4 | % | 83.5 | % | 59.0 | % | 63.6 | % | ||||||||
| GAAP Net loss attributable to Synchronoss | $ | (15,367 | ) | $ | (69,432 | ) | $ | (37,790 | ) | $ | (122,049 | ) | ||||
| Add / (Less): | ||||||||||||||||
| Stock-based compensation expense | 4,391 | 6,000 | 14,547 | 17,028 | ||||||||||||
| Acquisition costs | — | — | — | (230 | ) | |||||||||||
| Restructuring, transition, and cease-use lease expense | 6,580 | 6,215 | 15,280 | 7,429 | ||||||||||||
| Amortization expense | 4,107 | 5,808 | 20,207 | 19,072 | ||||||||||||
| Cumulative adjustment to STI receivable | — | 26,044 | — | 26,044 | ||||||||||||
| Net change in contingent consideration obligation | — | — | — | — | ||||||||||||
| Litigation, remediation and refiling costs | 1,943 | 4 | 3,500 | 1,506 | ||||||||||||
| Loss on Extinguishment of Debt | — | — | — | — | ||||||||||||
| Net (loss) income attributable to noncontrolling interests | — | — | — | — | ||||||||||||
| Non-GAAP Expenses attributable to Non-Controlling Interest | — | — | — | (76 | ) | |||||||||||
| Non-GAAP Net Income (loss) from continuing operations attributable to Synchronoss | $ | 1,654 | $ | (25,361 | ) | $ | 15,744 | $ | (51,276 | ) | ||||||
| Diluted Non-GAAP Net Income (loss) from continuing operations per share | $ | 0.04 | $ | (0.62 | ) | $ | 0.38 | $ | (1.26 | ) | ||||||
| Weighted shares outstanding - Diluted | 42,360 | 40,910 | 41,777 | 40,564 | ||||||||||||
SYNCHRONOSS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| Sep 30, 2019 | Dec 31, 2019 | Mar 31, 2020 | Jun 30, 2020 | Sep 30, 2020 | Sep 30, 2020 | Sep 30, 2019 | ||||||||||||||||||||||
| Net (loss) income attributable to Synchronoss | $ | (69,432 | ) | $ | (14,678 | ) | $ | (12,275 | ) | $ | (10,148 | ) | $ | (15,367 | ) | $ | (37,790 | ) | $ | (122,049 | ) | |||||||
| Add / (Less): | ||||||||||||||||||||||||||||
| Stock-based compensation expense | 6,000 | 5,222 | 5,169 | 4,987 | 4,391 | 14,547 | 17,028 | |||||||||||||||||||||
| Acquisition costs | — | — | — | — | — | — | (230 | ) | ||||||||||||||||||||
| Restructuring, transition, and cease-use lease expense | 6,215 | 17 | 1,696 | 7,003 | 6,580 | 15,279 | 7,429 | |||||||||||||||||||||
| Cumulative adjustment to STI receivable | 26,044 | — | — | — | — | — | 26,044 | |||||||||||||||||||||
| Litigation, remediation and refiling costs | 4 | 1,320 | 824 | 733 | 1,943 | 3,500 | 1,506 | |||||||||||||||||||||
| Depreciation and amortization | 18,508 | 18,116 | 11,356 | 10,284 | 12,212 | 33,852 | 58,920 | |||||||||||||||||||||
| Interest income | (228 | ) | (542 | ) | (58 | ) | (1,509 | ) | (20 | ) | (1,587 | ) | (716 | ) | ||||||||||||||
| Interest Expense | 203 | 104 | 245 | 84 | 72 | 401 | 1,251 | |||||||||||||||||||||
| Gain on Extinguishment of debt | (5 | ) | — | — | — | — | — | (822 | ) | |||||||||||||||||||
| Other (Income) expense, net | 422 | (7,372 | ) | (1,692 | ) | (1,367 | ) | (2,684 | ) | (5,743 | ) | (17 | ) | |||||||||||||||
| Equity method investment loss | — | — | — | — | — | — | 1,619 | |||||||||||||||||||||
| Provision (benefit) for income taxes | 9,849 | (4,439 | ) | (12,432 | ) | (7,972 | ) | (8,744 | ) | (29,148 | ) | 6,614 | ||||||||||||||||
| Net (loss) income attributable to noncontrolling interests | 25 | 194 | 17 | 165 | 60 | 242 | 931 | |||||||||||||||||||||
| Preferred dividend | 8,194 | 8,544 | 8,908 | 9,289 | 9,685 | 27,882 | 23,590 | |||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 5,799 | $ | 6,486 | $ | 1,758 | $ | 11,549 | $ | 8,128 | $ | 21,435 | $ | 21,098 | ||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net Cash (used in) provided by operating activities | $ | 7,053 | $ | (6,725 | ) | $ | 8,661 | $ | 11,839 | |||||||
| Add / (Less): | ||||||||||||||||
| Capitalized software | (3,926 | ) | (3,330 | ) | (12,610 | ) | (9,289 | ) | ||||||||
| Property and equipment | (147 | ) | (2,137 | ) | (571 | ) | (7,077 | ) | ||||||||
| Free Cashflow | $ | 2,980 | $ | (12,192 | ) | $ | (4,520 | ) | $ | (4,527 | ) | |||||
| Add: Litigation, remediation and refiling costs | 1,943 | 4 | 3,500 | 1,506 | ||||||||||||
| Adjusted Free Cashflow | $ | 4,923 | $ | (12,188 | ) | $ | (1,020 | ) | $ | (3,021 | ) | |||||
