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Synchronoss Technologies, Inc. Announces Fourth Quarter and Full Year 2016 Financial Results
  • GAAP combined total revenue was $145.6 million
  • Non-GAAP combined total revenue was $147.8 million
  • GAAP total revenue from continuing operations for the fourth quarter was $121.7 million
  • Non-GAAP total revenue from continuing operations for the fourth quarter was $123.9 million
  • GAAP EPS from continuing operations for the fourth quarter was ($0.51)
  • Non-GAAP EPS from continuing operations for the fourth quarter was $0.24

BRIDGEWATER, N.J.--(BUSINESS WIRE)--Feb. 8, 2017-- Synchronoss Technologies, Inc. (NASDAQ:SNCR), the leader in mobile cloud innovation for mobile carriers, enterprises, retailers and OEMs around the world, today announced financial results for the fourth quarter of 2016.

“Synchronoss has transformed its strategy with the Intralinks acquisition and divestiture of its traditional activation business as the company now looks to expand the scale and scope of its enterprise and cloud initiatives to drive the new SNCR 3.0 vision.” said Ronald Hovsepian, Chief Executive Officer of Synchronoss. “The Synchronoss team is laying the foundation for the next chapter of growth.”

“It has been an exciting time at Synchronoss over the past few months as we view the acquisition of Intralinks to be a major step forward in our enterprise strategy with Ron leading the team to successfully integrate both companies into a single portfolio,” said Founder and Executive Chairman Stephen Waldis. “I look forward to working with Ron during this pivotal time for Synchronoss’ employees, customers, and partners around the globe.”

Financial Highlights for the Fourth Quarter of 2016:

  • Total revenues from continuing operations: $121.7 million GAAP compared to $121.2 million in the fourth quarter of 2015. $123.9 million non-GAAP compared to $121.8 million in the fourth quarter of 2015. Total combined revenue from continuing and discontinued operations was $145.6 million. Non-GAAP combined total revenue from continuing and discontinued operations was $147.8 million.
  • Gross profit from continuing operations: $71.5 million GAAP compared to $75.7 million in the fourth quarter of 2015. $78.1 million non-GAAP compared to $83.4 million in the fourth quarter of 2015.
  • Operating (loss) income from continuing operations: ($30.4) million GAAP compared to $1.5 million in the fourth quarter of 2015. $13.1 million non-GAAP compared to $29.9 million in the fourth quarter of 2015.
  • Net (loss) income from continuing operations attributable to Synchronoss: ($22.6) million GAAP compared to ($3.2) million in the fourth quarter of 2015. $11.0 million non-GAAP compared to $20.0 million in the fourth quarter of 2015.
  • (Loss) earnings per diluted share from continuing operations: ($0.51) GAAP compared to ($0.07) in the fourth quarter of 2015. $0.24 non-GAAP compared to $0.43 in the fourth quarter of 2015.
  • Operating cash flow: $86 million GAAP and non-GAAP compared to $63.2 million GAAP and non-GAAP in the fourth quarter of 2015.

Financial Highlights for the Full Year 2016:

  • Total revenues from continuing operations: $476.7 million GAAP compared to $428.1 million in 2015. $490.2 million non-GAAP compared to $429.4 million in 2015.
  • Gross profit from continuing operations: $282.5 million GAAP compared to $272.8 million in 2015. $319.2 million non-GAAP compared to $288.0 million in 2015.
  • Operating (loss) income from continuing operations: ($71.9) million GAAP compared to $15.1 million in 2015. $82 million non-GAAP compared to $96.2 million in 2015.
  • Net (loss) income from continuing operations attributable to Synchronoss: ($55.7) million GAAP compared to $1.3 million in 2015. $59.8 million non-GAAP compared to $63.6 million in 2015.
  • (Loss) earnings per diluted share from continuing operations: ($1.28) GAAP compared to $0.03 in 2015. $1.28 non-GAAP compared to $1.38 in 2015.
  • Operating cash flow: $142.5 million GAAP compared to $139.8 million in 2015. $142.5 million non-GAAP compared to $143.4 million in 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."

Fourth Quarter and Recent Business Highlights:

  • GAAP Cloud Services revenue from continuing operations accounted for $121.7 million in the fourth quarter. Non-GAAP Cloud Services revenue from continuing operations accounted for $123.9 million in the fourth quarter. This was led by cloud deployments at new and existing customers.
  • Completed the acquisition of Intralinks together with the closing of the $1.1 Billion credit facility.
  • Completed the divestiture of our carrier activation business to Sequential Technology International as well as the sale of our SpeechCycle and Mirapoint Software activation businesses.
  • Strong progress at international customers in EMEA and APAC as they move towards scaling our Messaging and Personal Cloud Platforms.

First Quarter Investor Conference Participation Schedule:

  • Raymond James Investor Conference March 7, 2017-Orlando, FL

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call on Wednesday, February 8, 2017, 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 52260549. 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 52260549. An archived webcast 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 (NASDAQ: SNCR) is an innovative software company that helps both service providers and enterprises realize and execute their goals for mobile transformation. Our simple, powerful and flexible solutions serve millions of mobile subscribers and a large portion of the Fortune 500 worldwide today. 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.

Synchronoss and the Synchronoss logo 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, 2016 December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents $ 181,018 $ 147,634
Marketable securities 12,506 66,357
Accounts receivable, net of allowance for doubtful accounts of $1,756 and $3,029 at December 31, 2016 and December 31, 2015, respectively 137,561 136,117
Prepaid expenses and other assets 33,488 48,127
Assets of discontinued operations, current       8,710  
Total current assets 364,573 406,945
Restricted cash 30,000
Marketable securities 2,974 19,635
Property and equipment, net 155,599 168,280
Goodwill 273,710 182,000
Intangible assets, net 203,864 174,322
Deferred tax assets 1,503 3,560
Other assets 7,541 10,350
Receivable from related party 83,000
Equity method investments 45,890
Assets of discontinued operations, non-current       45,136  
Total assets $ 1,168,654   $ 1,010,228  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 15,770 $ 26,038
Accrued expenses 72,705 45,819
Deferred revenues 22,602 8,323
Contingent consideration obligation 11,860
Short term debt   29,000      
Total current liabilities 151,937 80,180
Lease financing obligation - long term 12,121 13,343
Contingent consideration obligation - long-term 930
Convertible debt 226,291 224,878
Deferred tax liability 50,838 16,404
Deferred revenues 16,724 559
Other liabilities 3,782 2,668
Redeemable noncontrolling interest 49,856 61,452
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at December 31, 2016 and December 31, 2015
Common stock, $0.0001 par value; 100,000 shares authorized, 49,317 and 48,084 shares issued; 45,323 and 44,405 outstanding at December 31, 2016 and December 31, 2015, respectively 5 4
Treasury stock, at cost (3,994 and 3,679 shares at December 31, 2016 and December 31, 2015, respectively) (95,183 ) (65,651 )
Additional paid-in-capital 575,093 512,802
Accumulated other comprehensive loss (43,252 ) (38,684 )
Retained earnings   220,442     201,343  
Total stockholders’ equity   657,105     609,814  
Total liabilities and stockholders’ equity $ 1,168,654   $ 1,010,228  
 
               

SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)**

 

Three Months Ended December 31,

Year ended December 31,

2016

2015

2016

2015

Net Revenues $ 121,717 $ 121,213 $ 476,671 $ 428,117
Costs and Expenses:
Cost of services (1)(2)* 50,210 45,512 194,198 155,287
Research and development (1)(2) 28,273 22,958 106,681 91,430
Selling, general and administrative (1)(2) 43,297 29,539 131,106 88,411
Net change in contingent consideration obligation 3,631 760 10,930 760
Restructuring charges 1,360 (34 ) 6,333 4,946
Depreciation and amortization   25,302     20,931     99,311     72,152  
Total costs and expenses   152,073     119,666     548,559     412,986  
(Loss) income from continuing operations (30,356 ) 1,547 (71,888 ) 15,131
Interest income 936 564 2,428 2,047
Interest expense (2,007 ) (1,503 ) (7,013 ) (5,711 )
Other income (expense), net   2,117     973     1,931     372  
(Loss) income from continuing operations, before taxes (29,310 ) 1,581 (74,542 ) 11,839
Provision for income taxes   3,996     1,310     7,290     (4,477 )
Net income (loss) from continuing operations (25,314 ) 2,891 (67,252 ) 7,362
Net income (loss) from discontinued operations, net of taxes   46,848     8,431     75,233     39,320  
Net income 21,534 11,322 7,981 46,682
Net (loss) income attributable to noncontrolling interests   (2,760 )   6,052     (11,596 )   6,052  
Net income attributable to Synchronoss $ 24,294   $ 5,270   $ 19,577   $ 40,630  
 
Net income (loss) from continuing operations attributable to Synchronoss $ (22,554 ) $ (3,161 ) $ (55,656 ) $ 1,310
Income effect for interest on convertible debt, net of tax               1,951  
Net income (loss) from continuing operations adjusted for the convertible debt $ (22,554 ) $ (3,161 ) $ (55,656 ) $ 3,261  
 
Basic:
Continuing operations $ (0.51 ) $ (0.07 ) $ (1.28 ) $ 0.03
Discontinued operations   1.06     0.19     1.73     0.93  
$ 0.55   $ 0.12   $ 0.45   $ 0.96  
Diluted:
Continuing operations $ (0.51 ) $ (0.07 ) $ (1.28 ) $ 0.03
Discontinued operations   1.06     0.19     1.73     0.93  
$ 0.55   $ 0.12   $ 0.45   $ 0.96  
 
Weighted-average common shares outstanding:
Basic   43,814     42,817     43,571     42,284  
Diluted   43,814     42,817     43,571     42,284  
 
* This presentation reflects the discontinued operations associated with the divestiture of our activation business.
** Cost of services excludes depreciation and amortization which is shown separately.
 
 
(1) Amounts include fair value stock-based compensation as follows:
Cost of services $ 1,076 $ 1,493 $ 5,669 $ 5,091
Research and development 2,451 2,374 8,817 7,487
Selling, general and administrative   4,837     6,137     17,854     17,289  
Total fair value stock-based compensation expense $ 8,364   $ 10,004   $ 32,340   $ 29,867  
 
(2) Amounts include acquisition costs as follows:
Cost of services $ 3,344 $ 5,612 $ 17,482 $ 8,814
Research and development 4,030 2,375 13,751 7,307
Selling, general and administrative   9,253     963     14,739     1,412  
Total acquisition costs $ 16,627   $ 8,950   $ 45,972   $ 17,533  
 
               
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,
  2016     2015     2016     2015  
Non-GAAP financial measures and reconciliation:
 
GAAP Revenue $ 121,717 $ 121,213 $ 476,671 $ 428,117
Add: Deferred revenue write-down   2,151     568     13,535     1,260  
Non-GAAP Revenue $ 123,868   $ 121,781   $ 490,206   $ 429,377  
 
GAAP Revenue $ 121,717 $ 121,213 $ 476,671 $ 428,117
Less: Cost of services 50,210 45,512 194,198 155,287
GAAP Gross Margin 71,507 75,701 282,473 272,830
Add: Deferred revenue write-down 2,151 568 13,535 1,260
Add: Fair value stock-based compensation 1,076 1,493 5,669 5,091
Add: Acquisition and restructuring costs   3,344     5,612     17,482     8,814  
Non-GAAP Gross Margin $ 78,078   $ 83,374   $ 319,159   $ 287,995  
Non-GAAP Gross Margin % 63 % 68 % 65 % 67 %
 
GAAP (loss) income from operations $ (30,356 ) $ 1,547 $ (71,888 ) $ 15,131
Add: Deferred revenue write-down 2,151 568 13,535 1,260
Add: Fair value stock-based compensation 8,364 10,004 32,340 29,867
Add: Acquisition and restructuring costs 17,987 8,916 52,305 22,479
Add: Net change in contingent consideration obligation 3,631 760 10,930 760
Add: Amortization expense   11,308     8,150     44,738     26,659  
Non-GAAP income from operations $ 13,085   $ 29,945   $ 81,960   $ 96,156  
 
GAAP Net income (loss) from continuing operations attributable to Synchronoss $ (22,554 ) $ (3,161 ) $ (55,656 ) $ 1,310
Add: Deferred revenue write-down 2,151 568 13,535 1,260
Add: Fair value stock-based compensation 8,364 10,004 32,340 29,867
Add: Acquisition and restructuring costs 17,987 8,916 52,305 22,479
Add: Net change in contingent consideration obligation, net of Fx change 3,631 760 10,930 760
Add: Amortization expense 11,308 8,150 44,738 26,659
Less: Noncontrolling interest non-GAAP adjustments (1,148 ) (183 ) (5,523 ) (183 )
Less: Tax effect   (8,720 )   (5,101 )   (32,904 )   (18,592 )
Non-GAAP Net income from continuing operations attributable to Synchronoss 11,019 19,953 59,765 63,560
Income effect for interest on convertible debt, net of tax   549     669     2,197     2,302  
Net income from continuing operations for diluted EPS calculation $ 11,568   $ 20,622   $ 61,962   $ 65,862  
 
Diluted non-GAAP net income per share from continuing operations $ 0.24   $ 0.43   $ 1.28   $ 1.38  
 
Weighted shares outstanding - Diluted   49,012     47,862     48,518     47,653  
 
       
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
December 31,
  2016     2015  
Operating activities: (As Adjusted)
Net income $ 7,981 $ 46,682
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 99,311 72,152
Amortization of debt issuance costs 1,607 1,501
(Loss) gain on disposals (952 ) 16
Gain on discontinued operations (95,311 )
Amortization of bond premium 1,416 1,705
Deferred income taxes 29,296 8,319
Non-cash interest on leased facility 1,111 924
Stock-based compensation 33,979 31,711
Contingent consideration obligation 10,930 (772 )
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts (1,662 ) (27,577 )
Prepaid expenses and other current assets 1 12,649 (8,543 )
Other assets 10,054 (4,282 )
Accounts payable (11,139 ) 6,185
Accrued expenses 1 25,479 16,333
Other liabilities (6,546 ) (402 )
Deferred revenues   24,298     (4,130 )
Net cash provided by operating activities 142,501 139,822
 
Investing activities:
Purchases of fixed assets (58,542 ) (59,960 )
Purchases of intangible assets (1,200 )
Purchases of marketable securities available-for-sale (13,445 ) (139,569 )
Maturities of marketable securities available-for-sale 82,904 106,210
Change in restricted cash (30,000 )
Proceeds from the sale of discontinued operations 18,135
Businesses acquired, net of cash   (98,428 )   (131,592 )
Net cash used in investing activities (99,376 ) (226,111 )
 
Financing activities:
Proceeds from the exercise of stock options 13,912 19,936
Taxes paid on withholding shares 1 (8,885 ) (17,043 )
Payments on contingent consideration obligation (4,468 )
Debt issuance costs (1,346 )
Borrowings on revolving line of credit 144,000
Repayment of revolving line of credit (115,000 )
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   (3,815 )   (2,021 )
Net cash used in financing activities (8,976 ) (1,694 )
Effect of exchange rate changes on cash   (765 )   (350 )
Net increase (decrease) in cash and cash equivalents 33,384 (88,333 )
Cash and cash equivalents at beginning of period   147,634     235,967  
Cash and cash equivalents at end of period $ 181,018   $ 147,634  
 
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)
December 31,
2016 2015
 
Non-GAAP cash provided by operating activities and reconciliation:
 
Net cash provided by operating activities (GAAP) $ 142,501 $ 139,822
Add: Cash payments on settlement of earn-out     3,532
Adjusted cash flow provided by operating activities (Non-GAAP) $ 142,501 $ 143,354

Source: Synchronoss Technologies, Inc.

Synchronoss Technologies, Inc.
Investor and Media:
Daniel Ives, +1 908-524-1047
daniel.ives@synchronoss.com