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Press release from Business Wire

Synchronoss Technologies, Inc. Announces Third Quarter 2011 Financial Results

<ul> <li class='bwlistitemmargb'> <i>Non-GAAP total revenue of $59.4 million increases 27% year-over-year</i> </li> <li class='bwlistitemmargb'> <i>Non-GAAP operating income of $13.1 million increases 36% year-over-year</i> </li> <li class='bwlistitemmargb'> <i>Non-GAAP EPS of $0.23 increases 15% year-over-year</i> </li> </ul>

Tuesday, November 01, 2011

Synchronoss Technologies, Inc. Announces Third Quarter 2011 Financial Results16:01 EDT Tuesday, November 01, 2011 BRIDGEWATER, N.J. (Business Wire) -- Synchronoss Technologies, Inc. (NASDAQ: SNCR), the world's leading provider of transaction management, cloud enablement and connectivity services for connected devices, today announced financial results for the third quarter of 2011. Stephen G. Waldis, President and Chief Executive Officer of Synchronoss, said “We continue to make excellent progress scaling our relationships with a number of new strategic, tier one service providers. Our continued progress with Verizon and Vodafone helped us achieve solid growth in our business during the quarter. We also moved into production with a new significant channel at AT&T, which contributed to the best quarter in our 10 year relationship with AT&T.” Waldis added, “The growing adoption of our ConvergenceNow® Plus+ platform, as evidenced by our partnership announced with Verizon and our new expansion at Vodafone, will help drive a truly unique experience for subscribers around the world. With the rapid growth of connected devices, we believe our “connect-sync-activate” approach to this market will help position Synchronoss as the market leader.” For the third quarter of 2011, Synchronoss reported net revenues of $59.2 million on a GAAP basis, representing an increase of 33% compared to the third quarter of 2010. Gross profit was $31.5 million and income from operations was $5.0 million in the third quarter of 2011. GAAP net income applicable to common stock was $3.6 million, leading to GAAP diluted earnings per share of $0.09, compared to $0.05 for the third quarter of 2010. Synchronoss reported non-GAAP net revenues for the third quarter of 2011, which adds back the purchase accounting adjustment related to FusionOne's revenues, of $59.4 million, an increase of 27% compared to the third quarter of 2010. Non-GAAP gross profit for the third quarter of 2011 was $33.1 million, representing a non-GAAP gross margin of 56%. Non-GAAP income from operations was $13.1 million in the third quarter of 2011, representing a year-over-year increase of 36% and a non-GAAP operating margin of 22%. Non-GAAP net income was $8.8 million in the third quarter of 2011, leading to non-GAAP diluted earnings per share of $0.23, an increase of 15% compared with $0.20 for the third quarter of 2010. 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." “Solid execution and ramping customer initiatives drove strong third quarter revenue and profitability that were both above the high-end of our guidance,” said Lawrence R. Irving, Chief Financial Officer and Treasurer. “The investments that Synchronoss has made in R&D are paying off, evidenced by the early traction of our SmartMobility product, our ConvergenceNow® Plus+ win at Vodafone that was driven by our content synchronization capabilities and expansion into on-device and retail store upgrade activations with AT&T as part of the iPhone 4S launch. We plan to continue investing in our business to solidify Synchronoss' leadership position and long-term growth opportunity.” Other Third Quarter and Recent Business Highlights: Business outside of the AT&T relationship accounted for approximately $29.9 million of non-GAAP revenue, representing approximately 50% of total non-GAAP revenue. Verizon remained the largest contributor to Synchronoss' business outside of AT&T, representing over 10% of Synchronoss' revenue for the quarter. Business related to AT&T accounted for approximately $29.5 million of non-GAAP revenue, representing the other 50% of total non-GAAP revenue. During the third quarter, Synchronoss hosted a user summit with leading OEM's on its new connect-sync-activate platform. Verizon was a keynote speaker at this event where it communicated the need for a strong connection management solution as well as the benefits of Synchronoss' connect-synch-activate strategy. Conference Call Details In conjunction with this announcement, Synchronoss will host a conference call on Tuesday, November 1, 2011, at 4:30 p.m. (ET) to discuss the company's financial results. To access this call, dial 866-362-4829 (domestic) or 617-597-5346 (international). The pass code for the call is 74713975. 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 at 888-286-8010 (domestic) or 617-801-6888 (international). The replay pass code is 86725247. 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, operating income, net income, effective tax rate, and earnings 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 the deferred revenue write-down associated with FusionOne acquisition, fair value stock-based compensation expense, acquisition-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 Technologies (NASDAQ: SNCR) is the world's leading provider of transaction management, cloud enablement and connectivity services for connected devices. The company's technology platforms ensure a simple and seamless on-demand channel for service providers and their customers. For more information visit us at: Web: www.synchronoss.com Blog: http://blog.synchronoss.com Twitter: http://twitter.com/synchronoss 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, 2010 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, ConvergenceNow, InterconnectNow, ConvergenceNow Plus+ and SmartMobility 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 30,2011December 31,2010   ASSETS Current assets: Cash and cash equivalents $ 148,611 $ 180,367 Marketable securities 18,145 1,766 Accounts receivable, net of allowance for doubtful accounts of $310 and $558 at September 30, 2011 andDecember 31, 2010, respectively 45,488 34,940 Prepaid expenses and other assets 12,566 8,606 Deferred tax assets   3,330     3,272     Total current assets 228,140 228,951 Marketable securities 22,862 7,502 Property and equipment, net 35,599 32,622 Goodwill 29,717 19,063 Intangible assets, net 31,629 33,231 Deferred tax assets 19,295 16,432 Other assets   2,228     2,598     Total assets $ 369,470   $ 340,399       LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,360 $ 7,013 Accrued expenses 16,120 12,999 Deferred revenues 10,457 5,143 Contingent consideration obligation   5,434     —     Total current liabilities 38,371 25,155 Lease financing obligation - long term 9,235 9,205 Contingent consideration obligation - long-term — 16,915 Other liabilities 821 1,101 Stockholders' equity: Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at September 30, 2011 and December 31, 2010 — — Common stock, $0.0001 par value; 100,000 shares authorized, 40,772 and 38,863 shares issued; 38,103 and 36,863 outstanding at September 30, 2011 and December 31, 2010, respectively 4 4 Treasury stock, at cost (2,669 and 2,000 shares at September 30, 2011 and December 31, 2010, respectively) (43,712 ) (23,713 ) Additional paid-in capital 301,924 255,656 Accumulated other comprehensive loss (349 ) (182 ) Retained earnings   63,176     56,258     Total stockholders' equity   321,043     288,023     Total liabilities and stockholders' equity $ 369,470   $ 340,399     SYNCHRONOSS TECHNOLOGIES, INC.STATEMENT OF INCOME(in thousands, except per share data)(Unaudited)         Three Months EndedNine Months EndedSeptember 30,September 30,   2011201020112010     Net revenues $ 59,238 $ 44,456 $ 166,933 $ 116,738 Costs and expenses: Cost of services (2)(3)(4)* 27,781 22,983 78,270 59,638 Research and development (2)(3)(4) 10,879 7,569 31,037 16,760 Selling, general and administrative (2)(3)(4) 11,118 10,465 31,913 23,310 Net change in contingent consideration obligation 480 (1,968 ) 3,311 (1,968 ) Depreciation and amortization   3,949     2,606     11,029     6,459     Total costs and expenses   54,207     41,655     155,560     104,199     Income from operations 5,031 2,801 11,373 12,539 Interest and other income 432 706 914 940 Interest and other expense   (441 )   (342 )   (975 )   (909 )   Income before income tax expense 5,022 3,165 11,312 12,570 Income tax expense   (1,447 )   (1,024 )   (4,394 )   (4,742 )   Net income $ 3,575   $ 2,141   $ 6,918   $ 7,828       Net income per common share: Basic (1) $ 0.10   $ 0.05   $ 0.22   $ 0.23     Diluted (1) $ 0.09   $ 0.05   $ 0.22   $ 0.23       Weighted-average common shares outstanding: Basic   37,573     31,586     37,285     31,276     Diluted   38,647     32,480     38,610     32,196     * Cost of services excludes depreciation which is shown separately.   (1) Adjustment to net income for equity mark-to-market on contingent consideration obligation: Net income $ 3,575 $ 2,141 $ 6,918 $ 7,828 Income effect for equity mark-to-market on contingent consideration obligation, net of tax   —     (591 )   1,466     (544 )   Net income applicable to shares of common stock for earnings per share $ 3,575   $ 1,550   $ 8,384   $ 7,284       (2) Amounts include fair value stock-based compensation as follows: Cost of services $ 1,416 $ 1,063 $ 3,673 $ 2,819 Research and development 1,146 562 2,931 1,330 Selling, general and administrative   3,326     1,554     8,511     4,614     Total fair value stock-based compensation expense $ 5,888   $ 3,179   $ 15,115   $ 8,763       (3) Amounts include acquisition and restructuring costs as follows: Cost of services $ - $ - $ 15 $ - Research and development 4 133 253 133 Selling, general and administrative   59     2,604     342     2,918     Total acquisition and restructuring costs $ 63   $ 2,737   $ 610   $ 3,051       (4) Amounts include fair value earn-out cash and stock compensation as follows: Cost of services $ 105 $ 4 $ 350 $ 4 Research and development 326 29 759 29 Selling, general and administrative   435     22     2,145     22     Total fair value earn-out cash and stock compensation expense $ 866   $ 55   $ 3,254   $ 55       SYNCHRONOSS TECHNOLOGIES, INC.Reconciliation of GAAP to Non-GAAP Financial Measures(in thousands, except per share data)(Unaudited)   Three Months EndedNine Months EndedSeptember 30,September 30,   2011201020112010     Non-GAAP financial measures and reconciliation:   GAAP Revenue $ 59,238 $ 44,456 $ 166,933 $ 116,738 Add: Deferred Revenue Write-Down   150     2,309     1,237     2,309     Non-GAAP Revenue $ 59,388   $ 46,765   $ 168,170   $ 119,047       GAAP income from operations $ 5,031 $ 2,801 $ 11,373 $ 12,539 Add: Deferred revenue write-down 150 2,309 1,237 2,309 Add: Fair value stock-based compensation 5,888 3,179 15,115 8,763 Add: Acquisition and restructuring costs 63 2,737 610 3,051 Add: Net change in contingent consideration obligation 480 (1,968 ) 3,311 (1,968 ) Add: Deferred compensation expense - earn-out 866 55 3,254 55 Add: Amortization expense   660     525     1,980     525     Non-GAAP income from operations $ 13,138   $ 9,638   $ 36,880   $ 25,274       GAAP net income attributable to common stockholders $ 3,575 $ 2,141 $ 6,918 $ 7,828 Add: Deferred revenue write-down, net of tax 78 1,432 861 1,432 Add: Fair value stock-based compensation, net of tax 3,877 1,971 10,520 5,433 Add: Acquisition and restructuring costs, net of taxes 30 1,697 424 1,892 Add: Net change in contingent consideration obligation, net of tax 265 (1,220 ) 2,304 (1,220 ) Add: Deferred compensation expense - earn-out, net of tax 544 34 2,264 34 Add: Amortization expense, net of tax   427     326     1,378     326     Non-GAAP net income $ 8,796   $ 6,381   $ 24,669   $ 15,725     Diluted non-GAAP net income per share $ 0.23   $ 0.20   $ 0.64   $ 0.49                           Weighted shares outstanding - Diluted   38,647     32,480     38,610     32,196     SYNCHRONOSS TECHNOLOGIES, INC.STATEMENT OF CASH FLOWS(in thousands)(Unaudited)Nine Months Ended September 30,   20112010   Operating activities: Net income $ 6,918 $ 7,828 Adjustments to reconcile net income to net cash provided by operatingactivities: Depreciation and amortization expense 11,029 6,459 Loss on disposal of fixed assets — 31 Proceeds from insurance claim — (418 ) Amortization of bond premium 326 — Deferred income taxes (2,920 ) 818 Non-cash interest on leased facility 688 684 Stock-based compensation 16,173 8,763 Changes in operating assets and liabilities: Accounts receivable, net of allowance for doubtful accounts (10,291 ) (12,604 ) Prepaid expenses and other current assets 3,376 (1,780 ) Other assets (26 ) (1,695 ) Accounts payable (698 ) 1,248 Accrued expenses 2,973 888 Contingent consideration obligation 2,640 (1,913 ) Excess tax benefit from the exercise of stock options (7,335 ) (755 ) Other liabilities (281 ) (285 ) Lease obligation — 3 Deferred revenues   5,314     2,451     Net cash provided by operating activities 27,886 9,723   Investing activities: Purchases of fixed assets (12,042 ) (7,310 ) Proceeds from insurance claim — 418 Purchases of marketable securities available-for-sale (35,757 ) (4,296 ) Maturity of marketable securities available-for-sale 3,670 2,659 Business acquired, net of cash   (7,913 )   (30,779 )   Net cash used in investing activities (52,042 ) (39,308 )   Financing activities: Proceeds from the exercise of stock options 14,163 2,663 Payments on contingent consideration (8,286 ) — Excess tax benefit from the exercise of stock options 7,335 755 Repurchase of common stock (19,999 ) — Payments on capital obligations   (721 )   (684 )   Net cash (used in) provided by financing activities   (7,508 )   2,734     Effect of exchange rate changes on cash   (92 )   43     Net decrease in cash and cash equivalents (31,756 ) (26,808 ) Cash and cash equivalents at beginning of year   180,367     89,924     Cash and cash equivalents at end of period $ 148,611   $ 63,116     SYNCHRONOSS TECHNOLOGIES, INC.Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities(in thousands)(Unaudited)Nine Months Ended September 30,   20112010     Non-GAAP cash provided by operating activities and reconciliation:   Net cash provided by operating activities (GAAP) $ 27,886 $ 9,723 Add: Tax benefits from stock options exercised 7,335 755 Add: Cash payments on settlement of Earn-out   2,578   —   Adjusted cash flow provided by operating activities (Non-GAAP) $ 37,799 $ 10,478 Synchronoss Technologies, Inc.Investor:Tim Dolan, 617-956-6727investor@synchronoss.comorMedia:Stacie Hiras, 908-547-1260Stacie.hiras@synchronoss.com