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Press release from Business Wire

Synchronoss Technologies, Inc. Announces Second Quarter 2013 Financial Results

<ul> <li class='bwlistitemmargb'> <i>Second quarter non-GAAP total revenue of $85.2 million increases 27% year-over-year</i> </li> <li class='bwlistitemmargb'> <i>Second quarter non-GAAP operating income of $19.5 million represents 23% non-GAAP operating margin and drives non-GAAP EPS of $0.31</i> </li> </ul>

Tuesday, July 30, 2013

Synchronoss Technologies, Inc. Announces Second Quarter 2013 Financial Results

16:05 EDT Tuesday, July 30, 2013

BRIDGEWATER, N.J. (Business Wire) -- Synchronoss Technologies, Inc. (NASDAQ: SNCR), the mobile innovation leader that provides personal cloud solutions and software-based activation for connected devices across the globe, today announced financial results for the second quarter of 2013.

“Both our Activation Services and Cloud Services delivered a strong performance during the second quarter, leading to total revenue that exceeded our expectations,” said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “Our second quarter was highlighted by many successful deployments in our Personal Cloud Services offerings, and very encouraging initial subscriber adoption rates and customer forecasts for storage growth. Synchronoss is well positioned to participate in this growth opportunity based on our highly differentiated cloud services platform, proven track record and Tier One customer base.”

On a GAAP basis, Synchronoss reported net revenues of $83.8 million, representing an increase of 25% compared to the second quarter of 2012. Gross profit was $48.3 million and income from operations was $5.7 million in the second quarter of 2013. Net income applicable to common stock was $3.4 million, leading to diluted earnings per share of $0.09, compared to $0.31 for the second quarter of 2012.

On a non-GAAP basis, Synchronoss reported net revenues of $85.2 million, an increase of 27% compared to the second quarter of 2012. Gross profit for the second quarter of 2013 was $51.2 million, representing a gross margin of 60%. Income from operations was $19.5 million in the second quarter of 2013, representing an operating margin of 23%. Net income was $12.3 million in the second quarter of 2013, compared to $11.2 million in the year ago period. Diluted earnings per share were $0.31 for the second quarter of 2013, compared to $0.29 for the second quarter of 2012.

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."

“We are pleased with the strong operational performance Synchronoss delivered in the second quarter, as we met our profitability objectives while continuing to make significant investments in our cloud services offerings,” said Lawrence R. Irving, Chief Financial Officer and Treasurer. “We continue to identify new growth opportunities across our worldwide portfolio of Tier One customers as mobile operators begin to launch, test and scale their cloud strategies. As such, we will continue to invest in our cloud services platform in order to maximize our market share and shareholder value over the long-term.”

Other Second Quarter and Recent Business Highlights:

  • Cloud Services revenue accounted for approximately $26.8 million of non-GAAP revenue, representing approximately 31% of total revenue and growing 30% on a year-over-year basis.
  • Activation Services revenue accounted for approximately $58.4 million of non-GAAP revenue, representing approximately 69% of total revenue and growing 26% on a year-over-year basis.

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call on Tuesday, July 30, 2013, at 4:30 p.m. (ET) to discuss the company's financial results. To access this call, dial 877-474-9503 (domestic) or 857-244-7556 (international). The pass code for the call is 83831771. 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 70537367. 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, net income, effective tax rate, earnings 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, 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 mobile innovation leader that provides personal cloud solutions and software-based activation for connected devices across the globe. The company's proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers to live in a connected world. 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, 2012 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 TECHNOLOGIES, INC.
BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
       
June 30, 2013 December 31, 2012 1
 
ASSETS
Current assets:
Cash and cash equivalents $ 46,204 $ 36,028
Marketable securities 12,996 20,188
Accounts receivable, net of allowance for doubtful accounts of $372 and $258 at June 30, 2013 and December 31, 2012, respectively 73,995 74,980
Prepaid expenses and other assets 23,576 24,012
Deferred tax assets   4,142     4,114  
 
Total current assets 160,913 159,322
Marketable securities 1,767 653
Property and equipment, net 85,009 58,162
Goodwill 124,160 127,322
Intangible assets, net 101,954 110,760
Deferred tax assets 8,008 6,961
Other assets   3,589     3,482  
 
Total assets $ 485,400   $ 466,662  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,345 $ 8,980
Accrued expenses 33,087 41,658
Deferred revenues 22,353 20,954
Contingent consideration obligation   11,051     3,279  
 
Total current liabilities 78,836 74,871
Lease financing obligation - long term 9,260 9,540
Contingent consideration obligation - long-term - 5,100
Other liabilities 3,104 2,494
Stockholders' equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at June 30, 2013 and December 31, 2012
Common stock, $0.0001 par value; 100,000 shares authorized, 43,945 and 42,533 shares issued; 40,121 and 38,674 outstanding at June 30, 2013 and December 31, 2012, respectively
4 4
Treasury stock, at cost (3,824 and 3,859 shares at June 30, 2013 and December 31, 2012, respectively) (67,487 ) (67,918 )
Additional paid-in capital 366,377 344,469
Accumulated other comprehensive loss (7,049 ) (365 )
Retained earnings   102,355     98,467  
 
Total stockholders' equity   394,200     374,657  
 
Total liabilities and stockholders' equity $ 485,400   $ 466,662  

1 Certain prior period amounts have been recast in connection with ASC 805, Business Combinations.

             
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2013     2012     2013     2012  
 
 
Net revenues $ 83,848 $ 66,990 $ 162,124 $ 131,550
Costs and expenses:
Cost of services (2)(3)(4)* 35,527 26,631 67,658 55,252
Research and development (2)(3)(4) 16,358 12,570 33,076 25,446
Selling, general and administrative (2)(3)(4) 14,943 11,060 29,595 21,450
Net change in contingent consideration obligation 1,743 (4,628 ) 2,176 (5,408 )
Restructuring charges - - 5,172 -
Depreciation and amortization   9,610     5,962     18,579     11,133  
 
Total costs and expenses   78,181     51,595     156,256     107,873  
 
Income from operations 5,667 15,395 5,868 23,677
Interest income 197 330 283 728
Interest expense (247 ) (241 ) (479 ) (480 )
Other income (5)   301     779     43     793  
 
Income before income tax expense 5,918 16,263 5,715 24,718
Income tax expense   (2,506 )   (4,314 )   (1,827 )   (7,286 )
 
Net income $ 3,412   $ 11,949   $ 3,888   $ 17,432  
 
 
Net income per common share:
Basic (1) $ 0.09   $ 0.31   $ 0.10   $ 0.46  
 
Diluted (1) $ 0.09   $ 0.31   $ 0.10   $ 0.45  
 
 
Weighted-average common shares outstanding:
Basic   38,551     38,353     38,368     38,207  
 
Diluted   39,523     39,075     39,367     39,123  
 
* 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 $ 3,412 $ 11,949 $ 3,888 $ 17,432
Income effect for equity mark-to-market on contingent consideration obligation, net of tax   -     -     -     -  
 
Net income applicable to shares of common stock for earnings per share $ 3,412   $ 11,949   $ 3,888   $ 17,432  
 
 
(2) Amounts include fair value stock-based compensation as follows:
Cost of services $ 1,204 $ 891 $ 2,404 $ 2,136
Research and development 1,650 1,227 2,946 2,655
Selling, general and administrative   3,276     2,421     5,690     4,959  
 
Total fair value stock-based compensation expense $ 6,130   $ 4,539   $ 11,040   $ 9,750  
 
 
(3) Amounts include acquisition costs as follows:
Research and development - 208 $ - $ 209
Selling, general and administrative   363     159     937     424  
 
Total acquisition costs $ 363   $ 367   $ 937   $ 633  
 
 
(4) Amounts include fair value earn-out cash and stock compensation as follows:
Cost of services $ 304 $ - $ 247 $ -
Research and development 171 (98 ) 105 116
Selling, general and administrative   239     (116 )   190     136  
 
Total fair value earn-out cash and stock compensation expense $ 714   $ (214 ) $ 542   $ 252  
 
 
(5) Amounts include Fx change of the contingent consideration obligation as follows:
Other (expense) income $ (15 ) $ 347 $ 15 $ 114
 
             
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2013     2012     2013     2012  
 
 
Non-GAAP financial measures and reconciliation:
 
GAAP Revenue $ 83,848 $ 66,990 $ 162,124 $ 131,550
Add: Deferred Revenue Write-Down   1,342     170     2,546     516  
 
Non-GAAP Revenue $ 85,190   $ 67,160   $ 164,670   $ 132,066  
 
 
GAAP Revenue $ 83,848 $ 66,990 $ 162,124 $ 131,550
Less: Cost of Services   35,527     26,631     67,658     55,252  
 
GAAP Gross Margin 48,321 40,359 94,466 76,298
 
Add: Deferred revenue write-down 1,342 170 2,546 516
Add: Fair value stock-based compensation 1,204 891 2,404

 

2,136
Add: Deferred compensation expense - earn-out   304     -     247  

 

  -  
 
Non-GAAP Gross Margin $ 51,171   $ 41,420   $ 99,663   $ 78,950  
 
Non-GAAP Gross Margin % 60 % 62 % 61 % 60 %
 
GAAP income from operations $ 5,667 $ 15,395 $ 5,868 $ 23,677
Add: Deferred revenue write-down 1,342 170 2,546 516
Add: Fair value stock-based compensation 6,130 4,539 11,040 9,750
Add: Acquisition and restructuring costs 363 367 6,109 633
Add: Net change in contingent consideration obligation 1,743 (4,628 ) 2,176 (5,408 )
Add: Deferred compensation expense - earn-out 714 (214 ) 542 252
Add: Amortization expense   3,525     1,820     7,147     3,295  
 
Non-GAAP income from operations $ 19,484   $ 17,449   $ 35,428   $ 32,715  
 
 
GAAP net income attributable to common stockholders $ 3,412 $ 11,949 $ 3,888 $ 17,432
Add: Deferred revenue write-down, net of tax 810 115 1,601 338
Add: Fair value stock-based compensation, net of tax 3,719 3,029 6,943 6,380
Add: Acquisition and restructuring costs, net of taxes 69 243 3,842 414
Add: Net change in contingent consideration obligation, net of Fx change, net of tax 1,758 (5,170 ) 2,161 (5,522 )
Add: Deferred compensation expense - earn-out, net of tax 454 (135 ) 341 165
Add: Amortization expense, net of tax   2,116     1,207     4,495     2,156  
 
Non-GAAP net income $ 12,338   $ 11,238   $ 23,271   $ 21,363  
 
Diluted non-GAAP net income per share $ 0.31   $ 0.29   $ 0.59   $ 0.55  
       
Weighted shares outstanding - Diluted   39,523     39,075     39,367     39,123  
 
       
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended June 30,
  2013     2012  
 
Operating activities:
Net income $ 3,888 $ 17,432
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 18,579 11,133
Loss on disposal of asset 32 214
Amortization of bond premium 149 665
Deferred income taxes (1,137 ) 438
Non-cash interest on leased facility 462 460
Stock-based compensation 11,040 9,750
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts 985 (2,165 )
Prepaid expenses and other current assets 807 2,844
Other assets (444 ) (170 )
Accounts payable 3,364 (4,517 )
Accrued expenses (8,658 ) (5,658 )
Contingent consideration obligation 2,672 (8,803 )
Excess tax benefit from the exercise of stock options - (4,864 )
Other liabilities 511 82
Deferred revenues   1,082     (558 )
 
Net cash provided by operating activities 33,332 16,283
 
Investing activities:
Purchases of fixed assets (37,728 ) (21,863 )
Purchases of marketable securities available-for-sale (3,496 ) (13,013 )
Maturity of marketable securities available-for-sale 9,391 7,603
Business acquired, net of cash   -     (26,467 )
 
Net cash used in investing activities (31,833 ) (53,740 )
 
Financing activities:
Proceeds from the exercise of stock options 10,630 4,912
Payments on contingent consideration obligation - (2,268 )
Excess tax benefit from the exercise of stock options - 4,864
Proceeds from the sale of Treasury Stock in connection with an employee stock purchase plan 670 -
Payments on capital obligations   (910 )   (480 )
 
Net cash provided by financing activities 10,390 3,255
 
Effect of exchange rate changes on cash   (1,713 )   (147 )
 
Net increase (decrease) in cash and cash equivalents 10,176 (34,349 )
Cash and cash equivalents at beginning of year   36,028     69,430  
 
Cash and cash equivalents at end of period $ 46,204   $ 35,081  
 
       
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
Six Months Ended June 30,
2013 2012
 
 
Non-GAAP cash provided by operating activities and reconciliation:
 
Net cash provided by operating activities (GAAP) $ 33,332 $ 16,283
Add: Tax benefits from stock options exercised - 4,864
Add: Cash payments on settlement of Earn-out   -   3,533
 
Adjusted cash flow provided by operating activities (Non-GAAP) $ 33,332 $ 24,680
 

Synchronoss Technologies, Inc.
Investor:
Brian Denyeau, 646-277-1251
investor@synchronoss.com
or
Media:
Stacie Hiras, 908-547-1260
stacie.hiras@synchronoss.com

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