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Press release from Business Wire

Synchronoss Technologies, Inc. Announces Third Quarter 2013 Financial Results

<ul> <li class='bwlistitemmargb'> <i>Third quarter non-GAAP total revenue of $90.3 million increases 30% year-over-year</i> </li> <li class='bwlistitemmargb'> <i>Third quarter non-GAAP operating income of $21.0 million represents 23% non-GAAP operating margin and drives non-GAAP EPS of $0.34</i> </li> </ul>

Monday, November 04, 2013

Synchronoss Technologies, Inc. Announces Third Quarter 2013 Financial Results

16:05 EST Monday, November 04, 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 third quarter of 2013.

“We are pleased to announce our strong third quarter results,” said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “We are excited by the positive adoption trends we are seeing across our Personal Cloud Services deployments. Our software is enabling our mobile operator customers to provide compelling cloud services that have become a critical part of their overall strategic initiatives. At the same time our Activation Services offering continues to be positively impacted by industry trends and marketing initiatives by mobile operators to drive more frequent upgrade activity and enable more family share plans. We believe Synchronoss is well positioned to continue driving strong top line growth, and our differentiated value proposition is further reinforced as our Tier One customers such as AT&T and Verizon commit to new and expanded multi-year agreements.”

On a GAAP basis, Synchronoss reported net revenues of $89.7 million, representing an increase of 30% compared to the third quarter of 2012. Gross profit was $51.6 million and income from operations was $8.8 million in the third quarter of 2013. Net income applicable to common stock was $3.6 million, leading to diluted earnings per share of $0.09, compared to $0.16 for the third quarter of 2012.

On a non-GAAP basis, Synchronoss reported net revenues of $90.3 million, an increase of 30% compared to the third quarter of 2012. Gross profit for the third quarter of 2013 was $53.9 million, representing a gross margin of 60%. Income from operations was $21.0 million in the third quarter of 2013, representing an operating margin of 23%. Net income was $13.5 million in the third quarter of 2013, compared to $10.7 million in the year ago period. Diluted earnings per share were $0.34 for the third quarter of 2013, compared to $0.28 for the third 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."

“Our third quarter results were driven by solid performance in both our cloud services and activation services platforms,” said Lawrence R. Irving, Chief Financial Officer and Treasurer. “The growing adoption of our Personal Cloud platform, along with positive activation trends around an expanding array of devices, makes us increasingly confident that the investments we are making in 2013 will generate significant value for Synchronoss, our customers and our shareholders going forward.”

Other Third Quarter and Recent Business Highlights:

  • Cloud Services revenue accounted for approximately $26.9 million of non-GAAP revenue, representing approximately 30% of total revenue and growing 55% on a year-over-year basis.
  • Activation Services revenue accounted for approximately $63.4 million of non-GAAP revenue, representing approximately 70% of total revenue and growing 22% on a year-over-year basis.
  • Executed a new three-year contract with AT&T that extends our successful ten-year plus relationship.
  • Entered into a $100 million Credit Agreement to further enhance the company's financial flexibility and facilitate general corporate purposes. This Credit Agreement can be expanded to $150 million and expires in September 2018.

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call today, November 4, 2013, at 4:30 p.m. (ET) to discuss the company's financial results. To access this call, dial 866-202-3048 (domestic) or 617-213-8843 (international). The pass code for the call is 92967348. 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 27040474. 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)
 
September 30, 2013 December 31, 2012 1
 
ASSETS
Current assets:
Cash and cash equivalents $ 37,087 $ 36,028
Marketable securities 7,894 20,188
Accounts receivable, net of allowance for doubtful accounts of $440 and $258 at September 30, 2013 and December 31, 2012, respectively 88,694 74,980
Prepaid expenses and other assets 23,710 24,012
Deferred tax assets   4,120     4,114  
 
Total current assets 161,505 159,322
Marketable securities 5,787 653
Property and equipment, net 95,821 58,162
Goodwill 125,998 127,322
Intangible assets, net 100,764 110,760
Deferred tax assets 4,047 6,961
Other assets   9,821     3,482  
 
Total assets $ 503,743   $ 466,662  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,660 $ 8,980
Accrued expenses 29,756 41,658
Deferred revenues 22,031 20,954
Contingent consideration obligation   9,037     3,279  
 
Total current liabilities 72,484 74,871
Lease financing obligation - long term 9,257 9,540
Contingent consideration obligation - long-term - 5,100
Other liabilities 3,139 2,494
Stockholders' equity:

Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at September 30, 2013 and December 31, 2012

Common stock, $0.0001 par value; 100,000 shares authorized, 44,303 and 42,533 shares issued; 40,510 and 38,674 outstanding at September 30, 2013 and December 31, 2012, respectively

4 4
Treasury stock, at cost (3,793 and 3,859 shares at September 30, 2013 and December 31, 2012, respectively) (67,104 ) (67,918 )
Additional paid-in capital 381,919 344,469
Accumulated other comprehensive loss (1,901 ) (365 )
Retained earnings   105,945     98,467  
 
Total stockholders' equity   418,863     374,657  
 
Total liabilities and stockholders' equity $ 503,743   $ 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 September 30, Nine Months Ended September 30,
2013 2012 2013 2012
 
 
Net revenues $ 89,716 $ 68,961 $ 251,840 $ 200,511
Costs and expenses:
Cost of services (1)(2)(3)* 38,133 29,136 105,791 84,388
Research and development (1)(2)(3) 16,554 12,645 49,630 38,091
Selling, general and administrative (1)(2)(3) 15,562 10,278 45,157 31,728
Net change in contingent consideration obligation 500 (327 ) 2,676 (5,735 )
Restructuring charges - - 5,172 -
Depreciation and amortization   10,213     6,068     28,792     17,201  
 
Total costs and expenses   80,962     57,800     237,218     165,673  
 
Income from operations 8,754 11,161 14,622 34,838
Interest income 149 295 432 1,023
Interest expense (235 ) (222 ) (714 ) (702 )
Other (expense) income (4)   (369 )   (207 )   (326 )   586  
 
Income before income tax expense 8,299 11,027 14,014 35,745
Income tax expense   (4,709 )   (4,825 )   (6,536 )   (12,111 )
 
Net income $ 3,590   $ 6,202   $ 7,478   $ 23,634  
 
 
Net income per common share:
Basic $ 0.09   $ 0.16   $ 0.19   $ 0.62  
 
Diluted $ 0.09   $ 0.16   $ 0.19   $ 0.60  
 
 
Weighted-average common shares outstanding:
Basic   38,960     38,107     38,589     38,219  
 
Diluted   40,056     38,872     39,662     39,192  
 
* Cost of services excludes depreciation which is shown separately.
 
(1) Amounts include fair value stock-based compensation as follows:
Cost of services $ 1,470 $ 925 $ 3,874 $ 3,061
Research and development 1,538 1,201 4,484 3,856
Selling, general and administrative   4,264     2,511     9,954     7,470  
 
Total fair value stock-based compensation expense $ 7,272   $ 4,637   $ 18,312   $ 14,387  
 
 
(2) Amounts include acquisition costs as follows:
Cost of services $ 254 $ - $ 254 $ -
Research and development 353 - 353 209
Selling, general and administrative   (269 )   -     668     424  
 
Total acquisition costs $ 338   $ -   $ 1,275   $ 633  
 
 
(3) Amounts include fair value earn-out cash and stock compensation as follows:
Cost of services $ - $ 199 $ 247 $ 199
Research and development - 353 105 469
Selling, general and administrative   -     183     190     319  
 
Total fair value earn-out cash and stock compensation expense $ -   $ 735   $ 542   $ 987  
 
 
(4) Amounts include Fx change of the contingent consideration obligation as follows:
Other (expense) income $ 107 $ (32 ) $ 122 $ 82
 
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,
2013 2012 2013 2012
 
 
Non-GAAP financial measures and reconciliation:
 
GAAP Revenue $ 89,716 $ 68,961 $ 251,840 $ 200,511
Add: Deferred Revenue Write-Down   558     232     3,104     748  
 
Non-GAAP Revenue $ 90,274   $ 69,193   $ 254,944   $ 201,259  
 
 
GAAP Revenue $ 89,716 $ 68,961 $ 251,840 $ 200,511
Less: Cost of Services   38,133     29,136     105,791     84,388  
 
GAAP Gross Margin 51,583 39,825 146,049 116,123
 
Add: Deferred revenue write-down 558 232 3,104 748
Add: Fair value stock-based compensation 1,470 925 3,874

 

3,061
Add: Acquisition and restructuring costs 254 - 254

 

-
Add: Deferred compensation expense - earn-out   -     199     247  

 

  199  
 
Non-GAAP Gross Margin $ 53,865   $ 41,181   $ 153,528   $ 120,131  
 
Non-GAAP Gross Margin % 60 % 60 % 60 % 60 %
 
GAAP income from operations $ 8,754 $ 11,161 $ 14,622 $ 34,838
Add: Deferred revenue write-down 558 232 3,104 748
Add: Fair value stock-based compensation 7,272 4,637 18,312 14,387
Add: Acquisition and restructuring costs 338 - 6,447 633
Add: Net change in contingent consideration obligation 500 (327 ) 2,676 (5,735 )
Add: Deferred compensation expense - earn-out - 735 542 987
Add: Amortization expense   3,534     1,955     10,681     5,250  
 
Non-GAAP income from operations $ 20,956   $ 18,393   $ 56,384   $ 51,108  
 
 
GAAP net income attributable to common stockholders $ 3,590 $ 6,202 $ 7,478 $ 23,634
Add: Deferred revenue write-down, net of tax 519 148 2,120 486
Add: Fair value stock-based compensation, net of tax 5,561 2,954 12,504 9,334
Add: Acquisition and restructuring costs, net of taxes 564 - 4,406 414
Add: Net change in contingent consideration obligation, net of Fx change, net of tax 393 (295 ) 2,554 (5,817 )
Add: Deferred compensation expense - earn-out, net of tax 29 476 370 641
Add: Amortization expense, net of tax   2,801     1,252     7,296     3,408  
 
Non-GAAP net income $ 13,457   $ 10,737   $ 36,728   $ 32,100  
 
Diluted non-GAAP net income per share $ 0.34   $ 0.28   $ 0.93   $ 0.82  
       
Weighted shares outstanding - Diluted   40,056     38,872     39,662     39,192  
 
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
    Nine Months Ended September 30,
2013     2012
 
Operating activities:
Net income $ 7,478 $ 23,634
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 28,792 17,199
Loss on disposal of asset - 198
Amortization of bond premium 225 1,000
Deferred income taxes 3,401 32
Non-cash interest on leased facility 691 690
Stock-based compensation 18,313 14,387
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts (13,714 ) (6,733 )
Prepaid expenses and other current assets 1,656 7,022
Other assets (6,724 ) (122 )
Accounts payable 2,680 (2,665 )
Accrued expenses (11,952 ) (3,042 )
Contingent consideration obligation 1,724 (8,396 )
Excess tax benefit from the exercise of stock options (983 ) (6,592 )
Other liabilities 1,063 (146 )
Deferred revenues   760     (1,707 )
 
Net cash provided by operating activities 33,410 34,759
 
Investing activities:
Purchases of fixed assets (55,216 ) (25,377 )
Purchases of marketable securities available-for-sale (6,703 ) (13,082 )
Maturity of marketable securities available-for-sale 13,635 15,531
Business acquired, net of cash   -     (26,572 )
 
Net cash used in investing activities (48,284 ) (49,500 )
 
Financing activities:
Proceeds from the exercise of stock options 17,495 7,330
Payments on contingent consideration obligation (1,090 ) (2,268 )
Excess tax benefit from the exercise of stock options 983 6,592
Repurchase of common stock - (13,898 )
Proceeds from the sale of Treasury Stock in connection with an employee stock purchase plan 1,474 612
Proceeds from capital obligations - 38
Payments on capital obligations   (1,236 )   (750 )
 
Net cash provided (used) by financing activities 17,626 (2,344 )
 
Effect of exchange rate changes on cash   (1,693 )   391  
 
Net increase (decrease) in cash and cash equivalents 1,059 (16,694 )
Cash and cash equivalents at beginning of year   36,028     69,430  
 
Cash and cash equivalents at end of period $ 37,087   $ 52,736  
 
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
    Nine Months Ended September 30,
2013     2012
 
Non-GAAP cash provided by operating activities and reconciliation:
 
Net cash provided by operating activities (GAAP) $ 33,410 $ 34,759
Add: Tax benefits from stock options exercised 983 6,592
Add: Cash payments on settlement of Earn-out   1,463   3,533
 
Adjusted cash flow provided by operating activities (Non-GAAP) $ 35,856 $ 44,884
 

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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