Synchronoss Technologies, Inc. (NASDAQ:SNCR), the mobile innovation leader that provides cloud solutions and software-based activation for connected devices across the globe, today announced financial results for the first quarter of 2014.
“Synchronoss delivered strong first quarter results highlighted by revenue that exceeded our expectations, driven by 83% year-over-year Cloud Services revenue growth,” said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “Increased promotional activity by our customers, along with enhanced and integrated new cloud functionality embedded on the device, is having a positive impact on subscriber adoption rates and positions Synchronoss well to deliver strong growth in 2014.”
Waldis added, “Customer reaction to our most recent product launches, Synchronoss Integrated Life™ and Synchronoss Workspace™, has been extremely positive and represents additional growth opportunities over time. We are seeing our customers rapidly embrace cloud technologies as a key component of their enhanced communications strategy. Our expanded product set meaningfully increases the value we can deliver to our customers and reflects the increasingly strategic role Synchronoss can provide to them.”
On a GAAP basis, Synchronoss reported net revenues of $98.5 million, representing an increase of 26% compared to the first quarter of 2013. Gross profit was $58.5 million and income from operations was $12.4 million in the first quarter of 2014. Net income applicable to common stock was $7.6 million, leading to diluted earnings per share of $0.19, compared to $0.01 for the first quarter of 2013.
On a non-GAAP basis, Synchronoss reported net revenues, adjusted for the effect of certain acquisitions, of $98.7 million, an increase of 24% compared to the first quarter of 2013. Gross profit for the first quarter 2014 was $60.0 million, representing a gross margin of 61%. Income from operations was $24.2 million in the first quarter of 2014, representing a year-over-year increase of 52% and an operating margin of 25%. Net income was $15.9 million in the first quarter of 2014, up from $10.9 million in the year ago period. Diluted earnings per share were $0.39 for the first quarter of 2014, an increase of 39% compared to $0.28 for the first quarter of 2013.
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."
“The first quarter was a strong start to 2014 and we are pleased with the rapid adoption and customer scaling of our Synchronoss Personal Cloud™ platform,” said Karen L. Rosenberger, Chief Financial Officer and Treasurer. “We are seeing positive trends in a number of areas in our business and believe we are well positioned to generate strong levels of revenue growth and profitability going forward.”
Other First Quarter and Recent Business Highlights:
- Cloud Services revenue accounted for $43.7 million of non-GAAP revenue, representing approximately 44% of total non-GAAP revenue and growing 83% on a year-over-year basis.
- Activation Services revenue accounted for $55.0 million of non-GAAP revenue, representing approximately 56% of total non-GAAP revenue and essentially flat on a year-over-year basis.
- Announced a partnership with Napster to create cloud-based music sharing through Synchronoss’ new solution called The Synchronoss Social Music Platform™ by integrating Napster’s music streaming services directly into the Synchronoss Personal Cloud™.
- Telstra, Australia’s largest telecommunications provider, announced the availability of the T-Cloud™ personal cloud service, which is being powered by the Synchronoss Personal Cloud™.
- Time Warner Cable chose Synchronoss Integrated Life™ to support their Connected Home offering, which includes 24x7 security and fire protection, remote access and lighting and temperature controls.
- Appointed Mr. Chris Halbard to the role of Executive Vice President and President, International, to lead the company’s international business development initiatives and operations. Mr. Halbard is the former Chief Operating Officer and Chief Financial Officer for British Telecom Global Services and held senior positions at AT&T and Lucent Technologies.
Conference Call Details
In conjunction with this announcement, Synchronoss will host a conference call today, April 30, 2014, at 8:30 a.m. (ET) to discuss the company's financial results. To access this call, dial 866-202-0886 (domestic) or 617-213-8841 (international). The pass code for the call is 36063587. 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 888-286-8010 (domestic) or 617-801-6888 (international). The replay pass code is 16327293. 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, Inc. (NASDAQ:SNCR), is the mobile innovation leader that provides 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: www.synchronoss.com
Source: Synchronoss Technologies, Inc.
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, 2013 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, Synchronoss Personal Cloud, Synchronoss Integrated Life, Synchronoss Workspace 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) | ||||||||
March 31, 2014 | December 31, 2013 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 47,271 | $ | 63,512 | ||||
Marketable securities | 11,122 | 9,105 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $329 and $237 at March 31, 2014 and December 31, 2013, respectively | 93,911 | 64,933 | ||||||
Prepaid expenses and other assets | 19,042 | 19,451 | ||||||
Deferred tax assets | 3,752 | 4,626 | ||||||
Total current assets | 175,098 | 161,627 | ||||||
Marketable securities | 3,833 | 4,988 | ||||||
Property and equipment, net | 104,165 | 106,106 | ||||||
Goodwill | 137,373 | 137,743 | ||||||
Intangible assets, net | 99,997 | 101,963 | ||||||
Deferred tax assets | 3,175 | 4,210 | ||||||
Other assets | 9,899 | 10,382 | ||||||
Total assets | $ | 533,540 | $ | 527,019 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 6,145 | $ | 9,528 | ||||
Accrued expenses | 29,717 | 37,919 | ||||||
Deferred revenues | 12,182 | 15,372 | ||||||
Contingent consideration obligation | 22 | 22 | ||||||
Total current liabilities | 48,066 | 62,841 | ||||||
Lease financing obligation - long term | 9,247 | 9,252 | ||||||
Contingent consideration obligation - long-term | 6,079 | 4,468 | ||||||
Other liabilities | 3,686 | 2,819 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0
shares issued and | ||||||||
— | — | |||||||
Common stock, $0.0001 par value; 100,000 shares authorized, 44,913
and 44,456 shares | ||||||||
4 | 4 | |||||||
Treasury stock, at cost (3,767 and 3,793 shares at March 31, 2014 and December 31, 2013, respectively) | (66,770 | ) | (67,104 | ) | ||||
Additional paid-in capital | 403,550 | 393,644 | ||||||
Accumulated other comprehensive income (loss) | 276 | (723 | ) | |||||
Retained earnings | 129,402 | 121,818 | ||||||
Total stockholders’ equity | 466,462 | 447,639 | ||||||
Total liabilities and stockholders’ equity | $ | 533,540 | $ | 527,019 | ||||
SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||
STATEMENT OF INCOME | ||||||||
(in thousands, except per share data) | ||||||||
(Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Net revenues | $ | 98,477 | $ | 78,276 | ||||
Costs and expenses: | ||||||||
Cost of services (1)(2)(3)* | 39,979 | 32,131 | ||||||
Research and development (1)(2)(3) | 15,541 | 16,718 | ||||||
Selling, general and administrative (1)(2)(3) | 17,125 | 14,652 | ||||||
Net change in contingent consideration obligation | 1,211 | 433 | ||||||
Restructuring charges | - | 5,172 | ||||||
Depreciation and amortization | 12,266 | 8,969 | ||||||
Total costs and expenses | 86,122 | 78,075 | ||||||
Income from operations | 12,355 | 201 | ||||||
Interest income | 49 | 86 | ||||||
Interest expense | (420 | ) | (232 | ) | ||||
Other income (expense) (4) | 796 | (258 | ) | |||||
Income before income tax expense | 12,780 | (203 | ) | |||||
Income tax (expense) benefit | (5,196 | ) | 679 | |||||
Net income | $ | 7,584 | $ | 476 | ||||
Net income per common share: | ||||||||
Basic | $ | 0.19 | $ | 0.01 | ||||
Diluted | $ | 0.19 | $ | 0.01 | ||||
Weighted-average common shares outstanding: | ||||||||
Basic | 39,769 | 38,121 | ||||||
Diluted | 40,655 | 39,089 | ||||||
* Cost of services excludes depreciation and amortization which is shown separately. | ||||||||
(1) Amounts include fair value stock-based compensation as follows: | ||||||||
Cost of services | $ | 1,258 | $ | 1,200 | ||||
Research and development | 1,270 | 1,296 | ||||||
Selling, general and administrative | 3,314 | 2,414 | ||||||
Total fair value stock-based compensation expense | $ | 5,842 | $ | 4,910 | ||||
(2) Amounts include acquisition costs as follows: | ||||||||
Cost of services | $ | 31 | $ | - | ||||
Research and development | 48 | - | ||||||
Selling, general and administrative | 139 | 574 | ||||||
Total acquisition costs | $ | 218 | $ | 574 | ||||
(3) Amounts include fair value earn-out cash and stock compensation as follows: | ||||||||
Cost of services | $ | - | $ | (57 | ) | |||
Research and development | - | (66 | ) | |||||
Selling, general and administrative | 424 | (49 | ) | |||||
Total fair value earn-out cash and stock compensation expense | $ | 424 | $ | (172 | ) | |||
(4) Amounts include Fx change of the contingent consideration obligation as follows: | ||||||||
Other income | $ | - | $ | 30 | ||||
SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||
(in thousands, except per share data) | ||||||||
(Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Non-GAAP financial measures and reconciliation: | ||||||||
GAAP Revenue | $ | 98,477 | $ | 78,276 | ||||
Add: Deferred revenue write-down | 224 | 1,204 | ||||||
Non-GAAP Revenue | $ | 98,701 | $ | 79,480 | ||||
GAAP Revenue | $ | 98,477 | $ | 78,276 | ||||
Less: Cost of services | 39,979 | 32,131 | ||||||
GAAP Gross Margin | 58,498 | 46,145 | ||||||
Add: Deferred revenue write-down | 224 | 1,204 | ||||||
Add: Fair value stock-based compensation | 1,258 | 1,200 | ||||||
Add: Acquisition and restructuring costs | 31 | - | ||||||
Add: Deferred compensation expense - earn-out | - | (57 | ) | |||||
Non-GAAP Gross Margin | $ | 60,011 | $ | 48,492 | ||||
Non-GAAP Gross Margin % | 61 | % | 61 | % | ||||
GAAP income from operations | $ | 12,355 | $ | 201 | ||||
Add: Deferred revenue write-down | 224 | 1,204 | ||||||
Add: Fair value stock-based compensation | 5,842 | 4,910 | ||||||
Add: Acquisition and restructuring costs | 218 | 5,746 | ||||||
Add: Net change in contingent consideration obligation | 1,211 | 433 | ||||||
Add: Deferred compensation expense - earn-out | 424 | (172 | ) | |||||
Add: Amortization expense | 3,914 | 3,622 | ||||||
Non-GAAP income from operations | $ | 24,188 | $ | 15,944 | ||||
GAAP net income attributable to common stockholders | $ | 7,584 | $ | 476 | ||||
Add: Deferred revenue write-down, net of tax | 149 | 791 | ||||||
Add: Fair value stock-based compensation, net of tax | 3,894 | 3,224 | ||||||
Add: Acquisition and restructuring costs, net of taxes | 145 | 3,773 | ||||||
Add: Net change in contingent consideration obligation, net of Fx change, net of tax | 1,211 | 403 | ||||||
Add: Deferred compensation expense - earn-out, net of tax | 283 | (113 | ) | |||||
Add: Amortization expense, net of tax | 2,609 | 2,379 | ||||||
Non-GAAP net income | $ | 15,875 | $ | 10,933 | ||||
Diluted non-GAAP net income per share | $ | 0.39 | $ | 0.28 | ||||
Weighted shares outstanding - Diluted | 40,655 | 39,089 | ||||||
SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||
STATEMENT OF CASH FLOWS | ||||||||
(in thousands) | ||||||||
(Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Operating activities: | ||||||||
Net income | $ | 7,584 | $ | 476 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization expense | 12,266 | 8,969 | ||||||
Amortization of bond premium | 74 | 86 | ||||||
Deferred income taxes | 3,112 | (118 | ) | |||||
Non-cash interest on leased facility | 230 | 229 | ||||||
Stock-based compensation | 5,842 | 4,910 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net of allowance for doubtful accounts | (28,935 | ) | 5,519 | |||||
Prepaid expenses and other current assets | 816 | 4,499 | ||||||
Other assets | 465 | (384 | ) | |||||
Accounts payable | (3,388 | ) | (2,639 | ) | ||||
Accrued expenses | (8,743 | ) | (11,126 | ) | ||||
Contingent consideration obligation | 1,611 | 241 | ||||||
Excess tax benefit from the exercise of stock options | (385 | ) | - | |||||
Other liabilities | 1,249 | 1,247 | ||||||
Deferred revenues | (3,204 | ) | 3,325 | |||||
Net cash (used in) provided by operating activities | (11,406 | ) | 15,234 | |||||
Investing activities: | ||||||||
Purchases of fixed assets | (8,044 | ) | (10,964 | ) | ||||
Purchases of marketable securities available-for-sale | (1,244 | ) | (13 | ) | ||||
Maturities of marketable securities available-for-sale | 315 | 4,791 | ||||||
Net cash used in investing activities | (8,973 | ) | (6,186 | ) | ||||
Financing activities: | ||||||||
Proceeds from the exercise of stock options | 3,273 | 6,212 | ||||||
Excess tax benefit from the exercise of stock options | 385 | - | ||||||
Proceeds from the sale of Treasury Stock in connection with an employee stock purchase plan | 740 | 670 | ||||||
Payments on capital obligations | (324 | ) | (760 | ) | ||||
Net cash provided by financing activities | 4,074 | 6,122 | ||||||
Effect of exchange rate changes on cash | 64 | (82 | ) | |||||
Net increase (decrease) in cash and cash equivalents | (16,241 | ) | 15,088 | |||||
Cash and cash equivalents at beginning of period | 63,512 | 36,028 | ||||||
Cash and cash equivalents at end of period | $ | 47,271 | $ | 51,116 | ||||
SYNCHRONOSS TECHNOLOGIES, INC. | |||||||
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities | |||||||
(in thousands) | |||||||
(Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Non-GAAP cash (used in) provided by operating activities and reconciliation: | |||||||
Net cash (used in) provided by operating activities (GAAP) | $ | (11,406 | ) | $ | 15,234 | ||
Add: Tax benefits from stock options exercised | 385 | - | |||||
Adjusted cash flow (used in) provided by operating activities (Non-GAAP) | $ | (11,021 | ) | $ | 15,234 | ||
Contacts:
Investor:
Brian Denyeau,
646-277-1251
investor@synchronoss.com
or
Media:
Stacie
Hiras, 908-547-1260
stacie.hiras@synchronoss.com